This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

When I did my ego search to see where White Folks TV was being aired, it ended up in some strange places. Two of my favorites are what appears to be a Latino vacation destination (I love me some Spanish women), and this UFO website. I hope I don’t end up on some kind of watch list now.

Here is a short video showing my entry points versus LBR’s - The Anti System.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Richard’s original article can be found here.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Why is the music so old? Cause I’m old!

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I think this idea works with Richard’s VWAP indicator, but it would apply to a moving average as well.

I have a chart setup that is supposed to identify trends. Its a 50 cent Renko chart with a few indicators to help. However, one problem I’ve been having, is quickly recognizing a chop zone.

Here’s the problem and solution. Let’s say you use a 10-period weighted moving average to identify the trend. When its moving up, and your trend indicators are in agreement, you want to be long. That part looks easy after the fact. How can you identify a possible reversal, or chop zone, before the fact? If you can do this correctly, you can stay in your trade longer, having the confidence to exit closer to the end of the move.

One way is to plot a double smoothed TSI using the same period as the moving average. On this chart, the red line determines trend. The double smoothed TSI has less lag, and turns in the opposite direction right as the congestion starts.

If there is a slope divergence between the two, do not initiate new positions. You also want to start looking for an exit when the divergence occurs. I wouldn’t use this to play reversals, because it doesn’t mean it will reverse. It just picks up the change in trend. Flat prices, at the very least, are a momentary change in trend.

If this helps, buy William Blau’s book. There’s a ton of great information, that will have you thinking in new ways.

Edit: I’m not going to paste the other chart, but I put the TSI on the price pane, so I can see the divergence easier. I followed it up with a couple of signal markers that identify when the slopes are congruent. This system will be called “Trading for Monkeys.” Monkey see, Monkey Do. Monkey Did!

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I still haven’t been able to resolve the issue with the intra day, EFI indicator. That may actually have been a good thing. I remembered a book I had by William Blau - Momentum, Direction, and Divergence.

Hopefully, one of these rocket scientist will read it, and explain it, better than I can. I’ve been coding some of his ideas into Investor RT, and I lucked into something. If I have the opportunity to trade today, I’m going live with this system (work in progress).

It looks like this Nerd Festival was a success.

EDIT: I’m down 1/2 point. Maybe a huge move comes this afternoon, but I’ll have to miss it. This is like watching paint dry.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Take a look at this. I wanted to post this chart separately, because I think its a better alternative than what I posted a few hours ago.

Notice how it identified the break (the Force remained strong during the consolidation), and nailed the Trader Vic 2B (note the subsequent drop).

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Popular opinion would say to stay away from the 1st hour of trading. I signed up for the UTC, so I could learn how to do it. I could see I was missing opportunites, or worse, losing money. I’m pleased with what I found.

From this post by Dr. Brett, you can plainly see that you have to learn how to trade the opening hour.

Moreover, we can see that essentially all of the market’s upward trend has taken place during the first hour of trading. The first hour has accounted for about 1116 points of gain during 2007; the middle hours have lost about 780 points; and the last hour has gained about 719 points. What that means is that daytraders who sit out the first hour of trading have not, as a whole, benefited from the upward market trend. Indeed, there has been something of a downward trend to the market’s middle hours.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I won’t make any obvious references to an extremely popular movie. Its bad enough that we’re labeled trekkies around here.

Force index = (Close [today] - Close [yesterday]) * Volume

This indicator was also made by Dr. Alexander Elder (the R guy). Richard brought up a valid point about the bull and bear power indicators I was using. I still found that helpful, but it didn’t really tell you much that you couldn’t eyeball. I guess that’s why he’s been profitable longer, and more consistently, than me. I needed the indicator to tell me what he was already seeing. I found no problems with it, but I may have found something slightly more uselful, and definitely easier to watch.

I stumbled across the force indicator, and looked over the charts of the limited range data that I have. Incredible charts gives a good overview of the indicator.

