NewCycleTrading

NCTA Adaptive Entry System

Adaptive Entry System ( AES )

Price action of stocks, indexes, and futures consists of periods of trending action, retracements within the trend and then a resumption of the original trend. Trending patterns do not move straight up or straight down. They move in cycles which, when properly identified, can offer traders an opportunity to “follow the trend” while also recognizing the probability of a near term retracement before resuming movement in the direction of the trend. Experienced traders with advanced skills at interpreting wave patterns ( Elliott Wave ), Fibonacci retracements, Stochastics (overbought / oversold conditions), Momentum, and Moving Averages apply their advanced knowledge to trading and identifying these trend - retracement - continuation of trend cycles. These skills require an advanced knowledge of these complex indicators and can be difficult for traders without the same skill set to optimize their trading performance.

The Adaptive Entry System ( AES ) was created as a technical market metrics system to interpret a variety of advanced signals and present to the trader a “single actionable signal” displayed in an easy to recognize format for traders of most any skill level to benefit from.

AES is a “system” as opposed to a single indicator. It was designed with the goal of simplifying a traders ability to recognize an entry opportunity by summarizing the consensus of several key indicators and displaying a single entry / exit signal in a color highlighted, strategy labeled format. The work of comparing a variety of indicators and assessing the strength of alignment is performed for the trader by the Adaptive Entry System.

There are three possible entry signals displayed. A trader may trade all three or customize the settings to choose just a single signal to trade. It is important for any trader incorporating AES into their toolset that they trade in sim / virtual mode for a period of time to confirm they understand how price action responds to the signals and to personally track the performance of each. A good trading system still requires due diligence on the part of the trader to confirm understanding of how the system performs.

Entry Signal #1 Description:
Trend Bias Plus Signal is intended to provide traders with an early view of the probable directional bias of the stock, index, or futures being traded. Trend Bias was designed to recognize the probability of the early stages of the strongest segment of a wave pattern. Recognizing the probable bias of the trend at an early stage and also having an indication of when that trend may be ending offers traders an opportunity to enhance their ability to optimally benefit from the trend.

How to Read the Trend Bias Plus Signal:
The Trend Bias Plus Signal is displayed as a simple to recognize color coding of the price bars. Blue price bars indicate a probable rising price bias. Red price bars indicate a probable declining price bias. White bars indicate a neutral period with no clear directional bias.

How to Trade the Trend Bias Plus Signal:
The Trend Bias Plus Signal is simple to interpret. When a price bar closes blue and the next price bar opens blue, this signals to the trader to open an upward bias position. Buy-to-open a call option, buy the stock, or open a long futures position. When a price bar closes red and the next price bar opens red, this signals to the trader to open a downward bias position. Buy-to-open a put option, short the stock or close a long stock position, or open a short futures position.

When holding a short or long position based on the Trend Bias Plus, there are a variety of exit methods which a trader can use including stops, limit price orders with fixed profit targets, or trail stops. Regardless, the end of a Trend Bias Plus cycle is indicated when a new price bar opens white. This is evidence that the current rising or declining trend is shifting to a neutral state. A trend may also be viewed as having ended when an opposite color bar prints at the open of a new price bar.

Entry Signal #2 Description:
The Momentum Signal is a near term indication of a probable retracement of the current trend. It identifies a temporary reversal of an overarching trend in a stock's price. Retracements are short-term periods of movement against a trend, followed by a return to the previous trend. Momentum signals are usually counter-trend trades identifying that part of the wave sequence where price temporarily moves opposite the direction of the trend. The momentum signal can be an opportunity for traders to take advantage of the natural pattern of trend - retracements - continuation.

How to Read the Momentum Signal:
The Momentum signal is displayed as a vertical color highlight on the price bar with a “M” label inside a directional indicator box. A red vertical highlight with an arrow box and “M” label pointing lower is a signal that the near term price movement may be downward bias. For an upward bias price movement signal, the Momentum indicator will display a green highlight across the price bar with an arrow box and “M” label pointing higher.

How to Trade the Momentum Signal:
When the highlighted directional labeled box prints at the open of a new price bar, take the trade based on the directional bias displayed. Momentum signals are generally counter trend indicators so a downward bias red bar, prompting the trader to go short may print on a long bias blue Trend Bias Plus price bar. This should not be viewed as a conflict but instead as a probable indication of a short term retracement following the natural sequence of cycles in price movement.

Momentum signals may be traded using stocks, options, or futures .

Entry Signal #3 Description:
The Consensus Signal is an indication that price action may be resuming in the direction of the primary trend.

