ZoneTraderPro For NinjaTrader 8

ZoneTraderPro For NinjaTrader 8

ZoneTraderPro is pleased to announce that the system has been converted to ZoneTraderPro For NinjaTrader 8 and has been updated. The first beta ZoneTraderPro for NinjaTrader 8 has been received and is currently in testing.  The initial testing does not show any significant bugs that need addressing.  Visually you are not going to see much difference between the NinjaTrader 7 version and this version.  But one of the huge under the hood differences can be seen in the new and improved Order Flow Power indicator.

Order Flow Power Indicator

The Order Flow Power indicator has also been updated.  Previously the percentage of buying and selling was based on the ZigZag indicator.  When a ZigZag occurred, a new ratio percentage would be displayed.  This feature is still available in the new version, however the ratio may now be displayed based on a look back of X number of bars.

One of the reasons that NinjaTrader 8 is superior to the 7 version is its ability to build a bar without having to use market replay.  So the order Flow Indicator will now print on the historical chart.  The Accumulation Distribution indicator still needs a live feed for its information.

ZoneTraderPro for NinjaTrader 8 with Order Flow Power Indicator
ZoneTraderPro for NinjaTrader 8 with Order Flow Power Indicator

Here you can see the difference between the two indicator settings.  The indicator in Pane 2 has the bars back setting of 15.  So what it is telling you is the ratio of buyers to sellers over the last 15 bars.  This is a great way to spot divergences, especially at the Tick Divergence trade.  The Power indicator in Pane 3 is using a 6 and 6 setting.  That means it is based on a 6 ZigZag setting looking at 6 price levels.

In the following example you have good divergence. There is also a nice V shape pattern.  V shaped patterns are a good indication of reversal.

Tick Divergence Trade with Divergence on the Order Flow Power Indicator
Tick Divergence Trade with Divergence on the Order Flow Power Indicator

What happens when there is no divergence?  We can see from the following trade that there was a tiny fraction of divergence.

No Divergence in Power Indicator
No Divergence in Power Indicator

The trade went 6 ticks in your favor and then entered a strong trend.  What is even more important is what the indicator is telling you at the next Tick Divergence trade.  The indicator is solid green and going sideways.  There is no selling and only strong buying.  Price rises to strong trend resistance and keeps climbing.  This is where the indicator becomes invaluable for trading.  The Power Indicator keeps you from making bad mistakes.

Upgrades

Upgrade to the ZoneTraderPro NinjaTrader 8 indicator for free if you have purchased a NinjaTrader 8 lifetime license.  The indicator will be in testing for several weeks.  If you would like to have the beta version please contact me.

New Indicator

With the newest version of NinjaTrader 8, they released charts that can now show order flow.  You need to have a lifetime license for these.  I have already made a programming request to have some very highly profitable patterns coded to take advantage of the new NinjaTrader functionality.  These patterns will identify exhaustion, trapped buyers and sellers, ratios, and order flow divergence.  All of these patterns will be extremely helpful in your trading, so stay tuned.

 

 

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.

New Forex Currency Tool From ZoneTraderPro

The New ZoneTraderPro Forex Currency Tool

ZoneTraderPro is pleased to announce the ZoneTraderPro Forex Currency Tool which has been designed to provide very powerful real time information about the Forex currency market.  The Forex Currency Tool measures the strengths and weaknesses of currency pairs which have a direct correlation to the stock and bond market.

All ZoneTraderPro customers have access to this powerful tool at no additional cost.  Contact ZoneTraderPro via the contact page and the software will be emailed to you.

The Forex Currency Tool displays as both an indicator on the bottom of the chart, and colors the chart background the same color as the indicator, giving the trader instant information while reading the chart.  Here is an example from Friday of a Tick Divergence / Exhaustion trade.

ES Trading Examples

The 1st thing I notice on the chart above is the divergence of the currency market leading into the trade.  The indicator is telling you the market is getting weaker, not stronger.  It is really important to note that the theory behind both Exhaustion and Tick Divergence is to identify situations where the market rising or falling without justification at the NYSE in the underlying cash market.  In 1 minute the ES rises with no buying at the NYSE, which gives us Tick Divergence and the light red colored bars on the Currency Tool indicator tells us the Forex Currency Tool is saying the Forex markets are falling.  The trade is good for 3.5 points.  As noted in previous posts, a great place to put a target is just above the blue counter trend support zone, because 50% of the time, price does not trade through that zone.

Here is a 6.75 point Tick Divergence trade from Thursday.

20515 ES Tick Divergence Trade
20515 ES Tick Divergence Trade

Here is what the 20 point sell off on Wednesday afternoon looked like.  ZoneTraderPro and the currency tool both got you short with a Tick Divergence / Exhaustion trade before the news hit.  The indicator turns green both times the market traded at the 2031 lows.  This is not pointed as a trade opportunity even though there is a tick divergence pattern there, but as a reason to exit a trade.

20415 ES Tick Divergence Trade and a 20 Point Selloff
20415 ES Tick Divergence Trade and a 20 Point Selloff

 Avoid a Losing Trade with the Forex Currency Tool

Here is how the tool avoids a losing Exhaustion trade.

