Stocks and Commodities: Sep 2008 - The Midas Touch

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Stocks and Commodities: Sep 2008 - The Midas Touch

Postby Overload » Tue Aug 19, 2008 11:43 am

This post is for those interested in exploring "The Midas Touch", an article by Andrew Coles in the September 2008 issue of Stocks and Commodities magazine.

You can import the necessary Setups by right-clicking on the following file and selecting "Save Target As...":

http://www.stratasearch.com/files/tasc_sep2008.sse

After the above file has been saved on your computer, use the File > Import Database menu to locate and import it. You will then have access to these items:

A Custom Formula named:
Midas(Month, Day, Year)

And a new Chart named:
Midas Touch

In this month's article, the author provides us with a unique method for building support and resistance lines. It is important to note, however, that to draw these lines, one must define a "clear reversal in trend". No formula is provided for this definition, and instead the formula requires the user to manually enter the date of this reversal. Naturally, this prevents the indicator from being used in automation or even back testing in its current form. For this reason, it is being provided only as a custom formula for use in the charts.

One of the theories behind this indicator is that a long-term trend might support four or five curves (or lines) before the trend is ended. As each short-term reversal is observed, a new line is drawn, providing an additional layer of support or resistance. As these lines become deeper (3 to 5 deep), they can then be used to identify the strength at which a long-term trend is being broken. For example, if only 1 of 5 support lines are broken, the indication of a long-term reversal is still quite weak, whereas if 4 of 5 support lines are broken, a long-term reversal may be imminent.

Because of the manual requirements of this indicator, I was not able to run back tests to determine the effectiveness of the approach. Nevertheless, StrataSearch users can still install the indicator and examine and experiment with its uses in the charts.

Midas Touch Chart:
Image
Overload
 
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