C++ Neural Networks and Fuzzy Logic: Preface

Momentum and Rate of Change

Momentum is really velocity, or rate of price change with time. The formula for this is

     M

t

 =  ( P

t

  −  P

t−a

  )

     where  a = lookback parameter

     for a 5−day momentum value, a = 5

The Rate of Change indicator is actually a ratio. It is the current price divided by the price some interval, a,

ago divided by a constant. Specifically,

     ROC = P

t

 / P

t−a

  x 1000

Relative Strength Index

The Relative Strength Index (RSI) is the strength of up closes versus down closes over a certain time interval.

It is calculated over a time interval T as :

     RSI = 100 − [ 100 / (1 + RS )]

C++ Neural Networks and Fuzzy Logic:Preface

Technical Analysis and Neural Network Preprocessing

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     where  RS = average of x days’ up closes/ average of x days’ down

  closes

A typical time interval, T, is 14 days. The assumption with the use of RSI is that higher values up closes

relative to down closes indicates a strong market, and the opposite indicates weak markets.

Percentage R

This indicator measures where in a recent range of prices today’s price falls. The indicator assumes that prices

regress to their mean. A low %R indicates that prices are hitting the ceiling of a range, while a high %R

indicates that prices are at their low in a range. The formula is:

     %R = 100 x (HighX − P)/(HighX − LowX)

     where  HighX is the highest price over the price interval of interest

        LowX is the lowest price over the price interval of interest

        P is the current price