(Click on image to enlarge it)
(This is Part 1 of a series.)
In this example, we will focus on the new BTX tools from Ocean Pro, with some attention to the STX as well, and we'll apply these tools to the Copper market.
Let's take a moment to look at these four tools, named BTX, Plus TX and Minus TX (BTX derivatives), and STX.
The BTX, which is the primary trend identification tool, is shown in the chart above - in the first pane below price - as a red line with a set of standard deviation (SD) bands surrounding it, as well as a horizontal line located at a level of 35.
The most important point to remember about BTX is that its movement (up or down) is not related to the directional movement of the market. The BTX is designed to measure trend strength, and thus an increase in BTX indicates that the trend is increasing. Remember that trend strength can increase whether the market is advancing or declining.
Conversely, a decrease in the BTX scores indicates that the trend strength is diminishing, which can occur in an advance or a decline. The chart interpretation discussed below will explain the importance of the interplay between BTX and its SD bands, as well as the significance of BTX scores above or below the trend threshold of 35.
The next tool is the Plus TX and Minus TX, shown in the pane immediately below the BTX. This indicator, which is a derivative of the BTX, has two primary plots associated with it. They are the solid green line (the Plus TX), and the solid red line (the Minus TX). These plots will be referred to as the +TX and –TX throughout the analysis discussed below. These plots help identify the positive and negative components of the BTX line, and allow for a deeper level of understanding of both the BTX and price action in general.
Both the +TX and –TX have their own set of standard deviation (SD) bands so that they can be analyzed individually. The two sets of SD bands are shown in green and red to complement the same colors chosen for the +TX and –TX. Additionally, there is a horizontal line plotted at a level of 20 to establish a trend threshold for the TX lines.
Price action analysis via the TX lines is achieved by understanding the interplay of the TX lines with each other and with their SD lines and center moving averages, as well as where these events are occurring relative to the trend threshold. This rather complex interplay will be clearly explained in the text below.
The last Ocean tool examined here is the STX, which is plotted directly on the bars themselves. The STX is normally shown as a set of points in a default color of blue. This tool has been designed to function primarily as a very responsive and accurate price based stop level to use for exits and trailing stops.
As we’ll see, it not only provides a very responsive and well located stop, but by adding the same STX with different settings to the chart, it can often provide another set of clues about the market’s behavior. When a second STX is added to the chart, I may change the plot styles of the STX to be less confusing, but the text discussion will reflect any changes that I make to the STX plots.
Now that we can distinguish each of the tools shown in the examples, let’s begin an analysis of the Copper market and see how they perform.
(This is the end of Part 1. Go to Part 2.)
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