Friday, January 18, 2008

Swing Quality

I have added a simple yet interesting indicator called Swing Quality. It is a correlation between swing legs and actual prices. Although visually obvious, it is interesting to notice that swings can sometimes be out of tune for a while, until the indicator adjusts itself again in realtime. SwingQuality can therefore be used to filter those transient situations.

Here above, we have a QQQQ chart with swings and Fibonacci calculated automatically. Swing legs are not always suitable for Fibonacci calculations, and here they clearly are. A Swing Quality above 30 is generally more than good enough. Again, since the algorithm continuously adjusts itself, SQ will very seldom drop to low levels.

As a reminder, Fibonacci expansion levels are displayed from L1 to L5 at the right of the chart. L1 and L5 are seldom used, but L2 (Fib COP), L3 (Fib OP) and L4 (Fib XOP) are quite commonly used. Here QQQQ is sitting on COP. Quite an easy short signal it was, wasn't it...? :)