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Note: marketDirection Monitor is a 64-bit application and requires the 64-bit version of eSignal in order to operate. A computer with a fairly recent processor and 32Gb of RAM is recommended, but not absolutely required. The total number of symbols that marketDirection Monitor can monitor simultaneously is limited only by your eSignal subscription symbol limit, your internet bandwidth, and your hardware. |
Overview
As mentioned in the Introduction, marketDirection Monitor's purpose is to seek out inflection points by looking for price action that is typically a precursor to change. It does this by searching for blocks of price action in various shapes and sizes, and in various combinations, which it combines into formations. The system is geared to identify these formations before the inflection point is reached, sometimes well before, so you will typically have plenty of advance warning and plenty of time to study the chart before anything occurs.
The default settings for all of the formation groups are fairly loose as we have found that even less-than-perfect formations can have outstanding results. For example, Dome and Chevron formations will often consolidate briefly after breaking into new high or low territory. By keeping the settings loose, most of the time the Dome or Chevron will continue to be tracked by the system so that when the stronger move does come the formation will still be on your radar.
Bullish Chevron formation that consolidated briefly before making the final push.
The scanning process takes place at the completion of each bar and any formations detected are only guaranteed to be valid for the next price bar. Now there certainly are times where a particular formation is identified somewhat early and it continues to display uninterrupted for several bars until the inflection point is reached. Then there are times when a formation will be detected and on the next bar a different formation is detected, and so on.
This is perfectly normal behavior and the takeaway is that it pays to at least take a cursory look at each formation as it is identified. Don't be discouraged if different formations are being displayed for a specific security over a sequence of bars as this may actually be a strong indication that a reaction will occur soon. Also keep in mind that each formation group can be toggled on or off, so if you wish to focus on a specific formation you have the option to do so.
Another aspect of marketDirection Monitor that comes in handy is the watchlist display itself. If you have a large enough basket of securities that are representative of the market in general, the directional bias of the formations that are being displayed at any given time can indicate overall market sentiment. So if the majority of formations are bullish you might want to focus on those, and vice-versa for a overall bearish condition.
Lastly, when using marketDirection Monitor keep in mind that the inflection point we are trying to identify is much more important than the actual formation we draw. The formation itself is just a tool to provide some visual context. Often times the formation will be "ugly" or the directional bias will be wrong. But time after time you will see that some kind of reaction takes place in the area indicated by the formation, particularly with the Chevron, Dome, Incline, Top, Bottom and Consolidation formations. So in our opinion it would be a mistake to focus only on well-formed or very obvious formations. Give the program a chance with the default settings for a few days and see if you don't agree.
In the end, trading requires volatility and price movement and marketDirection Monitor does an incredible job of identifying price levels where this will take place.
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Note: To get up and running quickly, please see either the Watchlist Operation or Chart Operation sections. Both of these sections include step-by-step instructions on loading one of the marketDirection Monitor Demo pages that were included as part of the installation. |
Operation
In terms of operation, it is recommended that you use marketDirection Monitor as follows:
•Select the list of securities that you wish to monitor, and the bar intervals you will use.
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•Set up your watchlist and chart components based on what you decided above. See the Demo Pages, Watchlist Operation and Chart Operation sections for details on the correct way to set up these components.
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•Once the watchlist and chart components are up and running, you can make adjustments to the individual formation group settings (or remove formation groups that you do not wish to consider). Consult the Settings section as well as the individual formation sections (e.g., Dome & Chevron, Incline, Top/Bottom, Consolidation, and Cycle) for more information on the formations and their parameters. Be sure to save your eSignal Page frequently so you do not lose any changes.
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•Optional: Set up column sorting logic in your watchlist(s) that makes the most sense for you (i.e., sort by Rank, or sort by Age and then Rank, etc.).
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•Optional: Configure Alert Padding for one or more of the formations, if desired. Alert Padding simply reduces the sensitivity of the alert logic so that you are only alerted to larger moves.
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•In real-time operation, the watchlist component(s) will update and refresh on each new bar. Click on the formations in the watchlist that interest you and review them in the chart component. Take note (literally) of any that look promising so that you can go back and check on them if they are not already at their inflection point.
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•If you see an alert condition (♫) in the watchlist Status column, that means that price is moving in the direction indicated by the formation bias. If you see a volume condition (●) in the watchlist Status column, that means that price is currently trading at or above the average volume for that security. If both appear at the same time in the Status column then it is definitely worth taking a look.
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•If you trade only one or two securities, perhaps in only one interval, consider setting up marketDirection Monitor to monitor just those one or two securities in multiple intervals. If formations pop up at the same time but in different bar intervals this can be a very strong sign. All of this is very easy to implement in marketDirection Monitor.
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•Even with a very small list of securities and/or intervals it is likely that the system will generate a large number of formations for you to evaluate throughout the trading day. For the first few days you might just want to inspect all of the formations and watch how they develop so that you can get a better feel for which formations will be the most productive for the securities and/or intervals that you trade.
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The Formations
The actual formations that are identified by marketDirection Monitor can be grouped into five categories, which are discussed in the sections that follow:
See Also:
