Overlays are shown directly on the chart.
To display an Overlay Indicator, right-click the Chart Window and select Chart Overlays. Select the name of the Overlay Indicator that you would like to view from the dropdown menu. A checkmark will appear next to any indicators you have selected and all selected indicators will show directly on your chart, not in the indicator window. To remove an overlay indicator from your chart, click on the indicator in the dropdown menu again and the checkmark with disappear.
The Overlays that come from plug-ins are listed at the top of the menu, these are further discussed in the Plug-Ins section of this manual.
Overlay Preferences (Quick Links)
In the bottom right of the chart you will see symbols that will correlate with which Overlays you have selected. If you click these symbols the control panel will switch to the preferences tab automatically with the preferences of that overlay displayed. These symbols abbreciations are included in the title of the Overlays in the manual with parenthesis.
You may right-click the abbreviated names to Remove the overlay, open Chart Preferences or view Properties for that overlay.
You can also navigate to the preferences of each overlay by right clicking on the chart and go to Overlay Preferences and selecting the appropriate Overlay.
On Screen Text
When you open an overlay you will see text appear on your chart in the upper left hand corner. You can choose whether to show this text, and choose where it appears by right-clicking on your chart. Mouse over On Screen Text to view your options. This also changes how indicator on screen text is displayed.
The Overlays are explained in detail in the following sections:
A unique use of fractal geometry and nonlinear dynamics is used to create the method of calculations for the Alligator Indicator. Used in combination with the Gator Indicator, the Alligator has proved to be effective at pinpointing large market trends.
Components
Alligator’s Jaw (blue line): The Balance Line for the timeframe that was used to build the chart (13 period Smoothed Moving Average, moved into the future by 8 bars).
Alligator’s Teeth (red line): The Balance Line for the value timeframe of one level lower (8 period Smoothed Moving Average, moved by 5 bars into the future).
Alligator’s Lips (green line): The Balance Line for the value timeframe, one more level lower (5 period Smoothed Moving Average, moved by 3 bars into the future).
The Lips, Teeth, and Jaw of the Alligator show the interaction of different time periods. As clear trends can be seen only 15 to 30 percent of the time, it is essential to follow them and refrain from working on markets that fluctuate only within certain price periods.
When the Jaw, Teeth and Lips are closed or intertwined, the Alligator is going to sleep or is asleep already. As it sleeps, it gets hungrier and hungrier: the longer it sleeps, the hungrier it will be when it wakes up. The first thing it does after it wakes up is to open its mouth and yawn. Then the smell of food comes to its nostrils: flesh of a bull or flesh of a bear, and the Alligator starts to hunt it. Having eaten enough to feel quite full, the Alligator starts to lose interest in the food/price (Balance Lines join together), and this is the time to fix the profit.
Alligator Example:
To open the Alligator Preferences click on the QuickLink (AL) in the lower right of the chart. Or you can right click, select Overlay Properties and then Alligator. If you click on the chart, the Preferences tab will go back to chart settings.
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Jaws, Teeth, Lips: Specify your periods and shift specifications.
3. Type: Select Simple, Linear Weight, or Exponential.
4. Data: Select Open, High, Low, or Close.
5. Jaws, Teeth, Lips: Choose the color, line style, and line thickness of your indicator line.
John Bollinger created Bollinger Bands in an effort to gauge the volatility and condition of a market. These bands are used to determine the trading range and give an indication of when to buy and when to sell. Bollinger Bands are also used to indicate market volatility, the wider the bands the greater the volatility. Inversely, the narrower the bands, the lesser the volatility. By plotting two lines at an interval around a moving average, Bollinger bands give a good indication of market conditions and price relation. The moving average which the band is based on works as an indicator to confirm trade signals.
Calculate the moving average with this formula:
Subtract the moving average from each of the individual data points used in the moving average calculation. This gives you a list of deviations from the average. Square each deviation and add them all together. Divide this sum by the number of periods you selected.
Take the square root of d. This gives you the standard deviation.
Compute the bands by using the following formulas:
Pn: The price you pay for the nth interval.
n: The number of periods you select.
A buy signal occurs when a chart bottom is below the lower band followed by a bottom above the lower band. A sell signal occurs when a chart top is above the uppermost band followed by another top that is below the upper band.
Example of Bollinger Bands
To open the Bollinger Bands Preferences click on the QuickLink (BB) in the lower right of the chart. Or you can right click, select Overlay Properties and then Bollinger Bands. If you click on the chart, the Preferences tab will go back to chart settings.
