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"Tech Analysis: Formula Insights"
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OmniTrader Professional Forum
OmniTrader Pro General Discussion
"Tech Analysis: Formula Insights"
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Last Activity 7/8/2024 10:45 AM 1 replies, 278 viewings |
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Frank Birch Veteran   Posts: 166 Joined: 3/25/2006 Location: UK  User Profile |
Tech Analysis: Formula Insights Dive into an exploration of nine hand-picked formulas centered on Average True Range (ATR) and volume. Within this guide, I share insights on the significance and application of each formula, shedding light on their role in technical analysis. Whether you're a seasoned trader or just beginning your journey, these formulas offer valuable perspectives on market behavior. Join the discussion, and let's unravel the mysteries of ATR and volume together! 3DayVolRise Formula: V > V[1] AND V[1] > V[2] AND V[2] > V[3] The "3DayVolRise" formula assesses a progressive volume increase over three consecutive days. In essence, it filters for stocks or securities that have experienced consistent growth in traded volume. Breaking down the formula: V: Represents the current day's volume. V[1]: Refers to the volume of the previous day. V[2]: Denotes the volume two days prior. V[3]: Indicates the volume three days back. This formula evaluates whether today's volume is greater than yesterday's, whether yesterday's volume is greater than the volume from two days ago, and if the volume from two days ago exceeds the volume from three days prior. So, why is this volume progression important? Volume often accompanies price movement. A steady increase in volume can signal a growing consensus among traders about the current direction of a stock's movement, either bullish or bearish. Such a pattern might indicate a trend gaining strength due to emerging news, an upcoming event, or a shift in market sentiment. By identifying these patterns, traders can gain insights into potential breakouts or significant movements. In technical analysis, volume is crucial for confirming price trends, making the "3DayVolRise" formula an essential tool for spotting such confirmatory signals. ATRsurge Formula: ATR(14) > AVG(ATR(14), Period) The "ATRsurge" formula gauges instances where the 14-period Average True Range (ATR) surpasses its own specified-period average. This metric focuses on evaluating the volatility of a security, and in this case, determines if recent volatility is anomalously high compared to its recent history. Breaking down the formula: ATR(14): Represents the Average True Range over the past 14 periods. ATR measures the true range of an asset, accounting for gaps and providing an indication of volatility. AVG(ATR(14), Period): Denotes the average value of the 14-period ATR over a specified number of periods. When the ATR(14) is greater than its own average, it signals that recent price movement—whether up or down—has been more volatile than usual. So, why is this surge in ATR significant? Heightened volatility often corresponds with periods of market uncertainty or heightened trading activity. This can be due to various reasons, including major news releases, earnings reports, or shifts in overall market sentiment. By recognizing increased volatility, traders can better assess the risk and potentially capitalize on larger price swings. While a surge in ATR doesn't indicate the direction of a trend, it provides traders a clue about the strength and momentum behind price movements. In essence, the "ATRsurge" formula acts as a radar for detecting bursts of market volatility. CMF21Positive Formula: CHMF(21) > 0 The "CMF21Positive" formula evaluates the bullishness of the Chaikin Money Flow (CHMF) over a 21-period span. The Chaikin Money Flow, developed by Marc Chaikin, is a volume-weighted average of accumulation and distribution over a specified period. Breaking down the formula: CHMF(21): Represents the Chaikin Money Flow over 21 periods. The CHMF ranges between -1 and 1, taking into account both the close price and volume to determine if a stock is under accumulation or distribution. When CHMF(21) is greater than 0, it indicates that the security is primarily in a phase of accumulation rather than distribution. In simpler terms, buying pressure outweighs selling pressure over the 21-period span. But why is a positive Chaikin Money Flow important? Being volume-weighted means that CHMF provides a more nuanced view than just looking at price action alone. A positive CHMF suggests that not only are closing prices tending to be closer to the high of the day's range, but they are doing so on stronger volume. This can be seen as a sign of strength for the asset and could indicate sustained upward momentum. Recognizing this, traders might consider it a bullish signal, indicative of continued market interest and potentially higher prices in the future. Thus, the "CMF21Positive" formula is a tool for identifying securities that might be receiving more significant attention from buyers. CMF21UpTrend Formula: CHMF(21) > 0 AND CHMF(21) > CHMF(21-1) The "CMF21UpTrend" formula delves deeper into the dynamics of the Chaikin Money Flow (CHMF) over a 21-period timeframe, not only ensuring that the flow is positive but also that it's showing an upward progression. Breaking down the formula: CHMF(21): Represents the Chaikin Money Flow calculated over 21 periods. This metric provides insights into buying versus selling pressure by taking into account both the close price and volume. CHMF(21-1): Denotes the Chaikin Money Flow value from the previous period. For this formula, two primary conditions must be met: The CHMF(21) should be greater than 0, signaling that the buying pressure over the 21 periods is predominant, implying more accumulation than distribution. The current CHMF(21) value should be greater than the previous