Thursday, 29 September 2011

1-2-3 Detrend

I've been fooling around with a couple indicators, and one that stands out is the Detrending Price Oscillator (DPO). The default setting on this indicator work well in the long term aspect, but it doesn't catch them a lot of cycles. So, I changed the settings to its lowest possible period number (period = 1), and now it shows every single price move and down... naturally, it is wrong a lot of the time. !HOWEVER! if this fast DPO drops below/above zero and remains there for three price moves (three bars), then we have a trend, or at least the tail end of it. My exit is just a small take-profit limit (5 points + spread), and as always the stop-loss is set just below/above the low/high of the previous bar.

One of the best parts about this is that it works even when volatility is low (for light sweet crude this would be when the US market is not open). 

I'm using this at a 30 minute timeframe on Light, Sweet Crude Oil Futures. Here's an Example: