Advanced Tools Plug-in:

ADV - Advantage Lines Overlay Indicator

Advantage lines were created in an attempt to help eliminating whipsaw from a short-term moving average trading system. The main advantage of a short term moving average trading system is that it provides early entry signals to potential trading opportunities and trend reversals.

This is also the disadvantage to the same system. Due to the early entry notification, you receive a lot of false signals, better known as whipsaw. To help eliminate many of these false signals, Mr. Turner changed the moving average formula of the first and shorter moving average to calculate on the high of the price bar when the moving average was above the second moving average, and then calculate on the low of the price bar when crossing to the downside. This significantly helped in reducing whipsaw, but also somewhat delayed the early entry signals. To enhance and help in getting back the early entry signals, the “projection” part of this formula actually projects forward where we anticipate tomorrows lines to be, and lets us know if we are “anticipating” a crossover or not.

Watch the Advantage Lines Overlay Indicator Video

Formula

Moving average Line Calculations:

First Line: The formula to calculate a moving average is as follows:

Mat = (P1 +... + Pn) / n

Second Line: The formula to calculate a moving average is as follows:

If (previous First Line value is higher than previous Second Line value)

Mat = (H1 +... + Hn) / n

else

Mat = (L1 +... + Ln) / n

Mat - The moving average for the current period,

Pn - The price for the nth interval

Hn - The price for the nth interval (High)

Ln - The price for the nth interval (Low)

n - The length of the moving average.

Compute the average of the past n intervals using the price specified for that period. Now use real values to compute a five interval moving average. If you assume the following prices, the calculations are:

MA = (7380 + 7375 + 7385 + 7390 + 7395) / 5

= 36925 / 5

= 7385

Prediction Lines:

Mct = ((P1-(P1-1)) + … + (Pn-(Pn-1))) / n

D = Pn + Mct

Mat = (P1 + … + Pn + D) / (n+1)

Mat - The moving average for the current period with the predicted data value.

Mct - The moving average of change in prices.

D - The Predicted new data value.

Pn - The price for the nth interval.

n - The length of the moving average.