My chart setup uses a 10-period weighted moving average, and the force index is calculated with the same parameters. I also don’t necessarily see the need in waiting for the turn in the MA, or the flattening out of it, to take profits. I would suggest playing the price action with tried and true setups, and using the force index to increase consistency/profitability.

If Force index flattens out it indicates that either (a) volumes are falling or (b) large volumes have failed to significantly move prices. Both are likely to precede a reversal.

Looking at one indicator is easier than watching two, and since it factors in what I consider to be the relevant information on volume, then this may be a good replacement. There is nothing new in this post. Its just another way for me to identify good reversal candidates. I guess you recognize the pattern in this chart, so there is no need to go over that. Can you say, One Trick Pony?

Edit: I just noticed something. When I was using the bull/bear power indicators, it didn’t give me enough information. A few minutes ago, I pulled up a change chart with the Force indicator. Man o’ Man! It looks like we have a winner. Not only did it identify each of the trades that would have signaled (most of them anyway) with the range chart, it made it easier to follow breaks. That’s what I originally noticed when I first looked at the change charts. I was already leaning towards the Force indicator, because of the simplicity. Now its a slam dunk, since I can use the change charts. It looks like it should provide opportunities in more than one way. Now, I may be a Two Trick Pony!

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I think the best compromise, for me anyway, may be using the bull/bear power indicator on range charts. It doesn’t seem to work on the change charts. I didn’t take this trade, because I was either looking for a double top or Trader Vic 2B setup. I didn’t get either.

However, look at the divergence on the bull power (top indicator). As price fell, it reached new momentum lows on the bear power. I think the key (as Elder lays it out) is using both indicators simultaneously. On the limited intra-day data that I have, it does an excellent job keeping you on the correct side of the market. I like to trade reversals (and even breaks when I identify them correctly), and this is helping.

Btw, I didn’t have the 24 hour session up yesterday, and missed an ideal setup. I should actually post that chart later. It really showed the divergence on the two indicators and price coming out of the gate (compared to the 9:00 am eastern run up).

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I’ve been using a new indicator, for the last couple of days, that I find quite helpful. It appears to work better on time based charts, but I’m hoping I can use it on the change charts. We’ll see.

Investopedia has two links (1, 2) that help explain it. Its by the same guy who came up with R.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I’ve made semi-realtime change bars for Tradestation, in a kludgy way:

(recall that change bars are like range bars, except the distance between the successive bar opening prices is kept constant, rather than the overall range. So, you get a slightly different picture)

… it uses the ascii import mechanism to get the bars on a chart, which means I can use indicators on the chart. Great! But, I have to reload the chart to pull in more data. And, that recalculates all the indicators. So, I won’t be scalping off this chart! But, for study, and for occasionally getting an updated look at the market from a change/range/renko/etc. perspective, this approach should get me by.

The data is created via an indicator that watches a 1-tick ES chart, spitting out new bars to a file as each new bar is created. I only did change bars tonight, since Mr. White Folks got me interested in them. I’ll code up range bars and renko bars and 3-line-break and whatever else I want soon enough.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Because of the way work is going today, I can’t trade. I don’t know from one minute to the next if I’ll be called away.

Instead of trading, I’ve been looking through different indicators offered by Investor RT, and I ran across this. Originally, the COG was featured in Technical Analysis of Stocks and Commodities. Its supposed to identify turning points without much lag. I’m not sure if that would produce a lot of false signals since it reacts so quick. I’m just putting it out there for now - no endorsement from Mr. White Folks yet. I think it may be worth watching in real time.

The zero line is the line in the sand, but I would imagine it could be used as any other oscillator (divergences, etc.) The advantage would be in the quick response - if it works!

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Here is an idea from long ago… using a sliding-window technique to compromise between responsive charts and summary-level information.

