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Tension Market indicator

By jaguar1637 2327 days ago Comments (5)

Hi

Prizm shows me a very interesting indicator.

Victor sends me a very interesting link 

https://docs.google.com/viewer?a=v&pid=forums&srcid=MTI4NDcyNzUzNDYwMDc4NTI0OTYBMTU5NjI2NDMwMDgwNTY0NDk3MDgBMlhXak10SmMzYmNKATEBAXYy

and jcpar, wrote me "Write this indicator !" . Is it a joke ?

Comments

  • jaguar1637 2325 days ago

    About optimization regarding tension market indicator

     a) using velocity only
     b) using acceleration only
     c) using both velocity and acceleration

     All options provide decent results, but b) and c) do not seem to add any extra edge to a).

    1) When the velocity of a signal is positive, wait for its acceleration to turn negative
    2) When the velocity of a signal is negative, wait for its acceleration to turn positive
    good long entries can be made when balance velocity reaches a high positive value and is starting to decelerate down

    balance = 100 * (cumulativeBidSize - cumulativeAskSize) / (cumulativeBidSize + cumulativeAskSize)

    now about the tension_period, to calculate movment, I was thinking about a Fibonacci number

     

  • JohnLast 2325 days ago

    Are you interested in those concepts?

    Discussion



    Opinion A: Supply is unlimited

    In capital markets, the supply often can be manufactured instantly, in any quantity at will and the demand can be deferred without any adverse consequence: e.g. there is no physical limitation on the number of ES contracts that can be written by the sellers and the buyers can easily forego the purchase if they believe the price is too high, no matter what the book imbalance is.

    Of course ES contract can exist only if there are both, buyer and a seller. That is not the point, however. As a seller of ES, I am not limited by a finite inventory. I can offer to sell as many contracts as I want (subject to margin requirements). The supply and demand theory originally was proposed in 1691 and formalized in 1817. It referred to trade of physical goods with finite inventory and demand driven by need for consumption of those goods rather than speculation.



    Opinion B: Supply is limited
     
    By definition, an ES contract can only exist if there is both a buyer and a seller.

    Verdict: Supply is NOT infinite.

    There're two schools of thought on this "supply and demand" thing. I think the bridge is the fact that the supply is NOT infinite. There has to be a willing seller for every buyer, and a willing buyer for every seller. If there is not, then the price is going to move. If there were infinite supply, then the price would never move.


    For example, looking at the formula: 
     
    Tension = (fastBalance  - slowBalance)  -(fastPrice - slowPrice). As prices rise, there are less and less buyers willing to pay for higher prices, consequently fastBalance will be more negative than slowBalance, the term  (fastBalance - slowBalance) will result in negative number.  fastPrice will be 
    higher than  slowPrice and the term  (fastPrice  - slowPrice) will become positive. 


    Overall when price rises tension will turn to negative. The strategy is to go short when tension is really negative and to go long when tension is really positive.


  • JohnLast 2325 days ago

    In our work here we are totally disconnected from terms of supply and demand. We are measuring Hurst exponent and Entropy as characteristics of the system. The question is if the current state is predictable or not. We are just a machine in a swarm among other machines forming the market. Yes the problem is that supply and demand is a human notion that has no place in a machine world.  

  • jaguar1637 2325 days ago

    You are right , We are trying to mesure Hurst exponent, entropy

    and it's also possible to apply this on Bid Volume and Ask Volume

    The tension indicator could be the ties of a gaussian curve predicting the begin of a break out. 

  • jaguar1637 2325 days ago

    About how to building a tension indicator, Tommaso was kind to indicate the SDX 

    http://www.datatime.eu/public/gbot/MetricsForAlgorithmicTrading.htm#SDX

    One can compute a Short term SDX and a Long term SDX, depending on the timeframe or hit list length considered. An excellent and simple way to determine break points or "peaks" in the price curve is to detect a difference of sign between the Long term and Short Term SDXs. This is also used by G-Bot for the the entry style based on "peaks" (good choices of hit list lengths for SDX_Lt and SDX_St, are, for instance, 11 and 101, respectively).

     Relationships between the above concepts
    From the definitions, one may notice that :
    Trending %   =  | SDX |
    Sideways %   =  100 - | SDX |
     
    As it is intuitive, the trending percentage is given by the absolute value of the signed direction index.