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.
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.
- 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.
- At the entry to the long Tick Divergence trade, the buy volume was 45%. That trade was good 3.25 points.
- 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.
- After the trend trade fails and the market trades through the red intermediate resistance zone, you see 3 more dark green spikes
- Next we have two patterns print, a trend and a reversal pattern. This trade is good for 4 points.
- 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.
Here is a group of short trades
- 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.
- 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.
- 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.
- 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%.
- 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.
- 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.
Here we have a reversal short trade that works great and the indicator predicts the failure of the Tick Divergence / Exhaustion long trade.
Here we have several successful trades using the indicator. But what is important is the last long trend trade.
- 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.
- 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.
Next we have a great counter trend setup. The counter trend trade is what the auto trader is based upon.
- Going into the trade we have a red spike lower.
- Then we have indicator divergence at the blue counter trend zone.
- $TICK red dot almost immediately followed by a red spike at the green intermediate support zone.
- 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.
- 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.
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.
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.
Buy Sell Pressure Parameters
There are a few parameters to this tool. The important parameters are the ratio levels and deviation points.
The setting of 6 in the picture says that the tool will look at 6 tick levels of price.
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.
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.
This Buy Sell Pressure indicator only works in real time or in market replay. ZoneTraderPro customers can contact me for the file.