FOR WINDOWS
www.TradeGuider.com
TRENDS ……………………………………………………………………………………………………………………….… 18
The Last Active Trend ……………………………………………………………………………………….. 18
Displaying the Last Active Trend ……….……………………………………………………………… 19
The Trend Indicators ………..…….………………………………………………………………..………. 19
Displaying the Trend Indicators …………………..……………………………………………..…… 20
Short Term Trend Changes – The Diamonds ……….………………………………………….. 21
Interpreting Trend Status Using the Diamonds ……………………………………………….. 22
Taking an Overall View of the Diamonds …………………………………….……………………. 25
Displaying the Diamond Indicators ………….……………………………………………………….. 25
Medium Term Trend Changes – Bar Colouring …………….…………….……………………. 26
Displaying the Trend Bar Colouring System …………………………………………………….. 26
There are two basic ways to use the TradeGuider software package:
1. The software can be run on a separate monitor screen alongside your other trading
software, technical indicators, or proprietary systems. In this mode, TradeGuider is
adding value to your trading, by allowing you to see the extra dimension of volume
beside your current systems. When used in this way, TradeGuider can be referred to
as a Decision Support System, enabling you to make more effective and timely
decisions throughout the trading session. Indeed, this concept of Trade Guidance
forms the basis behind the name of the software - TradeGuider.
2. Alternatively, you may not have any other trading systems and you’re looking to
TradeGuider to help you to approach your trading in a definitive and objective way.
You need a solution to remove the guesswork from your trading decisions.
Whichever category you fall into, we think you’ll find the Basic Trading Guide useful
as an introduction to using TradeGuider to make your trading more profitable, and
ultimately, more enjoyable.
Don’t forget to refer to the “Things to Remember” section right at the end of this guide!
This manual is part of a set that helps you become acquainted with the software:
The Getting Started manual is designed to get you up and running with TradeGuider as
quickly as possible. It describes how to get data into the software and shows you how to
load and use charts. The Getting Started manual leaves out a lot of details so that you
can make a start with TradeGuider right now.
For more help with the Volume Spread Analysis (VSA) indicators and methodology,
read the Master the Markets book.
The Glossary will help you come up to speed with various terms that are frequently used
as part of TradeGuider’s proprietary Volume Spread Analysis (VSA) methodology.
For help with your EOD data vendor, refer to the EOD Data Directory, which will
enable you to locate a data provider in your country.
If you’re using QCollector to acquire data from QCharts, you’ll need the QCharts
Connection Guide, which describes in easy steps, how to link TradeGuider to QCharts.
For a quick tour around the screen, you’ll find the Quick Reference Card useful to help
you learn what the various buttons and toolbars do.
For more detailed information regarding the TradeGuider product, please refer to the
Video User’s Manual.
There is also a separate video series to provide you with a walkthrough of using
TradeGuider’s tools to good effect.
NOTE: At the time of writing, some of these manuals may still be in the closing stages
of development. If you cannot find a particular manual under the Help menu in
TradeGuider, please refer to the Support section on the TradeGuider website
(www.TradeGuider.com) and choose the Documentation link. From here,
you’ll be able to download the latest versions of the documentation.
There are tools within the TradeGuider software to help you take advantage of all these
commonsense principles. The following pages explain the various tools available to you,
with good advice on how to use them in order to minimise your risk and maximise your
chances of success.
• Prices will nearly always reverse from a resistance (or support) area when the spreads
narrow and volume drops.
• Conversely, prices will nearly always penetrate a resistance (or support) area when the
spreads widen to penetrate the resistance and volume increases substantially (usually
seen as a spike in the volume histogram at the bottom of the chart.)
• Lines of historical support or resistance will often band together. The effect of
support and resistance levels is cumulative. In other words, several lines that occur
around the same price level represent stronger support or resistance, which forms a
barrier to price penetration. In the example above you can see 3 lines of historical
support which act as solid ‘ground-level’ support. In order to penetrate this band of
support will require a lot of ‘effort’ in the form of significantly higher trading
volumes. You would also expect to see much wider spreads that punch through the
banding, or the price may even gap over the banding entirely.
The other cumulative factor is time. The longer a line of support or resistance has
been in effect, the more resistant it will be to price change.
