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Full IRA Release, New Indicator Discussion, and more
Investors Collaborative Community Newsletter
Jacob Traut
January 22nd, 2024
Yo Dawg
Welcome back to Investors Collaborative. Its been a fun week, just not in the market. Lets check the menu.
We’re collectively famous now!
We’ve been featured in the Wall Street Journal! By we I mean Composer, and tangentially the community. Here’s a link to the article, if you’re curious. The article itself seems extremely skeptical of what we do here, which I suppose is fair. It’s hard to believe that routinely getting 30% or more annualized return is possible when you’ve spent your entire life being told it’s not. Overall, very fair article!
The real gold here is the comment section though. Not since the last time I was on the Bogle-heads subreddit have I seen such a massive hive of Broad Index Fund cult behavior. I’m hoping the flood of people that have found their way to the server since the article was released are slightly more open minded than their comment section counterparts!
IRA’s are arriving today!
The long-awaited public release of IRA accounts is FINALLY happening today! This means that finally, after a long, long year of waiting, I can finally open an account on Composer and actually use the platform I’ve been dissecting, ranting, and raving about. It’s a big, big day. For both me personally, and the platform as a whole!
To celebrate the occasion, we’re going to be hosting a Community Q&A Call with the Composer staff! Rumor has it Ben Rollert (Composers CEO) is going to be making an appearance. If you’re free at 5PM EST, drop by the Stage and say ask them any questions you can think of!
Percentage Price Oscillator. What it do?
We had a community request for a breakdown of an upcoming indicator from Composer, and since I still didn’t know what it even was, I turned to the only logical source of research anyone uses for anything these days. Perplexity AI!
The Percentage Price Oscillator (PPO) and the Moving Average Convergence Divergence (MACD) are both momentum oscillators that measure the difference between two moving averages. The main difference is in how they express this difference. The MACD measures the absolute difference between two moving averages, while the PPO measures the percentage difference between the two moving averages. The PPO is calculated by taking the difference of the two exponential moving averages (EMAs) and dividing it by the 26-day EMA, and then multiplying by 100 to express it as a percentage. On the other hand, the MACD is the absolute difference between the 12-day and 26-day EMAs. Both indicators are used to compare asset performance, spot divergence, generate trade signals, and help confirm trend direction[1][3][4].
The PPO is particularly useful for assets with large price differentials, as it measures percentage movements, making it easier to compare readings between assets with different prices. Additionally, when the PPO is above zero, it often indicates a bullish trend, and when it's below zero, it may indicate a bearish trend, providing potential buy or sell signals[3][5].
In summary, while both the PPO and the MACD are momentum oscillators that measure the difference between two moving averages, the PPO expresses this difference as a percentage, making it particularly useful for comparing assets with different prices and identifying potential bullish or bearish trends.
Citations:
Unironically, 1000x more helpful than ChatGPT just because it sources itself and I can double check it.
So, my input and summary on this is that I’m glad the Composer staff decided to go with PPO rather than something like MACD. It’s slightly more obscure, obviously since I hadn’t heard of it yet, but I can see at least one obvious pro.
It’s comparable across assets and strategies, much like RSI is.
Its very hard to compare the price or moving average of price of two different strategies or assets in a meaningful way, but an RSI of 75 is almost universally “overbought”. PPO seems like the same idea, but applied to moving averages, and should be useful for comparing the moving average of two disparate things. Comparing the PPO of one strategy versus another’s is a compelling use case, if its possible.
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