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Indicator Manual
April 2010 | Version 1.0 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved www.dvindicators.com
Contents
Introduction – Indicator Construction Principles page 1
DV Indicators Page 3
page page
DV Bounded (DVB) 3 DV Stochastic (DVS) 28
DV Unbounded (DVU) 5 DV Bands (DVBU/DVBL/DVBM) 29
DV Oscillator (DVO) 6 DV Band Indicator and DV Band Percentile (DVBI/DVBP) 30
DV Super-Charged Bounded (DVSC) 7 DV Zones (DVZN) 32
DV Intermediate Oscillator (DVI) 9 DV Super-Charged Percent Exposure (DVSE) 33
DV Mean-Median Divergence (DVMM) 10 DV Bounded Percent Exposure (DVBE) 34
Rolling Exponential Moving Average (REMA) 13 Daily Historical Volatility (DHV) 35
Rolling Relative Strength Index (RRSI) 14 DV Percentile Rank Volatility (DVPV) 36
DV Fractal RSI (DVFR) 15 DV Composite Volatility (DVCV) 37
DV Adaptive RSI (DVAR) 17 DV Breakout, Composite Vol Plus, Composite Vol Minus (DVBR) 38
DV Aggregate-M (DVAM) 19 DV R-Squared Autocorrelation (DVRAC) 39
DV Adaptive Agg-M (DVAA) 21 DV Differential Autocorrelation (DVDA) 40
DV Intermediate Stretch (DVIS) 22 DV Composite Fractal Efficiency (DVFE) 41
DV Intermediate Magnitude (DVIM) 23 DV Smoothed Trend (DVST) 42
Trend Stochastic (DVTS) 25 DV Self-Adaptive Slow (DVAS)/ DV Self-Adaptive Fast (DVAF) 43
DV Trend-Minus Cycle (DVTO) 26 CSS Analytics Adaptor One (CSSA1) 45
DV Super-Smoothed Double Stochastic (DVDS) 27
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 2
DV Bounded (DVB)
Baseline Strategy
Long <= 0.50, Short > 0.50
Suggested Usage
…
0.50996
0.2
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
The DV Bounded is also known otherwise as the “DV2” and was created by David Varadi to capture the normalized relative close. The “DV2” version
of the DV Bounded represents the 2-period average of the relative close to the high-to-low range. The “bounded” portion represents the
normalization using a percentile rank function to re-scale the indicator on the basis of the historical distribution of values.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 3
Example 1: DVB v RSI2 on SPY
Amibroker Code
in Appendix 1
Ticker: SPY
Metrics
CAGR: 30.40%
Sharpe: 1.23
Num Trades: 912
Average Trade: 0.33%
% Winners: 62.4%
DVR: 0.70
SPX Correlation: -30%
Ticker: SPY
Metrics
CAGR: 16.20%
Sharpe: 0.50
Num Trades: 60
Average Trade: 0.20%
% Winners: 66.7%
DVR: 0.37
SPX Correlation: -29%
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 4
DV Unbounded (DVU)
Baseline Strategy
Long <= 0.0, Short > 0.0
Suggested Usage
…
0.00099
0.00000
-0.008
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the unbounded variant of the DV2 that was originally introduced by Michael Stokes at MarketSci. Unlike the original DV2 - which is bounded
by using a percentile rank function - the unbounded DV2 is simply a raw conversion of the average of the relative close to the high-to-low range.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 5
DV Oscillator (DVO)
Baseline Strategy
Long <= 0.50, Short > 0.50
Suggested Usage
…
0.2
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the “mother oscillator” framework from which the simpler DV Bounded variant was originally derived. It was conceived in its first form as a
flexible blueprint for the selection of the optimal oscillator calculation. The DVO is partially adaptive and more accurate/reliable than the original
version. As a consequence it requires more historical data, and the indicator values make smoother transitions to changing volatility. As of the
current writing, no other public indicator that we are aware of shows raw performance as strong as the DVO on the major indices.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 6
DV Super-Charged Bounded (DVSC)
Baseline Strategy
Long <= 0.50, Short > 0.50
Suggested Usage
…
0.2
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the smoothed and slightly altered version of the DV Bounded that delivers superior performance. The nature of the calculation is very similar,
but the differences make it more responsive with less whipsaws than the original.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 7
