The Reflex
We all react to stimuli and this comes in various forms. The doctor taking a small ball peen hammer to your knee, a startled reaction to a sudden loud noise, a fit of sneezing to an allergen, and so on. Coincidentally, we also react in trading. Probably more than we should. What if we applied that concept to an indicator?
Zero-Lag
We’re going to be looking at a “zero-lag averaging” indicator called the Reflex which came to us by Mr. John Elders and was published in the February 2020 issue of Stocks and commodities magazine. Coincidently, it was coded for us MetaTrader users the same year.
Combo
The premise of this indicator is that it is modeled on the concept that market data is a combination of both data cycles and short term trends. It measures the cycle between either the peak or valley, pulling its data until the completion of the cycle.
Filtration
As with a few other zero lagging indicators, the data is sifted through the Ehlers Super Smoother Filter and then follows the following algorithm before outputting its final data;
- A root-mean-square of the average distance between the trend line and price points is found.
- The ratio of the average distance to its root-mean-square yields the Reflex indicator value.
Brothers In Arms
We found this indicator in both a zero cross histogram style and as a color change. Since we were intrigued at the notion that this came in two flavors, we tested both styles and determined that the color change posted better results, so that’s the brother we’re going with.
Mind the Change
Below is a screenshot of the default colors, although we did thicken them up somewhat for easier viewing.
Settings
We’ve only got one variable in the settings menu, which is always nice for testing speed.
Reflex period: The one and only number used for all the internal calculations. The default value is 50.
Daily Maintenance
Remember, once you’re ready to perform daily maintenance on your trades during the last 20–30 minutes of the trading day (1700 New York time), you’ll be presented with one of four options.
- Opening a trade.
- Closing a trade
- Maintaining a trade; i.e.
- Moving a stop loss level.
- Exiting a trade.
- Taking a pass (nothing to do).
Long: When the signal line turns from coral (orange) to blue.
Short: When the signal line turns from blue to coral (orange).
Color Me Happy
Now, we’ll see how this indicator works with price.
The cool thing here is that it’s kind of a no-brainer with respect to picking out the signals. Blue = long and Coral = short. What we also noticed is that the default value of 50 is a rather long one, as noted when the signals present themselves. This is where changing the value and comparing price action with signals becomes more of a science than an art. Let’s go see how it did in our testing lab.
We’ve Got What You Need
As mentioned in the recent past, we stated that we were not going to print all the revised rules of testing published over the last couple of months. If you want to familiarize yourself or refresh your memory, click HERE, which takes you to the Cross Roads indicator study.
Below are the results from our testing efforts.
Okay Then
Pretty nice on these numbers. What we noticed was that on all but BTC, default numbers were in the red, and especially high for XAU and SPX. Tweaking them made a pretty noticeable effect on both the ROI and, interestingly enough, the number of trades went up in all cases. We like that…more opportunities. We believe that dialed in appropriately, this would make for a nice C1 in your algorithm. Go get it and get crack’in!
Resources
If you’re wondering where to get this, look no further than our on-line library. It’s free and will have a “NEW ” notation next to the name to help you find it. Get it, HERE. Also, be sure to subscribe to the Stonehill Forex YouTube channel for the technical analysis videos. Sign up for the Advanced NNFX Course HERE.
NEWS FLASH
You asked, we responded. After the overwhelming success of our homegrown indicator “Cross Roads” and the innumerable requests for other platform versions, we have started conversion of the indicator into MT5 and TradingView. Both will be released within a few weeks and will be accessible through the on-line library. Be sure you’re subscribed to the YouTube channel “Stonehill Forex” and request to be part of our broadcast list via email “[email protected]”.
Our only goal is to make you a better trader.
*Our published testing results are based on money management strategies employed by the NNFX system and depend on varying external factors, which may be different between individuals and their specific broker conditions. No guarantee, trading recommendations, or other market suggestions are implied. Your results and subsequent trading activities are solely your own responsibility.
BTW — Any information communicated by Stonehill Forex Limited is solely for educational purposes. The information contained within the courses and on the website neither constitutes investment advice nor a general recommendation on investments. It is not intended to be and should not be interpreted as investment advice or a general recommendation on investment. Any person who places trades, orders or makes other types of trades and investments etc. is responsible for their own investment decisions and does so at their own risk. It is recommended that any person taking investment decisions consults with an independent financial advisor. Stonehill Forex Limited training courses and blogs are for educational purposes only, not a financial advisory service, and does not give financial advice or make general recommendations on investment.