Log in

History

Brain Trend logic: Revision

Brain Trend logic

Last updated 2265 days ago by JohnLast

The logic of the brain trend is based on 3 key aspects:

A signal is generated whe we have a momentum + volatility break - out of a digitally filtered price over a momentum treshold.

The first aspect is the momentum

The Brain Trend needs a momentum computation in order to generate a signal for the trade. The momentum is computed using the Stochastic indicator. As the momentum often preceeds the price action this is a sound technical principle.

In fact it is possible to change the tresholds for the momentum manually.

In the privded expet we did not touch to this parameter. The default setting is a 9 period Stochastic for momentum computation.

As far as I understand  we need a strong momentum in the direction of the price action in order to generate a signal. If we go up we need the momentum to go in the overbought area. If we seel we need the momentum to go in the oversold area.

 

The second aspect is the breaking of a volatility range

The momentum by itself is not sufficient in order to generate a signal A break - out over a determined range is needed.

The signal would be active only the price goes beyond a predetermined range. This part of the formula has never been touched. However as we know the volatility is changing all the time in the forex market and there are repeatable patterns of volatility I think that should be adapted. 

There are many possible ways to determine the break - out. The core idea of the digital mods is to use not the price but a smoothed price in order to check if there is a break - over the predetermined range or not. The more smothed is the price the  break above range level would be identified later. In fact this is the thing that is used to regulate the sensitivity of the filter and this was the main innovation of the digital brain trend mods. For example in the jurik JJMA versions we are not used the actual price but we are using the values of the filter. And we are looking for smoothing without delay and that is what the digital filters do in  the digital Brain Trend. It was not very far the idea to use jurik everywhere in complex systems so that gave birth to  a whole new generation of systems. However we can use everything that smoothes the prices without lag.  

 

The third aspect is a volatility stop

This is a classic in the trend following systems. The idea is to slide the stop loss level point by point based on the current volatility in the trend.