Moving Parabolic Fits

Many traders believe that markets move in linear trends.  However research indicates that oscillators based on market prices behave linearly, which means that the prices themselves must behave parabolically.  To accommodate this, FDC has a moving parabola function named movparab.  This function fits a parabola to moving periods of data and identifies the current value on that parabola.  The expression “30 movparab cl spx” will fit a parabola to each 30-day period, and give you the value of the last of those 30 days.  The expression  produces the following:

** N.B. The text of all commands is located at the end of this document.  That way you can simply copy them over to your own command set, should you wish to duplicate or modify the research

Thus you can see that movparab can be used as a smoother.  Furthermore, the formula can be used to generate values ahead in time or backward in time along the parabola.  That is, the expression “djia with (5 3 movparab cl djia)” will fit a parabola to the last 5 days of the close of djia, extend that parabolic fit for another 3 days, and give us that value.  Here’s that chart:

Thus, movparab can be used as a momentum indicator.  Lastly, should you request “qqqq with (20 -5 movparab midrange qqqq)”, FDC will give you the value of the parabola 5 days previous.  Thus movparab can also be used to provide meaningful stop values.  **

** N.B.  The expression “30 movparab cl spx” is equivalent to “30 0 movparab cl spx)”.  That is, if you only enter one left argument to movparab, it will assume that the value requested is for the “zero” day.  

spx with (30 movparab cl spx)

djia with (5 3 movparab cl djia)

qqqq with (20 -5 movparab midrange qqqq)

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