Chande’s Trend Score: Comparing Current Closes with Older Prices
Summary
The document describes a trend indicator attributed to Tushar Chande. It compares the current close with closes from 11 through 20 days earlier, assigning a positive point when the current close is higher and a negative point otherwise. Adding these comparisons produces a score ranging from negative ten to positive ten, which is then smoothed with a weighted average over five periods.
The score offers a compact way to represent whether recent prices are generally above or below prices from those earlier observations. The document gives the calculation rules and an implementation example, but no market, testing results, or evidence that the indicator predicts returns. Its description of the negative case is worded inconsistently: it refers to a close from x+1 days ago, while the example compares against the close at each lag. The indicator’s usefulness therefore depends on implementation details and independent validation.
Key ideas
- The indicator compares the current close with closes from lags 11 through 20.
- Each comparison contributes either positive one or negative one to the score.
- Summing the ten comparisons yields a range from negative ten to positive ten.
- A five-period weighted average is used to smooth the raw score.
- The document provides no performance evidence, and its verbal rule for negative scores is ambiguous.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.