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Period: To specify the number of days used in calculating the indicator, click in the box, highlight the number, and type in a new value.
3. Type: Change the type of the Moving Average line to simple, linear weight, or extra smoothed.
4. Data: Choose either open, high, low, or close as the data used in calculating the moving average.
5. % Deviation: Defines the displacement between the Bollinger Bands. Click in the box, highlight the number and type a new value to change the displacement.
6. Upper, Middle and Lower Band Lines: Change the color, line style, and line thickness of the Bollinger Bands.
Donchian Channels were created by Richard Donchian, an expert in trends. The DON is a simple trend breakout system. The channel works well in trending markets, but not as well in sideways moving markets.
Donchian Channels measure volatility by creating two bands based on the highest high and lowest low for a specified period. Many traders view the market crossing above the upper band as a signal to buy and the market crossing below the lower band as a signal to sell.
The calculation of the DON is here:
Donchian Channel High = MAX (HI, n)
Donchian Channel Low = MAX (LO, n)
n: The number of periods you select.
To open the Donchian Channel Preferences click on the QuickLink (DON) in the lower right of the chart. Or you can right click, select Overlay Properties and then Donchian Channels. If you click on the chart, the Preferences tab will go back to chart settings.
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Donchian Period: Specify the number of bars in a period.
3. Upper, Lower: Choose the color, line style, and line thickness of your indicator line. Upper is the line formed by the highest high in the period specified. Lower is the line formed by the lowest low in the period specified.
4. Mean Line: Graph a line that is the midpoint between the upper and lower.
The middle line (20 period EMA) in a rising market should provide support. In a falling market, the middle line should provide resistance. Keltner Bands, as with any moving average indicator, seem to work great in strongly tending markets, but not so well in sideways markets. Just like all trend-following systems, the Keltner Bands are not meant to spot tops or bottoms. Use the Keltner Bands in conjunction with other indicators such as RSI or MACD. Using it in combination with either of these will help provide verification of the strength of a market.
The calculation for the top, or Plus Band, is here:
2 (ATR over 10 periods) + (20 period exponential moving average)
The calculation for the bottom, or Minus Band, is here:
2 (ATR over 10 periods) - (20 period exponential moving average
To open the Keltner Bands Preferences click on the QuickLink (KLT) in the lower right of the chart. Or you can right click, select Overlay Properties and then Keltner Bands. If you click on the chart, the Preferences tab will go back to chart settings.
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Period: Specify the number of days used.
3. Type: Select Simple, Linear Weight, or Exponential.
4. Band Calculation: Select Original or ATR and enter values of your own.
5. Upper, Middle, Lower: Choose the color, line style, and line thickness of your indicator line.
The moving average, or simple moving average, represents the average of the last several closing prices. The moving average is simple to compute, easy to understand, and reliable under tests. This simplicity is the strength of the moving average.
The basic moving average is computed the same as any other mathematical average. The most common way of determining the moving average of a market is to take the closing price over a certain number of days, add them together, and divide by the select number of days.
Moving averages are generally thought to be indicators of trend. For example, conventional interpretation is that once prices cross from below the moving average to above it, the trend is considered up. On the other hand, if prices go from above the moving average to below it, the trend of the market is considered down.
The purpose of the simple moving average is to track the progress of the trend. Moving averages can potentially keep you in the trend for a long time. The moving average gives you an indication of the trend being up (prices above the moving average) or down (below the moving average). However, the moving average gives you no indication of the length or duration of the trend.
Double moving averages use two different averages in tandem. The first average is generally a faster reacting average using a shorter period of time, usually 10 days. The second average is a slower reacting average that will indicate longer-term price movement.
Using these two averages together helps to alleviate whipsaws by giving a basis of comparison. The faster average breaking above the slower average is a buy signal, the faster average breaking below the slower average is a sell signal.
When using two different moving averages the trader gets a clearer picture of price indications. By combining a slower moving 20-day average, with a quicker reacting 10-day average, you can see where the long-term indications are going.
You would sell once the faster moving average crosses below the slower trend because that’s an indication of change in trend. Near-term prices should be rising at a greater rate than longer-term prices in a good upward trending market, and vice versa for a down trend.
The system of triple moving averages is employed by plotting three different moving averages together. The first of these averages is a faster average that only looks at the short-term price direction. The second average is a medium average that reacts to a longer period of time, but not as long as the final average. The third average is the slowest to react, because it takes an average of the longest period of time.
