Saturday, July 26, 2014

Custom Indicator - Should I pay?

To answer this question, I have to ask another question, Is there a holy grail indicator?

Yes / No, the custom indicator is a rip off. This is subjective. Because, understanding the concept is the key. Someone creating a successful indicator for them, can be based on his strategy. Does not mean can be a a profitable indicator for you.

For example, (Please understand i am not against anyone coding an indicator, All I am saying is, don't hunt for holy grail indicators).

Simpleroptions, Thinkscripter and many others are selling indicators. Some explains the concept and how it works. Without understanding the indicators don't buy them.

Steps to consider before buying an indicator.
  1. Most Importantly, How does it work? What is the basis of any indicator?
  2. The Math behind the basis and the indicator you are purchasing.
  3. Different strategies that can be used on the indicator.
  4. Can you understand the strategy?
  5. Did you backtest the indicator yourself?
Lets start with an example.

So this is an indicator that is priced for a little less than $1500 and discounted for $500. 

What are ABC wave reading? It measuring the short term trend, medium term trend and long term trend. 

Now the second question is, How else can I measure this? 
  1. MACD (short term, medium term and long term). 
  2. Moving averages (short term, medium term and long term) are some simpler ways to do this. 
or you can use a linear regression on price chart for different indicator. 

So there are many other ways to perform the same. 

Now, you know there are many other ways to do this. 

The next question is, do you need this?

This is just an example. It uses the same EMA, to create a similar wave patter, Its not exactly same. But the concept is same. 

So you can free the price chart for other purpose. and utilize the price chart for other purposes. 

Does Trend Line break become Support or Resistance?

Absolutely, Check out the following charts. 

I can show this on hundreds of different charts, Do I need to? Same story different tickers.

Lycka till (Good Luck) fellows.

Winner - Stretch Plays

I am not sure, if you guys noticed AAPL chart in the last post (Birth Of New Indicator).

AAPL had the Stretch Oversold, The Cloud was strong, within the zero zone. Guess what happened? Bounce and infact a new 52 week high.

Like I always do, the post contain the live charts at that momentum of time.

I do want to point out a couple of other options trades I picked last two weeks, based on this indicator, and the reason why I chose to play them.

1. BIIB calls- held it through earning (full risk trade) Was looking for a retest of previous high

Setup - Dark Cloud was BULLISH (down arrow), Pulled back on histogram. [DAILY CHART]
Trade signal - Reversal (eject), Histogram getting inside the Cloud. Signals a reversal on that time frame.
and provided a nice basing consolidation breakout.

Target was - Retest of the trendline.
Out - Over the target. HUGE WINNER.

2. Z calls- got stopped out once on the first Pullback, Did take the next Pullback trade.

3. WFC calls (not a huge trade yet profitable) - Same setup.

4. REGN calls (not a huge trade yet profitable) - Same setup on different time frame. REGN and BIIB happened on the same day.

Apart from the high volume optionable stock and etf list, I love these high priced extended weekly option tickers, with considerable ATR (average true range) compared to the closing price, and monitor the list daily for a good size drop and a setup.

Last week was amazing, HOPE for another amazing week.

There are more setups to come.

Wednesday, July 23, 2014

Birth of a new Indicator

The Most exciting day!

For those who have followed me a while for now, and wondered if I was alive, Fortunately I have survived to stay in the market. lol, Just took some time to build a bit more sharper tool to capitalize the market way better.

Many followers are obvsly from Promotion stock secrets, they know the power of RSI 3 Pullback. But there must be a question among those, Why not all the RSI pullbacks bounce like the others?. Because not All RSI pullbacks are created equally, there are some difference. The difference mainly comes from Trend, and the Strength of the Trend.

Here is a solution. THE STRETCH.

Why am I calling it Stretch? Because the price chart is stretching away from the Trend.

Using the Analogy of an Elastic, The Histogram is the Stretch. The Cloud can be classified as the Elasticity of the material (in this case, the strength of the trend).

So the Histogram is stretching and the trend is strong. WHAT will HAPPEN? a bounce. (just like a material returning back to its state), and vice versa.

The below indicator is designed around the same philosophy, Using RSI, EMA, BB. Or Rather Multiples of RSIs, EMAs, BBs, KCs and combinations of indicators in a better way to my conscious along with some linear regressions on RSI and short term EMA. I wanted to populate the TTM Squeeze in this indicator as well, But the indicator might get over populated.

This indicator can also be modified to know where the Squeeze could fire (long or short) based on the different combinations. For those who are not familiar with the squeeze. It just a BB squeezing within KC. BB is bollinger band and KC is Keltner Channel.

Below is my version of the squeeze indicator (credits to tradingview mods for helping me build it). For More information on squeeze indicator, Pay John Carter and learn it. I am not up for any copy right infringement deals. This may look like a copy version, But there may be a change, Instead of using the upperband vs lowerband, I approached it differently, by measuring the width of the BB and KC, is there an edge? Negligible, so to speak. You can see in the below image, the squeeze took a day more to signal. Thus avoiding a little noise.

Eitherway, I think it is one of the best way to scan for Stocks in consolidation.

Here is a visual explanation of squeeze indicator

Here are some examples of the how the Stretch worked.
1. The zero line dots indicate the direction of the trend in the underlying,
2. Stretch histogram (pullback against the trend)
3. The dark cloud, indicating the how strong the trend is.

D. Extreme zone (very Rare plays) but solid to pick some nice trade if used right.

Now, This is Way tooooooo valuable for me to trade. Before I open the indicator for public access, the codes for this indicator and the theory is under copyright review. Once, It gets approved will be available for public access. 

Again, Trading is based on probabilities, so not all signals are profitable, no matter how awesome the indicator is. Risk gets higher, as you approach closer to the smaller time frames, and the trades get expensive. SWING SWING SWING with STOPLOSS. Know when and where to stop.

There are more indicators to join arsenal, like 
1. Trend Prediction (back testing the concept), can be used in conjunction with squeeze. 
2. Enhanced MACD histograms
3. Range Bound CCI, with RSI breakout. etc...