16 July, 2016

Price Rejector

Rationale & Trading Techniques

Price Rejector is an indicator that considers the most basic concepts of supply and demand:

  • as the price of an item rises higher, fewer people will be willing to buy it it
  • as the price of an item falls lower, fewer people will be willing to sell it

It follows that if we have a lack of sellers and an excess of buyers, price must rise and if we have a lack of buyers and an excess of sellers, price must fall.

Price Rejector is a powerful Order Flow tool that applies these basic concepts to trading and indicates when volume is falling at a price extreme as price rises or falls and this rise or fall is met by strong opposing selling or buying. It can be used on Numbers Bars and other chart types including bar, candlestick, Renko and Heiken Ashi and allows the trader to quickly assess potential for a low risk entry without the need to analyse the traded volume detail within Numbers Bars.

 


Examples

Note the importance of considering Delta in conjunction with a Price Rejector condition as well as the market’s reaction to the price levels forming the rejection condition that may be highlighted with a Forward Projection Zone and/or Extension Lines:

As price traded lower we first encountered positive Delta at 8:35:48 however a trader seeking to fade the downward move was potentially too early and perhaps a little stressed if they took a long entry during the 8:36:02 bar and watched the 8:36:47 bar form. 3 bars and 1 tick lower, we again encountered positive Delta but the low was not confirmed until 8:35:05 when Price Rejector indicated falling supply at these price levels and excess demand. Note too how the high extreme of the Price Rejector zone (2259.25) held strongly in the 8:38:32 bar allowing for a confident and low-risk long entry:

Price Rejector delta confirmation 2 - Emoji Trading Order Flow Suite

 

Conversely, the 9:32:10 bar below has a buying Price Rejector condition however this is not confirmed by the bar’s Delta which is negative and the Price Rejector zone is broken within the next two bars. Note also how as price rose to the Open, demand fell and was met by increased supply. This should not be surprising as traders target entries and exits around key levels. Although this selling Price Rejector condition was confirmed by negative Delta, the context of price trading around the Open requires more consideration and a wise trader would be watching the market’s reaction to the Price Rejector levels and be mindful of what was not happening, i.e. demand fell as the Open was tested, however the resistance levels created by Price Rejector were quickly broken to establish new highs with the Open possibly serving as a support level from this point:

Price Rejector delta no confirmation level reaction - Emoji Trading Order Flow Suite

 


Price Rejector Settings


 

Input Name Description
Imbalance % The percentage level used for diagonal bid/ask volume imbalance calculations.
Lookback Period If set to a value greater than 0, Price Rejector indications will not be displayed unless the current bar’s high (or low) is greater than (or less than) or equal to the highest high (or lowest low) within the lookback period.
Extend Until Future Intersection? Select whether Extension Lines are enabled/disabled for the highest and lowest rejected price levels.
Extension Line Label Text indicator for the Extension Lines.
Forward Projection Zone The number of bars forward from the bar in which the Price Rejector condition occurred that a Forward Projection Zone will be drawn.
Symbol Offset (Ticks) Specifies the indicator’s display position above/below the current bar.

 

 


Indicator Subgraphs

Subgraph ID Subgraph Description
SG1 Price Rejector Condition Evaluates to 1 when a buying Price Rejector condition occurs, -1 when a selling Price Rejector condition occurs, 0 otherwise.
SG2 Price Rejector Symbol The symbol used to indicate a Price Rejector condition.
SG3 Price Rejector Bid Volume Zone Low Use in conjunction with SG4 to highlight the highest and lowest price levels where a buy Price Rejector condition occurred within the current bar. Follow this link for the Sierra Chart Notes about Top and Bottom Draw Style Pairs
SG4 Price Rejector Bid Volume Zone High Use in conjunction with SG4 to highlight the highest and lowest price levels where a buy Price Rejector condition occurred within the current bar. Follow this link for the Sierra Chart Notes about Top and Bottom Draw Style Pairs
SG5 Price Rejector Bid Zone High Extension Line Use to set the drawing properties for the Extension Line drawn from the Price Rejector Zone high price. 
SG6 Price Rejector Bid Zone Low Extension Line Use to set the drawing properties for the Extension Line drawn from the Price Rejector Zone low price. 
SG7 Price Rejector Ask Volume Zone High Use in conjunction with SG8 to highlight the highest and lowest price levels where a buy Price Rejector condition occurred within the current bar. Follow this link for the Sierra Chart Notes about Top and Bottom Draw Style Pairs
SG8 Price Rejector Ask Volume Zone Low Use in conjunction with SG7 to highlight the highest and lowest price levels where a buy Price Rejector condition occurred within the current bar. Follow this link for the Sierra Chart Notes about Top and Bottom Draw Style Pairs
SG9 Price Rejector Ask Zone High Extension Line Use to set the drawing properties for the Extension Line drawn from the Price Rejector Zone high price. 
SG10 Price Rejector Ask Zone Low Extension Line Use to set the drawing properties for the Extension Line drawn from the Price Rejector Zone low price.