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Dunn's Noisetest

Formula for: TradeStation

Views: 1552

Added: May 17, 2007

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ELA CODE -> DUNN'S NOISE TESTER
. To: omega-list@xxxxxxxxxx
. Subject: ELA CODE -> DUNN'S NOISE TESTER
. From: "Andy Dunn" <andy@xxxxxxxx>
. Date: Wed, 07 Oct 1998 14:11:12 -0700
. In-Reply-To: <002c01bdf0d1$b5b1c740$0200a8c0@xxxxxxx>
. References: <002c01bdf0d1$b5b1c740$0200a8c0@xxxxxxx>
. Resent-Date: Wed, 7 Oct 1998 14:11:32 -0700
. Resent-From: omega-list@xxxxxxxxxx
. Resent-Message-ID: <"BiFkO3.0.kW4.4az6s"@mx1>
. Resent-Sender: omega-list-request@xxxxxxxxxx

This comes from the Kaufman interview in S&C bonus issue 98. He talks about giving markets an efficiency ratio or rank and I guess this is used in chaos theory as "fractal efficiency". Anyways, there are 3 ways to calculate this theory....the one with the most detail is to take the "price change" over a period of time, and then divide that by the individual price changes over the same period. The ranking goes between 0 and 1. There is less NOISE in the market and more efficiency as we approach 1, but if the mrket is wild and crazy, teh denominator swells and we approach 0. I believe Kaufman's theory is that it is much easy to trade trends in efficient markets and you can use shorter moving averages...but as markets get more volatile, you then logically have to use loser, or longer MAs. This indicator helps quantify the markets.

I'm a butcher of a programmer so I can only figure out how to code this at a 10 day interval...perhaps Pierre or another top programmer would be so kind as to make the "extra cool" version that will allow either O,C, H,or L and any range of days rather than 10.

thanks
Andy

Code:

Type : Indicator, Name : Dunn's Noisetest

{Inspired by Kaufmans "efficiency ratio" and chaos "fractal efficiency"}

value1= absvalue(close - close[1]);
value2= absvalue(close[1] - close[2]);
value3= absvalue(close[2] - close[3]);
value4= absvalue(close[3] - close[4]);
value5= absvalue(close[4] - close[5]);
value6= absvalue(close[5] - close[6]);
value7= absvalue(close[6] - close[7]);
value8= absvalue(close[7] - close[8]);
value9= absvalue(close[8] - close[9]);
value10= absvalue(close[9] - close[10]);
value11=absvalue(close - close[10]);
value12=value1+value2+value3+value4+value5+value6+value7+value8+value9+value10;
value13=value11/value12;

Plot1 (value13, "noise rating");

Source: http://www.purebytes.com

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