The Arps Hurst Polynomial Regression Bands (Arps Hurst BandsTM) Tool Kit is a set of indicators that gives the trader the power to relate the price to statistically-generated price channels. This tool helps to identify overbought/oversold levels, divergence, and momentum.
Based upon work originally described by J.M. Hurst, the Tool Kit tools generate a series of statistically-derived channel lines that display a polynomial best-fit center line, plus a set of lines spaced at equal standard deviation distances away from the center line. Using the Arps Hurst BandsTM, the professional trader is able to determine upcoming reversals, sideways movements, and optimum buying and selling levels.
Trading with the Arps Hurst BandsTM
Prices tend to regress toward the mean, which is represented by the blue centerline on the Arps Hurst BandsTM chart. The three bands above and below and paralleling the centerline represent one, two and three sigmas of the actual data points from the mean centerline. There is only a five-percent chance that prices will exceed the 2-sigma line, and less than a one-percent chance that they will exceed the 3-sigma line. So, when prices reach these channels, a relatively low-risk entry opportunity presents itself to trade in the opposite direction of the current move.
Additionally, a red momentum line is shown on the chart. When the centerline diverges from the red momentum line, the overall trend will be in the direction of the centerline relative to the red line. When the red momentum line and the centerline are close together and more or less parallel, a trendless market condition exists, and it is best to stay out of the market.
Arps Hurst BandsTM - Actual
As you watch the Arps Hurst BandsTM in action on a real-time chart, you will see that the shape of the channels change on each bar as the first bar of the previous bar's regression calculation is dropped from the calculation and the new bar is added into the calculation. Thus, the Actual channel plots the progress of the end point of the Arps Hurst BandsTM channel calculations for each bar on the chart. In other words, this indicator permits a continuous evaluation of how the Arps Hurst BandTM relationships changed with time.
If you overlay the Arps Hurst BandsTM indicator with the Actual indicator, both with the same settings, you will see that the value of the Actual lines on the last bar will match exactly the value of the corresponding Arps Hurst BandsTM Actual lines on the last bar. It's as if the Arps Hurst BandsTM Actual represent a "trail of crumbs" showing where the Arps Hurst BandsTM were when each bar was the last bar on the chart. The usefulness of this indicator is to show how the Arps Hurst BandsTM calculations have behaved in the past as the regression channels are recalculated on every bar.
Arps Hurst BandsTM Actual Centerlines
Another use for the Actual calculations is to plot the Actual Centerline on a chart twice using two different settings for the Order input. The example below shows a blue Actual line or Order 3 and a red Actual line of Order 4. Note how closely the blue line follows behind price and how responsive it can be to changes in trend direction. The use of these lines in trend analysis opens a whole new area of potential for better technical analysis tools.
CY1 = Param("Short Cycle Length?" ,10, 1 ,1000 ,1 )/2;CY2 = Param("Medium Cycle Length?" ,80, 1 ,1000 ,1 )/2;M1 = Param("Short Cycle Multiplyer?" ,1, 0.01 ,10 ,1 );M2 = Param("Medium Cycle Multiplyer?" ,3, 0.01 ,10 ,1 );T1 = Ref(MA(Close ,CY1 ),CY1/2)+ M1*ATR(CY1 );B1 = Ref(MA( Close ,CY1 ),CY1/2)- M1*ATR(CY1 );T2 = Ref(MA(Close ,CY2 ),CY2/2)+ M2*ATR(CY2 );B2 = Ref(MA( Close ,CY2 ),CY2/2)- M2*ATR(CY2 );Plot(T1, "", colorLime);Plot(B1, "", colorLime);Plot(T2, "", colorRed);Plot(B2, "", colorRed);GraphXSpace = 5;_SECTION_BEGIN( "Price" );SetChartOptions( 0, chartShowDates | chartShowArrows | chartLogarithmic | chartWrapTitle );_N( Title = StrFormat( "{{NAME}} - " + SectorID( 1 ) + " - {{INTERVAL}} {{DATE}} Open %g, Hi %g, Lo %g, Close %g (%.1f%%) Vol " + WriteVal( V, 1.0 ) + " {{VALUES}}", O, H, L, C, SelectedValue( ROC( C, 1 ) ) ) );Plot( C, "Close", colorRose, styleCandle | styleNoTitle | ParamStyle( "Style" ) | GetPriceStyle() );if ( ParamToggle( "Tooltip shows", "All Values|Only Prices" ) ){ ToolTip = StrFormat( "Open: %g\nHigh: %g\nLow: %g\nClose: %g (%.1f%%)\nVolume: " + NumToStr( V, 1 ), O, H, L, C, SelectedValue( ROC( C, 1 ) ) );}_SECTION_END();