• Price action will sometimes meander around a support or resistance level, and will
occasionally congest around these areas. In this instance, prices will move
erratically, with rapidly fluctuating spreads and volume levels, as the bulls and bears
fight it out. When prices exhibit these indications, it’s advisable to stay out of the
market until this stabilise. The rectangular area that has been marked off at the
bottom of the chart demonstrates how price action can move along an old level of
support in a tight congestive range.
• Finally, you may also notice areas where a line of support switches to becoming a
line of resistance (or vice versa). This sort of action can be seen on the chart below:
• Select Tools > Show Highs & Lows > Show from the menu.
A number of lines will be drawn on the screen, and you will most probably find that
there are too many to begin with.
• Tools > Show Highs & Lows > Adjust Sensitivity from the menu.
Use the spin control to adjust the sensitivity level from 1 to 20, where 1 is the least
sensitive and 20 is the most sensitive.
Trend Clusters
Trend clusters are discussed in the “Master the Markets” book in some depth. Basically,
these areas are an extension of support and resistance, but applied to trends, rather than
highs and lows. Where historical trend lines intersect, we call this a ‘trend cluster’, and
display a rectangular block on the chart to signify this. Trend clusters represent strong
areas of resistive price levels. The chart below shows the clusters and the highs/lows
features displayed together.
• When the price is in the vicinity of a trend cluster, there will be a good chance that
price action will retreat from the cluster, on narrowing spreads and a reduction of
volume.
• If the prices break past the cluster, they will tend to continue in the same direction,
until further support or resistance is encountered. There are examples of this sort of
thing happening in the chart on the previous page.
• In situations where the clusters and the show high/lows feature are displayed at the
same price level, one can assume that there is a greater possibility of prices
reversing.
• Prices can often be seen to meander between a narrow, confined area, such as in the
chart below.
• On occasion, the price will punch straight through the cluster on a wide spread with
significantly increased volume (see chart below.)
• When prices are in the vicinity of a cluster, they will normally be extremely resistive
to price penetration – see the rectangular area that is shown top centre in the
following chart for an example of this sort of observation.
Then, choose the desired sensitivity level from the drop-down menu.
Tip
For more detailed information regarding the use of trend clusters, refer to the “Master
the Markets” book.
Above the pivot are key points of resistance, which are marked as R1, R2, and R3 (which
is the most extreme point of resistance that is likely to be met during the current trading
session.)
Below the pivot are key points of support, which are marked as S1, S2, and S3 (which is
the most extreme point of support that is likely to be met during the current trading
session.)
• When the price is in the vicinity of R1, R2, or R3, there is a good chance that price
action will turn downwards if the spread narrows and the amount of volume reduces.
• Similarly, when the price is in the vicinity of S1, S2, or S3, the price action is likely
to turn upwards if the spread narrows and the amount of volume reduces.
• If the price penetrates through a level, especially on high volume and a wide spread,
one can usually use the next level as a price target. For example, if the price moves
down through R2, one could expect the price to carry on moving down to a price
target indicated by R1.
• In the same way, if the price moves up through the Pivot (P), one could expect the
price to carry on moving up to the price target indicated by R1. If price continues to
move up through R1, one would then use R2 as the next price target. Lastly, if the
price continues to move up through R2, one would then consider using R3 as the
next price target. An example of this sort of price movement can be seen in the left
side of the chart on the previous page.
IMPORTANT: Keep in mind that the further the price moves to the extreme price
targets represented by R3 (or S3 if moving down), the less likely it is
for those price objectives to be met.
• If the price reverses from a level, especially on high volume and a wide spread, one
can usually use the next level as a price target. For example, if the price reverses
from R2, one could expect the price to carry on moving down to a price target
indicated by R1.
• In situations where the pivot levels and the trend cluster features are displayed at the
same price level (red circles), one can assume that there is a greater possibility of
prices reversing. The chart below shows how these two features can work together,
and it also demonstrates how the pivot point levels can act as price targets (black
circles.)
• On occasion, the price will punch straight through a pivot level on a wide spread
with significantly increased volume. A good example of this is shown on the
previous page, where the price rises through R1 to the left of the chart.
