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Indicator study

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tothe   Saturday, 01/26/19 09:15:45 PM
Re: tothe post# 151
Post # of 187 




Indicator study


Multicollinearity a common TA mistake

Quote:
Multicollinearity is a statistical term for a problem that is common in technical analysis. That is, when one unknowingly uses the same type of information more than once. Analysts need to be careful and not utilize technical indicators that reveal the same type of information.
http://stockcharts.com/school/doku.php?id=chart_school:overview:multicollinearity




A typical three indicator chart
https://c.stockcharts.com/h-sc/ui?s=TREP&p=D&yr=0&mn=3&dy=0&i=p4631216300c&a=642509717&r=1548546033126


Rough Outline or Quick Reference?


Category Indicators
================================================================
Momentum Rate of Change (ROC) Stochastics (%K, %D)
Relative Strength Index (RSI)
Commodity Channel Index (CCI)
Williams %R (Wm%R)
StochRSI
TRIX
Ultimate Oscillator
Aroon
------------------------------------------------------------------
Trend Moving Averages Moving Average Convergence Divergence (MACD)
Average True Range (ATR)
Wilder's DMI (ADX)
Price Oscillator (PPO)
------------------------------------------------------------------
Volume Accumulation
Distribution Chaikin Money Flow (CMF)
Volume Rate of Change
Volume Oscillator (PVO)
Demand Index
On Balance Volume (OBV)
Money Flow Index (MFI)



------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CMF study

There are 3 main money flow indicators, OBV on balance volume, Accum/Dist accumulation distribution and CMF Chaikin money flow.
Each an improvement on the one before. OBV uses raw daily close data; Accum/Dist uses daily "close location values", CLV to plot a line; and CMF uses Accum/Dist and weighs it over a period of time, giving an over all positive negative pressure indication, above or below zero.

Strong positive pressure is seen when the CMF is above .25 and strong negative when the CMF is below - .25.

The reason you can see positive CMF with a price decline is found in the way the CLV is determined.
1.If the stock closes on the high, the top of the range, then the value would be plus one.
2.If the stock closes above the midpoint of the high-low range, but below the high, then the value would be between zero and one.
3.If the stock closes exactly halfway between the high and the low, then the value would be zero.
4.If the stock closes below the midpoint of the high-low range, but above the low, then the value would be negative.
5.If the stock closes on the low, the absolute bottom of the range, then the value would be minus one.

The CLV is then multiplied by the corresponding period's volume, and the cumulative total forms the Accumulation/Distribution Line.

CMF take this for 21 days and uses an average. So if several days close at the high end of the daily price spread, event though the price is declining, the high closes will effect the average. The more high EOD finishes the more positive pressure is injected into the formula. Every day the oldest days data is removed and the newest days added.

So with OBV all volume is added with a close above mid daily price range. With Accum/Dist only portions of the volume depending on the close position and CMF bundles the Accum/Dist line data for a period of time. Creating a pressure indication, more then flow indication.

Money flow is thought to precedes price. OBV is very basic (all or nothing), Accum/Dist balances data (to plot a direction line) and CMF combines data (showing pressure over time)
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=50505000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Rule
When CMF is in selling and Stoch RSI at BE IN, retail is buying and big guys selling. When CMF is buying and Stoch RSI is at BE OUT. Retail is selling and big guys buying. I think of Stoch RSI as what retail wants and CMF the bank. Customers deposit and withdraw from the bank, during conflict.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=75458527


Detailed Outline

How to use indicators from Lowtrade compiled from his posts. Quick & condenced for reference:

Momentum
TRIX - rate-of-change of smoothed moving average momo
StochRSI - overbought and oversold levels in RSI momo
ROC - percent change momo
Stochastic - over bought / over sold momo
RSI - Average Gain / Average Loss momo
WM%R - price close vs. range top /bottom momo
----------------------------------------------------------
Trend
Aroon - close high /low trend
DMI - price direction / ADX strength trend
ATR - gap /small move - up down reversal trend
Macd - +/- moving averages - direction & strength trend
PPO - increasing / decreasing price trend
-----------------------------------------------------------------
Volume
PVO - increasing / decreasing volume volume
OBV - close above vs below totals volume
Acc/Dist - ave close totals volume
CMF - A/D strength divided by volume = pressure volume
MFI - RSI volume-weighted volume

TRIX & Aroon are trend indicators, not momo. As they are not oscillators but do present a stocks trend indication.
-----------------------------------------------------------------------------------------------------------------------------------------
Momentum/ Trend indicators
RSI, & MFI; are oscillators. Good for support of trend.

