New technical indicator - RAIX layer oscillator and building a trading strategy RASL + RAIX

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Using the layer oscillator RAIX - the ability to fully describe the dynamics of the band components of the signal quotes of the instrument being traded.

The technical indicator developed by the author of the article - the RAIX layer oscillator - is offered for practical use by traders. The indicator is recommended to be used together with the previously published indicator of the RASL layer, it is also possible to use the RAIX oscillator together with other technical indicators.

Figure 1 shows the RASL layer indicator (upper Figure 1) and the RAIX layer oscillator (lower Figure 1) for the signal fluctuations layer of the traded instrument quotations concluded within the range from 20 to 60 periods.

Fig. 1. Example of indicators RASL (top figure) and RAIX (bottom figure) for the signal fluctuations layer of prisoners' quotations in the interval from 20 periods to 60 periods.

A full description of the RASL layer technical indicator is given in the previously published article "New RASL layer trend indicator and trading strategy based on it".

Stages of constructing the RAIX layer oscillator

Figure 2 shows 9 moving averages RAMA with smoothing periods from 20 to 60 with step change of 5 (20, 25, 30, 35, 40, 45, 50, 55, 60) (top figure 2) (technical indicator "moving average RAMA" is described in detail in the previously published article "Improved modification of the moving average - indicator RAMA vs SMA"). The bottom part of Figure 2 shows the normalized derivatives calculated from these 9 moving averages RAMA.

Fig. 2. Moving averages RAMA with smoothing periods from 20 to 60 with step change 5 (20, 25, 30, 35, 40, 45, 50, 55, 60) (top figure) and normalized derivatives calculated from these 9 moving averages RAMA (bottom figure).

The normalized derivative for each individual RAMA line is calculated as the difference between its current RAMA value_t at time t and its previous value RAMA_t_-1 at time t-1. Then this difference is divided (i.e., normalized) by the current value of RAMA_t (at time t), taken from the RAMA line with the maximum smoothing period. In this case, the maximum RAMA smoothing period is 60.

The bottom figure 2 shows for each individual RAMA line the change (or the rate of change, the rate of change) relative to the current value of the RAMA line with a maximum smoothing period (in this example the maximum smoothing period is 60). The whole set consists of 9 moving averages RAMA with periods from 20 to 60 and with a step change of 5.

Next, using the resulting set of normalized RAMA derivatives (bottom figure 2), we standardly calculate the average value for each current moment t over all normalized moving average RAMA(N) derivatives_twhere N varies from 20 to 60 in steps of 5. The next step is to calculate the standard standard deviation (RMS) (square root of the variance) for each current moment t over all values of the normalized derived moving averages RAMA(N)_t (bottom Figure 2), where N varies from 20 to 60 in steps of 5.

The upper part of Figure 3 shows the original 9 moving averages RAMA, (red lines), also on the top of the Figure 3 (black and blue lines) shows the indicator layer RASL.

The bottom part of Figure 3 shows the normalized derivatives (red lines), calculated by 9 moving averages RAMA. In addition, the RAIX oscillator is depicted: the bold red line - the average line, calculated on all 9 normalized derivatives of the moving averages RAMA, as well as two more lines (black dotted line), offset against the average line "up" and "down" by the amount of the calculated standard deviation (RMS) on all 9 normalized derivatives of the moving averages RAMA. The signal line (blue) - the line of the normalized derivative of a moving average RAMA with a maximum smoothing period of 60 (the maximum smoothing period from a set of periods from 20 to 60).

Fig. 3. Moving averages RAMA with smoothing periods from 20 to 60 in steps of 5, formed lines of the layer RASL (top figure), the normalized derivatives calculated from these 9 moving averages RAMA, formed lines of the oscillator RAIX (bottom figure).

The upper part of Figure 4 shows 9 moving averages RAMA with smoothing periods from 4 to 20 with a step change of 2 (4, 6, 8, 10, 12, 14, 16, 18, 20).

The bottom part shows the normalized derivatives calculated for these 9 moving averages RAMA.

Fig. 4. Moving averages RAMA with smoothing periods from 4 to 20 with step change 2 (4, 6, 8, 10, 12, 14, 16, 18, 20) (top figure) and normalized derivatives calculated from these 9 moving averages RAMA (bottom figure).

