Spot and Trade Institutional Money Moves

Algorithmic Trading with Human Interaction for:

Day Traders, Swing Traders, Long-Term Investors

Tuesday, December 4, 2012

NeverLossTrading Volume Differential Indicator Test

The NeverLossTrading Volume Differential Indicator is the latest addition to our indicator family. It measures the volume differential and marks the high and low of the referring candle associated. The differential is calculated as the gradient change of the sine-wave-approximated volume curve and is part of our NLT HF-Trading package. 

Base Hypothesis

A)     The change of the gradient in the volume curve identifies institutional investor’s activity. Associating price action, we trade the direction the price-move takes, after we identified the volume gradient change.
B)      Frequent changes in buy- and sell-activity lead to multiple trade opportunities in the observed time frame. To formulate an easier directional entry, an approximation of the expected directional price-move is made and spells out a trade signal: Buy > or Sell <, with the following trade conditions: 

Entry:    1-tick above/below the high/low of the associated price candle. A trade is only entered if the price of the candle following the trade initiation candle surpasses the required price level. If this does not happen, we drop the signal.
Exit:       ½-SPU (Speed Unit NLT-specific measure). Painted as a light green dot on the chart.
Stop:     Red Line on the chart (NLT Double-Decker). 

By the input of active traders, we tested the volume differential indicator as a standalone trade entry indicator and found that it provides high probability trade entries. A short explanation to our charts:

  • Red-Zones identify downtrends.
  • Blue-Zones stand for up-trends.
  • Purple-Zones identify indecision, where institutions fight for a directional move.
  • Horizontal lines identify support and resistance levels.
  • Volume bar colors: Cyan = extreme volume. Red=high volume on a down-move.  Blue = high volume on an up-move. Maroon = higher volume with no directional decision. Yellow = low volume.  Gray = average volume. Red and blue waves: Sine-Waves simulated over the volume curve to calculate the gradient change.  

Emni S&P 500 Futures Hourly Chart

The NLT Volume differential indicator provided positive trade results: Six gains with an average gain of three points and one loss. In the three observed trading days a net 15-point gain was achieved. This relates to a potential trade income of $750/contract in 3 days or $250/day. 

Soybean Futures 10-Minutes Chart

The results show six positive trades, where the price threshold was surpassed by the candle, following the trade initiation candle. Key directional price change levels were identifies and multiple trade entries provided. Result: Six positive trades, with an average gain of 1.5 points. The gain in the displayed trading day relates to a $450/contract per day. 

Corn Futures 10-Minutes Chart

Our indicator picked up strong signals and produced six positive trades in the displayed trading day, with an average 1-point gain/trade, which relates to a net profit of $300/contract per day. 

Natural Gas 10-Minutes Chart

The displayed trading day gave us five gains and two losses, with an average gain/loss of six ticks per contract. This relates to a net gain of 18 ticks or $180/contract per day.

Crude Oil Futures 10-Mintues Chart

The displayed trading day showed six positive entries, with an average gain of six-ticks, resulting in a net gain $360 per contract/day. 

Test on FOREX were not possible by not possessing a viable data feed for volume. However, when we tested the indicator on Currency Futures, where we saw very positive results:

Euro Futures 10-Minutes Chart

In the observed trading day, the six trades fulfilled the entry requirements and produced an average gain of 5 Pips/trade, which resulted in an average gain of $375/contract per day. 

Dear contributors, thank you very much for helping us to test the indicator on your time frames and assets. We highly appreciate your contributions from the LinkedIn discussion group, where this indicator test is still posted. 

The NLT Volume-Differential-Indicator is available as part of our NLT HF-Stock-Trading Mentorship package and will be made available in the NLT HF-Day-Trading package. All our indicators are licensed to you for your personal use on two computers, while the copyright remains with Nobel Living, LLC the parent company of NeverLossTrading. 

See related articles: 

Friday, November 30, 2012

How To Identify Sideways Moving Markets In Advance

Looking at a chart, you always know in retrospect that prices moved sideways, but how to know in advance?

In the NeverLossTrading concept, we integrated a study, which measures changes in implied volatility and informs the trader by painting a "Purple Zone" on the chart,  indicating, that the price/volume development of a share has reached this critical stage of consolidation. Then, we either apply short term sideways strategies, or wait for the breakout signal, to trade along with the direction after the breakout.

In the “Purple Zone”, we find little directional movement with various counter price trend activities until a breakout to the up- or downside occurs. To support the visibility of such price development, we shade the price chart for the time-period purple and produce a very powerful indicator, signifying: 

-          Apply short term sideways strategies, with limited risk or do not to initiate trades when the Purple Zone continues, by not knowing when it ends and in which direction prices might breakout. 

-          Trend-trade when the Purple Zone is over, if the first candle outside the Purple Zone shows an arrow pointing to the trade direction:
o   Purple Arrow: To the upside
o   Purple Arrow: To the downside. 
GE Daily Chart

At times we get asked why the zone is purple? 

The answer is: It marks a time-zone of indecision where the market forces negotiate until an upside or downside price-move concludes the decision making process. The color purple is achieved by mixing red (down-color) and blue (up-color). 

For the beginning financial market investor, the best is not to trade in the “Purple Zone”, but right after, when a trend is established. 

More advanced traders gauge the price range in the zone and take trades already at the first break out. By being aware that even light-tower-candles that occur can quickly be reverted while the “Purple Zone Indicator” is present. 

If we are in a trade that enters a “Direction Change Zone”, we either exit the trade or adjust the range for the stop not to be taken out by radical price movements. If we are unwilling to accept additional risk and still want to stay in the trade, the stop line (red line) of the Double-Decker at entry into the “Purple Zone” builds the point where we put our stop. 