MFI over bought over sold; 0 to 100, 50 is zero
RSI over bought over sold; o to 100, 50 is zero

The Money Flow Index (MFI) is a momentum indicator that is similar to the Relative Strength Index (RSI) in both interpretation and calculation. However, MFI is a more rigid indicator in that it is volume-weighted, and is therefore a good measure of the strength of money flowing in and out of a security
In essence MFI is the volume-weighted RSI of money flow.


Volume indicators

OBV & CMF are volume indications good for pressure expected when a move starts.CMF shows pressure. 0 is zero + positive, - negative
Accumulation Distribution shows pressure, bottom is zero shows increasing and decreasing. Not +/-
OBV being less useful then AccumDist, AccumDist which is in turn less useful the CMF. Because AccumDist was an improvement to OBV and CMF an improvement to AccumDist.We should always put more weight on CMF.

Being in or being out vs. get in or get out: RSI and MFI

Like StochRSI, MFI shows 2 indications. Strength & overbought/oversold, because it graphs like an oscillator. It mainly relies on RSI for it's basis.

MFI uses volume with RSI to determine if more money is coming into a stock, then going out. And because the consensus is, price follows volume. You can judge entry/exit with the RSI position on the graph. MFI above 80 signals entry and below 20 exit.

While StochRSI signals Be In the stock or Be Out of the stock. MFI signals Get In or Get Out.
It has a different focus then OBV, Acc/Dist, or CMF. While being in the volume group, because it uses volume in it's formula. It is mainly used for decision making, rather then support.

Like the Aroon, I disagree with where the books place this indicator. I would put it in the trend group, where you find other decision making indicators. They have the Aroon in the momo group for decisions and I would place that in the trend group.

RECAP, MFI determines entry exit, or positive negative momentum. It's name and placement in the volume group is misleading. IMO


Summery
Choose 3 indicators, one momentum, one trend & one volume. Your watching for trend entry, will retail support your decision and how strong to expect any move you enter, will be. My choices to fulfill these are StochRSI, DMI and CMF.

StochRSI - overbought and oversold levels in RSI indicates momentum
StochRSI signals Be In the stock or Be Out of the stock.StochRSI shows 2 indications: strength & overbought/oversold, because it graphs like an oscillator.

DMI - price direction / ADX strength indicates trend
ADXis non-directional; it registers trend strength whether price is trending up or down.

ADX Value Trend Strength
0-25 Absent or Weak Trend
25-50 Strong Trend
50-75 Very Strong Trend
75-100 Extremely Strong Trend



CMF - A/D strength divided by volume = pressure indicates volume
CMF is a volume indication good for pressure expected when a move starts.CMF shows pressure. 0 is zero + positive, – negative

MFI - While StochRSI signals Be In the stock or Be Out of the stock. MFI signals Get In or Get Out.
It has a different focus then OBV, Acc/Dist, or CMF. While being in the volume group, because it uses volume in it's formula. It is mainly used for decision making, rather then support.

sources
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=45219382&txt2find=mfi
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=45336616&txt2find=mfi
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=45337703&txt2find=mfi
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=48320279&txt2find=mfi
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=46259534&txt2find=mfi


Tracking market sentiment for entry using six month chart

Basic entry indicators

Choose 3 indicators, one momentum, one trend & one volume. Your watching for trend entry, will retail (AccumDist) or +5% holders (OBV)support your decision and how strong to expect any move you enter, will be. My choices to fulfill these are StochRSI, DMI and CMF.

StochRSI - overbought and oversold levels in RSI indicates momentum
StochRSI signals Be In the stock or Be Out of the stock.StochRSI shows 2 indications: strength & overbought/oversold, because it graphs like an oscillator.

DMI - price direction / ADX strength indicates trend
ADXis non-directional; it registers trend strength whether price is trending up or down.

ADX Value Trend Strength
0-25 Absent or Weak Trend
25-50 Strong Trend
50-75 Very Strong Trend
75-100 Extremely Strong Trend



CMF - A/D strength divided by volume = pressure indicates volume
CMF is a volume indication good for pressure expected when a move starts.CMF shows pressure. 0 is zero + positive, – negative

A decision indicator

MFI - While StochRSI signals Be In the stock or Be Out of the stock. MFI signals Get In or Get Out.
It has a different focus then OBV, Acc/Dist, or CMF. While being in the volume group, because it uses volume in it's formula. It is mainly used for decision making, rather then support.

https://c.stockcharts.com/h-sc/ui?s=TREP&p=D&yr=0&mn=2&dy=29&i=p4521256470c&a=638446980&r=1548548176644


The support indicators

TOTHE's charting compilation for investor sentiment:

I use the three indicators below to track the sentiment of the different sectors of investors in a stock, their actions on the chart coincide with the actions within these three different sectors of investors/traders:

First... On Balance Volume is the one that tracks insider and off restriction registered shareholder money going in and out of the stock. The OBV indicator will go down when different SEC forms are filed showing preferred conversions into commons, restricted becoming unrestricted or distribution by insiders (yes, it that “D” in that box on form 4}. Example using the 20 day moving average filter: OBV (EMA 20) or MA(20) trend line up indicates no dilution. Daily spikes of the OBV indicator show settled & unsettled shares, shorting & covering as the MA(20) filters out the rough spots.

