STMI Demo

Speaking of Trading Market Indicator

STMI Demo

Documentation

What is Speaking of Trading Market Indicator (STMI)?

STMI is the Speaking of Trading Market Direction Indicator. It is an extremely important tool which offers an edge to any trader. As 4 out of 5 stocks tend to follow the direction of the general market, if one knows the current market conditions, it is much easier to achieve success and be profitable over the long run. Purchasing stocks blindly without knowing how the environment is, can be a very risky approach and that is why market timing techniques are so useful. With the help of this tool, to be in sync with the primary tendency of the market is no longer a dark room.

How many states does STMI have?

STMI has three states. Uptrend, Uptrend in danger and Downtrend. An Uptrend means that the market is in a confirmed rise and overall conditions are healthy. The trend is in place and thus, a more aggressive trading approach can be executed. Breakouts are more often and tend to provide established follow-throughs.
When the market is in an Undefined Trend, that means conditions have been deteriorating and the risk to start new buys is higher. This market state often happens when the market had a strong up move and then spends some time consolidating gains. Sideways markets can be very frustrating for swing traders but are part of the system. At this stage, breakouts are scarce and more prone to failure. To minimize risk, a more defensive and selective approach should be adopted in order to maximize profits and/or avoid potential losses.
The Downtrend is the worst-case scenario and a risk-off posture must be adopted. It is a time when new buys should be avoided, open trades must be closed and cash is a position. Patient plays a key role here. Pullbacks and corrections can be very harmful and have the potential to erase all the profits made throughout the bonanza times.

How is the STMI status defined?

The STMI status is the net result of a combination of several indicators. Each indicator is analyzed providing an output that is used in conjunction with the others. After all the assessments are made, a decision is taken to whether maintain the current market status or change it to another level. Many of these values can be easily obtained but it is the combination of them based on the past experience accumulated that makes the difference when defining the state to choose. STMI is based on the following indicators:

  • Indexes action
  • Accumulation/Distribution days
  • VIX level “CBOE Volatility Index”
  • Leaders behavior
  • Market breadth
  • Market sentiment
  • Volume & Price action
How often is STMI updated?

STMI is updated every day, excluding weekends and market holidays.

Disclaimer

Although STMI provides an accurate picture of where the market is, bear in mind that its accuracy is not 100%. Despite all the indicators used, there are many external non-predictive events that can change the current Market Direction status during the day.