TradeStation Indicators - How Price Action Helps Understanding Every Market Mode

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Published: 07th May 2011
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Advanced TradeStation indicators can provide multiple time frame (MTF) price action. Price action is undisputedly the most important fact in trading. If you use multiple time frames to track price action you will increase the effectiveness of your trading edge many fold. The interaction of the different time frames provides great information regarding which market mode you are trading. This article will explain how MTF price indicator will tell you what market mode you are in. Knowing this will assist you to greatly improve your trade management.

The 3 major market modes are consolidation, trend (up-trend or down-trend), and choppy (a trading range). Every financial instrument goes through these three market modes on any chart. The interplay of a multiple time frame price indicator shows at a glance when you are in an up-trend, a down-trend, when you have a MTF consolidation, and/or when you are trading a choppy market.

First, let's focus on consolidation. A consolidation can be any of the following types; price, volume, volatility, or oscillating inside a trading range. Price consolidation across multiple time frames gives the most powerful consolidation breakout trades. With a MTF consolidation, TradeStation traders can typically get breakouts that will sometimes go on for several days. This is a very powerful method of trading. The MTF Price Action Consolidation trade set-up is present when all the price trend lines are collapsed into a tight range.

The second major market mode is trend. A MTF up-trend is shown by the expansion of the interaction of the different MTF trend lines. You'll see this where the shortest trend line is breaking out to the upside and the MTF lines are fanning out into a ribbon. But don't be mistaken; simple moving average ribbons are nothing more than a single time frame indicator using multiple different lagging lines. Unlike the simple moving average ribbon, a MTF price indicator has nothing to do with lagging lines. In fact, the MTF trend line lags no more than one and a half bars, and yet it shows a smooth price line. The interaction between the MTF lines is very useful.

You can also see a MTF trading range. When you go into a choppy market or a trading range, the interaction of the MTF trend lines will show a trading range inside several higher time frame lines and the shortest line will be oscillating between the longer time lines.

You have a big advantage when you know what market mode you are trading in and know how to appropriately trade that market mode. With a quick glance at a TradeStation indicator called the multiple time frame price action indicator this information will be at your fingertips to advance your trading success.

Mark David Johnson is a full time TradeStation programmer, trader, and trading coach. He has personally developed over 60 strategies and over 200 indicators for the TradeStation platform. Mark's passion is to match his client's trading style with the best possible trading tools for them. Mark started his trading career as a licensed commodity trading advisor in the late 1970s. He was offered a full time position in a medium sized futures broker in Chicago, but chose to take another career path while continuing to use the trading information for his own use. From 1990 through 2005 he did extensive amounts of trading using long term trading with the average trade position spanning from months to years long. In 2005, Mark could see the oncoming financial turmoil and liquidated 90% of his portfolio. Mark spent the next year and a half studying day trading full time, and since 2006 he has been full time trading and programming using the TradeStation platform.

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