Lizard Trader – Leading Indicators

Much as been said about leading indicators, but there’s really only one and that’s price action. Price action is simply historical price data plotted on a chart, as opposed to lagging indicators that can be used to confirm trends or reversals.

Below you’ll find our proprietary indicators for NinjaTrader 7 and 8, namely our leading indicator package, i.e. the Session Tools (the multi time-frame Opening Range, Range Projections, Pivot and VWAP packages), along with the LizardRenko bars. You will also find our entry timing tools; the Auction Bars, Candlestick Pattern, Ichimoku Kinko Hyo, Swing Trend and the Zerolag Oscillator. The tools can be used as add-ons to improve any system you currently trade, alternatively you may use them as stand-alone trading tools.

What You’ll Learn In Leading Indicators

Auction Bars

That the trend is your friend, is probably the single most used line in the trading community. Of course, one may identify trends that last for extended periods of time in higher timeframes, such as daily or weekly charts. This is however rarely the case in intraday trading. Typically there are temporary imbalances that lead to a sudden increase or decrease in price. For a brief moment the market will know where it is heading. But then the sudden move stops and the market returns back to a bipolar mode. The new price levels are now being tested until there’s a new sudden move with a breakout from the trading range.

Candlestick Pattern

Candlestick patterns are price movements which can be shown on a candlestick chart. A candlestick pattern typically consists of one or several candlesticks. The different patterns can be used to predict price reversals or price continuation. The Candlestick Pattern indicator identifies 30 bullish and bearish pattern which have been adapted for intraday charts.

Bullish / Bearish

• Bullish / Bearish Belthold
• Bullish / Bearish Engulfing
• Bullish / Bearish Harami
• Bullish / Bearish Harami Cross
• White / Black Marubozu
• Bullish Piercing / Dark Cloud Cover
• Bullish Hammer / Shooting Star
• Dragonfly Doji / Gravestone Doji
• Inverted Hammer / Hanging Man
• Morning Star / Evening Star
• Morning Doji Star / Evening Doji Star
• Long White Candle / Long Black Candle
• Tweezers Bottom / Tweezers Top
• Three White Soldiers / Three Black Crows
• Rising Three Methods / Falling Three Methods

Reversal Pattern and Continuation Pattern

A bullish reversal pattern alerts to a potential change from a downtrend to an uptrend. Therefore bullish reversal patterns are only valid when they occur during a downtrend. Likewise, bearish reversal patterns precede a potential change from an uptrend to a downtrend and therefore require that the market is in an uptrend.

For a bullish continuation pattern the market should already be in an uptrend, while a bearish continuation pattern requires that the market is already in a downtrend. Most of the candlestick pattern are reversal pattern. A reversal pattern is reinforced by support and resistance. The predictive power of reversal pattern increases when there are several reversal patterns in a row.

Statistical Analysis

Candlestick pattern were originally developed in Japan around 1850 for daily, weekly and monthly charts. The concept has been developed for time based charts and can be extended to intraday charts for many of the pattern. Gap pattern are not suited for intraday charts.

Ichimoku Kinko Hyo

The Ichimoku Kinko Hyo, also known as the Ichimoku Cloud, is a versatile indicator that defines support / resistance, trend direction, momentum and trade signals. The indicator was developed by Goichi Hosoda who published a book about it in 1969.

LizardRenko Bars

The LizardRenko Bar package come with four (4) bar types and a specific indicator for this bar type; a low market liquidity detection tool and the projected high low level for the next bar.

LT_Renko_Tools:

Market Liquidity: Detects low liquidity scenarios where thin market conditions cause one or several order book levels to be skipped.

Opening Range

The Opening Range is also a leading indicator and displays the range obtained from the highest and lowest price of a security during the first minutes of daily trading activity. The Opening Range indicator displays the range and the current open of the RTH session. The premium version is a multi-timeframe (MTF) version of our standard library version. Specifically, a secondary minute bar series is added to the chart and calculates the opening range.

Range Projections

The Range Projections Suite indicators display support & resistance and expansion bands based on the average range of the prior N sessions. Noise Bands show how far retail traders typically drive prices and represent areas of support & resistance. Once these levels are breached, it typically indicates participation from higher timeframe traders. At that point, Range Expansion Bands or Range Projection Bands may be used to place targets.

Weekly and Monthly Projections:

Weekly or monthly projections are calculated by looking at the previous N weeks or N months. Noise Bands, Expansion Bands and Range Projections Bands are calculated in a similar fashion from weekly and monthly input parameters.

Weekly and monthly projections may also be calculated for partial sessions of the trading day.

Session Pivots

Session Pivots are a well known trading technique used by market makers and were frequently used by local pit traders to calculate intraday support and resistance points. The technique has been around for decades, and because of its simplicity and efficiency, it is still in use today. Pivots are calculated from the high, low and close of the previous day’s session. This information is available prior to the start of the current day’s session and does not change throughout the day. The Session Pivots are leading indicators and can be used to display Floor Pivots, GLOBEX Pivots or JacksonZones.

Session VWAPs

Many institutional traders have their trade execution measured by volume weighted average price (VWAP). The VWAP is a benchmark that tells us the average price for all transaction executed during a day. Because institutional investors have their execution measured as good or bad by how far away they were from the average price, they will try to buy as close as possible to the VWAP. Accordingly, there are two ways of using the VWAP, namely as trend filter or as support and resistance indicator.

Swing Trend

The Swing Trend indicator is a classic tool for trend analysis and determines the general direction in which the market is moving. Swing trend analysis is furthermore used for Fibonacci analysis, pattern recognition and for detecting divergences.

Establish the current trend

Identify potential low risk, high reward trade setups

More courses from the same author: Lizard Trader

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