NEW HIGH, NEW LOW RATIO

With this indicator, the new high and new low values play some interest when they are divided to create the oscillator. Backtesting of this rationale was hopeful to uncover any positive results. Because of some randomness that exists when single values are taken from stock past data, usually the moving average of the stock values is taken before the backtesting is to run.

With various backtesting runs, it was found that the 10 day Moving Average was the best to smooth out the slightly erratic data of the stock. The results were layed down in statistical formation which is out of the context of this book. Therefore we will not discuss how the results were gathered for this indicator.

One interesting occurrence about this indicator was that the value of New High / New Low that showed some positive results was found to be around 40, i.e. the 10 day MA of (New High/ New Low) = 40.

The results do not hold much value because they were constructed in terms of statistical analysis rather than pure traditional backtesting. The conclusion is therefore that this indicator needs more studying and testing because it can be shown whether it is useful in predicting stock price movement.

Perhaps someone undertake the job to backtest this indicator in a better formation, i.e. simplier terms of buying or selling when the ratio hits a specific value without using statistical practices. Therefore we cannot conclude whether it is a good indicator in this respect. More research is basically needed to uncover any usefulness in this particular indicator.
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