6. Using the Velocity Oscillator as a entry/exit trigger
As seen in the last chart, the Surge oscillator is not very good at pinpoint the timing of when the market will pivot in a new direction. However, it is quite remarkable how well the Velocity oscillator is able to pinpoint the market's next move by 1 or two bars.
As you can see in the above chart, the green and red lines identify what the velocity oscillator determines as the change in direction point. You need at least one bar to determine that the market has changed direction, and in practice the velocity indicator could trigger to buy/sell on open of the next bar.
This can be advantageous or disadvantageous. In some cases the next bar may open lower then the triggered bar, and in that case you get a better fill. In other cases, such as a runaway market, you will not get as good of a fill. But in many cases the market has much more room to grow, or to fall, depending on your positioning, and there is plenty of room to profit.
By combining the Surge with Velocity, you can see that they complement each other for an ideal oscillator based trading system. The strengths of one offset the weaknesses of the other. The Surge provides impending end-of-trend information, while the Velocity provides an ideal entry point. The result is filtered Velocity trigger signals, that is, only those signals that are most likely to produce a good trade.
As you can see in the above chart, the green and red lines identify what the velocity oscillator determines as the change in direction point. You need at least one bar to determine that the market has changed direction, and in practice the velocity indicator could trigger to buy/sell on open of the next bar.
This can be advantageous or disadvantageous. In some cases the next bar may open lower then the triggered bar, and in that case you get a better fill. In other cases, such as a runaway market, you will not get as good of a fill. But in many cases the market has much more room to grow, or to fall, depending on your positioning, and there is plenty of room to profit.
By combining the Surge with Velocity, you can see that they complement each other for an ideal oscillator based trading system. The strengths of one offset the weaknesses of the other. The Surge provides impending end-of-trend information, while the Velocity provides an ideal entry point. The result is filtered Velocity trigger signals, that is, only those signals that are most likely to produce a good trade.
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