When using the Pivot Point feature, it’s important to make sure that the levels are
calculated properly. To ensure this, follow the steps below:
• Click the chart (with the left mouse button) at any point of today’s trading session.
• Then click the small black triangle to the right of the PIV button, which will show a
small pop-up menu.
• Click on the “Select New Start Point” option. You can now see the pivot point
levels for today’s trading session.
NOTE:
The Pivot Point feature in TradeGuider is for live trading use only. Please do not try to
apply this line study to EOD (End of Day) charts, because it hasn’t been designed for this
purpose.
The boundaries of the trend channel are shown by the dotted blue line. The following
points are useful observations that will help you to judge potential moves:
• The chart above shows that strength appearing (denoted by the green rectangle) at
the bottom of a trend channel is usually a significant event that results in an upward
price move.
• If prices break out of the channel, especially if they gap over the channel
boundaries, this is normally indicative of an explosive move in the direction of the
gap. In the example on the previous page, prices are seen to gap down, over the
bottom of the channel in an effort to quickly break through the support level. The
price moves downward in a steep and determined move to the downside. This
principle is just as applicable if a gap to the upside is witnessed.
Tip
For more detailed information regarding the use of trend channels, refer to the “Master
the Markets” book.
You should immediately see a trend channel superimposed over the chart. If this isn’t
the case, it could be that you need to adjust the sensitivity for this feature. To adjust the
sensitivity:
• Use the spin control to change the sensitivity level from 1 to 20, where 1 is the least
sensitive and 20 is the most sensitive.
… or, you could add the volume spread analysis (red/green) indicators for an extra
dimension that takes volume into account.
If the trend indicator button is pressed again, the blue trend indicators are turned off.
Apart from the changing colour of the diamonds, one of the great things about this
indicator is the way it levels out, as prices become slow to progress. If prices suddenly
surge forward, this indicator will also accelerate upwards or downwards, smoothing out
the fluctuations caused by minor corrections or reactions.
The chart below shows what the diamond indicator looks like when it’s superimposed
over a chart.
In common with other tools and indicators in TradeGuider, the diamonds can be used on
an individual basis, but they are more effective when used as part of a trading set-up, in
combination with other features. We shall be looking at a suggested set-up later on in
this guide.
1. Trend in Progress
The graphic below shows a downward trending market. This is characterised by the
following:
- Red diamonds
- Falling diamonds
- Closing price below the diamonds
The graphic below shows an upward trending market. This is characterised by the
following:
- Green diamonds
- Rising diamonds
- Closing price is above the diamonds
The graphic below shows a pause in a downward trending market. This is characterised
by the diamonds turning colour from red to white:
The graphic below shows a pause in an upward trending market. This is characterised
by the diamonds turning colour from green to white:
The graphic below shows a trend reversal from long to short. This is characterised by
the diamonds turning colour from green/white to red:
The graphic below shows a trend reversal from short to long. This is characterised by
the diamonds turning colour from red/white to green:
If the diamonds indicator button is pressed again, the diamonds are turned off.
It’s possible to change the setting of the diamonds to take into account your own personal
preferences. To adjust the settings, click the small black triangle that appears next to the
diamond button. Change the Period setting using the spin control. The larger the
number, the more smoothing (and lag) will be introduced.
Tip
When using the Diamond Indicators, you’ll achieve better results from markets that trend
in a consistent way – look at the major currency pairs and the bonds (T-bonds etc.)
As can be seen from this chart, this type of trending system is more forgiving with
regards to adverse moves, or a temporary slowing of price momentum (unlike trending
systems that are based on moving averages.)
This system can be used in conjunction with other features (according to your
preferences), as part of an overall trading set-up. A suggested set-up is demonstrated
later in this guide.
If the trend bar button is pressed again, the coloured bars will be turned off.
The chart below shows a number of green symbols, indicating strength (demand) in a
stock. Showing supply and demand graphically on a chart is one of TradeGuider’s major
strengths. In the chart below, we can see that following the cumulative effect of a build
up of demand, the stock responds with a positive and sustained price rise.
TradeGuider is armed with several hundred supply and demand indicators, which
make it a sophisticated and effective guidance tool. TradeGuider can even give a
visual indication of the approximate imbalance of professional activity and show
where this appears on your chart.
