Using the Slope of an Indicator to define the Trend

Using the Slope of an Indicator to define the Trend

One of the most used techniques to define the Trend of a Market is looking at the Slope of an Indicator.

Usually a Moving Average like HMA, EMA, SMA provide a good idea of the trend, having the first one ( HMA ) the fastest, and the last one ( SMA ) the slowest reaction.

On this Chart we can see an example of 3 Indicators using the same Period :

If we look at the Trend Changes, then the signals on each Indicator happens on the shown points :

We can even look at combinations of Indicators to define the trend.
For example, looking at a fast EMA to produce the quickest results may also produce too much signals, most of them not good, as we can see on this Chart :

Here I apply an HMA(8) to get the fastest response :

But to avoid so many signals, we can Average this line, using an EMA(8) of the HMA(8) and it looks like this :

On all type of moving average types, using a small period offers more response, less delay but more fake signals, so it is always a good idea to average the line several times using a small period ; Example : EMA(EMA(Close)) 

The Donchian Channel is also very useful, it has 3 lines : the upper, the lower and the median ( average between upper and lower ).

On this example I will use the Median of a 12 Bars Donchian:

These example Charts were generated with the TIS_Slope_Color Indicator for Ninjatrader, which allows to detect the Slope of any Indicator or combination of them as seen on this YouTube Video :

Hope you find these basic concepts useful to add or enhance your Trade Setups.

Please share and post any questions !

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Best Regards,

Pablo Maglio

Pablo Maglio | The Indicator StorePablo@TheIndicatorStore.Com  Skype id : pmaglio

Defining a Trade Setup using Crossovers with Ninjatrader

Hello Traders !

Today we are reviewing several Indicators that can be used to define a Crossover Trade Setup.

There are some Indicators that produce only one line, like EMA, SMA, HMA, etc.

Then we can use 2 Instances of same Indicator with different settings and check its Crossovers.

Examples : 

Crossovers of an EMA(14) vs EMA(7)

Note : The places where the Blue Line crosses above the Cyan Line there is a Long Entry Signal. Where the Blue Line crosses below the Cyan Line there is a Short Entry Signal.

On these type of Setups the Best Results can be obtained with faster Indicators like the HMA. 
The HMA produces faster and less lagged results as we can see on this Chart

Crossovers between an HMA(26) and an HMA(12) :

Note : On this example the Crossovers are indicated with Arrows using the Custom Indicator TIS_HMA_XO
The Entry Signals produced by the TIS_HMA_XO Indicator can be automated using the The Markers System.


Some other Indicators produce 2 lines like MACD, RSI, Stochastics, etc.
On those cases we can check the Crossovers of the 2 Lines produced by the Indicator.

Examples using 2 lines Indicators :

On this Chart we can see the Stochastic, MACD and RSI on the lower panes

Stochastic and RSI are Indicators that plot its lines in a defined range from 0 to 100, so we can define overbought and oversold zones.
MACD has no defined limit for its plots, so not suitable for overbought/oversold analysis but we can use it to trigger signals when the MACD crosses the AVERAGE lines as we can see on this Chart :

MACD Crossover ( MACD vs Average Line ) :

The Blue and Red Arrows indicate where the Macd crosses the Average Line.
These arrow signals can be painted by the Custom Indicator TIS_MACD_XO and automated using the The Markers System.

More info on this YouTube Video

 


RSI Crossover ( RSI vs Average Line )

As we can see the RSI produces a good amount of signals but it is very fast without lag. 
The values of RSI are limited between 0 and 100, so if we optimize its settings we can take only longs on the oversold area and only shorts on the overbought area. But the overbought/oversold level on RSI is not its best feature.
It should be used with some additional filter to select only Longs or Shorts depending on the trend. The trend can be defined by the last signal produced by some of the previously seen indicators, like the EMA's Crossover.
The Arrows signals shown on this chart are produced by the custom Indicator TIS_RSI_XO and can be automated using the The Markers System.


