• How to use the Pyramid data

    The Pyramid is an easy way to present information from the Effective Volume database. This information is shown in a pyramid format, indicating that a specific trade must be executed only if the two bases that represent the market and the sector direction are supportive of your stock trade direction.

    The Pyramid data can be accessed either through the Stock Selection section



    or through the End of Day section.



    Let's see an example of how the Pyramid works.

    DSW is a shoe manufacturer. As you can see in the screen shot below, the Pyramid data includes numerical values, with a color code, as well as the Effective Volume figure.

    The color code:


    Red is bearish, green is bullish, and white is neutral.
    Hence, the rating for each stage of the pyramid is as follows:

    Very Bearish: two red dots
    Bearish: one red dot
    Neutral: two white dots
    Bullish: one green dot
    Very Bullish: two green dots

    From here, you can read the details of each rating, but most importantly, just look at the number of green and red dots.

    Many green dots signify that it's okay to buy.
    Many red dots mean that it's okay to short.





    The Stock Section

    1. LER: Large Effective Ratio

    LER is measured every day. It is defined as the ratio between LEV (Large Effective Volume, which represents large or mainly institutional investors) and the total volume.
    LER is then normalized between -125 (strong distribution) and + 125 (strong accumulation).

    LER > 100: two green dots
    50 < LER < 100: one green dot
    LER < -100: two red dots
    -100 < LER < -50: one red dot


    2. Supply:

    The Supply Indicator is a mathematical model that calculates the probability that a shareholder will sell his or her shares. (See more explanations here:http://www.effectivevolume.com/conte...al-time-system)

    The Supply must always be used along with the Active Boundaries. (See the Active Boundaries explanation below.)

    Supply > 10% and AB > 50: two red dots.
    Supply > 10% and AB < 50: one red dot
    Supply < 10% and > 5%: one green dot
    Supply < 5%: two green dots

    Two red dots are shown when most investors are losing money and are ready to sell in order to cut losses.

    3. AB: Active Boundaries

    The Active Boundaries measure the Upper and the Lower limit of the average profits of active shareholders. The idea is that active shareholders tend to buy when their average profit reaches a low level and tend to sell when their average profit reaches a high level. These levels are called Upper/Lower boundaries and are reevaluated on a weekly basis. This indicator is excellent at catching trends, and therefore is good for trend-following. (It is described fully in Ch 2 of the "Value in Time" book.)

    AB > 80: two green dots
    AB > 50 and < 80: one green dot
    AB < 20: two red dots
    AB > 20 and < 50: one red dot

    4. 20D RS: This is the 20-Day relative strength ranking.

    The ranking is normalized between 0 and 100. 100 is for the strongest stocks.
    A stock with a RS > 90 would receive two green dots
    A stock with a 80 < RS < 90 would receive one green dot
    A stock with a 10 < RS < 20 would receive one red dot
    A stock with a RS < 10 would receive two red dots

    The Sector Section

    20D RS: This is the 20-Day relative strength ranking.

    A sector with a RS > 80 on a bullish mode would receive two green dots
    A sector with a RS < 10 on a bearish mode would receive two red dots

    The Market Section

    In this section, we look at past 3-day and 5-day profits when the 20DMF was in similar conditions.

    Profit > 1.5%: Two green dots
    Profit > 0% and < 1.5%: One green dot
    Profit < -0% and > -1.5%: One red dot
    Profit < -1.5%: Two red dots
    Comments 3 Comments
    1. pgauti's Avatar
      Hi Pascal,
      On your pyramid tool, would it be possible to be a little more precise on the sector by adding the number of days since the sector is long or short (as well as the estimated number of days until a long or short signal triggers in the other direction)? This way we would have, visually, a picture telling us if we are early or late in the party if we take a trade.
      Thanks in advance.
    1. Pascal's Avatar
      Quote Originally Posted by pgauti View Post
      Hi Pascal,
      On your pyramid tool, would it be possible to be a little more precise on the sector by adding the number of days since the sector is long or short (as well as the estimated number of days until a long or short signal triggers in the other direction)? This way we would have, visually, a picture telling us if we are early or late in the party if we take a trade.
      Thanks in advance.
      OK. I'll try to do something, but that demands some integration work with the server, so probably 2/3 weeks from now as we first need to tackle the new faster RT system and the server transition.


      Pascal
    1. pgauti's Avatar
      Quote Originally Posted by Pascal View Post
      OK. I'll try to do something, but that demands some integration work with the server, so probably 2/3 weeks from now as we first need to tackle the new faster RT system and the server transition.


      Pascal
      Thanks a lot, no hurry!