Example 2: DVU,DVB,DVO & DVSC
DVO
2,500,000 DVU
Long: Enter DVU <= 0.0, Exit DVU > 0.0
Short: Enter DVU > 0.0, Exit DVU <= 0.0
2,000,000
DVSC
DVB
Long: Enter DVB <= 0.50, Exit DVB > 0.50
Equity
1,500,000
DVB Short: Enter DVB > 0.50, Exit DVB <= 0.50
DVU DVO
1,000,000 Long: Enter DVO <= 0.50, Exit DVO > 0.50
Short: Enter DVO > 0.50, Exit DVO <= 0.50
500,000 DVSC
Long: Enter DVSC <= 0.50, Exit DVSC > 0.50
Short: Enter DVSC > 0.50, Exit DVSC <= 0.50
-
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 NOTE: Back-test assumes 100,000 starting equity
with compounding of profits
Amibroker Code
in Appendix 1
System Metrics
No. Net % Profit CAR Max. Sys % Drawdown Sharpe Ratio Avg Profit/Loss % % of Winners DVR Ratio SPX Correlation
DVU 1184% 28.17 -24.4 1.13 0.31 62.31 0.65 -0.32
DVB 1433% 30.4 -25.79 1.23 0.33 62.39 0.69 -0.3
DVO 2529% 37.42 -19.58 1.33 0.41 64.02 0.76 -0.33
DVSC 2152% 35.37 -19.76 1.29 0.4 63.89 0.82 -0.32
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 8
DV Intermediate Oscillator (DVI)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Long <= 0.50, Short > 0.50
Suggested Usage
…
0.2
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the smoothed intermediate oscillator framework designed to complement the DVO. It was also designed to be flexible for use in adaptive
systems. The current DVI is a combination of two different indicators: 1) DVIM- DVI Magnitude which measures the distance price has travelled over
multiple intermediate time frames and 2) DVI Stretch which measures the net up or down days over multiple time frames. Both indicators are
complementary and combine to produce a superior composite- the DVI- in most cases. The DVI line is very smooth and is designed to help identify
areas of higher or lower value rather than peaks or valleys as it stays in oversold or overbought territory for longer periods. This makes it ideal for
combination with intermediate trend systems, or for filtering DV2, DVSC or DVO trades.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 9
DV Mean-Median Divergence (DVMM)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Long: Rising and/or >0.0,
Short: Falling and/or <0.0
Suggested Usage
…
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the DV equivalent of the MACD, substituting the median for the average to make it more responsive to picking up acceleration in the trend. It
is one of the few indicators that are successful on noisy intraday data. It is one of the best intermediate term trend indicators we have tested, and can
be used numerous ways: 1) as a trend filter 2) as a trend indicator 3) an oscillator 4) it can be re-scaled to create a volatility measure.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 10
Example 3: DVMM on WYNN,BIDU
Ticker: WYNN
Metrics
CAGR: 44.98%
Sharpe: 1.26
Num Trades: 41
Average Trade: 8.66%
% Winners: 56.10%
DVR: 1.00
SPX Correlation: 4%
Ticker: BIDU
Metrics
CAGR: 63.00%
Sharpe: 1.25
Num Trades: 27
Average Trade: 11.69%
% Winners: 51.85%
DVR: 1.06
SPX Correlation: -1%
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 11
Example 3: DVMM on WYNN,BIDU
WYNN
WYNN - Daily 25/10/2002 Open 13, Hi 13.15, Lo 12.85, Close 13.01 (0.0%)
70.0
63.68
60.0
50.0
40.0
30.0
20.0
Oct Dec 2009 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 Feb
WYNN - DV Mean-Median Divergence(26,12,9) = {EMPTY}
8.0
4.0
0.00000
0.0
-1.25154
-4.0
-8.0
-12.0
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 12
Rolling Exponential Moving Average (REMA)
Baseline Strategy
Long when rising, Short when falling
Suggested Usage
…
Sep 2009 Oct 2009 Nov 2009 Dec 2009 Jan 2010 Feb 2010 Mar 2010 Apr 2010
Jeff Pietsch, of Market Rewind fame, is the brain child behind this EMA alternative1. This is an exponential moving average that creates a “rolling
memory” as new price data is added to make it slightly less weighted than a standard EMA. It can be used to smooth indicators or as a replacement
for a moving average in a trend strategy. Our preferred use is to apply the REMA to a momentum or ROC series to enhance responsiveness for
relative strength applications. The DVST uses the REMA in this format and can be applied also as a trend indicator.
