Accumulation Distribution With The New Buy Sell Pressure Indicator

Accumulation Distribution

This week I identified two instances of Accumulation Distribution after the trading day.  Previously I had said in the trading manual that you identify Accumulation Distribution as the market bounces between red and green intermediate zones, so it looks like Christmas tree lights.  Now I was able to see Accumulation and Distribution from the new Buy Sell Pressure indicator.  Fortunately for me, I was on the right side of one of these and took a small profit on the other.

Wednesday 4/26/17

This is a trade from Wednesday 4/26/17 at the end of the day.  Normally I would stay away from this scenario but because of news events, I was looking for an opportunity to short. In the picture below you see how each time the indicator spiked between 1442 and 1450 you had immediate selling and a V shape pattern.  I entered the trade where I have drawn the solid red vertical line and immediately had 2 points in my pocket and I relaxed a little.

My relaxation would not last long.  Price came back and I found myself with 3 ticks of adverse excursion, but what was worse is that the Buy Sell Pressure indicator was solid green and going sideways.  There wasn’t a sharp V shape this time.  But what was interesting and I only realized after the fact was that this was a distribution, as price could not even reach the blue counter trend zone.

4/26/17 Afternoon Distribution Trade
4/26/17 Afternoon Distribution Trade

Currency Tool

Here is what the currency tool looked like which shows the entry and exit to my trade.  At around 1532 hours there was a strong move down in the correlated currencies and I was back to relaxation mode while I waited for an exit.

4/26/17 Currency Chart
4/26/17 Currency Chart

Normally when the Buy Sell Pressure Indicator is solid green, price is rising. Even when the solid green lines’ slope is falling price is normally rising. We can see this in these two trades from the morning of 4/26/17 in the picture below. These were two huge long trend trades with perfect setups.  In the first trade you again see a distribution after price reaches 2390 at 1054 hours.  This is confirmed by the accumulation distribution indicator in the bottom panel.  There is a positive sloping green line but price goes nowhere until there is a small retracement.

But after the second trend trade price first rises on a flat slope dark green line then rises significantly on a downward sloping line.  Those shorts have been forced to give up and cover their positions and this is again confirmed by the Accumulation Distribution indicator on the bottom.

4/26/17 Distribution Morning Trade
4/26/17 Distribution Morning Trade

What I expect to see from price happens when the line is a dark green color after 1110 hours.

The next picture below is the end of that move up.  I have placed a vertical red line where the indicator turns light green and where the indicator flips from green to red.  Also on this chart you see a successful Tick Divergence trade with some very nice divergence in the indicator at the time of the trade and the next long trend trade also.  Notice all the reasons not to take the Tick Divergence short trade at 1211 hours.

4/26/17 Tick Divergence Trade
4/26/17 Tick Divergence Trade

Monday 4/24/17

This last picture is from Monday 4/24/17.  I was short from the intermediate resistance zone. Look at the dark red color in the indicator where I got short.  Price came down to the blue countertrend support zone.  Normally I would take profit here, but because the indicator was solid red, I held the trade.  When price rose to the intermediate zone I exited the trade with a small profit. I did this because the market was not reacting as I had expected it to.  There was an unsloping line but I hadn’t seen this before.  Then a distribution takes place again at the blue counter trend zone.  I did not short this because the indicator was solid dark green.

4/24/17 Accumulation Distribution
4/24/17 Accumulation Distribution

 This last chart is from the open on 4/24/17. You can see how when the indicator is solid red and going sideways and we have price moving as expected.

4/24/17 Open
4/24/17 Open

Conclusion

I did not identify the Accumulation Distribution pattern with the indicator until after the Wednesday trade when I went back and reviewed what had happened.  I had recognized the zones bouncing between intermediate support and resistance. The trade from Monday was also stuck in my mind because of how the price did not fall.  This is when I learned how to spot Accumulation or Distribution using the new indicator.

In reviewing my trade from Wednesday I was very lucky.  As price moved against me I considered taking a small loss. I decided against it because my stop was just two ticks away.  At that point it really didn’t matter and I stuck with the trade because of the theory I had going into the close.

The purpose of the post is not to identify a trading opportunity, but exactly the opposite.  The lesson to be learned is from what happened on Monday as I was holding for a deeper target.  If you find yourself in a trade such as I did on Monday and price reverses, you need to be prepared to immediately say you are wrong and wipe the trade.

