Dekalog Blog is an interesting site where the author, Dekalog, attempts to develop new and unique ways to apply quantitative analysis to trading. In a recent post, he discussed using the concept of Brownian Motion in a way that would create bands around a chart’s closing prices. Those bands would represent non-trending periods, and a trader could identify any time the price was outside the bands as a trending period.
At the root of most every trend following trading system is a way to define a trends existence and determine its direction. Using Dekalog’s Brownian Motion idea as the root of a system might be a unique way to identify trends and extract profits from markets through those trends.
Here is how Dekalog explains his concept:
The basic premise, taken from Brownian motion, is that the natural log of price changes, 平均, at a rate proportional to the square root of time.
Take, たとえば, a period of 5 leading up to the “current bar.” If we take a 5 period simple moving average of the absolute differences of the log of prices over this period, we get a value for the average 1 bar price movement over this period.
This value is then multiplied by the square root of 5 and added to and subtracted from the price 5 days ago to get an upper and lower bound for the current bar.
He then applies these upper and lower bounds to the chart:
If the current bar lies between the bounds, we say that price movement over the last 5 periods is consistent with Brownian motion and declare an absence of trend, すなわち. a sideways market.
If the current bar lies outside the bounds, we declare that price movement over the last 5 bars is not consistent with Brownian motion and that a trend is in force, either up or down depending on which bound the current bar is beyond.
Dekalog also believes this concept could have value beyond just being an indicator:
It is easy to imagine many uses for this in terms of indicator creation, but I intend to use the bounds to assign a score of price randomness/trendiness over various combined periods to assign price movement to bins for subsequent Monte Carlo creation of synthetic price series.
マイク 言う
where is the download for this indicator for mt4 ?
アンドリュー ・ セルビー 言う
こんにちは、マイク,
I’m sure Shaun could work with you on coding something like this for MT4 if you are interested!
おかげで!
ショーンオバートン 言う
こんにちは、マイク, there is no download available. We’re sharing the ideas.
Dekalog 言う
I have just posted C++ code for this idea on my blog at http://dekalogblog.blogspot.com/2013/11/brownian-bands_7726.html
I’m sure it would be easy to translate this into MT4 code.
DKN 言う
This is very interesting. I remember reading about this many years ago in Jim Sloman’s Ocean Theory book. Anything that can reduce subjectivity in trading decisions is a plus as far as I’m concerned and it would be interesting to see an MT4 indicator built around this code.
ショーンオバートン 言う
We’ll write it up as an MT4 give-away if enough people ask for it. Leave comments here if you’d like to see us write this for MetaTrader and NinjaTrader.
I completely agree with your comments on mechanical rules. It’s hard to know what you’re doing wrong if you do something different on every trade.
carlos 言う
こんにちはショーン,
For a long time, I would Like to use the Brownian motion in some way.
Is it possible for you to share a code for Ninjatrader ?
I really appreciate,
ありがとう
Carlos
ショーンオバートン 言う
Hi Carlos,
We may do this at some point in the future, but it’s not likely to happen soon.
carlos 言う
ありがとうショーン…..please let me know.
sss 言う
[はい], this is the Ocean indicator that was done by Jim Sloman