1. See http://marketrewind.blogspot.com/2009/02/solving-ema-backtest-dilemma.html
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 13
Rolling Relative Strength Index (RRSI)
Platforms
Excel
Baseline Strategy
Long <= 30, Short >= 70
Suggested Usage
…
50
20
The RRSI uses the REMA1 in the place of the conventional average in the RSI calculation. This makes it a more responsive price oscillator and
superior to the RSI in many respects. All other features are identical to the RSI. Users can select their preferred time period, such as a 2-period.
1. See http://marketrewind.blogspot.com/2009/02/solving-ema-backtest-dilemma.html
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 14
DV Fractal RSI (DVFR)
Platforms
Excel
Baseline Strategy
Long >= 50, Short < 50
Suggested Usage
…
50
Level 1
20 Adaptive
The Fractal RSI is a “Level 1” adaptive indicator that dynamically shifts weight in the RRSI between 2 and 30 days by default. This shifting is done to
accommodate changes in volatility and fracticality in the market price data. However users may select any two periods in between these bounds.
The longer term bound (30 days by default) is always set to have a trend influence on the shorter-term bound. Some good parameter choices you
may wish to explore include 2/30, 2/15, 3/30,3/20, 10/30, 14/30.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 15
Example 4: DVFR on SPY,IWM
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 16
DV Adaptive RSI (DVAR)
Platforms
Excel
Baseline Strategy
Long: Falling or <= 50,
Short: Rising or > 50
Suggested Usage
…
50 Level 2
Adaptive
The Adaptive RSI is a “Level 2” adaptive indicator uses the same bounds as the Fractal RSI, but determines weight based on relative profitability
within the bound spectrum instead of optimization. The Adaptive RSI performs well across a broad array of instruments and does a very good job of
adapting considering its limited input. It requires a lot of data to calculate and as such is only available in the Excel Plug-In.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 17
Example 5: DVAR on ^GSPC
Ticker: ^GSPC
Metrics
CAGR: 22.64%
Sharpe: 1.49
DVR: .87
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 18
DV Aggregate-M (DVAM)
Platforms
Excel
Baseline Strategy
Long >= 0.50, Short < 0.50
Suggested Usage
…
0.5
0.2
The DV Aggregate M is a composite trend/mean-reversion indicator that is based on integrating the short-term and long-term price distributions. The
AggM assumes that prices are noisier and tend to mean-revert in the short to intermediate term, but tend to trend over longer time periods. It has
been shown to be effective across a wide array of markets and stocks and is one of the more general/robust DV Indicators.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 19
Example 6: AggM on SPY, EWZ
Ticker: SPY
Ticker: EWZ
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 20
DV Adaptive Agg-M (DVAA)
Platforms
Excel
Baseline Strategy
Long >= 0.50, Short < 0.50
Suggested Usage
…
0.5 Level 2
Adaptive
The Adaptive Aggregate M is a “Level 2” adaptive indicator like the Adaptive RSI that determines weight based on relative profitability within the
bound spectrum but constrains the long-term setting to avoid changing the nature of the original indicator. It can be combined with the original
Aggregate M to give more accurate signals.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 21
DV Intermediate Stretch (DVIS)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Long <= 0.50, Short > 0.50
Suggested Usage
…
0.2
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is one component of the DVI that isolates the stretch in terms of net days up or down over a series of periods and is re-scaled to create an
accurate and consistent measure. The stretch is not like RSI because it does not consider the magnitude of up or down days but rather the net
difference. It also looks at the short, intermediate and long time frames with a net weighting on the intermediate. This is a very accurate and useful
indicator for identify mean-reversion areas of value rather than actual turning points. It can also be used as a trend measurement in conjunction with
the ADX (Average Directional Movement).
