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Andreas Clenow Plunge indicator
Last Activity 5/25/2019 11:20 AM
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Manfred

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Joined: 4/2/2006
Location: South Africa

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Subject : Andreas Clenow Plunge indicator
Posted : 1/9/2019 7:36 AM
Post #30232

Hi all,

Came across this recently at http://www.followingthetrend.com/2014/06/a-counter-trend-indicator/ and coded it for OT. Hasnt shot the lights out for me (yet) but maybe others have some use for it. I can see some potential as an entry/exit filter in a trade system. However YMMV as you can see from the example charts. Hopefully it works well for you or can be combined with other filters or refined further. I have made most parameters optimisable in the code.

I also included a colourchart template based on Clenow's defaults.

Have fun,

Cheers

------------------------------------------

"Trend followers buy on 50 day breakout with the trend using a 3 ATR trailing stop. Position volatility is adjusted using ATR, targeting 20 basis points impact. So when do trend followers suffer? On sharp trend pullbacks of course.
Whether that happens right after breakout or later in the trend, it’s these pullbacks that cause the problem. In particular when there’s a pullback far enough to trigger a stop loss and then turns back into the trending direction. This happens all the time and it’s highly frustrating.
But what if we could quantify and measure trend following pain? Perhaps we can find a way to enter trades just as many trend followers are forced out? Let’s start with the trading model presented in my book and make an indicator to measure pain level.
Quick recap: The model had a trend filter using 50/100 day EMA, entered on 50 day extremes and took stops at 3 ATR units against the trend. And that’s the one sentence summary of my 300 page book. Sorry for the spoiler. The stop logic is key here. What if we made an indicator that measures how many ATR units we are from the recent peak? Yep, that’s exactly what The Clenow Plunger does.
The input numbers can of course be changed:
* Check the trend filter, using a 50/100 EMA.
* Check the last 20 day extreme price, in the direction of the trend
* Check current price.
* Calculate the difference between current price and 20 day trend extreme.
* Normalize this difference by dividing it by a 50 day ATR.
Now you’ve got an interesting indicator. When the reading is around 3, many medium term trend followers are exiting. If you do some simulations, you’ll also find that this is a pretty good entry point. This indicator can be used for entries into both counter trend and trend models, depending on how you want to handle your exit strategy. Note how the Plunger spikes up during pullbacks (downtrend), just as it should. It measures the extent of the pullback on a normalized basis. In essence, it measures trend following pain levels. This can be traded in a few different ways of course. Having a good entry point is only part of making a complete trading model." — Andreas F. Clenow, Chief Investment Officer of ACIES Asset Management AG."


Attached file : ClenowPlungerIndicatorExampleOmnitrader1.png (133KB - 54 downloads)
Attached file : ClenowPlungerIndicatorExampleOmnitrader2.png (136KB - 37 downloads)
Attached file : ClenowPlungerIndicatorExampleOmnitrader3.png (112KB - 36 downloads)
Attached file : ClenowPlunger-ColorChart.zip (0KB - 29 downloads)
Attached file : ClenowPlunger.txt (4KB - 34 downloads)

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LSJ

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Subject : RE: Andreas Clenow Plunge indicator
Posted : 1/10/2019 1:01 PM
Post #30235 - In reply to #30232

Thanks for the Clenow material, Manfred. An interesting twist. I created a template and applied it to and looked through several charts. I think it is definitely is useful.

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