March 2006

Last Spring, I had the pleasure of collaborating with Alan Robinson on EVRAA, a Wyckoff interpretation of volume plotted directly on a chart.  Alan you may know as "rabbit" in the Ensign EChat rooms.  (Editor's note:  Text that is underlined and blue in color is a hyperlink to additional information on the Internet.   Click the link for additional material to read.)

This past year, Alan and I had great fun working on a visually intuitive template Alan calls "X-Swing".  X-Swing overlays multi-time moving averages and uses prior swings to alert the user of trend reversals and congestion zones.  Cross-overs are used as future support and resistance, a key difference that distinguishes this approach from typical moving average methods.  It also includes a chart-only VolSum, highlighting potential volume exhaustion points with a yellow bar on the chart.  The use of alerts and DYOs (the Design Your Own studies feature in Ensign Windows) automates finding these key levels and marking them on the chart.

The template can be used on all time frames and all instruments, with only a small change to the Auto-Trends and Pesavento Pattern studies for instruments with small ticks, such as the Euro.  Shown above is X-Swing on a Daily YM chart.  This folder directory list has numerous examples in various time frames for further study.

Download Template:   xSwingX.dat   (for all but Euro)  [right click and Save to your Ensign Template Folder]

Download Template:   xSwingX_euro.dat   (Euro & similar currencies)

complaints or questions?   (just kidding)

Key Elements of the Template

• 180-bar Bollinger - Black dots and heavy black lines
   
• Two moving-average pairs:
  The MA pairs are used to generate "future support and resistance" lines as well as give a visual indication of the general price trend.
  
            40ma, 120ma (weighted) - Red and Blue Stars
            10ma, 13ma (simple)  -  "gold" hashed
   
• Prior 40/120ma cross extensions: two types
  (1) Horizontals (red/purple lines) act as future support/resistance
  (2) Verticals (orange) for reversals (or mid-point inflections).  These in particular are worth study.   Here is an example.
   
• Swing retrace "blocks" where swings are determined using the 10/13 ma reversal points (gold, red, fuchsia, purple).
  Here is a guide to the retrace colors.
  

• Note: It is assumed that you are familiar with Fibonacci retrace methods.  If not, click here for a short introduction.
   
• Optional Auto Trend study:  This is not "turned on", however, it uses 10/13 reversal points, ie, larger swings.  To turn it on, select "Auto Trends" study and check the Trend Line box.
   
• A note on the colors
  The central idea of this template is to do the work for you, using colors that your eye can quickly process without much thought. Alan uses a light gray (silver) background with black/white candles. The examples in this article are in white so as to print, but use what works for you as long as the colors stand out.
   
• A note on learning this template
  A very useful way to quickly train your eye to "see" the features is to apply the template to your favored time-frames and play back the charts at 10x speed using DEMO, not at all attempting to trade it, but rather, jotting notes where you see tags, crosses, and reversals, as shown in the triple screen example below.

The template does not include the indicators shown in the triple time frame example as you can readily add your own favorites by layering them into the X-Swing template.

Interpreting the Indications

Combining the very long (180), medium (120/40), and very short (10/13) averages are intended to quickly let your eyes assess the bias.

• The 180 bar Bollinger Band stands out the most.  A critical idea to bear in mind is that price likes to seek the center line, but rarely lingers, preferring instead to swing to the opposite extreme.  Because of the long period used, reversals at the outer bands and traverses of the mid will often result in the strongest moves. General Bollinger Band rules apply, so in addition to band tags look for squeezes.  To better see the value of the 180-BBand, compress the bars closely, as in this example.  Because of the very long 180-bar period, a look at the next time frame for more clues helps to refine the signal.
   
• The 40/120 "star" pair are meant to be seen as working in tandem.  Their cross is often significant as future support, for which purple and red horizontal extensions are drawn.  Additionally, the cross relates well to the 180 bands for timing, and for this, red vertical bars are drawn.  In the triple-screen example, note how the vertical drop-bar indicated price tests of the 180-mid on the 700V and 250V and a test of the lower 180BBand on the 10m chart.
   
• The fast 10/13 pair has various uses.  Look for 10/13 (and 40/120) proximity to the 180-BBands, which often indicate imminent slowing or even reversal of the price swing in progress.  The 10/13 reversal tops and bottoms are also used to project retrace levels, for which "color blocks" are drawn on the chart.  This is done using auto-trends and Pesavento Pattern studies, neither of which are actually drawn on the chart.
   
• Here is a folder of rabbit's most recent xSwing charts, where you can study the precise timing that can be achieved with this approach.

Example of Triple Time Frame Use of the Template

The following example uses three time frames to select and manage a trade: 250-Volume, 700-Volume, and 10-minute.  The 250-Volume is selected as it approximates a 1-minute chart. Volatility, of course, can change that value.  A simple rule of thumb to use is the divide the average daily volume by the total number of minutes traded during the day.  The second time frame is 3x the first, and the third is 3x that.

First:     (~1 minute) 100,000 Vol/450minutes = 222 volume bars per minute, rounded to 250
Second: (~3 minute) 222 x 3 = 666, rounded to 700 volume
Third:   10 minute bars

[it may be helpful to open the three images in a separate window]

I found the Ensign playback feature very helpful learning to trade with the CCI (Commodity Channel Index study).  I also found the link to Bracket Trader (BT) helpful and the trade logger (ver 3.03) to record the results of my simulated trades.   This is a link to a site that has a video, and it shows how to link BT to Ensign's playback.

I could not get sound on this to work.

If you are NOT using a registered version of Bracket Trader, you will get a message asking if you like the feature and do you wish to register or purchase.  Just click OK, and it will link correctly.

You NEED two files in your Ensign ESPL directory first.   They are BTlinker1.spt and BTlinker1.lib

My version of the instructions are:

1. start Ensign Windows
2. open a chart with the name of DEMO and the template of your choice.
3. click the ESPL button and select Btlinker1.spt
4. click the Run button on the ESPL form and close the ESPL form
5. go to your chart and select studies
6. find btlinker and add that study
7. start BT and go to preferences
8. then data source and select Ensign play back

I had difficulty getting those two ESPL files to work the first time.  Saving with the proper file extension is a pain.  I had to change the file extensions after I downloaded the files.

It will take a minute for BT to connect and a symbol called Demo will appear.  That will be what ever you have playing on Ensign playback.

I run multiple time frames at the same time.  After you get the first Demo chart up and running, select the Demo chart over and over with new time frames.  It works for me.  I run four screens and as many as eight different time frames for the same market with BT linked to the playback.

Remember to set start in BT with the symbol selected that you plan on using first.  After you get that set up and do the link thing above the symbol will change to $espb.

Here is a link to the latest version of the Bracket Trader logger.  As far as I know it is only for Bracket Trader Front end:   http://www.tradersinfo.net/forum/viewtopic.php?t=116

Bracket Trader works with IB and eSignal, and perhaps others.  You will need to check the BT link.

http://www.bracket-trader.com