Today proposed indicator aim to compare the estimated of two instruments in order to provide various informations to the user, especially about risk and profitability.
The relative normalized (RNV) indicator is the ratio between the moving average of the absolute normalized price changes value of two securities, that is:
Where a and b are two different securities (note that notation "Δ(x)" refer to the 1st difference of x, and the "||" notation is used to indicate absolute value, for example "|x|" means absolute value of x).
The indicator aim tell us which security is more volatile between a and b, with a value of the indicator greater than 1 indicating that a is on average more volatile than b over the last length period, while a value lower than 1 indicating that the security b is more on average volatile than a.
The indicator use the current symbol as a, while the second security b must be defined in the setting window (by default the S&P500 ). Risk and profitability are closely related to , as larger price variations could potentially mean larger losses (but also larger gains), therefore a value of the indicator greater than 1 can indicate that it could be more risked (and profitable) to trade security a.
RNV using AMD (top) against Intel (bottom) .
RNV using EURUSD (top) against USDJPY (bottom) .
Larger values of length will make the indicator fluctuate less often around 1. You can also plot the logarithm of the ratio instead in order to have the indicator centered around 0, it will also help make values originally below 1 have more importance in the scale.
If you compare different types of markets the indicator might return NaN values, this is because one market might be closed, for example if you compare AMD against BTCUSD with the indicator you will get NaN values. If you really need to compare two markets then increase your time frame, else use an histogram or area plot in order to have a cleaner plot.
An original indicator comparing the between two securities has been presented. The choice of posting a indicator has been made by my twitter followers, so if you want to decide which type of indicator i should do next make sure to check my twitter to see if there are polls available (i should do one after every posted indicator).
« Je prendrai l’essor et je m’envolerai vers la mer.
« Je connaîtrai le goût des brises du large. J’entendrai les grands cris de la tempête.