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Using indicators to find good trades

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Starting with the market attitude of the day, Ralph Vince uses a combination of indicators he developed to spot trading opportunities – indicators he is making available today only on TradeShark.

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Tim:

My guest today is Ralph Vince. We're talking about his indicators exclusively on TradeShark. Ralph, I want to talk generally though about how you find good trades as a trader. I know you're a great programmer, and I think people will appreciate you're a trader too, which is important. How do you go about finding good trades on any given day?

Ralph:

Well, Tim it starts with an attitude on the day. I look and I say there's all these markets out there going on today. There is opportunity all over the place, on just about any day. I try to set up my trades so that I can be closing something out at a profit today, or setting something up that I can be closing out on a profit tomorrow. Anytime the market makes a substantial move one way or the other, I should be having something that I can close out at a profit. If what I'm doing, I'm doing the right way. I approach this, this is an interesting part of it here. To me this has to be fun. I've got to enjoy doing this. I enjoy making money, but the entire experience has to be fun. No matter how much heat I'm taking on a position, and I'm taking heat on positions everyday. If I'm going to be closing stuff out at a profit tomorrow, and the next day, and the day after that. I've got to be taking heat on positions today. Sometimes I'm taking a lot of heat. I've got a lot of cinder blocks lined up on my chest on some days. To me it has to be fun, okay. TradeShark makes it that way. I don't have to mess around with what have I got wrong in my code, here this, and the other thing. I know it's right. It's easy to use.

Tim:

Let's talk about your kind of routine. Are you at night flipping through a bunch of charts to see what you're looking at for the next day, or in the morning? How do you do that?

Ralph:

Usually on the weekends I'll spend time looking over my positions and re-assessing them. Only because I do a lot in the options market. I'll very often have things that might be put with some stock, I may have some stock culled away. I'll have some things that I have to do in terms of position alteration, come Monday. Usually I'll look at things before the market opens. I'll take a look at what's going in the pre-market and overseas. I trade just US markets anymore. Often times I'll look at things end of day.

Tim:

Let's talk about forward feedback specifically. What are your popular indicators only on TradeShark? Talk about how you would use that to find a good trade and then enter that trade.

Ralph:

That indicator I usually use on the exit portion of things. I will sometimes use it on the entry if I use it on conjunction with the red compression, and work some very low readings of red compression for a while. Then I know, okay, get ready, this markets getting ready for a trending move. If I want to be on the right side of it. The right side of that, the forward feedback's going to be on the right side of that thing when it gets moving. That I can be certain of. So I need to be aligned with forward feedback on that, on a market that's really winding up and getting ready to go.

Tim:

The reason you can be so certain is because you've traded it with real money.

Ralph:

Absolutely.

Tim:

What is it looking for on the chart? How is it finding its trades?

Ralph:

It's really chasing after price. Okay. But price can move awfully quickly and awfully abruptly. So the more price moves, and the more abruptly it moves, the faster it's going to respond. You can think of almost as something trying to intercept a missile in flight. Okay. The missiles trying to fake it out. This things going to catch up to it at some point in time. That's what forward feedback does. For a substantial period of time in a trend, forward feedback will not have caught up to it. If I'm on the right side of forward feedback, I'll be on the right side of that trade.

Tim:

How about exiting a trade, Ralph? I know that for a lot of traders they talk about entry a lot, but exiting is something that's as talked about and forward feedback helps you do that.

Ralph:

It does. Forward feedback, you tend to see a cross over in that before a trend is over. In fact, the longer the trend persists, the more forward feedback will tend to cross over earlier. Especially if that trend is not accelerating, or it's not a parabolic type of move.

Tim:

How clear is that signal on TradeShark? Am I going to know easily, even if I'm a new trader that its signals been hit?

Ralph:

You can't miss it. I mean you just look what the closing price is in that forward feedback line, and you know whether you're on the right side of it or not.

Tim:

It makes it very easy, even though there's a lot of math behind this, to see it.

Ralph:

There's a lot of math behind that one in fact. That and the cycles determination. There's a lot of math behind both of those. That's part of the nice thing about this platform. There's a lot of math behind these indicators. There's a lot of history behind them, but all’s I have to do is load my portfolio and voila. There it is in front of me.

Tim:

It sounds like you have a lot of trust in your indicators, but there's also a lot of trust in the platform of TradeShark itself. Talk about that.

