2011issue C0547-54

Three-filter confirmation for short-swing futures

A crowded overlay can issue buy and sell prompts at the same time and freeze the entry-or-exit decision. The described stack keeps three tools, with Bollinger Bands as the trend reader and MACD plus the Relative Strength Index as confirmation. Editorial reading: apply that order as a confirmation ladder, then assign a separate playbook for trend, range, or the transitional open.

Limit the stack to three tools so a crowded overlay cannot issue buy and sell prompts at the same time and freeze the decision.
Read Bollinger Bands first as trend confirmation: outer-band slope and a price walk mark an intact trend, and flattening or reversal marks the end of the move.
Require MACD and Relative Strength Index agreement, including the zero-line filter, before a long or short is considered.
Keep separate playbooks for trending, sideways, and transitional-open conditions, and let session-scale readings override a contrary daily directional bias.

Entries in this reading3 entries

Current trackBollinger Bands84 readings MACD115 readings Relative Strength Index186 readings

Why a crowded overlay freezes the decision

A crowded indicator overlay can issue buy and sell prompts at the same time, which freezes the entry-or-exit decision. The described stack is limited to three tools, with Bollinger Bands as the primary trend reader and MACD plus the Relative Strength Index used as confirmation.

Editorial reading: treat those jobs as a confirmation ladder. Read Bollinger Bands first, require MACD and Relative Strength Index agreement second, and only then assign the matching playbook. Combining the three tools is presented as a way to mark when a short-horizon trend starts and when it ends.

Read Bollinger Bands as trend confirmation

Bollinger Bands are treated as trend confirmation rather than fade-the-touch signals. A lower band sloping down at about 45 degrees or steeper with price walking it marks a downtrend, and the symmetric upper-band walk marks an uptrend. Flattening or reversal of that outer band marks the end of the move.

On intraday bars the described Bollinger setup uses a 12-period moving average and two standard deviations, a shorter lookback than the 18-to-21-period daily convention.

Require MACD and Relative Strength Index agreement

A 7-period Relative Strength Index holding above 70 is treated as an intact uptrend, while a drop back through 70 is treated as a warning that the uptrend is weakening. The 30 threshold plays the symmetric role in downtrends.

MACD is applied with the 12-26-9 defaults, but a long is considered only after a cross above the signal line that also sits above zero, and a short only when the line is below both the signal and zero. That is the zero-line filter: MACD must sit on the same side of zero as the intended trade.

Assign a playbook instead of one hybrid rule

Separate playbooks are kept for trending, sideways, and opening transitional conditions rather than forcing one hybrid rule onto every tape. The transitional open is the first minutes of the session, when trend and range are not yet resolved.

Session-scale readings from the three-filter stack can override a contrary daily directional bias. The hold itself is a short-swing: an intraday hold measured in minutes rather than a multi-day position.

Let range bars set the sampling clock

Fixed-width range bars, illustrated as a two-point increment on equity-index futures, drop clock time so the same three indicators update on volatility rather than on minutes.

Editorial note: range bars change the sampling clock. They do not change the confirmation order or replace the separate playbooks for trend, range, and the transitional open.

Euro futures on 16-tick range bars, 22 September 2009

After a tight coil near 1.4735, 16-tick range bars on the December 2009 euro contract run almost vertically into the 1.4800s and spike to about 1.4835 before the labeled 1.4793 last print. The series is the close of each readable candlestick on the published Rockwell Navigator screenshot for 22 September 2009.CME Euro FX futures (G6E December 2009) · 16-tick range bars · 2009-09-22T00:00:00.000Z to 2009-09-22T00:00:00.000Z

High minus low is fixed on these range bars, so the breakout prints as a thin stacked column; closes inside that column were not separately readable and are omitted rather than interpolated. Digitized prices are rounded to 0.0005 except the labeled last print.

Educational research material, not investment advice. Historical source context does not establish present-day performance.

30 of 45 in the Bollinger Bands track

201177-79 pp.Next on Bollinger BandsConstructing an inverse Fisher stochastic with bands and averagesSmooth price first by leaving the number of rainbow-average iterations as a free parameter, then compute the stochastic on that iteratively smoothed series rather than the raw close.

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