Every day, traders have to make big decisions about support and resistance. Should I deploy capital based on this high and low, or another? Which levels have real meaning, and which should be ignored?
Today we’re reviewing a product designed to help TradeStation users answer some of those questions: Insider Bars by OF-G.com. It’s one of the tools for sale in TradeStation’s TradingApp Store. Free trials are available.
Insider Bars analyzes order flow to determine what investors are doing at different prices. Upticks help find buying areas and down ticks detect selling pressure. The algorithm then crunches thousands of transactions to find to concentrations of activity, which are plotted with red and blue dots.
“It looks at every price point and micro-analyzes to see if bulls or bears are more in control,” creator Chris Cheatham said. “This lets you see the auction process as it actually occurs.”
Yesterday’s session provides an example of how the tool can be used on S&P 500 e-mini contracts (@ES). The first chart below has five-minute bars. It shows the index initially bouncing at 2691 before falling through it. Notice how the second time, there were only red dots near the low. That indicates bears were in control, according to Cheatham.
His tool also draws light gray zones at the highs and lows of the previous regular session (9:30 a.m. ET and 4 p.m. ET). This is intended to hide potentially unimportant, low-volume price action that occurs overnight. Notice how that price area effectively served as resistance yesterday morning. (Top of chart.)
The Insider Bars work space also features a longer-term view with 30-minute bars. This chart shows the volume-weighted average price (VWAP) for both the current week and the previous week in orange. Traders can use it to find trend signals between sessions over the previous month. It also draws black lines for “value ranges,” areas where 70 percent of price action occurs. Then, each following week, the previous value ranges become horizontal dark gray price zones. Notice how one of those levels served as resistance on April 9.
“Thinking of the week as a session is a very powerful idea,” said Cheatham. “There is a natural periodicity in markets.”
The 30-minute chart below shows how some of these indicators help analyze price action in @ES.
This article is a series of posts about tools for sale in the TradingApp store.
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