Keeping up with the intraday Trend

[Eddo]

Greetings,

I have mentioned this to Steve, however, some members might be interested in checking out an indicator that I have used for years and which helps me to decide on whether to take and hold an intraday position.

The vehicle I use is the 5 min TRIN ($TRIN on Esignal). I've been using it for years and can honestly say that it has proven to be an excellent 'check' as to wherether to take a trade.

In short when the 5 min TRIN is above 1 (the higher the better), then I will be looking for short trades. If its below 1 (the lower the better) I will be looking for longs. If already in a position, say a short, and the TRIN starts to move down (i.e. from a good +1 reading down towards 1) I will be looking very closely at closing my short positions and visa versa (i.e. I don't want to be short when the TRIN is below 1 and I don't want to be long when its above 1).

I run its chart in the bottom corner of my Esignal screen (snapshot attached) along with the 5 min $TICK. I can't count the number of times the TRIN has kept me out of trouble or has alerted me to be thinking of exiting a trade.

Give it a look, I think its worth its weight in gold - Chris ;)

[Angel]

Hi Chris, Hi all,

What a nice thing that few traders have been sharing ideas on this forum.

So many thanks for that Chris :)

I would like to ask you a question, concerning your TRIN method for filtering MTPredictor trades, what is :

The % of winning trades without break-even
The break-even Ratio
The Win/Loss Ratio
The general Profit factor

Thanks for your attention,

Have all a good trading,

Angel

[Eddo]

Hi Angel,

Between March 2005 and 31 August 2005 I placed 151 intraday trades.

My records for these is:

Total Trades 515

B/E 11 ( 7%)
Profitable 85 (57%)
Lossers 55 (36%

In short 64% of trades were either profitable at a min of 2:1 to risk or were breakeven trades.

Hope that helps

Chris

[Angel]

Hi Chris, Hi all

Let me say that you did a very good job, congratulation !!!!

The TRIN indicator seems to be a reliable trades filtering alternative compared to the classical 20 EMA trend filter on a higher time frame.

Last question what does "Total Trades 515" mean ?

Thanks for your attention,

Angel

[Eddo]

The total trades between 1 March and 31 August was 151 - the 515 was a typing error - sorry

Chris

[Angel]

Hi all, Hi Chris,

No problem, I did also typing errors :o

Last thing, the TRIN indicator seems to be a reliable trades filtering alternative compared to the classical 20 EMA trend filter on a higher time frame. So I tell me in my mind if Steve would be agree to include it as a new weapon in the next 5.00 version ?

Have a good week end all,

Regards,

Angel

[Steve Griffiths]

Hi Everybody,

Thaanks to Chris for sharing his experience here

"64% of trades were either profitable at a min of 2:1 to risk or were breakeven trades."

Is definatly good trading and show how the TRIN has helped Chris with the larger degree trend.

As Chris has already said this is a symbol in eSignal - $TRIN, so everbody can perfrom this filter themselfs. But now chris has confiormed how good this is, I may look at including this automatically in the set-ups for you all.

Again - well done Chris, 64% profitable trades with the majortity above 2:1 and a few at break-even - that is good trading, and I am gald that the MTP set-ups in conjucnction with the $TRIN filter are working so well for you. :)

Thanks

Steve

[Angel]

Hi Steve, Chris and all

What a good news about that !! Thanks to Steve to take care of our wishes :)

Last stupid question, but can we use TRIN on the futures, indices and commodities market as well ?

Thanks,

Angel

[Steve Griffiths]

Hi Angel,

No, it is just a short-term indicator for the direction of the Stock market, please see below:

"The TRIN - Short-Term Trading Index

One technical indicator used by many traders to help them gauge the overall direction of the market on any particular trading day is the TRIN index. Quite often, this index proves to be a fairly reliable indicator of the overall market direction on a short-term, daily basis.

Definition
TRIN measures the relative rate at which volume is flowing into advancing or declining stocks on the New York Stock Exchange. The index is based on the underlying assumption that the overall direction of stock prices and the rate of volume are leading, short-term indicators for the stock market.

TRIN is calculated by taking the ratio of the number of advancing issues to the number of declining issues and then dividing this ratio by the ratio of the volume of advancing issues to the volume of declining issues. Specifically, the formula for computing the value of the TRIN index is as follows:

TRIN = (# of advancing issues/# of declining issues)/(volume of advancing issues/volume of declining issues)

As an example, suppose that at a particular point during the trading day, the data looked like this - advancing issues (1,500), declining issues (2000), advancing issues volume (300,000,000), and declining issues volume (800,000,000). By plugging the numbers into the above formula, TRIN would be computed as follows:

TRIN = (1500/2000) / (300,000,000/500,000,000) = 1.25

TRIN Interpretation
A TRIN index value below 1 is considered bullish, whereas a TRIN index value above 1 is a bearish indicator.