period's, indicating an increase or uptrend in the buying momentum. Why is this uptrend in Chaikin Money Flow crucial? A rising CHMF, especially one that is already in positive territory, can be a strong indication of sustained bullishness. It suggests that not only is the asset under accumulation, but this accumulation is also intensifying. Such a scenario often aligns with increasing confidence among investors and traders in the asset's potential upside. By identifying this trend of increasing buying pressure, traders can gauge the strengthening of a bullish trend. In summary, the "CMF21UpTrend" formula offers a robust method for spotting securities that might be on a strong upward trajectory, backed by volume and price action. OBV&VSurge12 Formula: OBV > AVG(OBV, 12) AND V > AVG(V,12) The "OBV&VSurge12" formula combines two pivotal metrics in technical analysis: On-Balance Volume (OBV) and trading volume (V). It aims to identify securities that demonstrate both a rise in cumulative volume momentum and an increase in recent trading volume over a 12-period average. Breaking down the formula: OBV: On-Balance Volume is a running total of volume adjusted depending on price movement. It increases when the close is higher than the previous close, and decreases when the close is lower, effectively gauging buying vs. selling pressure. AVG(OBV, 12): Represents the average On-Balance Volume over the past 12 periods. V: Represents the current trading volume. AVG(V,12): Denotes the average trading volume over the last 12 periods. For this formula to be valid, two conditions must be met: The current OBV should exceed its 12-period average, indicating that the net buying pressure over recent periods is higher than the average buying pressure over the last 12 periods. The current trading volume (V) should surpass its 12-period average, signaling that recent trading activity is more robust than the recent historical average. Why does this combined surge in OBV and Volume matter? A concurrent increase in OBV and trading volume can often suggest strong consensus in the direction of the price movement, be it bullish or bearish. Higher volume on up days (reflected in OBV) combined with higher overall trading activity can be a sign of a strong, validated trend. Traders might interpret this as a robust confirmation of market sentiment, possibly leading to more pronounced price movements. In essence, the "OBV&VSurge12" formula serves as a comprehensive tool to spot securities with momentum backed by volume, both from a cumulative and recent trading perspective. OBVvsAVG24 Formula: OBV > AVG(OBV, 24) The "OBVvsAVG24" formula inspects the relationship between the On-Balance Volume (OBV) and its 24-period average. It is an analytical tool designed to single out securities that show a predominant buying pressure over a recent span compared to their past 24 periods. Breaking down the formula: OBV: On-Balance Volume is a cumulative volume measure that adds volume on days when the price closes higher and subtracts volume on days when the price closes lower. It helps in determining the flow of volume, whether into or out of an asset, thereby giving insights into the strength of a particular trend. AVG(OBV, 24): This is the average On-Balance Volume over the past 24 periods. For the formula's criteria to be satisfied, the current OBV must be higher than its 24-period average. This means that the net buying pressure in recent times exceeds the average buying pressure over the preceding 24 periods. So, why is this comparison between OBV and its 24-period average significant? When the OBV surpasses its average, it indicates sustained buying pressure, which can be a bullish sign. It suggests that volume is increasingly flowing into the asset, implying that the prevailing price trend—whether upward or downward—has strong backing from traders and investors. Such a phenomenon might indicate a stronger conviction in the asset's direction, either due to fundamental factors, news, or shifting market sentiment. By utilizing the "OBVvsAVG24" formula, traders can identify potential securities that are gaining or maintaining momentum, making it a valuable tool in technical analysis to validate ongoing trends. VolBoost24 Formula: V > (1 + 0.5) * AVG(V, 24) The "VolBoost24" formula inspects securities that witness a substantial surge in trading volume—a surge that isn't just a slight increase but one that's at least 50% more than the 24-period average. Breaking down the formula: V: This represents the current trading volume. AVG(V, 24): Denotes the average trading volume over the preceding 24 periods. (1 + 0.5) * AVG(V, 24): This calculates 150% of the average trading volume over the past 24 periods. The criterion for this formula is for the present-day trading volume (V) to surpass 150% of its 24-period average. But why does this significant volume boost matter? An increase in trading volume can signal a variety of market scenarios, and when the volume substantially outpaces its recent historical average, it underscores a particularly strong market consensus or reaction. This could be due to impactful news releases, a shift in market sentiment, corporate developments, or other catalysts drawing an exceptional amount of trader and investor attention. Volume acts as a validator of price movements. A sharp upswing in volume, especially one that substantially outpaces its historical norm, can provide credence to the strength and sustainability of a given trend, be it bullish or bearish. Using the "VolBoost24" formula, traders can pinpoint assets undergoing pronounced interest, which may lead to more significant price movements. Such insights are crucial for traders looking for momentum plays or trying to gauge the strength behind a potential breakout or trend reversal. VolBullATRRise Formula: V > AVG(V, 24) and Close > Open and ATR(14) > AVG(ATR(14), 24) The "VolBullATRRise" formula is a multifaceted tool designed to filter out securities that