Losing Trade Avoided
Losing Trade Avoided

 And the ZoneTraderPro Forex Currency Tool is not just for the ES

The ZoneTraderPro currency tool also works on the bond market and in the pre-market.

20615 Bond Market Trades using the Forex Currency Tool
20615 Bond Market Trades using the Forex Currency Tool

The colors for the bond market are reversed because the bond market is inversely correlated to the stocks and currencies.  So when the colors are red you want to buy bonds and when they are green you sell the bonds.  The currency tools does allow you to customize the colors, but for purposes of this picture, I wanted to emphasize the inverse relationship.  This chart above is from Friday after the release of the jobs number.

20615 Bond Market Trades using the Forex Currency Tool
20615 Bond Market Trades using the Forex Currency Tool

Here are two more ZN Bond Market support and resistance trades at about 1030 EST that same day.

 

 

ZoneTraderPro Daytrading Theory and Patterns on the 10 Year Bond

ZoneTraderPro Daytrading Theory

ZoneTraderPro just doesn’t work on the ES chart.  It can also be used on bonds and currency futures to filter the ES trade.  The TICK Divergence pattern is a consistent winning pattern as seen in this trade from yesterday.  The TICK Divergence is an even better pattern when combined with an Exhaustion pattern because the Exhaustion trade is normally marking a top or a bottom.

When the trade does not work

Here is a TICK divergence pattern from this morning that did not work and using ZoneTraderPro on a ZN and/or the TLT chart shows the reason why.

ES and ZN Chart Together

This morning we saw a TICK Divergence / Exhaustion trading pattern that only worked for 5 ticks before it reversed.  Then the market traded in a second TICK Divergence pattern that was a loss.  This makes me ask the question that I have always asked when trading.  I know why trades win.  But a seemingly perfect setup failed. Was there any reason (other than a news event) that the trade failed?  The answer is easily found in the ZN chart.

The ZN chart went from blue countertrend resistance through the opposite blue counter trend support zone by 4 ticks.  The ZoneTraderPro theory says that this is a trend reversal when the market trades from a blue zone to a blue zone.  The next part of the theory says that the market should retrace to the pink minor resistance zone before resuming the trend.  This is where theory becomes strategy.  When the TICK Divergence trade is signaled on the ES, the ZN had traded through countertrend support.  The ZN is in a strong bearish trend (without retracement) so the ES will respond in kind with a strong bullish trend.  As the ZN retraces back to exactly the minor resistance zone, the 1st TICK Divergence trade works for 5 ticks.  With the ZN in a strong bearish trend, why take the ES long trade?

The ZN market then sells off again into the 10:08 AM TICK Divergence loss.  With the ZN in a strong bearish pattern and responding exactly as the ZoneTraderPro theory suggests, taking either of these two trades was a high risk.

Next the ZN makes a triple bottom, supporting the successful short ES trade at 10:40.  Nothing has changed with the ZN 8 minutes later when the TICK Divergence long trade fails as the ZN has traded off the low and its’ price is rising.

ZoneTraderPro Theory and the TLT

The ZoneTraderPro theory also applies to the TLT, which is the iShares 20 year treasury bond.  This market was in a typical bearish trend trade when the first TICK Divergence trade lost.  At the point where the ES trade was signaled, since the price had traded through intermediate support, the theory says price should keep falling to blue counter trend support, which is exactly what it did.

Twenty minutes later price made a bullish move from blue support to blue resistance and then retraced to minor support.  This is the same theory that was just demonstrated on the ZN.  With the TLT Bullish, the ES short trade works and the TICK Divergence long fails.

The ZoneTraderPro theory is not hard to learn because there are three basic patterns.  The first is the trend trade pattern (1st trade on the TLT).  The next theory describes a strong market and the third describes reversing markets, which is what you see demonstrated on the ZN and TLT charts.

Realtime Trading Example

Realtime Trading Example

I have received several requests for a video of a realtime trading example.  The following video is an example of a TICK Divergence / Exhaustion realtime trading example, followed by a reversal trading example.  The video illustrates how the zones and patterns develop.

There is no sound to the video.  It is commented with captions to illustrate the important events as they occur, so it is not necessary to describe what you will see here.  The two examples run about 24 minutes total.

There is also a TICK Divergence / Exhaustion trade that occurs shortly before the video starts.  I point this out to emphasize trade management techniques that are commented on here on the blog.  The market had come up and exactly touched the blue counter trend zone.  Then you had fours ticks of favorable excursion, before the market reversed and traded at the theoretical stop price.  You can read about Trade Management here.

http://zonetraderpro.com/wordpress/trade-management-the-trade/

 

You can also find the video in the video library of the website.

TICK Divergence Setups

Excellent TICK Divergence Setups

The last 2 days have seen a lot of excellent trading setups, with a wealth of tick divergence setups.  On 2/26/14 within the 1st 30 minutes of the market there were 4 high probability setups, 2 of which were tick divergence setups.