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 22
DV Intermediate Magnitude (DVIM)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Long <= 0.50, Short > 0.50
Suggested Usage
…
0.2
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the other component of the DVI that looks at the magnitude of up and down movements and is smoothed to reduce noise and also re-scaled
to create an oscillator that appears to move in a “wave” format. The DVIM is a great complement to the DVIS because it measures the net
percentage move over a variety of look backs weighted primarily on the intermediate time-frame. Like the DVIM, it does not attempt to identify
turning points, and is instead a measure of relative value that does not change as frequently as other oscillators. The “wave” movement of the
indicator is ideal for “hook” type mean-reversion strategies that buy or sell following a transition from overbought or oversold levels. It can also be
lengthened to create an excellent trend or relative strength indicator.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 23
Example 7: DVIS/DVIM on SPY
Ticker: SPY
Ticker: SPY
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 24
DV Trend Stochastic (DVTS)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
121.19
Long: Falling and/or >= 0.50,
Short: Rising and/or < 0.50
Suggested Usage
Short when it hits 0.20 from above,
and long when it hits 0.80 from below
0.5
0.2
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
The Trend Stochastic is a super-smoothed 10-period stochastic that moves gradually relative to the standard indicator developed by George Lane. It
borrows from concepts used to smooth noisy data such as momentum. As a consequence it can be used as a trend indicator or a filter for mean-
reversion trades. It is a number scaled between 0 and 1, where .5 is not necessarily the median point. It can be traded long anywhere above .4 to .6,
and short below. Or it can be traded by observing whether the stochastic is rising or falling, and potentially a combination of both the direction of
movement and relative position.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 25
DV Trend Minus Cycle (DVTO)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Long >= 0.50, Short < 0.50
Suggested Usage
…
May Jul Aug Sep Oct Nov Dec 2010 Feb Mar Apr
SPY - DV Trend Cycle Oscillator(3, 252) = 0.29
0.59761
0.5
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
The Trend-Minus Cycle oscillator is a transform that nets the difference between the trend stochastic and a calculation related to the DVDS or super-
smoothed double stochastic. The DVTO is useful for markets where an intermediate trend signal is hidden or obscured by a cyclic component. This
trend may occur at medium frequencies such as the S&P500 or at extremes such as the case with Oil. If the DVTO is highly unprofitable on a given
market that is usually because it is mean-reverting at the intermediate level—this occurs in markets such as natural gas or gold stocks. The benefit
of the DVTO is that you can use it to filter intermediate trend signals such as in the MACD or DVMM, or you can use it to combine with longer term
trend indicators to create a more accurate multiple time frame system.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 26
DV Super-Smoothed Double Stochastic (DVDS)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Long <= 0.20, Short >= 0.80
Suggested Usage
…
Jul Aug Sep Oct Nov Dec 2010 Feb Mar Apr
0.9
SPY - DV Double Stochastic(10) = 0.41
0.891468
0.1
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
The super-smoothed double stochastic is the preferred mean-reversion variant to the conventional stochastic by George Lane. The DVDS
normalizes the 10-period stochastic position within the channel to increase peak/valley classification accuracy and is smoothed twice to make it less
prone to whipsaws. It does not use a percentile rank classification which tends to increase median accuracy versus extreme accuracy.As a
consequence is a good compliment to shorter –term oscillators like the DV2, DV Stochastic, or RSI2, or even intermediate oscillators like the DVI as
it helps to increase the odds of finding a temporary bottom or top. DVDS levels below 10 and above 90 often coincide with peaks/valleys within a few
days. With the broader trend, levels below 20 and above 80 tend to be the appropriate signal levels.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 27
DV Stochastic (DVS)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Long <= 0.50, Short > 0.50
Suggested Usage
…
0.2
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the short-term cousin of the DVDS and resembles a stochastic version of the dv2. Like a conventional stochastic it permits highly profitable
entries from oversold/overbought levels when the indicator is rising/falling, and this is a much lower risk entry than classic rsi2 and dv2 variants. It
isn’t designed as much for binary use, although the binary version responds better to adaptation than DV2 or RSI2 variants because it is more
predictable in its oscillation. Itdoes use the percentile rank to permit a consistent number of entries.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 28
DV Bands (DVBU/DVBL/DVBM)
SPY - Daily 01/04/2010 Close 117.8 DV Bands(20,252,0.975, 0.5, 0.025) = 117.38 121.19 Type: Charting Indicator
120.825
119.289 Platforms
Amibroker, Tradestation, Excel
0.5
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
The DV Lower Band (DVBL) price is similar to the lower band of a standard Bollinger Band but is re-scaled to the annual lower band level frequency.
