There are three technical indicators inside the algorithmic trading strategy. The 'Signal' indicator, the 'Momentum' indicator and the 'Exposure' indicator. As a unit of three icons, they make monitoring your Stocks, Forex, ETF's and Mutual Fund positions simple, seamless and quick.
Let's break the trading algorithm down one-by-one.
01 / Signal indicator
This proprietary technical indicator was influenced by Bollinger Bands and the Moving Average Cross. As a stand-alone technical indicator, Bollinger Bands seek to measure a security's overbought /oversold environment while the Moving Average Cross helps identify its directional change.
INDICATORS Understanding the importance but also the limitations of Bollinger Bands and the Moving Average Cross, SellerySignals set out to create their own algorithmic technical indicator. An indicator that could identify both overbought and oversold environments as well as directional change. The outcome of their research produced the Sellery Bands and the Sellery Moving Average which together make up the 'Signal' indicator.
(Rainbow Colored Lines) Used to identify the Moving Average's directional change by measuring its deviation from the average's mean over time. These 'bands' move dynamically based on a security's relative volatility and therefore are more sensitive in times of price consolidation (anticipating future price volatility, or change), and less sensitive in times of current volatility in an effort to reduce false entry or exit signals.
Sellery Moving Average
(Dark Line) Seeks a faster or slower smoothing process based on the directional change and velocity of a security's price over time. The dynamic smoothing process is run by a proprietary mathematical equation that measures the strength or weakness in the greater bullish or bearish cycle of a security.
02 / Momentum indicator
As it suggests this indicator is meant to measure the momentum or 'strength' of the 'Signal' by running a rate-of-change calculation over the trading signal's proprietary moving average.
FORECASTING CHANGE The momentum arrow exists to help find divergences in the strength of our moving average to help forecast a potential change in the trading signal arrow.
(Dark Line) Measures the directional strength of the Sellery Moving Average.
(Green Line) Identifies when the 'Momentum' of the Sellery Moving Average is changing in direction. When the Dark Line is above its Momentum Average [the Green line] the Signal's momentum is rising and when the Dark Line is below its Momentum Average [the Green line] the Signal's strength is falling.
(Yellow Arrow) Identifies the direction of the momentum for the current week.
03 / Exposure indicator
As a algorithmic trading strategy, we do not endorse perfection but rather, probability and highest likelihood. The 'Exposure' indicator uses a proprietary, algorithmic model that weights the odds of a security’s weekly bullishness or bearishness using a spin of the classic MACD technical indicator.
PLAYING THE ODDS When playing to the odds of a bullish cycle the algorithmic trading signal will favor 100% exposure on 'entry' arrows and 50% exposure on 'exit' arrows. Inversely, in a bearish cycle, the algorithm will favor 50% exposure on 'entry' arrows and 0% exposure on 'exit' arrows. Note that the Exposure could increase or decrease within a current signal position if the algorithm identifies that the cycle has changed from bullish to bearish or vice versa.
(Dark Line) Measures an Index or Security's long-range trend. Above zero = Bullish. Below zero = Bearish.
(Red Line) Identifies a shift in the bullish or bearish long-term trend. This is the key to the system's suggestions of 100% exposure, 50% exposure or 0% exposure.
(Green Line) This line or 'moving average' speaks with the Sellery Moving Average to help identify how fast or slow the Average's smoothing rate should be in conjunction with the security's status within its current cycle. The 'Smoothing Line' does not interact with the Exposure Study.
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