The red and green indicators are all able to visually express the estimated amount of
residual strength or weakness and this is communicated by using different symbols:
Red/Green Rectangles
Rectangles represent strong weakness (red) or strength (green) respectively. When
TradeGuider displays a red or green rectangle, there is a good chance that the current
price move will stop and reverse. If this does not happen, the market will usually
stop trending and move sideways for a while. Sometimes rectangles are seen during
a trending market as the professionals are either buying into or selling into the
market. In the chart on the previous page, note how the professional money sells the
market at the top left of the chart, which causes prices to fall (see the red rectangle
amongst the other signs of weakness.) At the bottom of the downtrend, note the
three green rectangles denoting heavy buying at this price level. The market rises as
a consequence of this strength and is later countermanded by a red rectangle, which
causes a resumption of the downtrend.
Red/Green Triangles
These symbols denote an intermediate probability of a correction (down move) or a
reaction (up move) in the market. Clusters of strength or weakness symbols often
appear together on your charts, especially at certain price levels. This type of
clustering is highly significant, especially if it appears in new high or low ground, or
at areas of support or resistance (including pivot points.) In the chart on the
previous page, the principle is demonstrated by 4 signs of weakness (top left), which
results in a large fall in price.
• The indicators are not buy and sell signals (or entry and exit points.) It is a mistake
to use the indicators in isolation, without taking any other factors into consideration.
You must view the market holistically, looking at what has gone before and also
reading the market as it unfolds. Each signal is like a word in a sentence, but it is
only when all the words in the sentence have been read, that the information is
imparted. Take a look at the accompanying “Master the Markets” book for further
assistance.
• Indicators can be used as part of a ‘trading set-up.’ So, once an indicator has
appeared, you may wish to wait for the trend to change in the direction of the
indicator, or you may take an entry point once the market has moved up or down by
a certain number of points. For more information, see the “Master the Markets”
book.
• TradeGuider’s indicators can be used in conjunction with other trading tools, such as
TradeStation, MetaStock, TC2000 and OmniTrader. The idea is to use the
TradeGuider indicators, which take into consideration the added dimension of
volume, as an additional confirmation tool in combination with the indicators or
systems that you have already learnt to trust.
• You can use TradeGuider to analyse any liquid, well-capitalised market. So, it will
work well with major world indices, the component stocks in the DOW, S&P, and
NASDAQ, major currency pairs, and popular commodities.
The amount of green that appears on the gauge is ‘bullish’ volume and the amount of red
is ‘bearish’ volume. So, in the example shown to the left, we would consider this
situation to be more bullish, and may even be looking to enter a trade based on this
information.
• If the amount of green is above the 50% mark, this is considered a bullish sign.
• If the amount of green is below the 50% mark, this is seen as a bearish sign.
It is best to use the relative volume gauge as part of a trading set-up to aid you in your
entry or exit. Later in this guide, we’ll be looking at a potential set-up that you might
consider using. However, we encourage you to experiment with the various features and
decide what’s best for you and you’re trading style.
NOTE: If you can’t see the volume gauge, you’ll need to turn it on. To do this:
• It is volatility based, which mean that it adjusts quickly to price moves, and is more
sensitive in calmer markets.
• The ‘H’ stop is actually a pair of stops, comprised of a near and far stop. The near
stop can be used by more cautious traders to get out early, whilst the far stop can be
used by traders who don’t mind risking the possibility of being taking out with a
bigger loss, but with the potential for a far larger return.
• The ‘H’ stops can separate, so that one of the stops sits above the bar, whilst the
remaining stop sits below the bar. This is useful for marking off potential areas of
congestion. In these circumstances you should be watching the trade extra close.
• Similarly, when both stops switch from being above the bar, to below the bar, this
can be seen as a potential long position.
• The ‘H’ stops operate on a ratchet, so they will move in the direction of your trade
and then stick at a certain level to lock in profit and protect your exposure.
• The ‘H’ stops are always ‘in the market’ and can be used as a basis for a trading set-
up.
If the ‘H’ Stop button is pressed again, the ‘H’ stops will be turned off.
It’s possible to change the setting of the ‘H’ stops to take into account your own personal
preferences. To adjust the settings, click the small black triangle that appears next to the
‘H’ stop button. Change the parameter settings using the spin controls for either the near
or far stops.
