1999issue C021
Constructing a lagged rate of change cycle system
An assumed 90-day rhythm can be built into one mechanical procedure by placing that rhythm in a lag, reading a short-window close-to-close rate of change from the lagged bar, and testing that reading against a volatility-scaled-threshold. Long and short entries, a holding-clock, and optional protective exits then stay inside a single rule skeleton.
- The dominant-cycle-rhythm is implemented by lagging the rate-of-change input, not by estimating a new cycle on the decision bar.
- A long entry requires the lagged-rate-of-change of the close to exceed a volatility-scaled-threshold; the short side is the mirror-entry with the inequality reversed.
- A holding-clock of 10 bars since fill can exit the trade on its own; a point-based trailing stop and an inactivity-stop are optional protections in the same construction.
- Default constants can be replaced as a locked set, including a threshold of 3.25 and a 5-bar hold, without changing the rule skeleton.
From a rhythm to a rule
The archive describes a mechanical procedure that can take both long and short positions and that acts with a zero-bar delay between signal and trade.
Editorial: treat the assumed rhythm, the impulse measure, and the trigger as one locked story so entry, exit, and standing aside can be tested without changing that story mid-stream.
Place the cycle in the lag
The cycle premise is stated as a 90-day rhythm. That premise is implemented by lagging the rate-of-change input rather than by estimating a new cycle on the decision bar.
A dominant-cycle-rhythm, in this construction, is an assumed repeating interval that justifies the lag between the current bar and the rate-of-change observation used for the signal.
A lagged-rate-of-change is a short-window close-to-close rate of change read from a fixed number of bars earlier than the decision bar, so the cycle length sits in the lag rather than in a live spectral fit.
Turn impulse into a volatility test
A long entry can be constructed by requiring a lagged short-window rate of change of the close to exceed a constant multiple of that lagged series' 20-period standard deviation.
A volatility-scaled-threshold is a barrier formed by multiplying the recent standard deviation of that lagged rate of change by a chosen constant, then using the positive and negative barriers as opposite entry tests.
The default construction constants shown for those rules are a 3-period rate of change, a 63-bar lag, a 20-period standard deviation, and a threshold multiple of 4.
Add the short side as a mirror-entry
A short entry is the mirror of that test: the same lagged rate of change falling below the negative of the volatility-scaled-threshold.
A mirror-entry is the short-side counterpart of the long rule, using the same lagged series and the same threshold multiple with the inequality reversed.
Exit on a clock, then keep protection optional
A complete procedure can exit on a holding-clock alone, with 10 bars since fill used as the default time stop.
A holding-clock is a time-based exit that closes the position a fixed number of bars after the fill, independent of later price action.
Optional protective exits in the same construction include a point-based trailing stop and an inactivity-stop that applies to both long and short positions after 10 bars.
An inactivity-stop is a protective rule that closes both long and short positions after a set number of bars if price has not moved enough to keep the trade active.
Treat the constants as a locked set
The same rule skeleton can be rebuilt with other locked constants, including a threshold of 3.25 and a 5-bar hold, so those values are construction choices rather than a single required specification.
Editorial: once a set of constants is locked, rebuild the whole set together rather than changing one piece while leaving the rest of the story in place.
All readings on this track · 46 readings
- 1985Constructing excess and momentum difference-curve oscillators
- 1988Five reading rules for smoothed indicator charts
- 1989Momentum overlays that speed moving-average oscillators
- 1990A laboratory template that constructs Rate of Change as a pane module
- 1991Volume-scaled rate of change as a momentum construction
- 1991Three-indicator market overview from tape, sentiment and rates
- 1991Three-component trend model with rate-of-change filters
- 1992A KST oscillator from a weighted rate-of-change stack
- 1992Four-window weighted rate-of-change composite
- 1992Constructing multi-span smoothed rate-of-change filters
- 1992Constructing a four-horizon summed rate of change
- 1992Constructing KST from four weighted smoothed rates of change
- 1992Constructing a composite from weighted smoothed rates of change
- 1992Three-horizon KST maturity alignment
- 1992Construct a bond-led dividend-to-bond-yield regime first
- 1992Constructing relative-strength KST from weighted rate-of-change
- 1993Constructing a volume oscillator from average ratios and smoothed rate of change
- 1994Gold as a cycle clock for commodities and yields
- 1994Constructing a composite from weighted, smoothed rate-of-change windows
- 1994Constructing gold-mining rate-of-change tripwires for Treasury bonds
- 1994A capacity-stress checklist across commodities, bonds, and breadth
- 1994Rate of change parameters for testable entries
- 1994Constructing rate-of-change midpoints, lookbacks and divergence
- 1994Lead oscillator breaks need price trendline confirmation
- 1994Nested averages for an annual momentum curve
- 1994Evaluating a Coppock-style rate of change as a bottom-regime filter
- 1995A weighted eleven-month Dow rate of change as one testable timing procedure
- 1996Named lookbacks, thresholds, and streaks for entry rules
- 1997A midpoint rate-of-change test for bond trend follow-through
- 1997Constructing a short-rate-adjusted equity momentum filter
- 1998Daily momentum rank-churn as a portfolio-construction problem
- 1999Constructing a lagged rate of change cycle system
- 2000A triple delay line then a one-bar elliptic oscillator
- 2001Confirming rate of change divergences with price
- 2001Momentum trendline breaks need price confirmation
- 2001Market breadth, On-balance volume, and Rate of Change as a combined timing framework
- 2001Know Sure Thing with stacked horizons and trendline confirmation
- 2003Constructing a mechanical system from a rate of change condition
- 2003Constructing momentum from two closes and spotting divergence
- 2003Formula choice tilts which momentum mismatches count as divergences
- 2004RSI and momentum agreement as an asymmetric filter
- 2005Constructing price-normalized moving-slope hybrids
- 2005Unsigned speed gates on a fixed average-cross pair
- 2007Rebuilding rate of change as a path-weighted oscillator
- 2008Construct Special K so short-horizon signals stay inside the primary trend
- 2013Restore volume balance before adding another price-time indicator