2/26/14 AM TICK Divergence and other trading patterns
2/26/14 AM TICK Divergence and other trading patterns

In less than an hour we saw 2 additional tick divergence setups along with a high probability reversal trade.  What was interesting about this set of trades was that the 1st tick divergence was only good for about 2 S&P points, with the price stopping at intermediate support.  The market then traded to an even higher tick divergence setup pattern, which proved to be a much better trade.  This was then followed with a high probability reversal trade, with the tick filter indicating a lower low and a lower high going into the trade.

2/26/14 TICK Divergence Setup
2/26/14 TICK Divergence Setup

If all these trades weren’t good enough, in about another hour we saw a tick divergence long trade which was then followed by a high probability reversal trade, which again had the tick filter going in its direction for support.

Today we saw a near repeat of the tick divergence trades.  The 1st 2 tick divergence setups were similar to the trade yesterday, in that the 1st tick divergence trade within exhaustion pattern only traded to the intermediate resistance zone.  This was then followed by a 2nd tick divergence trade, and in similar fashion to the previous day, a very profitable trade.  These 2 trades also illustrate the risk of taking a trend trade when there has been a tick divergence pattern preceding it.  In each case where the trend trade failed, the tick filter was not supportive of the trade and the tick divergence pattern, traded and exceeded the opposing blue counter trend zone.

Next we see a 2 tick divergence trades, one that is successful and one that is not.  What is interesting about the trade that failed was that on 2 occasions the market had traded at the blue counter trend zone and then traded for 4 ticks a favorable excursion.  I previously written in the manual and on this blog about what happens when price trades at a zone and initially gives a trader this 4 tick favorable excursion, only to see price come back and take out the entry.  Take a look at this blog post concerning trade management.

http://zonetraderpro.com/new1wordpress/trade-management-the-trade/

Going into the afternoon trading we saw another 5 high probability low risk trading setups, 2 of which were tick divergence setups.  The 1st trade saw an exhaustion trade that initially had tick divergence, however at the low of the move the tick was exceeded by 17, thus negating the divergence.  The exhaustion trading pattern however is still a valid trade.  We next saw an exhaustion trend trade in which the tick filter was favorable for the trade and resulted in a very profitable exit.  An exhaustion trade followed, with the tick divergence setup, trading into another successful tick divergence setup.  What should be noted in the tick divergence long set up is what happened when it reached the intermediate zone and essentially matched the previous tick high.  Look at the lower indicator on the chart which is the actual $TICK value.  Notice that after making the initial high, the tick became divergent each time he tried to go higher as the market traded sideways.  That, combined with the fact that there was a successful tick divergence exhaustion short trade, would’ve been a very good reason to exit and consider the short exhaustion trend trade or completely flatten the position for profit and wait.

The tick divergence setup has a setting in the indicators to adjust when it will appear on a trading chart.  The current default setting is that it will appear 2 ticks away from the blue counter trend zone.  In the last example on the chart you see the tick divergence symbol being given, then immediately followed by a black dot.  The black dot signifies that the tick is no longer divergent.  This is then followed by a red dot which is the ZoneTraderPro tick filter indicating that the tick is now been exceeded by over 100.  This is noted because if you remained in the trade with no valid trading pattern, you took a loss.  In the trade from one hour earlier, there was still a valid exhaustion trading pattern.

The point of this and the previous example is that no trading symbol is going to be perfect.  Conditions will change after a trade is indicated and entered.  If your trading plan questions negative information, such as the tick becoming non-divergent after the trade is entered or 4 ticks of favorable excursion is suddenly wiped out, then you have a trading plan that would’ve survived without taking a full loss on these 2 trades.  And you have a trading plan that would’ve shown profit from the 15 other ZoneTraderPro trades that did work.

 

Exhaustion Trend Trading Pattern

Exhaustion Trend Trading Pattern

The Exhaustion Trend Trading Pattern looks to take advantage of the 1st trading pattern after the exhaustion pattern has signaled a top or bottom.  Typical retail traders see the small retracement after a large move as an opportunity to try and trade with the trend.  Unfortunately for them, profit taking and trend reversal will cause them to lose money.  The pattern involves a low risk stop usually 4 ticks or less.

Exhaustion Trend Trading Pattern
Exhaustion Trend Trading Pattern

Tick Divergence Exhaustion Trading Pattern

A very nice pattern occurs when TICK divergence occurs at the exhaustion trading pattern preceding the exhaustion trend trading pattern.  In the below picture we see the market in a strong bullish trend and the exhaustion trading pattern marking the top.  We see tick divergence at the top, followed by a lower tick low leading into the exhaustion trend trading pattern.  At the Exhaustion Trend trading pattern we have a lower low TICK and a lower high TICK at the area of the trade.  There is also Euro divergence at the trade.  ZoneTraderPro is always looking at the status of the dollar to determine if there is a divergence that would assist the current trade.

While not shown on the chart, the Exhaustion trade risked just 4 ticks and 2 points of profit. The exhaustion trend trading pattern had just 3 ticks of risk and 10 ticks of profit.

Tick Divergence Exhaustion Trading Pattern
Tick Divergence Exhaustion Trading Pattern