Tip
When using the ‘H’ stops, you’ll achieve better results from markets that trend in a
consistent way – look at the major currency pairs and the bonds (T-bonds etc.)
Position Trading
Taking positions by using a daily chart offers several advantages over intraday trading:
The first thing to do before considering any trades is to select your stocks or other trading
instruments. If you’re trading stocks, you would be well advised to follow the rules
below:
• To consider taking a long position (i.e. to buy), you need to select stocks that are
acting stronger than their parent index. For instance, “Cisco Systems” belongs to
the NASDAQ 100 index.
• To consider taking a short position (i.e. to sell), you need to select stocks that are
acting weaker than their parent index.
Tip
When trading stocks, always trade in harmony with the parent index.
• Then follow the prompts from the wizard, which will take you through the whole
process of stock selection. Once the scan is complete, you’ll have a list of the 10
strongest stocks and the 10 weakest candidates for trading purposes.
1. Scan the business sector indices against the primary industrial indices for your
country. This would produce a list of the strongest and weakest business sectors.
For instance, the Telecommunications Sector Index may show that it is weaker that
the NASDAQ 100 Index, and the DOW Industrial Average.
2. From the business sector scan, you’ll have a list of the 10 strongest and the 10
weakest business sectors.
3. You now need to scan the component stocks from the various business sectors
(identified above) against their parent indices. So, if the Telecommunications Sector
Index is the weakest sector, we now need to scan the Telco Sector Index against the
NASDAQ 100 (and maybe the Dow Industrial), to produce a list of the weakest
companies from the weakest business sector.
4. This scan would theoretically show the weakest stocks in the market. In this
example, you would know at the end of the procedure, that out of all the business
sectors, the Telecommunications market was the weakest, and that Cisco Systems
Inc was the weakest stock from this sector.
Basically, you are looking for both stops to switch above the bar (a short trade) or both
stops to switch below the market (a long trade.)
For more information regarding the ‘H’ Stops, see the Trade Management section on
page 31.
The first thing to do is to set up your screen so it looks like the one below. This is
achieved by making sure that Auto is selected from the tiling toolbar. Now, load up two
daily charts for Cisco Systems Inc and convert one of these to weekly by selecting
Chart > Convert > Weekly from the menu. Finally, load up a daily chart of the parent
index (in this case the NASDAQ 100 index.)
Finally, click the Cisco Systems daily chart and press the Tile to Pattern button. Your
screen should now be laid out like the one below.
• Note the band of heavy resistance that appears above the market. This tells you that
there is more chance that prices will fall, rather than rising to penetrate the resistance
area.
• The blue, downward facing trending indicator tells you that a possible short trade is
about to start.
• Also, note that the diamonds are red and that they have actually been red for the last
5 bars, indicating that a down trend is now underway.
• Next, look at the ‘H’ Stops; both of the ‘H’ Stops have just switched to being above
the bar. The evidence is accumulating and the timing is now looking OK for the
start of a short trade.
• The Relative Volume Gauge is showing that the amount of bullish volume (seen in
green) is well below the 50% mark, and that the closing price on this bar is below
the opening price, which is also a bearish indication.
• Both the ‘H’ Stops and the Diamonds confirm the poor performance. The ‘H’ Stops
have been above the bars all the time and the Diamonds have been red nearly the
whole time too.
• Also, note similar resistance levels on the weekly chart, which confirms what we see
on the daily chart. The chances of this stock rising up and taking out a potential
short are minimal.
• As the weekly chart has been short for a long time, we now have an even better
indication that now is a good time to short Cisco again. However, we’re not quite
finished with our analysis – it’s now time to look at the parent index.
• The first interesting thing we can see here is the resistance (again.) We can now say
that as far as we can comfortably ascertain, there is no way this market is going to be
going up very far.
• Right-click the bar where you want the trade to start. A pop-up menu is displayed.
• Choose Open New Position and then choose the settings as required.
