Letters To S&C by Technical Analysis, Inc.
I recently read the interesting article series in your magazine by Dirk Vandycke regarding intrinsic divergences for detecting contraction before expansion (“The Chartmill Value Indicator, Part 1,” January 2013 S&C, with parts 2 and 3 following in the February and March 2013 issues). I found the series very interesting and I have visited Vandycke’s site to take a look at the indicators. His articles mention that the indicator’s response is recommended in those instruments in which it has been proven to work in the past.
Is there any guidance regarding the instruments in which this indicator has been backtested successfully? Maybe regarding the kind of instruments in which it behaves more accurately?
Author Dirk Vandycke replies:
Thank you for the praise for my articles.
I have been using the indicators as they are (in my software, Chartmill) for three years now and they have provided me with nice trading opportunities.
To me, the most interesting backtest was the one showing early signals from those indicators, as mentioned in my articles. As such, I use the signals to put in technical buy stops, getting me in early.