Category: MESA91
Input parameters
Name |
Setting |
Default |
Optimization range |
Price |
Input time series |
Close |
|
Angle |
Real number |
0 |
0 - 360 |
LP (Lowest Period) |
Integer |
12 |
8 - 60 |
HP (Highest Period) |
Integer |
24 |
8 - 60 |
Description
The MESA91_EvenBetterSince Indicator can forecast market trend and it does so in only a half period of the dominant cycle, compared to the Sine indicator, which requires the full dominant cycle before it can determine market trend.
The original Sine indicator correlates a pure sinewave with the phase of input cycle (or dominant cycle in MESA91) over a full cycle period. This completely removes any trend component and only gives the cycle inherent in the data. The disadvantage of this indicator is that sometimes the cyclic swing is so small that the dominant cycle data is inconsequential. This is particularly true when the market is in a trend. The Sine indicator should be combined with the Trend Vigor indicator to determine when to use the Sine indicator in the first place (look at the Sine and LeadSine with TrendVigor example chart). The advantage of the Sine indicator is that once the dominant cycle is found, the wave can be artificially advanced to have predictive powers under the assumption that the dominant cycle will continue into the future.
On the other hand, the EvenBetterSine correlates the data with a sinewave over a HALF period of the dominant cycle. When you set the Angle parameter to 0, the segment goes from maximum positive to maximum negative (similar to an "S" shape on its side) over the half cycle period. The result is that you get nearly a maximum correlation when the market in an uptrend, nearly a maximum anti-correlation when the market is in a downtrend, and the indicator correctly calls the transitions between the two. One can advance the zero crossing a little bit with the phase lead input (the Angle parameter), but then one starts to lose the maximum correlations in the trends.
A trader can build a system using the zero crossings by optimizing the entries and exits based on the angle parameter. By the time the angle is advanced to 90 degrees, the price data is being correlated with the negative alternation of the dominant cycle (a "U" shape). This will have maximum correlation at cycle troughs, whether those troughs are true reversals or are wiggles in the trend. By advancing the angle to 180, the output waveform will be exactly anti-correlated with the waveform with the phase at 0 degrees.
A trader can also build a system using the EvenBetterSine twice the the two angles somewhere near anti-correlation. Then the angles can be optimized so the crossings of the two indicators produce the best trading strategy.
Related Indicators: