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For TradeStation
The ADAM Theory Price Reflection indicator has been developed for
the TradeStation platform by Jan Arps based on a concept originated by Jim Sloman and perfected
and popularized by Welles Wilder in his excellent trading book,
The ADAM Theory of
Markets, or What Matters is Profit. This TradeStation 2000i indicator will plot a set
of Adam mirror-image reflection bars on any price chart on any data stream on any time
period.
In Wilder's words, ADAM
Price Reflection plots "the market's own prediction of the highest probability
of where it will go in the future. [It contains] All information known by the
market.information that cannot be improved by adding anything to it. "
Trading with the ADAM Reflection Indicator
When you are considering a trade
entry or exit, use the Expert Commentary icon to click on the price bar from which you
want to plot an Adam projection. The ADAM Reflection Indicator will plot a string of
predictive price bars into the future and display in the Expert Commentary window the
highest high and lowest low values of the prediction. Look at the prediction made by the
indicator and ask yourself the question, "If what I see is what the market will do in
the future, do I want the trade today?" The answer will be either "Yes",
"No", or "I'm not sure". Only take the trade if the answer is
YES.
Once you are in the trade and a
pullback occurs, re-run the ADAM Theory Reflection indicator on the most recent bar to
project the anticipated extent of the pullback and subsequent resumption of the trend, if
any. Then put your protective stop below the projected pullback level.
Continue to raise your stop levels,
using the information generated by the ADAM Theory Reflection indicator, until you are
stopped out of your position.
There are three clues to indicate it
is time to apply the ADAM Reflection Indicator and make a decision to get aboard a trend:
Clue # 1:
A breakout:
The market has moved above many or
all of the previous tops that can be seen on your chart. This situation shows that there
is enough power behind the move to propel the price into new ground. The longer the time
frame for the breakout, the more significant is the move.
Clue # 2;
A trend change:
The market has broken out above a
long well-defined downtrend and has taken out several previous highs of the new uptrend.
Clue # 3:
Gaps and/or
wide-range days.
The market is relatively dull and
suddenly gaps up and/or the daily range increases significantly showing that the market
has awakened and something is happening. This is especially significant if it happens in
combination with clues #1 and #2 above.
When one or more of these clues
appear, it's time to apply the ADAM Theory Reflection indicator to your chart.
ADAM Price
Reflection Bars
ADAM Channels
Indicator
The ADAM Channels indicator plots a channel above and below the price representing the lowest low and the highest high projected by the ADAM Price Reflection tool. These bands represent a measure of projected reward and risk at any point in time on the price chart. When there is a large gap between the high of the last bar and the upper ADAM channel and a small gap between the low of the last bar and the lower ADAM channel, the potential profit of a long trade is indicated to be better than the potential profit of a short trade. Conversely, a large gap between the low of the last bar and the lower Adam channel and a small gap between the high of the last bar and the higher Adam channel would imply that the potential profit of a short trade is better than the potential profit of a long trade at that point in time. When the prices ride the lower channel boundary, the trend is up. When the prices ride the upper channel boundary, the trend is down.
ADAM Price Leader
Oscillator
The ADAM Price Leader Oscillator, derived from the ADAM Price Reflection Tool, is an excellent oscillator for predicting the degree and direction of the trend. When the oscillator breaks above the "noise zone" around the zero line, the trend is up. When it breaks below the noise zone, the trend is down.
The ADAM Price Reflection package includes the following studies:
- ADAM Price Reflection Indicator
Click here to order separately
- ADAM Price Channels Indicator
Click here to order separately
- ADAM Price Leader Oscillator
Click here to order separately
- Welles Wilder's book,
The Adam Theory of Markets
For TradeStation
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