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Monday, Sep 22nd

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Last Updated (Sunday, 25 March 2012 03:07) Written by Carl Weiss Saturday, 24 March 2012 21:08

True Reckoning

Spotting Virgin Trends by Using ‘True Reckoning’

The goal of True Reckoning is to help traders isolate which specific market turns have a higher probability of becoming new, tradable trends.

The challenge with Momentum indicators

Though Momentum indicators can be used to identify new tradable trends, their challenge is that they cannot identify a new trend until that trend is well formed and has run significantly.

This is so because the increased momentum of a new trend can only be measured after an initial reading of momentum has been taken in the direction of the new trend.

This is the basic flaw of looking for increased momentum.  In order to have increased momentum, you must first have momentum to compare it to.

In the real trading world, where time is money, by the time increased momentum is realized the trend is already well on its way.

Thus, though increasing momentum does a good job of confirming a trend, it does not do a good job of providing timely entry signals.

To counter this lagging deficiency, some traders look for trends to end by measuring decreasing momentum.

Using decreasing momentum to infer when a trade may be ending is a very handy method, but it also has core flaws.

Specifically, no matter how much momentum has drained from a move, no matter how ‘tired’ a trend is, in today’s electronic markets, where massive explosions of bots can be fired off, which they themselves excite and fire off other bots, all within 24 milliseconds, any ‘dying’ trend can instantly regain new life.

Hence decreasing momentum, though a handy tool in an earlier market age, and still at times viable today, can only tell you what happened.  It cannot tell you what is about to happen.

‘True Reckoning’ changes all momentum indicator’s inherent ‘lagging’ dilemma

True Reckoning eliminates the lagging nature of momentum indicators by doing a couple of things really, really well.

First, True Reckoning looks at more data than the typical Open, High, Low, Close data that a classic momentum indicator does.

True Reckoning analyzes each and every transaction in a particular market (not just the Open, High, Low, and Close of every bar).

True Reckoning also uses an advanced, proprietary ‘noise-to-signal’ filter algorithm tuned specifically for the unique market data that is generated by electronic markets.  This ‘noise-to-signal’ filter reduces the amount of ‘clutter and chatter’ in the market data that it processes and leaves a cleaner stream of information with which to analyze.

Once the market data is scrubbed by the ‘noise-to-signal’ filter, True Reckoning leverages a recursive data processing approach to hunt specifically for, and identify, a probable data ‘footprint’ that is unique to a significant portion of new trends.

When these new trend footprints are identified signal is surfaced.


True Reckoning was developed by Algo Futures' Lab and is distributed exclusively via …sceeto.