Advance / Decline Correlation
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     sir_lance
Member
Username: sir_lance
Post Number: 9
Registered: 12-2005
Rating: N/A
Votes: 0
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| | Sunday, August 19, 2007 - 07:44 pm: |  
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Hi All
I have been working with one of my many systems, which (backtested over 1 year) appears to be able to predict the Advance / Decline direction to about 75%. Based on my system, the number of advances should be down on Monday as shown by my attached chart below.
Trouble is this doesn't really correlate to anything useful. I assumed that if the number of Advances were increasing, then XJO or XAO at the very least would also advance. The last two days shows the Advance line increasing yet XJO decreased over these two days.
So my question is, Does anyone know a security, index, or spread bet which could use this information to try and be profitable? ie Does the Advance line or Advance / Decline data correlate to anything useful ?
Sir Lance
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moldy
Member
Username: moldy
Post Number: 37
Registered: 11-2004Rating: N/A
Votes: 0
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| | Monday, August 20, 2007 - 08:28 am: |
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I looked at this AD stuff a while ago, and could not get any real advantage out of it. That's not to say there is something there, I couldn't see it. I trade the SPI so you can see why I thought it might be useful.
I now buy what goes up, and sell what goes down.
Moldy
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junkone
Member
Username: junkone
Post Number: 1
Registered: 08-2007Rating: N/A
Votes: 0
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| | Monday, August 20, 2007 - 11:54 pm: |
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The Ad Dec line is useful only to identify the turning points of the index. if you put the charts of the Ad-dec and nasdaq, you will find that the ad-dec will make extreme high and low in a short interval. the nasdaq will reverse soon after.
Ad-dec line identifies high volatiltiy and the market changes course after high volatility.
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sir_lance
Member
Username: sir_lance
Post Number: 10
Registered: 12-2005
Rating: N/A
Votes: 0
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| | Tuesday, August 21, 2007 - 01:58 pm: |
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Thanks for your reply Junkone, not to paraphrase you, but ...
You stated that "you will find that the ad-dec will make extreme high and low in a short interval". What is your short interval timeframe - 1 day / 3 days / 1 week etc. I have noted that the Advance line (or A/D) will peak then peak again from 4-7 days later. I am looking for a coutertrade against this bullishness (or bearishness - depending on direction).
You also stated "Ad-dec line identifies high volatiltiy and the market changes course after high volatility." I am not so sure about the volatility comment, as the market may simply be bullish for the day, however if the market changes course after high volatility, how quickly do you beleive this occurs 1 day / 1 week etc.
Finally, your words "The Ad Dec line is useful ONLY to identify the turning points of the index". Knowledge = $$$$, and if we can identify when the index is going to turn - then we ONLY make lots of money.
Sir Lance
(Message edited by Sir_Lance on August 21, 2007)
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junkone
Member
Username: junkone
Post Number: 4
Registered: 08-2007Rating: N/A
Votes: 0
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| | Wednesday, August 22, 2007 - 04:46 am: |
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ok. here is the deal. you can only anticipate the turn in index direction. how much of a turn depends on the overall long term direction of the market. there should be a follow thro. basicallly you scan longs and shorts. depending on the direction of the market, u go long or go short.
is there a guarantee. no. is there a good probablity, yes.
ad dec can be used as one of the factors to mark the edges during trading. if u are at the left of the edge and keep ur stops, the probablity of win/loss will be high enough to be profitable.
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