Buy Sell Pressure Indicator Video

Buy Sell Pressure Indicator Video

I went and created a 20 minute video using the new buy sell pressure indicator.  The video illustrates 3 tremendous winning trades that were all setup using the buy sell pressure indicator.  But the point of the video is not to illustrate just the good trades.  I also look at the indicator and explain why other trades are either just marginal 6-8 tick winners, or losses.  The important takeaway from this video is that you learn what patterns will take a market higher or lower, and what patterns lead to reversals.

The video shows an extremely bullish first move, followed by a three short trades which ends up in nearly 20 ES points of profit in 3 trades.  You look at how the indicator told you to either stay in the trade, move a stop, and when to consider exiting a trade.  All from just the buy sell pressure indicator.  You can also see why other trading patterns during this period just did not work.

This is what is important.  I have always understood that ZoneTraderPro patterns work but have always needed a filter to explain why either a trade is marginal or will fail.  This indicator goes a long way in this understanding of what works and what doesn’t work.  This will allow you to create a trading plan where only the highest probably trades are taken.

Also explained in this video is how the accumulation distribution indicator works and the indicator setups for both.  You can see the accumulation distribution indicator in the lower panel of this picture.  This indicator is measuring the 5 levels in the Super Dom and displays whether there are net buyers or net sellers.

ZoneTraderPro Buy Sell Pressure Indicator
ZoneTraderPro Buy Sell Pressure Indicator

Be sure to expand the video to full screen in the lower right corner for the best viewing experience.

 

Live Trades With New Buy Sell Indicator

Live Trades With New Buy Sell Indicator

Here are a couple of live trades that I made today using the new Buy Sell Pressure indicator.  This article only represents my opinion and is not a guarantee that your results will be similar.  For the full risk disclosure, please read this.

In order to be have confidence in making live trades I needed a trading plan and for the past week I have been developing and testing a plan.  Based on the plan that I created, I created a Ninja workspace which had 3 instances of the new indicator and the accumulation distribution indicator.  I placed 3 instances of the indicator so I could look at 3 different ratio levels.  I wanted to look at the 5, 6, and 7 ratio levels.  A ratio level is the number of prices levels that are looked at.  Additionally, in my testing I used values of 45/55 as the extremes.  A value of 55 means that the line will turn dark green and you will see an arrow of the buying volume is 55% or more.  A dark red line will appear at 45% or more of buying volume.

Trades from 4/21/17

4/21/17 Live Trades
4/21/17 Live Trades

Today I made two short trades for a total profit of 5.25 points.  The 1st trade was trend trade and when the trade was entered it was 2 ticks above the bottom of the zone and the indicators were all within my parameters to enter a trade.  However just as I entered there was a push up which resulted in 3 ticks of adverse excursion.  My stop was 5 ticks and my original target was 2348.50, which I moved ended up moving up 1 tick and exactly called the bottom.  I considered pulling the trade as it traded into an exhaustion pattern, however when you look at the 7 ratio level (top indicator) it was a declining sloping line.  When the 6 ratio line spiked it formed a deep V shape.

Normally I would take profit at the blue countertrend zone, because approximately 50% of the time, there will be a 6 tick retracement.  However look at the 6 ratio level (2nd indicator) which is dark red, but with a slightly positive slope.  I really did not like the slope of that line and moved my stop to a 1 tick profit so the trade would be paid for or at worst a scratch, since I use a simulated stop.

What caused me to move my target 1 tick up?  I am also a tool called Bookmap.  Bookmap is a visual aid in showing where resting orders are sitting.  Where you see a solid white area, that represents orders that have been resting.  You also can see if orders are pulled as price approaches, which is spoofing. If those orders are not pulled, you know those are probably not spoofing orders.

4/21/17 Bookmap 1st Trade
4/21/17 Bookmap 1st Trade

In this image you can see the resistance building at 2353.00, but was briefly pulled as price approached the second time, but this was after my entry.  This was not a good sign and caused me to consider exiting.  Fortunately as I was thinking, price fell pretty rapidly.

