The Deep Reversal Indicator as a Powerful Market Predictor

Using The Deep Duration Technique For Market Predictions

Market reversals can sometimes be predicted by a few techniques when conditions are normal. This article presents a reversal technique referred to as the deep duration technique.

The Concept of Extreme and Deep Duration

First introduced by J. Welles Wilder Jr., the RSI is one of the most popular and versatile technical indicators. Mainly used as a contrarian indicator where extreme values signal a reaction that can be exploited. Typically, we use the following steps to calculate the default RSI:

• Calculate the change in the closing prices from the previous ones.
• Separate the positive net changes from the negative net changes.
• Calculate a smoothed moving average on the positive net changes and on the absolute values of the negative net changes.
• Divide the smoothed positive changes by the smoothed negative changes. We will refer to this calculation as the Relative Strength — RS.
• Apply the normalization formula shown below for every time step to get the RSI.

I have presented the RSI first because the extreme duration is simply an add-on to any bounded indicator. It is not an indicator on its own per se, but simply a way to see how long the indicator spends being overbought or oversold. We understand that:

• An overbought indicator is saying that the bullish momentum should fade soon and we might see a correction or even a reversal on the downside.
• An oversold indicator is saying that the bearish momentum should fade soon and we might see a correction or even a reversal on the upside.

However, if things were so simple, we would all be millionaires. This is why we need other techniques to improve our forecasting ability. One of these techniques answers the following question:

“What if the average time spent on the extremes can help us understand when the indicator will exit these mentioned extremes?”

Let’s create those conditions then:

• A bullish signal is…