Profitable ETF Trading Strategies – An Improved Oscillator – The NDX()


In my last article, I described two issues I had with the otherwise excellent technical indicator known as the Williams% R. I just like the scale that goes from zero to -100 which seems counterintuitive, and I don't like that she uses today's price action to calculate the value of ; index that hides information about the breakout days.

I suggested that if I were to design the indicator from scratch, I would fix both of these issues by having the scale read normally from 0 to 100 like a thermometer, and I would not use not today's price action to calculate the value of the index in order to highlight the breakout is above and below the period's trading range. return.

To support my own trading, I have built such an indicator in Microsoft Excel and use it to analyze a large number of stocks and ETFs as part of my daily trading practice. . I found the modified indicator that I call NDX or "index" to do whatever Williams% R does while adding value by correcting the two issues I identified.

In my spreadsheet reports use the column header of NDX (t), where "t" represents the rollback period. For example, NDX (10) would represent a look back period of 10 days from yesterday to 11 days, with today represented as day zero.

If the asset traded in a range of 10 to 20 in the retrospective period, and closed today at a price of 10, it would have an index value of zero. If today's close was 20, then the index value would be 100. If today's close was 21, then the index value would be 100. If today's close was 21, then the index value would be 100. If today's close was 21, then the index value would be 100. If today's close was 21, the index value would be 100. 39; index would be 110, which would indicate a breakout 10% above the previous trading range.

You can see how very useful this information would be if you are looking for breakout opportunities in a large population of stocks and ETFs. The normal scale of 0 to 100 is also more intuitive.

I am using conditional formatting in Microsoft Excel to highlight index values ​​greater than 90 in green and less than 10 in red. I generally rank sets of symbols from highest to lowest or lowest to highest, in order to find these symbols in the most extreme condition relative to their peers. This is consistent with the use of oscillators and in general and I have found it very helpful to focus on these extremes for short term trading goals.

When using a one year return period, I write the column header as NDX (52w) as you would expect.

I use Williams% R whenever I use commercial or public stock filters, but I use my own NDX indicator on my own spreadsheet reports.

These types of refinements come from a deep understanding and appreciation of the construction, use, and limitations of conventional technical analysis. The improvements only seem significant if you take a very close look at the specific indicator. Attention to detail pays off in the practice of trading.

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