"The trend is your friend."
This a common phrase most have heard but many traders have no idea how to catch a trend consistently.
GammaEdge's Market Trend Model (MTM) makes this easy and is something you can implement tomorrow!
Here's how:
This a common phrase most have heard but many traders have no idea how to catch a trend consistently.
GammaEdge's Market Trend Model (MTM) makes this easy and is something you can implement tomorrow!
Here's how:
1/ Every transaction in the market produces an uptick (buying) or a downtick (selling).
One way to measure buying and selling is through the Cumulative Tick, the backbone of our MTM.
Before going too far down the rabbit hole, here is a primer on the CT:
One way to measure buying and selling is through the Cumulative Tick, the backbone of our MTM.
Before going too far down the rabbit hole, here is a primer on the CT:
2/ Tick is transactional — it triggers with each stock transaction.
An uptick occurs when the stock price increases, no matter if we buy 1 share or 1,000 shares.
It is similar for the downtick scenario too.
We then keep track of these upticks and downticks...
An uptick occurs when the stock price increases, no matter if we buy 1 share or 1,000 shares.
It is similar for the downtick scenario too.
We then keep track of these upticks and downticks...
3/ By subtracting total downticks from upticks over a short interval (1-minute maximum duration), we can create a net balance (i.e., net buying activity).
This directly represents the sentiment of market participants over the measurement's time period.
This directly represents the sentiment of market participants over the measurement's time period.
4/ This has advantages because the CT is not delayed like other indicators, which is KEY 🔑
Why?
By focusing on the slope of the CT line, we gain insight into trader sentiment and URGENCY.
Why?
By focusing on the slope of the CT line, we gain insight into trader sentiment and URGENCY.
5/ This graphic below shows the CT as a bolded white line.
After one glance, it is intuitive that the market is in an uptrend -- the CT is moving from lower-left to upper-right (LLUR).
Said another way, participants are net buying.
After one glance, it is intuitive that the market is in an uptrend -- the CT is moving from lower-left to upper-right (LLUR).
Said another way, participants are net buying.
6/ A positive slope indicates more buying activity than selling.
A negative slope indicates the opposite.
Your eye is a great filter -- you can see the general uptrend and periods where the CT pulls back.
We exploit this to trade.
Read on (and take notes ✍️ )!
A negative slope indicates the opposite.
Your eye is a great filter -- you can see the general uptrend and periods where the CT pulls back.
We exploit this to trade.
Read on (and take notes ✍️ )!
7/ Now that you understand what the CT is, why it's important, and how it moves -- the question becomes "How do I use this to time the market and make money?"
There's no better way to show you than with another visual.
Start on the left side and read to the right:
There's no better way to show you than with another visual.
Start on the left side and read to the right:
8/ The previous example shows a bearish to bullish reversal with follow-through.
Catching these trend changes, especially from oversold or overbought conditions, can help align trade entries and exits with market sentiment.
As they say, "A rising tide lifts all boats."
Catching these trend changes, especially from oversold or overbought conditions, can help align trade entries and exits with market sentiment.
As they say, "A rising tide lifts all boats."
9/ How can a #0DTE trader use the CT?
0DTE traders want short-term, real-time sentiment.
For this, focus on the slope of the CT.
0DTE traders want short-term, real-time sentiment.
For this, focus on the slope of the CT.
10/ The next chart example shows how a #0DTE trader could follow the intraday trend via CT.
Many of our members report getting out of the trade or reversing their position when the CT intraday trend falters or reverses.
Many of our members report getting out of the trade or reversing their position when the CT intraday trend falters or reverses.
11/ Swing and Positional traders add to winners during short-term pullbacks in the context of a long-term uptrend.
How can these trading styles use the CT?
How do you know if you can add to a position?
As we say in GammaEdge, "Every swing trade begins as an intraday trade."
How can these trading styles use the CT?
How do you know if you can add to a position?
As we say in GammaEdge, "Every swing trade begins as an intraday trade."
12/ Like the aforementioned #0DTE traders who follow the intraday trend, swing traders should do the same.
If that signal persists, the position can be held overnight.
Here is another example:
If that signal persists, the position can be held overnight.
Here is another example:
13/ As one final example, the following shows a progression and integration of styles: 0DTE to Swing, Swing to Position.
Start in the lower left and follow the sequencing to the upper right.
The market is all about sequencing.
Start in the lower left and follow the sequencing to the upper right.
The market is all about sequencing.
14/ We have developed short-term, medium-term, and long-term signals through extensive backtesting via tools from our partner @EdgeRater.
The compelling results show a clear edge to using the Cumulative Tick in your trading, whatever your trading style.
The compelling results show a clear edge to using the Cumulative Tick in your trading, whatever your trading style.
15/ If the CT thread has piqued your interest and you want to learn more about how it can improve your trading, consider joining our community (risk-free 14-day trial)!
16/ We have versions of the CT that run in @TradeStation and @TDAmeritrade TOS and are available to all members upon sign-up (including back-testing results using the @EdgeRater tools).
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We hope this thread has provided value for you.
Follow us @GammaEdges for helpful content on trading, trend following, and making the options market actionable.
Like/Retweet the first tweet below if you learned something new:
Follow us @GammaEdges for helpful content on trading, trend following, and making the options market actionable.
Like/Retweet the first tweet below if you learned something new:
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