When constructing the RAIQS system of four indicators to implement the "Follow the Market" strategy, previously published indicators are used: the RAMA moving average, the RASL layer trend indicator, the RAOS and RAOSQ quadrature indicators (quadrature oscillators).
Previously published indicators are described in detail in the articles:
- Improved modification of the moving average - indicator RAMA vs SMA
- New RASL layer trend indicator and trading strategy based on it
- New technical indicator - RAIX layer oscillator and building a trading strategy
- RAOS and RAOSQ quadrature indicators - more information for your trading strategy
- Indicators for RASL + RAOSQ technical analysis system
- The speed and acceleration of the moving average are two important characteristics when trading on
The work of the trading strategy
"Following the market" consists in the dynamic display (using indicators) of the signal of the traded instrument quotations, which enables to determine the current state of the asset at the moment, as well as to make short-term forecasts of the dynamics in the near future.
Figure 1 shows an example of the RAIQS system of four indicators to implement the strategy "Following the market"for Brent crude oil quotes (Daily, end date April 20, 2018).
Figure 1 shows:
- moving average RAMA(11) (red line),
- RAOS(11) oscillator (blue lines) displays the rate of change of the RAMA(11) indicator,
- RAOSQ(11) quadrature oscillator (yellow and red lines) displays the change in velocity (acceleration) of the RAMA(11) indicator,
- indicator of the RASL layer (orange lines) for the layer of fluctuations of the signal of quotations, concluded in the interval from 5 periods to 20 periods.
The boundaries of the indicator of RASL layer are displayed in the form of two lines shifted relative to the middle line of RASL layer "up" and "down" by the value of the calculated standard deviation (RMS) on the set of moving averages RAMA, concluded in the interval from 5 periods to 20 periods. The width of the RASL layer can be changed. In this example, the width of the RASL layer is coordinated with the RAOS(11) oscillator spread (blue lines).
Rules of the strategy
Figure 1 shows that the boundaries of the RASL layer indicator show the range of the quote signal, the lines of the RAOS oscillator practically coincide (slide along) with the upper or lower boundary of the RASL layer indicator when the direction of the quote signal changes, the lines of the RAOS oscillator pass from one boundary of the RASL layer to another boundary, the lines of the quadrature oscillator RAOSQ (yellow and red lines) form "proactive" signals of local divergence (within the RASL layer) about a possible reversal, fading, or resumption of directional movement.
The resulting dynamic display of the quote signal (Figure 1) is a RAIQS system for implementing the "Follow the market" strategy.
Stages of the trading strategy
Let's consider the stages of the RAIQS system for implementing the "follow the market" strategy using the EURUSD quotes as an example.
Figure 2 shows quotes EURUSD (Daily, end date April 18, 2018), the layer RASL oscillation signal quotes concluded in the range of 5 periods to 20 periods.
We see the boundaries of the RASL layer (orange lines): the inner boundaries of the layer define the standard width of the RASL layer, the outer boundaries of the layer define the width of the RASL layer, increased by 4.2 times.
Figure 3 shows the RASL layer (outer boundaries of the layer, orange lines), added RAOS(11) oscillator (blue lines, moving average speed RAMA(11)), moving average RAMA(11) (red line).
Figure 4 shows a repetition of Figure 3 with the addition of the RAOSQ(11) quadrature oscillator (red and yellow lines, accelerating moving average RAMA(11)), which forms the anticipatory local signals divergence within the RASL layer to more precisely fix the beginning of possible reversals, fading or resumption of directional movement.
Figure 4 is divided into two parts: Figures 5 and 6 for a more detailed display.
Other examples of how the strategy works
Let's look at other examples of the RAIQS system of four indicators to implement the "Follow the market" strategy for other quotes signals. Indicator settings for all examples of the article are not changed.
Figure 7 shows an example of a RAIQS system of four indicators to implement a strategy for the gold price area (Daily).
Figure 8 shows an example for the USDRUB exchange rate quotes (Daily, end date April 20, 2018).
The trading strategy "Follow the market" can be effectively used in a trend, in the flat and on the reversals.