I would go with RSI to detect the so called anomaly (isn't it practically a divergence?).
It is a faster indicator and I guess it would show better if the symbols are really correlated and momentarily out of sync.
The Rsi period would vary accordingly to your timeframe, rsi(9), rsi(14), rsi(20). Just testing.
Moving averages could/should be used too. Maybe together with RSI, to confirm that the Composite Ticker (index) and a simple ticker (stock) are correlated and on the same trend, down or up.
I would begin with a classic Ema(20).
It is a good idea and could be used in Forex as well.
Instead of Trading baskets, one could trade a single pair in relation of its own basket.
Hi,
- Setup: 4000 Tickers
- Industry: 200
- One Composite Ticker for each and every Industry. Example: "~Cargo four Wheeler"
Anomaly: When the close of a ticker (ABC Automotives Inc) is in divergence with the combined Close of the Composite Ticker "Cargo four Wheeler" in last N days.
Objective:
If for past N days this industry composite ticker is down, but a particular Ticker is continuously Up, then it would trigger an alert to me and I would probe further that why was there North direction in a particular ticker and not the whole industry. Is something building up behind the scenes? And that's Anomaly.
1) Any refinement of this idea?
2) What is the best way to detect the divergence? is it the MACD() or any better approach?
Thanks
Ankur
Posted by: =?UTF-8?Q?Jo=C3=A3o_Fl=C3=A1vio_Machado_Derzi?= <joaoderzi@gmail.com>
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