The DV Middle Band (DVBM) price is similar to the middle band of a standard Bollinger Band--but is not the average price but rather the re-scaled
average price. The DV Upper Band (DVBU) price is similar to the upper band of a standard Bollinger Band but is re-scaled to the annual upper band
level frequency. DV bands ‘contain’ price more effectively because they utilise the actual distribution of historical prices (unlike Bollinger Bands which
assume a normal distribution).
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 29
DV Band Indicator and Percentile (DVBI/DVBP)
SPY - Daily 01/04/2010 Close 117.8 DV Bands(20,252,0.975, 0.5, 0.025) = 117.38 121.19 Type: Intermediate Mean Reversion
120.825
119.289 Platforms
Amibroker, Tradestation, Excel
Suggested Usage
…
0.5
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
Both the DVBP and DVBI can be used as probability-based indicators, where the likelihood of exceeding the absolute extremes the next day is very
low. In our testing the upper and lower DV Bands contained up to 95% of closes out of sample—that is, the chances of exceeding the upper or lower
band or 97.5th and 2.5th percentiles were roughly equivalent to their promised probability (2.5+100-97.5=5% of values outside the range). This
makes DV Bands a good tool for mean-reversion strategies and/or filtering for abnormal market conditions.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 30
Example 8: DV Bands Price Containment
Study
The following table empirically tests the DV bands ability to ‘contain’ price, as compared to the original Bollinger Bands ability to contain price. It is
clear from these results that DV Bands do in fact contain significantly more of a stock’s price movement than Bollinger Bands. For example, the
original Bollinger Bands contain 82.4% of SPY prices (i.e. the close is within the bands), whereas DV Bands contain 89.6% of SPY prices.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 31
DV Zones (DVZN) for Excel Plug-in Only
Platforms
Excel Only
This is one method of identifying regimes, in this case DV Zones are constructed using DVRAC- a trend filter that uses multiple smoothed regression
slopes that are smoothed with a 30-day measurement periods, and DVPV which is the percentile rank of 30-day historical volatility. The following
table shows the corresponding number codes and indicator values used to de-lineate the zones:
DV Zones are excellent for developing comprehensive trading systems. They are static regimes that capture a broad spectrum of market conditions.
You also may wish to shift a portfolio allocation to various systems dynamically based on the current zone position. The most common use of zones
is to understand the performance of a given indicator within each zone, since they will be very different. It is instructive in some cases to consider
longs separately from shorts. For example, in up trends with low volatility, shorting using a short-term indicator like the RSI2 or DV2 might not be
desirable. The same may apply with going long in down trends with low volatility. As always taking a smaller position size is the least risky alternative
if you have a good system to avoid missing out. The zone concept can be applied using other indicators as well such as the 200 day moving
average. DV Zones allow the user to create trading systems for each market regime, as opposed to one system for all market regimes.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 32
DV Super-Charged Percent Exposure (DVSE)
SPY - Daily 14/04/2010 Close 121.19 Type: Short Term Mean Reversion
121.19
Positing Sizing
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Position Size = Normal Position Size
* DVSE Exposure %
Suggested Usage
…
0.2
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the DV Super-Charged DV2 percent exposure model that varies between 150% and -150% based on a simple algorithm. The DVSE
increases exposure on both the long and short side at extremes, and normalizes its exposure positioning to keep size proportionate.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 33
DV Bounded Percent Exposure (DVSE)
SPY - Daily 14/04/2010 Close 121.19 Type: Short Term Mean Reversion
121.19
Positing Sizing
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Position Size = Normal Position Size
* DVSE Exposure %
Suggested Usage
…
0.2
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the DV2 percent exposure model that varies between 150% and -150% based on a simple algorithm. The DVSE increases exposure on both
