20DMF - EOD March 9

[pdp-brugge]

Pascal,

The 20DMF charts is still saying "Short since 3/6/2012" although the MF has become positive yesterday.
Shouldn't the 20DMF be in CASH now?
I tought that the rules of the 20DMF EOD state that a short position should be covered (go to CASH) if the MF turns postive again...
Have the rules for the 20DMF changed?

PdP-Brugge

[adam ali]

Has to finish +0.10% end of day - porosity factor

[pdp-brugge]

is this "porosity factor" now an official rule?

[adam ali]

Yes - you may wish to search under the term as Billy and Pascal have written extensively about it including Billy's response to a similar question yesterday.

[Pascal]

is this "porosity factor" now an official rule?

It has been there since the start of the 20DMF. However, since the RT sytem has been on-line, I have put some efforts to explain more about this feature, because otherwise the logic of some signals would be difficult to understand.


Pascal

[pdp-brugge]

I'm sorry that I did not read all the post made yesterday.
This is due to the fact that I was travelling to my holiday destination yesterday and had no access to the internet.
I did not know that this "porosity" was used.
Maybe a new document from Pascal that reaffirms this porosity rule for the 20DMF would make things clearer?

[Pascal]

I'm sorry that I did not read all the post made yesterday.
This is due to the fact that I was travelling to my holiday destination yesterday and had no access to the internet.
I did not know that this "porosity" was used.
Maybe a new document from Pascal that reaffirms this porosity rule for the 20DMF would make things clearer?

There is not much to write about this porosity issue. The idea is to avoid whipsaws, which occur when a reversal takes place just after a position is entered. For example, if we cross below the 0 level, the market could reverse up within minutes or hours. Without the porosity feature, we would start issuing many signals around the 0 level because it is a natural equilibrium level. The porosity feature is also used for overbought/oversold levels, but it is less useful there.

In general, the porosity level is calculated as half the MF variation for a normal day. This means that the porosity level would evolve with volatility. This is the case for the GDX MF and the newer ETFs MF. However, it is NOT the case for the 20DMF, which is an older algo. For the 20DMF, the porosity level is set at 0.1%.



Pascal

[pdp-brugge]

OK
Clear for me now.
Thanks

[TraderD]

There is not much to write about this porosity issue. The idea is to avoid whipsaws, which occur when a reversal takes place just after a position is entered. For example, if we cross below the 0 level, the market could reverse up within minutes or hours. Without the porosity feature, we would start issuing many signals around the 0 level because it is a natural equilibrium level. The porosity feature is also used for overbought/oversold levels, but it is less useful there.
Pascal

Pascal, what is your level of confidence that the 0 level isn't subject to non-stationarity drift relative to the true equilibrium level?

Trader D

[Pascal]

Pascal, what is your level of confidence that the 0 level isn't subject to non-stationarity drift relative to the true equilibrium level?

Trader D

I do not know. if you could define what the true equilibrium level is and what the non-stationary drift is, then I could eventually measure this.


Pascal

[TraderD]

I do not know. if you could define what the true equilibrium level is and what the non-stationary drift is, then I could eventually measure this.
Pascal

Asked differently, how likely is the MF zero level (relative to which buy/sell signals are generated) to be consistent over time, as opposed to having its mean drift?

Trader D