TT Flow of Funds Indicator

MetaStock SPRS Series - Week 103 - TechniTrader® Stock Discussion for MetaStock Users - TT Flow of Funds Indicator - January 28, 2013
By: Martha Stokes C.M.T.

The TechniTrader® Flow of Funds TTFF indicator is designed to help traders and investors see when funds are moving into or out of a stock. There are currently over 12,000 funds trading stocks and many have billions of dollars to place. Their presence in the market is dominant with over 80% of all order activity being some sort of fund buying or selling.

Therefore if you as a trader or investor simply watch MACD, Bollinger Bands, Stochastic or some other price indicator you are missing a huge portion of the analysis you need to do in order to be consistently successful. Systems and strategies alone will not give you consistent results.

TT Flow of Funds tracks institutional activity and can help you see tops and bottoms earlier as well as anomalies that warn of a sudden change of trend.


Chart 1

In the Chart above we can see TT Flow of funds, which is the blue line in the bottom chart window. The red line is the subordinate indicator that helps you read the TT Flow of Funds indicator better.

First of all TT Flow of Funds should be trending upward, with steady relatively consistent upward action.

Secondly keeping an eye on the subordinate indicator which is a linear regression indicator, we can watch cross over patterns. During sideways patterns the TT Flow of Funds will oscillate, but during trending patterns it will step upward as the stock moves up. When Flow of Funds ebbs or wans, it will be flat with the subordinate indicator hovering tightly. As it moves up, a sharp stairstep pattern emerges which is a signal that heavy Flow of Funds occurred.

This was confirmed with Reuter Lippor Reports the following month that indeed, Mutual Funds had a huge influx of money by small investors.

Two areas to watch closely for in using TT Flow of Funds are the extreme high range and extreme low range. These areas are early topping and bottoming warnings.

Here is a chart view after the topping pattern formed in TT Flow of Funds. The chart below shows the peaking action of TT Flow of Funds indicating this was a top, before the top confirmed. The V line on TT Flow of Funds indicates a bottoming or strong support level for the stock.


Chart 2

TechniTrader Flow of Funds TTFF is one of the TechniTrader® proprietary indicators created exclusively for MetaStock Charting Software Users.

Trade wisely,

Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner
©2013 Decisions Unlimited, Inc.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader, its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor it is strictly an educational service.

Buying Into Strength

MetaStock SPRS Series - Week 102 - TechniTrader® Stock Discussion for MetaStock Users - Buying Into Strength - January 21, 2013
By: Martha Stokes C.M.T.

“Buying Into Strength” is a standard professional strategy helping traders avoid whipsaw action, and temporary retracements caused by large lot profit taking.

ZIGO is the chart example to explain how buying into strength, rather than using a Limit Order that gets you in at “a better price” is the preferred choice of professional traders.

Below is a daily chart for ZIGO which shows a consolidation, then a move up a little and then another consolidation. Say for this example you are trading the swing style resting day entry patterns, and feel this may be a good entry point before the stock moves up again.

Chart 1

The rule of entry is to “Buy Into Strength.” However you have heard other traders talk about getting in on a Limit Order, which says “Buy Me In At This Price Or BETTER” which means “LOWER” in the marketplace. For this example you feel pretty good about this new strategy, so you enter your Limit Order to buy into this stock.

The next day the stock drops and your order is executed. You’re not too worried because you are confident this stock is trending up, and you are using your favorite indicator MACD which is a momentum moving average based indicator.

Chart 2

You hold for several more days but the stock continues to move down rather than up. A big engulfing black candle forms and you either sell out at a small loss, or you hold on desperately hoping that the stock will reverse.

Chart 3

Those of you who would choose to hold hoping it would turn around, find yourselves losing even more money as the stock dropped further. Now by this time most short term retail traders gave up and sold out.

Chart 4

The reason you lost money is:

1. You bought into weakness using a Limit Order allowing the computers of the market to buy you in as the stock was falling in price. Not a good idea. The notion is you “save” money with a Limit Order, but more often than not the above scenario happens.

Buying into strength means:

1. Analyzing the strength of VOLUME and Institutional buying activity, to determine that the stock is going to move up and has enough strength to sustain that move up.
2. Using a controlled bracketed order that ONLY triggers if the stock does move up into your buy zone, and also controls what you pay for the stock.

The “Buy into Strength” bracket order ONLY triggers when the stock moves up into your order price. Now you would be in a stock that is moving up making nice profits rather than a stock moving down.

