Creating an Index

bearmountain I use custom indicies to help
spot divergance between a normal price or cap weighted
index like the dow/sp500..

e.g you could have a potential failed double bottom pattern that
takes out the 2nd low on the sp500, but on the custom index
you may notice that the 2nd bottom hasnt been took out yet.

Also as a 2nd example you can use the custom index to create
market breadth studies like tick, uvol/dvol, trin etc that are a better representation and update faster than the usual nyse/nasdaq.
 
david22, thank you for your reply, very informative.

I have thought about creating a custom mkt breath index off a list of stocks. but as a tradestation use wasn't sure how to go about doing it.

are you saying do it programatically? so a custom index of 10 stocks, programatically capture all the upticks/downticks of the indiviaul stocks to create a custom TICK?

Thanks
 
bearmountian to create a custom index and breadth studies like
advancers/decliners, uvol/dvol I use TOS and excel.

The fields I look at are volume, open and the last price fields.


Here's a link showing how to link TOS to a spreadsheet:

http://readtheprospectus.wordpress....or-swim-for-streaming-real-time-calculations/


In terms of the Tick indicator, I use the standard nyse tick only.

You could create market breadth tools using neoticker, especially
the tick for a basket of stocks.

http://www.tickquest.com/?page_id=18

I think theirs no programming invoved using neoticker
becuase they have already created those martket breadth tools.
But it requires a datafeed like esignal.


Using TOS and excel requires no datafeed costs but requires
someone to program your excel sreadsheet using VBA to plot a chart of the incoming streaming data.
 
Thank you david and bob for the links. much appreciated.

intuitively I always think there is an edge in using custom indices and custom mkt breath studies. but never been able to program them in properly.

I have looked at mkt internals quite a bit over the past couple of weeks, i find and others have also said that there is a 1-2 second lead over ES, but for a small retail futures traders I find it hard to take advantage of it. i don't even know if I could get the orders filled at the right price that fast.

If you don't mind me asking, how would one go about selecting appropiate stocks to include in a custom index to trade the ES?

i usually just look at a correlation tree for lets say SPY.

http://www.aistockcharts.com/stock_correlation_tree_tool_help.htm

In 2009 financials led the ES, so focuing on XLF etf paid off.

Thanks
 
bearmountain when looking at the ES, I simply
track the 500 individual stocks that make up the sp500 index.

Also you dont have to be a scalper to benefit from market
internals in relation to the question about 2/3 seconds and fill rate.

I personally use 5 min candles and watch market internals at key levels like intraday high/low points from open, prior days high/low, high volume areas, swing points etc..

I prefer to go for 3+ point moves and market internals do help.


I suppose if your a scalper, you could probably use time and sales
and filter for size.


You also mention financial/XLF, I also look at 12/15 different sectors
intraday from financials (banks/brokers/insurance), technology (hardware,software, internet, software), oils, transport, retail, housing etc..


Again a possible setup could be a intraday double top in the ES and you would look at all the sectors to confirm this by forming a lower high in their own charts.
 
great thank you david, I appreciate you sharing your insights.

divergence which you mentioned appears to be a promising area for me to research further.

lead/lag I have looked at quite a bit, is not stable.

all the best
 
What you describe is a stock basket, not an index. Indexes are created with rules of construction so that they can be fluid and dynamic and exist as stocks come and go depending on market conditions.

If you want to set out a list of rules that will always comprise a basket of stocks roughly close to what you are going after - then you have an index.

If you want to pick a random group of stocks and lump them together you have a basket.

Are you using any weighting scheme or are they all equal weighted (equal number of shares each)?
 
WinstonTJ, I simply use a equal weighted stock basket
and dont take into account the number of shares.

each stock regardless of the number of shares, value or market cap
has the same value. I apply this to the ftse 100 (no market internals exist ) and it works fine to my linkings.

Also market internals is just one small part of my toolbox.
I also look at sectors and bonds/usd (tend to go opposite
the market) using intraday charts.
 
If you are taking into account the price of the stock then you are at a minimum pricing an equal weight of 1 share per stock so what you say confuses me.

Equal weighted stock basket how? For example, if you have 10 stocks how many shares of each stock do you use to track your basket?

If you use one share per stock (just using the stock's price) then what do you do with it? For example, 10 stocks:

Stock A: $1
Stock B: $2
Stock C: $3
Stock D: $4
Stock E: $5
Stock F: $6
Stock G: $7
Stock H: $8
Stock I: $9
Stock J: $10

Next what? How many shares of each stock (A-J) do you use and how do you come up with a basket price?

Quote from david22:

WinstonTJ, I simply use a equal weighted stock basket
and dont take into account the number of shares.

each stock regardless of the number of shares, value or market cap
has the same value. I apply this to the ftse 100 (no market internals exist ) and it works fine to my linkings.

Also market internals is just one small part of my toolbox.
I also look at sectors and bonds/usd (tend to go opposite
the market) using intraday charts.
More...
 
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