HISTORY AND CREDITS–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Recreating the Labels functionality of ThinkorSwim. The most important labels for momentum trading. I have been using these over the years and am considering this my star indicator. I have included various methodologies from reading many trading books. Some of the credits go to Dr . Van Tharp (featured in the first Market Wizards book by Jack Schwagger), John Carter from Simpler Trading and Mark Minervini.
WHAT IT DOES–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
- The momentum labels give reading of different important momentum studies:
Current price of the ticker selected
- SQN - defined by: "A measure of a market’s movement through an application of the System Quality Number calculation. To calculate, the daily changes from close to close measured in percentage terms are averaged and the standard deviation is calculated. Plugged into the SQN formula, those values and the number of days (N) provide the market SQN score." Fully customisable length for calculations. As per Dr . Tharps methodology.
- Squeeze Pro - wether the ticker has created a squeeze as per John Carters methodology.
- Average Directional Movement measure ( ADX )
- ADXc = Daily ADX change - please refer to my other indicator
- Beta - the measure of a stock's volatility in relation to the overall market. Customisable symbol to calculate beta against
- Up vs Down volume ratio, calculated on customisable period
- Correlation coefficient with customisable symbol over customisable length
- Price relation to high. The definition of high can be chosen between 52WK high (works only on Daily timeframe ) or ATH
- Wether the 8,21,34 MAs are stacked. Can customise for SMA or EMA
- The MTF VWAP . This label shows how are the HIGHER timeframe VWAPs relating to each other. /please note that this works only on higher timeframes to the current timeframe, e.g. if you have a daily chart , the VWAP calculations would only work on timeframes higher than 1 day). It calculates the VWAP on higher timeframes and then it assigns values depending on their relations
- Stacked+ = this means that VWAP on timeframe1 > WAP on timeframe2 > WAP on timeframe3 // color here is LIME
- Stacked = this means that VWAP on timeframe2 > WAP on timeframe3 // color here is GREEN
- x = this means that none of the above conditions are met // color here is RED
- Current VIX measure
HOW TO USE IT–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
The measures of the Momentum Labels are very important to assess the strength of the trend.
SQN (when using 100 as a lookback period):
- SB stands for SuperBullish trend
- B stands for Bullish trend
- N stands for Neutral trend
- Br stands for Bearish trend
- SBr stands for SuperBearish trend
- For ADX we have two coloring conditions.
ADX > 20 and the trend is either Bullish or Superbullish - then the square colors green
- ADX < 20 and the trend is either Bearish or SuperBearish - then the square colors red
For ADX change (ADXc)
- Combined with DMI, we want positive number to assess acceleration of the current trend. We look for ADX > 20 with Bullish trend and positive movement of the ADX change - this signifies acceleration.
- As a Swing trader, I look at stocks with beta over 1.0, since they are more volatile than the market and can access as leverage to my position size.
- Looking for measures over 1.1 to assess high inflow of volume . The treshold can be customised.
- Correlation metric gives me indication how much this stock acts on its own and how much is dependent on the market
For % from High:
- I look for stocks that are within 10% of 52WK High since Breakouts can be the start of a significant move up.
For MTF VWAP:
I set up the indicator so that Timeframe 1 is my trading timeframe (for me this is the Daily), Timeframe 2 is my first higher timerframe (for me this is the Weekly) and Timeframe 3 is my second higher timeframe (for me this is the Monthly). I am looking for confirmation that we are in a strong uptrend when we have D>W>M, which is indicated by condition "Stacked+" and color LIME.
This shows that the trend is strong and I have higher probability of going with the trend. PS I never trade AGAINST the trend.
- Always looking at the VIX , measures over 25, would block me from trading with full size position in the market. The treshold can be customised
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