A directional arrow after the Purple Zone identifies a high probable trade entry.
If there is no arrow on the first candle after the Purple Zone, the study recommends not to enter into a directional trade. 

The best trade entry for a trend trade is two ticks above/below the trade proposal painted on the chart.  

The same functionality applies for Intra-Day-  and Swing-Trading Charts.  After our new software update, we are now allowing in the NLT-Purple-Zone-Indicator to put a computer generated price proposal at the end of the Purple Zone arrow:  

SPY Hourly Chart

The trade direction-pointing arrow after the Purple Zone now resides on the price level of the cloud and identifies the new price direction to trade.
The width of the cloud can be adjusted from the factory setting of 2 to a higher or lower level:
If the level is set to zero, the Purple Zone Cloud disappears.
If it is set to 1, it narrows the width of the cloud.
A setting above 2 widens the cloud setting.
Further: The alert sound and the end of Purple Zone alert can be set to individual preferences.
Additional Switch Functions: 

-          If you want the computer generated trade proposal, set the switch on “Yes”.
-          To receive a sound alert, when the End-of-Purple-Zone -Indicator is triggered, put the switch on “Yes”. 

The  “Purple Zone Indicator” is an integral part of our software package. See, how you can integrate it in your trading. We offer four mentorship programs, geared to the need of the individual Investor: 

  1. NLT Top-Line, for the Independent investor, where we install real-time analysis software.
  2. NLT HF-Stock-Trading: For frequent traders, able to trade the markets every day.
  3. NLT Wealth Building: If you are trading two times a week/month.
  4. NLT Income Generating: For day-trading futures and options.

Schedule for a private consultation:

Tuesday, November 27, 2012

High Frequency Stock and Futures Trading (HFT)

Our latest edition to the NeverLossTrading concept family is the HF-Concept. It offers:

  • Frequent trades on key reference time- and tick charts.
  • Clearly defined entries and exits. 
  • Human interaction (not automated).

The indicator family applies measures and proposes trade entries based on:

  • Momentum changes: Short-term price movement, trend in the trend. Dark-Green-Signal.
  • Volume differential changes: Following institutional money flow: Light-Green-Signal. 
  • Trend positioning and price composition reversal potentials. Pink-Signal. 
  • Price Breakout after consolidation: Purple-Signal. 

Today, we tested the NLT HF-Trading-System based on the input of a Linkedin-Group, where we asked for securities with proposed time and tick relations to test our indicators on. The focus of the indicator-test is on the Momentum Change and Volume Differential, the other indicators we leave aside: Pink signals (reversal opportunities) do not show on the chart. 

AMZN (Amazon): 1-Hour chart

The hourly chart for AMZN provided highest probability trading:

  • 13 trades, 13 gains.
  • The average entry to exit price move calculated: $2. 
  • Applying the NLT Delta-Force option trading concept, this trade provided an average return on capital of 30% per trade, which is an outstanding result, quadrupling the risk capital in 5-days.

Russell 2000 Futures on a 233-Tick Chart

Actually, the Russell 2000 and trading tick-charts is not where we have the most expertise. By the request of a trader, we simulated the 233-tick chart and indeed it provided high probable entries and exits.
To not overcrowd the chart, we display the afternoon session of November 27, 2012.

  • The light-green and dark-green indicator provided 11 trades: 
  • Nine trades with an average gain of $60/contract =          $540
  • Two trades with an average loss of $90/contract =           $180
  • A net positive result of                                                     $360 in 2 hours.

We simulated a 333 tick chart and still had a positive outcome of 8 gains and 4 losses. 

Hence, the trader who proposed the 233-tick chart gave us a higher probability tick-reference to trade on. 

The chart below shows the morning session. In Purple framed zones, we do not trade.

If you want to learn how to trade like this:

Thursday, November 22, 2012

1 New Volume Differential Indicator for Stock and Futures Trading

Institutions try to hide their market actions by using robotic traders, placing orders in small increments, however, by the sheer volume of their investments you can spot their actions on the volume graph our software puts on your screen. In our latest project, we developed an indicator, which takes the volume differential as basis for trade entry. 

The way our new indicator works: 

When the gradient (slope) of the Indicator changes direction, the high and low of the referring candle is marked and a directional trade proposal is generated: 

Buy-Target; and Sell-Target; signals occur, spelling out a minimum calculated price threshold. 

The trade entry will only occur, when the price threshold is surpassed by the candle following the candles associated with the volume gradient price move. 

The target for the trade is 1/2-SPU  (SPU is the calculated price-movement per observed time unit). 

To integrate power users in the development and test of our new indicator, we posted It at the Linkedin group: "Algorithmic Trading for Real Traders", and ran the indicator on SPY (ETF of the S&P 500 Index) between November 7th  to November 21st , 2012. A 1-hour chart was chosen as key reference time-frame for SPY.  

SPY 1-Hour Chart NLT Volume-Differential-Indicator (click the chart to magnify)
The new NLT Volume Differential Indicator produced between November 7th and 21st

  • 10 trades with the expected gain of ½-SPU.
  • 1 failure.
  • 2 trades, which did not get initiated by not fulfilling the minimum threshold.

By the trading method, we teach to trade SPY, you will learn to pick specific options suited for day trading. The goal is to achieve an return of about 10 cents on a 50 cent investment per share controlled. 

When approved by positive forward and back testing, this indicator will be integrated into the NLF HF-Trading Concept.

Let us know your input or schedule for a private demonstration. 

Find a 25 minute introduction to NeverLossTrading at: