2014-06-23
trend: down
intraday median daily price: $591
intraday daily MACD hist: -13.3
RI = 38
comment: last day of trading didn't exactly help the reversal case. RI further away from 50 again. MACD still pretty far from turning positive.
Topic: Experimental indicator, anyone? I give you the... reversal index - page 2. (Read 5119 times)
I'm really enjoying reading this thread. It appears that you have a nice work in progress that may develop into a useful tool.
Back when I was still trading/speculating vs. hodling; I wrote a python script that was intended to do something similar - warn about reversals. Several variables were used and assigned a value of -1, 0, or +1 (like counting cards in blackjack). The scale was -7 through +7. It worked pretty well before I broke it. I'll be following this thread with some interest. Good work.
Even though I no longer speculate in the short term, I still enjoy reading this sub and marvel at the detailed analysis that many of you guys do. Quantifying and predicting new markets is valuable beyond the scope of just bitcoin. Tip: weight your variables, add assumptions (be willing to remove them if they prove wrong), and be very critical of your process. Thanks for posting.
Back when I was still trading/speculating vs. hodling; I wrote a python script that was intended to do something similar - warn about reversals. Several variables were used and assigned a value of -1, 0, or +1 (like counting cards in blackjack). The scale was -7 through +7. It worked pretty well before I broke it. I'll be following this thread with some interest. Good work.
Even though I no longer speculate in the short term, I still enjoy reading this sub and marvel at the detailed analysis that many of you guys do. Quantifying and predicting new markets is valuable beyond the scope of just bitcoin. Tip: weight your variables, add assumptions (be willing to remove them if they prove wrong), and be very critical of your process. Thanks for posting.
Thanks :)
What do you mean though you "broke" the script? You changed the parameters, and didn't keep a backup of the ones that worked?
Anyway, I like the idea of combining very different types of analysis, some chart based, some maybe news/sentiment based, aggregating them into a single value (if I understood it right that this is what you did.) Could then even be an interesting optimization problem to find the best weights for the different types of input.
* * *
2014-06-22
trend: down
intraday median daily price: $596
intraday daily MACD hist: -14.5
RI = 50
comment: 50, means RI is getting nearer to indicate a reversal (upwards). MACD still far from it, which makes it all the more interesting.
I'm really enjoying reading this thread. It appears that you have a nice work in progress that may develop into a useful tool.
Back when I was still trading/speculating vs. hodling; I wrote a python script that was intended to do something similar - warn about reversals. Several variables were used and assigned a value of -1, 0, or +1 (like counting cards in blackjack). The scale was -7 through +7. It worked pretty well before I broke it. I'll be following this thread with some interest. Good work.
Even though I no longer speculate in the short term, I still enjoy reading this sub and marvel at the detailed analysis that many of you guys do. Quantifying and predicting new markets is valuable beyond the scope of just bitcoin. Tip: weight your variables, add assumptions (be willing to remove them if they prove wrong), and be very critical of your process. Thanks for posting.
Back when I was still trading/speculating vs. hodling; I wrote a python script that was intended to do something similar - warn about reversals. Several variables were used and assigned a value of -1, 0, or +1 (like counting cards in blackjack). The scale was -7 through +7. It worked pretty well before I broke it. I'll be following this thread with some interest. Good work.
Even though I no longer speculate in the short term, I still enjoy reading this sub and marvel at the detailed analysis that many of you guys do. Quantifying and predicting new markets is valuable beyond the scope of just bitcoin. Tip: weight your variables, add assumptions (be willing to remove them if they prove wrong), and be very critical of your process. Thanks for posting.
2014-06-21
trend: down
intraday median daily price: $587
intraday daily MACD hist: -16.8
RI = 41
trend: down
intraday median daily price: $587
intraday daily MACD hist: -16.8
RI = 41
Next round...
2014-06-20
trend: down
intraday median daily price: $590
intraday daily MACD hist: -17.6
RI = 48
comment: Let's stipulate for now that 1d MACD signals reversal when the MACD histogram turns positive, and RI when it goes above 50 (and remains there). So neither MACD nor RI signal a reversal today from the downtrend starting fromJuly June 5.
