MoneyVolume ^ä Indicator

 

For TradeStation® 10 (and prior), 2000i, Pro, 6, 7, 8, SuperCharts 4

 

 

User's Manual

 

Version 2.01

 

 

© Copyright 2000 Micro-Labs, Inc. All rights reserved

 

 

 

 

                    TABLE OF CONTENTS

 

 

Introduction..................................................................................................... 2

 

Installation........................................................................................................ 2

 

Applying the MoneyVolume Indicator......................................................... 3

 

Interpretting the MoneyVolume Indicator.................................................. 4

 

Example of MoneyVolume in Operation..................................................... 5

 

Advanced Parameter Settings....................................................................... 8

 

Using the MoneyVolume Function............................................................... 9

 

MoneyVolume Theory of Operation.......................................................... 11

 

Technical Support......................................................................................... 11

 

Limited Waranty, Disclaimers and Limitations of Remedy.................... 12

 

License Agreement....................................................................................... 13

 

Trademark Acknowledgements.................................................................. 13

Rev 2.01

 

INTRODUCTION

 

The MoneyVolume Indicator for Tradestation attempts to reveal buying/selling pressure and/or accumulation/distribution in a security, which is not yet reflected in the security price.

 

MoneyVolume is a technical indicator calculated from both a security’s price and volume. It works equally well in any time frame. It would usually be overlaid in the same window as the security although it can be placed in a separate window. MoneyVolume is interpreted by comparing MoneyVolume to price to see if a positive or negative divergence has formed.

 

 

INSTALLATION

 

To transfer the MoneyVolume indicator into your program, you will need to use the ELA (Easy Language Archive) Transfer Utility that is built into the TradeStation Power Editor or the SuperCharts Quick Editor. Once you have the MoneyVolume indicator in your Program it will appear in the Function Library and you can apply it to charts or use it in trading systems.

1.     Insert the “MoneyVolume Indicator” diskette into drive A:

2.     Left click on File, then left click on Import/Export Easylanguage…

3.     Choose the option: ‘Import EasyLanguage file (ELD, ELS or ELA) then click on NEXT>.

4.     In the ‘File name:’ box type

5.     ‘A:\moneyvol.els’ and Left click on NEXT>. A window should appear with a check mark by both Function and Indicator. Left click on NEXT> again.

6.     A window should appear with a check mark by MoneyVolume Function, MoneyVolume Indicator, and WeightedPrice Function. Left click on FINISH.

7.     Left click on OK twice to complete the transfer.

1.     Insert the “MoneyVolume Indicator” diskette into drive A:

2.     Go into the EasyLanguage Power Editor. (press F12 from within ProSuite 2000i)

3.     Left click on FILE, then on IMPORT AND EXPORT.

4.     Choose the option: ‘Import EasyLanguage Archive or Storage File (ELA or ELS)’ then click on NEXT>.

5.     In the ‘Select the location of your EasyLanguage Archive file’ box type

‘A:\moneyvol.els’ and Left click on NEXT>. A window should appear with a check mark by both Function and Indicator. Left click on NEXT> again.

6.     A window should appear with a check mark by MoneyVolume Function, MoneyVolume Indicator, and WeightedPrice Function. Left click on FINISH.

7.     The transfer should complete and you may close the EasyLanguage Power Editor.

1.     Insert the “MoneyVolume Indicator” diskette into drive A:

2.     Go into the EasyLanguage Power Editor.

3.     Left click on FILE, then on OPEN.

4.     Click on the Transfer button.

5.     Choose the option: 'Transfer Analysis Techniques FROM EasyLanguage Archive File (.ELA)' then click OK.

6.     In the ‘From’ box type ‘A:\moneyvol.els’ then click OK.

7.     On the next Menu, choose TRANSFER ALL, then click OK.

8.     The transfer should now be complete and you may close the EasyLanguage Power Editor.

 

1.     Insert the “MoneyVolume Indicator” diskette into drive A:

2.     Go into the Quick Editor by choosing TOOLS, then OPTIONS, then Quick Editor.

3.     Left click on TRANSFER.

4.     Choose the option: 'Transfer Analysis Techniques FROM EasyLanguage Archive File (.ELA)' then click OK.

5.     In the ‘From’ box type ‘A:\moneyvol.els’ then click OK.

6.     On the next Menu, choose TRANSFER ALL, then click OK.

7.     The transfer should now be complete.

 

 

APPLYING THE MONEYVOLUME INDICATOR

 

The installation process described above only needs to be completed once. After installation, you are ready to apply the MoneyVolume Indicator to a chart. The steps to do this are as follows:

 

1.               Open up a chart and then Left click inside the chart window where you want to add the indicator.

2.               On the menu, Left click on INSERT and then INDICATOR.

3.               Scroll down until you see MoneyVolume. Left click on MoneyVolume to highlight it and then Left click on OK.

4.               Left click on the Style tab and set the Type to be Line and then click OK.

5.               Left click on the Scaling tab and set Scale type to Screen and then click OK. If you want MoneyVolume to overlay the price graph (recommended) instead of being in a separate subgraph, then left click on Properties and set Subgraph to One and click OK. Leave all Inputs set to their default values for now. These values are explained in the section: Advanced Parameter Settings.

6.               You should now see MoneyVolume plotted on your chart.

 

 

INTERPRETTING THE MONEYVOLUME INDICATOR

 

The MoneyVolume Indicator for Tradestation attempts to reveal buying/selling pressure and/or accumulation/distribution in a security, which is not yet reflected in the security price.

 

MoneyVolume is a technical indicator calculated from both a security’s price and volume. It works equally well in any time frame. It would usually be overlaid in the same window as the security although it can be placed in a separate window. MoneyVolume is interpreted by comparing MoneyVolume to price to see if a positive or negative divergence has formed. For example, if price surpasses its previous peak and the corresponding MoneyVolume indicator does NOT, it constitutes a negative divergence between price and MoneyVolume. The theory being that since the price peak is unconfirmed by the indicator, it should eventually result in the price pulling back. When considering these factors, it is important to note how reliably MoneyVolume worked in the past on a particular security and/or within the context of a particular time frame. If the indicator did not work reliably in the past, it stands to reason that is might not work in the future.  It may also be helpful to look at MoneyVolume versus price on slightly different time frames. The more consistent the divergence is over several similar time frames, the more reliable the divergence would be considered.  MoneyVolume would tend to be less indicative for very thinly traded issues which have only slight and/or sporadic volume in the time frame being observed.

 

Note that when MoneyVolume is shown on the same chart as price that the two lines do not always start in the same place on the left side of the screen and when the compression of the bars is changed it sometimes changes the position of the two lines relative to each other. This is because MoneyVolume and price have very different values and Tradestation has to scale them to fit the screen when putting them on the same graph.  So when the compression is changed, different amounts of data are displayed on the screen and Tradestation scales them such that the visible data for each line is expanded to fill the screen. That is why you have to visually judge how MoneyVolume moves versus price, look for divergences, and not just look at the absolute position of the two on the same graph.

 

EXAMPLES OF MONEYVOLUME IN OPERATION

 

 

This is an example of a daily chart where MoneyVolume gives us a number of clues as to the future direction of the price. Note how the four rallies from May through July are unconfirmed by a corresponding increase in MoneyVolume. In each case the rallies failed and pulled back to the MoneyVolume line. However, in the late July pullback note how MoneyVolume holds at the same height as the peak in June while price is lower. This divergence is our first clue to the change in character about to take place. Beginning with the August rally, note how MoneyVolume confirms the rallies with new highs and relative strength. Now, instead of MoneyVolume diverging with the rallies, it diverges with the pullbacks. Price drops much more than MoneyVolume during the four pullbacks from late August through October. In each case the stock price moves to catch up with the MoneyVolume indicator.

 

 

 

In this 5 minute chart of Applied Materials, we can observe that MoneyVolume tracks the price fairly well at the beginning of the chart which only tells us that we have no divergence and price is moving  in step with MoneyVolume. Since we have a track record of  no divergence then when we do have a divergence, we can have more confidence in the signal than for a stock where MoneyVolume and Price do not correspond as well. Note that 90% of the time, MoneyVolume will tell us absolutely nothing that we can’t already observe from the price. However, since we have so many thousands of securities to select from, we are free to keep studying charts until we find one in the 10% where we do see something.

 

In this chart the price starts diverging from MoneyVolume at the beginning of the day on 10/20. MoneyVolume does not fall as far as price and around 11:30 it makes a new high and starts rising about 12:00 giving us a few minutes warning of the impending rally. Note that at 12:45 price catches up to MoneyVolume, warning us that we probably need to consider taking our profits or at least start setting tight stops.  Note that what is more important than the absolute values of MoneyVolume is the relationship of the behavior of MoneyVolume versus price. So while MoneyVolume did make a new high at 12:45 which would normally be a confirmation of the new high in price, we were suspicious of the rally in price because it was the first time since 9:00 that the price had caught up with MoneyVolume.

 

 

In this 5 minute chart of Applied Micro Circuits we see MoneyVolume tracking price fairly closely up until about 9:00 on 10/20. From that point on, MoneyVolume leads price higher, confirming the new highs in price and holding when price pulls back.

