Quant analytics: Most reliable technical indicators for identifying if in trending or range-bound market?

(Last Updated On: February 17, 2012)

Quant analytics: Most reliable technical indicators for identifying if in trending or range-bound market?

Just wondering what people think about the best indicators to use for this case. I’ve experimented with a few things; ADX, ATR, fast/slow moving average difference, gradients of SMA’s, momentum etc. They are all lagging indicators and I know there’s no crystal ball, but interested to see what things have worked for others.

 

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I use ADX. When the 14-day ADX is above 30 and rising, the trend is strengthening and I rely on trending indicators like moving averages and MACD. When ADX is below 25 and falling, the trend is losing strength and I rely more on non-trending indicators like stochastic and RSI. When ADX is below 20, especially below 15, the asset has “non-trended long enough” and I look for a breakout and resumption of a new trend – which direction depends upon what the non-trending indicators are telling you.

 

One limitation with indicators (be it MA/Stoch/MACD/ADX…) is their measurements are relative to a cycle. So they work great when market cycle length coincides and not so well when cycle lengths don’t match. So I find it easier to just assume any thing with ascending price highs & lows as trend (vice versa for down trends) and everything else on chart as range.

 

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Price action combined with ratios and a sturdy understanding of structural price development is best…

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!
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Hi i there My name is Bryan Downing. I am part of a company called QuantLabs.Net This is specifically a company with a high profile blog about technology, trading, financial, investment, quant, etc. It posts things on how to do job interviews with large companies like Morgan Stanley, Bloomberg, Citibank, and IBM. It also posts different unique tips and tricks on Java, C++, or C programming. It posts about different techniques in learning about Matlab and building models or strategies. There is a lot here if you are into venturing into the financial world like quant or technical analysis. It also discusses the future generation of trading and programming Specialties: C++, Java, C#, Matlab, quant, models, strategies, technical analysis, linux, windows P.S. I have been known to be the worst typist. Do not be offended by it as I like to bang stuff out and put priorty of what I do over typing. Maybe one day I can get a full time copy editor to help out. Do note I prefer videos as they are much easier to produce so check out my many video at youtube.com/quantlabs