2014-06-20
trend: down
intraday median daily price: $590
intraday daily MACD hist: -17.6
RI = 48
comment: Let's stipulate for now that 1d MACD signals reversal when the MACD histogram turns positive, and RI when it goes above 50 (and remains there). So neither MACD nor RI signal a reversal today from the downtrend starting from
As promised, the RI values during the last swing plotted against price (and daily MACD)
Observation #1: As mentioned a few posts above, values above or below 50 (i.e. when 50 is crossed), even when still near 50, should be considered a buy/sell signal. IOW, the output should be interpreted with high sensitivity, if it is to be useful at all.
Observation #2: daily MACD outperformed RI during this swing. MACD went negative on June 10, around $650, my own signal crossed the 50 line 2 days later, near $590. Still in time for the bigger drop to $530, but even more lagging than the MACD, so it has to be improved.
Conclusion: I'm changing some of the parameters to make my method more sensitive to an impending reversal. Will post the results, under the new rules, in a bit.
Observation #1: As mentioned a few posts above, values above or below 50 (i.e. when 50 is crossed), even when still near 50, should be considered a buy/sell signal. IOW, the output should be interpreted with high sensitivity, if it is to be useful at all.
Observation #2: daily MACD outperformed RI during this swing. MACD went negative on June 10, around $650, my own signal crossed the 50 line 2 days later, near $590. Still in time for the bigger drop to $530, but even more lagging than the MACD, so it has to be improved.
Conclusion: I'm changing some of the parameters to make my method more sensitive to an impending reversal. Will post the results, under the new rules, in a bit.
This is interesting. Are you able to plot the indicator? It would be nice to see how it interacts with price visually.
Yes, absolutely. will do that at the end of the current "swing".
This is interesting. Are you able to plot the indicator? It would be nice to see how it interacts with price visually.
I reckon you won't get a signal, because I reckon any down move is not a reversal but just a little dip. fwiw.
so... SUCCESS!
so... SUCCESS!
hehe, that's a nice thought, but not what I'm aiming for.
It's intended to be a trading signal for swing traders: if there's a price change of about 5 to 10%, I aim to pick it up, ideally before other indicators like MACD do.
If, on the other hand, we don't get to see a price drop into the $585 to $618 range, then: yes, I'd consider not giving a reversal signal intended behavior of the RI.
once again, pulling opinions out of my ass (but it keeps this thread near the top, hehe) id say there will be no concerted move into that range, if it does spike down, it will be short lived. No reversal, just a blip in a general uptrend.
I'm keeping track of the output so far in a chartable format, so once this swing (or non-swing) is over, I'll post the results charted against price and daily MACD (which is a reasonably close analogue to my RI, from what I can tell so far), and I shall do so with a bump :D
I reckon you won't get a signal, because I reckon any down move is not a reversal but just a little dip. fwiw.
so... SUCCESS!
so... SUCCESS!
hehe, that's a nice thought, but not what I'm aiming for.
It's intended to be a trading signal for swing traders: if there's a price change of about 5 to 10%, I aim to pick it up, ideally before other indicators like MACD do.
If, on the other hand, we don't get to see a price drop into the $585 to $618 range, then: yes, I'd consider not giving a reversal signal intended behavior of the RI.
once again, pulling opinions out of my ass (but it keeps this thread near the top, hehe) id say there will be no concerted move into that range, if it does spike down, it will be short lived. No reversal, just a blip in a general uptrend.
I reckon you won't get a signal, because I reckon any down move is not a reversal but just a little dip. fwiw.
so... SUCCESS!
so... SUCCESS!
hehe, that's a nice thought, but not what I'm aiming for.
It's intended to be a trading signal for swing traders: if there's a price change of about 5 to 10%, I aim to pick it up, ideally before other indicators like MACD do.
If, on the other hand, we don't get to see a price drop into the $585 to $618 range, then: yes, I'd consider not giving a reversal signal intended behavior of the RI.
I reckon you won't get a signal, because I reckon any down move is not a reversal but just a little dip. fwiw.
so... SUCCESS!
so... SUCCESS!
Another example of my RI backtesting. This time on the early March (failed) breakout:
RI reversal signal came a solid 3 days before daily MACD turned red, and at around $40 higher price.
For comparison, 6h MACD turned red around the same time as RI signaled 'reversal' (slightly earlier in fact), but it gives a lot more signals altogether, including many bad ones, so can't really be compared:
EDIT: the current situation is actually quite interesting. Almost all momentum signals of comparable time scale are either red, or are about to (1d MACD will probably go down in the next day or two). My RI signal is still saying "doesn't look good, but no reversal case yet". Will be really interesting to see if it is just lagging even more than the momentum signals at the moment, or whether it is onto something.
