$$ Parabolic Trendicator

Some trends go parabolic at the end - seemingly almost straight up or down.  Nearly all parabolic trends experience range expansion throughout the trend culminating in a blow off, high volatility climax.

As a trader, you don't want to miss out on a parabolic trend.  They rarely happen more than once a year in any security.  So I devised my "Parabolic Trendicator" to make sure I'm always aware of trends that have a high probability of going parabolic. Here are the basics:

1.  On a weekly chart, multiply the Friday weekly closing value of the ADX indicator by the Bollinger Band width.  If you don't know what these indicators measure, please read the links.  I use the standard settings for each indicator.  The product of multiplying the two values is the "Parabolic Trendicator Value" (PTV) for the week.

2.  Keep a database of the last 7 months of weekly PTVs on the securities you follow.  I track about 30 ETFs across the spectrum.  It takes me less than an hour each weekend to update the database. 

3.  You get the warning signal once the weekly PTV makes a 6-month high.

The Parabolic Trendicator is not designed to be an early detection system.  Often times, a trend will be in full force for awhile before you get the signal, so don't expect to be catching trends in their early stages.  The upside is that it's usually very easy to determine what direction you need to invest (long or short) by the time you get the signal.

One reason I devised the Parabolic Trendicator is because it's not my nature to chase prices.  If there's a trend in full force already, I'm reluctant to play the part of the "greater fool" for fear of getting left holding the bag.  However, with the promise of a parabolic ending, I'm much more eager to jump into a trend mid-stream.