Quote from jack hershey:
I always make it a point to read your posts. While I do not orient to up and down, I do use an up and down oriented chart for Premium considerations and it is a 1 minute real time chart that locks in the past on 1 minute intervals.
The Premium may be found using any number of resourses. The web site riskarb.com is one of those. There, is is set before open using the business school type orientation of fundamental analysis calculations on the DJIA stocks. This means it is an important value since the Premium is used around the world by the larger organizations.
It, therefore, is a terrific referential value that is set on a daily basis.
For roll over indexes, the premium is in relationship. By using the Cash value of the DJIA and relating it to DJXX or YM, you have a simple indicator (call it X) of the present market relationship to the Premium Call it Y)(determined by FA).
The two values, X and Y are not always the same during the day.
Some organizations calculate the Premium and use it for gating their bots. A typical value of change during the day is 4 points. This is called "drift" and these bots are triggered to take advantage of the disparity because it is felt that the disparity will be corrected if it drifts too far. This is correct for making money doing arbitrage. Hence the name of the site, riskarb.com.
For everyone's comfort, I have mentioned a lot about the CW oriented aspects of the premium.
You mentioned that the "leading" aspect of indicators is a nice consideration. Here the lead is 30 seconds to 2 or 3 minutes; I find such an amount of time a good amount as compared to the amount of time a person may spend looking at the progress of a chart such as your multi indicator chart.
By using a pre open setting and not dealing overtly with drift, a person can take advantage of the "tells" from those who most influence the market. Script or a snippet is sufficient for using the Premium as a leading indicator.
Any person can do the first and second derivatives visually and at the pace of normal trading of turns. Take X and Y and use arithmetic so that when the markt goes long, your display bar value is UP. (black) This will automatically take care of when the market is going DOWN (red).
This gives you a row of bars with amplitudes and the amplitudes vary from bar to bar. A line drawn from bar to bar (I just look) is either sloping up or sloping down. This is the first derivative.
It trading making money happens all the time. When you are as far away from a turn, you can know that by looking for the bar to bar line becoming horizontal. It changes its slope from one sign to another. This is an early warning system for telling you that taking a trade's profit segment is comming up.
All of this is offest in a leading manner as you see and it is parasitic to those who trade the big money. I call them "smart money" since it shows how they use the premium for arbitrage with huge sums of capital.
All smart money exhibits an odd harmonic Fourier wave form, almost. To "see" it, think of a black head and shoulders and a red head and shoulders. Make one adjustment (go from flute to oboe so to speak). Simplify the left shoulder by drawing a line from the shoulder to the head so the intial part of the formation is "smoothed". (In an oboe the fifth is dominant.)
Read the OP post in a thread called "how to sit on winners". The waveform described above does just that as a leading indicator. The OP describes in his first post exactly how he screws up and induces permanent fear of trading by hyis repeated failure.
He says he gets in when before the red goes to black (think of the premium velocity increasing (getting less and less negative, going to zero and tutrning positive) on a long entry (at some non fearful point). He exits on the left shoulder of price. and watches from the sidelines to the line across the tops of the price shoulder. He holds to the peak of price and begins his "freeze" (the Lizard Syndrome and the Bohr Effect combo). His oxygen has declined in his brain to 30% below required for rational thinking. He holds the drawdown from the top of the price head and goes upside down due to the second poor entry.
The Premium snippet using X and Y, would give him a leading indicator and it eliminates "seeing" his first exit (he should not display price on his screen; it screws him over with fear).
Long ago there was an SPM that had lagging signals (for two reasons: wrong signal and lagging signal). So it traded many angular degrees late in the cycle.
The Premium snippet is the reverse of a lagging signal. Look at the "signs" of X and Y to be able to use arithmetic to get the color to always work for UP and DOWN trends. The color is the trend.
The greatest advantage is that the magnitude of the bars tell you how fast you are making money. On my display I put two lines on each side of neutral. They tell me the relationship to trend slope to bar volatility. All ATS's need this measure for sidelining on an CW derived ATS (the riddle of induction problem that is always there in CW). Smart money works by induction and there is the small draw back of what they call "noise". I do not deal in either anomalies or noise but those I am parasitic to, do.
You will find a huge increase in your profitability when you begin to use leading indicators such as this Premium snippet based upon observing first and second derivatives in a Fourier series setting.
Some platform providers we have worked with have it as SOP these days.