the long and short side at extremes, and normalizes its exposure positioning to keep size proportionate.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 34
Daily Historical Volatility (DHV)
Platforms
Amibroker, Tradestation, Excel
Suggested Usage
121.19
…
8.58655
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the standard historical volatility calculation with a user defined measurement period. The default setting is 30 days. The calculation is the
standard deviation of the natural logarithm of price changes over the period selected scaled to 1 year as defined by 252 trading days using the
square root rule. It has been multiplied by 100 to make it comparable to the VIX. When the VIX is trading above this number it is bullish for the
market and vice versa based on our historical research.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 35
DV Percentile Rank Volatility (DVPV)
SPY - Daily 14/04/2010 Close 121.19 Type: Mean Reversion / Trend Filter
121.19
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Mean Reversion environment when > 0.50,
Trend environment when < 0.50
Suggested Usage
…
N D 2009 M A M J J A S O N D 2010 M A
SPY - DV Percent Rank Volatility(20, 252) = 5.98
5.9761
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the percentile rank of DVHV with a 30 day default setting and a 252 day look back for the normalization. The DVPV is an excellent tool for
system filtering and testing as well as position sizing and portfolio allocation. Primarily it should be considered as a key measure to watch when
deciding between mean-reversion and trend-strategies. It is also a key component of “zones” analysis (see DVZN).
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 36
DV Composite Volatility (DVCV)
SPY - Daily 14/04/2010 Close 121.19 Type: Mean Reversion / Trend Filter
Platforms
Amibroker, Tradestation, Excel
113.33
Baseline Strategy
Mean Reversion environment when > 0.50,
Trend environment when < 0.50
Suggested Usage
…
J S O N D 2009 M A M J J A S O N D 2010
SPY - DV CompositeVolatility(5, 252) = 0.62
0.5
0.0398406
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is a composite volatility measure that includes ratio volatility , longer term historical volatility, and a measure of daily variation. It can be used as
mean-reversion filter on its own or combined with DVPV. A rising DVCV over the past week or 5 days and a reading above the lowest quartile or .25
is more favorable for short-term mean-reversion on an absolute and risk-adjusted basis. Day-traders may also want to pay attention to the DVCV.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 37
DV Breakout, Composite Volatility Plus, Composite
Volatility Minus (DVBR/DVCP/DVCM)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Long: >= 0.0, Short: < 0.0
Suggested Usage
…
May Jun Jul Aug Sep Oct Nov Dec 2010 Feb Mar Apr
SPY - DVCV(P+M)(10, 252) = 0.06
0.0629482
0.00000
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 38
DV R-Squared Autocorrelation (DVRAC)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Long: >= 0.20, Short: < -0.20
Suggested Usage
…
0.00000
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
This is the premier trend filter used within the 6 different regime “Zones” that reflected different combinations of trend and volatility. The DVRAC
utilizes a slope-based R-squared correlation of prices that captures the Highs, Lows and Closes. Smoothing is applied to the indicator which
minimizes false signals but also has the disadvantage of producing lag. DVRAC levels above .2 show a statistically significant positive trend which
helps to provide a minimum criteria for placing buys to avoid false entries. Levels between -.2 and .2are indicative of temporary uncertainty in the
trend condition, and this area is often called the “No-Trend” zone. Levels of the DVRAC below -.2 show a statistically significant intermediate down
trend. This must be analyzed within the context of the long-term trend to consider going short.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 39
DV Differential Autocorrelation (DVDA)
Platforms
Excel
Suggested Usage
…
50
20
The differential autocorrelation indicator is a filter that detects shifts in the difference in autocorrelation between closing prices and high versus low
prices. This is significant as a trend/mean-reversion filter since a strong trend will tend to have persistently higher closes but variation in highs and
lows. Levels of DVDA well below .25 characterize short-term random drift in the market and indicator signals are less valuable in this area. In
