That’s right, it’s “splitter eve.” So tell someone you love that you love them.

Tonight, I sent off the first release version of the volume splitter to the eotpro.com mothership. From there, it will be disseminated to the elite series subscribers. I really think this indicator works very well.

In its release form, it is a function that you can use in custom indicators and strategies, which is sweet. In fact, the indicator itself just calls the function, scales it, and displays it.

Here is a screenshot of the volume splitter in action as a market timing device. Today I went over more examples in indicator lesson school, and also during my segment in the eotpro live room. It’s easy to see examples of how the splitter can be of help, all day, every day. At least, that’s the way it seems to me…

Sorry, I have been trying to get to where I am free to write more per day, but I am terribly busy at the moment. Here is a screenshot showing three trades from today, with text annotations. Here, I’m using the bid/ask histogram rather than the volume splitter… just because this is an eotpro ad and the bid/ask histogram is available today.

As usual for me lately, this ad makes the point that you can’t avoid losses. What you can do is work to keep them small relative to your gains. Here we have 2 wins and 1 loss that nets over 4 points per contract. Not bad!

I’m at home right now waiting on a new mattress to be delivered. My old one is worn out, if you know what I mean. Anyway, I opened my trading platform and took this quick trade, almost immediately:

You can see that the volume splitter wasn’t really splitting much yet, as it only fully operates in real-time. But, the magenta line is still quite usable even in this form, in terms of which direction it is going. So, I noted the bearish divergence in the double top just prior to entry. I noticed that the paintbars had turned color and weren’t green anymore. I noticed that the big traders were net sellers. I got in.

Now, I’ll remind you again that the indicator had not built up enough history to trust the dot sizes, but I definitely got directional confirmation. The large (magenta) traders pushed down, and the market fell with them. I picked an exit around Alla’s Average (the yellow dotted line) when the large traders stepped aside. This is marked on the chart.

As it happened, there was a small fake-out push that knocked price down another point before it reversed, but I am happy with my exit. The odds were fading that the price would drop much more, and I only play when the odds are strong in my favor. That’s what works for me.

Ok, back to my day off…

It’s important for traders to understand that not every trade will win. It’s pretty silly to try to eliminate losses. Instead, focus on keeping losses small, and keeping winners big. That’s why, in our eotpro screenshot advertisements, we don’t mind showing losses. In fact, I consider it to be the best kind of ad possible, when we show how our indicators work together to keep losses small.

Here we have two long signals from Barb’s Reversal indicator. Since it’s trying to catch reversals, there is always a danger that you step right in the way of a strong trend. That’s exactly what happened yesterday. But, with Bonnie’s Bars to get you out, you lost a total of 4 points, even though we are on huge bars (10k share bars). Consider that, the day before, Barb’s Reversal caught an 8 point winner, and you can see the secret to winning the trading game.

Big wins and Small Losses. Drill that into your head, until you mumble it in your sleep!

In addition to what I showed yesterday, I have the Cycle Moving Average Shift indicator working now on Ninja. Soon, as I mentioned, the main set of eotpro indicators will be functional on ninja.

Feels good!

Here’s the video from last night’s indicator lesson school. I talk more about the volume splitter, and also about Ninja!

http://eotpro.acrobat.com/p23758053/

I have finally found the time to do some serious work on converting eotpro’s indicator set to ninjatrader. Here’s a screenshot of the progress on ninja so far:

Here we see:

• Bonnie’s Bars
• Cycle Moving Average
• Plot Cycles
• GValu
• EOT_TA
• EOT_ID
• Market Sync Bias
• … and not shown are Alla’s Avg and the Market Sync Predict Points, but those are done, too.

I think, at a minimum, I need to do some form of volume indicator, the math lines, and the Patty B. Then, I can make a ninja version of Bill’s Arrows out of it, and release the EOTPro ninja product, version 1. Hopefully in the next couple weeks I can get this done. It’s pretty exciting!

Then, over time, I can port over other EOTPro indicators that ninja folks might want. With the above covered, though, the core EOTPro toolkit will be available on ninja soon!

Can’t write much today… getting ready for tonight! ;-) But here is an ad about the new volume splitter indicator. It’s still working quite well, if you ask me!

Unless there are unexpected snags, it will become a part of the elite series on August 1st!

Today I spent some time researching ninja issues, and I do think I’ll make a good bit of progress this week on the ninja conversion. I know some people are really anxious to get going on it.

Here’s the presentation on trade volume that we gave at eotpro last night, including some insight into how I read the new volume-splitting indicator I’m working on. I want to remind all my readers that the Thursday night presentations are free and open to anyone who might be interested.

Enjoy: http://eotpro.acrobat.com/p17708498/

[EDIT: Wanted to mention that I'll be going over this chart again live in the eotpro live room tonight, July 17, 2008, at 6:45 Central time. This is our "indicator lesson school" night, and everyone is welcome to attend.]

All I gotta say is: Damn! That’s one good indicator.