Now look at the solid white line at the price where I had placed my target.  I then looked at where the strong trend support zone had printed at  2349.00 and decided moving up my target by 1 tick would be a good idea.  Obviously a good call.  You can also see the ZoneTraderPro Accumulation Distribution indicator is solid green.  This indicator is reflecting numbers in the Super Dom similar to information in the Bookmap.

Second trade

The second trade was a trend short trade.  The Bookmap showed resistance developing at 2351.50 and I took the trade after price touched and dropped two ticks.  I was filled with a limit order at 2351.25 and price immediately dropped from there.

4/21/17 Second Trade Bookmap
4/21/17 Second Trade Bookmap

Again my stop was 5 ticks but my target was 8 ticks at 2349.25.  I probably would have also moved the stop 1 tick based on the orders sitting at 2353.00 if price had gone against me. Normally I would have liked to have the 2:1 ratio but there already was support at 2348.75 and additional support had formed at 2349.00.    You can see that form in the 1st Bookmap picture above.  I interpreted this as a second big buyer who wanted to get long stepping in front of the contracts still sitting at 2348.50.  Also, the ZoneTraderPro intermediate support zone formed at 2349.00 and if this was going to be a test of the low, it seamed a reasonable exit and it was.  When price traded at the exit, there were 1300 more buy orders that you can see on the Bookmap.

4/21/17 Second Trade Exit
4/21/17 Second Trade Exit

The indicator formed a deep V shape, however I was already out of the trade at this point.  What I saw in my testing of the indicator was that a zone is not going to hold when the indicator is dark red / dark green (setting at 45/45) and the line is mostly horizontal.  You can see this in the 6 ratio level on the 1st trade.

Neither of these live trades were trade of the day material, but I had to leave the house in less than an hour.  Both trades were within my plan and the only tough decision was during the 1st trade when it went against me the second time in the exhaustion pattern.  I then had to move the stop which wasn’t a hard decision, but I was uncomfortable and did not like my odds for this trade.   I was extremely lucky to have properly read the indicators and exited at the optimum exit prices.

 

Trading Results With New Indicator

Trading Results

In this post we are going to look at a day of trades using the new Buy Sell Pressure indicator and look at the trading results.  When I use the term trading results, what I mean is not a winning percentage.  What we are going to look at is the trades themselves and what the new indicator was telling us going into the trade.  In this sense the trading results will be subjective because it is left up to you to determine, with the information available, would you have taken the trade.  You can then objectively judge the results.  For example, there may only have been 3-4 arrows telling you to take a trade and that trade gave you 7 ticks before reversing.  Another trade may have given you 6-7 arrows and resulted in 3.5 points.  Or there could have been arrows going against your position when it was time to take the trade, and that trade gave you adverse excursion and only a few ticks of favorable excursion.

Variables

What I have done differently is that I have used a different set of variables to assess a potential trade.  There are two main variables to this indicator which give it a great deal of flexibility.  Those two variables are the Deviation Points and the Ratio Levels.  Deviation Points is when we tell the formula that we have a zigzag.  The ZoneTraderPro indicator is based on a 6 tick zigzag and that is the red line you see on the price chart going from highs to lows.  When there is a zigzag, 90% of the time you are going to see the indicator spike.  This is expected.  For example, if we have just made a high, the % of the contracts will have been buyers.  When the sellers come in and drive price down and we have a zigzag, we are taking those buy contracts out of consideration, so you see the spike.

What is important about the spike is what happens after.  This picture indicates both behaviors.  The number can spike and form an immediate V shape.  The V shape is indicating a reversal.  The other behavior is where the indicator remains at/or increases in value.  The number you see in the oscillator pane is irrelevant and has no meaning.

Oscillator Reaction
Oscillator Reaction

The second variable is the ratio levels.  The ratio levels tell the indicator haw many ticks worth of information you want to look at.  So if you want to look at a 6 tick zigzag with 6 levels of price, you would use 1.25 for the Deviation Points and 6 for the Ratio Levels.  The Deviation Points is always 1 tick less than you want to see.

The last available variables is where you want to see the extremes at and print an arrow.  The defaults are set at 60/40, but you are highly encouraged to experiment using market replay and determine optimum settings.

What is used in this post are 4 different settings for the oscillator.  I made the deviation points / ratio levels at 4/4 ,5/5, 6/6 and 7/7 to see if one particular combination was better than another.  What I found was all 4 gave me information that I wanted.  The 4/4 gives a “fast” setting and the 7/7 is “slower” and looks at more information.