Chart 5

Summary:

In this example ZIGO did have upside potential. However many pro traders took profits early and many retail traders got over zealous and started selling short, which caused a brief correction.

The downside sell off in this chart example was very brief because at this same time Mutual Funds were being invested in by those small lot investors, who use Mutual Funds for their investing. This increased the money in funds accounts allowing institutional investors to jump into good stocks like ZIGO to buy on the dip, which shows in the TechniTrader® Indicator TTQA in the bottom chart window.

The Gap took the stock back to its original buy in price, and the stock ran up in a velocity run for 4 days.

Limit Orders are usually used improperly by retail traders and are the cause of many poor trades.

Notice that the TechniTrader® indicators were weak on the initial setup but much stronger after the gap.

Trade wisely,

Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner

©2013 Decisions Unlimited, Inc.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader, its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor it is strictly an educational service.

"Ride the Velocity Express of High Frequency Trading Action"

Learn about high frequency trading action and how you can benefit in this free recorded webinar hosted by Martha Stokes! Check it out.

Main Article: MetaStock Monitor JANUARY - FEBRUARY 13

Point and Figure Charting

Contributed by Remould Robert (Remo), Director and Founder of www.chartsview.co.uk

Point and figure charting is a popular charting method used in technical analysis. Point and figure charts are used because they are distinctive in terms of their analysis and construction, unlike other charts, time does not play a big factor. They are plotted on a grid and are made up of O's and X's. O's are used when the price moves down and X's are used when they go up, each box on the grid will be used for O's or X's.

Prices movements are plotted on the vertical axis (y axis) and direction changes are plotted on the horizontal axis (x-axis), prices are scaled on the vertical axis. A box represents the number of points that you have selected. When the price goes up then you would mark it with an X but only when the market price rises completely through the box then you would place an X in the box, so every full box size will generate an X.

For O's to be generated the price must reverse a minimum of 1-box (1-box reversal) but most commonly used is a 3-box reversal, which requires the correction of 3 boxes before the O's can be plotted. This will help filter out most of the noise so time is not really a factor. Once in the trend the next X or O will only need 1-box move to register on the chart whereas a reversal will require 3-box move in the opposite direction to register. That's why it's called a 3-box reversal. It's up to you what setting you want to use, for example you can use a 5-box reversal but remember this will take a lot longer to see the movements on the chart. Therefore, the usual preference is the 3-box reversal and this is the most common one.

Another way to change the setting will be the price move itself e.g.




The following table will help you to decide what box sizes to use, you should really try and experiment with different box sizes to suit your share.





As can be seen from the chart above when prices reverse the X or the O is not in the same column. Every reversal will start in a new column and it must reverse by 3 to generate a reversal. For example: If you are plotting a 5 by 3 (5*3), 5=box size and the 3=reversal.

If the latest box to be filled is 300 and the price rises to 305 then you would place another X in the 305 box. If then the price rises to 309 then you would ignore this, as it has not moved by 5 points. If the price suddenly moves to 323 then you would place an X up to the 320 mark (310,315,320), you would discard the 323 price as it has not moved by 5 clear points.

If the price then turns down and moves to 313 you would still not plot any O as it has not corrected by 3 box sizes. For a new set of O's to be plotted the price must move 5*3=15 points, the current high is 320 - 15 points therefore 305 will be the level before a new set of O's can be plotted. Remember every box is equal to 5 points so once 305 is hit then you would plot an O in 315, 310 and 305 hence a new column of O's. All the above is based on intraday moves as most point and figure charts are done on intraday.

End of Day

There are different time frames you can use with point and figure. End of day point and figure is plotted exactly like the intraday point and figure but only the closing price is used. So it misses a lot of the intraday moves, a bit like the line charts where all the important levels will be missed. See chart below for end of day:



High/Low

This method uses the whole days moves so you use a lot more data, it totally ignores the closing prices. This method has the advantage that you can read the supports and resistances levels much better and clearer, see chart below for example:



Trend lines

• Trend lines are drawn from an extreme bottom or top with a 45-degree angle attached to it.
• Bullish trend lines are drawn from a known low at 45-degrees pointing upwards.
• Bearish trend lines are drawn from a known high at 45-degrees pointing downwards.

Common Buy and Sell Indicator







Price Targets

Point and figure charts have the ability to project targets; there are 2 ways to count these either using the horizontal or the vertical count.

• Vertical count. Upwards Target - This is done by counting the number of X's in the move up then multiply by the box size and then multiply by the reversal box, i.e. number of X's 6, Box size 1, reversal box size 3 and Target = 18. Once you have your target you use the previous low of O's as the bottom and then you project it from there, you have your target. This is best used from a low point and the reverse is true for downside target.

• Horizontal Target - This is done using congestion area (sideways moves). The way to do the count is for an upside Target Columns x Box size x Reversal. You need to use the move that started the congestion and count from there to the move out of the congestion. So if there are 10 columns (including the start and finish columns) you would multiply that by the box size and then multiply that by the reversal so if box size is 5 and reversal is 3 then you would have 10x5x3 = 150 points target. This then is added to the lowest point of the congestion and projected up from there. The reverse is true for a downside target.

There are many different signals on the point and figure charts and so you do really need to read about them first. The above is just an introduction to point and figure charting.

Advantages

• From the charts you can see almost the entire trading history on one page.
• Easy to see buy and sell signals.
• Trend is clear to see.
• Point and figure charts have targets.

About Remould (Remo) Robert

Remo has over 20 years experience in technical analysis, its his love for technical analysis and his passion to help others to succeed in trading that saw him run one of the most successful private members board in the UK. He decided to take this community further and now runs his own ChartsView community at http://www.chartsview.co.uk, which includes regular technical analysis on shares, great trade set-ups and regular tips, a comprehensive learning section and a community of active traders from around the world.

Support Tip: MetaStock Monitor JANUARY - FEBRUARY 13

How do I apply a template to a chart?

Contributed by MetaStock Support

MetaStock 12 has made applying indicators and templates to a chart easier. This support tip will focus solely on applying a template to a chart. Templates give you access to preset indicators and systems, enhancing your charts. A template can be applied as a chart is opened from the Power Console. Here's how:

1) After selecting an instrument, click "next".


2) The next screen to appear is the Chart Options. Select "apply template" and choose the desired template from the list.


3) For this example, we chose the Darvas Box template.


*** Tip
A template can be applied to an open chart by right clicking anywhere on the chart. In the popup menu, select "apply template." Select the template from the list and click "open."

1) Right click anywhere on the chart.


2) Select the template you wish to view and click "apply." This will automatically add the template to your chart.


3) For this example, we used the Darvas Box.

Power User Tip: MetaStock Monitor JANUARY - FEBRUARY 13

LMS Trailing Stop Fixed %
Contributed by Breakaway Training Solutions

Would you like to plot a trailing stop on your chart that you can customize? In this four minute video, Kevin Nelson will show you how you can download your own percentage-based trailing stop and also how to use it. You'll be able adjust the sensitivity of it to your specifications and whether you want to use it on long or short trades. Have a look!

http://www.youtube.com/watch?v=00pU8CLEeT8

For more MetaStock training, make sure to visit Breakaway Training Solutions at www.learnmetastock.com or email Breakaway Training Solutions at admin@breakawayts.com.

About Kevin Nelson

Kevin Nelson is the founder of Breakaway Training Solutions, Inc. He has spent the last 17 years becoming an expert on MetaStock software and a serious student of technical analysis while working for MetaStock. Prior to joining MetaStock in 1993, Kevin was a stockbroker for a well-known NYSE firm. In his role as Sales Manager at MetaStock, Kevin interacted extensively with MetaStock customers via phone, webinars, and public appearances. His experiences while working at MetaStock have enabled him to gain a keen understanding of the needs of technical analysts worldwide. While with MetaStock, Mr. Nelson was a featured presenter for four years. During this time, he traveled the U.S. introducing the MetaStock program to thousands of people and teaching them how to use its many features. His easy-to-understand approach is considered by many to be the best in the industry.

©Breakaway Training Solutions, Inc. 2013

Reading Charts

MetaStock SPRS Series - Week 101 - TechniTrader® Stock Discussion for MetaStock Users - Reading Charts - January 14, 2013
By: Martha Stokes C.M.T.

Reading Charts is a skill that all traders need to hone and strive to improve constantly. Price patterns matter. What price is doing tells you a great deal about what market participants are controlling price. Who is in control of price tells you:

1. How price will behave
2. How price will react to support and resistance
3. How long price will move in that pattern
4. What to look for ahead of sudden price moves
5. When a bottom or top is underway

The chart of MRK shows an extreme angle of descent into the lowest low before a bottom commences. Even as this final sell down occurs, it is obvious that the steepness of the angle of descent is unsustainable. Plus you have TechniTrader® Quiet Accumulation TTQA exposing smaller fund capitulation as the stock tumbles.

