Friday, September 12, 2008

Following the NYAD

Yesterday's S2 - R2 swing in the Qs was picture perfect and exceptional for the range. I've previously mentioned benefits of monitoring the NYAD (NYSE advance/decline) in conjunction with the major indices, and the value of the NYAD can be demonstrated above. The 3 Finger study displayed the relative alignment of index behavior and I typically rely on the NYAD not only to confirm trade signals, but, perhaps more importantly, to keep me out of premature exits . . . which I am prone to execute as I scoot away from risk. The trick, of course, is to determine what's a pullback and what's a reversal. Although many scalpers prefer to just exit on 1 minute bar ADX reversals and then re-enter when (and if) the 3 or 5 minute bar trend rekindles, I'm more inclined to just follow the 5 minute bars, avoid the whipsaws, and exit of the alignment of the parabolics trigger, an RSI crossover and a NYAD reversal.
I've also found it's helpful to watch the action of the 8 and 16 MAs on the NYAD and frequently use the crosses for mid-day entries or exits. While the NYAD will seldom have the width of range of the indices and the slope of the NYAD is typically only a fraction of the indices, this is an important tell for what's really going on with market dynamics. Best monitored with a good vertical aspect in order to detect the signals.

No comments: