strategies

Charts

Rules for Trading

Technical indicators from TAS Professional can help you analyze markets and find
high-probability, rules-based opportunities to buy and sell. By Paul Ciana, CMT

At times, even the best traders and Three indicators that can help you make such
­investors struggle to identify entry and exit points. decisions are TAS PRO VAP Map, TAS PRO
They may continue to hold a position after they Dynamic VAP and TAS PRO Navigator. Type TECH
should have sold. Trading by gut feel, they may lack <Go> to use the Technical Study Browser function
a sense of confidence. One way to address these to access them. Click on 3rd Party Studies under
common challenges is to find tools you can use in Categories on the left side of the screen. Then click
rules-based strategies. on TAS Professional and on TAS PRO VAP Map.
One such set of tools is a group of technical indi- Type 1 <Go> to launch a historical chart. To save a
cators from Roseville, California–based TAS Pro- copy to your library of custom G charts, click on the
fessional LLC. Now available for free on the Save As button on the red tool bar. Enter a name in
Bloomberg Professional service, the TAS PRO In- the TITLE field, click on the Save button and then
dicator Suite includes 15 studies inspired by Mar- on the Open Chart button to display the chart.
ket Profile, the analysis technique created by The TAS PRO VAP Map—VAP stands for vol-
Chicago Board of Trade trader J. Peter Steidl- ume at price—overlays a color-coded frequency
mayer. Here’s a brief introduction to three of the distribution histogram sideways on a price bar
TAS Professional indicators. chart. The histogram shows how often the secu-
TAS starts by observing that markets are simple rity traded at various levels during a period you
in that they have only two phases of movement: can specify. Tab in to the MAP STARTING BAR
horizontal or vertical. That is, prices tend either to field at the top of the screen, enter 450, for
move within a range horizontally or to trend up or
down vertically. In range-bound markets, prices
change relatively little. In effect, prices move
slowly with respect to time. In trending markets,
prices move fast.

The TAS PRO market strategy goal is to

differentiate between these two phases so you can
avoid being on the low-probability side of the mar-
ket. For example, let’s say you identify the point at
which trading moves through the top of an estab-
lished range. From that point, the price may behave
in a couple of ways: It may rise quickly, or it may
drop back into the range and resume a slow, hori-
zontal move. A less likely possibility is that it may be-
gin to decline quickly in a downward trend. So at that
A custom G chart of the S&P/Toronto Stock Exchange Composite Index with the
point, you might avoid wagering that the security
TAS PRO VAP Map study shows three peak areas of trading.
will drop by selling it short—a low-probability bet.

1 4 2 bloomberg
142 m a r k e t s April
b l o o m b e r gmarkets D e c e2012
mber 2010
 A G chart with the TAS PRO Dynamic
VAP and TAS PRO Navigator focuses
in on recent price moves by the
S&P/Toronto Stock Exchange
Composite Index.

A second indicator, TAS PRO

Zooming in Dynamic VAP, shows the impor-
In the shorter time frame of the
TAS PRO Dynamic VAP, the tant levels derived from the VAP
index finds support—the green Map analysis for shorter peri-
line—at the 11,450 level in late ods. To add it to the chart, click
2011 and early 2012.
on Security/Study and then on
Add Study and select To SPTSX
Index (Last Price). In the
ENTER STUDY field that ap-
pears, enter TAS PRO DY-
NAMIC VAP and click on the
matching item in the list that
appears. The Dynamic VAP in-
dicator plots three horizontal
A Rules Key A B C D E lines when new price swings are
TAS PRO Navigator is Green Histogram Histogram turns Red histogram Histogram turns forecast in the market. The red
histogram and turns magenta: dark green and below zero, dark dark red, and line
an oscillator that green line above Warning green line turns red line below crosses yellow line indicates the top of a high-
identifies which side of yellow: Don’t be of trend dark red: Get yellow: Don’t be and turns green:
the market to trade on. short; get long exhaustion; short or wait for long; get short Get long or wait volume-at-price area similar to
Here’s a summary: and stay long. tighten stops. next long. and stay short. for next short. what’s represented in red in the
VAP Map chart. The light-blue
example, and press <Go> to start your analysis center line indicates the point of control. The
back 450 price bars. That’s about nine years of green line represents the bottom of the high-vol-
weekly bars. Enter a zero in the MAP ENDING ume-at-price area. Because price tends to oscil-
BAR field to have the analysis run through the late horizontally between these levels, you can
most recent bar. The DENSITY field lets you use them to help in pinpointing entries, exits, tar-
specify how many “bins” the histogram will sort gets and stops.
price data into, which can range from 4 to 200.
To chart the Standard & Poor’s/Toronto Stock A third indicator, TAS PRO Navigator, can
Exchange Composite Index, tab in to the field in the confirm the direction of a trend and trend mo-
top-left corner of the screen, enter SPTSX mentum. To add it, click on Add Study and select
<Index> and press <Go>. The TAS PRO VAP Map To SPTSX Index (Last Price) again. Enter TAS
laid over a weekly chart of the benchmark from PRO NAVIGATOR in the field and click on the
Jan. 1, 2004, to early 2012 showed three peak areas matching item. The colorful indicator uses TAS
indicated in red that represent slow, horizontal PRO’s rules-based approach to identify which
markets. The largest of these fell between the index side of the market to trade on.
levels of 11,450 and 12,250. During the 450-bar pe- You can find more information about TAS Pro-
riod, the index most frequently was be- fessional strategies in the contribution
tween those levels. Another peak area was TIP BOX by TAS Professional Managing Part-
from 13,100 to 14,200. A third lay between ner Andrew Kezeli in New Frontiers in
8,350 and 8,900. Between these slow areas Type TASP Technical Analysis: Effective Tools and
<Go> for
were regions of vertical or fast movement, more
Strategies for Trading and Investing
indicated in blue, from 8,900 to 11,450 and information (Bloomberg Press, 2011).
from 12,250 to 13,100. A green horizontal about TAS
Professional
line represented the point of control, or the indicators.
Paul Ciana, CMT, is an equities application
specialist at Bloomberg in New York.
most frequent level during the time frame. [email protected]

April 2012 bloomberg markets 143