New RASL layer trend indicator and trading strategy based on it
Applying the technical layer indicator RASL - the possibility to represent the complex dynamics of the quotes signal as a set of simpler (band) components.
RASL indicator - idea and application
The technical indicator of RASL layer developed by the author of the article is offered for practical use in trading. An example of RASL indicator for the signal fluctuations layer of quotes concluded in the interval from 4 periods to 20 periods is shown in Figure 1.
The stages of constructing the RASL layer indicator are shown further in Figures 2 and 3.
Figure 2 shows nine 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).
Indicator algorithm
The technical indicator "Moving Average RAMA" is described in detail in the previously published article "Improving the quality of smoothing using the technical indicator RAMA".
Then we calculate the average value for each current moment in the standard way t over all values of RAMA (N)twhere N varies from 4 to 20 in steps of 2. We also calculate the standard standard deviation (RMS) (square root of the variance) for each current moment t over all values of RAMA (N)t, where N varies from 4 to 20 in increments of 2.
Figure 3 shows the original 9 moving averages RAMA (Figure 2), also drawn in red line average line, calculated for all 9 moving averages RAMA, as well as two other lines - the offset against the average line "up" and "down" on the calculated value of the standard deviation (RMS) of 9 moving averages RAMA.
In addition, Figure 3 shows a signal line (yellow). The signal line is moving average RAMA(20) with a smoothing period of 20 (the maximum period of the set of nine moving averages RAMA (Figure 2)).
From the analysis of Figures 1 and 3 in the most general form follows the rules for using the indicator:
- RASL band (red lines) below the signal line (yellow) - movement of quotations on the average (within the calculated RASL band) "down",
- RASL band above the signal line (yellow) - movement of quotations on the average (within the calculated RASL band) "up", plus reversal areas.
Figures 4-6 show the construction stages of RASL technical indicator calculated using a set of 9 RAMA moving averages with smoothing periods varying from 20 to 60 with step change equal to 5 (20, 25, 30, 35, 40, 45, 50, 55, 60).
Figure 7 combines Figures 2 and 4.
Figure 8 shows the superposition of the two RASL layers shown in Figures 1 and 6, that is, a two-layer TA system is displayed.
In general, it is possible to map an arbitrary number of coordinated RASL layers for the purpose of building a TA system.
Figures 9, 10 show a two-layer TA system (Figure 8) for other parts of the quote signal.
TA system capabilities
Multilayer TA systems (using RASL layers) can be combined with other known technical indicators. For example, Figures 11 and 12 show a two-layer TA system and a classic technical indicator "Bollinger Bands" with an averaging period of 24 for different parts of the quotes signal.
Mathematical algorithm for calculating the RASL indicator
The algorithm for calculating the technical layer indicator RASL(N1, N2, n) , (N1 - the smallest smoothing period, N2 - the largest smoothing period, n - step change of the smoothing period from N1 to N2).
The RASL output calculates four smoothed lines:
- RASLm is the middle line of the RASL layer,
- RASLe is the bottom line of the RASL layer,
- RASLu is the top line of the RASL layer,
- RASLs is the signal line of the RASL layer.
The calculation is made in accordance with the expressions:
where
- M=(N2-N1)/n+1 number of RAMA moving averages in the calculation set;
- Li=N1+(i-1)*n - averaging periods of the RAMA moving averages from the calculation set;
- RASLe(N1, N2, n)t=RASLm(N1, N2, n)t - RASLd(N1, N2, n)t;
- RASLu(N1, N2, n)t=RASLm(N1, N2, n)t+RASLd(N1, N2, n)t;
RASLs(Ns)t=RAMA(Ns)twhere Ns is the selected smoothing period for the signal line.