{quote} Hey parisboy, Do you mind clarifying what you are trying to show in these? I assume the bands are where you are looking to enter to trade back to fair value, but am curious how you are calculating their widths?
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Width of the "Band" = 1/4 of your screen Price Range
Roughly Price can be represented as a Sinewave oscillating around the Trend
Do you undesrstand why Price returns to its mean ? {image}
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Because you're using a non-causal smoother (=uses data from the future) as opposed to a filter. The dotted lines project the bands forward and will correct with every new bar. With a usual MA the price doesn't return to the MA. It is the MA that catches up the price when it slows down.
{quote} Because you're using a non-causal smoother (=uses data from the future) as opposed to a filter. The dotted lines project the bands forward and will correct with every new bar. With a usual MA the price doesn't return to the MA. It is the MA that catches up the price when it slows down.
The centered moving average is a MA shifted backward in time. At a given bar the value of the MA is the value the MA will have in <lag-of-the-MA> bars.
The current bars are a linear projection which will repaint.
{quote} The centered moving average is a MA shifted backward in time. At a given bar the value of the MA is the value the MA will have in <lag-of-the-MA> bars. The current bars are a linear projection which will repaint.
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no the last Centered Moving Average point calculated is calculated with real price (see solid Envelopes and Centerlines) the dotted line is just an extrapolation
{quote} no the last Centered Moving Average point calculated is calculated with real price (see solid Envelopes and Centerlines) the dotted line is just an extrapolation
By the way the "exactness" of the extrapolated boundaries has just to do with the methodology of the calculation of the "width " of the Band which encloses "most of " Price oscillations around the Centered Moving Average (the Trend)
Pretty sure it's just taking the last slope of the known MA and projecting it forward from that point in a straight line. This assumes the future slope is going to be the same on each bar. It's a simplistic assumption but you know that the price will generally stay inside the 2 standard deviation bands, and that's the governing principle.
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I don't even know how to estimate the error, even in long hindsight. What was the fair value at a given point in the past?
The centered moving average for a given length can be used as fair value. As you know, you only have the last MA value so error can only be computed up to the current bar minus the lag amount of the MA. So it won't be available for for real-time analysis.
Pretty sure it's just taking the last slope of the known MA and projecting it forward from that point in a straight line. This assumes the future slope is going to be the same on each bar.
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Of course it is what he does. It looks good in hindsight or when the price waves nicely like on the right hand side of the screnshot. But doing the same thing in real time when the price is like the left hand side right before the MA turns sharp the envelop will overshot. The price in this situation will be far below the projected envelop. The envelop will later self correct and look nice like it does on the screenshot.
{quote} Of course it is what he does. It looks good in hindsight or when the price waves nicely like on the right hand side of the screnshot. But doing the same thing in real time when the price is like the left hand side right before the MA turns sharp the envelop will overshot. The price in this situation will be far below the projected envelop. The envelop will later self correct and look nice like it does on the screenshot.
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100% agree. These approaches are usually red herrings.
Would be interesting to see chart if it showed all of the projected values at each step so you could see the differences between projected and realized values.
Would be interesting to see chart if it showed all of the projected values at each step so you could see the differences between projected and realized values.
Hi Riskcuit - reference you example of the 3 trades in post 229 (before you rolled) - i am curious to understand if you used the same position size on trades 2 & 3 (as trade 1). If you are applying different trade sizes, could you explain how you calculate the size?
Hi Riskcuit - reference you example of the 3 trades in post 229 (before you rolled) - i am curious to understand if you used the same position size on trades 2 & 3 (as trade 1). If you are applying different trade sizes, could you explain how you calculate the size?
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I typically use a fixed lot size for each entry. If it starts really running you can break your "entry" in 2 legs so you add 1/2 of the new entry at a time. For leverage, I wouldn't start with anything larger than 1:1 per entry. Especially when starting out with the system, you should probably 1/2 it just to get a feel for what it's like to actually trade it.
