Studying Breadth of the Market

Market Breadth – ADS (Advance, Decline, Same) Feature in TrueData Cheetah is similar to the breadth indicator. Breadth Indicator measures the number of advancing and declining stocks using a mathematical formula. It reflects Market Sentiments. Looking at ADS, a Trader would get an idea about how a Market Performing. It also has a third line ‘Same line’ which shows the percentage of stocks which are neither advancing nor declining, it shows stock with no % change in their close price.

The advance-Decline line can be better understood by Studying convergence and divergence:-

Convergence

Bullish- when advance line converge towards decline line from bottom to above, then it’s a bullish convergence. It generally shows signs of trend reversal in the market from Bearish to Bullish.

Bearish – when advance line crosses the decline line by moving down, it leads to bearish convergence. This typically indicates a bearish reversal in the market.

Divergence

After convergence, ADS forming new highs or new lows. This can be used to identify a trend where fewer stocks are declining and the decline in the index may be nearing an end. Thus a trader can identify a stock in a group by using ‘% chg’ for trading.

Similar trading pattern could be followed in Bearish divergence.

Ratio

A/D ratio if above 1.25 shows a bullish trend in the market whereas if below indicates a Bearish Trend, if A/D ratio is between 0 and 1, this indicates bearish to choppy market. Using A/A+D formula shows a strong bullish trend if above 0.60 or bearish trend if below 0.50.

This TrueData Cheetah feature is therefore significant while trading as it gives you an overall view of the market.

Market eye filters is made creatively to help you take advantage of market opportunities without using any strategy. Market eye is an event tracker, a type of Market Scanner. There are pre-defined Bullish as well as Bearish events such as high of the day, low of the day, gap up, gap down, etc. Most of the software’s in the market provide this kind of feature but what makes this feature unique in TrueData Cheetah is the option of ‘Filters‘.

Market Eye filters will help you to filter out the choppy market, as a good scanner should not have same stocks repeating itself.

As I mentioned above, taking advantage of market opportunities such as:

1) Gap up/Gap down:–

Breakout occurs when a stock forms a Gap up, trader can take a long position or cover short position or a Gap down, trader can go short or sell long positions.

2) Turn over:–

Volume breakout can lead to market reversal or conviction that breakout is real. Momentum traders are thus benefitted from volume breakout. High volume with gap up or gap down could be identified with this filter.

3) Identifying Support and Resistance:–

When a stock reaches a new high in an uptrend it forms support and similarly, resistance is formed when a stock reaches a new low in down market. Thus Selling in new low and buying in new high can be a profitable trade. Reversals build slowly. Also in case of the first sharp dip always finds buyers and the first sharp rise always finds sellers.

4) % Chg:–

Long candle (bullish or bearish) accompanied with high volume filter is significant.

Removes noise from the market. Only significant movement between tick is identified thus stocks with significant movement can be concentrated upon.

Thus using our market eye one can trade in any kind of market in the right direction irrespective of noise.