Notifications
Clear all

Correlation Reversal Indicator (CRI)

Mike
 Mike
(@vanguardai)
Co-Founder Admin

We created our version of a reversal indicator based on the correlation of its average movement in the past 6 days. The back test results were surprisingly better than expected but requires more optimization, such as risk based exits but more especially a filter that disallows the system to trade during downtrends.

This indicator does very well in non-trending markets but expect it to get killed during downtrends, thus the need for a trend filter.

Some modification ideas:

  • change the sensitivity of the upper/lower difference
  • add more periods for a larger average difference

The formula is below:

//Correlation Reversal Indicator
set 1diff = close - ref(close,1)
set 2diff = close - ref(close,2)
set 3diff = close - ref(close,3)
set 4diff = close - ref(close,4)
set 5diff = close - ref(close,5)
set 6diff = close - ref(close,6)
set avediff = (1diff + 2diff + 3diff + 4diff + 5diff + 6diff)/6
set avediffnorm = (avediff / close)

set CRIraw = PCC(avediff,close,10)
Set CRI = if(CRIraw > .75, avediffnorm, 0)
//Set Sensitivity
// .02 means our sensitivity is ave of 2% change in the past x days
Set Upper = .02
Set Lower = -.02

Set Buy = crossover(lower,CRI)
Set Sell = crossover(CRI,upper)

plotbuysell(buy,sell,green,red,main)
plot(CRI,line,firebrick,CRI)
plot(Upper,line,white,CRI)
plot(Lower,line,white,CRI)

signals(buy,sell)

1622196167-CRI-MPI.png
1622196297-CRI-performance.png
This topic was modified 2 months ago 3 times by Mike
Quote
Topic starter Posted : 28/05/2021 6:02 pm
Share: