What is RFTL (Reference Fast Trend Line) and RSTL (Reference Slow Trend Line)?
What is RFTL (Reference Fast Trend Line) and RSTL (Reference Slow Trend Line)?
RFTL and RSTL are support "slow" trend line are digital filters response of LPF 1 and LPF 2 to the entry discontinuous series taken with delays. Support lines of RFTL and RSTL are analogues to simple moving "average" in the sense of their delay in relation to the current prices.
Indicators of FTLM (Fast Trend Line Momentum) and STLM (Slow Trend Line Momentum) show the tempo of change (fall or growth) of FATL and SATL and are calculated similarly to indicator Momentum by formulas:
FTLM(k) = FATL(k) - RFTL(k),
STLM(k) = SATL(k) - RSTL(k).
Main difference of FTLM and STLM
Main difference of FTLM and STLM from classical technical instrument Momentum is that for its calculation not the close prices but smoothed (leveled) in the result of filtration values of the trend line are used. In the result FTLM and STLM turn out more leveled (smoothed) and regular functions than the classical instrument Momentum, and therefore have more forecasting value.
During computation the classical indicators Momentum requirement is often not fulfilled and it leads to unavoidable distortions in the spectrum of the entering signal. Specialists in the digital processing of the signals name these distortions aliasing that is frequencies overlay or ambiguity. This ambiguity leads to strong irregularity and chaos in the classical technical indicator Momentum.
A set of the technical instruments of the method contains two more new oscillators. They are indexes of RBCI and PCCI.
RBCI (Range Bound Channel Index) - is calculated by means of the channel (bandwidth) filter (CF).
PCCI Index (Perfect Commodity Channel Index) - is a perfect commodity channel index.
It has some outer similarity in the calculating method with commodity channel index CCI by D. Lambert. Indeed, CCI index is calculated as normalized difference between current price and its moving average and PCCI - as the difference between closing price and its mathematical expectation represented by the FATL value. Here lies more than in comparison with CCI the perfection of PCCI. PCCI index - is a normalized for its standard deviation high frequency component of the currency rate volatility.
Main Principles for the Trading Algorithm Development Using the Digital Filters:
- Trade only in the direction of the prevailing tendency the direction of which is specified by "slow" adaptive trend line SATL;
- To consider dynamic characteristics of the "fast" and "slow" trend represented by the FTLM and STLM indicators;
- To use information on what area of the values (neutral, overbought, oversold, local maximum and local minimum) is the sum of prevailing market cycles (index of RBCI) in chosen by means of frequency range spectral analysis;
- To take oscillator signals as secondary ones in cases when trend indicators are evidence of the very marked bearish or bullish tendency availability;
- To take oscillator signals as main ones in cases when trend indicators give signals about absence of the very marked tendency;
- To use flexible system of protective stop orders based on the values of RBCI, PCCI indexes and volatility values of the "fast" market oscillations.
Main rules for the above mentioned instruments interpretation are the following:
- Growing SATL line is evidence of the bullish trend on the market. The point of the reversal beginning of the bearish trend is considered the point of the local minimum of SATL. The point of finishing the reversal of the bearish trend is the point where the sign of STLM changed from minus into plus.
- Falling SATL line is evidence of the bearish trend on the market. The point of the bullish trend reversal beginning is considered the point of the local SATL maximum. The point of finishing the bullish trend reversal is the point where STLM sign changed from plus into minus.
- Close to horizontal the form of SATL is evidence of the neutral tendency.
- STLM interpretation requires special attention. Positive value of STLM is evidence of the bullish trend and the negative one testifies the bearish trend. STLM is an advance indicator. Local minimum of STLM always precedes the local minimum of SATL. Local maximum of STLM always precedes the local maximum of SATL. Achievement by STLM its points of extremum is necessary but insufficient condition for the achievement by the curve of SATL the top or the bottom. Growing STLM at growing SATL is evidence of the bullish trend acceleration. Horizontal and positive STLM at growing SATL is evidence of the set bullish trend. The more absolute the value of STLM, the more potential the bullish trend has. Falling STLM at falling SATL testifies the bearish trend acceleration.
Horizontal and negative STLM at growing SATL testifies the bearish trend setting. The more absolute value of STLM, the more potential the bearish trend has.
4 Attachment(s)
All Digital Filters indicators - old ones
Please find old digital filters indicators attached which I found inside my PC.
Trend signals (RSTL):
Attachment 7555
FARL crossing RFTL:
Attachment 7556
RBCI:
Attachment 7557