A 10, 20, and 40 day moving average system would be considered a triple moving average. The first average, the 10-day, is the quickest to move when prices show a change. The second average, the 20-day, is the medium average that does not show change until the prices have moved for a longer period of time. Finally the slowest moving of the averages is the 40-day. This slow average will not indicate a difference until prices have made a significant move. Shorter-term moving averages, being more sensitive to changes in price, are said to follow the trend more closely. The middle or medium average would follow less closely and the slowest or least sensitive average would lag the most.
The use of the triple moving average is to buy when all three averages move to be in an upward trend or to sell when these averages are in a downtrend. The upward trend appears when the fastest average is higher than both of the other averages, the medium is above the slowest, and the longer term moving average is on the bottom.
This look would be reversed for a strong down trend with slow average on top, followed by the medium average, and the fastest on bottom.
Simple Calculation:
Mat = (P1 +... + Pn) / n
Mat: The moving average for the current period.
Pn: The price for the nth interval.
n: The length of the moving average.
Compute the average of the past n intervals using the price specified for that period. Now use real values to compute a five interval moving average. If you assume the following prices, the calculations are here:
MA = (7380 + 7375 + 7385 + 7390 + 7395) / 5
= 36925 / 5
= 7385
Linearly Weighted Calculation:
Mat = [(P1 x (n –1)] + …+ [Pn x (n – n)]
Denom = n + n-1 + n-2 +…+ 1
MA = Mat / Denom
n: The length of the moving average.
Pn: The price for the nth interval.
MA: The moving average for the current period.
Exponential Calculation:
fPerc = 2 / (n + 1)
MAt = (P x fPerc) + [MA(t-1) x (1 – fPerc)]
MA: The moving average for the current period.
t: The current time period.
Max Average Calculation (found below moving average 6):
Max Ave. = Sum of ( nclose * npos ^ pow ) / sum of ( npos ^ pow )
npos: position in the period, starting at 1
nclose: close of the bar at npos
pow: Max Average Power
Moving Average signals are calculated from the first 2 moving average lines. A buy signal occurs after the Moving Average 1 moves above Moving Average 2. A sell signal occurs after the Moving Average 1 moves below Moving Average 2.
Open the Preference tab from the Control Panel on the left of your screen. Select the moving average line on your screen. The preferences will appear in the Control Panel. (Once you click on the chart, the Preference tab will go back to chart settings.)
Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default willsave your current personal settings.
Line: Choose the color, line style, and line thickness of your indicator line.
Period: The number of bars, or interval, used to calculate the moving averages. To add a displacement, add a second number in the period box (with only a space between the two numbers.)
Type: Select Simple, Linear Weight, or Exponential.
Data: Select Open, High, Low, Close, Mean, Median, or Mode.
The Parabolic SAR, developed by Welles Wilder, creator of RSI and DMI, sets trailing price stops for either long or short positions. Also referred to as the stop-and-reversal indicator, Parabolic SAR is more popular for setting stops than for establishing direction or trend. Wilder recommended establishing the trend first, and then trading with Parabolic SAR in the direction of the trend. If the trend is up, but the underlying price drops back below the trailing PSAR indicator, then sell or liquidate your long position. If the trend is down, and the underlying price rises above the trailing PSAR indicator then buy or liquidate your short position.
Calculation
Once the market establishes a direction, the initial SAR becomes the extreme price for the two intervals. The extreme price is either the lowest price or highest price for the two trading intervals. The short position uses the high, and the long position uses the low.
The calculation for the PSAR is here:
SARt = SARt-1 + [ a x ( EPtrade - SARt-1) ]
SARt: The stop and reverse price for the current interval.
SARt-1: The stop and reverse price for the previous interval.
a: The acceleration factor.
EPtrade: The extreme price for the trade.
The SAR is always the “stop and reverse” price point. This is the point you would want to liquidate your current position and establish the opposite position.
The acceleration factor, a, is a weighting factor. In Wilder’s work, the initial value for the acceleration factor is .02. The acceleration factor increases by a value of .02 each time the extreme price changes for the trade. You do not increment the acceleration factor if the extreme price fails to change. The value for a, the acceleration factor, never exceeds .20 in Wilder’s methodology.
The extreme price (EP) for the trade is the highest or lowest price achieved during the trade. If you have a long position, use the new highs as the extreme price. When you have a short position, use the new lows as the extreme price. The extreme price concept allows for normal market corrections without immediately triggering the SAR price. It keeps the SAR price moving in the direction of the market.
