"Framgångsrik Aktiehandel" by: Peter Nilsson, Jonny Torsell, Johan Hellström
Idea: FearZone tries to indicate when a stock has fallen to a level where
fear, instead of common sense, control the further development.
It is only intended for (very) short trades.
Suggestion: Enter a trade (at your own risk) when all columns are green.
Exit as soon as profit is made, but no longer than 5 periods has lasted.
Each of the triggering Signal Indicators now have distinctive colors in order
to make it easier to see which is which.
The Panel now consists of the following rows:
1. FZ1 indicator (lime)
2. FZ2 indicator (lime)
3. Impulse down 10% (blue)
4. In Ricochet zone (yellow)
5. Magic-K1 (white)
4. Above MA-200 (lime)
Well, I'm far from any expert (yet... hehe) but I think the FZ2 is the easier one to understand
(at least for me...). As I understand it, it says that the Average Price (ohlc4) is below the
the mean in more than 84% (lower Bollinger Band with a standard deviation of 1) of the measured time.
I'm actually a bit wondering about the 'ohlc4' value mayself compared to just 'close', but
I guess that 'ohlc4' incorporates some of the ongoing momentum and volatility.
The FZ1 indicator is a bit more complicated I think, but here is my take on it: it says
that the Average Price has varied very little under the majority (84%) of the measured time.
So in other word: it has been compressed, like a 'squeeze'.
I may have interpreted it wrong, so if anyone else has a better understanding of it I would
appreciate to hear about it. /Cheers
Here is my take: by using Open,High,Low,Close you get four opinions of what the price should be for the current period.
If there is a difference between 'close' and 'ohlc4' there seem to exist an uncertainty if the closing price is correct.
Can we say anything about direction? I don't think so; either the 'close king' has to listen to its 'people' and move
toward 'ohlc4', or the other way around. A way to see if the uncertainty increases over time could be to see if:
abs(close - ohlc4) < abs(close - ohlc4) ,which say that we are more uncertain this period than the in previous one.
And I guess, with increased uncertainty comes 'fear' of loosing money ;-)
When it comes to the Stochastic part, it really just makes use of that indicator, which says that at a low value
the stock is oversold and may be ripe for a reversal. In our case it strengthen the total indicator of ours in
our believe that the stock will go up. /Cheers
I did some simple manual backtesting, taking position every time it gave signal, result: 15 trades , +19.57% profit , on average: +1.3% profit with a position length average of 4 days :-)