New Research: Essay Three (continued)
© Andrew Coles
Comparing the new indicator with the MIDAS/AC Displacement Bands in Chapter 14 of the book
It would be pointless to develop this new indicator if its plotting is identical to the MIDAS/AC Displacement Bands. This is not the case, however, for two reasons:
In Figure 8 below I’ll illustrate the two indicators in sideways moving markets where we’ll see the immediate superiority of the MIDAS/AC Displacement Channel over the MIDAS/AC Normal Deviation Bands. In Figure 9 I’ll compare the two indicators in lightly trending conditions.
In Figure 8 immediately below, the first chart in the sequence is the MIDAS/AC Displacement Bands which handle the price action perfectly. The second chart is the MIDAS/AC Normal Deviation Bands which aren’t as good in a sideways market. The third chart is an overlay of both indicators. As usual, the green arrows highlight the fixing points of the bands.
Figure 8: Comparing the MIDAS/AC Displacement Channel and MIDAS/AC Normal Deviation Band in a sideways market In the Nikkei 225 cash index
In Figure 9 below I’ll briefly compare the two indicators in a trending market. Here we’ll see that this time the MIDAS/AC Normal Deviation Bands are superior, which again is exactly what we want to avoid duplicating indicators. In the first chart we see the MIDAS/AC Displacement Channel. The second chart illustrates the MIDAS/AC Normal Deviation Bands. Again the green arrows highlight the launch points. The red and green arrows highlight successfully predicted areas of support and resistance.
Figure 9: Comparing the two indicators in a naturally sloping uptrend in the Nasdaq 100 cash index in 2009-2010
I’ll now round off this essay with a brief conclusion overleaf.
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