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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]

mailto:[email protected]


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


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.



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.


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.


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.


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:


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.


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.


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.


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.


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:


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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).


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


Support

Copyright 2009-2010 Financial Trading Inc. and John Bruns

For information on trading software, videos and books for traders, as well as Traders‟ Camps,

please contact

Financial Trading Inc.

PO Box 20555

Columbus Circle Station

New York, NY 10023

USA

Tel. 718.507.1033

Email [email protected]

www.elder.com

For technical support, please contact

John Bruns [email protected]

John is also available for private consulting and custom programming – please inquire directly if

interested.

If your email address changes, please advise us at [email protected] – we need your address to

offer you our latest updates.




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