For example, suppose that the advancing/declining issues ratio is at 3/2 and the advance/decline volume ratio is at 3/1. The TRIN value would be: (3/2)/(3/1)= 0.5. The TRIN value here is below 1 and is considered bullish. This is because the volume of advancing issues is large relative to the ratio of advancing/declining number of issues - indicating that a relatively large amount of volume is flowing into advancing issues.

Now let's suppose that the advancing/declining issues ratio is at 2/1 and the advancing/declining issues volume ratio is at 4/3. The TRIN value would be: (2/1)/(4/3)= 1.5. The TRIN value here is above 1 and is considered bearish. Although the number of advancing issues exceeds the number of declining issues, the volume associated with advancing issues is small relative to the ratio of advancing/declining number of issues.

Note that it is not necessary to manually calculate TRIN values. The symbol for the index on the NYSE is $TRIN and TRIN values can be obtained by entering this symbol on one of the many online quote services.

In summary, the TRIN index is often helpful as a short-term indicator for the day's overall market direction. However, it should not be used in isolation from other technical indicators. "

Thanks

Steve

[pbb]

Hi everybody,

I am sure that this $trin might be very helpfull for some, however others may not want to use it or trade markets that need other indicators or just mtp alone. So Steve please make sure that when you deside to use this or other indicators in your program that there is no need to change program-coding itself. Only that it might be interesting for different users to ad their specific needs to the scanning-restrictions. Just like it's now possible to scan for different set-ups or different levels. The coding is fine, the system works, the moneymanagement is simple but proven excellent and the last thing you should do is turn MTP into the same 1000-indicator-charting-package as all the others that are available.

Kind regards,

PB

[Steve Griffiths]

Hi PB,

I agree totally, the TRIN is just a way that MTP Users can "filter" the intraday set-ups, it is not part of MTPredictor.

As far as other indicators, I will porbably add CCI, RSI, StochRSI and MACD, which will make less than 10 induicators in MTP, and only because a lot of users have requested these, especially the CCI.

Thanks

Steve

[Angel]

Hi Steve, hi all,

I agree with PB's and Steve's comments. We are only talking about adding few indicators which are ABSOLUTELY NOT part of MTPredictor.

Having said that, my question is concerning the Trend filter which will be part of the v5.0

As all you know, this will allow us to trade with the main (larger-degree) trend on stocks, futures, Forex and commodities markets. For example, on the weekly chart if you trade on daily basis or on the 60 mn chart if you trade on intraday basis.

I guess that a 20 EMA will be use for that, but I'm telling in my mind two things which are :

1) Is it possible to find a simple and robust indicator which would get the advantage of a 20 EMA for showing the real trend direction WITHOUT the mean flaw of lagging ?

2) Did you ever thing of applying the same MTPredictor calculation routines (TS1, 2 and 3 and NEW ABC corrections module) on the higher time frame and at the SAME time ?

For example, if MTPredictor find an elligible TS1 buy set-up on the daily chart and at the same time it find an elligible ABC buy set up on the weekly chart, then the higher time frame or the weekly chart would CONFIRM the daily trend chart direction. May be it would be an alternative when there is no obvious trend on a higher time frame.

Thanks,

Angel

[mascurioso]

Hi,

I'm not an intraday trader trading 3-5 minute charts, but I'm intrugued by the TRIN as a tool. Could the TRIN be used successfully to trade 60 Min stock charts from the MTP EOD, which frequently can turn into multi-day trades?

Thanks

[Matt Bowen]

Hi Mascurioso,

I noticed you trade off of the the 60-minute time frame. My Grandfather was a portfolio manager and he used to trade off of the Up Volume minus the Down Volume on 60-minute time frames. Here is a great tool to measure the order flow and Block trades on the NYSE.

A Block trade is very simply a large order to buy or sell a stock. Block orders are called down to the floor (or main trading room) on the New York Stock Exchange. Blocks are orders that consist of 10,000 (or more) shares of a stock or the total transaction had a value of $200,000 (or more). In other words, this is not Tom, Dick and Harry down the street trading with their 100 lot orders...This is BIG money.

Now, since the NASDAQ does not have a trading floor, they execute orders through ECN's or Electronic Communication Networks. Typically on the NASDAQ, if a Block Trade order is sent through an ECN to BUY or SELL 10,000 or more shares of stock, the order will be broken into several pieces or smaller trades...thereby making it much more difficult to track. However, you can use the $VOLD to overcome this problem...we can find the Blocks that the ECN try to bust apart or hide from the public with up - down volume.

You can plot in eSignal's symbol:
$VOLD

If you want to plot the Up Down for the Nasdaq use eSignal's symbol:

$ADDQ

I noticed everybody is very excited about the $TRIN ( Thanks to Chris) so I added it to the chart below so you can compare the actual trading contract to both the $TRIN and the $VOLD to see them work side by side:
http://www.mtptrader.com/Vold.gif

Notice at the 2:00pm EST. Rally on the Dow...The $VOLD had run out of gas and the index collapsed 20 minutes later. Unlike most indicators, the $VOLD does not blow much smoke interms of false signals.