Or at least, it appears to be. I went through every one of this morning’s signals with folks in the eotpro.com live room a minute ago, and they were timed flawlessly by the new Volume Splatter Indicator. If you have no idea what that is… then check out my previous few posts about it.

Here’s a wide screenshot with six signals from my Bid/Ask/Stoch Entry signal. You can see on the screenshot that I’ve labelled the trades 1 to 6. Let’s see how the volume splatter indicator helps us trade with astounding accuracy (click the thumbnail to enlarge it):

1. We have a short signal, but the large (magenta) traders are posting a sizeable dot above their zero line. They are active and buying. This is a danger sign that they could be supporting the price here. So, I’d wait for a couple bars to see if the big boys and girls will start selling. They don’t. Skip this trade.
2. We have another short signal. This time, the big traders are not too active (small magenta dot), but are at least net sellers. You’d either get in here or wait one bar to see a further drop in the magenta series, with a bigger dot. You get in. Price pays you, and you have confirmation from large, falling magenta dots. You have caught a ride down with the big traders. Congrats! Once the magenta dots start rising, note that you have several bars to pick an exit. This appears to be typical, as price will continue paying you even as the sellers step aside.
3. Another short signal. Again, the large traders are net buyers here, though not active (tiny magenta dot above the zero line). If you wait and see them become sellers (though still not active), you might sell here, but would quickly bail and reverse at the next signal. So, probably a small loss here, depending on how aggressive you are.
4. A long signal, with active buying from the large traders. Great! Price starts paying you immediately, and though the large traders quickly become inactive, the dots do not fall. So, buying pressure stays on, even though the amount of it declines. When the magenta dots finally do fall, you know to book your profits. Couldn’t be simpler.
5. Another long signal. The large traders don’t seem too interested, as they have tiny magenta dots at their zero line. In fact, a bar or two after entry, they momentarily dip below their zero line. If you got in, you’d bail for b/e, or maybe a tick or two of profit.
6. Last long signal. Now this is what you want to see! The magenta dots have been rising steadily for the last few bars, and are printing large dots. Price pays you immediately after entry, and the buying pressure stays on. When the magenta dots start to fall, you have several bars to find a good exit point, before price drifts down significantly.

As you might be able to tell (especially if you heard me talking about it in the live room), I am extremely happy with how this indicator is acting. I hope it holds up for another week or so, and then I’d be confident releasing it to eotpro elite-series subscribers.

Here’s another example I couldn’t resist posting… there are too many to publish them all!

You buy at the vertical line because the big traders pull back toward neutral and then start to buy again. Meanwhile, the over-eager small and medium-sized traders have gotten net short during the little pullback. Oops! They’ll regret that…

Look at the large magenta dots heading up right after entry, confirming that you have caught a ride up with the big traders. That’s what you want to see.

Also, notice once again, that once the large buyers step aside, and their tiny magenta dots drift back down to zero, you have about sixteen bars to pick an exit as the small traders prop up the price. Once again, they are getting in too late! You can see their large yellow and cyan dots revealing their futile attempts to jump on in time. Oops again…

Here’s another example of my split-out volumes indicator. I wanted to show you the examples from my actual trades, but Tradestation crashed on me when I tried to share my screen in the eotpro live room today. TS and acrobat don’t seem to jive well ever since I installed the global variables package. And, since this is a real-time only indicator, I can’t restart TS and get the same charts back that I was looking at. Oh well!

Anyway… check this scalping chart out (if you don’t know how to read this, check out yesterday’s post on the volume splatter indicator.

The place to sell is the first vertical line. The place to cover is the second vertical line.

I’ve noticed again and again that the big traders get out of the trade first, and the price usually doesn’t run too far away for a few bars. You get plenty of time to get out, before the small and medium traders catch on. It’s kinda nice.

You sell short because volume from large trades is growing and heading straight down, while we are bouncing down from the rolling VWAP. Note that on a 2584 share bar chart, I’d probably wait until the small and medium traders started selling too, but on the scalping chart I’m now leaning towards not waiting. But, that brings up an important point: YET AGAIN the small and medium traders are on the wrong side of this trade at first. Always caught off guard, they are!

Then, look, for the entire trade between the two vertical lines, the large trading pressure stays on… as I described in the live room today, there is a nice space between the zero line and the large trade pressure. So, heavy selling pressure stays on, and there are plenty of large dots, indicating spikes in volume as well.

Note that the medium and small traders start covering about a point too early, and the medium traders even get net long before the drop ends! Then, they both get net short again a couple bars after my designated exit. I think this is part of the reason for the big spike from the small and medium traders at 13:01… those way-too-late shorts have to cover and reverse.

It’s like a comedy watching how wrong-headed the small trades are.

Now, if you don’t mind a little advertisement, I’ll point out that if this indicator continues to look so awesome, it will be part of the eotpro elite series in a couple weeks. And, the only way you’re going to get it is by signing up as an elite series subscriber. If you haven’t checked it out, you really should… we have tons of interesting and useful indicators for your trading arsenal.