To open the Parabolic Stop and Reversal Preferences click on the QuickLink (PSAR) in the lower right of the chart. Or you can right click, select Overlay Properties and then Parabolic Stop and Reversal. If you click on the chart, the Preferences tab will go back to chart settings.
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Initial, Additional, Limit: Specify the calculation number you would like each section of the indicator.
3. Style: Choose how you would like the indicator displayed. Select squares, crosses, dots, or lines.
4. Color: Select the color of the indicator.
However, many traders believe that once one point is violated, the next point will be tested, making a violation of these support and resistance levels a clue in trend following. Though we cannot vouch for the truth of this statement, the popularity of pivot points amongst floor traders tends to make these points worth watching.
The popularity of these numbers can be seen on any day when the exchanges are cleaned-up. The trading floor is literally piled high with folded pieces of paper that contain pivot points calculated on them.
The uses of pivot points varies greatly by trader. The most common function of the daily pivot is as a guide. If prices are trading above the pivot point, then the trend is considered up. Traders may wish to take short-term positions on a violation of the daily pivot to the upside with an initial upside objective of the first resistance level. If prices stall or slow at the first resistance level, then aggressive traders may wish to take profits. However, if the first Resistance level is violated to the upside, then the market should go on to test the second resistance level. If prices have violated the 1st resistance level, then this level should act as support on future pullbacks, as should the pivot point.
The opposite is true for support levels. A violation of the daily pivot to the downside indicates that the daily trend is down, with a downside target being the first support level. If the market stalls, then traders may wish to take profits on short positions, or initiate long positions in anticipation of a retracement to the daily pivot. However, if the first support level is violated, the day is said to be a strongly down trending day, and as such should move down further to test the second support level. As with the resistance numbers, the support numbers, once violated, become resistance lines to trade with in the trend.
Though originally used as a means for floor trading, longer-term traders can use pivot points for longer periods. Try plotting the weekly pivot points on the daily chart and using it for shorter term positioning on the daily charts. Pivot points can also be calculated using the monthly pivot points on the daily chart, and used for longer-term positions.
There are several methods used to determine the Pivot Point. We have included the three different formulas in Track 'n Trade 5.0.
Traditional formulas:
Pivot Point = (H + L + C)/3
First Support Line = (2 x Pivot Point) - H
First Resistance Line = (2 x Pivot Point) - L
Second Support Line = Pivot Point - (H - L)
Second Resistance Line = Pivot + (H - L)
Third Support Line = Low - 2*(High - Pivot)
Third Resistance Line = High + 2*(Pivot - Low)
Variation 1:
This method changes the formula used to derive the Pivot Point. The changes include adding the trading day's open and calculating the average of the four values. With this variation, one takes into account both opening gaps and overnight trading. The calculation is here:
Pivot Point = (H* + L* + C* + O**) / 4
*=Yesterday
**=Today
Variation 2:
This method changes the formula used to derive the Pivot Point as well. In this method you substitute yesterday's close with today's open. Variation 2 also takes into account opening gaps and overnight trading. The calculation is here:
Pivot Point = (H* + L* + O**) / 3
Open the Preference tab from the Control Panel on the left of your screen. Select the Pivot Points on your screen. The preferences will appear in the Control Panel. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Pivot Points: Check the boxes to view different support and resistance lines. Change the color, style, and thickness of the lines.
3. Calculation: Select Traditional, Variation 1, or Variation 2.
4. Display Settings: Check to display Historical, Daily, Weekly, or Monthly pivot points. Select if you would like to see the Moving average line and enter the number of price bars you would like to be used to calculate it.
This system uses two simple moving averages, but they are calculated in a slightly different manner than those traditionally used. The first moving average is a moving average of the daily highs, as opposed to that of the daily settlement. The second moving average is calculated using the daily lows.
Though Mr. Bernstein recommends using a 10 period moving average of the daily highs and an 8 period moving average of the daily lows based on his observation that prices tend to fall about 20% faster than they rise, any combination would do the trick. Generally, accepting market lore that prices fall faster than they rise, the moving average of the lows should be of shorter term duration than that of the highs.
The most basic use of the 10x8 Moving Average is to look for a breakout above the upper moving average to initiate a buy signal. When the daily settlement price exceeds the average high of the last 10 days, this indicator flashes a buy signal indicating that the trend of the market should be up.
