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1 Elder-disk for StockFinder 2.0
ElderDisk for StockFinder
Thank you for purchasing this software. It was developed in 2009 by Dr. Alexander Elder, the
author of Trading for a Living, Come into My Trading Room, and other books, and John Bruns, a
programmer. It was updated in 2010 to correspond to a major upgrade of StockFinder Version 5.
StockFinder is a trademark of Worden Brothers, Inc.
This software will enable you to implement certain market indicators. No trading advice is
offered or implied.
This Manual and CD are Copyright © 2010 by Financial Trading Inc. and John Bruns. All rights
reserved. Violators will be prosecuted. For technical support, please contact John Bruns [email protected]
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Table of Contents
ElderDisk for StockFinder ...........................................................................................................1
About this software .....................................................................................................................3 How to install and use software ...............................................................................................3
Alternate access to templates ...................................................................................................5 Customizing your indicators ....................................................................................................6
Whats new in 2.0 for StockFinder 5. ...........................................................................................7 Elder - Standard (Layout) ............................................................................................................8
Weekly (Elder- Standard Chart Tab) ......................................................................................8 MACD COMBO .................................................................................................................8
Elder - Force Index ..............................................................................................................9 The Impulse System ............................................................................................................9
Weekly Impulse ................................................................................................................ 10 AutoEnvelope.................................................................................................................... 10
Daily ( Elder – Standard Chart Tab) ...................................................................................... 11 AutoEnvelope.................................................................................................................... 11 Daily Impulse .................................................................................................................... 13
Elder - Impulse Release ..................................................................................................... 13 MACD COMBO ............................................................................................................... 13
Elder - Force Index ............................................................................................................ 13 Elder – Other Indicators (Layout) .............................................................................................. 14
Elder-ray (Bull Power & Bear Power) ............................................................................... 14 Smoothed Rate of Change ................................................................................................. 14
Market Thermometer ......................................................................................................... 15 Elder - Hi-Lo (Layout) .............................................................................................................. 16
Elder – MACD Xover (Layout) ................................................................................................. 17 Impulse Predictor .............................................................................................................. 18
Elder – Scanner (Layout) .......................................................................................................... 19 Fallen Angel Scan ............................................................................................................. 20
Elder – Channel Scan (Layout) .................................................................................................. 22 LAYOUTS for setting STOPS .................................................................................................. 23
Reading Stop Values ......................................................................................................... 24 Lost the date cursor? .......................................................................................................... 24
Elder - Safe Zone Long (Stop Layout) ....................................................................................... 25 Elder - Safe Zone Short (Stop Layout)....................................................................................... 26
Elder - Chandelier Long (Stop Layout)...................................................................................... 27 Elder - Chandelier Short (Stop Layout) ..................................................................................... 28
Support ..................................................................................................................................... 29
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About this software
This manual explains how to install, modify, and change settings on Dr. Elder‟s indicators. It
does not explain the meaning of those indicators and how to use them in trading – for that please
refer to Come into My Trading Room. If you do not have this book, please contact
[email protected] to order a copy at a 25% discount from the lowest current price, for software
owners only.
Some of Dr. Elder‟s indicators offered on-line by other vendors have been programmed
incorrectly. This Elder-disk contains correctly programmed tools, verified by Dr. Elder.
StockFinder is an extremely powerful platform for creating your own indicators – but it does not
allow you to save complex ones. What it does allow you to save is custom layouts and charts.
This ElderDisk provides indicators in the custom layout form. Each contains one or more charts,
their indicator(s) and all the relationships between them.
How to install and use software
1. You must have the StockFinder 5 or later software from Worden Brothers, Inc. loaded
into your computer to use this ElderDisk. It will allow you to add the indicators from Dr.
Elder‟s books to your StockFinder.
2. The disk contains the installation file that should load automatically after insert the CD
into your disk drive. If for some reason the install does not start automatically, you can
run it by opening a file browser and running the install file
“ElderDisk_for_StockFinder_2” manually. If you are running Vista or Windows 7, we
recommend that you run it by right clicking and running it as an administrator. You do
not need to remove version 1 if you own it as Version 2 replaces all ElderDisk files.
