Market Trend

For a Trader or investor it is extremely very important to understand the market trend .You may have heard the famous saying that the Trend is the friend. Lack of knowledge of market trend often leads to bad entry into the market and loss of capital.

We can note that the market behaves in three ways. First, it can go up. Second is it can take a downward trend. The third is it may travel in a sideways which means a consolidation phase

In addition to this, we also come across 1. Short-term trend, which indicates the market trend is short lived. 2. Intermediate term market trend, which is normally followed by upswing or downswing. 3. Long term market trend, which indicates that the market is continuing its course in either way

How can we use these trends for trading stocks

For buying  one has to confirm that If the long term trend (seen on monthly charts) is up. Then, wait for the intermediate term trend (seen on weekly charts) to break up out of a long running consolidation. Then check for first short term (seen on daily charts) drop turns up. This could be a comfortable entry point

For selling the hidings one should look for the long term trend (seen on monthly charts) of the market is down. Then wait till the intermediate term trend (seen on weekly charts) of the market to break down out of a long running consolidation Upon confirmation of this condition the trader can initiate selling after the first short term (seen on daily charts) rally turns down.

Low Volatility Entry

Here we take into consideration of Gann’s rule of buying based upon the market making new highs on the monthly and weekly charts. We make use of daily short-term reactions and take up positions. Since the market is trending upwards, the risk involved is not too much. This type of entry can sometimes return big profits.

When assessing the market trend we can conclude safely that the trend is strong when the Long term, Intermediate term and the Short term are all pointing up and in the same direction.

Charts play an important role in deciding the Market trend. To be specific a Monthly chart give us an idea about a long term market trend. A weekly chart tells us the Intermediate market trend and the Daily chart indicates the short-term market trend

Before entering the market it is better to look for market activity that can tell us something about the market trend. The market is likely to have low activity at the bottom and abnormally high activity at the top. The average daily, weekly or monthly range will indicate if the market is near a top or bottom. 

When the market trend is likely to change, the number of days of a reaction will increase. This is the first indication of an upcoming change of trend in a market. One has to pay attention to the number of days reaction in both calendar and trading days. When calendar days are counted all days must be taken into consideration. 

To count the trading days some points must be noted. When the current trading day’s high and low are inside the previous day’s high and low it is not counted. The market must have two days of consecutive newer highs or lows. If there is break in the rally, it is better to halt the counting and begin a new count.

Understanding the market trend gives the share trader a basic knowledge of important trends, which in turn helps him to make safer decisions

The Guppy trading system AFL for Amibroker with Buy Sell signal

This trading system was developed by Australian trader Daryl Guppy and named after him. He had used a set of twelve exponentially-weighted moving averages.  He had selected 3, 5, 8, 10, 12, and 18 period exponentially-weighted moving averages ( EMA)  as short-term and 30, 35, 40, 45, 50, and 60 as long term EMA. This helps a trader to analyze the stock from different levels.

There are many ways to deploy this system, but rather than seeing this system as a cross over trading system we should view it as a trend momentum identifier. What has been suggested by Guppy is to take the sum of six short-term EMAs against the sum of the six long-term EMAs and look for trading signals.

The Foundation AFL for Amibroker

 The Foundation by Southwind

 Today I am posting an AFL which looks colorful and interesting. I am not the creator of this AFL. This is known as The Foundation AFL by a Bangladeshi coder with a nick name of SouthWind. The SouthWind as the coder calls himself has attempted to incorporate many indicators into one AFL.

Heiken Ashi type of candles have been used instead of the normal candlestick charts. Weekly, Short term, Medium term and Long term trends have been included.

Besides the general market trend all major indicators like RSI, MACD Stochastic, T3 have been covered. Volume, price spread is indicated. Support and resistance lines are drawn on the charts. Many other features can be enabled with the help of properties window.I have removed or disabled many features as they were more confusing than informative.

This AFL can be used for general study purpose, but for deep observation we need to be more focused on individual index charts.However this work of The Southwind must be appreciated for the effort put together.

The most important thing about this AFL is that the requirement of two other files needed to run the code in Amibroker. They are T3_include.afl and JurikLib.dll and kpami.dll. The T3_include afl must be copied and pasted in the folder Include. The other two plug in dll files must be copied and pasted into Plugins folder under Amibroker. I have uploaded the files in my 4shared folder for which I have included the links. For the AFL to run properly the correct placement of these files are important. 

Once these copy past job is done the Foundation AFL for Amibroker is ready for charting. The code it self is too large to be posted here. I therefore have uploaded in my 4shared folder. Kindly download the same from links given here.

T3_Include  - in include folder

 kpami.dll     in plugin folder

JurikLib.dll  in plugin folder

The_Foundation Afl in custom formula folder

Best of Luck

Amibroker AFL for Intraday with Buy Sell -2

Today I am posting another AFL that can be used both for Intraday and on EOD basis. I found this in internet and I am not the creator of this AFL. This AFL seems to have an Indonesian origin, which I am not sure.Anyway the interesting thing is it can be used for trading.

The background color can be changed using the properties window. It also has a magnified market view for viewing convenience.
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I request the readers to do some back-testing, before they arrive at decision to deploy this tool in intraday trading. I would like to suggest the use of other indicators for confirmation.

Amibroker AFL for Identifying Candlestick chart patterns

Candlestick pattern Identification

Candlestick patterns invented by the early Japanese rice traders are becoming more and more popular among technical analysts. The art of identifying a chart pattern is something every share trader must learn. Candlestick chart reading can be like Greek for beginners because of the peculiar terms involved in interpreting the patterns. But with little involvement, the interpretation of candlestick charts can be very interesting. 

I am posting another AFL today. This AFL will identify the candlestick patterns in a chart and print it on the screen. This afl covers all major candlestick patterns. Each pattern has been allocated a number for easy identification. I have listed the allocated number to each pattern below. Wherever the mouse is clicked and a pattern is selected the name of the pattern is displayed at the top left corner of the chart window.

NearDoji  -1, BlackCandle – 2LongBlackCandle -3SmallBlackCandle  -4/ WhiteCandle  -5, LongWhiteCandle - 6 SmallWhiteCandle - 7 BlackMaubozu – 8 WhiteMaubozu – 9, BlackClosingMarubozu - 10, WhiteClosingMarubozu - 11, BlackOpeningMarubozu - 12, WhiteOpeningMarubozu  - 13, HangingMan - 14, Hammer - 15, InvertedHammer - 16, ShootingStar – 17, BlackSpinningTop -18, WhiteSpinningTop - 19, BearishAbandonedBaby - 20, DarkCloudCover - 21, BearishEngulfing - 22, ThreeOutsideDownPattern – 23, BullishAbandonedBaby - 24,BullishMorningDojiStar - 25BullishEngulfing - 26, ThreeOutsideUpPattern - 27BullishHarami – 28ThreeInsideUpPattern - 29/PiercingLine - 30, BearishHarami - 31, ThreeInsideDownPattern - 32,ThreeWhiteSoldiers -33, DarkCloudCover - 34,  ThreeBlackCrows  -35, doji - 36, GapUp - 37, GapDown - 38, BigGapUp - 39, BigGapDown - 40, HugeGapUp - 41HugeGapDown - 42, DoubleGapUp - 43, DoubleGapDown - 44 

I hope this afl will be of some help to beginners who would like to learn the technical aspects of a candlestick pattern chart.

Amibroker AFL for MACD and ADX based trading

MACD  and ADX based trading system

I have posted a colorful AFL. This AFL is a combined system both MACD and ADX indicators. In any market finding the trend is the most important priority. To a greater extend the ADX can help in detecting the trend of stock. One thing to note about ADX is that it does not take the sideways movement of the stock. The MACD on the other hand is based upon moving averages and works differently

This AFLdisplays the MACD with histogram and the ADX is plotted in a ribbon style without interfering one an other. 

Trend finder afl for Amibroker

Today I am posting an afl which will help to identify the current trend in a market. This afl uses 35 long period SMA, 8 short period SMA and 5 period for signal. This setup gives us the strength of current market movement. I have also attached chart with price with bollinger band. One can note that the trend reversal actually matches with the price band chart. This can help the traders to find the right time to enter the market and also find the exit levels, Although the chart is for the EOD, I have observed that this indicator works well in weekly charts.

Finding the trend in any market is a challenging task. Once a trader finds the correct trend, very profitable trades can be achieved. I would suggest that this indicator be applied to the weekly charts in order to get the correct picture of the market.

The code is very simple as it involves just three parameters. But it carries some value for the traders.

////////// the code of the afl begins here////////

_SECTION_BEGIN("PPO ");

m=Param("long period",35,1,500,1);

n=Param("short period",8,1,100,1);

s=Param("signal",5,1,100,1);

mac3=( (WMA(C,(n) )) -WMA(C ,(m)) ) /WMA(C ,(m))*100 ;

signa=WMA(MAC3,s);

diff=(MAC3-signa)*2 ;

Plot(mac3, "PPO line", colorBlack, styleDots);

Plot(signa, "PPO signal", colorBlue, styleDots);

Color=IIf(diff>=0 , colorGreen,colorRed);

Plot(diff, "", color, styleNoTitle| styleHistogram | styleNoLabel |styleThick, maskHistogram);

Plot(diff, "", color, styleNoTitle| styleLine | styleNoLabel, maskHistogram);

Plot(0, "", colorDarkGrey, styleLine);

Title="Strenght Index " + WriteIf(diff>0 AND MAC3>0 , "   UP Trend    ", WriteIf(diff<0 AND MAC3>0 , " Down trend ", WriteIf(diff<0 AND MAC3<0 , "DOWN Trend", "Up trend"))+WriteIf( (diff>Ref(diff,-1) AND diff>0 ) OR (diff<Ref(diff,-1) AND diff<0 ) , " formation", " weakening"));

_SECTION_END();

///////////////////////// end of code///////////////

Best of luck