Ralph:

That's why these indicators are in that platform, because I trust that platform. Again, just as my indicators are robust and solid, because I need them in the foxhole, so too is TradeShark. It's the kind of tool you want in the foxhole with you, because it is robust and solid. All that aside, from any relationships with Mendelsohn’s at all.

Tim:

Which goes back quite a long way?

Ralph:

It goes back decades.

Tim:

Ralph, you've known the Mendelson family for a long time. Talk about some of your earlier experiences with them.

Ralph:

I first met Lou when I was working for Bruce Babcock. I had to call Lou on a product of his called Profit Taker, which really was the first incarnation of let's say what TradeShark is today, as I understand it. I thought "Well I'm going to call this guy, and he's going to not want to have me waste his time. I'm just some kid, he doesn't know who I am." I call him up, and the guy was very accommodating on the phone with me. We spoke for maybe close to half an hour. There wasn't many guys to probe (6:05) things up in those days. I was able to start asking. Let me ask you, how would program this type of thing up? He was very forthcoming with me, very warm on the phone. When guys are sincere, they're usually laden with details, and willing to open up with you. I got off the phone and thought wow, I just met a guy on the phone, who I'll be friends with for life. Here we are.

Tim:

He's built that culture in the company, which exists today, where a trader can call and actually spent time with somebody who knows what they're talking about, and can help them out.

Ralph:

It is. In fact, I've called. These guys have answered for me. They're exactly that way. They have the same culture that Lou created back in the early eighties.

Tim:

Ralph, the volume bar rules indicator, compares bars and price movement on that day. Talk about how that works.

Ralph:

We're looking for changes in the continuum of the liquidity, with volume bars. We're looking what's a little bit out of the ordinary going on with liquidity here. With respect to the price bar, the activity and price. By itself, the volume bar doesn't tell us anything, but with respect to price, it tells us a lot. Let's say we have large range bar day, okay, that closes anywhere but the upper say one third of that day. At the end of a good run up in price, and we have a volume bar signal. This is a type of signal, typically, where I know okay. This thing is going to be a good sell here and it's extremely unlikely that it's going to take out the high of, the day that gave us the signal. Now, with that you'd say "Well then, I want to look to be a seller tomorrow." And not necessarily, okay. I'm going to sit and I'm going to watch it tomorrow. This could be in the middle of a very impulsive run up. If that tomorrow comes and it doesn't take out the high of that day, but let's say it's just an inside type day. I go that's it, this is a perfect sell based on that volume bar. Given on Monday, this is going to be a perfect sell tomorrow, Wednesday.

Tim:

All right. In the red compression indicator, also very impressive, when the indicator readings are high, and are priced high or low, talk about what that means.

Ralph:

If it's rolling over from being high, that generally means okay, this trend has about run its course. There's a second use of that that comes up Tim, in a lot of markets that really start trending. I think if you looked at the recent drop in crude oil, you probably see this. In the rise in the dollar lately, where you'll see it start rounding over with respect. The price kind of goes into a consolidation period and then it starts to pick up again. You have a little break out to the down side. When you have that happen, boy this trend is back in force. You need to back lined up with that trend. The indicator that will go to then of course, forward feedback.

Tim:

Are you using these indicators now? You said they stood the test of time. How important is that? That something has been working for a long time to be a successful indicator?

Ralph:

To me it means an awful lot. Look, right now, we live in a period of time where I see a lot of track record that are all from 2009 forward or go back only 5 years. I don't know what tomorrow is going to bring in these markets. I do know every now and then, they tend to shake rattle and roll pretty good. I want stuff that I've used in the foxhole on some really tough days and didn't jam up on me. And that's what I want to be using tomorrow, that's what these indicators are that are in Trade Shark.

Tim:

And I think what set you apart from other programmers is that you have traded these things yourself with real money in your own account, you have trust them that much?

Ralph:

Absolutely, in fact I don't use an indicator or an approach to the market. I don't even talk about it with anyone until I have gone and traded it, my own money and traded it through some pretty scary times, some pretty hair raising market conditions. If it holds up then and I make money with it then I know I have something. That is the case with these indicators, Tim.

Tim:

Ralph, thanks for your time today.

Ralph:

Thank you Tim.

Tim:

We've been talking with Ralph Vince about his exclusive indicators in TradeShark

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