I never properly defined what I'd consider a "success", but since I'm thinking in terms of profitable trading signals, I'd want to see at least a 5%, and preferably a 10% change in price from here to say that we substantially deviated from the main trend. In other words: staying above 618, or 585, in case RI doesn't signal reversal would be a success in my view. If price hits 585 before RI signals reversal, I'd consider it a clear failure.
RI reversal signal came a solid 3 days before daily MACD turned red, and at around $40 higher price.
For comparison, 6h MACD turned red around the same time as RI signaled 'reversal' (slightly earlier in fact), but it gives a lot more signals altogether, including many bad ones, so can't really be compared:
EDIT: the current situation is actually quite interesting. Almost all momentum signals of comparable time scale are either red, or are about to (1d MACD will probably go down in the next day or two). My RI signal is still saying "doesn't look good, but no reversal case yet". Will be really interesting to see if it is just lagging even more than the momentum signals at the moment, or whether it is onto something.
I never properly defined what I'd consider a "success", but since I'm thinking in terms of profitable trading signals, I'd want to see at least a 5%, and preferably a 10% change in price from here to say that we substantially deviated from the main trend. In other words: staying above 618, or 585, in case RI doesn't signal reversal would be a success in my view. If price hits 585 before RI signals reversal, I'd consider it a clear failure.
Huh. That's a nice surprise...
I spent a bit of time backtesting the formula (still not all the way automatized, but I'm getting reasonably fast at it), and I took for example a look at the April 11 rally and the period that followed.
It's an example of a scenario that I was hoping my RI would be able to pick up: there's a strong trend, an initial retracement, followed by a longer period of indecision. In situations like that, I'd like to get a leading signal from my RI whether reversal is expected or not.
Here's the period I'm talking about:
Marked in green is the beginning of what I define to be the main trend, orange is the crash I'd like to predict.
Turns out, at the time of the last green candle *before* the crash, RI was 55, i.e. "undecided, leaning towards reversal" by my interpretation guidelines as specified so far. So the RI was leaning in the right direction (reversal signal more likely than no reversal signal), but the value was pretty close to 50. Perhaps the way to make use of it is considering even small deviations from that baseline as a relevant signal. Further testing needed obviously to determine if an "aggressive" interpretation like that gives too many false signals or not.
Anyway, the above "aggressive" interpretation applied to the current situation and values would mean that the values we're seeing now (high 30s, low 40s) are actually a comparably strong indication that there is no reversal signal coming in from the RI. (The updated values can be found 2 posts above)
Let's see.
I spent a bit of time backtesting the formula (still not all the way automatized, but I'm getting reasonably fast at it), and I took for example a look at the April 11 rally and the period that followed.
It's an example of a scenario that I was hoping my RI would be able to pick up: there's a strong trend, an initial retracement, followed by a longer period of indecision. In situations like that, I'd like to get a leading signal from my RI whether reversal is expected or not.
Here's the period I'm talking about:
Marked in green is the beginning of what I define to be the main trend, orange is the crash I'd like to predict.
Turns out, at the time of the last green candle *before* the crash, RI was 55, i.e. "undecided, leaning towards reversal" by my interpretation guidelines as specified so far. So the RI was leaning in the right direction (reversal signal more likely than no reversal signal), but the value was pretty close to 50. Perhaps the way to make use of it is considering even small deviations from that baseline as a relevant signal. Further testing needed obviously to determine if an "aggressive" interpretation like that gives too many false signals or not.
Anyway, the above "aggressive" interpretation applied to the current situation and values would mean that the values we're seeing now (high 30s, low 40s) are actually a comparably strong indication that there is no reversal signal coming in from the RI. (The updated values can be found 2 posts above)
Let's see.
bump away! its better than some of the tripe that keeps being pushed to the top 
Okay... as mentioned one post above, I changed my mind about how to interpret the output of my indicator, though I didn't change the formula itself.
I'd rather think of it as a 'reversal indicator', because the (previous) upper side of the value range doesn't really say that a continuation is guaranteed or even likely, just that no signs for a reversal can be picked up. Think of it like looking, for example, for bearish divergences on the RSI: finding one is an indication that a trend is about reverse, but not finding one is not equally an indication that the trend will continue. Below I'll re-post the previously calculated values as: RI = 100-CI, i.e. mapping the 0 effect to 100, and vice versa, and calling it "RI" (reversal index) from now.
