Since VT now includes volume information, I felt it necessary to include one of my favorite volume indicators I use for stocks. The Volume Flow Indicator (VFI) is from the June (I believe) issue of Technical Analysis of Stocks and Commodities magazine. Please refer to this article for more information about this indicator.

This indicator has its strongest signals when it (volume) diverges with price. I like to use momentum to also confirm price action. The following screenshots are examples (not all inclusive) of the divergence set-ups. The pink trendlines are drawn in by me as illustration.

This tick chart shows divergence of price and the VFI.




This 1-min chart shows the divergence of momentum and price. A good signal occured when VFI crosses its signal line.




This 10-min shows that price made a double-top. However the VFI was plunging... a precursor to what follows.




This 30-min shows both VFI and momentum diverging with price that made a new low.




This 2-hour (current - 7 Jan 2004) shows that price has been making new lows. The VFI and momentum are diverging, and VFI is actually positive. To predict the future, I would say that cable will strengthen.




A 4-hour chart.




A daily chart.




The indicator follows...

I discovered your post recently and was very impressed. I seems to me that the "crossing / bounce" signals very often a Top or Bottom. Do you agree ? Do you incorporate these indicators (VFI & Momentum) in a trading system ? Please, would you agree to elaborate ? TIA

BigBlackFeet

Yes, I use VFI, Momentum, and have just incorporated the CCI as a better timing indicator for divergences with VFI and Momentum.

The setup for my trades are first, I must see (the construction of) a divergence in either VFI or momentum. Both would be great, but sometimes that doesn't happen. Then I must see CCI at an extreme, either >100 or <-100.

When CCI crosses +-100 back toward zero, I pull the trigger. When the CCI crosses zero, I reign in the stops. This strategy must be done during London or US maket hours.

The trick is of course seeing the divergences BEFORE there are actually confirmed divergences. That's where the CCI comes in. I have an alert set to go off when CCI is over 100 or less than -100, then I look at VFI and momentum to see if they are set up for a divergence.

Check it out on your own charts (CCI-14 and Mom-14).

I always check out the longer timeframes. The daily will give you the overall sentiment of the market. If the daily is diverging, you are looking at a major top or bottom. The 4-hour is the mainstay of the institutions, so I always look at that. In fact, I use the 4-hour divergences to make a little side cash at a fixed odds site (BOM). Using a 2-day NO TOUCH on the opposite side of the divergence, just beyond support/resistance automatically gives you a 66% chance of making money. (Only early in the week, because major news comes out on Thurs/Fri).

I will post some charts soon.

Carl

Yes, first thanks a lot for your detailed answer. You very kindly describe a whole trading system that seems very efficient.
I'm longing to see your new charts and give a try to this TS.
However, I must confess that due to my unfortunately poor english, I'm afraid I didn't quite cath the exact meaning of your last sentence:

".....
to make a little side cash at a fixed odds site (BOM). Using a 2-day NO TOUCH on the opposite side of the divergence, just beyond support/resistance automatically gives you a 66% chance of making money
...."
I hope you'll be kind enough and take the time to help me understand !

Thank again.

Here is a quick example: It seems the CCI-34 gives great timing signals (in this timeframe) which confirm volume, momentum and price divergences. I like it when the complete setup happens then the CCI signals. Sometimes only the VFI diverges.

I don't know how much I can explain here in this forum, but I was referring to BetOnMarkets (google it). You can perform options type trades on FOREX at that site. They don't really call it that, but thats what they are. In the case of 21 Apr, I would have bought a 2-day NO TOUCH (basically selling a put option) on the USDCHF at 1.1700. What I'm believing is that USDCHF will not touch 1.1700 in the next 2 days. Using this strategy, you can make a good 30-50% for a 2-day trade.

[img=left:0268b4e3de]broken link[/IMG]

nice post

Crodzilla,

i dont suppose you could put all your trading conditions mentioned above into a trading system, to be built by Chris .S. I find it difficult for some reason your screen shots dont appear on my screen.

I see how the CCI works but im not sure what you mean by divergence of VFI and Momentum, could you upload the screenshot with settings (or not) via the file attachement mechanism within [reply].

Kind Regards,
LEviathan

Hi Leviathan,

Even with the screenshots provided, this isn't a system that can be programmed in VT Trader for full automation (as described). It's too discretionary.
Regards,
Chris