In his article in this issue, “Long-Term Trading Using Exchange Traded Funds,” author Sylvain Vervoort demonstrates a powerful oscillator for recognizing and following longer-term trends. It is also reasonably sensitive to interruptions of the trend and full-trend reversals.
Vervoort’s oscillator uses the TEMA smoothing function four times. TEMA is not a built-in function in Excel, but it can be implemented by way of cell formulas (as I have done for this Traders’ Tip) or as a user-defined function (VBA macro). See Patrick Mulloy’s February 1994 S&C article that is referenced in the suggested reading section at the end of Vervoort’s article (“Smoothing Data With Less Lag”) for more on TEMA.
As Vervoort suggests in his article, you need a large amount of data prior to the period of interest; otherwise, the oscillator parts do not have sufficient time to stabilize properly.
This is evidenced in Figure 13. Per Figure 6 of Vervoort’s article, there should be a dip to the HACO 50 level in the middle of 2004. The dips in 2005 and 2006 did not show up for me until I pulled in all of the weekly data I could get from the Yahoo Finance history page.
FIGURE 13: MICROSOFT EXCEL, HEIKIN-ASHI CANDLES OSCILLATOR LONG TERM (HACOLT). Here is Sylvain Vervoort’s HACOLT indicator implemented in Excel using a CandleSize setting of 1.1.
This spreadsheet file for Excel can be downloaded by clicking here.