Once more, the suggested (from now on) way to read the RI value is as follows:
100 = reversal (from main trend) certain
50 = undecided/unclear signal
0 = no sign of reversal (by the metric of the RI)
(edit) To keep track of performance, I take note of current price (H+L/2 of last closed daily interval at time of calculation), and the direction (up, down) and starting point of what is assumed to be the current main trend.
This is also the last new post I'll make in updating the values. all further values will be added inside this post by edits. I feel this method isn't really worth bumping to the 1st page of the forum every day. Feel free to check on it if you wish though, I'll keep updating it daily, if possible.
2014-06-04, 3:08 PM CEST
RI = 46
trend: up (from 2014-05-20)
price: $665
2014-06-05 3:39 PM CEST
RI = 40
trend: up (from 2014-05-20)
price: $648
2014-06-06 3:02 PM CEST
RI = 39
trend: up (from 2014-05-20)
price: $655
2014-06-07 3:07 PM CEST
RI = 44
trend: up (from 2014-05-20)
price: $655
2014-06-08 8:37 PM CEST
RI = 38
trend: up (from 2014-05-20)
price: $647
2014-06-09 3:00 PM CEST
RI = 45
trend: up (from 2014-05-20)
price: $656
2014-06-10 4:00 PM CEST
RI = 43
trend: up (from 2014-05-20)
price: $649
comment: RI continues to stay below 50, which implies the larger upwards trend is likely still intact. Momentum signals differ: 1d MACD just turned negative, so it'll be interesting to see how the situation resolves.
2014-06-11 04:15 PM CEST
RI = 49
trend: up (from 2014-05-20)
price: $650
2014-06-12 3:30 PM CEST
RI = 51
trend: up (from 2014-05-20)
price: $634
comment: first time during this swing that RI goes above 50. Slightly so, but if past results apply here as well, it's starting to look like the downturn isn't over yet.
also, I'm already not too happy with the results of the RI, but have some ideas how to fine tune it better. I will however continue this first "experiment cycle" with the old rules to get a result at the end that allows me to draw some conclusions. Afterwards, if I think improvements might work, I can do the next cycle with the new rules
2014-06-13 4:00 PM CEST
RI = 52
trend: up (from 2014-05-20)
price: $590
comment: I'm late with the post, but the value above is calculated for the chart ~24h after the last one for consistency.
The method doesn't really provide a price target, but if I look at the situations in the past where similar values came in, I would consider ~$530 to be a possibility in the coming days.
2014-06-15 2:00 AM CEST
RI = 57
trend: up (from 2014-05-20)
price: $566
comment: Last update for now. RI = 57 just states what is obvious anyway: the previously dominant trend is broken. I'll stop posting updates for now because I don't see how it can inform anyone's trading. We went down substantially, and the question right now is if, how and when we will go back into an upwards trend, but the RI in its current form can't answer that question.
I'll make another post with a more detailed analysis of the results for now, together with a chart of the values of the RI, and then I'll work on improving it. The RI value crossed 50 shortly before the crash began, but e.g. daily MACD would have actually performed better this time, so I should work on it.
I'd rather think of it as a 'reversal indicator', because the (previous) upper side of the value range doesn't really say that a continuation is guaranteed or even likely, just that no signs for a reversal can be picked up. Think of it like looking, for example, for bearish divergences on the RSI: finding one is an indication that a trend is about reverse, but not finding one is not equally an indication that the trend will continue. Below I'll re-post the previously calculated values as: RI = 100-CI, i.e. mapping the 0 effect to 100, and vice versa, and calling it "RI" (reversal index) from now.
Once more, the suggested (from now on) way to read the RI value is as follows:
100 = reversal (from main trend) certain
50 = undecided/unclear signal
0 = no sign of reversal (by the metric of the RI)
(edit) To keep track of performance, I take note of current price (H+L/2 of last closed daily interval at time of calculation), and the direction (up, down) and starting point of what is assumed to be the current main trend.
This is also the last new post I'll make in updating the values. all further values will be added inside this post by edits. I feel this method isn't really worth bumping to the 1st page of the forum every day. Feel free to check on it if you wish though, I'll keep updating it daily, if possible.
