The instant of sign trade occurrence is a key factor in success, each major shift (posterior / anterior) between the sign and the price movement may be the major cause of loss , in these contexts we speak on leading indicators such as the RSI and stochastic, and lagging indicators such as MACD and MA.
My articles (Prices, Material Point ... Laws in Common (part 1) and (Prices, Material Point ... Laws in Common (part 2) in which I presented my arguments about the possibility of 'mesuring' the price movement by the simulation of concepts and physical laws was implicitly an attempt to better predict the next destination ie avoid as much the (Wipsaws). The fruit of this work was an indicator of buyers relative strength and a sellers relative strength.
Work is ongoing to better combine these two indicators and make other indicators derived to generate the most reliable signs and timely, to make I initially grouped the relative strengths indicators on the following way (indicator called NPINDEX).
The blue histogram represents the buyers's relative strength (in relation to a given period).
The pink line represents the sellers's relative strength (in relation to a given period)
The next step it was connecting the price by two weights, one for buying power (blue) and one for sales force (pink) which gave the following two curves and generates signs as follows:
Derived from strength indicators, ‘speed's indicator called 'NRDIV' measures the speed of buying and selling separately from each other.
The histogram represents the speed of the buyers while the curve represents the speed of sellers.
As in the physic , changing trend is that when the speed passes through zero value the ‘speed's indicator called 'NRDIV' generates the signs in the following way:
Comparison between different signs indicators
In this comparison I chose a combination of EMA (8) and EMA (4) indicators (lagging) and the RSI for the (leading) indicators with my strength indicator (NPINDEX) and my ‘ speed's indicator ’ (NRDIV)
The arrows on the chart represent the signs generated by the ‘speed's indicator’ (NRDIV)
By observing the above example, we see that the signs generated by the speed's indicator are still ahead of at least one unit of time in chart (a candle) With respect to signs generated by EMA (8) and (4).
On the vertical line 1: the EMA (8) is always above the EMA (4), the RSI recorded a highest peak but the strength indicator reveals on the 'actuel' bar of buyers strength a value less than the previous , even for the speedometer indicates a decrease in the speed of purchase and increased sales velocity which generated the sign of down trend .
On the vertical line 2: in red EMA (8)> EMA (4) even the RSI down direction, but the speed's indicator show (capting) a divergence in favor of buyers.
In the vertical line 3: strength indicator and speedometer confirm the ongoing up trend, but the indicator RSI always expresses overbought with divergence to the downside.
We also note through one shaded by the blue speedometer gives a clearer vision on the horizontal wave
Signs generated by the indicators of strength and speed's indicator can minimize the gap between the indicator's sign and the price
The best way to exploit the sign generated by the strength indicator (NPINDEX) and speed's indicator (NRDIV) is the instantly following ie automat trade.