 

 

 

In this 5 minute chart of Lycos, MoneyVolume shows a positive divergence at 11:55 and 2:00 of 10/19. On 10/20 at 9:00 we see another positive divergence of MoneyVolume preceding a nice move to the upside in price. Also notice the negative divergence at 1:00 on 10/20 which appears in plenty of time to exit the position or go short prior to the drop in price.

ADVANCED PARAMETER SETTINGS

 

Since the interpretation of MoneyVolume versus price divergences are somewhat subjective, we have developed some more objective measures of interpreting MoneyVolume. These methods can be used either in conjuction with the basic MoneyVolume versus price divengence interpretation or as stand-alone Indicators. Several examples are given in the next section, but the most basic way of looking at MoneyVolume is to determine if it is currently above or below its own moving average.

 

By changing parameters in the MoneyVolume Indicator, the MoneyVolume plot can be set to show one color when it is above its moving average and a different color when it is below. The Input parameters and their descriptions follow:

 

ChangeColor=False

The MoneyVolume plot is shown only in the one color which is set by the Format Indicator Color setting.

ChangeColor=True

The MoneyVolume plot is drawn with two colors as defined by the following parameters.

 

SimpleMovAvg=True

The color change is determined by whether the MoneyVolume value is above or below the simple moving average of MoneyVolume.

SimpleMovAvg=False

The color change is determined by whether the MoneyVolume value is above or below the exponential moving average of MoneyVolume.

 

AboveColor=Black, Blue, Cyan, Green, Magenta, Red, Yellow, White, DarkBlue, DarkCyan, DarkGreen, DarkMagenta, DarkRed, DarkBrown, Gray, LightGray

Determines the color the MoneyVolume plot is when it is above or equal to its average.

 

BelowColor=Black, Blue, Cyan, Green, Magenta, Red, Yellow, White, DarkBlue, DarkCyan, DarkGreen, DarkMagenta, DarkRed, DarkBrown, Gray, LightGray

Determines the color the MoneyVolume plot is when it is below its average.

 

MovingAvgLen=number of bars to average

USING THE MONEYVOLUME FUNCTION

 

In addition to the MoneyVolume Indicator your ELS file also includes the functions WeightedPrice and MoneyVolume. WeightedPrice is used by the MoneyVolume Function and it simply returns a value which weights the closing price the highest but also factors in the price range for that bar.

 

The MoneyVolume Function can be passed as an input to a number of traditional/commonly used Indictors instead of Price. The theory is that MoneyVolume, by incorporating Volume and Price might give a better signal/representation of what the market is doing than by simply using Price alone. In the graph below, we have an example of doing this with four common Indicators supplied with Tradestation:

 

The subgraphs and their settings are described below:

 

Subgraph 1:

MoneyVolume Indictor

ChangeColor=True, SimpleMovAvg=True, AboveColor=Cyan, BelowColor=Magenta, MovingAvgLen=12

Scaling set to “Screen”

 

Subgraph 2:

Volume Indicator

Scaling set to “Screen”

 

Subgraph 3:

Mov Avg 1 Line Indicator

Price=MoneyVolume, Length (Simple Moving Average)=12, Displacement=0

Scaling set to “Same as Symbol”

MoneyVolume Indictor

ChangeColor=True, SimpleMovAvg=True, AboveColor=Cyan, BelowColor=Magenta, MovingAvgLen=12 (This should be set to the same number as Length Above)

Scaling set to “Same as Symbol”

 

Subgraph 4:

Mov Avg Exponential Line Indicator

Price=MoneyVolume, Length (Simple Moving Average)=12, Displacement=0

Scaling set to “Same as Symbol”

MoneyVolume Indictor

ChangeColor=True, SimpleMovAvg=False, AboveColor=Cyan,

BelowColor=Magenta, MovingAvgLen=12 (This should be set to the same number as Length Above)

Scaling set to “Same as Symbol”

 

Subgraph 5:

Mov Avg 1 Line Indicator

Price=MoneyVolume, Length=14, OverSold=30, OverBought=70,

OverSColor=DarkRed, OverBColor=DarkBlue

Scaling set to “User Defined” Maximum=100, Minimum=0

 

Subgraph 6:

Mov Avg 2 Lines Indicator

Price=MoneyVolume, FastLength=8, SlowLength=20, Displacement=0

Scaling set to “Same as Symbol”

 

 

MONEYVOLUME THEORY OF OPERATION

 

