Market Sentiment

Designing an indicator. It has been done before and there are numbers derived from market internal numbers like Advancing Volume vs Declining Volume vs Unchanged Volume or Advancing Issues vs Declining Issues vs Unchanged Issues

But nothing is better to understand an indicator, if you try to build one for yourself. Think what you want to see if certain parameters are met and then start designing with the numbers you have. See if it makes sense, if it gives you the results you look for.
I'm thinking Volume preceedes price movement. If there is no trade, there is no price movement. Of course we can have huge price swings on low volume, but the market as a whole moves on volume. And that's the reason I'm thinking about the numbers mentioned above.
Currently I have Excel open, plugged in some arbitrary numbers and am experimenting with some formulas. Keep it simple, logical (not stupid)
I will let you know, what I'm finding

Template

I have been asked to post the template I'm using on my charts.
Well the Chartprogram is called Ensign Software (I'm not affiliated with them, I just use it for about 5 years now) and the Template I currently used can be downloaded here. Place it in the \Ensign\Template1 subfolder on your harddisk.
The Lines you see are the Highs and Lows of the previous 120, 240, 300, 480, 600 and 720 minute candles. The thicker the line the longer the timeframe. And the reasoning behind the approach I currently use is, that the more money you move around, the longer the timeframe you trade. Think of moving an oiltanker around. You need space and time to do that. You can't turn on a dime or you create huge, really huge waves in the market. And if you are such a big boy, you watch longer timeframes and respect the Highs and Lows formed there. Nothing else I'm doing now on my short term charts. I look for reversal signals, when the big boys think yes here is Support or Resistance.

Resistance becoming Support

A wonderful example how Resistance becomes Support once broken

The Holy Grail

As traders we all want to find this Holy Grail.

And if you have accepted that there is no Holy Grail in trading, listen deep enough into your mind and you will find this wish, this hope, this belief, that in fact there is a Holy Grail, that it is worth strugling, fighting day for day to find it, to reach it some day and if one day you’ve found it, you will hold it tight, you won’t let it slip from your hands again.

What is the Holy Grail? Let’s take a look at what we all try to do.

We have charts, we have fundamentals, we have Market Delta. What have these seemingly so different types of information in common?

Structure!

They provide structure in an otherwise random, some might say chaotic environement. Humans have a tendency to structure, to filter. It’s the way we all are wired internally, as otherwise we are unable to cope with the amount of raw data reaching our brain each and every second through all of our senses.

And this filter is responsible for a lot of problems we have in trading. Why?

Because this filter is programmed not only by our contious mind, meaning we contiously set it up to look only for certain information, but it is also accessed and programmed by our uncontious mind. And the agenda of our uncontious mind is a lot more basic, some might say archaic, than you might think.

One of the agendas our uncontious mind has on its forefront: Avoid Pain

And pain avoidance at the most basic level comes in form of viewing the world through a filter, seeing only what we want to see and filtering the rest. If you ever were in a losing trade and looking at all the reasons, why you should stay in the trade you know what I mean.

Trading is such a difficult endeavour because you need to reprogram your internal filter to become successful. Pain avoidance by not taking a stop, by not recognising the Writing on the Wall leds to disaster.

One way to reprogram your internal filter is structuring the information you use in a way, that you have to see, what you consider important, that your internal filter can’t filter it out. That’s why KISS is so important in trading. Keep it simple, stupid.

Less information, means less things to consider, less things you are able to ignore. Everyting you see on your chart has to be important for your trade. If you can leave it away and still are able to decide, that you have a trade setup and that it means: Go long or Go Short then off it goes from your chart. You don’t need it.

Trader's Paralysis

I don’t have a problem taking a trade…usually.

But there is one setup, which triggers an inability to press the button, to take the trade. I can’t, I sit there, asking myself, Chris, what is holding you back, go on, do it. And when I finally Do it, I go long the high or short the low.

What triggers it:

Missing this move?

NO! I missed it, I wasn’t in, I don’t jump into a running trade.

Here is the real setup, which let me miss a lot of ticks in the Euro today:

I take the entry and get stopped out on a wiggle, only to see it bounce back up.

Kick in: You shall not chase rule
Reentry opportunity missed due to being stopped already 3 times. I think, this earlier resistance is now support, but “I know” it will not hold. Add to that scenario a slow tape and I don’t take the trade.

Why? Because it failed so often in the past.

This time it worked wonderfully. While I’m writing this the ER2 is another 3 points upgoing for a straight run from 662.50 to 669.00. I saw it and I missed all of it. Am I dumb not to chase? Maybe, but taking the short would be worse. So maybe it’s “just” fatigue setting in, my mind telling me to take a rest. The markets are there tomorrow as well.

I see a lot of rules Kick-In when deciding whether I take the trade or not. EG: I saw a great setup in the Euro here:

Usually I take the trade, no questions asked. But I asked myself before I pressed the trigger:
How far has the Euro run today? 130 ticks, that’s too far, this setup will most likely fail! It’s a red light!
And right I was: