Some Advanced GET Quick Definitions

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Elliott Wave

The simplified version of Elliott Wave theory states that you will have a 5 wave sequence in either an up or down direction, followed by some kind of corrective pattern (most of the time), and then a new 5 wave sequence in the opposite direction.

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MACD

The Moving Average Convergence/Divergence (MACD) is an oscillator technique attributed to Gerald Appel. The MACD consists of an oscillator that is the point spread difference between two exponential moving averages with different periods, and a moving average of that oscillator. (An exponential moving average is an average that weighs recent data more heavily at a geometric rate than data from the distant past.) Signals are generated by the relationship of the two values.

The Moving Average Convergence/Divergence (MACD) indicator is used in three variations. MACD is used as an indicator to determine overbought or oversold conditions in a market. MACD can be used to generate signals on line crossovers, and it can generate oscillator divergence signals. It is similar to the RSI and Stochastics in its usage, where divergences between the MACD and prices may indicate an upcoming trend reversal.

A primary MACD usage: When the MACD is increasing, prices are trending higher; when the MACD is decreasing, prices are trending lower. A buy signal is given when the MACD graph is in an oversold condition below the origin and the MACD line crosses above the signal line. A sell signal (negative breakout) is given when the MACD graph is in an overbought condition above the origin and the MACD line falls below the signal line. The important crossovers of the MACD line to the signal line occur far from the zero line (the horizontal axis). The amount of divergence between the MACD line and the signal line is important; the greater divergence, the stronger the signal.

Other ways MACD is used: It is also popular to buy/sell when the MACD goes above/below zero. When the shorter moving average pulls away dramatically from the longer moving average, the price may be overextending, indicating the creation of a possible "overbought/oversold" condition. Divergence analysis is helpful near the end of a current trend when the MACD diverges. A bearish divergence occurs when the MACD is making new lows while prices fail to reach new lows. A bullish divergence occurs when the MACD is making new highs while prices fail to reach new highs. Both of these divergences are most significant when they occur at relatively overbought/oversold levels.

The MACD is said to be effective in wide-swinging trading markets. For more volatile markets, some MACD users may shorten the calculation periods of the exponential moving averages.

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ADX-DMI

General Description

The ADX is a helpful trend indicator. The Average Directional Movement (ADX) is a momentum indicator developed by J. Welles Wilder. The ADX is designed to measure if a market is trending and to what extent. The Directional Movement Index (DMI) is another momentum indicator developed by Wilder. It is designed to determine whether a trending or non-trending pattern exists in a market.

This indicator measures-- regardless if the direction of price movement is in an up or down trend-- the strength of the trend. The higher the value the stronger the trend. When the ADX is moving higher, the market is in a trend mode. The trend can be either up or down. The +DMI and -DMI identify which direction the trend is going. When the +DMI is above the -DMI the market is stronger. Conversely, if the -DMI is above the +DMI, the market is weaker. By identifying when the ADX turns up, in either situation (stronger or weaker), a potential beginning point of a trend can be identified. Subsequently, when the ADX keeps turning up, a continuation of a trend can be identified. A setting of 4 may be more choppier but will identify more potential opportunities. A setting of 14 smoothes out the signals. Welles Wilder, the developer of the DMI, suggests what he calls the 'extreme point rule'. This rule states, "On the day the +DMI crosses above or below the -DMI, don't take the trade. Just take note of the high or the low of the day.


The ADX-DMI is actually three separate indicators.

1. The ADX indicates the trend of the market. This is typically used as an exit signal.
2. The +DMI measures the strength of upward pressure.
3. The -DMI measures the strength of downward pressure.

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Market Cap

If you are using eSignal scanners you will find a selectionc called Market Cap. Below defines how to use a Market Cap selection..

Allows you to eliminate stocks whose market capitalization are outside the specified boundaries.

Micro Cap (<100M)
Small Cap (>100M & <500M)
Mid Cap (>500M & <2B)
Large Cap (>2B & <50B)
Huge Cap (>50B)

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Moving Average

A moving average is an indicator that shows the average value of an issue over a specific time period. For example, a six period moving average would take the sum value (often the closing price of the bar) over six days, compute the sum, and divide by six. The longer the length of the moving average, the slower it reacts to the market and, conversely, the shorter the moving average, the more sensitive the moving average will be to a price change.

Some ways moving averages can be used are to “smooth-out” price fluctuations and help emphasis the direction of a trend, if even a minor trend. For example, if a price is above a moving average, speculators and investors tend to buy; if a price is below a moving average, speculators and investors tend to sell.

Moving averages can be displaced, or offset, by a given number of bars – this is called a displaced moving average, or DMA. It is frequently meaningful when the current price crosses the DMA.

For Advanced GET Users:

The “6/4 Moving Average” is the same thing as the “6/4 DMA Channeling” technique, which is referred to in the Advanced GET manual, seminar video tapes, and demo disk. It combines two moving averages, which have slight variations, and says that trend reversal is not complete unless both the moving averages are crossed.

The “6/4 Moving Average Cross Up” scan helps identify those issues that are higher probability candidates for a trend reversal. The 6/4 DMA Channeling technique should be used with a Type 1 or 2 Buy or Sell setup to help confirm that trend reversal. A “6/4 Moving Average Crossing Up” scan is also useful in identifying early Type 1 and 2 Buy signal setups.

To manually create a “6/4 Moving Average” in the Advanced GET program, go to the Moving Average menu, and create two moving averages. Both moving averages will have a “Length” set to “6” and the “Offset” set to “4.” The difference between the two moving averages will be to set one moving average “Source” to “High” and change the color to “Blue;” the other set the “Source” to “Low” and make “Red” the color.