[RN] MultiTimeFrame Center of Gravity
Can the inverse of an oscillator help you to forecast support and resistance?
This is an experimental adaptive support and resistance study based on Giorgos Siligardos's reverse-engineered relative strength index, or RevEngRSI along with zigzag study based on J. Welles Wilder’s relative strength index.
Giorgos Siligardos holds a PhD in Mathematics and a Market Maker certificate on derivatives from the Athens Exchange. He is a financial software developer and coauthor of academic books on finance. Giorgos has also been a research and teaching fellow to the University of Crete as well as a teaching fellow to the Department of Finance and Insurance at the Technological Educational Institute of Crete for many years teaching math and financial courses and supervising Masters dissertations.
I should note that the possible values of one-day closing prices and the corresponding RSI values are in one-to-one correspondence. The reverse engineering tactic can be applied to all oscillators if the value depends upon one and only one parameter (high, low, close, open, or volume). For the highest accuracy, it should only be used for the next price projection.
After identifying where the market is likely to move, you may want to see which are the possible levels or what the most extreme scenario is for the next close. The reverse engineering of RSI should be considered only for the next day’s (week’s, month’s, and so on) movement of the market for highest accuracy, because there are numerous variations of two or more market movements that can push RSI into a specific value. With only one movement, the market can push the RSI to a specific value only by one way, giving you an exact price projection. The reverse engineering process cannot be used for complex indicators with more than one parameter (such as stochastics) because there would be more than one unknown variable. If you use the reverse engineering method of RSI to project a closing price that needs more than one movement of the market to push the RSI to a specific level, then the accuracy will be low. Moreover, the more movements the market requires to push the RSI to the projected level, the lower the accuracy of the projection for the closing price. Generally, after you identify an important support or resistance value for the RSI or after you have projected a future value of the RSI, you may create a RevEngRSI indicator for that value. This will follow the price and give you the next closing price at which the RSI will attain that value.
This is an experimental adaptive support and resistance study based on Giorgos Siligardos's reverse-engineered relative strength index, or RevEngRSI along with zigzag study based on J. Welles Wilder’s relative strength index.
Giorgos Siligardos holds a PhD in Mathematics and a Market Maker certificate on derivatives from the Athens Exchange. He is a financial software developer and coauthor of academic books on finance. Giorgos has also been a research and teaching fellow to the University of Crete as well as a teaching fellow to the Department of Finance and Insurance at the Technological Educational Institute of Crete for many years teaching math and financial courses and supervising Masters dissertations.
I should note that the possible values of one-day closing prices and the corresponding RSI values are in one-to-one correspondence. The reverse engineering tactic can be applied to all oscillators if the value depends upon one and only one parameter (high, low, close, open, or volume). For the highest accuracy, it should only be used for the next price projection.
After identifying where the market is likely to move, you may want to see which are the possible levels or what the most extreme scenario is for the next close. The reverse engineering of RSI should be considered only for the next day’s (week’s, month’s, and so on) movement of the market for highest accuracy, because there are numerous variations of two or more market movements that can push RSI into a specific value. With only one movement, the market can push the RSI to a specific value only by one way, giving you an exact price projection. The reverse engineering process cannot be used for complex indicators with more than one parameter (such as stochastics) because there would be more than one unknown variable. If you use the reverse engineering method of RSI to project a closing price that needs more than one movement of the market to push the RSI to a specific level, then the accuracy will be low. Moreover, the more movements the market requires to push the RSI to the projected level, the lower the accuracy of the projection for the closing price. Generally, after you identify an important support or resistance value for the RSI or after you have projected a future value of the RSI, you may create a RevEngRSI indicator for that value. This will follow the price and give you the next closing price at which the RSI will attain that value.
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