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Four Steps
Indicators Download Entire Indicator Manual FREE
TradeStation®
7 is a
registered trademark of TradeStation Technologies, Inc. Introduction On the following pages you will find detailed descriptions of the use of each
indicator listed above. Frequently users will request that an automated system be designed using a
combination of several of the tools presented here. I am available for custom
programming of such a system should you wish to do so.
The JFC Market Direction Indicator is used, in conjunction with the Clayburg Directional Day Filter, to predict the direction of the major trend early in the trading day. The
indicator will appear as two different colored histograms. As with all of these
trading tools, a blue color will relate to a buying situation and a red color
will indicate a selling situation is in order. The blue histogram will plot
above the zero line and the red histogram will plot below the line. This
indicator measures both the positive and negative energies within the market and
then does a comparison between the different energy levels. The positive energy
of the market is charted by the blue histogram while a red plot depicts the
level of negativity in the market. Therefore,
60 – 90 minutes into the market day, if you observe more blue than red
on the subgraph containing the indicator you can be confident in expecting an up
day for the remainder of the day. Conversely, an abundance of red visible on the
general plot will be telling you that the most profitable trades will be found
on the short side for this day. There
is a third plot on the indicator which measures the balance between the positive
and negative internal market forces. This calculation is represented by the line
you will see plotted overlaying the histograms. If it is plotted on the red
portion of the indicator it will appear as a yellow line while it will appear as
a white line when it is in the blue portion of the subgraph. This
line is a very important one to observe occasionally during days which are
identified early on in the trading day as being sideways in nature. Careful
observation of this plot can give you an early warning of a general trend change
for the day.
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The appearance of cyan squares below
the price bars is indicative of a significant downtrend in progress which is
exhibiting signs of exhaustion. In other words, this indicator signifies that
the current downtrend has reached the point where other similar downtrends have
"run out of steam" so to speak. When the cyan squares no longer appear
below the price bars the probability is high that at the very least the current
phase of the downtrend is decreasing in momentum. Entry Options User Customizations Use this indicator in an automated Trading System : Four Steps Level Two Indicators & Systems
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The JFC Real Time Pivot Indicator has the same basic uses as the JFC Entry Point Indicator in that both tools are used in an attempt to define short term high and low points in the market. The Red Dots above the bars are sell points while the Blue Dots below the bars indicate buying opportunities. There are, however, important basic differences in the manner in which these
indicators perform their tasks. First, refer to the JFC Entry Point section and
review the manner in which they are plotted.
The obvious advantage is the quicker appearance of the indicator.
Unfortunately, a degree of accuracy, when compared to the Entry Point, must be
sacrificed. In a sharp, protracted uptrend or downtrend the indicator will give
premature indications of a high or a low. Using this indicator in combination
with the JFC Rubber Band Indicator and the JFC Entry Points can greatly increase
the accuracy of this tool. Entry Options 1. Buy or sell at the market at the first appearance of a JFC Real Time Pivot
Higher risk. User Customizations 1. FDB: On a scale of 1 - 100, the FDB input sets the indicator sensitivity for the buy signals from the indicator. A lower number equals a higher sensitivity and thus fewer, but possibly more accurate signals. Suggested range = 5 to 15; optimal setting is 9. 2. FDS: On a scale of 1 - 100, the FDB input sets the indicator sensitivity for the sell signals from the indicator. A higher number equals a higher sensitivity and thus fewer, but possibly more accurate signals. Suggested range = 85 to 95; optimal setting is 91 Use this indicator in an automated Trading System : Four Steps Level Two Indicators & Systems Contact
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Plot Explanation The JFC Exhaustion Indicator is one of the more complex
tools to understand. On the other hand, when properly mastered, it can be one of
the most rewarding when attempting to ascertain turning points in the market. Basic Exhaustion Theory It is very important to realize that markets, trends, or
most anything else for that matter, will not continue in one direction or
another forever. There comes a time when the trend will reverse and go in the
opposite direction for a while. Nature has a way of constantly trying to achieve
equlibrium.
