GMT MARKET DIRECTIONAL INDICATOR (MDI) - INDICATOR & STRATEGY INPUT

The GMT Market Directional Indicator has been designed to automatically plot the markets direction and therefore identify the trend for the current day. The challenge that most traders face is identifying the trend for the day. A failure to adequately identify the daily trend is a common mistake most traders face in trying to build systems to suit all market environments.

A simple interpretation of a chart pattern early in the day will give the trader all the information necessary to determine the major trend of the day. Let’s take a look at how this is going to appear on our charts and review the indicator Inputs.

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WHAT IS VWAP?

Start time: This is your first selected input. Each trader will need to nominate a start time that they would like the MDI to start calculating the trend of the day. 

Time Split = true or false. True turns this option on. This input refers to the option the trader has to select either the time setup or the bar set. A time setup will work on all time based charts. While the bar setup has been designed to work on range, renko, volume, time and other chart types.

Time setup = 5. The trader will need to input a number in this column. This number will be a time based valued and will record the high and low of the trading day based on the value as a time increment. Therefore, if the trader selects five as the input, after five of the trading day, the indicator will record the highest price which the market has reached at this point in time and the lowest price of the day at the same time. Traders are able to select a start point for their calculations. This is referred to as the “start time”. From the data you have recorded, an average price for the first five minutes of the day (or what time the traders chooses) will be calculated by adding the two recorded prices and dividing by two. The resulting price is the critical price level which you will use for the rest of the trading session to determine the trend of the day. The average price will appear as the middle line on your MDI inputs and will appear in yellow.

Delay: The delay is critical in our calculations as it is determining the overall trend of the day. The delay is a time based value where the trader is selecting the period that needs to pass before we are measuring how far price has moved away from our average line. The larger the move in one direction the greater the trend. Visually you will see this delay bar appear on your screen as a vertical bar. It is defaulted to 60 minutes. The trader can choose what time this bar is to be measured in the properties section.

Fixed =1 which turns the setting on and selecting 0 turns it off.  This setting means that the trader is able to apply the indicator at the start of the trading session by selecting the desired start time.  The indicator will determine the trend of the day by printing bullish or bearish.

 

Provided below is an example of the bullish and bearish calculation.

 

Value Bullish: (Value of price action  - total points or ticks above the average of the first five minutes and during the 60 minutes of trading or where the trader has selected the interval bar calculation).

 

Value Bearish:  (Value of price action  - total points or ticks below the average of the first five minutes and during the 60 minutes of trading).

 

Bullish/Bearish ratio: (this is the bullish value divided by the bearish value to determine the market strength number:  For example

Strategy Settings

Value settings

Bullish =>1

Neutral =1

Bearish<1

 

Initial trading Zone =1 has the input on while selecting 0 turns it off. (this is the initial high and low of the day as per the traders initial time setting).  The initial trading zone is referred to as the no trade zone. 

 

Calculating the Bullish and Bearish Value

Bullish value is 60 ticks/points
Bearish value 20 ticks/points
60/20=3

Period 1

Bullish value is 60 ticks/points
Bearish value 20 ticks/points
60/20=3

Bullish/bearish ratio:3 Bullish

Period 2

Bullish value is 70 ticks/points
Bearish value 0 ticks/points
70/20=3.5 Bullish

Period 3

Bullish value is 60 ticks/points
Bearish value 0 ticks/points
50/20=2.5 bullish

Period 4

Bullish value is 20 ticks/points
Bearish value 20 ticks/points
20/20=1 Neutral

Period1 Period 2 Period 3 Period 4 Period 5
3 2 2.5 1 -1
bullish bullish bullish Neutral Bearish

(Ideally this would be plotting at the base of the charts with these values.) 

Dynamic =1 turns the setting on while 0 has it off. – This occurs every 60 minutes in the trading day or when the trader nominates. And is plotted on the chart and reflected in the indicator. That means effectively that the trend for the day is being recalculated periodically throughout the day. 

STRATEGY SETTINGS

Trading:

Bullish =1

Bearish =1

Neutral =1

No Trade Zone =1 (this is the initial high and low of the day as per the traders initial time setting.  Or the re-caculated high and low for the dynamic setting)

DYNAMIC FILTER

If this is set to 1 then trades will only be taken during the market conditions.

 

Trades only taken with changing periodic value:

Increasing Bullish Value =1/0

Increasing Bearish Value =1/0

Reducing Bullish value =1/0

Reducing Bearish Value =1/0

No Trade Zone = 1/0

Period1 Period 2 Period 3 Period 4 Period 5
3 2 2.5 1 -1
bullish bullish bullish Neutral Bearish

Any additional questions concerning the indicator please email shane@gmtfutures.com.