Timing by TradeSmith FAQ

Dec 07, 2020

Listen to this post

What requirements of stocks do we have to have to create a cycle?

  • At least 1 year of price history
  • Current volume is more than zero
  • Average 1 year daily volume is more than $2M for U.S. stocks,  A$10,000 for AUS stocks, and more than $100K for crypto.

What determines the cycle conviction level?

The conviction currently depends on 2 factors:

  • The strength of each individual cycle or how persistent it is. A stronger cycle appears for a longer time while weaker cycles may just begin appearing.
  • The number of cycles.

When more cycles are in agreement for a longer amount of time, the cycle has stronger conviction.

How do I read Volume-At-Price Indicators?

Volume-at-Price measures the amount of volume traded at a particular price level. You can use Volume-at-Price data to identify current and future support and resistance levels. Price levels with heavy volume indicate elevated interest levels that may influence future resistance or support (supply and demand).

Total volume is made up of buying volume and selling volume. Buying volume (green bars) is the number of shares, contracts, or lots that were associated with buying trades, and selling volume (red bars) is the number that were associated with selling trades

The length of the volume bar will show you how much was bought (green) and sold (red) in that price range.

VAP price bar example
The indicator marks potential support when prices are above a long bar and potential resistance when prices are below a long bar.

What does Relative Strength Index (RSI) show me?

When a security is overbought or oversold. The standard is to use 14 periods to calculate the initial RSI value. Currently we set the RSI to the standard 14 days.

RSI data in conjunction with the Cycle turn areas can show increase the likelihood of the turn area.

When the RSI shows a stock is undervalued (close to the 30% threshold) and in a cycle valley turn area, the likelihood of growth is increased.

You can follow these standards for your positions.

For Long Positions:

  • RSI is showing the undervalue
  • Ideally if at the same time, the RSI is showing the divergence with the price
  • The price is in the valley
  • NOTE: conviction also increases if the price is also at the most concentration of the VAP

For Short Positions:

  • RSI is showing the overvalue
  • Ideally if at the same time RSI is showing the divergence with the price
  • The price is in the peak

You can learn more about the Timing indicators in the video below: