Module 5, Lesson 1
Market Internals DPS techniques
Tomas: Module 5: Market Internals Dynamic Position Sizing techniques.
I'm really excited to share with you this one. This is definitely an advanced Dynamic
Position Sizing technique. I really love this one. It is based on market internals, which
is definitely a very independent - very, very powerful input to use.
So, let's get to this.
Disclaimer - a short disclaimer here again.
And let's talk about Market Internals Dynamic Position Sizing techniques.
Market Internals is one of the most unfair advantages I ever discovered. And you
probably know already that I even have an entire course on this topic, on trading-
[Link].
Market Internals is a truly independent input that give us information on the behav-
ior of the exchange as a whole. So, this is very, very crucial information. It's a special
calculation which we receive directly from the New York Stock Exchange.
And this proprietary calculation at the New York Stock Exchange basically calculates
the overall behavior, the market as a whole, because the New York Stock Exchange
uses their own algorithms to watch, and compare, and see the behavior of all the
stocks on their exchange - and their behavior at each particular minute or on differ-
ent timeframe.
And it delivers fantastic information about the behavior of the market as a whole.
That's also why it works mostly with indexes, stocks, and ETFs; because it comes
from the New York Stock Exchange and the calculation is based on up to thousands
of stocks traded there. But it can also be used for energies and some metals, like
gold, or even silver. You need to try it.
And it probably will not work with all the future markets. I cannot see much of an
impact, or much of a benefit for grains or softs. But again, you feel free to test it
Page 1 of 3
(c) 2018 [Link] / Distribution without author´s approval is not permitted.
TRADING INVOLVES A SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS,
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
with anything. Maybe you will be surprised. Maybe you will get some surprising re-
sults. Anything is about to be tested. So, unless you test, you never know.
So, this is a key independent information. And we will use this assessment of the
market as a whole, again, to create different levels of strength - different levels of
the strength of the market as whole, and separate it into three different levels, and
adjust the position size accordingly.
There are plenty of Market Internals. And that's why we have an entire course on
trading Market Internals only, because that's where I talk about more of them, or
the most important that I found. But in this program, and specifically in this module,
we will work with the following Market Internals.
We will work with a Market Internal which is called $UVOL, and that's a Market In-
ternal that monitors the total volume of all rising stocks on the exchange, meaning
New York Stock Exchange, at the given moment.
And $DVOL, which monitors the total volume of all falling stocks on the exchange,
each given moment.
So that's a very, very powerful information because now you already know that we
measure strength through volume from Module 3 where we covered Dynamic Posi-
tion Sizing based on volume. Now, we are basically pushing this entire concept way
further, and we're going to use the total volume of all exchange, New York Stock Ex-
change, so we will see the big picture of the market as a whole.
And we will use this information of total volume - that means total power behind
the rising stocks at each moment - and the total volume or total power behind the
falling stocks at each given moment. And then we will see which is stronger - if it's
the volume on the upside or downside, for the market as a whole. And that's the in-
formation we will use to create different levels, different zones, and then we will, of
course, have different position sizing within each zone, as you already know.
Now, again, very important. We are combining different time zones. So same as with
the previous module, we need to use local time in TradeStation to be able to mix dif-
ferent markets in one chart, because $UVOL, $DVOL, these are completely inde-
pendent markets.
These are not indicators, but completely - New York Stock Exchange delivers them,
this information, as kind of an independent market. So, we need to insert this infor-
mation as another market into our charts. Same with the VIX - with the volatility-
based index.
So, when it comes to data, in TradeStation you will need this data. It's called New
York Stock Exchange Real-Time Data.
Page 2 of 3
(c) 2018 [Link] / Distribution without author´s approval is not permitted.
TRADING INVOLVES A SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS,
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
It costs $1 dollar per month and it will provide you with all the Market Internals you
need - specifically for this module, $UVOL and $DVOL.
So, in this module, we will cover four different techniques based on Market Internals
- $UVOL, $DVOL. We will, again, have an indicator to explain to you the whole con-
cept. We will have testing-strategy, Optimization code, and the Result code.
So, let's move to TradeStation.
Page 3 of 3
(c) 2018 [Link] / Distribution without author´s approval is not permitted.
TRADING INVOLVES A SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS,
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS