Dear members,
The various indicators which we are familiar with in the normal course of analysis can be termed as 'Quantitative Indicators', i.e they measure the actual values of the constituent elements. They are perfectly suitable and functional if only one dimension is being looked at viz. price, volume etc. However, if one is to interpret the interplay between various elements / dimensions of the market then it is probable that a 'Qualitative Indicator' serves the task better.
What exactly is a 'Qualitative Indicator'. In a basic form the indicator is nothing but a ranking of sorts for every unique instance of interplay between various dimensions. The ranking may be linear, exponential or based on an algorithm. The indicator thus paints the picture of the market as viewed through the parameters of the interplay of the constituent dimensions only!
Hybrid indicators can also be constructed which have the filter part as quantitative and the analysis part as qualitative or vice versa.
Posting a simple quantitave indicator which paints the interplay between price, volume and open interest (updated). (This is courtesy of casoni's post who sparked this issue in another thread).
This is how the indicator looks. Posted with Nifty till date.
As you can see the advantage of a qualitative indicator is that it's pretty well lagless without the need for synthetic lag removal. Also when the interplay is confirmative, then the indicator becomes forward looking and forecasts market direction. The EMA periods can be tweaked to personal preferences, I have entered the default values which work all right in most situations.
Various ways of use-
1. Longer term traders may play divergences and
(a) Add to positions while the indicator and lows are above the blackline and sell upon break of trendline, EMA cross or dip after incursion into distributive zone.
(b) Short the market at every instance of the indicator and tops below the black line and cover upon break of trendline, EMA cross or upmove after incursion into accumulative zone.
In this respect the red zones are distributive areas and the lime zones are accumulative areas.
2. Shorter term traders may play every wiggle of the indicator w.r.t it's EMA in consonace with the general direction of the EMA.
Notes -
1. This is a trend indicator as well as an oscillator (when it enters into distributive / accumulative zones).
2. Trendlines can be drawn.
3. Do not use it as standalone. It is to be used as a secondary indicator in conjunction with your favourite setup.
4. And Yes! This is not the holy grail.
Enough food for thought for one day!
Regards,
The various indicators which we are familiar with in the normal course of analysis can be termed as 'Quantitative Indicators', i.e they measure the actual values of the constituent elements. They are perfectly suitable and functional if only one dimension is being looked at viz. price, volume etc. However, if one is to interpret the interplay between various elements / dimensions of the market then it is probable that a 'Qualitative Indicator' serves the task better.
What exactly is a 'Qualitative Indicator'. In a basic form the indicator is nothing but a ranking of sorts for every unique instance of interplay between various dimensions. The ranking may be linear, exponential or based on an algorithm. The indicator thus paints the picture of the market as viewed through the parameters of the interplay of the constituent dimensions only!
Hybrid indicators can also be constructed which have the filter part as quantitative and the analysis part as qualitative or vice versa.
Posting a simple quantitave indicator which paints the interplay between price, volume and open interest (updated). (This is courtesy of casoni's post who sparked this issue in another thread).
This is how the indicator looks. Posted with Nifty till date.
As you can see the advantage of a qualitative indicator is that it's pretty well lagless without the need for synthetic lag removal. Also when the interplay is confirmative, then the indicator becomes forward looking and forecasts market direction. The EMA periods can be tweaked to personal preferences, I have entered the default values which work all right in most situations.
Various ways of use-
1. Longer term traders may play divergences and
(a) Add to positions while the indicator and lows are above the blackline and sell upon break of trendline, EMA cross or dip after incursion into distributive zone.
(b) Short the market at every instance of the indicator and tops below the black line and cover upon break of trendline, EMA cross or upmove after incursion into accumulative zone.
In this respect the red zones are distributive areas and the lime zones are accumulative areas.
2. Shorter term traders may play every wiggle of the indicator w.r.t it's EMA in consonace with the general direction of the EMA.
Notes -
1. This is a trend indicator as well as an oscillator (when it enters into distributive / accumulative zones).
2. Trendlines can be drawn.
3. Do not use it as standalone. It is to be used as a secondary indicator in conjunction with your favourite setup.
4. And Yes! This is not the holy grail.
Enough food for thought for one day!
Regards,
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