How to Read the Consensus Signal:
The Consensus Signal is displayed as a vertical color highlight on the price bar with a “C” label inside a directional indicator box. A red vertical highlight and an arrow box with a “C” label pointing lower is a signal that the price movement may be resuming a downward bias trend or strengthening a conviction to the current trend. For an upward bias price movement signal, the Consensus indicator will display a green highlight across the price bar and an arrow box with a “C” label pointing higher. This is a signal that the retracement off of the trend may be concluding and/or a strengthening of a conviction to the current trend.

How to Trade the Consensus Signal:
When the highlighted directional labeled box prints at the open of a new price bar, take the trade based on the directional bias displayed. Consensus signals are generally most productive when traded aligned with the trend, as displayed by the Trend Bias Plus price bar color or when a white bar indicates a neutral state of the price trend. Counter trend trades using the Consensus Signal are not advised and considered to be less productive / higher risk.

Consensus signals may be traded using stocks, options, or futures .

Some General Rules:
  • Trade signals are only considered valid when they display at the open of a new price bar.

  • The signals can be traded on different timeframe charts from short term 3 minute charts to longer timeframe daily charts .

  • The signals are designed to be a generic indication of probable price movement and as such, can be used effectively for trading futures , stocks, options on stocks, options on ETFs, and options on cash settled indexes.

  • AES offers traders an opportunity to optimize performance from the natural cycles of the market….trend - retracement - continuation.

  • AES offers an opportunity for traders to have a clear entry / exit criteria. However, it is still imperative that each trader understands the trading strategy they intend to use and the risks and opportunities associated with that strategy. It is highly advised, regardless of the system or strategies being used, that a trader validates their understanding of the system/strategy by trading in a simulated, paper account format to self test the system and personal ability to trade it successfully.


Next Bar Alert:
Included is an optional "Next Bar Alert" setting. Since many of these signals benefit from very prompt action at the beginning of a price bar, there is an additional option in Settings to set an arbitrary number of seconds to be alerted before the next price bar opens. Simply set this to a level you prefer, then set an alert in TradingView on the indicator using the "Next Bar Alert" alert parameter.


Summary:
The color highlight indicator allows the trader to be 100% certain that the rules/criteria for confirming a valid entry were met at the open of the price bar. This feature, along with the alert settings in Trading View, provide clear confirmation of the timing and print of the signal as either valid or not.

Adaptive Entry System has been designed to help traders of all skill levels to trade the natural sequence of patterns in price action using a simple to recognize, single signal entry/exit format. The natural cycle of trend (Trend Bias Plus), then retracement (Momentum), followed by a continuation of the original trend (Consensus) can be identified within this system and offers traders a simple signal to take advantage of each phase in the cycle. Stock investors, options traders, and futures traders can benefit from the simple design of the AES on a variety of time frames.


Trend Bias Plus signals on NASDAQ:TSLA Daily chart:

Trend Bias Plus signals on NASDAQ:AMZN Daily chart:
Release Notes: In this update, the default checked settings have changed to the most commonly used settings. The following settings are now checked by default:
  • Colorize Price Bars For Trends

  • Display Consensus Entries

  • Display Momentum Entries

  • Highlight Entries

  • Show Entry Labels


This update also adds an alert option for the end of a Trend Bias Plus cycle.
Release Notes: In this update we have added the Trend Bias Plus Continuation signal, shown as a T+

Entry Signal #4 Description:
The Trend Bias Plus Continuation is an indication that price action may be continuing in the direction of the primary trend.

How to Read the Trend Bias Plus Continuation Signal:
The Trend Bias Plus Continuation Signal is displayed as a vertical color highlight on the price bar with a “T+” label inside a directional indicator box. A red vertical highlight and an arrow box with a “T+” label pointing lower is a signal that the price movement may be continuing a downward bias trend or strengthening a conviction to the current trend. For an upward bias price movement signal, the Trend Bias Plus Continuation indicator will display a green highlight across the price bar and an arrow box with a “T+” label pointing higher. This is a signal that the trend may be continuing higher and/or a strengthening of a conviction to the current trend.

How to Trade the Trend Bias Plus Continuation Signal:
When the highlighted directional T+ labeled box prints at the open of a new price bar, take the trade based on the directional bias displayed. Trend Bias Plus Continuation signals are only displayed when aligned with the trend, as displayed by the Trend Bias Plus price bar color.

Trend Bias Plus Continuation signals may be traded using stocks, options, or futures.

This update also includes a bug fix with the Next Bar Alert.

Use the link below to obtain access to this indicator:
https://newcycletrading.com/adaptive-entry-system
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