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3. After you have loaded StockFinder and the ElderDisk, you can access the READ ONLY
templates using the Windows Start Menu. We recommend typing “Elder” into the search
box and then selecting the template you want from the search results.
For pre-Vista users or those who want to use the traditional Start menu method select the
template of your choice in the ElderDisk_for_StockFinder Start folder.
When you open a layout, it will automatically start the StockFinder program and load the
layout, or if StockFinder is already running, switch to that layout.
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4. Save your template using Save Layout As… in StockFinder.
IMPORTANT: You cannot save to these templates directly. You must use
the “Save Layout As…” feature in StockFinder to make these templates your
own. Open them from the start menu only the first time or whenever you need a fresh
copy of the template.
Alternate access to templates
We also provide a complete copy of the layouts in a subfolder named “Elder” on the disk. You
can manually copy the layouts to your StockFinder My Layouts file and open them directly in
StockFinder. The directory is located under your Windows Documents directory in a subfolder
named StockFinder 5. Then look under the user ID you sign into StockFinder for the “My
Layouts” directory. Copying these layouts to your StockFinder 5 “My Layouts” folder will
make them show up in the StockFinder open Layouts menu, easily recognizable because their
names start with Elder. You can modify them as you wish and save them as your own layouts.
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Customizing your indicators
Every indicator in a StockFinder chart has a built-in edit panel that allows you to change key
parameters, colors and other features. For example, here is an edit panel for the moving average
we use for the Impulse system. Right click on the indicator name and choose “edit” to bring up
the panel.
Using the edit window you change the parameters of the indicator as well as graphics features,
such as line type and color and how often it is updated. There is also a description box in which
I have sometimes put notes about how the indicator works.
Colors in StockFinder 5 are done with Paint Schemes. In the main chart it is indicated by a paint
scheme box in the lower left of the chart. Note that you can change the scheme by clicking on
rules, dragging them to plots, or editing the paint scheme manually. It is easy to accidentally
change a paint scheme, so learn how to manipulate them. In most cases, you can restore it by
clicking on the paint brush icon in the main paint scheme box.
StockFinder allows you to link indicators, so that when you change one indicator in a workspace,
it will affect others. For example changing this moving average will change the parameters of
the Impulse system which uses this average. The same applies, for instance, to the MACD
parameters – they also propagate into the Impulse system. This eliminates the need to input
parameters multiple times in a system that requires consistency.
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Whats new in 2.0 for StockFinder 5.
We have made a number of changes as a result of the new features and methods found in
StockFinder 5 and as a result of customer feedback.
1. AutuEnvelope is now a single indicator. See the AutoEnvelope in the Elder – Standard
Daily template for details. It is now included in the weekly charts as well as the daily.
2. We added a number of scans.
a. Red to Green and Green to Red on the Daily Scanner Chart.
b. Fallen Angels as a separate chart in the Scanner Template.
c. Channel width, actual and %, in a new Elder – Channel Scan Template.
d. Thermometer Quiet and Spikes in the Elder – Other Indicators Template.
3. Added Impulse Predictor on MACD Xover Charts.
4. If you use Impulse Release color bars – be sure to uncheck the “do not calculate
indicators on charts that are hidden” box in StockFinder Settings:
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Elder - Standard (Layout)
Weekly (Elder- Standard Chart Tab)
The first workspace is named Elder Standard. It has weekly and daily charts. To follow the
classic Elder method, you would look first at your long-term weekly chart, make a strategic
decision to go long or short, and then make the tactical entry and exit decisions using the shorter-
term daily chart.
The weekly chart has two exponential moving averages: a red 13-week and yellow 26-week
EMA lines. The 13-week EMA is is used to create the weekly Impulse.
