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2000issue C061-5

A three-filter tether and volume trend system

A long-only trend-following procedure is assembled from a tether line, a signed-volume confirmation, and a two-speed moving-average spread. A long entry is allowed only when every filter is true at once, and the flatten rule uses only a close back below the tether line.

  • A conjunction-entry fires only when a close crosses above the tether line, the volume-oscillator is above zero, and the moving-average spread is rising.
  • The tether-exit flattens on a close back below the tether line and does not wait for the volume or moving-average filters to reverse.
  • The same three-filter arithmetic can be restated as spreadsheet rows or wizard conditions without changing the lookbacks or the all-must-pass entry logic.
  • The extra confirmation that cuts false turns can also keep the procedure out of some large later moves.
Entries in this reading3 entries
Current trackOn-balance volume88 readingsTrend following168 readingsMoving average597 readings

The long-only trend-following procedure is assembled from three indicators. A long entry is allowed only when every indicator's condition is true at once.

Trend-following is a holding-period procedure that stays with a directional setup and stands aside whenever any required filter fails.

Three independent predicates

The location filter is the midpoint of the highest high and the lowest low over a 50-bar window. That midpoint is the tether line. It is the location test and the flatten trigger.

The volume confirmation is a seven-bar on-balance-volume-style average. Add volume when the close is above the open, subtract it when the close is below the open, and treat an unchanged bar as zero. The volume-oscillator is that short average of volume signed by whether the close is above or below the same bar's open. On-balance-volume is used here as a signed-volume chart condition that becomes a confirmation filter.

The moving-average filter is the 25-bar simple average of close minus the 200-bar simple average of close, and that spread must be higher than its prior value. A moving-average here is an equal-weight average of ordered closes over a stated lookback. The difference between the shorter and longer average is the mbo, used as a two-speed spread whose latest change must be positive.

Compaq price versus the 50-bar tether line

A trader should see the long-only location rule on Compaq: price climbs from the high teens into a mid-1999 spike just above 50, then collapses into the low 20s, while the 50-bar high-low midpoint lags both the advance and the break and is the level used to allow a long or to flatten. The points were read from the labeled price scale on the TradeStation-style screenshot; the source printed no numeric table.
A trader should see the long-only location rule on Compaq: price climbs from the high teens into a mid-1999 spike just above 50, then collapses into the low 20s, while the 50-bar high-low midpoint lags both the advance and the break and is the level used to allow a long or to flatten. The points were read from the labeled price scale on the TradeStation-style screenshot; the source printed no numeric table.Compaq Computer Corp (CPQ) · Daily · 1997-07-01T00:00:00.000Z to 2000-05-31T00:00:00.000Z

Digitized from a low-resolution software screenshot of daily CPQ. Prices are approximate to the nearest one to two dollars. Month stamps are inferred from the 1998, 1999 and 2000 axis marks. The volume-oscillator and moving-average-spread panes share the figure but use other scales and were not transferred.

When the procedure enters, exits, or stands aside

The specified long entry is a close crossing above the tether line, a volume-oscillator above zero, and a rising moving-average spread, required together. That conjunction-entry fires only when the location, signed-volume, and moving-average tests are all true.

The specified exit is a close moving back below the tether line. The volume and moving-average filters are not required to flatten. That tether-exit uses only a close back through the range midpoint and does not wait for the other filters to reverse.

If any required filter fails, the procedure stands aside.

The same arithmetic in other encodings

One encoding places both the entry and the exit as market orders on the next bar after the conditions print.

The same three-filter arithmetic can be restated as spreadsheet rows or wizard conditions without changing the lookbacks or the all-must-pass entry logic.

Recoding the same rules in another package need not reproduce every sample entry and exit from the original write-up.

The extra confirmation that cuts false turns can also keep the procedure out of some large later moves.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
35 of 61 in the On-balance volume track
20031-9 pp.Next on On-balance volumeConstructing finite volume elements as a finite-period money-flow filterVolume-based money-flow tools split into intra-day readings, which compare the close with the day's midpoint or open, and inter-day readings, which compare today with yesterday. A gap at the open can make those families disagree on the same bar.
All readings on this track · 61 readings
  1. 1988Cumulative volume trend and 200-session polarity
  2. 1988Three clocks when cumulative volume led price
  3. 1988Payoff index checkpoints for open interest and divergence
  4. 1988Relative strength, stochastics, and on-balance volume as a turning-point stack
  5. 1988Signing volume by open interest change
  6. 1988Case study: weekly on-balance volume with trendlines and a 21-period average
  7. 1988Combining weekly and daily MACD divergences with on-balance volume
  8. 1988Restoring the original tests for market breadth, on-balance volume, and trendlines
  9. 1989Evaluating volume-weighted breadth extremes
  10. 1989Demand oscillator construction with a momentum overlay
  11. 1989Constructing a volume percentage ratio from advance-decline flow
  12. 1990Constructing net positive volume as On-balance volume
  13. 1990Buying-share scale with on-balance volume
  14. 1990Friday-filtered on-balance confirmation lines
  15. 1991Constructing rate-market volume breadth from on-balance volume
  16. 1991Building a breadth composite from on-balance volume breakouts
  17. 1992Constructing a rate-complex volume-breadth index
  18. 1992Constructing a breadth index from on-balance volume
  19. 1992Constructing signed market thrust from issue volume
  20. 1992Constructing indicator phase across averages, volume and bands
  21. 1993Force on-balance volume to agree with itself at slower horizons
  22. 1993Three transforms of market thrust from breadth and volume
  23. 1994Constructing a tick-line momentum oscillator
  24. 1994Constructing a smoothed on-balance tick momentum oscillator
  25. 1994Histogram confirmation and a second-series veto for MACD-family alerts
  26. 1994Constructing a 40-period envelope on on-balance volume
  27. 1996Constructing a matched percent-B volume disparity
  28. 1997Constructing calendar regime overlays and volume-weighted rules
  29. 1997Constructing market thrust from breadth and volume
  30. 1997Constructing on-balance volume as a signed running total
  31. 1997A three-layer construction for a signed volume-force oscillator
  32. 1997Constructing a range-sum volume-force oscillator
  33. 1999On-balance volume confirmation, price-indicator divergence, and bounded exits
  34. 2000A daily long-only confirmation stack on the tether line
  35. 2000A three-filter tether and volume trend system
  36. 2003Constructing finite volume elements as a finite-period money-flow filter
  37. 2003Constructing on-balance volume from signed session volume
  38. 2003On-balance volume as a market-breadth participation ledger
  39. 2003Construct a volatility-adjusted on-balance volume filter before confirming a breakout
  40. 2004Opening and midday ranges as an on-balance-volume breakout case
  41. 2004Constructing a volatility-gated volume-flow measure
  42. 2004Constructing a volume-flow series from on-balance volume
  43. 2004Volume-flow indicator construction from on-balance volume
  44. 2004Volume-flow slope divergence, then separate on-balance-volume and crossover rules
  45. 2004Volume flow and band construction as one inspectable problem
  46. 2004Auditing advance-decline confirmation for scale, horizon, and composition
  47. 2005Bounded market breadth from the Arms index to BRIN
  48. 2006Overnight-hold entry and exit construction
  49. 2007Evaluating Volume-price confirmation versus On-balance volume and MACD
  50. 2009Volume confirmation versus a price advance
  51. 2010Typeahead retrieval of a moving average, on-balance volume, and a stochastic oscillator
  52. 2010Modified volume-price trend and log-price scale alignment
  53. 2010Constructing liquidity accelerometers from advance-decline averages
  54. 2012Failed short cycles as breadth and volume tests
  55. 2016Earnings straddles, implied volatility, and money-flow filters
  56. 2017A volume residual filter and a price projection matrix
  57. 2019Volume-volatility parabola and signed-volume momentum
  58. 2019Separating on-balance volume into breadth and volume
  59. 2020Constructing the obvm signal line
  60. 2020Constructing smoothed on-balance volume with a signal line
  61. 2020Keep neutrality as a first-class input in three-state market data
By fieldTrend and mean reversion140 readingsBy year200085 readings
All 88 readings tagged On-balance volume
Also on On-balance volume5 readings
2016Earnings straddles, implied volatility, and money-flow filters2000A daily long-only confirmation stack on the tether line1988Cumulative volume trend and 200-session polarity1988Case study: weekly on-balance volume with trendlines and a 21-period average1992Constructing indicator phase across averages, volume and bands