In a market dominated by High Frequency Trading (HFT) and hedge funds, it is becoming increasingly difficult for the individual trader to gain an edge. In the last few weeks I have devoted some time to scalping futures which is not my normal trading activity. There are as many different entry methods and signals as traders. However, anyone who has traded for any length of time (i.e. survived) knows that entries are not nearly as important as money management and exits – in that order.
HFTs and hedge funds do their best to hide their activity (random lot sizes etc) but the one thing they can’t hide is their desire to execute a large number of trades at a given price. One can glean a hint of this activity by watching the time and sales tape. However, tape reading is a skill few possess – yours truly included. Enter the Tape Momentum indicator. This is my solution to seeing rapid changes in the pace of the tape. As large traders try to execute numerous trades at a given price, the tape speeds up and the Tape Momentum indicator spikes to indicate this activity. The average tape momentum bars are colored red. As the momentum increases, the bars turn yellow and then green when an extreme spike occurs. Spikes are cues that large players are rotating in/out of the instrument (i.e. potential reversals or breakout/breakdown). This is designed to be used as an exit cue – a signal to tighten your stops if in a trade. I have found it to be very useful when trying to get the most out of a runner. You will see in the image of the ES below that the spikes tend to occur several bars prior to key inflection points. (PS: I will get this to the Pro Members this weekend)
Tape Momentum
Brilliant !
Very nice, looks promising.
Thanks for this indicator, looks very good.
P.S: Where can we get the adaptive CCI?
I have not made it available.
Any chance to make the adaptive CCI available in the near future ?
Thank you.
I’m not planning to release it for now.
-Eric
Eric,
You do a great job here, and provide a great service.
I was curious about your thoughts on (link removed)
I don’t think you’ve ever talked about them.
They’ve got some awesome stuff over there.
(Please don’t take this the wrong way – I think you’re awesome!)
I’ve said it many times here and elsewhere…If someone offers to sell you an indicator with lofty claims of guaranteed profits they are trying to take advantage of your lack of market knowledge – pure and simple. Don’t fall victim to any such nonsense.
No indicator there, here, or anywhere else will magically turn you into a good trader. It takes hours of study, screen time, practice, discipline, and most of all money management.
That site is a classic example of someone trying to capitalize on new traders’ ignorance. Enough said.
Thanks Eric just downloaded Tape -M much appreciated, how would compare this to Berry’s Better Pro AM (blue/yellow bar) indicator — thanks again
Not sure what’s going on in that indicator so I couldn’t tell you.
Thanks
Many professional traders only look at price action in relation to support and resistance points. I have scaled back my indicators to a simple 1-5 SMA ribbon combined with a 20-100 SMA ribbon, Shadow Trader Pivots and Volume Profile. I am very interested to see if this adds one more tool as a clue for end-of-trend.
Thank you
So this new indicator can only be used with tick charts? Can it be applied to a 5 minute chart somehow?
TICK charts only.
Have you released the Tape Momentum indicator.
Thanks
Yes. The updated zip file is posted to the Pro forum as usual.
-Eric
Hi Eric, checking out the TapeMomentum study…like what it does ;-} I cut out the histogram and made it an upper study to get just the cap dots above the high – to save chart space. I get the dots to stick in the correct spots, but a spot keeps moving with the current bar. While I’m busy ignoring it a 2nd dot gets printed = prior dot real signal ; so I set an alert if two spots occur in a row to grap my attention. Everything I’ve tried to remove the ‘rolling dot’ wipes out all the dots. So I’m using it, but if you are interested in making it an upper study as well I would be grateful, and interested in how you set it up. I can cut & paste, but this has put lumps on my head……thx for all you do…dave
Will add an upper study to list of things To Do…
-Eric
Eric — THANK YOU for more great stuff.
Apologies if this is right in front of my face, but what is the significance of the purple dot at the top of the more extreme green bars? Thanks.
The indicator will cap very large spikes at some multiple of the average to avoid unnecessarily scaling the entire bar series down and making it hard to see. If a bar has ben capped (i.e. truncated) it will have a purple dot on it. You can turn this off in the settings to see the difference without.
-Eric
Yup, like I said, right in front of face. Thank you, Eric.