MACD COMBO
The MACD is a standard 12-26-9, using exponential averages. The MACD is also tied to
weekly Impulse using chart conditions. We have added a histogram overlay in the MACD
window. Its scale factor is set to double the distance of the MACD lines, for better visibility.
You can edit this by right clicking the histogram and changing the Scale Factor.
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We have colored the histogram using the conditions of the Histogram moving up or down.
These conditions are also the used to calculate Impulse. You may edit the Histogram and
remove the paint scheme if you like.
Elder - Force Index
Force Index links together volume and price change. This tool for measuring the force of market
moves was first described in Trading for a Living and elaborated in Come into My Trading
Room. Technically, it plots a moving average of the change in price multiplied by volume. The
default moving average for the weekly charts is a 13 week EMA.
The Impulse System
The Impulse System is a method for determining the direction and power of any market move in
any timeframe. It was first described in Come into My Trading Room. The Impulse system uses
the direction of a fast EMA to determine the inertia of the market. It uses the slope of MACD-
Histogram to determine whether bulls or bears are becoming stronger. It performs those
measurements at every price bar:
When both the EMA and MACD-Histogram are rising, the Impulse system colors the bar
green.
When both the EMA and MACD-Histogram are falling, the Impulse system colors the
bar red.
When the EMA and MACD-Histogram are pointing in different directions, the Impulse
system colors the bar cyan.
The Impulse system is a censorship system. It does not tell you what to do – it tells you what not
to do. When the bar is green, no shorting is allowed, and when the bar is red, no buying is
allowed. The rule is never to trade against the Impulse. The trading signals are given by the loss
of color: when the Impulse turns from Green to Blue, a prohibition against shorting is lifted, and
when the Impulse turns from Red to Blue, buying is no longer prohibited.
We have implemented the Impulse system in StockFinder using the conditions. This allows you
to change the parameters of MACD or the EMA and directly affect the Impulse system. In the
Condition palette, you will see conditions for the price history above/below the Impulse moving
average and the histogram moving up/down. These conditions are combined to give us the
Impulse conditions “Impulse Don‟t Buy” and “Impulse Don‟t Short”. These conditions are then
used to color the price bars. Note that the neutral is the base color for the price bars and you will
have to save and reload the workspace to get it to change.
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Weekly Impulse
Impulse is now represented by a paint scheme. You can change the colors by editing the specific
conditions.
AutoEnvelope
By request of many customers, we have added AutuEnvelope to the weekly graph. It is
described below in the daily section. Note that the 26 bar EMA is contained as the centerline of
this plot. If you don‟t want to see the Envelope, either uncheck the top and bottom line boxes, or
delete it entirely and replace it with a moving average.
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Daily ( Elder – Standard Chart Tab)
The daily chart features:
A 13 day EMA in red and a 22 day EMA in yellow. The shorter EMA is tied to the
Impulse system, described below. The longer EMA forms the basis of the AutoEnvelope
indicator, described below).
The Impulse Release Bar.
The MACD lines 12/26/9 with and overlaid MACD histogram.
The Force Index EMA is set to 2 on the daily chart to better track short-term activity.
AutoEnvelope
Envelopes or channels are set parallel to a moving average (usually the slow MA if you use more
than one). Dr. Elder suggests creating an envelope containing approximately 90-95% of all
prices for the past two or three months between its channel lines, with only the extremes
protruding outside. These envelope channels provide attractive profit targets for price swings –
sell longs near the upper channel line and cover shorts near the lower channel line.
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The AutoEnvelope is a custom indicator – a unique tool that automatically resizes channels by
calculating a standard deviation for the last 100 bars. The AutoEnvelope center line is the
slower EMA. If you do not want to see the moving average, edit and uncheck the centerline
checkbox. The width of an AutoEnvelope is designed to adjust no more than once a week,
making it suitable both for position trading and day-trading.