For scalping on @ES, 1597 share bars are about the fastest candles I can comfortably watch. Yet, when turns are fast, my bead-reader measure of the trend direction is too slow to turn around. So, I created a chart out of 377 share bar data, but created synthetic bars out of a rolling 5-bar window. These synthetic bars show approximately the same level of information as the 1597 bars did, so I don’t have to put up with any extra price noise.

These two example pictures should make it clear what I mean… you can see the 1597 share bars on the left, and my synthetic 1597-level info on the right, made out of ultra-fast 377-share bar data.

Interesting to note that the good PattyB (eotpro) signals on the 377 chart generally have corresponding PattyB signals on the 1597 chart. What a great indicator! It’s just that the rest of the “bead” indicators don’t usually line up in time to validate the faster turns. The 377 chart is fast enough, all around, though.

Also note how generally disorganized the beads are in that first pic, when the synthetic price chops through that blue moving average. Two indications of choppy action. (This works on normal charts as well, but the MA isn’t usually quite so eager to get inside the action.)

I’ll look through a bunch of historical data before I try to replace my 1597 chart with this synthetic one, but the idea makes enough sense…

Aside: Note that while the drawing part would be a ton harder, it should be possible to create synthetic renko/range/change/etc bars manually and draw them. The problem is, you wouldn’t be able to apply indicators to those charts, since there’s not a 1-to-1 correspondence between the underlying chart data and the synthetic bars. Oh well… I would like to play with those change bars, so maybe I’ll write the code regardless.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Change charts isn’t a statement. its just another setup option.

I’m not exactly sure if this will be beneficial or not, but it looks promising. Since Richard is now posting videos with androids resisting the sexual advancements of humans, I thought I would break my own rules, and post something market related.

I’ve been experimenting with range charts, and one thing that I’ve not been able to do, is trade breakouts. It does a fairly good job of identifying reversals. The breakouts are probably there too, but unless I get a good retracement, I can’t recognize it quick enough. By the time I see it, the train has left the city - much less the station.

Take a look at a ‘change’ chart. The setting is exactly the same as a range chart - 2 points. The only difference is the construction. For example, if the current bar opens at 2000, a new bar will start at 2002.25, or 1997.75. That may not seem that different on the surface, but it actually is. Some of these bars may actually print with a range of several points. That in itself isn’t surprising, but the picture it paints, seems to be. I’ve cherry picked two examples using the different settings.

It also has a Renko feel to it that Prospectus might like. Identifying flags, and other setups used in a trending market, seems easier with this type of chart.

Rinse Job on the Change chart

Rinse Job on the 5′ chart

Gap on the 5′ chart

Gap on the Change chart

Gap on the Range Chart

I didn’t post the rinse job on the range chart, because like I previously stated, it does a good job on reversals. The problem with the range chart (to me) is that it took so long before it gathered enough steam to power ahead. After the gap, it didn’t appear to do much , and didn’t seem like it would. However, on the Change Chart, you could see the orderly nature of the breakout.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Do you polish the brass on a sinking ship? I know that’s a dumb question, but let me tell you what I’m thinking. The likely winner of the Trading Pimp of ‘07 won’t acknowlege the award. The runner ups are swimming in money anyway. They already have their own Chalice, luxury cars, and a stable of women. Do they really need anything more than Mr. White Folks recognition of the strength of their game?

What I’m thinking is this. I receive no ad revenue, and could care less about blog links, and page views. I’m a man of the people. I remain the only blogger who gives away cash and prizes with zero expectations of future financial gain.

This year I’ve decided to name the Trading Pimp of ‘07, but not award them the grand prize. The prize actually goes to a struggling trader. Since I’m still pimpin’ on a small stage, he/she will be given a one year’s subscription to Technical Analysis of Stocks and Commodities.

Here’s what I need from you. In the comments of this post, tell me why you should get the subscription. You can also nominate other struggling traders. Links to this post will gain favor with the judges. Now let’s help polish the brass on a ship that may be sinking.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com