What’s in a trend, anyway? How do you tell whether you are in a trend? How strong is it? What condition is its condition in? Take a look around down below and see if these studies and indicators can’t help you answer these and other pressing price action questions.
Acme Sigma Channel
The Acme Sigma Channel is an adaptive, 6-sigma range, on-chart indicator similar to the Bollinger Band study with which many are already familiar. You can use this indicator on any instrument, and on any time frame, similar to how you might use the Bollinger Bands. However, the Acme Sigma Channel indicator gives you several moving average options and provides one additional sigma level. In fact, we developed this indicator with the VIX in mind. Many traders watch the VIX intraday as well as on a daily basis as it provides another real-time sentiment data point. Since the VIX is a naturally mean-reverting instrument, that makes an indicator such as the Acme Sigma Channel a perfect fit.
Acme Historical Volatility
Who needs volatility analysis? Many traders find it instructive to analyze price on intermediate term time frames separate from volume. Why? It really is this simple – price is the expression of human emotions in financial markets.
If you believe that, and you’re not a stranger to emotions, then you know that emotions ebb and flow. We feel horrible or elated, then with the passage of time, we tend to feel better or mellow out. Sometimes we get stuck at an extreme, but usually drift back to our baseline level of hapiness/sadness. What does this have to do with markets? In a word… everything. Over time, just like emotions, prices tend to be mean-reverting.
When doing your homework for the next day or next week, you may find it useful to look at price movement in terms of a mean, and ask the questions:
- Where is the mean now, how is it trending?
- Where is the current price in relation to that mean?
- When we’ve seen price at a similar place in the past in relation to the mean, how did it behave going forward?
The answers to these questions are helpful when forming trading hypotheses, this study can help you help find the answers you seek. The AHV is a bottom-panel indicator that can display an unbounded number of sigma (aka standard deviations), and is appropriate for any instrument on any time frame. It displays two key pieces of information:
- Values greater than zero represent how many sigma (standard deviations) more volatile the bar range is as compared to the number range of the bars you specified in the Period parameter. Higher and/or extreme values confirm higher volatility, and may signal a mean-reversion event in the near future.
- Conversely, values below zero represent how many sigma the bar range is below the mean of volatility. As positive extremes often portend a retracement to a mean, an extended series of negative values confirm strong trend is in place (pretty easy to see in price also). More importantly, a shorter series of negative extreme values (very low volatility) may portend more volatility soon.
The AHV has only a few parameters. The colors of the positive and negative values, the type of moving average to be used to calculate the mean and the number of bars used – the Period – in that moving average calculation.
Acme Fibonacci Wave
This is an idea we, er, borrowed from noted forex trader Raghee Horner. It’s also known as the 34EMA Wave, and GRaB Candles. We won’t spend much time explaining it, because you should read all about in the inventor’s own words here. The Fibonacci Wave might very well be one of the best methods for visualizing a moving-average trend. We know many members and non-members alike who won’t trade spot forex without it. Even if you don’t trade forex, you can use it on any instrument on any time frame. Be creative. How could you fold it to your strategy?
Acme Trend Channel
This one is a basic moving average line, only with a couple of interesting, value-added twists. First, you have your choice of moving average formulas: simple; exponential; and weighted. So when you want to switch, just change the parameter instead of removing and adding a different indicator. The other, more interesting twist is that the line can be differently-colored when price is above (bullish), below (bearish) or on the trend line (neutral).
Again, not an earth-shattering innovation, but one of the little things that can make a real difference. Have a look below and see if you agree.