In version 2 of this product AutoEnvelope is implemented as single complex indicator. The
standard deviation based on its period which defaults to 100 (based on the last 100 bars). The
Reset on parameter tells which day of the week to use to fix the envelope size. If you trade short
time intervals, you might want to change this – choose a day prior to day you are trading but
close enough that you have enough bars of data to trigger the indicator. The Change Weekly
parameter is normally set to False. If you change this parameter to true, the envelope changes its
size after each bar of the reset on day. This is never correct for time periods shorter than 1 day,
but can be very helpful for creating a historical view of the Envelope.
The Average Type and Period control the type and length of the centerline. We default to and
Exponential (EMA) but you can choose simple or front weighted if you want.
The factor controls the width of the envelope. The default is 2.7 which is the value required to
get 95% of the plots inside the envelope assuming a normal distribution. Because distributions
of prices are not always normal, you might want to change this value. Alternately, leaving at 2.7
will give you graphic evidence that the distribution has suddenly changed. Note that this
indicator controls the color and plot type of the envelope:
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Daily Impulse
The bars on the daily chart are colored the same way as they are on the weekly, only using the
daily Impulse EMA and the Daily MACD Histogram data.
Elder - Impulse Release
The purpose of Impulse Release is to prevent trading in the wrong direction. While the Impulse
System operates in a single timeframe, Impulse Release is based on two timeframes. It tracks
both the longer and the shorter timeframes to find when the Impulse points in the same direction
on both. Its color bar flashes several signals. If one timeframe is in a buy mode and the other in
a sell mode, the signal is No Trades Allowed, a black bar. If both are neutral, then any trades are
allowed, showing a cyan bar. When one is bullish while the other is either bullish or neutral,
there is a green bar, allowing traders to buy and prohibiting shorting. When one is bearish while
the other is either bearish or neutral, a red bar signals that shorts are permitted, while long trades
are not allowed.
There are no parameters for Impulse Release other than the colors. The signals flow from the
two Impulse calculations.
Warning: As of the release of the software, StockFinder occasionally showed some
problems with rules based on multiple timeframes. In particular, with a real-time feed,
sometimes the Impulse plot seemed to loose the weekly data and show the exact same colors as
Impulse or all a single color. It always seems to correct when switching to another security. If
you notice this, you can correct it by switching to another security and then back to restore the
correct plot.
Furthermore in StockFinder 5 as initially released, an offscreen chart is not plotted unless you
check the option to do so on the options setting screen. The result is you MUST look at the
longer timerframe chart for a security for Impulse Release to work. This might be corrected, but
in the meantime it enforces the Elder discipline of always looking at the weekly chart first!
MACD COMBO
Other than using the daily version of the rules for coloring, this is identical to the Weekly
version.
Elder - Force Index
Once again the same indicator as the weekly but set to an EMA of 2 to better track short-term
pullbacks. It is otherwise identical to the Weekly version.
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Elder – Other Indicators (Layout)
This template combines some of the less frequently used custom indicators:
Elder-ray (Bull Power & Bear Power)
Bull Power and Bear Power are the components of Elder-ray, an indicator described in Trading
for a Living and Come into My Trading Room. Bull Power measures the spread between each
bar‟s high and the EMA. Bear Power measures the spread between each bar‟s low and the EMA.
The default EMA is 13 days; changing it will affect the Bull and Bear Power Plots.
Smoothed Rate of Change
This indicator is described in Trading for a Living. It tracks the rate of change for an exponential
moving average of closing prices. When it changes direction, it helps identify and confirm price
trend changes. You can adjust the lengths of the moving average and/or of the rate of change.
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Market Thermometer
The Market Thermometer is described in Come into My Trading Room. It measures the degree
of volatility by tracking daily price ranges. When the Market Temperature either spikes above
its average or stays below its average for a number of days, it gives trading signals, as described
in the book.
Thermometer EMA – the default value of the moving average of the MarketThermometer
is 22, the average number of trading days in a month.
Quiet Period (6) – If the Temperature remains below its EMA for this number of trading
days, a visual indication appears on the chart.
Spike (3) – If the Temperature exceeds its EMA by this factor, a visual indication appears
on the chart.
