The Alpha

2020년 4월 25일

All assets are dictated by buyers and sellers at the bid and offer. The conviction of the auctioning process is always determined by volume as it represents the willingness of participants to participate at certain prices. Volume is the key force behind markets and is key to identifying major moves. When volume increases sharply without a significant change in an assets price, the price will eventually jump upward or fall downward based on these internal dynamics. You can glean a lot about a trend based on the buy and sell volume balance, as it often provides clues on the direction of a break during periods of consolidation. A strong, rising volume force should accompany an uptrend and should taper off towards the latter stages of the trend. The same applies during a downtrend.

Using these principles, I designed the Alpha, which is a combination of multiple volume and momentum based oscillators, capable of identifying trend and providing volume signals before a shift in participation occurs. The Alpha was developed with opposing goals in mind: i) to be sensitive enough to signal shifts in momentum and identify short-term tops and bottoms; and ii) be accurate enough to identify the long-term in flows and outflows into any asset at certain prices through time. The Alpha is an all-in-one oscillator, and has been fine-tuned and smoothed for optimal results. When all of these indicators converge, Alpha projects a green pulse signal. The green signal is characterised by extreme selling momentum, and a shift in the money flow index.

How to use it:

The Alpha is one of 3 automated swing strategies I have personally running at present. The Alpha was designed to catch onto momentum shifts with the explicit intention of catching trending moves. While the signals can fluctuate in a bracketed environment, its efficacy comes from catching large moves (see image 1 below).



Many are accustomed to using indicators like the On-balance volume (OBV) indicator to gage momentum and volume changes to make inferences on sentiment and overall market direction. While I find it to be a useful indicator, it generally lags and often give meaningless signals that don't translate to actionable set ups on an intra-day basis. The Alpha not only is more receptive, it also is optimised to pick up divergences in momentum. Image 2 and 3 below aptly illustrate this point.





Recommended timeframe:

The automated strategy I have running is set on the D-2, D-3 and the H-12. That said, you can use it on the D-1, weekly or even the monthly to infer shifts in macro trend. The bot sets a hard stop and is designed to cut its losses rapidly whilst riding its winners. For this indicator, I would recommend using higher time periods mentioned above as this is what it was inherently designed for. That said, I recognise many want to trade on an intra-day basis, so my recommendations would be to use the H-12 or H-8. This indicator does not repaint once the candle has closed, however, it will provide an early signal if momentum is starting to shift. If you want to front run the close, you can be aggressive and take a position, however, my advise would be to wait for confirmation upon a candle close.

2020년 4월 26일

릴리즈 노트

This is exactly like the old version of the Alpha, except I have now added a divergence hunter on it. It can now pick up hidden and regular divergences across all time frames. You have the ability to turn on one or the other (hidden or regular), or keep both at the same time. The timeframes of use from the previous version still apply.

To obtain access please PM me.