Category: Turning Points
Abbreviation: Peakprob
Input parameters
Name
|
Setting
|
Default
|
High
|
High time series
|
High
|
Low
|
Low time series
|
Low
|
Close
|
Close time series
|
Close
|
Neighborhood
|
Integer >= 1
|
3
|
Window
|
Integer >= 1
|
50
|
Calculations
The Peak Probability indicator output is the probability that the Close price is at the next turning point peak, based on the mean and standard deviation of the price percent change from valley to peak in the Window. For definition of turning point peak and turning point valley, see help topic Overview.
The probability ranges from 0 (valley is not probable) to 1 (valley is extremely probable). The peak probability only calculates if the most recent turning point in the window is valley. If it is a peak, then the peak probability is set to zero. For statistically reliable probabilities the window must be large enough compared to the neighborhood parameter. Generally, the ratio Window:Neighborhood of at least 20:1or higher is highly desirable.
This indicator can be used in a trading strategy as a Long Exit (or Short Entry) signal. Make a trading rule in the form of a relational operator A>B, where A=Peak Probability and B is a threshold, ranging from 0 to 1. Let the Trader’s optimizer find the best threshold B, the neighborhood size, and the window size that maximize your trading strategy return.
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