Indicators for RASL + RAOSQ technical analysis system

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When constructing the system of technical analysis RASL+RAOSQ and the principles of the trading strategy based on it, we use previously published indicators: the RAMA moving average, the RASL layer trend indicator, the RAOS and RAOSQ quadrature indicators (digital quadrature oscillators). You can read more about them in the previous articles of the author on the site of the Fortrader magazine.

Building a single-layer RASL + RAOSQ technical analysis system

Figure 1 shows the above indicators. The trend indicator of the RASL layer is shown for the layer of fluctuations of the signal of quotations, concluded in the interval from 4 to 20 periods. The quadrature oscillators RAOS(18) and RAOSQ(18) are coordinated with the moving average RAMA(18).

Figure 1. Layer indicator (4 to 20 periods) RASL (red lines and signal yellow line), digital oscillator RAOS(18) (blue lines), and digital quadrature oscillator RAOSQ(18) (magenta lines).
Figure 1. Layer indicator (4 to 20 periods) RASL (red lines and signal yellow line), digital oscillator RAOS(18) (blue lines), and digital quadrature oscillator RAOSQ(18) (magenta lines).

Figure 1 shows that the dynamics of the oscillator RAOS(18) agrees with the dynamics of the layer indicator RASL (4-20 periods). Both indicators reflect the average direction of the signal dynamics of the traded instrument quotations.

The dynamics of RAOSQ(18) is "anticipatory", which is connected with the adjustment of the indicator to the value of acceleration (or deceleration) (that is the second derivative) of the change of the moving average line of RAMA(18).

Before the U-turns the signal of quotations is observed divergence signal - anticipatory crossing by the RAOSQ(18) quadrature oscillator of the RASL layer indicator and anticipatory crossing (divergence) of the RAOSQ(18) and RAOS(18) dynamics.

In this case the divergence signal is connected with changes in the rate of increase (slowing down) of the directional movement of the quotes signal; the RAOSQ quadrature oscillator is adjusted exactly for the change of rate (that is, the value of the second derivative).

Figure 2 shows a repetition of Figure 1, but adds a quadrature oscillator RAOSQ(11) coordinated with the moving average RAMA(11) (for a smoothing period of 11). Period 11 is within the RASL layer from 4 to 20 periods. In this case RAOSQ(11) reflects the dynamics of quotes signal inside of RASL layer from 4 to 20 periods, i.e. it reflects an internal rhythm.

Figure 2. The RAOSQ(11) quadrature oscillator is added to Figure 1, matched to the RAMA(11) moving average for a smoothing period of 11. 
Figure 2. The RAOSQ(11) quadrature oscillator is added to Figure 1, matched to the RAMA(11) moving average for a smoothing period of 11.

Building a two-layer RASL + RAOSQ system

We form the second layer of fluctuations of the signal quotes, of prisoners in the range of 20 to 60 periods.

Figure 3 shows the indicators. The trend indicator of the RASL layer is shown for the layer of fluctuations of the signal of quotations, concluded in the interval from 20 to 60 periods. The quadrature oscillators RAOS(40) and RAOSQ(40) are coordinated with the moving average RAMA(40).

Figure 3. Layer indicator (20 to 60 periods) RASL (black lines and signal blue line), digital oscillator RAOS(40) (thin black lines), and digital quadrature oscillator RAOSQ(40) (thin red lines).
Figure 3. Layer indicator (20 to 60 periods) RASL (black lines and signal blue line), digital oscillator RAOS(40) (thin black lines), and digital quadrature oscillator RAOSQ(40) (thin red lines).

Figure 4 combines Figures 1 and 3.

Fig. 4. Alignment of Figures 1 and 3.
Fig. 4. Alignment of Figures 1 and 3.

Figure 5 shows the repetition of Figure 4, but newly added oscillator RAOSQ(11) coordinated with the moving average RAMA(11) for the smoothing period equal to 11. That is, Fig. 5 shows a two-layer system of technical analysis RASL + RAOSQ for the layer of quotes fluctuations concluded within the range of 4 to 20 periods ("fast" first layer) and for the layer of quotes fluctuations concluded within the range of 20 to 60 periods ("slow" second layer).

Figure 5. The two-layer system of technical analysis RASL + RAOSQ.
Figure 5. The two-layer system of technical analysis RASL + RAOSQ.

Basic points for the trading strategy using the technical analysis system RASL + RAOSQ

The "fast" RASL layer reflects the tendency of the directional movement of the quotations signal, the trend direction being determined by the yellow signal line of the RASL layer indicator and the RAOS(18) oscillator. The RAOSQ(18) quadrature oscillator (magenta lines) gives "proactive" signals of divergence when the direction changes, the fading of the directional movement, also signals of resumption of a directional movement.

For the "fast" RASL layer, the quadrature oscillator RAOSQ(11) reflects the "internal" rhythm of the RASL layer. The period equal to 11 is inside the interval from 4 to 20 periods of the "fast" RASL layer. According to the dynamics of the "internal" RAOSQ(11) it is possible to form trading signals in the direction of directional movement (in "average") signal of quotes reflected by the "fast" RASL layer.

The "slow" RASL layer is a reference layer for the "fast" RASL layer. Reflection of transitions (flips) of the "fast" RASL layer relative to the reference "slow" RASL layer is important. Reflection of transitions is formed by quadrature oscillators RAOS (40) and RAOSQ(40) coordinated with the "slow" RASL layer. The movement of the "fast" RASL layer along the "slow" RASL, as well as the transitions (flips) relative to the "slow" RASL layer reflect the "global" (for this example) dynamics of the quote signal.

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