It is fairly widely accepted that markets will trend for only 25% of the time. During the remaining 75% they are in a sideways phase. It is during this sideways phase that exhaustion indicators are valuable in detecting turning points in the markets. Interpretation There are multiple interpretations that may be derived
from the plots of this indicator. Alternative Interpretation of Exhaustion Indicator in a Trending Market
Although the primary use of the exhaustion indicator is the identification of turning points, there is alternative interpretation which can be used in a trending market. When a trend is identified with the use of the Market Direction Indicator, the Volume Direction Indicator and the Intraday Hi - Lo Indicator, the Exhaustion Indicator can be used to identify retracement points at which entries can be taken inthe direction of the persistent trend. In the chart to the left note the activity of the market when the red line pulls back between the yellow bands and briefly encounters the white line. These retracement areas frequently provide excellent entry opportunities. Also, note the difference in the pattern at point B when the red line proceeds abruptly through the white line and proceeds through the upper yellow band before it goes back below the white line. This pattern, following multiple retracement signals, often signals the end of the short term trend. Note the presence of the Intraday Hi - Lo indicator (small red dots) as it identifies the new lows being made by the market as the floor traders run the stops below the low of the day. Use this indicator in an automated Trading System : Four Steps Level Two Indicators & Systems Contact
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Plot Explanations The JFC Exhaustion 2 Indicator will plot a dot (white) on the red line
after it has crosses above the upper band and turned lower or has crossed below
the lower band and turned higher. It can be used in conjunction with the companion indicator. When used in in this manner, it makes the turning points of the red line easier to observe and therefore determine when the trend has changed according to the JFC Exhaustion indicator. This tool can also be used as a stand alone tool. It is quite interesting to observe the pattern created when this indicator is used along with the JFC Real Time Pivot indicator (Red and Blue Dots). You will readily note that the real time pivot will often slightly precede the actual turning point in the market while the JFC Exhaustion 2 indicator will slightly lag the turn. The two, when used together, can be a very powerful trading tool. CAUTION: When using this indicator with the JFC Exhaustion Indicator be sure the inputs for the two indicators are identical to each other. The plots will not match up if different inputs are being used.
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JFC Cluster Indicator The appearance of a larger
magenta dot above a price bar indicates that the market may have
reached a significant exhaustion point indicating a possible selling
opportunity.
1. Buy or sell at the market at the first appearance of a JFC Cluster
Indicator Dot. Higher risk. User Customizations Inputs: Plt. This input will define where the indicator dot will be plotted (plt) in reference to the high or low of the bar in question. For instance, on an S&P chart, a 5 entered here will plot the dot 5 points above the high of a high exhaustion point and 5 points below the low of a low exhaustion point. Experiment with this plot until you are visually comfortable with the presentation. Use with Other Indicators I've found this indicator to be particularly useful in combination with the Real Time Pivot, Reversal, and Exhaustion 2 indicator. Since all of these programs utilize different pattern recognition scenarios, an area in which all 4 are signaling an upcoming price move has a higher percentage of accuracy that using any of the tools separately. Use this indicator in an automated Trading System : Four Steps Level Two Indicators & Systems Contact
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The Volatility Stop Indictor, as with many indicators, has as its principle function the definition of the current trend. Note that when prices are above the Uptrend Volatility Line (UVL) the trend as defined by this indicator is considered to be up. When the prices are below the Down Volatility Line (DVL) this indicator is considered to be down. The UVL should be plotted as blue as it defines an uptrend. The DVL should be plotted as red as it defines a downtrend.
The market changes from an uptrend
to a downtrend when a bar CLOSES below the
plotted UVL. Note that the low of the bar can be
plotted below the UVL without initiating a trend
reversal to down. Entry Options None. This indicator is not intended to be used as an entry tool. Its best use is for trend definition and stop placement. Stop Placement Since the trend is defined to have changed when the market closes above or below the indicator lines, this indicator provides an excellent tool for the placement of trailing stops, particularly after a sustained move in the market and the line has drawn close to the price bars. User Customizations Length: Range = 7 to 35; 21 to 28 is optimal. Higher numbers = decreased sensitivity. Factor: Range = 2 to 8; 4 to 6 is optimal. Higher numbers = decreased sensitivity. Use this indicator in an automated Trading System : Four Steps Level Two Indicators & Systems Contact
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The appearance of a blue dot above a price bar indicates that this bar is a significant high defined by the sensitivity settings of the indicator. The appearance of a red dot below a price bar indicates that this bar is a significant low defined by the sensitivity settings of the indicator. Entry Options User Customizations Inputs: Strength: Practical range will be 2 - 5. Two will probably be optimum. Lower numbers will give a higher sensitivity. The most important aspect of this indicator is to realize
that for a bar to be marked as a high or low there must be an equal number of
bars both prior to and following the bar which, in the case of a high, have
lower highs than the market bar, or in the case of a low must have an equal
number of bars both prior to and following the bar which have higher lows. The
strength input defines the requisite number of bars necessary to form the high
or low. The trick to making this indicator as individually useful as possible is the constant observation of its activity in real time as well as on historical data. It is also important to periodically adjust settings and data compressions to obtain settings which closely match current trend changes in the market being observed. Use this indicator in an automated Trading System :
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The
JFC Intraday Hi Lo Indicator is a useful tool which is used to automatically
notify the user when the high or low of the current day is being approached.
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|
 By John F. Clayburg
JOHN WILEY & SONS, INC. |
