Market Indicators

Robert W. Colby,) Many Many thanks.

information & formula:

Volume: Williams? Variable Accumulation Distribution (WVAD)

Williams? Variable Accumulation Distribution (WVAD) is a volume-weighted price

momentum indicator, developed by Larry Williams. WVAD is based on the idea that

the best measure of a day?s buying power and selling pressure is dependent on the relationship

between the number of points that the market has moved from its opening

price to its closing price for the day. Specifically, it is calculated and interpreted in six

steps:

1. Subtract the opening price from the closing price. Respect the sign, plus or

minus.

2. Divide that difference (from Step 1) by the difference of the high minus the

low.

3. Multiply that ratio (from Step 2) by the volume.

4. Average that product (from Step 3) over a moving window of n-days of time.

5. If the moving average (from Step 4) is positive, net buying pressure is dominant

so a long position is initiated.

6. If the moving average (from Step 4) is negative, net selling pressure is dominant

so a short position is initiated.

Mathematically, Steps 1 through 3 of the WVAD formula can be expressed as:

WVAD ( ((C-O) / (H L)) * V )

where

C the current period?s closing price.

O the current period?s opening price.

H the current period?s high price.

L the current period?s low price.

V the current period?s volume.

For example, if the current day?s opening price was 175, the high was 180, the

low was 160, the close was 165, and the volume was 2000 shares, then:

WVAD( ((165-175)/(180-160)) * 2000) 1000

In Step 4, for a 4-period WVAD, for example, this 1000 would become an input

for a 4-day moving average.

In our independent Indicator Strategy testing, this indicator underperformed a

passive buy-and-hold strategy. As the chart of the S&P Depositary Receipts shows,

such a cumulative WVAD indicator peaked out on April 3, 1998, which was too early

for practical trading purposes. It appears that Williams? success depends on his good

judgement based on his long experience, rather than on any simple, mechanical interpretation

of this indicator.

The Equis International MetaStock? Indicator Builder Dialog for a cummulative

WVAD indicator may be written: Cum(((C-O)/(H-L))*V).

The Equis International MetaStock? System Testing rules may be written as

follows:

Enter long: Mov(((C-O)/(H-L))*V,opt1,E) > 0

Close long: Mov(((C-O)/(H-L))*V,opt1,E) < 0

Enter short: Mov(((C-O)/(H-L))*V,opt1,E) < 0

Close short: Mov(((C-O)/(H-L))*V,opt1,E) > 0

OPT1 Current value: 4

book code (page 782-783):

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