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Standard Deviation Movement
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SalimHira
Posted 11/18/2014 5:04 AM (#6008)
Subject: Standard Deviation Movement



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Hello Everyone:

What does it mean or pls help me understand when Standard Deviation moves from SD 2 to SD -2, yet the *price* has not moved or budged and holding steady ? Thanks in advance.

Thread moved by JimDean on 11/18/2014 4:41 PM from OmniTrader HowTo's > Chart Indicators - Canned > Standard Deviation Movement

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JimDean
Posted 11/18/2014 6:40 AM (#6010 - in reply to #6008)
Subject: Standard Deviation Movement



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Hi Salim

I'm not clear on what you are asking. What is "moving"? I would understand if you spoke of price moving from -2SD to +2SD, or of the upper BB line rising, or of the two BB lines compressing, etc - but in all these cases the price would be moving, not holding steady. Please provide an annotated picture, that shows center SMA plus both SD's, so that two times the full #bars related to the BB periods can be viewed. (ps: I moved this to the correct location :-)

Thread moved by JimDean on 11/18/2014 4:41 PM from OmniTrader HowTo's > Chart Indicators - Canned > Standard Deviation Movement

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SalimHira
Posted 11/18/2014 3:46 PM (#6011 - in reply to #6008)
Subject: Standard Deviation Movement



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Thanks Jim.

I wished now to have taken a screenshot of the price behavior and the GAMS Osc indicator, when this rare occurrence happened, unlike conventional wisdom. The price is pretty much in a very tight range bound, almost like a straight line, while the SD goes from +2 to -2 and back up.

My *real* question is what is on traders' mind during this SD behavior, as to why price is stagnant (emotions, psychology, etc. - bulls/bears neutral at play) while the mathematical (i.e., technicals) is whipsawing. Would this be a classic occurrence waiting for a price breakout based on traders' emotions, and not technical analysis ? Thank You.



Thread moved by JimDean on 11/18/2014 4:41 PM from OmniTrader HowTo's > Chart Indicators - Canned > Standard Deviation Movement


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SalimHira
Posted 11/18/2014 4:07 PM (#6012 - in reply to #6008)
Subject: Standard Deviation Movement



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Found the example, pls see attached. Thank You.


Thread moved by JimDean on 11/18/2014 4:41 PM from OmniTrader HowTo's > Chart Indicators - Canned > Standard Deviation Movement


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JimDean
Posted 11/18/2014 5:00 PM (#6013 - in reply to #6012)
Subject: Standard Deviation Movement



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Ok now I understand. You didn't mention that you were referring to the GAMS oscillator (part of the GMMA plugin (I moved the thread to that Room).

THe GAMS oscillator, as I understand it (grey box, not fully defined), is normalizing the differences between two values - the avg of the fast GMMA set and the average of the slow GMMA set. That is, the values being studied are *not* price, but rather the *differences* between two averages - the components of each avg themselves being averages. So, the values which GAMS normalizes (using std dev) are "third cousins" of price.

Every one of those components has significant lag. Especially the slow set. So, when price itself "jags" it won't show up fully and immediately, but will tend to be spread over time as the various component MA's "absorb" the effect. For similar lag reasons, that "jag" gets attenuated in the Std Dev calc process as well.

The best way to understand this is to use OLang to create plots of the components - that is, one line for each of the two averages of MA sets (on the price pane), then an indicator line showing the difference, then two pairs of BB lines around that difference (one sd and two sd).

The GAMS greybox oscillator is presumably that difference minus some SMA of that difference, divided by the SD of the difference - plotted on a normalized SD scale.

As the price flattens out after a significant period of time where it was consistently rising or consistently falling (ie fairly large diff of avg of MA's), the difference moves from a fairly extreme SD gap, getting closer to the mean as the fast set begins to compress and home in closer to price. The slow set changes less rapidly. If the average of the fast set crosses down through the average of the slow set (which can happen duing price flattening depending on prior bars), then the GAMS will turn negative.

It's hard to describe in words but it definitely can happen. If you plot all the GMMA lines, then the OLang set-avg lines as described above, it should become more obvious.



Thread moved by JimDean on 11/18/2014 4:41 PM from OmniTrader HowTo's > Chart Indicators - Canned > Standard Deviation Movement

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SalimHira
Posted 11/18/2014 8:09 PM (#6014 - in reply to #6008)
Subject: Standard Deviation Movement



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Thanks Jim, great learning explanation. Thank You again.

Edited by SalimHira 11/19/2014 11:46 AM


Thread moved by JimDean on 11/18/2014 4:41 PM from OmniTrader HowTo's > Chart Indicators - Canned > Standard Deviation Movement

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SalimHira
Posted 11/19/2014 11:44 AM (#6015 - in reply to #6008)
Subject: Standard Deviation Movement



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Hi Jim:

Is it safe to say - the GAMS Osc. as (lagging) but useful when volatility is low, but use with caution (leading) during high volatility when price is fluctuating erratically ? Granted, taken in consideration intraday trading, and not EOD. Thanks.



Thread moved by JimDean on 11/18/2014 4:41 PM from OmniTrader HowTo's > Chart Indicators - Canned > Standard Deviation Movement

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JimDean
Posted 11/19/2014 12:18 PM (#6016 - in reply to #6015)
Subject: Standard Deviation Movement



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I don't know. I have neither used it nor studied it. It is a gray box. Sorry I can't help you more.

Thread moved by JimDean on 11/18/2014 4:41 PM from OmniTrader HowTo's > Chart Indicators - Canned > Standard Deviation Movement

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