16 July, 2016

Trapped Traders

Rationale & Trading Techniques

Traders using price-based indicators or hoping to trade breakouts when a support or resistance level is breached will frequently enter a buy or sell position at the very high or low price, watch uncomfortably as price fails to progress in the direction they hoped for then as price falls back, exit their position at a loss. At the time they entered their position and price failed to advance, they became Trapped Traders with no option than to exit their position before their loss became unbearable.

By observing traded volume, we can see whether a move through a price level is supported by favourable buying/selling power. In the cases when it is not, the Trapped Traders indicator shows us when we have a buying or selling imbalance at the top or bottom of a price bar but price has fallen back from the level where the traders entered and we can expect these Trapped Traders to quickly exit their positions for a loss, driving price further away.

This indicator can be used in conjunction with many other emoji trading Order Flow Suite indicators including Unfinished Business, POC at Extreme, POC near ExtremeRatio Display and Delta Divergence to uncover low-risk trade entry locations.


Examples

Note how the selling imbalance at 2269.50 with 1881 contracts sold into the bid was unable to drive price lower and how this level held when approached at 10:06:14 and 10:12:33:

Trapped Traders - Emoji Trading Order Flow Suite

 


Trapped Traders Settings


 

Input Name Description
Enable Zero Diagonal Comparison? This input determines whether price levels where zero volume traded at the bid or ask (including the highest and lowest prices in within the bar) are evaluated for imbalance calculations.
Imbalance Percentage The percentage level used for diagonal bid/ask volume imbalance calculations.
Extend Until Future Intersection? Select whether Extension Lines are enabled/disabled for the price level at which Trapped Traders exist.
Extension Line Label Text indicator for the Extension Lines.
Display Offset (Ticks) Specifies the indicator’s display position above/below the current bar.
Lookback Period If set to a value greater than 0, Trapped Trader 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.
Calculation Frequency Specifies whether the indicator is displayed in Real Time or At Bar Close.

Indicator Subgraphs

 

ID Subgraph Description
SG1 Trapped Traders Condition Evaluates to 1 if there are Trapped Sellers, -1 if there are Trapped Buyers, 0 otherwise.
SG2 Trapped Sellers Indicator The symbol drawn below a bar that has Trapped Sellers.
SG3 Trapped Sellers Extension Line Used to set the drawing properties for the Extension Line at the price level where sellers are trapped.
SG4 Trapped Buyers Indicator The symbol drawn above a bar that has Trapped Buyers.
SG3 Trapped Buyers Extension Line Used to set the drawing properties for the Extension Line at the price level where buyers are trapped.