Today. I’m going to show you version 2 of the new volume indicator I showed you yesterday. I’m calling it volume splatter, because it looks like paint (or blood, if you are morbid) splatter.

The first example shows how often the small and medium-sized traders are on the wrong side of the market. Recall that the indicator plots three data series. From top to bottom, we have the small, medium, and large sized trades. Their position around their zero line tells you whether the volume pressure is to the up or the down side. The size of the dot tells you how much volume is in that particular bar, relative to the last 3 half-cycles. So, a large dot means greater than average volume is flowing into the bar for that type of trade. A tiny dot means not much volume.

It was important to split out the dot sizes, because… say you have a big push down from the large traders, and then the dots start drifting back towards the zero line. That drift up could be happening because they are buying, but it could also be happening because they aren’t doing anything. If no volume prints for their size, the dots will tend toward zero from wherever they are. I wanted to differentiate action from non-action. It’s working well to do so, today.

So, anyway, the first example… look at the action between the two vertical lines on this picture:

You can see that the medium (cyan) traders were pushing down during this consolidation, followed by a push from the small (yellow) traders. Meanwhile, the large (magenta) traders were steadily drifting up, with occasional spikes of volume. So, the right action is to buy the breakout up once the small and medium buyers figure out what’s going on and step in. I do think, so far, that you want to wait for the selling pressure from the small fries to stop… it doesn’t take long, as they are jumpy and scared all the time.

Here’s a second example, from my actual morning trading:

The blue horizontal trendlines outline a box play. I bought the breakout up at the first vertical line. You can see that during the previous consolidation there was a push from the large traders, and now at the buy point they seemed to have mostly stepped aside. But, their dots were staying above the 0 line (so net buyers over the last half-cycle). The breakout was fueled by the small and medium traders, which is not necessarily a problem.

But, I bailed for two ticks of profit (the maximum possible profit was three ticks, so I felt great). Why? I knew when I pressed the button that I wanted to see the large traders step in and move the markets up in my favor. But, look what happens over the next few bars after the breakout… tiny magenta dots drifting toward the zero line. In other words, the big guys were uninterested at best, and lightly fading the breakout in the worst case.

Now look what happens as we near the breakdown from the original box (marked by the second vertical line). All the small and medium traders freaked out that their breakout didn’t work, and sold it down to the breakdown point. The large traders are still mostly uninterested, but they are below their 0 line, so net sellers, and occasionally giving it a little push. But! Look after the breakdown at all those large magenta dots. They weren’t heading down in a big way yet, but they were net sellers and suddenly very active.

Note also that, just after the breakdown, the small and medium traders seemed to be actually buying here, as their dots were rising fast and punctuated by volume every few bars. The medium traders were even net buyers (above their zero line) by 8:50!

Look at the pullback at 8:57ish… the big traders have pushed back to their zero line, but not much above it. So, they are net neutral, taking profits probably. The small and medium traders are buying… do you think it’s a good idea to follow them? I don’t. Once they realize what’s up and panic, the big traders are also selling again… and when all three are selling in unison just before 9:00, you get a steep drop. Very nice.

Moral of the story: Small and Medium-sized traders appear to often be on the wrong side of the market… just like conventional market wisdom says they will. Don’t be one of them. Use them, instead!

First off, check out the kick-ass entry signals I’m getting today on my newest entry indicator. Not bad… (if you aren’t in the know, it’s the topmost subgraph showing three entries… two short and one long… and all very profitable).

Anyway….here’s a first version of a new indicator that gives volume pressure split by trade size… Above it you can see the full volume pressure histogram (the red/green one). As you can see, the overall volume pressure looks pretty much identical to the “large trader” profile, which I have set to watch trades of 51 contracts or more.

So, does seeing the smaller traders mean anything, then, if the overall profile and the large trader profile look so similar? I think there are possibilities. First off, I’m going to scale up the lines for the other trade sizes, so that they look visually the same as the large traders. Then, I’m going to examine ideas like watching for small-trader capitulation when they have been running against the large traders. Stuff like that. Maybe it will be useful, and maybe not. That’s what experimentation’s all about.

Lest you think I’ve fallen off the planet completely… I’ve taken some user suggestions and made a few new and/or modified indicators and posted the code to the forums.

Now, for the first time, you can put the same paintbars on your screens as I use on mine… they are built on a combination of the rolling VWAPs, and Alla’s average, and some anti-waffling logic, and they are fabulous. I also put my recent Bid/Ask-Volume pressure histogram up, which I know several people will be thrilled to get. There’s a version of the Murray Line Exits that gives you warning when bars are near the lines. And more!

Check them out in the forums section, and in particular the “Your Custom Indicators/Strategies” section.

The code’s all there, so you can see examples of the elite series being used in a variety of ways. Some simple, some not so simple. Of course, since these are built upon elite-series building blocks, they will only work for eotpro.com elite-series subscribers.