It has been said that more money has been lost due to trading oscillators than any other technical study. Oscillators have the ability to call the highs and lows as they form in some market conditions, giving an impression that this can be done under all conditions. Of course the problem is that once a trend forms, the oscillator will get overbought/oversold and remain that way for a long period of time. Woe to the trader who keeps selling into the rally because of the oscillator!
Recognizing the value of oscillator studies such as RSI and Stochastics, and very aware of their short comings, we began research into the area of overbought/oversold identification and have come up with our own tools which do this job very well. Exhaustion Bars are designed to locate turning points in real time, but differ from classical oscillators in that they are not based on mathematical equations but on actual price patterns that tend to form at highs and lows. Since they are based on patterns, they do not suffer from being overloaded during strong trends. Either the patterns are there or they are not.
We offer two Exhaustion studies, each of which uses different patterns to do the same thing. They can be used together or separately, and can be fine-tuned by the user to give signals more or less frequently. Pictures are more valuable than words when it comes to trading techniques, so here are a few examples.
This is an example of MA_Exhaustion Bars 1 on daily S&P 500 data. Red dots are given above the bar for a sell signal, and blue dots are given below the bar when a buy signal occurs. As you can see, the Exhaustion Bars were very accurate during this volatile time in October 1997. Note that the dots appear over the bar that they are triggered on, so these signals were all generated in real time.
Above is a 1 minute S&P chart with our second Exhaustion study applied. As you can see, the Exhaustion Bars come very close to the swing highs and swing lows without all of the problems associated with oscillators. There are no bands to set, and no overloading to worry about. Here's another 1 minute chart:
These studies are universal, and work on all time frames and all markets. Although you can change the parameters to suit your tastes, this is probably not necessary since the defaults work so well. All of these charts used the recommended default settings. User functions are included so you can use these studies to build your own custom systems.
If you have spent any time looking through the other sections of this website, you have probably come to the realization that we love to give out free bonus indicators with our products. This is our way of thanking you for your support. The Exhaustion Bars package is no different in this respect. If you turn your attention back to the above chart, you will notice that there are a number of trendlines that have been added.
These trendlines are part of MA_Trendlines and were drawn automatically. These trendlines are objective and have been drawn from a rigorous set of criteria that define when and where trendlines should be drawn. Since they are drawn as objects on the chart, it takes two clicks of the mouse to extend them into the future. If you have ever wondered if that trendline you drew was in the right place, this tool is for you. It works on any data stream, and gives you many options that you will have trouble finding in similar studies offered (at high prices!) by our competitors. For example, you have an option of drawing the trendlines from swing point to swing point or delaying them by a user selectable factor to keep them out of the way of prices. The trendlines on the above chart have been delayed by three bars. Another useful feature is the ability to modify the colors of the trendlines with a simple input change. You can even set the declining trendlines to be a different color from the rising ones! This is a very useful study, and could probably be combined with MA_Pivots (from the Momentum toolbox) to create a profitable mechanical system.
The Complete Package
The complete Exhaustion Bars package is only $275 and comes with the two Exhaustion Bars studies and MA_Trendlines. We seriously doubt you will be able to find better exhaustion studies anywhere else, especially at the low price we offer. Take advantage of this offer while it lasts. Click here for ordering information.