Big Trend Indicators - for capturing big trends and the length of the trend
The Problem
Research found that the market is trending
only 20% of the time. And 80% of the profit is made with trends. There is a
saying: the Trend is Your Friend. Everyone is looking for an indicator that can
capture the trend (our friend). But none of the indicator can do so. Even if we
could find the beginning of a trend, but there is no indicator that can show us
the end of a trend. Pullbacks within a major trend can cause false signals.
Our Solution
To solve the above problem, we need a set of indicators.
After years of research, we have
built 5 indicators that can point to big moves in any markets, from
equities, futures to forex in any timeframes (from 1 minute, 60 minutes to
monthly) including tick charts, range charts, etc. These indicators can
also show the length of a major trend, ignoring pullbacks within a trend.
We have 5 inicators:
1. the Direction Indicator
that shows the beginning of a trend
(up or down);
2. the Double Moving Averages that show the
length of a trend;
3. the
Bull-Bear Pivot Indicator that paints as Show Me to show the
beginning and end of a trend;
4. the Accurate Oscillator that
accurately identifies market overbought and oversold conditions, and the change
of such conditions;
5. the Power ADX Indicator that shows the power of the beginning a trend. We
applied these 5 indicators in all our million dollar strategies.
Profile of an Impending Big Move (Daily Chart)
Big Uptrend: There are 4 conditions (one condition by one indicator) that must be met before an impending
market big up move: 1. the Direction Indicator changes; 2. the Double MA crosses
and the pivot low has been plotted by the Bull-Bear Pivot Indicator; 3.
the
Accurate Oscillator is leaving the oversold area; and 4. the Power ADX indicator is
over 20 and moving up (one bar higher than the previous).
Big Downtrend: There are
also 4 conditions that must be met before an impending big downtrend: 1. the
Direction Indicator changes; 2. the Double MA crosses down and the pivot high has been plotted by our
Bull-Bear Pivot Indicator;
3. the Accurate
Oscillator is leaving the overbought area; and 4. the Power ADX is over 20 and
moving up.
1. At the beginning of the 2008 financial crisis, our Direction Indicator
crossed below 0.
2. Our Double Moving Averages crossed down, and our Bull-Bear Pivot Indicator
plotted a red dot.
3. Our Oscillator was leaving the overbought area.
4. Our Power ADX was over 20 and one bar higher than the previous one.
Our Bull-Bear Pivot Indicator is plotted alternatively, meaning the red dot is
always followed by a cyan dot. From the chart above, we can see the cyan dot
only appeared in April 2009.
Let us look at the big uptrend of @YM from Sep 2010.
Our Bull-Bear Pivot Indicator is plotted alternatively. If a big uptrend is not
over yet, the red dot will not appear. All other indicators may not have such
feature. As shown from the chart below, the Oscillator, Direction Indicator, and
traditional indicators such as MACD will not be able to show us the end of a big
trend.
As of today (May 27, 2011) a red dot is not plotted yet, the trend is not over.
The Forex Market (240-Minute Chart)le="font-weight: bold">
The Forex Market (240-Minute Chart)
Let's look at the big uptrend in the USDJPY currency pair. On
Mar 25, 2011 USDJPY had a big
uptrend (captured by our 5 indicators). On Apr 14, a red dot appeared,
indicating the end of this trend.
The Big Picture (Crude Oil ETF Typical Up and Down Daily Chart)
Let's take a look at how our indicators captured the up and crash in oil prices on
a daily chart.
The picture is so clear.
Application
Steps to capture uptrend:
1. Wait for our Direction Indicator to move up;
2. Wait for our Double MA to cross over and our Bull-Bear Pivot Cyan dot;
3. Check if OSC is leaving the oversold area;
4. Check if our Power ADX is going up and passing the 20 line.
Live Trading
Let's try to apply our indicators on a 15-Min chart of the Nasdaq futures
@NQH10: on Jan 18, 2010, all four conditions are met: (1) our Direction
Indicator was down; (2) our Double MA crossed over, and a cyan low dot appeared; (3) our oscillator
was up, (4) our Power ADX was over 20. We established a
long position.
We set a 4-point profit target limit order and a 4-point
stop loss order.
75 minutes later, we realized a 4-point profit of $77.69 per contract.
Steps to capture
downtrend:
1. Wait for our Direction Indicator to cross down;
2. Wait for our Double MA to cross down, and our Bull-Bear Pivot Red dot;
3. Check if OSC is leaving the overbought area;
4. Check if our Power ADX is going up and passing the 30 line.
More Live Trading
On Jan 21, 2010 9:17 am, we entered a short position and set 6 points profit
target and stop loss. 5 minutes later, we captured 6 points profit.
Power ADX as Filter
Our Power ADX serves as the final filter before entering the market.
If ADX is not over 20, and not one bar higher than the previous one, the trend
will not be strong.
Let us take a look at @NQM11 in April 2011. There are two trends. When 1,2,3,4
are the same, only 5 is different.
End of Trend
Our Bull-Bear Pivot Indicator is being plotted alternatively. A cyan dot
(beginning of an uptrend) will only be followed by a red dot (the end of the
current uptrend or the beginning of a new down trend). From the chart above, we
can see, a red dot appeared at 8:00 am May 18, 2011. This means the end of the
weak uptrend, as well as the beginning of a strong down trend (Look at the ADX
and other indicators).
Multiple Timeframe
To improve the performance of our indicators, we usually apply
our indicators on 2 charts, one on a shorter timeframe such as a 5-minute chart,
and the other on a longer timeframe, such as a 15 minute chart.
In the screenshot below, we place a 15 minute chart on top of a 5-minute
chart.
Weak Stocks -
Strong Down Trend in Weekly Chart
Our indicators will capture big trends in weekly charts. Let us look at the
weekly chart of Citibank. We should never buy stocks in such a big downtrend.
Bull-Bear MACD
We created a Bull-Bear MACD that replaces the traditional MACD with bull-bear histograms.
When the bull-bear histograms are above zero, it is in a strong uptrend. When
they are below zero, the market is in a strong downtrend.
Let us take a look at our Bull-Bear MACD in action on a weekly chart of
Citibank.
Options Trading
With the help of our indicators, we can improve the results of options trading.
For example, when all conditions of an uptrend were met, we could buy call options
or sell put options (cash-covered puts) on a daily chart. When everything is
pointing down, we can buy put options or sell calls.
Conclusion
Since our indicators are so powerful, we applied them in our $1,000,000
strategies. The performance is outstanding. To capture big moves, we must have
an oversold or overbought condition, a Double MA cross-overs, a leading pivot high or low, and an upward
moving Power ADX and the confirming Direction Strength. Remember, ADX is the strength indicator, not the trend
indicator. So in a strong downtrend, the Power ADX will move up (see the charts
above).
We are confident that our indicators have broad application to any market and any timeframes.