Stochastics Crossover ( K vs D Line )

The Stochastic has a very fast response and also a very precise determination of overbought and oversold levels so we can look at K vs D line Crossovers only on the OverBought and OverSold Areas.
On this example Chart, the  OverSold level is 10 and Overbought is 90, so a Blue Arrow ( Long Entry Signal ) is shown when K lines crosses above the D line and its was coming from below 10.
Red Arrows ( Short Entry Signals ) are shown when K line crosses below the D line and it comes from above 90.
These signals are produced by the TIS_STO_XO Custom Indicator. And the Entries can be automated using the The Markers System.

More info about this trade Setup on YouTube :

Hope you find these Trade Setup ideas useful for your use.
These are just simple pieces that we can use to create a more complex Setup.
As example, we can use any of the explained logic rules to define the trend, other to trigger an entry and then a different rule to trigger an exit.

Please post any questions, sugestions or ideas you wish to share...

Thanks and please share this post !

Pablo Maglio

Pablo Maglio | The Indicator StorePablo@TheIndicatorStore.Com  Skype id : pmaglio

EMA Setup for Ninjatrader

We have discussed several times in the past the EMA Setup for Ninjatrader, as we can see on the links at the end of this article.

Today we are reviewing again the EMA, and its counterpart, the Bouncer.


The EMA Setup is one of the easiest to learn and trade ; it only uses an EMA ( Exponential Moving Average ) and a Fixed Envelope.

The EMA is included on all Platforms, including Ninjatrader.

The Fixed envelope are 2 lines located at a fixed distance from the EMA, one above and the other below.

Most of the Platforms include it. And on Ninjatrader we can get a free version here TIS_EMA_Envelope_Free

On the folowing examples the NEW custom indicator TIS_EMA_V6 will be used

On this example chart we can see an EMA Setup with Neutral Offset.
The EMA is not shown, only the Envelope around it (gray light lines).
When the price touches the Upper Envelope, the trend is Up and the bars are painted in blue.

The Entry Price is at EMA + Offset.

The Blue Points are the Entries, which are located over the EMA because offset is null.

The arrows show the moment where there is an Entry ( compatible with Markers System )



On the next Chart we can see an example with Positive Offset

The Entry Price, shown by the blue dots are over the EMA, at a distance in Ticks equal to Offset.
The type of Order to enter the Market on this Setup is Limit ;

As soon we get a blue dot, we must place a Buy Limit Order over the Blue Dot, and we must update the Entry Price Order each time a blue dot is placed at a different Price.



With the same logic, we can also use a negative offset, being the Entry Price then, below the EMA




As we commented at the start of the post, inverting the logic we have a new Setup that we have already commented in the past ; The Bouncer.

The new version 6 of the Indicator TIS_EMA_V6 has an input parameter to invert the logic as shown on the following picture :



Bouncer Examples :

Using a positive offset we can trade a return of the Market to the EMA after an enough deviation to touch the Envelope :




Using a negative or null offset on this Setup is useful to trades EMAs with bad response to bounces, producing breaks through the EMA most of the times.




As explained on previous posts, if we calculate the performance of trading bounces over an EMA and create a chart of the PnL against the period, we get a Performance Profile Chart (using always the same fixed target and stop)

Usually this profile is composed by a well defined series of peaks and lows.

If those peaks are positive, then those points represent the periods of the EMA to use on profitable EMA Setups

If the Lows are negative, then those points represent the periods of the EMA to use on the Bouncer Setup.


Some times, all the peaks and lows are on the positive side. On those cases there are no successful Bouncer Setups.

If all the peaks and lows are on the negative side, then there is no profitable EMA Setup.

Another point to take into account are the Commissions, because the number of trades depends on the period of the moving average to trade. If possible, we should include the commissions in the report before generating the chart.

More Related info on the Following Links :

• Trading a Moving Average
• PM_EMA
• PM_EMA Strategy for NinjaTrader - Setup Review
• PM_EMA_Bouncer Strategy for Ninjatrader
• PM_EMA_Bouncer Strategy for Ninjatrader Update

Best Regards,

Pablo Maglio

Pablo Maglio | The Indicator StorePablo@TheIndicatorStore.Com  Skype id : pmaglio

SRS Setup

SRS Setup Review

Hello Traders !

