An oscillating technical indicator that tries to filter out the noise to identify trends.
Overview
Developed by Dennis Meyers and described in his article entitled “The Japanese Yen, Recursed” published in the December 1998 issue of Technical Analysis of Stocks and Commodities magazine, the Trend Oscillator (a.k.a. tosc) is calculated by calculating the difference between Meyer’s Recursive Moving Trend Average (also described in that same article) and an exponential moving average of the same n-periods.
TOSC in the EUR/USD 4H Chart on 3/21/2011
Source: VT Trader
Interpretation
Meyers mentions looking for changes in the price series that are above the normal noise fluctuations indicating that a potential uptrend or downtrend has started. This is accomplished by examining the plot of the tosc.
A potential buy signal is generated when the tosc’s value crosses above the “dup” level and a potential sell signal is generated when the tosc’s value crosses below the “-ddn” level.
During Meyer’s testing, the optimum “dup” and “-ddn” levels were calculated using optimization, walk-forward testing, out-of-sample testing, and averaging of all testing results.
For additional information, including the mathematical formulas for the Recursive Moving Trend Average and TOSC, please review Dennis Meyer’s whitepaper entitled “The Japanese Yen, Recursed” published in 1998, which is available from his website.