Trading Results From Monday 4/03/17

The Trading Results will look at Tick Divergence, Exhaustion, Reversal, Trend Exhaustion, and Trend trades from 0945 hours EST to 1545 hours.  I will place comments on the pictures.  The trading results are a lot easier to see on a live chart or when you use crosshairs.

This 1st picture illustrates the settings for the indicator.  The top panel (Panel 1) is the slow 7/7 setting and the bottom panel is the fast 4/4 setting.  A dark red horizontal line is placed in each panel at the 50% level.

Long Trend Trade
Long Trend Trade
Trend / Reversal Short Trade
Trend / Reversal Short Trade
Long Exhaustion Trade
Long Exhaustion Trade
Trend and Reversal Trade
Trend and Reversal Trade
Tick Divergence Exhaustion Trade
Tick Divergence Exhaustion Trade
Reversal and Trend Trade
Reversal and Trend Trade
Short Trend Trade
Short Trend Trade
Trend and Exhaustion Trade
Trend and Exhaustion Trade
More Trades
More Trades
Tick Divergence
Tick Divergence
40317-11
40317-11
40317-12
40317-12

Conclusion

There were some absolutely great setups and some marginal setups.  The point is that the arrows accurately tell you when you have a good setup, marginal setup, or a probable loser.  ZoneTraderPro was never meant to take every trade pattern.  Now without the use of other order flow programs, you can make the reading of a chart much easier.

New Indicator Tool – Buy Sell Pressure

The Buy Sell Pressure Indicator

With the new Buy Sell Pressure indicator, you are seeing the % of actual contracts being traded.  This simple indicator explains in very graphical form why some trades fail, others succeed and why some become home runs.  You have the ability in the indicator to set the extremes based on your preferences.  The Buy Sell Pressure indicator displays the % of buyers and sellers.  In the picture below you see extremes in dark red and dark green.

Buy Sell Pressure Indicator Lines
Buy Sell Pressure Indicator Lines

The ZoneTraderPro Difference

One of the huge advantages of ZoneTraderPro is that you can go back and create a trading plan based on what has happened in the past because nothing is going to re-print or re-draw.  You do not see disappearing signals with ZoneTraderPro. ZoneTraderPro was originally created to identify patterns.  Since ZoneTraderPro was created, new indicators based on real time information were developed. In the past I have illustrated how I personally use order flow to enter and exit a trade and the use of $TICK as a filter for entering a trade.

ZoneTraderPro doesn’t use MACD, CCI, or any other oscillator type of indicator for a simple reason.  These indicators are just a mathematical formula and have nothing to do with real buy or sell programs being executed.  Breaking news may be real reason why these indicators could also fail.

So how do you use this?  Let us analyze two successful long trades.

  1. There are two green spikes that lead into the Tick Divergence Trade at 1136 hours.  If you had taken the short trend trade at 1125 the trade would have gone only 7 ticks and the indicator remained green through the trade, indicating buying.
  2. At the entry to the long Tick Divergence trade, the buy volume was 45%.  That trade was good 3.25 points.
  3. It is normally a bad idea to take a trend trade after a Tick Divergence because it a reversal trade pattern.  This is no exception.
  4. After the trend trade fails and the market trades through the red intermediate resistance zone, you see 3 more dark green spikes
  5. Next we have two patterns print, a trend and a reversal pattern.  This trade is good for 4 points.
  6. As price increases, more green spikes as we reach a Tick Divergence trade short.  This trade has 4 ticks of adverse excursion, a 6 tick retracement, and then price continues higher.
Long Trade Examples
Long Trade Examples

