My in house computerised chart analysis program has been a decade in the making, a fortune in development costs, and is now in its fourth incarnation. Primarily designed for use in trading intra day futures, it can be adapted to analyse shares, indexes, currencies or in fact any well traded financial instrument or market on any time frame, as I shall illustrate as this page builds over the future.
My ultimate goal is to synchronise its operation with an automatic online trading program, so that it trades on its own!
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Indicator
Colour
|
|||||
|
Significance
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major
strength
|
minor
strength
|
major
weakness
|
minor
weakness
|
warning
bar
|
Above is a screenshot of the program operating on a 2 minute timeframe during 78 minutes of "a perfect day" in the FTSE100 Futures Contract. Above and below the price bars you can see the coloured indicators, as loosely defined in the above table
It should be noted that not only does the datafeed automatically update the price and volume bars in live time, but so too does the program simultaneously produce the indicators automatically as well.
In the months ahead I shall be adding more examples to this page, including screenshots of the program operating on a daily Index, a daily share chart, a currency, intra day Dow, and a precious metal.
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INDICATOR
AND POSITION IN CHART
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INTERPRETATION
|
| Blue alone in low chart area | Major upward turning point imminent |
| Green following blue | Uptrend maintaining strength |
| Red alone in high chart area | Major downward turning point imminent |
| Yellow following Red | Downtrend maintaining weakness |
| Green following Red | Minor rally within downmove |
| Yellow following Blue | Minor reaction within upmove |
| Purple in high chart area | Possible exhaustion of demand, beware sudden reversals |
| Purple in low area following Blue | Demand meeting resistance from supply - wait |
| All colours appearing in same move | Congestion or market moving sideways - close all positions and stay out of market |
| Red in middle chart area | Fundamentals appearing causing imminent markdown |
| Blue in middle chart area | Fundamentals appearing causing imminent markup |
| Red after Blue | Conditions deteriorating |
| Blue after Red | Conditions improving |
| Triple Reds in a row | Major price collapse imminent |
| Triple Blues in a row | Major price surge imminent |
| Purple anywhere | Warning - unknown conditions appearing |
| Other combinations | And so on and so forth |
Although there are just 5 indicator colours, there are many indicators which share the same colour, with each indicator having a unique number allocated to it, together with the individual analysis behind that indicator.
All the indicators together make up an "indicator library", and each type of financial instrument will have its own library, which in turn will house an average of 1000 indicators, with each indicator itself having up to 100 lines of seperate algebraic formulae which are computed to analyse each and every bar and to "track" the direction and mood of the price behaviour, factoring in any extremes of volume, and the position of the price within its chart, ultimately producing an automatic indicator when appropriate.
A text explanation of each indicator can also be pulled up to clarify any indicator. For example, in any one library, if there are 200 blue indicators numbered 1 to 200, and number 40 is clicked on, and up comes its analysis. I shall be illustrating this function in further page updates.
My belief is that a bar chart (of any arithmetical data) is analagous to a piece of sheet music - a score - with each group of adjacent bars being the equivalent of a series of notes and their syncopation.
A bar in a high area of a chart (of a predetermined size) is analagous to a high musical note, or a note in a higher octave. Conversely, a bar in a low area of a chart is analagous to a low musical note, or a note in a lower octave.
Musical composition and notation follow an orderly and regulated structure, and once the first part of a tune is known, the next part of that same tune can be reliably anticipated most of the time. But in addition to the tune, there is also the accompaniment which, for example in the case of a piano piece, will contain a treble clef for the tune and a bass clef for the accompaniment, with mainly the top part being played by the right hand and the bottom part being played by the left hand. The price bars represent the treble clef, and the volume bars the bass clef. Together, they are readable in an orderly way.
In future page updates I will be illustrating some simple pieces of music for the piano, and alongside show examples of equivalent charts of financial instruments.
NOTICE: The above article is a brief explanation of my system for academic interest only, i.e. it is not a product being offered to the public. However, development enquiries from Financial Institutions, or similar, are invited, and comments from others are always welcome.
