K-Bars Variations in charting Bars...

Also under consideration is a dream is a project to help and educate retail investors so that they do not easily lose their hard earned money in the market. The idea is to equip the small trader with the technical tools and education to save them from the sharks of the stock market and the snake oil vendors. The project has been given a pet name “Marar Foundation”.  Well, the seeds have been sown and we will wait for project to sprout and grow in to healthy and successful organization. I will be sharing more information on the same as the time goes.

Today I will be sharing some of the charting tricks I use. As a VSA enthusiast I more interested in how much easily the Smart Money would move the stocks or in other words what is the effort and the corresponding result. So I am more interested in the where the current stock price ended compared to the last bar close. In a EOD perspective how is today’s close compared to yesterday’s close. So I have special bars which have the current open adjusted to previous bars close. As a result we have a smoother chart without the Gap ups and Gap downs. I call it the K-Bars charts

The other chart I use is more interesting and the one with bars that reflect the buying and selling pressure. This chart helps us the easily understand the underlying market sentiment 

in terms of supply and demand. Let us look at it with an example.

In the Above chart the bars are coloured red and green. The green part represents the buying pressure / demand and the red part represent the selling pressure / supply. In the up move and down move the demand and supply is clearly indicated by the corresponding colour  However the utility of these bars are can be appreciated during the turning points. Look at the green box. After the down trend the demand /buying coming is very visible by dominating green colour  So the impending up move was very evident. In the same way in the red box the selling/supply was dominant and was clearly visible and the down is easily forecast.

I am sharing the code piece for Amibroker for those interested to experiment. You can upend the same to any other strategy code. The same can be down loaded here. Download the AFL code.

RSI with Dynamic levels

I am posting after a gap. Got hold of some original Wyckoff stuff and has been spending some time on it. More about it in a later post. Today I am presenting a Regular Classical Indicator RSI with a variation, a RSI with dynamic levels. No I am not talking about the RSI with Bollinger bands around it.

In the Stocks & Commodities V15:7 Leo Zamansky and David Stendahl talked about dynamic zones. They said that oscillator driven systems lack the ability to evolve with the market because they use fixed buy and sell zones. Typically the set of buy and sell zones for a bull market will be substantially different zones for a bear market. We need to have a system automatically define its own buy and sell zones and thereby profitably trade in any market — bull or bear. Dynamic zones offer a solution to the problem of fixed buy and sell zones for any oscillator-driven system. The idea of their system was to create a distribution of the signals in the given look back period. Then we have to find the value which is equal to the desired probability.

First of all the assumption is the distribution is normal distribution is a little far fetched actually. On that assumption we need to do the laborious calculation of the making the distribution and calculating the probability. But I would like to keep things simple. Trading is art and not complicated science. Precise calculation will not immensely improve your trading system.  In order to simplify the matters we can just assume uniform distribution and calculate the probability accordingly. I knew people will find it difficult to accept this. However even this simplification will provide a adequately dynamic zones.  Here I am presenting the conventional RSI with Dynamic Levels. Also in order not to confuse with widely available Dynamic Zone indicator with Bollinger bands I will call this indicator RSI with Dynamic Levels.

Download the afl from here 

Volume Wave

Of late I have not been able to find much time for the experiments. My latest interest has been on the Weis Volume waves. Maybe it is a commercial not much material is available. I tried Davis weis’s book “Trades about to Happen”. Frankly not very impressed with the book.  In the chapter on tape reading he does talk about the volume waves.  Somehow the explanation is very much lacking. Either he is not good teacher or he prefers not to explain as he is selling the stuff. Frankly I have not been able to find much use for the volume wave and the reasons are as follows

1. The waves is based on based on percentage or pips which he calls as waves size or reversal and it is in terms of pips. If the reversal percentage is changed then it could present a different picture. What is the ideal wave size? The wave size could change from instrument to instrument. How do you arrive at the ideal wave size?
2.      I fail to see discernible pattern on the waves. I am still experimenting.
3.      I do not know how the commercial program works but I feel that the concept calls for use of the zig-zag like functions to work out the waves.  The zig-zag function obviously looks to the future and this could lend the effort unreliable.

I have implemented the Volume wave in Amibroker. Please share your ideas about the Volume waves as I continue to experiment with it.

Sharing the AFL to you to experiment …..

The Volume Wave AFL...

Effort Index AFL

Finally here it is ... the Effort Index AFL...

The afl provides many options which are selectable from the Parameter window.
First option is to plot either the Raw Effort Index or the the Effort Index.

The Raw effort index provides the effort and the result in the same chart. The Result is plotted above the zero line and the Effort is plotted below the zero line. This makes comparison of the Effort and the corresponding Result on a Bar by Bar basis.

The Effort index is the ratio of the Result to Effort which in effort the Result per unit effort..

Also there is an Option for calculating the effort index either the Bar to Bar  or the Spread..

Bar To Bar  Calculation

Spread Calculation

Download the AFL...

Video On "Effort Index"

My latest video on the latest Indicator "Effort Index"

Afl will be available soon.

Regularized Indicators - Part 2

Currently I am working on fine tuning my latest simple indicator the “Effort Index”. I am also planning a video just like the video on the buy and sell indicators. Making video is interesting and I realized that it is not very easy as just recording. To make a proper video one has to plan properly and prepare a lot in terms of a script and story board etc. Making the bits and editing them all together is quite interesting. And there are many interesting software available for each of these aspects. It has been a huge learning experience. Currently I am just doing the story board and it is going to take some time to complete and release the video and Indicator. Meanwhile we will continue with our experiments with regularization of indicators.

 The next indicator I took for Regularization was the RSI. The RRSI is much more responsive and leading compared to the conventional RSI. Since regularization tends to take values to extremes the chart a little more jagged than the conventional one. So we can apply a small filter to smooth the signal. I have applied a 5 bar Ehler Filer to keep the lag minimum.

Similarly a regularized stochastic Indicator is characteristically smoother and less proven to whipsaws.

Download the AFLs

Regularized RSI

Regularized Stochastic

VSA - Identifying weakness with Effort and Result..

I am writing something about VSA after a long time.  The last time I posted the buying and selling pressure indicator which is a good add on indicator for VSA. Now I am going to talk about indentifying hidden weakness in the bars.  Many times we see up bars closing near the top with good volumes.  Most would naturally assume there is strength in those bars as it is an up bar, closing in the top and has good volume, all traits of strength. However there could be hidden weakness in these bars. Obviously the question is why and how we identify these.

Let us take the nifty chart as example. In the chart I have plotted the chart in one pane, the volume in another. The third pane consists of a new indicator which I call as the Effort index.  This chart plots the effort (in effect volume) as bars below the middle line. The result is plotted above the middle line as bars.  Now let is look at the charts and focus on the three bars marked 1, 2 and 3.  In the Bar marked 1 we can see a wide spread “Effort to Move up Bar” with good volume. In the pane three we can see that the effort was high and the result was also equally high. In other words the effort produced the required result. Now look at the bars marked 2 and 3. These are up bars closing near the top and volume was high almost equal to the previous day’s volume. So it is natural to consider that there is strength in these bars as well. But when we look at the pane 3 we see that the effort was high but the result was poor.  So there is a mismatch between the effort and the corresponding result which indicates weakness. The reason could be that the smart money has been distributing without bothering for higher prices. So these two bars (marked 2 and 3) really indicates weakness rather than strength. As you can see the weakness manifested from the very next bar the market came down. So looking at the effort and the results can tell us more about the bars. This is helpful in bar to bar analysis.

I am planning to release the new indicator “Effort Index” soon. More about is soon.