Open the Preference tab from the Control Panel on the left of your screen. Select the 10x8 MAC line on your screen. The preferences will appear in the Control Panel. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Display: Check the box to display the 10x8 MAC lines 1 and 2
3. 10x8 MAC Line: Change the color and style of the line. Also, change the type of the line from Simple, Linear Weight, or Extra Smoothed. Change the Data from Open, High, Low, or Close.
4. Display: Check the box to display the 3x3 MAC line.
5. 3x3 MAC Line: Change the color and style of the line. Also, change the type of the line from Simple, Linear Weight, or Extra Smoothed. Change the Data from Open, High, Low, or Close.
Volume By Price is an overlay that shows the amount of volume for a certain price range. It is shown by horizontal bars based on the current data of the chart. The drawn bars span the price range, meaning that all volumes within that range are added to that bar. Chartists can use Volume By Price to provide support or resistance based on the high volume price ranges.
Volume By Price can be used as a support and resistance identifier. That is because larger volume at a certain price range shows higher interest in that price range. This interest can influence future supply and demand such that if the price goes to far away from the interest range then the price is likely to return to that range. Therefore, if an arrow is thrown by another indicator and the arrow is near a peak or valley in a low interest (low Volume By Price area) and the arrow points toward the higher interest price range then it can be said that the arrow is more likely accurate or supported.
Example of Volume By Price overlay with the Volume indicator:
Calculation
Volume By Price calculations are based on the current chart screen and the price bar being displayed. That means that if the price bar is on the screen then it's volume is taken into account and if the price bar is not on the screen then it's volume is not taken into account. Know also that to be taken into account the close price for the price bar needs to be on the screen. The current chart screen is divided by the number of bars to get the price ranges for the Volume By Price bars.
A Volume By Price bar is broken up into down volume (darker default color) and up volume (lighter default color). Up volume is when a price bar's price is greater than the open and down volume is when a price bar's close is less than the open.
Preferences
Right-click anywhere on the chart and go to "Overlay Properties." Select Volume By Price from the list. The preferences will appear in the Control Panel. (Once you click on the chart, the Preference tab will go back to chart settings.)
Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
1. Volume Up: This is the color of the up volume or the volume for which the close price is above the open price.
2. Volume Down: This is the color of the down volume or the volume for which the close price is lower than the open price.
3. Number of Bars: This option specifies the number of bars that is being drawn on the screen. The number of bars is used the in the calculation for the ranges of the Volume By Price bars.
4. Length of Bars: The length of the Volume By Price bars is the percent of the chart.
The Zig Zag Indicator acknowledges minimum price changes and ignores those that do not fit the criteria.
A Zig Zag set at 10% with OHLC bars would yield a line that only reverses after a change from high to low of 10% or greater. All movements less than 10% would be ignored. The value at the 10% is called the target of Zig Zag. If a commodity traded from a low of 100 to a high of 109, the Zig Zag would not draw a line because the move was less than 10%. If the stock advanced from a low of 100 to a high of 110, then the Zig Zag would draw a line from 100 to 110 because the target was reached. If the commodity continued on to a high of 112, this line would be extended to 112 (100 to 112). The Zig Zag would not reverse until the commodity declined 10% or more from its high. From a high of 112, a commodity would have to decline 11.2 points (or to a low of 100.8 the new target) for the Zig Zag to reverse and display another line.
Retracements are from zig zag high to high, or zig zag low to low. If Zig Zag retraces to a zig zag High, they are calculated from the movement from the previous zig zag low to the current high divided by the movement from the previous zig zag high to the previous low.
The Zig Zag indicator arrows are thrown when the market hits the target value. That means that a buy signal occurs when a valley is found by the market rising above the target value. That also means that a sell signal occurs when a peak is found by the market falling below the target value. In the example given that means the buy signal happened at 110 and the sell signal would happen at 100.8 if the market declined.
Zig Zag Example:
Open the Preference tab from the Control Panel on the left of your screen. Select the Zig Zag line on your screen. The preferences will appear in the Control Panel. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. % Change Sensitivity: Change the percent of calculation.
3. Line: Choose the color, line style, and line thickness of your indicator line.
4. Line, Alt: Choose the color, line style, and line thickness of the retracement lines.
5. Show Retracement Target / Show as Percent, / Show Retracements / Show Alternative Retracements: to show percents, retracements, and alternative retracements.
6. Number of Alternative Lines: Enter the amount of alternative retracement lines you want to show on the chart.
7. Font: Select the font, size, and color of the text. You can also choose to bold or italicize.
8. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.