MoneyVolume is similar to On Balance Volume and Moneystream indicators in that it is a cumulative indicator based on volume and price movement. On Balance Volume works by adding volume of a particular bar if the price bar goes up and subtracting if it goes down. However, it adds the total volume for that bar whether the price moves 1/16 or 1 point. It could be argued that the 1/16 point volume was either not relevant or less relevant than the volume of the 1 point move. Moneystream works by adding the volume of a particular bar multiplied by the price change of that bar from the last bar. However, if price moves dramatically on lower than normal volume, such as on a gap up or down or from the close of one day to the open of the next, this introduces very large moves in Moneystream. It could be argued that this movement of Moneystream did not really represent the underlying consistent accumulation/distribution, which we are trying to observe. MoneyVolume attempts to improve on both of these indicators by looking both at the amount of price movement from one bar to the next as well as the amount of volume/money, which caused that movement, as well as the relative price volatility. It then adds or subtracts the weighted amount from the previous MoneyVolume total. The intent is to show the buying/selling of the security that is underlying the price movement but not apparently obvious simply by looking at the security price and volume. The theory being that if this underlying buying/selling of the security continues that the price will follow.

 

The WeightedPrice Function is also added to your list of available functions as it is needed by the MoneyVolume Function. Instead of simply basing calculations on only the closing price, this function considers the range of the price for that bar as well although the value is weighted to give the most significance to the closing price.

 

 

TECHNICAL SUPPORT

 

You may contact Micro-Labs technical support by phone, fax, or email:

 

972-234-5842  9-5:30 M-F

972-234-5896 fax

support@microlabs.com

 

 

LIMITED WARRANTY, DISCLAIMERS

AND LIMITATIONS ON REMEDY

 

We warrant the physical diskette and physical documentation furnished to you to be free of defects in materials and workmanship for a period of  sixty (60) days from the date of purchase. Replacement of defective disk(s) and documentation is your sole and exclusive remedy in the event of a breach of warranty. In no event will we be liable for any damages to you or any other person in excess of the lower of suggested list price or actual consideration paid for the License to use the Software, regardless of any form of claim. IN NO EVENT SHALL YOU HAVE ANY CLAIM FOR OR RIGHT TO RECOVER ANY OTHER DAMAGES, INCLUDING BUT NOT LIMTED TO, LOSS OF PROFIT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR OTHER SIMILAR CLAIMS, even if we have been specifically advised of the possibility of such damages. The entire risk as to the results and performance of the Software is assumed by you.

 

Except to the extent explicitly provided above, the Software is provided “AS IS without warranty of any kind, express or implied. THERE ARE NO OTHER WARRANTIES WHICH EXTEND BEYOND THE DESCRIPTION ON THE FACE HEREOF.  Further, we do not warrant, guarantee, or make any representations regarding the use, or the results of the use, of the Software in terms of correctness, accuracy or otherwise. We specially disclaim all other warranties, express or implied, including, but not limited to, and IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. The diskettes(s), information, and Software are acknowledged not to be “consumer products” within the meaning of the 15 U.S.C. 2301 (1). Furthermore, you acknowledge that you are not a “consumer” within the meaning of 15 U.S.C. 2031 (3).

 

The Software may include specific and implied buy and sell recommendations pertaining to individual stocks, options, indices, or other investment vehicles. It should not be assumed that past performance is any guarantee of future results. Results obtained from the use of these materials and information are not guaranteed to be profitable. It should be understood that investing and speculating in the financial markets involves a certain degree of risk and in some instances may result in either partial or total loss of one’s capital. The information in these materials has been obtained from sources which are believed to be reliable, but cannot be guaranteed as to its accuracy or completeness, whether supplied as written materials, magnetically or electronically by any means.

 

 

LICENSE AGREEMENT

 

1.     GRANT OF LICENSE. For the consideration you have paid for the Software, you are granted a non-exclusive, non-transferable license to possess, use and display the Software on a single computer unit at a single location at any one time.

2.     OWNERSHIP OF SOFTWARE. Except for your licensed right to possess, use and display the software under the terms of this License, all title to and rights in the Software remain with Micro-Labs, Inc.

3.     RESTRICTIONS ON COPYING, REPRODUCTION. By paying a license fee and taking possession of our Software, you acknowledge that both are copyrighted under and therefore protected by Federal Law. You Agree not to infringe or contribute to the infringement of our copyright by copying, reproducing, enhancing, or creating derivatives of our Software.

4.     MODIFICATIONS. This License may be modified by Micro-Labs, Inc. in conjunction with any enhancement of the Software.

 

 

TRADEMARK ACKNOWLEDGEMENTS

 

MoneyVolume and Micro-Labs are trademarks of Micro-Labs, Inc.

SuperCharts, TradeStation and the Omega Research Solution Provider Logo are a trademark of Omega Research, Inc.

All other brand and product names are trademarks or registered

trademarks of their respective companies