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OmniTrader 2018 General Discussion
Trend Reversal ATS Method
Last Activity 9/18/2018 10:32 AM
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Vinay

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Subject : Trend Reversal ATS Method
Posted : 11/29/2017 10:37 AM
Post #42710

In the Trend Reversal ATS Method provided in OT2018 one of the Ranker is "Relative Strength" which uses the formula RSI(3) to rank the signals. Normally one would assume that for Longs a low RSI reading would be conducive because that would imply an oversold condition which is due for a snap back. This RTM strategies are based on this concept only.

However in the above mentioned ATS Method for Long signals RSI(3) ranker is configured as "Descending" and vice versa for Shorts. However as per the the reasoning of the above paragraph for pullback in the direction of the main trend the Longs should have been "Ascending" and vice versa for Shorts.

This is puzzling. I guess Ed or Jeff would have an answer.


[Edited by Vinay on 11/29/2017 10:40 AM]

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Barry Cohen

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Subject : RE: Trend Reversal ATS Method
Posted : 11/29/2017 4:56 PM
Post #42724 - In reply to #42710

I referred this to Ed & here is his response...

RSI(3) is a very short term version of RSI. When comparing RTM trades, we want to avoid the "falling knife" effect if we can, because a chart that is falling hard has a higher probability of continuing down than one that is slowing its descent or slightly turning up. That is, a higher value of RSI(3) means the chart has probably already started turning up.

This only works on very short RSI periods, like 2, 3 or maybe 4. Definitely not 6 or higher. In that case, you would want to take trades with the lower RSI values, but using RSI(3) as a Ranking Function provides more information and better trades when it has a higher value than other trades (i.e. Descending Sort).



Attached file : rsi.jpg (97KB - 180 downloads)

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Vinay

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Subject : RE: Trend Reversal ATS Method
Posted : 11/30/2017 12:12 AM
Post #42727 - In reply to #42710

Thanks Barry for getting the insightful explanation from Ed. Makes sense though counter intuitive.

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