Spikes are highlighted by yellow dots. Quiet periods are highlighted with cyan arrows after the
initial quiet period.
The StockFinder 5 implementation of Market Thermometer is an interesting case of serendipity.
In StockFinder 4, I used true/false indicators to show quiet period and spikes. These got
converted to conditions and moved to the main graph. I found that true/false indicators only
function in the main window, so I had to redo things. Then I found that if kept them as
conditions, and used the conditions to do the plot, I got an interesting benefit. If you right click
on the condition and choose “scan” you can sort the security list showing those closest to the
desired conditions at the top of the list. So you now have a scan for quiet periods and market
spikes!
To change the parameters, you need to edit the conditions on the main graph.
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Elder - Hi-Lo (Layout)
This chart makes use of the extremely powerful feature of StockFinder that allows you to look at
the behavior of a basket of securities in addition to individual securities. You can use it to see
how the broad market is performing.
This chart focuses on the market rather than any particular stock. It computes the number of
stocks in a WatchList that have reached their yearly highs or lows on that day. You can apply it
to any WatchList can be used, but it is probably best to use one that tracks the broad market.
The bottom panel plots the raw data. In the example shown, we have plotted the number of
stocks on the NYSE hitting yearly (250 trading days) highs and lows. The highs are plotted as
positive green bars, the lows as negative red bars.
The middle panel shows the net of the highs minus the lows, tracked as a green line. The yellow
line is a cumulative plot of this net showing the longer term market direction. Note that this is a
free plot and has no plotted scale.
The upper panel is where you can plot any stock or index as a comparison. In our example we
have plotted the S&P 500. You can select any security or index by typing in the symbol.
It is easy to look at this plot on different time frames. Just change the time indicator for the
chart. The yearly highs and lows will now show up for the new time frame.
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Elder – MACD Xover (Layout)
This MACD Histogram Xover indicator was developed by John Bruns to predict the price point
at which the MACD-Histogram will reverse the direction of its slope. The indicator is plotted
one day ahead into the future, allowing, if your strategy depends on MACD-Histogram, to
predict its reversal point for tomorrow. Also, if your strategy depends on the Impulse system,
this indicator will help you tell at what price level the bar will change its color. If the closing
price tomorrow is above the value of this indicator, then MACD-Histogram will tick up. If the
closing price is below the value of this indicator, then MACD-Histogram will tick down. This is
especially interesting on the charts of the longer timeframes, where this indicator often moves far
away from the price, showing how difficult it is to change the direction of the MACD-
Histogram.
All the parameters are entered into the MACD pane so that the MACD and the MACD
Histogram are synchronized. The slow and fast EMA are computed but not plotted by default to
keep the graph uncluttered.
The timeframe indicator allows you to multiply all the parameters at once. Setting the timeframe
to 5 on a daily chart, for example, lets you approximate a weekly change while examining a daily
chart.
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Note: This chart has been added to the Standard template in two time frames so you can switch
back and forth if you are using the MACD Xover with your standard analysis.
Impulse Predictor
This indicator brings together the MACD Xover and the Fast Moving average used to compute
Impulse and shows you exactly the values where Impulse will change. The best way to use it is
to left click on the chart and use the cross hairs to center on the day you want to look at. You can
then look at the value shown in the box. In the example below, I selected ADBE and the date
7/14/2010. Since Adobe usually closes in even cents, any close on the 15th above $27.96 will
show a green bar, $26.97 or below will show a red bar, and any closes between will be blue.
The Impulse predictor is a ribbon with its lower line in red,
the upper line in green and a light blue fill in between to
graphically indicate this. If you find the ribbon distracting,
you can edit it and uncheck the line and fill boxes without
removing the indicator and still use the cross hairs to get the
values.
There are a couple of points to remember. You must use
the same numbers on your MACD and Impulse Moving
Average as you use on your Impulse graph. Also the
prediction will change on any bar that isn‟t final. For
example, if you are looking at real time data on a daily chart
and the market is open, the last bars values will be changing
with the market. To get tomorrows prediction, you need to
wait for the close.
