In this issue:
Main Article
The Leibovit Volume Reversal Toolkit in Action
Contributed by Mark Leibovit
As many of you know, MetaStock has just released my Leibovit VR Add-on and I’ve been asked to write a short article discussing those indicators. The Leibovit Volume Reversal add-ons are the result of 35 years of technical analysis work and study in this industry. Old-timers may remember that I first launched the ‘Volume Reversal Survey’ newsletter way back in July 1979. In the mid-1990’s with the introduction of the internet, the Volume Reversal Survey became VRsurvey.com and later VRtrader.com. As you know, two technicians can look at the same chart and often come up with differing views. My effort here was to try and avoid such an occurrence. Fortunately, within the last 18 months I had the opportunity to work with an excellent programmer associated with MetaStock who helped me fine tune the use of my Leibovit Volume Reversal in a format that could be adapted to the MetaStock platform and which would be easy to understand and use by MetaStock subscribers. The formula for the Leibovit Volume Reversal remains proprietary, but its use and dynamics are now clearly transparent to those who wish to incorporate it in their own trading and investment strategies. The beauty of the various Leibovit Volume Reversal indicators are that they can be used in all time frames satisfying a broad-range of trader and/or investor needs. A whole new world has opened up; even very short-term traders will find opportunity in the 60 minute charts and money-managers or longer-term investors will find opportunity in the weekly and monthly charts.
This article will present three examples of the Leibovit Volume Reversal Add-On - the Leibovit VR Sequential Expert, The Leibovit VR Directional Expert, and the Leibovit VR 2 Day Expert. The Leibovit VRs are based on the premise that volume precedes price. The theory is basic and the question is always the same. Are there more buyers than sellers or sellers than buyers? When a Leibovit Volume Reversal is generated, it is anticipated the price movement will follow through in the same direction. We are not looking at a delayed indicator, we are looking at an indicator that at that moment, buyers have shifted to the plate or sellers have shifted to the plate. It is displayed as a Positive VR or a VR+ on the chart.
Let’s briefly review the theory behind each of the Add-Ons, before showing you recent examples.
Leibovit VR Sequential
The Leibovit VR Sequential expert displays all historical and current Positive VRs and Negative VRs from the market data selected. Leibovit VR signals can provide some of the best leading reversal and trend continuation signals available in the financial trading industry as well as early warning signals prior to major market moves. The Leibovit VR Sequential expert can also be utilized as a component in a trading system and allows for additional trading indicators to be applied to the same expert chart. The VR indicator can be both saved as a chart and as a custom MetaStock template should you choose to use it as part of your trading indicators. In the Leibovit VR Sequential expert, every VR on the chart is labeled; a VR+ for a Positive VR, or a VR- for a Negative VR. As shown in the next example, a number is also displayed next to each VR identifying how many successive VRs have occurred in the same direction. VRs are assigned the following numbers in sequence: 1-5 and 6+.
Chart 1
If a 6+ is displayed after the VR, it means there have been 6 or more Positive or Negative VRs in a row. While the chart will display the number as 6+, the VR Trader Sequential expert commentary will display the exact number of successive VRs in the same direction inclusive of the most current VR signal. The VR Sequential Expert will also display if the VR signal was confirmed by volume and price follow through. A follow through will be displayed on the bar immediately following the VR signal bar if both the volume increased and price moved further in the same direction as the VR. The bar immediately after the displayed VR will be colored in the same color.
Leibovit VR Directional
Leibovit VR Directional can be used alone or can be the basis for a template for use with your own trading indicators. Unlike the VR Sequential Expert which shows all successive VRs in the same direction, the Leibovit VR Directional Expert only shows a newly generated VR when it is in the opposite direction of the previous VR, or the previous VR has hit its defined stop-loss level. As long as a VR has not been stopped out, only the initial VR signal in the direction of a trend is displayed. Sequential VRs are not included in this expert. Since the Leibovit VR Directional Expert can also be utilized for trading, a feature of this expert is that stop losses are placed on the chart as well as included in the commentary. The Leibovit VR Directional Expert also presents its commentary in a trading friendly format including order placement and stop loss levels. Since the only VRs displayed by this expert are the initial VRs in a given direction, several market conditions may be more easily identified. One such condition is that of the trend reversal. These initial directional VRs confirm that shift in control from buyers to sellers or from sellers to buyers, which is the hallmark of the indicator. Intermediate term tops and bottoms are often seen after a trend has been in motion for a period of time.
Below is an example of Directional VRs generated at the beginning and end of an uptrend.
Chart 2
On the left side a Negative VR triggered a downtrend until a Positive VR was generated. Price then rallied for a period of time until a Negative VR showed that the trend had ended.
The next condition is when several opposing VRs happen in short succession, or when a tight group of VRs in the same direction keep getting stopped out in a short amount of time. These are often little bouts of time when there is a sideways channel and a breakout of the channel is trying to occur. The last VR in the group is usually the successful one, letting you know which way to watch for the breakout. The example below shows a quick succession of VRs with reversals and stops in short succession with a Positive VR at the very end which led to a channel breakout to the upside and that became the more powerful signal. During the course of the channel you can see there were a couple of trades along with a stop (the small blue stop sign on the left side of the chart) where a Positive VR did not work out. The stop said to exit the trade.
Chart 3
Leibovit VR 2 Day
While the name of the expert refers to a 2 Day concept, it really means 2 bars. It is perfectly fine to use this expert on lower or higher timeframes rather than just daily bars. The VR 2 Day expert is another VR expert that can also be used as a trading system all by itself. The principle behind this expert is simple.
