Flow of Money

jasoneverettphillips

Hi,

I would like to know if there is a way for members of stockcharts.com to track the flow of money in and out of an asset ie. individual stock, sector etf or asset class

Any help is much appreciated.

Thanks!

Jason

markd

There are several indicators that use volume and price to guesstimate the flow of money in and out of a stock. Their calculations differ and their usefulness varies in different markets. You might want to play with the parameters where that is an option to fit your time frame. These are all explained extensively in Chart School under technical indicators:

VWAP - volume weighted average price
Accumulation/Distribution line
Chaiken Money Flow
Chaiken Oscillator
Force Index
Money Flow Index
Negative Volume Index
On Balance Volume

My personal preference is Force Index with various parameters corresponding to calendar periods - on the daily chart - 251 (annual), 63 (quarterly), 21(monthly), each with an MA one time frame down (63, 21, 5). These are not conventional settings, but they seem to be pretty good for showing accumulation and distribution for the selected period.

Divergences in the direction of the MAs with corresponding price MAs (for example, the 63MA of Force trending up while the 63MA of price still trending down) and local divergences between price and the index itself are often useful parts of setups (in other words, not triggers, but conditions that improve the odds).

I like Force because the calculation seems best suited to the purpose, but all of the others have their advocates and are worth looking into as well.

Teknical

Hello marKd
I truly admire your scans and use them in my rouine
Unable to Undestand this logic :"My personal preference is Force Index with various parameters corresponding to calendar periods - on the daily chart - 251 (annual), 63 (quarterly), 21(monthly), each with an MA one time frame down (63, 21, 5). These are not conventional settings, but they seem to be pretty good for showing accumulation and distribution for the selected period" ...requesting you to make a scan so that it is easier to understand...Thank you

markd

I think on this answer, I was thinking of how I use the indicator on charts to look for accumulation or distribution, not so much in scans. But you can scan for rising or falling Force, or rising or falling Force MAs, or MA crossovers.

Force(251) looks back over the last 251 bars - that is about a calendar year (52 weeks x 5 days = 260 days - 9 holidays = 251) - note: with the addition of the Juneteenth holiday, it should be 10 holidays, so Force(250)

When you plot this as an indicator you can add a moving average. The next time frame down (in my scheme of things) from annual is quarterly, so you would use a 63 day moving average of Force(251).

Different stocks and different markets move differently, so it can be helpful to play with different MAs. So you might use an MA the same length as Force - e.g. Force 251 and MA 251 instead of, or combined with MA 63. The longer MA will trigger later, but might be more reliable. You have to test it out on the kinds of stocks that interest you.

To scan for a crossover up, (Force crossing above its moving average,suggesting accumulation) you would write

and [Force(251) x sma(63, Force(251))]

For a crossover down (suggesting distribution)

and [sma(63,Force(251)) x Force(251)]

For a rising MA of Force, test for today's value greater than some number of days ago, e.g.

and [sma(63, Force(251)) > 20 days ago sma(63, Force(251))]


Force(63) looks back over one quarter or 13 weeks x 5 days = 65 days - roughly 2 holidays = 63. Not perfect but close enough.

Force(21) looks back over 4 weeks x 5 days = 20, but some months have more and some months fewer than 20 days, so I settled on 21. You could use 20, though. Not much difference.

Teknical

Thank You markd for your prompt reply...I shall use it and get back to you

Susan

any set up can follow smart money volume flow? Thanks!

Susan

Do you have definition for Force Index? I can't find it in chart school. Thanks!

Susan

can you explain in monthly chart how many days should be used? weekly? daily? not sure when you say daily, quartely, monthly, if those means, daily chart, weekly chart, and monthly chart. Thanks.

markd

@Susan

Force index

https://school.stockcharts.com/doku.php?id=technical_indicators:force_index

markd

@Susan

Daily, weekly and monthly refer to "time frames". Time frames are aggregation periods, or intervals of time used to sample data.

The market produces a continuous stream of prices (data), so it would be impossible to chart every transaction. Instead, traders look at a sample of all the prices that occurred in some period of time, usually the first, the last, the highest and the lowest.

The longer you want to hold a position, the longer the time frame you want to use to judge the trend of the stock. The most common charts are the following.

Monthly chart - each bar represents all the trading sessions in a calendar month. The actual number of trading sessions in a month will vary due to holidays, and the number of calendar days in the month 28, 29, 30 or 31. The average number is about 20.

Weekly chart - each bar represents all the trading days in a calendar week. Usually it's five, but sometimes four, due to holidays. - Note that the weekly bars and the monthly bars may not end on the same trading session. For instance, if the last day of the calendar month is a Wednesday, that will end the monthly bar, but the weekly bar will continue until Friday (unless Friday is a holiday).

Daily chart - each bar represents one trading session.

Shorter time frames show more detail, but that detail often includes more "noise" - price moves that don't tell you what the stock might do over a longer period of time. Longer time frames lose the detail but show the trend more clearly. The drawback to longer time frames is you may enter after the move is already underway. The drawback to shorter time frames is, you may make several "false entries" before the trend really starts.


How many bars you display on a chart is up to you. I use several years for a monthly chart, 2 years for a weekly chart and 9 months for a daily chart. But its a matter of personal preference.

If you chart has indicators, you probably want a chart that two or three times the length of the look back period for the indicator.

You may also want to explore Point and Figure (PnF) charts, which pay attention only to price, and don't show time at all. Proponents of PnF say these charts eliminate a lot of noise, are easier to read and give clearer signals.

Susan

Hi, Marked, Thank you for quick and detailed reply, how do you set up Force Index indicator number in each time frame? does this indicator track all trading volume in market for individual stock? Thanks!

markd

re Force data: it would use the volume and price data of the platform (e.g. Stockcharts) that offer the indicator. Probably that differs slightly from platform to platform, but the differences are probably not meaningful.

Elder (the Force Index inventor) recommends 13 periods for a default, apparently in any time frame. I would guess that number is based on his own research on what works. But, what "works" depends on your goals, I think. Elder apparently intended it for short term trading.

My personal preference for stocks is about 250, which is a full year of trading, although 63 (three months, or one calendar quarter) is usable, too. I add a moving average of the same length (250 or 63) because the crossovers sometimes work out (the stock changes direction somewhere around the crossover).

I use Force to find accumulation or distribution, which occurs (to my mind) when price and Force go in different directions over several weeks or months. So if price goes down while Force turns around and goes up, it looks like accumulation (Force rising shows net buying despite price falling or ranging). That suggests that the real low is near and prices should turn around. Likewise, if price continues up but Force falls off, that suggests distribution - net selling into rising prices - and a real top should be near. In both cases, it doesn't always work out that way, or it can take a long time - weeks or months - to work out. These ideas are based on Wyckoff -

https://school.stockcharts.com/doku.php?id=market_analysis:the_wyckoff_method

Susan

Thanks! It helps a lot.