High Frequency Trading has really made it more difficult for individuals, but good traders adapt. In this context, this indicator appears to be one first-class solution. I’m currently testing its performance, trying to get a handle on its predictive value. Standarizing and gathering the data is tedious. Eye-balling my preliminary experience, it does appear to be of greater value for exit timing. And Eric, as you point out, you can often make up for poor entry timing with good exit timing and money management.
Like other entries above, would vote “Yes” on the upper study version and “Yes” on a Pro member release of “Adaptive CCI.” The discretionary trader would be well-served by trading your Adaptive CCI on the tagged extremes.
Another important and innovative study, Eric.
Grateful.
- Steve
What are the names of the other indicators you are using in this chart to confirm the tape momentum? Are these scripts also in the bundle?
Great work.
There are 2 TS_Moving averages (hull 9, ema-45), keltner channels (4.5, 2.6), TS_MultiStops (customized), and Perfect Hedges improved Sine Wave Cycles (in the Pro area of the forum), TS_BetterVolumeCustomColors. The Adaptive CCI is not available.
Eric
Thanks Eric.
Eric, I can get the TMI to show on the lower study. But can’t get the upper study to work. Using /6E in 233t chart.
thanks,
Skip
Eric (or anyone), how important is the length of the signal in the Tape Momentum study?
Obviously the lower volume in pre-market and after hours will produce smaller signals. But does the height of the signal hold greater significance? I wonder, especially as the signals in the upper Tape Momentum are all the same size.
Thanks.
The height of a given bar should be judged in the context of the surrounding bars and not in terms of absolute height. Since pre/post market volume is far less, the absolute height of these bars will be smaller.
Thank you, Eric.
Hi Thinkscripter,
I don’t understand why you’re saying this indicator is useful for exit signals only.
Wouldn’t a yellow or green signal indicate increasing buying interest if, say, a stock’s price on the 5 minute chart is just starting to go up? The green signal could indicate the start of 3 or 4 bars of higher price action, no?
Thanks,
Andy
Andy,
I designed it for myself as an exit cue and that is how I use it. It can work extremely well as a reversal indicator too.
Eric
You explained red, yellow, and green, but what do the blue bars indicate?
The blue and red bars in the price panel are colored to reflect the ATR trailing stop.
Hey, Eric,
You’ve done so many great things here but I must say the Tape Momentum is a favorite.
Barry asked above about the blue bars. I know what an ATR trailing stop is, but I fail to see how blue bars in the lower TM study reflect that. On a 3200 tick chart at 8:32 on 5/20/11 there was a HUGE blue bar and shortly after /es started a 10 point decline, and perhaps I had not noticed previously, but besides that one, there were several more that began at 5:13. Would you please expound a bit on the meaning? Thanks very much.
Blue bars in lower TM study? You lost me there. There are no blue bars in the Tape Momentum. The blue and red candlesticks reflect a basic ATR stop. What blue bars are you referring to?
Eric – sending you and email with attachment. I didn’t think there were blue bars either.
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Hello Eric,
I have been having good luck with this indicator as of late in combination with support and resistance areas and had a question for you that I did not see in this tread. Do you have a legend or cheat sheet on what the different color bars mean? I understand the green but am curious about the light blue, yellow and red. I have been day trading off the green, blue and yellow spikes specifically. Many thanks and great work Eric!
Adam S.
Red – Average
Yellow – Above average
Green – > 2 standard deviations above average
Magenta Dot – Spike that has been capped to prevent abnormal scaling.
There are no blue bars….
Hey Eric,
I added the Tape-M upper study onto my tick chart and shows nothing on the upper price chart? How do you activate it? Thank you and great work.
Ensure you have the style setting for “Overlapped Volume” checked.
I did, but shows nothing???
Ok, I need to see your chart to be able to ascertain what you are doing wrong.
One thing i have noticed while watching this indicator on /ES for quite some time is that the much smaller spikes (sometimes hard to notice) seem to project a reversal (institutions taking up a position), while the very large spikes seem to be more indicative of stop running, where unless you are scalping, a reversal is not as likely.
TS_TapeMomentumSTUDY is my favorite indicator for entries and exits.
http://tinypic.com/r/2qn0ap2/7
Can someone help me create an alert when the histogram is greater than n?
Thank you!
These questions are better off asked in the Pro section of the forum “Requests”. You might be using an outdated copy of the Tape Momentum as well. There should be no bars colored cyan as you have in your picture.
-Eric