When a VR is generated this expert will exit the position on one of three conditions:
1. A stop loss is triggered
2. An opposing VR occurs
3. Two trading bars have passed
The last rule is what makes this expert different as it is designed to get out of a position quickly. In fact some of the studies we have done show that on the 2 Day daily plays, a 70% reliability factor exists.
The example below shows a string of four profitable Leibovit VR 2 Day trades in a row. Each trade was entered at the open of the bar after the VR was generated and exited at the close of the following bar.
Chart 4
Because of the fast nature of this expert it allows for more positions to be entered and exited during the same time that other experts may hold on to a position that an initial VR signal generated.
When trading this expert, the 2 Day exit should be taken as close to the close of the exit bar as possible instead of waiting until the opening of the next bar. The gaps that occur between the closing and opening of bars in this expert can mean the difference between a profitable trade and a losing one.
One important point to make here is MetaStock shows only one symbol on a chart for any given bar. Because of this occasionally an exit signal will not be displayed on a chart after the two bars have passed. This happens when there is a new VR signal on the second bar after an initial VR signal. With a new VR signal occurring, it is deemed more important to chart the new VR signal than to show the exit on the chart as the new VR signal would result in the previous entry having to be exited anyway.
Chart 5
Even though the exit does not show on the chart, all of the information concerning the trade is shown properly in the expert advisory commentary which can be pulled up on your MetaStock screen.
The example below shows a string of four profitable Leibovit VR 2 Day trades in a row. Each trade was entered at the open of the bar after the VR was generated and exited at the close of the following bar.
Applying the Leibovit Volume Reversal Add-Ons to the SIVR Weekly charts
Below, is an example of the Leibovit VR Sequential, the Leibovit VR Directional and the Leibovit VR 2-Day applied to the weekly chart of SIVR (the ETFS Physical Silver Shares ETF). I chose SIVR because of the recent heightened interest in Silver and because of the strong correlation of my Leibovit VR signals to movement in the security. I chose a weekly chart to demonstrate that the applicability of my indicators are not necessarily for trading and can of great use for longer-term investors and for money managers seeking an intermediate timing tool.
In the recent strong Silver market, it can be legitimately argued (in hindsight) that a buy and hold strategy would have made more sense than any trading system or discipline. That said, both the Leibovit VR Sequential and the Leibovit VR Directional have caught the lion share of the recent move, while the Leibovit VR 2-Day did exactly what it was supposed to do – get you out with a quick trade in two bars!
SIVR WEEKLY LEIBOVIT VR SEQUENTIAL:
SIVR WEEKLY LEIBOVIT VR Directional:
SIVR WEEKLY LEIBOVIT VR 2-Day:
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Support Tip
How do I get Greeks in QuoteCenter?
Contributed by MetaStock Support
For QuoteCenter Only
Have you ever wondered why the Greeks are so important for options traders? Well, the Greeks tell traders how much risk their option positions have.
There are many ways of estimating the risks associated with options, such as the risk of the stock price moving up or down, implied volatility moving up or down, or how much money is made or lost as time passes. These risks are determined through mathematical formulas collectively known as the "greeks", because most use Greek letters as names. Each greek estimates the risk for one variable: delta measures the change in the option price due to a change in the stock price, gamma measures the change in the option delta due to a change in the stock price, theta measures the change in the option price due to time passing, and vega measures the change in the option price due to volatility changing.
Here's how you can look up the Greeks in QuoteCenter:
1. Open a new workspace by going to "File", then "New Blank Workspace".
2. Double click anywhere in the new workspace.
3. Select OptionWatch and click "OK".
4. Double click again in the white space and select Analytics. Click "OK".
5. Click on the chain icon or go to "Edit", then "Add/Delete Visual Link" from the tool bar.
Chain Link
Edit - Add/Delete Visual Link
6. You pointer should have a little chain link at the bottom. Click the black area of the OptionWatch window, hold, and drag it to the Analytics1 window.
7. When asked what kind of link you want to create select "Display Analytics Page". Click "OK".
8. When asked "What parameters do you wish to use?" select or enter "/T".
9. In the OptionWatch window, type in your ticker symbol and hit enter.
9. Click on any green or red symbols in the OptionWatch window. These are the options contracts currently active. Double clicking will display all of the Greeks for the selected option in the Analytics window. The Greeks will appear in the bottom right hand corner.
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MetaStock Power User Tip
Creating a Custom Watch List
Contributed by Breakaway Training Solutions
In this six minute video, you’ll learn how to create your own watchlist of securities using MetaStock’s Favorites folder. You’ll also discover how to modify the list of securities, add multiple securities at one time and scroll through your favorite charts quickly to find buy and sell signals. Have a look!
http://www.learnmetastock.com/FreeStuff/FreeVideos/Favorites/FavsWorkingWith.html
For more MetaStock training, make sure to visit us at www.learnmetastock.com or email us at admin@learnmetastock.com.
About Kevin Nelson
Kevin Nelson is the founder of Breakaway Training Solutions, Inc. He has spent the last 17 years becoming an expert on MetaStock software and a serious student of technical analysis while working for MetaStock. Prior to joining MetaStock in 1993, Kevin was a stockbroker for a well-known NYSE firm. In his role as Sales Manager at MetaStock, Kevin interacted extensively with MetaStock customers via phone, webinars, and public appearances. His experiences while working at MetaStock have enabled him to gain a keen understanding of the needs of technical analysts worldwide. While with MetaStock, Mr. Nelson was a featured presenter for four years. During this time, he traveled the U.S. introducing the MetaStock program to thousands of people and teaching them how to use its many features. His easy-to-understand approach is considered by many to be the best in the industry.
©Breakaway Training Solutions, Inc. 2011
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