Great Article on Volatility and Volumes/Market Depth

The article is here.  It is the most interesting thing that I've read in a while..in fact, I've bookmarked it and will be reading it again later.



Above is one of the more interesting charts from the article.  Market depth dropping that much is a little concerning..

George

ThinkScript Indicator: CalmvVolatile

This is a pretty basic stud that compares the current Average True Range (ATR) with a long term average of the ATR.  The default periods are 14 period for the ATR and 500 period for the average.

This indicator can be helpful as a quick reference when taking short term trades.  If the instrument is volatile, you know that there's a better possibility of a quicker and farther move than if it's calm.  Enjoy.  The code is below.


#######Delete this line in TOS#############

input atrlength = 14;

input avglength = 500;

input plotlower = {default "yes", "no"};

def vol = AverageTrueRange(atrlength);

def avgvol = Average(vol, avglength);

def calm = vol < avgvol - (avgvol * .1);

def neutral = avgvol + (avgvol * .1) > vol > avgvol - (avgvol * .1);

def Volatile = vol > avgvol + (avgvol * .1);

AddLabel(yes, Concat("Market is Currently ", (if calm then "Calm" else if neutral then "Neutral" else if Volatile then "Volatile" else "Neutral")),  if calm then Color.GREEN else if neutral then Color.BLUE else if Volatile then Color.RED  else Color.GRAY);

declare lower;

plot window =  vol - avgvol;

window.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);

window.AssignValueColor(if Volatile then Color.RED else if calm then Color.GREEN else if neutral then Color.BLUE else Color.GRAY);

plot zeroline = 0;

######delete this line in TOS##############

S&P Rallying After Earnings

The market is liking earnings right now...some notable movers are AA, GS and FCX. Goldman is an important stock to keep an eye on because it is definitely a market leader who's price action tends to dictate the tone for the market as a whole.

The S&P has been rallying in the futures market since today's close...good for longs. Here's a 30 minute chart with today's action with the TLT Trender v2 and a nifty short term volatility indicator:We'll see what the follow through looks like for tomorrow and we'll have to keep an eye on the 1078 gap level that is quickly approaching.

TLT

I Bought the Market Today...

Went long with a leveraged ETF today as the S&P began pulling out of oversold levels. Will it continue going up? I don't know, but you have to be willing to step up and buy during times of uncertainty when you see a tradeable setup. For me, the setup is a pullback to oversold levels on the stochastic while an uptrend stays intact...the uptrend is indicated by the green bars painted by the TLT Trender v2. Here's the daily chart that shows the oversold level and the green bars:The daily chart gave me the signal to start looking for a long entry and a specific stop loss level. To determine this, I use the TLT Trender v2 on the 15 minute chart along with a volatility indicator to pinpoint the entry. The volatility indicator looks for rising short term volatility, which confirms a breakout. I'll post later on in the week about the volatility indicator and how I use it...don't really have time to right now.

Hope everyone's week is going well so far.

TLT

Multiple Trend-Following Systems Combined: Attempting to Achieve

Lately I've been exploring the use of a couple of independent trend-following systems used in conjunction with each other. I have finally found something that seems to work like I intended when I undertook this project. It combines 2 separate trend following systems and it waits for confirmation from both systems before an entry is generated.

Basically, it combines a moving average crossover system with a volatility break-out system. This seems to work pretty well, however, there is still room for improvement. The improvement comes with multi-time frame analysis. For this, I've integrated a brilliant indicator that tracks MACD readings for 9 different time frames (look at the upper left-hand text within the chart below). Below is a screen shot.In order to get a signal, there must be both green or red lines on the trend following signals (the band looking lines that surround the price and change color: green=buy, yellow is caution/sell, and red is sell/sell short) and there must be a correlation to the signals with multiple time frames on the MACD for an entry. Just how many and which signals I will leave for you to experiment with...if you're so inclined. I've found that it depends on your time frame and also on your profit target.

Bottom line: combining volatility and moving averages with multiple time frame readings can give you some excellent trend following entry signals. Just remember, the hardest part of trend following is getting out of the trade. Trading is like law in that you always practice it(as in "practicing law") and there is always room for learning...no matter how long you've been doing it. I give you these ideas in hope that they will influence a trader to think a little more or maybe even for someone to turn the corner and become profitable. It's one big challenge that attracts the best of the best...and we all hope that's us.

Good luck out there.

TLT