Second ... Accumulation/Distribution tracks the individual retail shareholder. many times Accum/Dist will go up while the PPS of a stock is going lower and lower; also while the PPS is going lower, investors on the message board for the stock, will be talking about buying, and how many shares they hold.

Thirdly... Chaikin Oscillator (momentum indicator of the AccumDist) controls the PPS more than the other two.... the PPS will tank when this indicator goes down, even if OBV and Accum/Dist are going up, this fact alone makes know this indicator tracks "the shares" that rule the stock (MMs in other words). OBV, and Accum/Dist can be going up, but until ChiOsc goes up the PPS will stay lower, or continue going down..... ChiOsc can go up before the PPS goes up, indicating that MMs are accumulating before a run.


Note on BB's that I have found after much observation:
The bottom Bollinger Band isn't used to detect shorting, it is a percentage indicator of the PPS movement. The bottom Bollinger will go down fast when a stock has a low beta and makes a significant move. MMs will usually keep the "close of the day" in a tight range to bring the Bottom B Band up to the PPS area before taking the PPS up. A good book to read for Bollinger Bands is "Bollinger on Bollinger Bands" by Bollinger.

Summery
OBV = Insiders, big share holder investors, institutional, note conversion, etc. and Registered shareholders, that is; individual shareholders with more than 5% holdings in the company.

Accum/Dist = over the counter individual Retail shareholders with less than 5% of the company stock.

ChiOsc = those who control the stock PPS and chart actions, that being MMs. Try to think of the various MM shops as computer driven algorithms which in reality what they are. This paradigm change in perception may cause trauma to newbie swing-traders who still believe in Santa Claus and that MMs are live people.

These three technical indicators have explanations on StockCharts.com and other places, that tell what they do technically, but they also work to track the buy/sell sentiment of the different sectors of shareholders

The Four Dilution Over Indicators

Watch for OBV, CHiOsc, MFI and Accum/Dist all turning up together... with less weight to Accum/Dist. & more weight to ChiOsc & MFI turning up together.

https://stockcharts.com/h-sc/ui?s=TREP&p=D&yr=0&mn=3&dy=0&i=p3117634458c&a=642214835&r=1548550529261




And here's a freebe to explain the use of 3 minutes & 10 minutes.

~~~ The advanced technical chart below has all indicator values that can be used in 3, 10, 30 and 60min timeslices when you change the period on the chart from daily.


First, I assume that I needed to know what the traders at professional desks are doing, so I put a 9 minute EMA and a 200 minute MA on a daily chart.

EDIT: I could use 20 MA instead of 9 EMA, but I make a choice here to use a short term EMA that is commonly used rather than the 20 because the short term EMA is juxtaposed against the long term 200 period MA. Provides balance, IMHO.

So.... back after the EDIT:
This gives me a view of what big boy trading desks do out there all day every day: 9 EMA and 200 MA.

Now here's my personal "secret sauce" for interday charts:
Since there are 390 minutes in a trading day, I use a period that is a factor of 390.... 3 minutes, 10 minutes, 30 minutes, and so forth. 20 minutes (standard fare industry wide) or 9 minute EMA or 200 period MA.... not factors of 390. Hence.... you end up having to compensate for the "remainder" on every candle.

Use a factor set of periods that is factorable into 390 for interday trading. Secret sauce.

This way, by using a set of periods that is factorable cleanly in a trading day, every candle is "clean": no opinion-based shifting to the right or left to compensate for the periodic rounding error that shows up on 20 minutes or 200 minutes (defaults out there for trading desk activity.... and these are on my screens only because it helps to see what the competition is looking at).

So that's the reason I'm saying 3 minutes: So you are looking at a high volume chart using 10 mins & 3 mins and in those "magnifications", you see a set of higher lows and higher highs. That's the tell at the moment.

Hypothetically, like, look at the 3 min candle that just formed. If I'd been involved in something other than typing this post (LOL), I could have had a 10K share buy in at $0.066 and I bet I'd have gotten a fill.


https://stockcharts.com/c-sc/sc?s=TREP&p=D&yr=0&mn=4&dy=0&i=p6680853606c&a=639143585&r=1548554336877












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