Before setting out as an intraday trader, you need to decide on which financial
instruments to trade. We recommend you specialise in one area and stick to it, rather
than trying to trade everything. The major world indices, such as the FTSE 100, Dow
Jones Industrial, S&P 500, NASDAQ and the Dax are a good place to start. If you’re
trading indices, you would be well advised to follow the rules below:
• To consider taking a long intraday position in an index (i.e. to buy), it’s a good idea
to check that the trend on the daily chart is UP. If the trend is up, only take long
intraday trades. Do not risk taking short trades in a long market - wait for the
trend in the index daily chart to change direction first.
• To consider taking a short intraday position in an index (i.e. to sell), it’s a good idea
to check that the trend on the daily chart is DOWN. If the trend is down, only take
short intraday trades. Do not risk taking long trades in a short market - wait for
the trend in the index daily chart to change direction first.
Trending Pre-Checks
The first thing to do is check the direction of the trend on the daily chart of the S&P 500.
You need to look at the EOD chart of the S&P 500 to ascertain how you should be
trading the following day. We can check the Last Active Trend feature to see whether
the S&P is currently in a trend channel, the direction of the trend channel, and the size of
the trading range. See the Trends section on page 18. Also, you may want to switch on
the Blue Trending Indicators, the Diamond Indicators or the Trend Bar Indicator to
help you in your decision making (again, see the Trends section on page 18.) All these
facilities will all help you to properly gauge the trend.
The first thing to do is to set up your screen so it looks like the one below. This is
achieved by making sure that Auto is selected from the tiling toolbar. Now, load up the
following three charts:
Click the S&P 500 1 minute chart and press the Tile to Pattern button. Your screen
should now be laid out like the one below.
Finally, synchronise the charts by select File > Synchronise from the menu.
• In the example above, you can see that the both the 2 minute and 5 minute charts (on
the left), are showing established down trends, indicated by the red diamonds and
red bars.
• Ideally, before initiating a trade, we’re looking for a consensus indication of strength
(green indicators) or weakness (red indicators). In the example on the previous
page, you can see that weakness is present at the same time on all of the different
timeframes.
The next we can do is to check out the Relative Volume Gauge for the one minute S&P
500 chart, to see if there is more bullish or bearish volume at the moment (see the Supply
& Demand section on page 27.) You may also see red/green indicators in the vicinity,
which would represent latent imbalances of supply or demand in the background. You
need to take particular note of rectangular symbols, or groups of triangular indicators, as
these signs are often more significant. The “Master the Markets” book explains more
about the various supply and demand indicators.
In Summary
So far, we have seen the following evidence for a short trade:
• The daily EOD S&P 500 chart for the previous day is in a downtrend situation (and
weakness was also present.) This means that the intraday opportunities should be to
the short side of the market.
• The Diamonds and Trend Bar indicators are red on the 2 and 5 minute timeframes,
showing that a downtrend is in progress on the longer intraday charts.
• The Trend Bar is Red on the 1 minute chart, which matches the 2 & 5 minute
timeframes. The Diamond is white, which means that the short term trend is now
changing. The evidence is now looking good for a trend change across all three
timeframes. We could wait to check for the diamond to change red on the 1 minute
for further confirmation if required.
• There is a consensus of red VSA indicators (showing weakness present) across each
timeframe. Based on these observations, we’re now expecting the market to drop.
• The Relative Volume Gauge for the 1 minute S&P 500 is showing that there is far
more bearish volume in the market at the moment and the closing price is lower than
the opening price.
Based on the evidence above, the time is now right to enter a short trade.
The settings of the near and far ‘H’ stops can be adjusted in accordance with your
preferences. This type of stop system is designed to keep you in the trade as long as
possible, sticking like a ratchet at points where your trade is under most risk.
Most traders will liquidate a position under one of the following conditions:
1. Keep it Simple! Simple systems based on commonsense factors are nearly always
the most effective. The more complex your system is, the more room there is for
error.
2. In any speculative venture, your main concern is to always put the odds of winning
in your favour. That means, adhering to a set of trading rules, or a regime, that
constantly favours your position. For example, if a stock is rising, but its parent
index has been falling for the last 5 weeks, you should not be tempting failure by
going long! Instead, locate stocks that are acting weaker than their parent index (by
using the stock scanner facility) and short these instead.
3. Once you have your trading rules together – stick to them! When the system says
“Get out!” - DO IT! If you can’t operate with discipline, it’s time to quit; otherwise
you’ll blow yourself out of the market.