According to Figure 4, the lines of the technical indicator of the RASL layer are depicted in Figure 5 (in the upper part of Figure 5) and the lines of the oscillator of the RAIX layer are depicted in the lower part of Figure 5. The interpretation of the RAIX oscillator lines in Figure 5 corresponds to the explanations to Figure 3.

Fig. 5. Example of indicators RASL (top figure) and RAIX (bottom figure) for the signal fluctuations layer of prisoner quotes from 4 to 20 with step change of 2 (4, 6, 8, 10, 12, 14, 16, 18, 20).

Thus, Figure 1 shows: technical indicators, RASL layer indicator and oscillator RAIX layer for the signal layer of quotations in the interval from 20 to 60 periods. Figure 5 shows the indicator of the RASL layer and the oscillator of the RAIX layer for the signal layer of quotations in the interval from 4 to 20 periods.

Comparison of the technical indicator - oscillator layer RAIX and a classic technical indicator TRIX

It is useful to draw an analogy between the classical technical indicator TRIX and the proposed technical indicator - the RAIX layer oscillator.

The TRIX line is said to be the rate of change of the triple exponential moving average the closing price of a financial instrument. The bottom part of Figure 1 (blue line) and the bottom part of Figure 5 (yellow line) show two curves, which are norms of variation of the single moving average RAMA for the closing price of the financial instrument. In this case, "triple" smoothing using the RAMA indicator is not carried out, a single smoothing is used.

The indicated lines (blue and yellow) are the rates of change of the lower bound (for the maximum smoothing period) of the analyzed layers. These indicated lines (blue and yellow) are analogous to TRIX, but only the single moving average RAMA (instead of the triple moving average EMA) is used in the RAIX calculation. To the indicated lines (blue and yellow), that is, the norms of changes of the lower boundary (for the maximum smoothing period), of the analyzed layers in the calculation of the RAIX indicator are added another line - the norm of change of the middle line of the layer, and 2 more lines (dotted line) - volatility boundaries (RMS) of the moving average change rate RAMA within the analyzed layer. That is, the RAIX oscillator reflects fully enough the dynamics of the analyzed signal layer of the financial instrument quotations.

Building a two-layer TA system: RASL + RAIX

Figure 6 combines Figures 2 and 4.

Fig. 6. The result of combining Figures 2 and 4.

Figure 7 combines Figures 1 and 5.

Fig. 7. The result of combining Figures 1 and 5.

Figure 7 shows a two-layer technical analysis system using the RASL layer technical indicator (top Figure 7) and the RAIX layer oscillator (bottom Figure 7). It is possible to build multilayer systems of technical analysis using several layers coordinated with each other.

Figure 8 shows a repeat of Figure 7, but with the dotted lines removed volatility (RMS) at the bottom of the figure. The volatility lines are removed only for the layer of fluctuations of the signal of quotations concluded in the interval from 4 to 20.

Figure 8. A two-layer technical analysis system, the combination of two layers is shown. RASL indicators for two layers (top figure) RAIX indicators for two layers (bottom figure).

Consider the behavior of a two-layer technical analysis system

(TA: RASL + RAIX) at different parts of the quote signal

Further, Figures 9-12 show examples of the resulting two-layer TA system (TA: RASL + RAIX) for different parts of the quote signal.

Figure 9. Two-layer technical analysis system (TA: RASL + RAIX ), second quotation section. — Figure 9. Two-layer technical analysis system (TA: RASL + RAIX), second quotation section.

Figure 10. Two-layer technical analysis system (TA: RASL + RAIX), third quotation section.

Figure 11. Two-layer technical analysis system (TA: RASL + RAIX), fourth quotation section.

Figure 12. Two-layer technical analysis system (TA: RASL + RAIX), fifth quotation section.

The joint use of RASL and RAIX technical indicators gives a sufficiently complete description of the dynamics of the signal layer of quotations, which can be used when creating effective trading systems of technical analysis. In this case, the analysis of several layers in TA systems (TA: RASL + RAIX), allows to cover a wide range of changes in the dynamic properties of the signal of quotes of the traded instrument.