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Elder – Scanner (Layout)
This layout is similar to the Elder – Standard daily chart. It has several additional rules that
allow you to use StockFinder and the Impulse system to track changes in securities charts.
In addition to the Impulse rules we have added the inverse rules; for example the inverse of
“Impulse don‟t buy” (red) is “Impulse buy is allowed” (not red but either cyan or green).
We have also added a sequential rule for identifying transitions from one state to another. When
the Impulse changes from red to not red, we label that condition “New Potential Buy”. When the
Impulse changes from green to not green we label it “New Potential Short”. We have also
added Red to Green and Green to Red scans showing extreme changes in impulse values.
Warning: this is not an indication that you should buy or short that particular security. It is
merely an indication that the Impulse system has changed in that direction. This cannot be used
as an automatic trading system. As always, you must examine the entire chart as well as the
market before proceeding with a trade.
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IMPORTANT: You can change the Impulse parameters and/or the time frames as you desire.
In that case, we strongly recommend that you save (as) and reload the chart to ensure the scan is
done correctly. Changing in the middle of a scan can produce incorrect results.
The Weekly chart remains on the layout so that you can look for a confirmation signal in the
weekly impulse.
To use these scans just right click on the condition you want and choose SCAN. It is extremely
easy to accidentally PAINT the chart when you do this. If you do so and want to restore impulse
coloration, just click on the paint brush icon to restore painting
Fallen Angel Scan
An excerpt from our Telechart manual shows where this came from.
What Stocks to Trade By Dr. Alexander Elder
Traders often ask me how to choose what stocks to trade. I have several answers to this question.
One of them involves coming up with a market concept that makes logical sense and then
programming it to see what stocks show that pattern.
In our recent Caribbean Camp I mentioned one of several concepts that I liked - trading 'fallen
angels.' Those are stocks of important companies that fell on hard times but are starting to recover.
If you visualize this pattern, it looks like a capital letter "L," with a long decline, flat base, and a little
uptick at the right edge. I look for these patterns on weekly charts, where they take a couple of years
to complete and often lead to multi-year bull markets. Try looking for stocks whose 26-week MAs
are less than half the level of a year ago, but higher than the previous week. Try to visualize it - we
are looking for stocks that are dramatically lower than they were a year ago, but have completed their
bear markets and are starting to tick higher.
John Bruns, a repeat camper who came to our latest Caribbean Camp as a peer counselor,
programmed this scan for TC2000, and added it to our elder-disk for TC2000. We applied this scan
in class to all stocks in the S&P500 and that scan returned a list of 8 very promising candidates. Try
doing this scan yourself - you will be surprised by the results. Try to play with these parameters, so
that your scan differs from everybody else's.
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In the StockFinder implementation you see the original 26 week Moving Average and a second
fainter line that is the same average offset 52 bars (weeks) and cut in ½ (factor .50). We want to
find symbols higher than the offset and where the Moving Average is increasing. A simple
compound condition shows this and lets us scan and paint at the same time.
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Elder – Channel Scan (Layout)
This template adds two more scans, both associated with AutoEnvelope. One scan allows you to
find securities whose channels are greater than a specified amount. The other channels that are
greater that a specified percentage of the price.
Once again, you set the values by editing the conditions, as shown in the picture. Right clicking
on the condition and selecting scan will sort the watchlist.
At the bottom of the chart are graphs of the channel width in both value and as a % of price.
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LAYOUTS for setting STOPS
Stops can protect you from adverse price moves. They can help cut losses and take profits on
winning trades before they turn into losers. You can use stops to help you determine trade size,
by dividing your maximum acceptable dollar risk per trade by the distance from your planned
entry to your stop. Still, you must keep in mind that stops do not offer total protection because
prices can gap across stop levels.
Use the method described below to compute your stop prior to placing a trade. The system
shows stops on the bar before the one where they become effective. For example, if you are
using a daily chart and planning to place a trade on Wednesday, you would look at Tuesday‟s bar
to see the level of your stop. The next day you would update the stop for Thursday, using the
level on the Wednesday‟s bar. A stop can only move in the direction of the trade, decreasing risk
until the trade is eventually stopped out.
