Parkiet, 16 December 1998. No. 1160 (
Four-week Rule
Richard Donchian, a market analyst from
American Express, invented a surprisingly simple investment method referred to as
the Four-week Rule for markets of commodities such as grain, green coffee,
cacao beans and other agricultural produce that was very quickly adopted by
stock and derivative markets. As we all have noticed, seasonality phenomenon
also applies to trading floors of stock markets ...
… for more active
investors I would be delighted to present an arithmetic formula, called by me
“N BARS” (i.e. the formula of N price bars – the lowest – closing – the
highest). Try it in your Metastock. You can either use the formula below and transform it accordingly in indicator builder and system tester or go to www.ascot.pl, choose your mother language and import ready made .dta files from FREE indicators or FREE systems.
where:
C – today’s closing,
maxH(k) – the highest price level in k days,
minL(k) - the lowest price level in k days.
… ‘’
Chart of futures
index FW20Z5 quoted at Warsaw Futures Exchange presented below
:
N Bars indicator
proved to be very effective for forex and futures
exchange.
Metastock tools in form of an indicator, system tester and expert can be
downloaded for free at http://www.ascot.pl/
Interpretation over
years:
N Bars is a function that shows an equilibrium
between a surface area of a C * C square and maxH(k) * minL(k) rectangle, and therefore we call it today Price
Area Equilibrium Oscillator [PAEO]. Therefore, we can attempt to conclude that
For every financial instrument there is
such a moment in time, when an equilibrium is provided between its price square
and surface area of a rectangle with sides equal the maximum and minimum price
respectively of this financial instrument over a period of k days,
ensuring this equilibrium.
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