1) when vol goes below certain level, a horiz line is placed at that level for easy reference.
2) you switch mode from trend to range mode
3) when vol goes above the horz line
4) es 5m.
if you are proficiency in excel, load up 5m data for a month or two do a study on a range of bar vs its volume you will arrive of a conclusion more vol = more range
ps. this doesnt hold true for cl its vol is relative hight most of time.
Last edited by cory; November 7th, 2010 at 08:06 PM.
To identify a range bound market, one of the best indicators I've found is the Average Directional Index. For intraday time frames use a 14-18 period. Overlay with the Directional Movement Index (DMI) as well using the same period. When the ADX is below both the DMI positive and DMI negative, you are definately in a flat market or range bound territory. Another criteria is an ADX reading below 15. This signifies a weak trend reading. For Daily charts a 10-14 period ADX should suffice. The best teacher on ADX is Chuck LeBeau who is now retired. Google him and find anything you can on what he's written on the subject.
Tip: It is critical that in a range bound market, you do not use trend following indicators---you will lose a lot of money being chopped around. You MUST move to an oscillator based indicators, stochastics, %R, etc... and navigate the trade using these indicators and you will do much better. Also, limit your upside profit target, range bound markets also have range bound profit targets-- 1-1.5 ATRs at most.
The following user says Thank You to veigaman for this post:
Take a look at attached pictures. You can often see when price is spiking, trying to rise or even attemting to go lower but the cumalative delta for the day is not following suit. They are either accumalating to mark up prices or distributing to accumalate at lower prices (significant in an uptrend market) to push price higher, usually identified by sideways activity. The cumalative delta can help to see if price is moving with them attemting to move price lower or higher. Chop is around is delta between +/- 10K or even +/- 5K
Trying to find the Damiani Vol meter indicator that someone had on this thread. THe links are dead. Has it been removed? I cant seem to find it. Need to try some indicators to remove chop...its killing my system
in my short trading experience i had too detected this phenomenon by myself.
people can be taught and instructed to hunt for breakouts / breakdowns and then the patterns rarely hold and you end up losing money if you follow the instructions strictly.
let's say a stock is ever closer to breaking below a significant support. it is ever closer to breaching, let's say 60, it is displaying consolidation, edging closer and finally it breaks below. novices and beginners would pounce selling short of the stock before or right at the start of the potential breakdown but a lot of times they end up scalped. price will only fall some cents below the resistance and with a mass of novices riding short it will oftentimes reverse and go back 20 cents or so above 60. this puts massive pressure on those who shorted the stock in anticipation and as they are also taught, a lot of novices will cut their losses but take a loss indeed. 30 or 40 minutes later, the stock will be back below 60 and significantly so.
the solution to this i saw in a youtube video, and it asked to always hold until the 2nd breach. 2nd breach of a support or resistance, 2nd time breaches moving averages in the opposite direction, 2nd regression of price to the moving averages during a trend, etc.
this cumulative delta indicator seems to highlight the same dangers and should be very beneficial. will further research on the concept and check the indicator out if it a version is available for tradestation.
On the July 9, 2009 there was a thumbnail posted the Eco2New graph which has the indicators on the imput series in other words right on the candles. I was looking for that actual indicator to download, I have the EcoNew2 White Fading Only but that has the indicators all on the bottom of the chart and I have the Eco2New Sharky Pack which is also on the bottom of chart.