Also, for those of you who want to keep running totals on the market internals you can do so here: http://tal.marketgauge.com/dvmgpro/charts/ChartTOC.asp

Hope this helps,

[mascurioso]

Hi Matt,

Thanks, this is very helpful. I'd never even heard of these indexes before.

So let me make sure I'm understanding correctly. If the $VOLD is breaking down away from the zero line, that might give me a reason to look for shorts or close out longs, and vice versa if $VOLD is moving up away from the zero line. Is that right? And does $VOLD track block trades on NASDAQ and NYSE?

Thanks

Mas

[Matt Bowen]

Hi Mascurioso,

Yes, you have it correct. To track the Dow or S&P use $VOLD to track the NASDAQ use $ADDQ.

As you can see from yesterday's action we had a no volatility day. The signals that we did get do not even get to 2 to 1 or 2X's risk:

http://www.mtptrader.com/Nochance.gif

Sure that's all good after the fact, but how do you avoid taking signal that have some follow-through? Keep an eye on the $VOLD if it's under 200k chances are you are wasting your time and you would be better off playing a roulette wheel. Look at Monday trading the S&P, it was much like Friday very
little volatility...and when that happens you have very little opportunity. Look at the trades you had this week in the E-mini S&P, I'll be willing to bet you made most of your money was made on Tuesday, Wednesday and Thursday...I can tell that by looking at this 60 minute $VOLD chart:

http://www.mtptrader.com/Nochance2.gif

This is why being (glued to the S&P E-mini screen) all day...might not be the best use of your time. There are some better trades to play in the commodity daily charts. While everyone sat chained to their S&P charts last month they missed some great trades that MTPredictor fired-off during the month.
These are only trading 1 contract (no position sizing was done).

Dax Futures + $4,687.00
Lumber +$2,332.00 (Still Short)
Pork Bellies +$6,240.00 (Still Long)

Sure there were losses... The largest loser was T-Bonds at $1406.25 and the second largest loser was T-Notes at $687.50, but compare that to the winners....this is how you run your business. Also, there are many trades the will make $300. then you might lose another for $400. bujt the bulk of your profits come from a few big winners like what Steve has been telling people all along.

Ask yourself this, take your monthly profit and divide it into how many hours you sat in front of the screen watching the S&P E-mini screen and ask yourself how well you were compensated for your efforts? I've done this with several people and they are shocked to find the results. The S&P's are great to trade with (when there is an opportunity), but don't overlook the commodities on the End-of-Day charts.

All the best,

[mascurioso]

Matt,

Re trading the 60 Min v. daily charts, you make a terrific point, one I'll take to heart. Obviously, there will be times when there are no really good daily trades, but some really good 60 Min ones. But I get it. Thx.

You mentioned the DAX, Lumber, and Pork Bellies signals generated by MTP over the last month. Aren't these markets very thinly traded, and as such higher risk trades?

[Matt Bowen]

Hi Mas,

You mentioned the DAX, Lumber, and Pork Bellies signals generated by MTP over the last month. Aren't these markets very thinly traded, and as such higher risk trades?

Yes, these are "thin" markets. So people who are new would probably avoid them because of all the "War Stories" about being trapped in a "Lock-Limit" trade. A good rule of thumb is make sure you have 3 X 's the margin requirement (per Contract) in ANY commodity before you trade it. The reason you hear people talk about horror stories is because people don't understand the risk involved in trading Futures.

The average Joe funds his trading account with 10,000 dollars studies a few charts ant then calls up his broker and says: " I want to trade Lumber...now how many of those contracts can I buy with 10,000 dollars?" Don't kid yourself, when I was a broker we got calls like this all the time, people don't care, they just want to make money...they don't care about position size, risk vs reward...they just want to step up to the plate and smack a home-run. What they really end up doing is smacking themselves in the head because they are NOT TRADING they are GAMBLING.

Listen, trading LUMBER or PORK BELLIES with a lock-limit is not different than a guy who buys a $20. stock and then wakes up one morning and sees a company missed earnings by .10 cents and the stock pummels 50%.

The job as speculator is to take calculated risk...and this business of trading is about risk management. If you deem a market to thin, then don't trade it. If lock-limit moves scare you, then do yourself a favor and study past markets that have has "Lock-Limit" moves and you will notice that many of those lock limits actually trade in the direction of the major trend. Just remember, if you ever get into a lock limit there is a chance you could be on the winning side :D

[mascurioso]

Matt,

Thanks for your insight. Your point regarding recognizing and managing risk as opposed to reflexively fearing it is a good one, especially for novice commodities speculators such as myself. I'll make my own decisions, but those "rules of thumb" do help.

Thx,

Mas