DOW Advance Decline Analysis

I received some emails requesting for same AD RSI analysis for DOW component stocks.

Using data from Yahoo, I perform the same analysis on DOW. Just to repeat the simple rules here

• Step 1. Obtain the number of gainers, number of losers and number of unchanged stocks that are in the 30 Dow index


• Step 2. Compute the difference between the number of gainers and number of losers


• Step 3. Compute the cumulative sum of the values obtained in Step 2.


• Step 4. Based on the series obtained in Step 3, compute a 13 day RSI. Lets call this AD RSI to differentiate it from normal RSI.
  

Below is the graph of the 13 Day AD RSI from 1999 to 2008.

For this studies, I assume the same rules as FTSE STI analysis

• Whenever the AD RSI drops below 30 wait for AD RSI to rise above 30
• When AD RSI rise above 30, buy 1 lot of DOW Index.
• Once long position is entered, hold the trade for 20 trading days before exiting.
  

Based on this simple trading method, we have the following trades

The probability of win turns out to be 72%.

Trade Updates 29 Jan 08

Today the market went up a bit. But overall it was a big disappointment.

There were 16 advancers, 9 decliners and 5 unchanged stocks in FTSE STI.

The AD RSI went up a bit and is now at 40.31.

The 2 opened trades are now sitting on losses of 0.78% and 0.19%

You can download the advancer decliner data from this link

http://www.yourfilelink.com/get.php?fid=456801


Happy trading.

Trade Updates 28 Jan 08

Today the market was down again. The FTSE STI index trades between 3004.76 and 3115.25. It closes at 3041.06, down by 118.42. Not a good start to the week.

Lets take a look at what the advancer and decliner is showing.

Today there are 0 Advancer, 30 Decliner and 0 Unchanged stocks in FTSE STI. The AD RSI is now at 38.47, down from 43.79.

The 2 open trades are now below water losing 1.06% and 0.48% respectively.



If you need to download FTSE STI Index together with advancer and decliner data,
you can download the data from the following link:

http://www.yourfilelink.com/get.php?fid=456741

This csv file contains the advancer and decliner numbers for stocks that are in FTSE STI Index from 2006 to 2008.

I will try to post it daily so that everyone can analyze the data.

You can add in your own trading rules and indicators to see how it will perform.


Have fun.

Advance Decline Line For FTSE STI Stocks

In the world of technical analysis, there are numerous methods of judging whether a market participants are bullish or bearish. One such indicator is the advance and decline line. If we were to use this method to trade the Straits Times Index, can we make money?

The way I calculate the advance and decline line is as follows:

• Step 1. Obtain the number of gainers, number of losers and number of unchanged stocks that are in the 30 FTSE STI Index


• Step 2. Compute the difference between the number of gainers and number of losers


• Step 3. Compute the cumulative sum of the values obtained in Step 2.
  
• Step 4. Based on the series obtained in Step 3, compute a 13 day RSI. Lets call this AD RSI to differentiate it from normal RSI.

Below is the graph of the 13 Day AD RSI for the past 3 years.

There are only 8 instances whereby the AD RSI values drop below 30.

Lets formulate a simple trading rule based on this observation

• Whenever the AD RSI drops below 30 wait for AD RSI to rise above 30


• When AD RSI rise above 30, buy 1 lot of STI Index.


• Once long position is entered, hold the trade for 20 trading days before exiting.

Based on this simple trading method, we have the following trades




We are able to capture the rebound in Aug 07, Jan 08.

Lets see how the 2 opened trades perform next week.