general, a falling DVDA over 1-5 days is a mean-reversion environmental signal. A rising DVDA signals favorable conditions for the prevailing trend.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 40
DV Composite Fractal Efficiency (DVFE)
Platforms
Excel
Baseline Strategy
Long: >= 0.75, Short: < 0.25
Suggested Usage
…
0.25
This is a composite mean-reversion and trend indicator that measures fractal efficiency at two different time frames. The DVFE assumes that mean-
reversion resides in the short-term and trends exist in the long term similar to the Aggregate M indicator. The signals are not highly correlated to the
Agg M even though the default periods are nearly the same. This is because the DVFE is best traded at extremes of >.75 for longs and <.25 for
shorts. The binary DVFE is not nearly as impressive as the Agg M, which naturally introduces the possibility of taking extreme DVFE signals and
using binary Agg M to take lower level signals.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 41
DV Smoothed Trend (DVST)
Platforms
Amibroker, Tradestation, Excel
Baseline Strategy
Long: >= 0.0, Short: < 0.0
Suggested Usage
…
-4
Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com
The DV Smoothed Trend is a momentum measure that is smoothed twice using REMA or the rolling exponential moving average. The use of
momentum/velocity assures that lag is minimized, and the use of double smoothing reduces the noise component. The DVST can be used as either
a relative strength indicator, or a trend indicator.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 42
DV Self-Adaptive Slow, DV Self-Adaptive Fast
( DVAS / DVAF )
Platforms
Excel
Suggested Usage
…
Level 1
Adaptive
Both DVAS and DVAF are Level 1 class self-adapters that resample the prevailing distribution of the underlying to match with indicator signals to
determine whether the best direction to trade an indicator is mean-reversion “MR” or trend “TR.” They can be applied with an indicator chosen by the
user, but are best suited to shorter-term or intermediate term indicators. The self-adapter also determines the best levels to buy and sell using a
given indicator by quickly adapting to the new distribution of returns for the underlying. The DVAS is less sensitive and tends to change more slowly
while the DVAF rapidly adjusts to current conditions and potentially noise. There is a trade-off to using both and the best way is to use one in
conjunction with the other.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 43
DV Self-Adaptive Slow, DV Self-Adaptive Fast
( DVAS / DVAF )
Platforms
Excel
Suggested Usage
…
Level 1
Adaptive
Both DVAS and DVAF are Level 1 class self-adapters that resample the prevailing distribution of the underlying to match with indicator signals to
determine whether the best direction to trade an indicator is mean-reversion “MR” or trend “TR.” They can be applied with an indicator chosen by the
user, but are best suited to shorter-term or intermediate term indicators. The self-adapter also determines the best levels to buy and sell using a
given indicator by quickly adapting to the new distribution of returns for the underlying. The DVAS is less sensitive and tends to change more slowly
while the DVAF rapidly adjusts to current conditions and potentially noise. There is a trade-off to using both and the best way is to use one in
conjunction with the other.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 44
CSS Analytics Adaptor One (CSSA1)
Platforms
Excel
Baseline Strategy
Long: >= 0.50, Short: < 0.50
Suggested Usage
…
0.5
Level 1
Adaptive
This is the first institutional class entrant of the DV Indicators - it is a Level 1 Adaptive short-term mean-reversion indicator that looks at multiple time
frames and different measures of volatility and fracticality. It dynamically self-adjusts to account for these factors to avoid making costly errors in
buy/sell decisions. CSSA is more robust than the standard DV Indicators and works on a wider range of markets and stocks - especially entering at
more extreme levels. It is a small preview of the future which will include Level 3 and Level 4 class that will have multiple layers of adaptation and
self-adjustment. CSSA is the frame of a new class of indicators that will represent compact artificial intelligence machines.
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 45
Example Applications
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 46
System A: DV SPY Swing System
Description
The DV SPY Swing System combines [......... Rules Provided with subscription ................]
Long
Zone 1 Zone 2
Rising SMA200 Falling SMA200
Entry and and DVDS10 < 20
DVDS10 < 20 and DVO <= 20
Exit [.........