Today we are revisiting the SRS, explaining its rules and different Trade Setups that we can trade with it.

• Classic Use with the Trend
• Classic Use against the Trend
• Alternate use on SRSx Setup

Lets start for the Begining : Trend Definition

On SRS we use an exponential envelope (DarkGolden lines) and an exponential moving average (Blue Line) to define the trend.
The Blue Line has a slower ( higher ) period than the Envelope, usually a number in the order of 50, 100 or 200.
The Envelope uses a faster ( lower ) period to follow the price.
Its size is fixed, and it should be big enough to keep the Blue Line inside while the Market is in sideways mode or changing the trend.
We can control the size of the sideways zone by changing the size of the envelope.

The trend has 3 possible states :

• Trending Down ( Envelope is all below the Blue Line )
• Trending Up ( Envelope is all above the Blue Line )
• No Trend = Sideways ( Blue Line is inside the Envelope )

Once the trend is defined, then we use a Donchian Channel to define the Trade Ready Condition :

When the Bars are touching the Upper Donchian and the Trend is Down, then we have a Short Trade Ready Condition.
Those bars are shown on the following picture with Orange Diamonds.

The Trade Setup Entry is at N ( default = 3 ) ticks below the low of the Signal Bar, just where the Diamonds are located.
That means that for Manual Trading this setup we place a Sell Stop Order over the Diamond and keep adjusting the Entry Price as each new Diamond is painted.
On the example shown above, we have an entry on the 3rd and final diamond ; the order placed there gets a fill at the next bar.

On the last version of the TIS_SRS Indicator we have the option to hide or show the lines ( EMA, Envelope and Channel ), the Diamonds, to paint the Bars according to the Trend and also the option to place a Marker where there is an entry, to make this indicator compatible with the Markers System.

Trade Setup against the Trend

On the classic ( with the trend ) setup the blue line is slower than the envelope ( blue line period > envelope period ).
On the counter trend Setup we exchange its values, so the blue line is now faster than the envelope  

Following the same rules with the Donchian and using the same Entry Technique than before we can see that we get long signals at the bottom extremes and sell signals at the tops.

Again, we can trade this Setup Manually by placing Entry Stop Orders over the Diamonds.
Or Enter the Market when we get an Arrow. This can be automated with the Markers System.

SRSx ( Extreme ) Setup

This Setup uses the same method to define the trend bu the Entry Technique is different.
On this Setup we trade a Breakout. And the breakout is detected when the Blue line gets outside of the Envelope.

As we can see on the above picture, the Blue line is faster than the Envelope.
When the Blue line is above the Envelope, then the Trend is Up and we get Blue Bars.
If Market is making new highs ( detected through the Bars touching the Donchian ) then we have a Diamond.
The Entry is at Market ; as soon as we get a Blue Diamond we Enter Long. Usually the first signals per side are the best, so we should only enter one or 2 times per side.
To automate this Setup we can use the Markers System by targeting the Diamonds as Entry Signals. The price location of the Diamonds has no use on this Setup.
The period of the blue line here should be very fast. And the size of the Envelope, should be tuned to avoid the system to trigger signals when not impulsing or trending. ( see left and right part of the Chart )

Parameters of TIS_SRS for SRSx Setup ;

To be able to follow the SRSx Setup with the TIS_SRS Indicator we need to do some tweaks on the parameters as shown :

As we can see, the colors are inverted, the period of the blue line is really fast with a period of 2. The offset to place the Diamonds is negative so we get them on the other side of the Bar. On this example, using a Range 6 Chart (where all bars are 6 ticks tall) placing the Diamond at -9 is like placing it at 3 ticks from the opposite extreme.

Related Videos :

I will post here links to related videos using the last version of the SRS Indicator and the Markers System to show how to configure and use them to trade the different Setups.

Live Examples using the 3 different trade setups and automating the Entries with Markers 
Pablo Maglio
www.TheIndicatorStore.com