I have an indicator which oscillates between -50 and +50 values.
Then I have to set a optimal signal value to go long or short.
I've thought in something like this:
if (indicator > ((50 / indicator.mean()) * 1.25)) and (isIncreasing(indicator) == True):
# go long!
elif (indicator < ((-50 / indicator.mean()) * 0.85)) and (isDecreasing(indicator) == True):
# go short!
else:
# chillax
Therefore, to sum it up:
- The mean is usually round -5 and +5, ish.
- If the indicator is 25% above of the max/mean, and is increasing: go long.
- If the indicator is 25% below of the min/mean, and is decreasing: go short.
- If none of previous conditions were triggered, then take a coffee. :)
The point is to stop before the indicator change its direction.
But, as you see, the previous formula is merely intuitive. And what if the mean is zero? Then I would have problems in the division...
So there is any formula to calculate the optimal value to place my signal, in order to prevent go long and immediately after a decrease of my indicator? May be using some kind of pattern regression which calculates the following movement?