1993issue C021-7
Constructing a two-parameter relative momentum index
The archive describes a lookback-insensitive relative strength core, a second comparison lag, and a reversal reading that is not yet a trading procedure. The editorial aim is to keep that core, make overbought-oversold bands testable through an explicit momentum lag, and require a mechanical trading system before the oscillator is used.
- A relative strength index that counts up and down closes is described as comparatively insensitive to lookback period, unlike many other technical measures whose useful window is said to change from sample to sample.
- A relative momentum index uses the same accumulation against a close a chosen number of sessions earlier, so momentum lag and overbought-oversold bands become explicit, testable parameters.
- Chart overlays on an uneven oscillator are characterized as subjective. Mixing the oscillator with seasonality, sentiment, commercial activity, and chart support or resistance is described as only partly objective, so conflicting readings still force a discretionary choice.
- The modified oscillator is framed as a reversal measure, not a complete trading procedure. A protective money-management stop is specified as a minimum add-on, and a mechanical trading system is proposed so a run of wins or losses can be checked against historical expectation.
Why a one-parameter oscillator is hard to test
A relative strength index classifies each close as up or down versus the immediately prior close and accumulates those counts over a lookback period. The archive describes this one-parameter oscillator as comparatively insensitive to that lookback length, unlike many other technical measures whose useful window is said to change from sample to sample.
The same oscillator, shown on a trading-range sample, does not travel evenly between overbought and oversold regions. Analysts often respond by drawing trendlines or support and resistance on the oscillator itself. Those chart overlays are characterized as subjective and therefore difficult to evaluate with a computerized statistical test.
Adding a momentum lag
The modified construction, a relative momentum index, applies the same accumulation to closes compared with a close a chosen number of sessions earlier, rather than only the prior session. That momentum lag need not equal one session.
An illustration holds the lookback period fixed and sets a longer momentum lag, producing more regular peaks and troughs than the consecutive-close version on the same price history. Fixed overbought-oversold bands can then be treated as candidate reversal zones instead of lines drawn on the oscillator by eye.
A scan that stays inside one market
The archive describes a search procedure that split a multi-year equity-index futures series into equal segments. In each segment it scanned lookback period plus overbought and oversold reversal levels across a short range of momentum-lag values. A follow-up scan reused the full undivided series for the same lag values.
The write-up states that the study was limited to that one market and therefore does not support a general conclusion.
A reversal measure is not a procedure
The modified oscillator is framed as a reversal measure, not a complete trading procedure. A protective money-management stop is specified as a minimum add-on before live use is considered.
Combining the oscillator with seasonality, sentiment, commercial activity, and chart support or resistance is described as only partly objective. Conflicting readings still force a discretionary choice.
A fully mechanical procedure is proposed so that a run of wins or losses can be checked against historical expectation. Live trading can then be paused, with signals still recorded on paper, until results return to the expected range or a fault is found.
All readings on this track · 51 readings
- 1984Half-cycle differencing for momentum signals
- 1987Relative strength evaluation under competing optimization criteria
- 1988Weekly MACD as a two-clock momentum confirmation stack
- 1989Equal-weight zero-cross from smoothed spreads
- 1989Testing relative-strength-index reversal rules against trend continuation
- 1989Smoothed three-day futures filter for index option bounces
- 1989Cycle-length windows for momentum, Relative Strength Index, and stochastic construction
- 1991Filtered rally magnitude as a bull-regime breakout
- 1992Constructing true strength from double-smoothed momentum
- 1992Constructing a double-smoothed true strength index
- 1993When momentum structure and breadth break together
- 1993Constructing double-smoothed range and momentum oscillators
- 1993Constructing a two-parameter relative momentum index
- 1993Building a bounded momentum oscillator with RSI smoothing
- 1993Two-speed oscillators with divergence and trendline gates
- 1993Constructing a relative momentum index from the relative strength index
- 1994Constructing daily advance-decline breadth tools
- 1994Building a composite regime score from monetary climate and weekly trend
- 1994Averaging Relative Strength Index and the stochastic oscillator into one reversal oscillator
- 1995Dividend-yield regression as a hold versus momentum gate
- 1996Jump and hold filters for long-term Treasury yield direction
- 1997Constructing extendedness from a 10 percent swing filter
- 1997A range-expansion oscillator that can refuse its own stretch
- 1997RSI trend permission and Fibonacci pullback rules
- 1998Nested midpoint construction for a range-normalized oscillator
- 1999Evaluating Relative Strength Index momentum with zero-line and threshold rules
- 1999Treat RSI and momentum as three mechanical procedures
- 2000Thrust strength figure from moving-average swings
- 2001Constructing a non-range-bound balance of market power score
- 2004Cleaned breadth oscillator and new-high divergence: a swing-market case file
- 2004Evaluating advance-issues-momentum on a fixed-symbol-basket
- 2004Constructing a trend filter from two adjacent high-low windows
- 2006A dollar-versus-commodity extreme as a regime case
- 2008Zero-centered stochastic bands and bracket stops
- 2012Evaluating engulfing momentum across hold windows
- 2012Staged stops as one mechanical entry and exit procedure
- 2012Stacking a relative-strength-index forecast, a trend filter, and long-only momentum
- 2013Constructing fair-value filters from averages and momentum
- 2014Constructing a multi-window slope divergence entry
- 2015Bandedge trend filter construction with inverse crossover rules
- 2017Opposite rules for index price and volatility momentum
- 2018A three-state overlay that colors a trend only after the line clears the bar
- 2018Half-cycle relative-strength index with a Fisher map for cyclic reversals
- 2018Emotion as a rule input when momentum breaks
- 2018Two-bar body expansion as a momentum breakout construction
- 2019Pair a two-day high breakout with a volume-weighted exit on the same chart
- 2020Building reflex and trendflex cross and extreme entry rules
- 2020Construct a dual-series price momentum oscillator overlay
- 2020A multi-timeframe stochastic as a panel of weekly voters
- 2020Centerline crossovers that compare index momentums
- 2020Multi-timeframe stochastic voting as one mechanical rule