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Thread: Synthetic CoIntegration Indicator(Modification Needed)

  1. #1

    Default Synthetic CoIntegration Indicator(Modification Needed)

    I was wondering if my ratio indicator(attached) can be modified in the following way:

    Please see pic below on the basic rule of mean reversion.
    i.e. When the ratio indicator touches (regardless) upper or lower boundary of bollinger bands and reverts to the mean 20MA of bbands, Let this be ONE count.

    Can the indicator include/show count numbers (C1 & C2) for user input N1 & N2 different no. of days range in any attached fixed T,time frame chart.

    Then do a line plot of the ratio C1/C2 for the attached timeframe chart on the same indicator.

    e.g, For the same fixed timeframe 5mins chart,
    Let user input N1=latest 5days, C1=count value
    Let user input N2=last 25days, C2=count value

    If C1/C2 is rising, relative synthetic CoIntegration is increasing...
    Attached Images Attached Images Synthetic CoIntegration Indicator(Modification Needed)-ratiorules-gif 
    Attached Files Attached Files
    Last edited by scalpmaster; 11-20-2010 at 19:33.

  2. #2
    Administrator funyoo's Avatar
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    Quote Originally Posted by scalpmaster View Post
    I was wondering if my ratio indicator(attached) can be modified in the following way:

    Please see pic below on the basic rule of mean reversion.
    i.e. When the ratio indicator touches (regardless) upper or lower boundary of bollinger bands and reverts to the mean 20MA of bbands, Let this be ONE count.

    Can the indicator include/show count numbers (C1 & C2) for user input N1 & N2 different no. of days range in any attached fixed T,time frame chart.

    Then do a line plot of the ratio C1/C2 for the attached timeframe chart on the same indicator.

    e.g, For the same fixed timeframe 5mins chart,
    Let user input N1=latest 5days, C1=count value
    Let user input N2=last 25days, C2=count value

    If C1/C2 is rising, relative synthetic CoIntegration is increasing...
    Hi scalpmaster,

    Can you show an example of a count with a screenshot please ?

  3. #3

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    Quote Originally Posted by funyoo View Post
    Hi scalpmaster,
    Can you show an example of a count with a screenshot please ?
    Hi Funyoo, a count is exactly what the above pic shows. i.e. basic rule of profit taking in reversion to the mean 20M.A. ...which is when the ratio indicator touches/crosses (regardless) upper or lower boundary of bollinger bands and reverts to touch the mean 20MA of bbands...
    Count the number of times this profit taking condition happens over last, say, 5days and last 25days over the same attached timeframe, say 5mins, chart...the ratio of C1/C2 gives a feel of relative improvement in convergence frequency...

    The criteria base on actual definition of CoIntegration is difficult to implement so I simplify it in the easiest way traders would apply it...
    Correlation is different from CoIntegration as 2 instruments may correlate(move in the same direction 90% of the time) but the spread may not converge/revert to mean which is the basis of pairs trading...so I consider CoIntegration as the frequency/count of bbands convergence for profit taking...

    Of course, it would still be best to trade the bounce Only in the direction of ratio line indicator Trend of higher TF in confluence with lower TimeFrame...which is what most high frequency pairs traders do not realise or bother(they assume revert to mean in both directions)...Maybe you can incorporate this MTF bbands ratio Trend + CoIntegration Count filter idea into an EA...? Thanks, Scalpmaster.
    Last edited by scalpmaster; 11-21-2010 at 23:54.

  4. #4
    Administrator funyoo's Avatar
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    Quote Originally Posted by scalpmaster View Post
    Hi Funyoo, a count is exactly what the above pic shows. i.e. basic rule of profit taking in reversion to the mean 20M.A. ...which is when the ratio indicator touches/crosses (regardless) upper or lower boundary of bollinger bands and reverts to touch the mean 20MA of bbands...
    Count the number of times this profit taking condition happens over last, say, 5days and last 25days over the same attached timeframe, say 5mins, chart...the ratio of C1/C2 gives a feel of relative improvement in convergence frequency...

    The criteria base on actual definition of CoIntegration is difficult to implement so I simplify it in the easiest way traders would apply it...
    Correlation is different from CoIntegration as 2 instruments may correlate(move in the same direction 90% of the time) but the spread may not converge/revert to mean which is the basis of pairs trading...so I consider CoIntegration as the frequency/count of bbands convergence for profit taking...

    Of course, it would still be best to trade the bounce Only in the direction of ratio line indicator Trend of higher TF in confluence with lower TimeFrame...which is what most high frequency pairs traders do not realise or bother(they assume revert to mean in both directions)...Maybe you can incorporate this MTF bbands ratio Trend + CoIntegration Count filter idea into an EA...? Thanks, Scalpmaster.
    Hi scalpmaster,

    Thanks for the explanation, here is an indicator.
    Attached Files Attached Files

  5. #5

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    Nice, funyoo.Thank you.

  6. #6

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    It's same than EURCHF with Bollinger Band if you check EURUSD / USDCHF

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