Many traders believe that tops and bottoms are indicated when a financial instrument’s rate of change value goes above 70 or below 30. They believe that failure to go above or below these values could indicate an instrument’s reversal in trend. They also believed that divergence between rate of change and price action on a chart could point out a turning point for the instrument. Investigator lets you test these theories. Investigator also allows you to combine the rate of change testing conditions with bar patterns and other indicator testing conditions.
First, select the time period and enter the number of bars and the number of bars ago value that you want to use for testing.
The first option you can choose is Above: or Below:. If you choose the Above: option, you are asking Investigator to see if the current bar’s rate of change value is greater than the number you’ve entered in the Above: edit box. If you choose the Below: option, you are asking Investigator to see if the current bar’s rate of change value is less than the number you’ve entered in the Below: edit box. You can also select the Just Crossed? parameter.
You can also optionally select the And Then Above/Below: option. If you checked the Above: option, this will test whether the price has first risen above the Above: edit box value and then dropped below the And Then Above/Below: edit box value within the given number of bars. More specifically, Investigator takes the current bar, subtracts the specified number of bars, moves up one bar, and starts moving forward in time checking to see if the rate of change of each bar is above the Above: edit box value. If the rate of change value is above the Above: edit box value, Investigator starts moving forward in time to see if the rate of change value of a bar is below the And Then Above/Below: edit box value. If this occurs before the current date, the condition is met.
Note that this can happen at any time within the bars specified. For example, if you specify ten bars and the rate of change value of eight bars ago is higher than the Above: edit box value and the rate of change value of two bars ago is lower than the And Then Above/Below: edit box value, the condition would be met. If you want the value to have just crossed below the rate of change value, select the Just Crossed? parameter. If you select both just crossed values, this indicates that you want the price to have crossed above the Above: edit box value exactly the number of bars indicated and then just cross below the And Then Above/Below: edit box value on the current date. For example, if you enter ten bars and select both just crossed values, this indicates that the rate of change value of the bar nine bars ago must have just crossed above the Above: edit box value and the rate of change value of the current bar must have just crossed below the And Then Above/Below: edit box value.
The converse of the above two paragraphs applies if you select the Below And Then Above option.
The other option you can choose is Divergence Up or Down. If you select the Divergence Up or Down option, you must enter the number of bars that you wish Investigator to check for the divergence. The program default is 10.