2014-06-04, 3:08 PM CEST
RI = 46
trend: up (from 2014-05-20)
price: $665
2014-06-05 3:39 PM CEST
RI = 40
trend: up (from 2014-05-20)
price: $648
2014-06-06 3:02 PM CEST
RI = 39
trend: up (from 2014-05-20)
price: $655
2014-06-07 3:07 PM CEST
RI = 44
trend: up (from 2014-05-20)
price: $655
2014-06-08 8:37 PM CEST
RI = 38
trend: up (from 2014-05-20)
price: $647
2014-06-09 3:00 PM CEST
RI = 45
trend: up (from 2014-05-20)
price: $656
2014-06-10 4:00 PM CEST
RI = 43
trend: up (from 2014-05-20)
price: $649
comment: RI continues to stay below 50, which implies the larger upwards trend is likely still intact. Momentum signals differ: 1d MACD just turned negative, so it'll be interesting to see how the situation resolves.
2014-06-11 04:15 PM CEST
RI = 49
trend: up (from 2014-05-20)
price: $650
2014-06-12 3:30 PM CEST
RI = 51
trend: up (from 2014-05-20)
price: $634
comment: first time during this swing that RI goes above 50. Slightly so, but if past results apply here as well, it's starting to look like the downturn isn't over yet.
also, I'm already not too happy with the results of the RI, but have some ideas how to fine tune it better. I will however continue this first "experiment cycle" with the old rules to get a result at the end that allows me to draw some conclusions. Afterwards, if I think improvements might work, I can do the next cycle with the new rules
2014-06-13 4:00 PM CEST
RI = 52
trend: up (from 2014-05-20)
price: $590
comment: I'm late with the post, but the value above is calculated for the chart ~24h after the last one for consistency.
The method doesn't really provide a price target, but if I look at the situations in the past where similar values came in, I would consider ~$530 to be a possibility in the coming days.
2014-06-15 2:00 AM CEST
RI = 57
trend: up (from 2014-05-20)
price: $566
comment: Last update for now. RI = 57 just states what is obvious anyway: the previously dominant trend is broken. I'll stop posting updates for now because I don't see how it can inform anyone's trading. We went down substantially, and the question right now is if, how and when we will go back into an upwards trend, but the RI in its current form can't answer that question.
I'll make another post with a more detailed analysis of the results for now, together with a chart of the values of the RI, and then I'll work on improving it. The RI value crossed 50 shortly before the crash began, but e.g. daily MACD would have actually performed better this time, so I should work on it.
2014-06-05, 3:39 PM CEST
CI = 60
current main trend: up
price at calculation: $647
* * *
Please note the correction I made in OP: the way to look at CI values near the top is different from what I said at first... it does not amount to the claim that "reversal is unlikely", but rather "no indication that a reversal is underway".
So I should probably rename it "reversal index", and map the current 0 effect to 100.
CI = 60
current main trend: up
price at calculation: $647
* * *
Please note the correction I made in OP: the way to look at CI values near the top is different from what I said at first... it does not amount to the claim that "reversal is unlikely", but rather "no indication that a reversal is underway".
So I should probably rename it "reversal index", and map the current 0 effect to 100.
Does the indicator itself determine the main trend? Is it binary?
Not right now, but it's not a really controversial choice in what the main trend is imo. Like I said above, I think it could be coded by looking at, for example, rate of change. It's just easier to do by hand if you're lazy, like I am. And it is binary. Positive slope, or negative slope. Nothing in between.
I can code it for you if u want ?
I'll keep that in mind, thanks. First, I'd really like to see if this thing has any informative value though.
Does the indicator itself determine the main trend? Is it binary?
Interesting.
So if it works, you'll have us convinced because you've posted the predictions ahead of time. However, we still won't know how to calculate your indicator. Which means you can charge us top dollar for a subscription to your newsletter
So if it works, you'll have us convinced because you've posted the predictions ahead of time. However, we still won't know how to calculate your indicator. Which means you can charge us top dollar for a subscription to your newsletter
Ha, I wish.
If the thing is even remotely informative, I'll happily share the algorithm. I'd probably need some help anyway to fully code it... the tricky step I mentioned, 'determination of dominant short term trend' can probably be automatized through some combined analysis of BBW and ROC, but it's probably not quite as simple as looking at hard coded threshold values.
So when I say "I could code it in principle" I really mean "a more competent programmer than me could code it probably"
I can code it for you if u want ?
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