StockFinder provides the exact stop values throughout the trade by using a date pointer. After
selecting the method and the parameters you want to use, set the date pointer on the bar prior to
the date of the trade and you will see the sequence of stop values. You can read the exact values
by using the cross-hair pointer set to the date you want.
Using StockFinder for stops:
1. Select the template for your stop type and trade direction. Choices are: Safe Zone (Long
or Short) and Chandelier (Long or Short).
2. Set the timeframe (here we assume daily)
3. Select the symbol, using either the WatchList or just typing the symbol.
4. Move the date pointer to the bar before you entered the trade by left-clicking and holding,
dragging the date pointer bar.
5. Move you cursor off the bar and left click to get a crosshairs cursor; drag it to the bar at
which you want to read the stop value
Using StockFinder to keep track of your trades and stops
We recommend that you create a separate workspace to track each open trade. When you initiate
the trade, follow the steps above then use the “save as” feature to save the workspace giving it a
name that will identify the trade to you. Then each time you are ready to update the stop, you
can just go to the rightmost bar and read the value for your stop. After you close the trade, this
can provide you with a graphical snapshot of your trade.
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Reading Stop Values
This example shows how to read stop values. First move the cursor off the start date and left
click to get cross hairs. Then target the date you want for the values. The calculated stop you
read is what you set for the next day.
Lost the date cursor?
Sometimes the cursor may be outside of the visible portion of the chart. In that case it shows up
as a little arrow in the lower corner of the chart. Just left click and hold on the arrow.
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Elder - Safe Zone Long (Stop Layout)
SafeZone is a method for setting stops on the basis of recent volatility. It places stops outside of
the level of „market noise,‟ as described in Come into My Trading Room. In an uptrend,
SafeZone defines noise as that portion of the current bar that extends below the low of the
previous bar, going against the prevailing trend. In a downtrend, SafeZone defines noise as the
portion of the current bar that extends above the high of the previous bar, against the downtrend.
It averages the noise level over a period of time and multiplies it by a trader-selected factor. For
long trades, SafeZone subtracts the average noise level, multiplied by a factor, from the current
low, and for short trades, it adds it to the latest high to compute the stop. Stops may move only
in the direction of the trade, always tightening. When a trade is stopped out, this indicator
reverses and starts a new sequence.
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Elder - Safe Zone Short (Stop Layout)
Both long and short strategies use the same parameters:
Factor – this is the factor by which we multiply the average level of noise computed by
SafeZone. It tends to vary between 2 and 3
LookBack – The number of days that the SafeZone looks back when calculating an
average market noise. The default is 99.
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Elder - Chandelier Long (Stop Layout)
The Chandelier Exit, introduced by Chuck LeBeau, is described in Come into My Trading
Room. It calculates each stop on a long position in an uptrend from the highest point reached
during that rally, and gets its name from the chandelier, which hangs from the highest point in
the room. The Chandelier Exit uses a multiple of the Average True Range (ATR), subtracting it
from the highest high since the trade was entered. It creates a new trade whenever the previous
trade is stopped out. For stops on short positions, it reverses the direction and adds the multiple
of the ATR to the lowest low since the trade was entered. Chandelier Stops differ from
traditional stops in that they can actually move against you if the anchor point stays the same but
the ATR increases due to volatility. This is plotted as Classic Chandelier (the smaller dots). The
more conservative approach is to ignore any change in a stop that increases your risk (plotted as
larger dots).
28 Elder-disk for StockFinder 2.0
Elder - Chandelier Short (Stop Layout)
Both long and short strategies use the same parameters:
Factor – this is the factor for multiplying the ATR when computing the Chandelier. It
typically varies between 2 and 3.
ATR Days – Number of days for computing ATR. Traditional default is 22
29 Elder-disk for StockFinder 2.0
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