Here is a group of short trades

  1. There is a short trend trade, but it has a $TICK red dot at the entry.  The trade works and there was no dark green, BUT the market traded back to the entry.
  2. Next we have a long Tick Divergence trade, but we have a red dot at entry and a deep red spike of the indicator.  There was 3 ticks of adverse excursion and only 5 ticks of favorable excursion.
  3. A perfect setup for a short trend trade then occurs.  There is a lower tick low and a lower tick high and we had the commitment of sellers from the previous move. But the indicator tells you why it doesn’t work.  The buying % remained at 47% and $TICK only got to -246.
  4. Next we have a Tick Divergence short setup.  The $TICK became slightly non-divergent after entry (but ZoneTraderPro still displays the entry).  Here the buy % was lower and the trade was good for 2.75 points.  The sellers come back into the market and buy % is a new low at 26%.
  5. This sets up the reversal and trend pattern.  Again another perfect setup occurs and this trade is good for 5.75 points.  Notice how the indicator never turned green into the entry of the trade.  Then as price reaches the blue countertrend zone, we have dark red selling which sends the market down a couple of points.
  6. At the bottom, there is divergence.  The indicator goes dark red again at the 1st touch of the low at 2367.25, but this is expected.  Here is the key,, look at the indicator at the second touch of 2367.25.  It is heading straight up and it is overcoming a ton of selling that occurred at 2367.50.  This isn’t an entry into a long trade, but it is a great reason to exit, because the indicator has moved up 13%, from 34% to 47%.  This same thing happened at the pink strong trend support zone at 2369.25 and would also have been a good exit zone.
Short Examples
Short Examples

Here we have a reversal short trade that works great and the indicator predicts the failure of the Tick Divergence / Exhaustion long trade.

Reversal Trade
Reversal Trade

Here we have several successful trades using the indicator.  But what is important is the last long trend trade.

  1. First look at the indicator and look at the divergence there is at the exhaustion trade.  The important aspect is the slope of the line as you go into the trade.  The buy % is making higher highs and higher lows.
  2. Then as the market sells off into the long trend trade, there is more than a 50% change in the indicator.  But price trades up 5 ticks.  Did you take the trade?  Are you feeling uncomfortable? You probably should be. The indicator is still red and dark red as price trades to 2336.50.  The %TICK will not give a red dot until the trade has significantly gone against you. The indicator tells you not to enter the trade.
Failed Trend Trade
Failed Trend Trade

Next we have a great counter trend setup.  The counter trend trade is what the auto trader is based upon.

  1. Going into the trade we have a red spike lower.
  2. Then we have indicator divergence at the blue counter trend zone.
  3. $TICK red dot almost immediately followed by a red spike at the green intermediate support zone.
  4. A red spike at the blue counter trend zone.  This is again important because normally it would be a good idea to take profit here.  Why? Approximately 50% of the time this is where price stops and retraces at least 6 ticks based upon the ZoneTraderPro statistics.  This now gives a reason why you could move a target to the strong trend support zone at 2335.00.
  5. When price touches 2335.00 to test the low at 1001 hours, the buy % is now 48% and the slope of the line is up.
Counter Trend Trade
Counter Trend Trade

What is great about this indicator is that it creates a really easy way to make a trade decision.  You don’t need to spend thousands of dollars to buy an order flow program and learn how to use it.  With the Buy Sell Pressure indicator you have a very easy way determine entries and exits for a trade.

This is not a holy grail type indicator.  Here is a successful long reversal trade followed by a great exhaustion trade.  But the Buy Sell Pressure indicator spiked going into the exhaustion trade causing you to pass on the trade.

Indicator Failed Example
Indicator Failed Example

This is why we have a set of rules.  Would it have been nice to have had a perfect entry and a great exhaustion trade? Absolutely.  But this is what we are avoiding by creating a set of rules to keep the losses small.

Green Spike
Green Spike

Buy Sell Pressure Parameters

There are a few parameters to this tool.  The important parameters are the ratio levels and deviation points.

Ratio Levels

The setting of 6 in the picture says that the tool will look at 6 tick levels of price.

Deviation Points

This is the setting for the zigzag function.  A setting of 1.25 on the ES means that you have a 6 tick zigzag on the ES.  A setting of .05 on the CL means that you have a 6 tick zigzag on the CL.

Buy Sell Pressure Parameters
Buy Sell Pressure Parameters

Here is an example of what the deviation points mean.  We want a 6 tick zigzag to match the 6 tick zigzag in the ZoneTraderPro indicator.  The contracts that traded on the first move down, are not counted in the second move down after we have a zigzag up.

Deviation Points Parameter
Deviation Points Parameter

 

This Buy Sell Pressure indicator only works in real time or in market replay.  ZoneTraderPro customers can contact me for the file.