Before we discuss indicators, we should note that the best form of protecting your account, in our opinion, is the use of money management trailing stop loss orders. You may use a set of indicators to get into a position as a trade, but the best way to get out of a trade (whether it's with a profit or loss makes no difference) is to use this kind of order.
Money Management implies that you have set a maximum amount, in percentage terms, of your account which is at risk on each trade. For instance, let's say you have set a rule that says you will only risk 1% of your total account balance on each trade. Right away, that firm rule will prevent you from making what is the most common mistake in trading, which is letting losses run. The ever-hopeful trader is afraid of losing. To avoid taking a loss, they let the losses grow until the pain is too great and end up closing the position at a huge loss.
A good money management rule will eliminate that mistake.
Example: you buy a stock index futures contract which is valued at $80,000. Your account balance is $40,000 and you do not want any single trade to lose more than 1%, approximately (slippage can happen, so the rule is an approximation). 1% of $40,000 is $400. When you set your trailing stop loss price, if the market moves down immediately and hits it without ever going above your entry price, you will lose $400. If the market moves up, the trailing stop price moves up with the market, reducing your overall risk.
After you enter the trade, let's say the market moves up and you have a profit of $500. At this point, you have a stop price which if executed would net you a profit on the trade. That's because the original stop price has been automatically adjusted by the broker's computer to sell at that level. Assuming the price continues moving up, you may want to adjust your trailing sell stop price to a larger percentage, on the theory that you are now "betting with the house's money." But, once you have a paper profit equal to your 1% rule, don't ever set your stop loss price below that level -- you never want to take a loss on a position which has had a profit equal to your 1% rule. If the market continues to move higher, and you have a sufficient profit, you can widen the stop. If the trend is strong, this will allow you to ride the position longer.
That's it. If you take a loss, realize that most successful traders lose on at least half of their trades. They are successful for two reasons:
All of these indicators are recalculated during the normal trading day using the latest data available. Neither the data nor the signals are guaranteed to be profitable. Traders should always use trailing stops after entering positions to protect account equity. These indicators are to be used as indicators as input into a trading plan and not by themselves -- they do not constitute trading systems.
The VLE-DJ spread indicator measures the difference in performance of an equally-weighted index of 1650 stocks (the Value Line Arithmetic Index) and the price-weighted average of 30 blue chip stocks (the Dow Jones Industrials Average). The indicator is computed by first converting the index values to dollars and cents and then subtracting the value of the Dow from the Value Line. Currently, the value of the index is nearly $70,000, which tells us that the bull market has been very strong for a considerable period of time. At the turn of the century, the value of the indicator was underwater to the tune of almost $15,000. It has risen almost $85,000 this century. While the blue chips have been losing propositions for the most part, most of the stocks in the market have been climbing substantially higher. Since most investors only watch the Dow, they have missed out on the huge bull market that's just under the surface.
Buy or sell signals are given when the fast stochastic line (gold in the chart below) crosses above or below the slow stochastic line, respectively (this is our exclusive Trend Stochastics indicator, not the traditional George Lane indicator which was popularized by Wells Wilder).
The RUT-SPX spread indicator is similar to the VLE-DJ indicator described above. It measures the performance of the Russell 2000 Index versus the S&P 500 Index. Signals are given using the same technique described above.
The ratios of contracts on each side of the spread are given on this Chicago Merc webpage.
The NDX-SPX spread indicator is similar to the VLE-DJ indicator described above. It measures the performance of the NASDAQ-100 Index versus the S&P 500 Index. Signals are given using the same technique described above.
The ratios of contracts on each side of the spread are given on this Chicago Merc webpage.
The MID-SPX spread indicator is similar to the VLE-DJ indicator described above. It measures the performance of the S&P 400 MidCap Index versus the S&P 500 Index. Signals are given using the same technique described above.
The ratios of contracts on each side of the spread are given on this Chicago Merc webpage.
The Trading Page (see "For Traders Only" on the Quick Links section at the top of your MyClues page) contains a panel in the center of the right side which updates every minute during the NYSE session with the current value of the index (which is actually a link to the chart, which will be displayed in a separate window if selected) as well as the current BUY or SELL value of the indicator.
The For Traders Only link will open the Trading Page in the current window (or tab, if you're using a Mozilla-based browser). The Trading Page link down the page under "Intraday Indicators & Charts" will open the Trading Page in a new window and maximize it. So, if you don't want that to happen, just use the For Traders Only link at the top of the page instead.
Oddball is a trading system developed by Mark Brown. It is fully disclosed and described at Oddball Systems. Our version of the system uses the change in advancers on the NYSE as of approximately 45 minutes after the hour, which makes it suitable for trading cash instruments, such as SPY or QQQ. Otherwise, it works as described at the website.
Signal updates are performed every hour at approximately 45 minutes past the hour, starting at 10:45 a.m. and ending at 3:45 p.m. The signal is timestamped (Eastern Time) so you know when the last signal was given. A wrap-up is calculated at 4:15 p.m. Eastern Time after the market close.
Football is a slight variation on Oddball. It uses a modified breadth measurement, but is designed to give fewer whipsaw signals than Oddball. Because of this, it usually gives fewer signals overall.
Podball is a variation on Oddball. It uses up and down volume in the calculation instead of advances. Otherwise, it works very similarly to the original Oddball.
The charts which show our version of "trend-adjusted" stochastics feature a modified stochastic indicator in the bottom plot.
Above is an example chart.
If you're familiar with the standard stochastic indicator, you know that it consists of "fast" and "slow" lines. In our charts, the fast line is shown in yellow and the slow line in magenta. When the fast line is above the slow line, the indicator is on a BUY signal; when the fast line is below the slow line, the indicator is on a SELL signal.
To aid in determining when those signals were given, a solid bar which alternates between yellow and magenta is shown. The yellow parts correspond to periods when the indicator was on buy signals; the magenta parts correspond to sell signals.
The lower right part of the chart will say something like, "BUY +9.2". That will indicate in English whether the indicator is currently (as of the time the chart was created) on a BUY or a SELL signal. The number indicates the difference between the fast and the slow lines. If it's on a buy signal, the number will always be positive; if a sell signal, the number is always negative.
Advance-Decline ratios are shown for the NYSE and NASDAQ. The ratio is computed by dividing the number of issues which are currently higher than their close the previous day by the number of issues which are currently lower than their close the previous day.
Advance-Decline volume ratios are similar to Advance-Decline ratios described above, except that the volume in advancing issues is divided by the volume in declining issues.
TRIN is formed from the above two Advance-Decline statistics. The formula for TRIN is:
(Adv/Dec) / (AdvVol/DecVol)
---where Adv/Dec is the Advance-Decline ratio and
AdvVol/DecVol is the Advance-Decline volume ratio. TRIN is just the ratio
of those two ratios.
Better TRIN is a more intuitive version of TRIN. This indicator is explained at this external site.
Several volume indicators are shown: