Thursday, April 01, 2010

BZB Pivot Indicator

Here's a little egg for your Easter basket . . the product of a project I've been fiddling with for over year which utilizes the PP pivot to forecast momentum. Basically we're looking at an oscillator similar to a 2 moving average cross system, but in this case our focus is not price per se, but the PP baseline pivot.
I have an expanded version of the indicator with R1 and S1 bands integrated into a single line range volatility indicator superimposed on the PP line, and this delivers an immediate view of floating volatility over time relative to the position of the PP, effectively complementing the momentum signal and producing a VIXEN setup situation. We'll look at that next week.
The Pivot Indicator should not be confused with the TS default zigzag indicator which is superimposed on the candlestick chart above. Although the zigzag tracking results look very impressive, the ZZ is in fact a lookback indicator that is always 2 days behind the curve and I use it more as a visual aid than a trade forecaster.
Below is the TS2000i code for the Pivot Indicator. I call it the Pivot Pivot because that's exactly what it is . . a signal of when the pivot pivots. As with most oscillators it's best to "tune" it to your focus stock or ETF . . . in this case it's set to 3 and7, although if you were to optimize it as a trading system the inputs would be 2 and 8.
With these relatively short data series the exponential function in lieu of a simple MA doesn't make much of a difference, but I'm always trying to squeeze as much out of the orange as possible.
As an aside I've once again tweaked the right blog panel to speed up loading time. The Prognosticators have been migrated over to the Pair Solution site after I updated the indicators on the real time Qs chart to reflect the Prognoticator signal in the lower technical panel (yellow).


Daniel said...

This has got to be the cutting edge of what the human race is doing on planet Earth.

This is ingenious, out of the box thinking. Floating volatility over time--YES.

Because volatility INCLUDES price and volume... the way price and volume include THEIR subsets; so it’s the uber-indicator.

You are literally beginning to map the "5th dimension", the one which includes Time. Volatility always includes both time (present moment) and Times (ALL past moments, at once, which are relevant to the study--but which are SUMMED to become a single number). And when you have multiple Times, you must have a Container to hold them in.

Since even physics 101 teaches that Time is the 4th dimension of Time-Space (as in the common phrase, 'time-space continuum'), then a concept of multiple Times is either a contradiction in terms, or, each Time exists in a single 5th dimensional container.

A common descriptive phrase would be ‘eternity’. Plato wrote about this, as did Robert Pirsig in his book ‘Zen and the Art of Motorcycle Maintenence’.

Yes. Your approach, BZB, is very quantum. So the quantum physicist would logically ask... WHAT is it that your floating volatility bands are floating IN?

Food for thought, hopefully. Really enjoy your work.


bzbtrader said...

OK...there might be a little bit of hyberole here, but thanks for the kind words. The volatility bands in conjunction with the PPP Indicator is part of Project Z and I'll post a more the fully integrated version (PPP+)in a week or two after I've debugged it a bit more.

Daniel said...

April Fools day calls for fun and hyperbole. Kidding aside, keep on this interesting line of approach!

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Your charts are beautiful.

Joshua said...


So is that a ( 3 period EMA divided by a 7 period EMA ) minus 1 or multiplied by minus 1?

...and Daniel, what are you smoking, man? I want some! :D


bzbtrader said...

That's just -1 as I'm looking for the reciprocal value.

Daniel said...

@Josh, since you asked so sweetly, I’ll tell you, and tell you how to get some. I'm smoking the absolutely smoking 5-Dimensional (actually 6) mathematics of the great 19th century mathematician David Hilbert, and his disciples Werner Heisenberg, Albert Einstein, P.D. Ouspensky, and Bertrand Russell, as applied to the Market cycle/trend work of J.M. Hurst... in search of the Holy Grail, the so-called factor of “intrinsic volatility”.

BZB is in search of this Holy Grail as well, in his quest to quantify “floating volatility” and “the pivot of pivot-points”, etc.

Of the above philosopher-mathematicians, I would suggest either Ouspensky or Russell to start with, since they were popularizers who wrote well, and are much easier to read.

People in financial circles use the term the “Mind of the Market”. One reads a blog or newspaper post, saying “the market had trouble making up its mind today......” All know that something real is being described by this language.

Where IS the ‘mind’ of the market?

Just think about that one thought for a week, Josh, and you won't need to smoke or read anything. Price is not the ‘thought’ of the Market... it’s the MOOD of the market. Volume is just its level of interest.

Nobody can talk of “intrinsic price”, what a silly concept. Price can go where it wants. But volatility...

VOLATILITY is the ‘thought’ on the ‘mind’ of the market. The Market’s core outlook is always expressed in its outlook on volatility.

Hence all of BZB’s mumble jumbo about the square root of pivots and such, he’s after that concept of ‘eternal’ reality-- for that particular tradeable security-- whether it is GE, or AAPL, the Qs, whatever.

And if one COULD discern the true genuine “intrinsic volatility” of any tradeable security, then one WOULD possess the ultimate pivot-point, and could sit back like a fisherman, with a simple Mean-Reversion trading model, minting coin could they not?