The sideways pattern after the low is indicative of the giant funds buying in incrementally with controlled bracketed orders over time. Since some retail traders and High Frequency Traders HFTs are still trying to sell short against the strength of the giant funds buying, the up and down day to day price pattern forms. Then as the stock moves up to the first tier of resistance around 35-37, the HFTs realize that dark pool buying by the giant funds is been going on, so they rush to buy in quickly creating a buzz in the retail traders world, and short term swing style trading occurs. At this time the giant funds have accumulated what they wanted, and so the news spreads of their buying.

This creates speculative runs due to emotional at market buying by smaller funds. The stock runs up and then hits stronger resistance where it stalls. Momentum evaporates and the stock moves sideways in a platform.

It could have just as easily started to move down in a correction. But it didn’t because as profit taking began by the HFTs and other pros short term swing trades, the giant funds buying in dark pools entered again, controlling price tightly with their orders off the exchanges.

Platforms are a “value oriented” market condition where the dominant buyers are large lots buying in incrementally over time. This is usually based on earnings reports.

The stock slides downward during the latter part of the sideways action.

This is a “gottcha” pattern. The giant funds are not selling, but rather they have stopped their accumulation, and a void of buying by these huge lot purchasers causes a slip-slide action.

But if you study the slip down action closely, you will see that the stock stops just at the lowest low of the platform, see the first red arrow as the lowest low. This indicates that the giant funds stopped buying, then as the stock slipped to the low range buying started again briefly.

HFTs and pros traders started buying the stock creating another speculative run, which now has shifted to a peaks and valleys trendline pattern.

The shift of trendline patterns throughout this chart show you where one market participant group started and stopped buying the stock, and different market participant group took control of price.

By understanding that the upward trend cycle has many different tiers and layers of a variety of market participant groups, you can quickly identify which market participant group or groups control price at what time.

By knowing who controls price, you will learn how price will behave and that tells you what to expect next.

Trade wisely,

Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner

©2013 Decisions Unlimited, Inc.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader, its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor it is strictly an educational service.

Volume Leading Price

MetaStock SPRS Series - Week 100 - TechniTrader® Stock Discussion for MetaStock Users - Volume Leading Price - January 7, 2013
By: Martha Stokes C.M.T.

I often talk to traders who are struggling with mediocre results or chronic small losses due to whipsaws. Although it is natural to want to blame the markets, market makers, or High Frequency Trader’s HFTS for these kinds of poor results and lost profits, but the actual culprit is a lack of Spatial Pattern Recognition Skills SPRS.

Technical Analysis is your EDGE in the markets. Most traders assume that everyone in the market, large funds to small funds, HFTs, and pros are all using technical analysis. The truth is that most of the market participants are not using technical analysis. This is the advantage, that edge that retail traders have, because by looking at a chart, you can learn to read what is going on before price moves.

An excellent example is below, and is a Cloud Industry Stock. The Cloud Industry is one of the big industries that is going to reshape the world economy over the next decade.

Chart 1

This stock was sideways for a period of time, gapped up on HFT activity, and then corrected. Now it is forming a consolidation after a brief run out of the bottom. What you need to learn to see is how volume is leading price.

The TechniTrader® Volume Accumulation TTVA indicator is showing the leading volume pattern over price very strongly during the consolidation. What this means is that someone is controlling price, holding it in a tight price pattern BUT the volume moving into the stock is huge. This is quiet accumulation going on in the Dark Pools.

Soon HFTs and pros will discover this quiet accumulation and rush in to buy the stock, moving price up.

By being able to identify a consolidation pattern under quiet accumulation, you can enter the stock with confidence and ride the run upward. The key to this type of trade is to be able to see that volume leads price.

Many traders still hold fast to the old adage that price is the most important indicator. However in our modern electronic marketplace dominated by huge share lot traders and funds, volume is now the more important indicator.

Remember that there are 3 pieces of data that come from the market:

• Price
• Time
• Quantity

By learning to interpret the subtle nuances of the relationship between these data streams, and what the relationships mean in terms of who is in control of price, you as a retail trader can make higher profits by avoiding weak traders and whipsaws. You will also have a much more enjoyable trading experience.

If you can learn this one SPRS of “volume leading price” then you will find that you are making consistent profits over time, with far better picks and stronger run gains.

Trade wisely,

Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner

©2013 Decisions Unlimited, Inc.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader, its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor it is strictly an educational service.