meet a specific set of bullish criteria related to trading volume, price action, and market volatility. Breaking down its components: V > AVG(V, 24): This checks if the current trading volume (V) is greater than its 24-period average. A higher-than-average volume suggests increased trading interest or activity in the security, potentially indicating a strong market move. Close > Open: This component verifies that the closing price is higher than the opening price for the current period, signifying a bullish day. ATR(14) > AVG(ATR(14), 24): ATR, or Average True Range, measures market volatility. This part of the formula checks if the 14-period ATR is greater than its 24-period average, indicating an increase in recent volatility. Why is this combination significant? Here's why: Volume Insight: A surge in volume can indicate strong market consensus or reaction. It could be in response to news, earnings reports, or shifts in market sentiment. Bullish Price Action: A close above the open typically signifies bullish sentiment for the period, suggesting buyers controlled the price action from the open to the close. Volatility Confirmation: An increasing ATR suggests that the range between the high and low prices is expanding. This can be an indicator of trending conditions, and in the context of bullish price action, it might indicate a strong upward trend. When combined, these three criteria can offer a potent filter for traders. A security experiencing increased volume, closing higher than its opening, and exhibiting growing volatility might be on the verge of a substantial bullish move. The "VolBullATRRise" formula essentially narrows down securities that not only show bullish sentiment but also have the momentum and volatility to support significant upward trajectories. VolOverAvg Formula: V > AVG(V, Periods) The "VolOverAvg" formula serves as a straightforward, yet potent tool to identify securities experiencing trading volumes surpassing their recent historical average. By using this formula, you're focusing on assets showing heightened trading interest or activity relative to their typical levels. Breaking down its constituents: V: This represents the current trading volume. AVG(V, Periods): Symbolizes the average trading volume over the specified number of periods, giving a broad understanding of the typical trading activity for the asset over that timeframe. The crux of this formula is to assess if the present-day trading volume (V) exceeds its average for the defined period. Why is this deviation from the average volume noteworthy? Trading volume serves as one of the primary indicators of market activity and trader interest. When volume swells significantly above its historical norm, it can suggest various market scenarios: Market Reaction: A pronounced volume spike can be indicative of a strong market reaction to events such as news, earnings releases, or fundamental shifts in the asset. Trend Confirmation: In the realm of technical analysis, volume is often used to confirm price trends. An uptrend coupled with rising volume can be perceived as a more robust bullish signal. Liquidity Implications: A higher volume indicates better liquidity, making it easier for traders to enter or exit positions. With the "VolOverAvg" formula, traders and investors can spotlight assets that are potentially experiencing significant market consensus, momentum shifts, or other pivotal dynamics. It's a valuable initial filter in the analytical toolbox of many market participants, helping them zero in on noteworthy market movers. As an avid trader and market enthusiast, I constantly seek tools and metrics that can potentially sharpen my trading strategies. Among the myriad of tools I've encountered, the assortment of volume and ATR-based formulas, such as "VolOverAvg", "VolBullATRRise", and others, have been particularly enlightening. These formulae, while simple at their core, offer profound insights into market activity, trader interest, and underlying momentum. If you've been on the hunt for auxiliary indicators to refine your trading edge, I'd strongly urge you to test these formulas against your preferred strategies. Why? Because while every formula has its inherent value, its real worth is realized when synergized with a strategy that aligns with your trading style and objectives. Whether you're a swing trader, day trader, or a long-term investor, understanding volume dynamics and volatility shifts can be game-changing. But here's my appeal to the wonderful community here: As you explore these formulas, I'd genuinely appreciate your feedback. How did they fare with your strategies? Were there any nuances or unique interpretations you derived? Sharing your experiences not only enriches our collective knowledge but also helps in refining and perfecting these tools for the benefit of all. Remember, trading is as much about collaboration and learning from each other as it is about individual strategy. I eagerly await your insights and thank you in advance for sharing your wisdom! Please find filter block attached below with all formulas listed above inside. Just save this to your Strategy folder, once save look for MktDynamicsPack. Also just copy and paste the block into your favorite strategy and when on close just click save as it an 1 block strategy. Regards Frank Birch [Edited by Frank Birch on 9/3/2023 6:31 AM]  Attached file : MktDynamicsPack.ots (612KB - 76 downloads) | ||
| Frank Birch Veteran Posts: 166 Joined: 3/25/2006 Location: UK User Profile |
I have just updated the most under rated part of the strategy flow chart. There is a description box inside the flow chart. So i have added the complete description of every formula there as well. so when you now download the MktDynamicsPack its there now. screen shot attached of what to look for. Enjoy. Regards Frank Birch Attached file : 03-Sep-23 21-59-21 Formulas.png (138KB - 79 downloads) |
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