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Registered User
Joined: 3/15/2008
Posts: 45
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Hi David,
I'm fairly new to Telechart and the forum, but have read several threads where you share your strategies and analysis. In one particular thread about VSA, you elaborated on one strategy as it relates to entries after a volume spike and gap. You illustrated this with a chart for APOL.
Coincidentally, that is the first thing I scan for with TC. My wait period is a little longer, typically 10 price bars after the gap, before I consider pulling the trigger, depending on what the weekly chart looks like. I also like to see what the 10 day linear regression looks like on the volume bars after the surge.
Anyway, I strongly agree with your strategy and have a question about the four custom price indicators you use on the price bars. Would you share your thoughts on how you use these indicators?
Much appreciated.
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Registered User
Joined: 6/6/2005
Posts: 1,157
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Hey endsley,
Nice to hear I'm not alone in looking for reversals after gaps. I like them because they create an "all bets are off" situation and a nearly fresh start. But mostly I like them because as I have them tested and my experience trading them, has shown them to be profitable.
The first custom indicator is a 50% retracement of the highest high over the last 250 days. I like price to be below this line. As with most of my strategies I have taken them from books and experience and pieced them together in a way that works for me. This line, usually light blue dotted on my charts became important to me when I read from a highly successful trader in the market wizards that many of the big funds don't even go looking for stocks unless they're lost 50% of their value that year. This, apparently, is a good place to value shop. At the time it was very eye opening for me to read. i tested buying my reversal criteria below this line and it really propelled the system into some very worthwhile numbers. Because I read about the funds in conjunction with this line, I only trade Russell 1000 stocks. You can narrow even further with the S&P 500...
I ran into a bit of trouble last year though during the subprime mess when a lot of the bank stocks drifted into this area. I took a couple nasty trades on the system before moving to cash and leaving it alone until I could understand what had happened and how to cure it.
The cure is watching the major indexes. When they've been trending up and suddenly begin selling off, this is not the time to go value hunting. Better wait until the market has sold off for awhile or is in the early stages of a turn.
This line is:
maxh250*.50
Next, the channel lines are simply 20 day Donchian Channels or price channels. They are composed of the highest high and the lowest low of the last 20 trading days. If I'm not feeling 100% about buying the 5th day after the gap (those buys can get intense sometimes) I can wait for a break of the 20 day high as a signal. To plot this:
maxh20
This line alone has kept me out of a LOT of trouble.
The bottom of the channel is:
minl20
I keep this line on the chart mainly for the sake of symetry although I do watch the width of the channel for a qucik reference to the current trading range.
Between these lines is usally the channel midpoint (magenta). I use this as a trailing stop loss area and close any long trade if it CLOSES below the channel mid-point. I would rather be out at this level and get back in if price makes a new 20 day high than wait and hope for a turn as price continues to deteriorate.
The plot for this is:
maxh20-((maxh20-minl20)/2)
Those indicators, and volume are pretty much the only indicators I ever use. Sometimes I'll look at RSI for a divergence but not much. The trade is either going to work or it isn't. As you said you trade these patterns so I'm sure you're familiar with how tricky they can be.
I used to trade all GAPS but I found some of the trickest ones for me were GAPS in uptrends. My mind just seems to like those meaty ones at the bottom.
Also, as i have mentioned before, my systems are always evolving. Sometimes I tweak for the better, sometimes not. If I ever have any new info I'll be sure to post.
If you have any insights you've picked up regarding gaps I'd love to hear. I'm always in the market for more info!
Good luck.
David John Hall
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Registered User
Joined: 3/15/2008
Posts: 45
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Excellent, thank you fine sir. I'm anxious to add these to my chart scans, as I think you are right on with your gap reversal ideas. I am just beginning to discover the technical brilliance of TeleChart. What a powerful program for such a bargain price. From time to time I would like to run some chart possibilites by you.
I know there has been a lot of discussion on the pros and cons of TradeGuider's VSA. I have spent some time on their webinars and think they accurately illustrate the impact of volume and price spreads as a predictive tool. But, for $1,299, I'm not yet sold on the value. It would seem to me that their volume analysis could almost be duplicated with the proper PCF's in TeleChart. Have you ever thought about that?
Again, thanks for your help.
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Registered User
Joined: 3/30/2008
Posts: 77
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David
RSI and TSV18? Or are they close enough?
http://www.worden.com/training/default.aspx?g=posts&t=32179
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Registered User
Joined: 6/6/2005
Posts: 1,157
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you're welcome, endsley - I agree with you about the possibilities of telechart and have been telling everyone I know about it since I became a member. It really does take user friendly to a whole new level and there's no denying it was made by traders for traders. Regarding VSA - I think the technical aspects can be worked into psfs and possible candidates highlighted - sell off - wide range bar - upper quadrant close. I think the final call comes down to would the nuances of trade guider be a need or a want - for myself telechart offers everything I need and the price is right. Regarding reversals and discussions of strategy - I am always open to hearing new ideas and different takes - I believe its the very best way to move forward.Yinzer - is it a Y? Tsv ads volume to its calculation. I used to use it to spot divergences - but for whatever reason I gravitated to a 10 period or 8 period RSI for my testing. Sorry can't post any visuals as I'm pecking away from my iPhone.David John Hall
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