RHS #2.8 Swing ratios as predictors

As it turns out, using the current swing ratio to determine if the swing should continue or not doesn’t have the support I thought it did. visually it still looks strong, but I’ll need to find another metric to measure it against the normal ratios to get it to shine.
Another idea I have is using the end swing point to predict the type of wave that will occur next. This is a bit easier to test if it works in the A/B structure because 3 swing stats are pretty easy to get. I normally wouldn’t have thought there would be any edge in this, but I thought I noticed something interesting about swings that has extreme ratios and the swing that came 2 legs after.

Following 3rd swing based on first swing, regardless of middle swing:
3rd swing
This is just the regular data set.

lr

Found some differences on down swings that aren’t there on up swings, which is kind of unfortunate.. Differences in rejection swings doesn’t matter too much, mostly because they’re rare to begin with, which makes the trading opportunities that come with them even more rare. There’s a small edge in DT swings leading to another DT/DJ swing (broken level) rather than DR by about 10%. Not too large..

 

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2 thoughts on “RHS #2.8 Swing ratios as predictors

  1. Relativity

    Something to think about. While confirmed UJ/DJs are somewhat rare (about 5% to 7% off my memory), unconfirmed UJ/DJs signals might not be. Consider the following progression :

    UR -> stays as an unconfirmed UJ -> price continues to push and break into UT
    VS
    UR -> straight off to UT

    This is when one starts to dig deeper and get closer to actually testing ‘signal strength’. Even if the resulting probabilities turn out to 50/50, it would be a helpful exercise to understand further how does logically price build up into a breakout.

    Reply
    1. lgtrader Post author

      Hmm, I’ve thought about tracking how potential reject swings affect the probability of turning out to be either reject or trend swings, but I wasn’t sure on how to compare this difference with UR->straight to UT swings other than simple bar counts.. I’ll think about it and give it a go!

      Reply

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