| Q: Is it possible to write the "4% Rule"
into a custom formula? A: The "4% Rule", popularized by
Martin Zweig, among others, states that you enter the market after it has gone UP 4%, and
exit the market after it has gone DOWN 4%. This counter-intuitive rule is intended
to get you into (or out of) the big price moves. This is a good strategy for a
strongly-trending market, but a poor strategy for a sideways market.
The following formula uses the PREV function and is slow to calculate on large amounts
of data. The formula returns +1 in buy mode, -1 in sell mode, and 0 before there is
a signal.
Formula:
If(PREV = 1,
If(CLOSE < HighestSince(1,PREV <> 1,CLOSE)*.96,
-1,PREV),
If(PREV = -1, If(CLOSE>LowestSince(1,PREV <> -1,CLOSE)*1.04,
+1,PREV),
If(PREV = 0, If(CLOSE>Lowest(CLOSE)*1.04,
+1,
If(CLOSE<Highest(CLOSE)*.96,
-1,
PREV)),PREV)))
I know, I know, it looks like it was written by a programmer! If anyone can
devise a more elegant approach, send it to metastock@debry.com. |
