Market Conductor Pre-Alert
The Market Conductor can give us some insight into how the Conductor works. Do not confuse the Conductor and the Market Conductor as two separate indicators. The Market Conductor simply indicates the count of required days in the one trend prior to a reversal.
Trend following system
All equities, not options
There are only two variables for the Market Conductor:
This indicator a positive price trend.
This indicator a negative price trend.
The colours of the market conductor can easily visually distinguish the change of trend compared to the bar they are on e.g. the bar maybe be green, but the market conductor is red and indicating a trend change.
The diagram below shows how the indicator is searching for the shares. The actual formula is of course proprietary; however, you can see the pattern.
For a trend reversal up, the figure below illustrates the trend going from red to green.
You can see that there have been 11 days in a downward trend before the reversal up.
For a trend reversal down, the figure below shows the pattern and reversal.
Again, you can see that there are 6 days in an uptrend before the down turn.
The chart below with the Market Conductor overlayed with the Conductor Pre-Alert you can easily see, and in fact count the number of green days required before a trend reversal down and how many red days are required before a reversal back up occurs.
As with all the indicators, the Market Conductor along with the Conductor is an alert to possible trades. It is different however as it waits for the change, unlike the Accumulation and Distribution indicators that are pre-emptive. The Market Conductor visually r alerts us to a selection of shares that have changed direction, you need to determine how significant that change in direction may be.
It is important that you establish the position the indicator is alerting, you need to keep in mind the share price, the overall chart. For example, is it an descending or ascending trend or at a level of support?
You can see on the chart the indicator alerted us to reversals up, but in reality, of the stock advancing far was rather unlikely.
The chart below indicates how you would use other charting methods to sieve the number of selections to find a share that suits our trading strategy.
While you may not be interested in trading as often as this, it is a good example of how a combination of the Conductor and other technical analysis need to work together. The red horizontal lines indicate the support levels, while the red angular lines represent the resistance and trends of the stock. Our entry would come on a break in the resistance, provided other conditions you’ve met. It is important to appreciate that the indicator can alert us to, say, an up reversal while the day in question is a negative day. This would make the decision to trade the stock less likely. To purchase a share, you like to see a positive day to indicate to us that the buyers are in control. Likewise, when being alerted to the possible down reversal, it can be with a positive day, however you like to see a negative day before you sell, to indicate the sellers are in control.
If you look at combining the Conductor with other indicators, the Accumulation and Distribution indicators work you will. The A and the D alert us the share and the C can help confirm that it has now changed direction.
The Conductor is alerting us to shares that have made a reversal in the most recent trend. It is a counter trend tool.
The length of that trend depends on the Conductor setting you chose. The smaller the setting the less significant the break in trend may be. For example, a resistance line drawn over twenty days and having been broken, has less significance for a trend reversal than, say, a resistance line drawn over twenty days and being broken.
It needs to be used in unison with other technical analysis and methods of trading. For those who would like to see some more detailed research using the conductor please refer to the module ‘Building a trading system- step by step’