DVDS10 >Rules
80 Provided
DVO > 50
with subscription
Short
................]Zone 2
Zone 1
Falling SMA200
Entry none and
DVDS10 < 20
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 47
DV SPY Swing System (Continued)
Amibroker Code
// ========================================================================================
// DV Indicators by David Varadi http://cssanalytics.wordpress.com/
// Copyright 2009-2010 David Varadi/ CSS Analytics, All Rights Reserved
// For Personal Use by Registered Users Only; NOT for Redistribution; No Implied Warranties
// ========================================================================================
// Long Signals
Entry1 = UpTrend AND (DVDS_10Period < 0.20);
Entry2 = DownTrend AND (DVDS_10Period < 0.10) AND (DVO_indicator <= 0.20);
Buy = Entry1 OR Entry2;
// Short Signals
Short = DownTrend AND (DVO_indicator > 0.50);
Cover = DVO_indicator < 0.50;
NOTE: Results differ marginally between Amibroker and Excel because of different trade management techniques
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 48
System B: DV Combo System
Description
The DV Combo system combines short-term mean reversion, using the DVSC2, with a longer term composite trend and mean-reversion indicator,
namely the AggZ. The benefit of this approach is that the system will stay long until both time-frames dictate that the position should be flipped – this
reduces the number of trades thereby avoiding chop and the associated trading costs. This system is intended for the S&P500 spider, the “SPY”.
[......... Rules Provided with subscription ................]
For those not familiar with the AggZ, the calculation is dead simple:
AggZ= (-1x( 10-day z-score)+(200-day z-score))/2,
where z-score = (close-sma (closing prices over last n periods))/(standard deviation( closing prices over last n periods))
> 0, add 1
AggZ
< 0, minus 1
Combo
< 50, add 1
Score
DVSC2[......... Rules Provided with
> 50, minus 1
subscription ................]
System Rules
Long Short
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 49
DV Combo System (Continued)
Amibroker Code
// ========================================================================================
// DV Indicators by David Varadi http://cssanalytics.wordpress.com/
// Copyright 2009-2010 David Varadi/ CSS Analytics, All Rights Reserved
// For Personal Use by Registered Users Only; NOT for Redistribution; No Implied Warranties
// ========================================================================================
function zscore(price,Length)
{ [......... Code Provided with subscription ................]
av = MA(price,Length);
st = StDev(price,Length);
zs = (price - av) / st;
return zs; }
// Long System
Buy = ComboScore > 0; Sell = ComboScore <= 0;
// Short System
Short = ComboScore < 0; Cover = ComboScore >= 0;
NOTE: Results differ marginally between Amibroker and Excel because of different trade management techniques
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 50
Appendices
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 51
Appendix 1: Amibroker Code
Value1 = Param("SystemToRun",1,1,2,1);
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 52
Appendix 1: Ami Code
Value1 = Optimize("SystemToRun",1,1,4,1);
if(Value1 == 1)
{ // DVU SYSTEM
[......... Code Provided with subscription ................]
myDVU = DVU(H,L,C,2); Buy = myDVU <= 0; Sell = myDVU > 0; Short = myDVU > 0; Cover = myDVU <= 0;
}
else if (Value1 == 2)
{ // DVB SYSTEM
myDVB = DVB(H,L,C,2,252); Buy = myDVB <= 0.50; Sell = myDVB > 0.50; Short = myDVB > 0.50; Cover = myDVB <= 0.50;
}
else if (Value1 == 3)
{ // DVO SYSTEM
myDVO = DVO(H,L,C); Buy = myDVO <= 0.50; Sell = myDVO > 0.50; Short = myDVO > 0.50; Cover = myDVO <= 0.50;
}
else if (Value1 == 4)
{ // DVSC SYSTEM
myDVSC = DVSC(H,L,C, 2, 252); Buy = myDVSC <= 0.50; Sell = myDVSC > 0.50; Short = myDVSC > 0.50; Cover = myDVSC <= 0.50;
}
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 53
Appendix 2: Amibroker Installation
Description
The Amibroker Plug-in package is easily installed.
1) Firstly close Amibroker, then simply double click on the provided installation file “DVPlugins.msi” and follow the installation prompts
2) When the installation is complete, start up Amibroker, where you will be presented with the dialogue box below. This will only appear once,
and should not be cause for concern.
3) Within Amibroker, the AFL files for all the DV Indicators can be found under the Charts pane > Custom Folder > DV Indicators Folder
27 April 2010 DV Indicators | Copyright CSS Analytics Inc 2010 All Rights Reserved 54