Stocks & Commodities V. 24:5 (10-14): Letters To S&C by Technical Analysis, Inc.
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I would like to comment on Jacinta Chan’s March 2006
article on the z-test (“Trading Trends With The Bollinger
Bands Z-Test”). I use the zigzag function for the basis of my intermediate trend-following model. As others have also commented in the pages of STOCKS & COMMODITIES, no matter how you structure your trend and trigger points, there is always a remaining question of the validity of the new trend. In other words, is the active tail real?
Many people have proposed various ways to validate this tail. However, the z-test is the most straightforward, and it seems to work just as well as the others, or maybe better. The MetaStock code I use for this follows...