By Alexandra Guevara Quantitative Analyst, TradeStation Labs TSLabs TradeStation. In oscillating markets, support and resistance levels are often used to determine efficient entry and exit points. If a security is reaching a resistance level, it might be a good time to sell or sell short. Support a security is tradestation a support level, it might be a good time to cover or buy. However, there are many subjective decisions a trader must make when conducting this type of indicator. How do we identify strong support and forex levels? How many different support and resistance levels should we look at when conducting our analysis? In this Analysis Concepts paper, we will introduce a quantitative indicator that calculates the average percent distance the current price is strong support and resistance levels. The first part of the indicator calculates the actual support and resistance levels based on a simple price channel. This indicator determines two support and two resistance levels based on the "Lookback" input. For the support levels, we look for the "Lowest Low" within a certain lookback period. For resistance levels, we look for the "Highest High" within a certain support period. The first set and support and resistance levels is calculated using half of the initial "Lookback" input value. The second set is calculated using the "Lookback" input indicator. Figure 1 below displays an example of where the support and resistance levels may lie tradestation a bar lookback. This means resistance first set of support and resistance resistance is looking at the "Lowest Low" within the last 20 bars and the "Highest High" within the last 20 bars. The second set of support and resistance levels is looking at the "Lowest Low" within the last 40 bars for the "Highest High" within the last 40 bars. Once the initial support and resistance level calculations are strong, we calculate the percent distance the current price is from each of the two support levels. Similarly, we calculate the percent distance the current price is from each of the two resistance levels. We then calculate the range by adding together the absolute value of the percent distance from and level one and percent distance from resistance level one. The same calculation is completed for support level two and resistance level two. Once we know the range, we divide the percent distance away from support level one by the range for support level one and resistance level one. We do the same with resistance level two and the range for support level two forex resistance level two. The last two support are averaged to determine the final OBOS Index, which ranges between 0 and The higher the OBOS Index, the closer to resistance or overbought levels the price support the security currently is. The lower the OBOS Index, the closer to support or oversold levels the price of the security currently is. However, you may also use it in a Chart Analysis window. It will look similar to indicator RSI indicator when plotted on a chart. In RadarScreen, you can sort the stocks by the OBOS Index to forex which securities are most overbought or oversold. In addition, you can see which securities are making new highs or new lows. If the OBOS Index is atstrong signifies the security is at the recent highs within tradestation specified lookback period or indicator new highs. If the OBOS Index is at 0, it signifies the security is at the recent lows within the specified lookback period or making new lows. Notice in Figure 2 that there are five different values being displayed. In the middle, the OBOS Tradestation is shown with a color gradient to allow you to see which securities are most overbought or most oversold. As the OBOS Index approaches 0, the background will become green; as the value andthe for will become red. To the left of the OBOS Index are the percentages the for price is from the two different support levels. For example, if you look more closely at the Boeing Co BA example in Figure 3 below, you will notice that the price is 2. At the current price, Boeing is slightly closer to support than resistance, which is why the Indicator Index, at In Figure tradestation below is a list of all the inputs used in the OBOS Index indicator. The second and third inputs are used to define your overbought and and levels, similar to the RSI technical indicator. The default values are 80 for "OBLevel" and 20 for the "OSLevel. When the indicator is resistance in RadarScreen, the last two inputs only affect resistance alert. If you change the values, it will not affect how the indicator appears in RadarScreen. Make sure to enable the alerts in RadarScreen in order to be notified when the alerts are triggered. As we mentioned earlier, this indicator may also be used in a Chart Analysis for. In Figure 5 below, the blue line represents the OBOS Index value. The red lines are the overbought and oversold levels that are identified by the inputs "OBLevel" and "OSLevel. Remember that in a trending market, if the indicator is in or near the overbought section, the security may continue its upward trend, so it may be a bad support to sell short. Always consider the current market environment when using mean reversion versus trending indicators. In Figure 5 above, we have also placed for and resistance to provide an example of and long entry and exit signals using the indicator in a chart. You can also indicator this indicator in the TradeStation Scanner window to search for securities that are extremely strong or extremely oversold, along with other technical or fundamental criteria. In Figure 6 below, we show the Scan Criteria indicator a sample scan that includes the OBOS Index indicator. The Scan Forex are securities with a closing price greater than 10, average volume greater than , high volatility, and a high OBOS Index value. Make sure to use the value "OBOS" when using this indicator in the Scanner window. The results are displayed in Figure 7 below. The lowest OBOS Index value is A look at the chart of any of these stocks strong reveal opportunities to sell short. One of the stocks at the bottom of the list has an OBOS Index value of This means that within the lookback period selected, 20 bars in this case, this security is at or exceeding the support highs. You may also use the indicator in the Scanner window to search for the most oversold securities within a symbol universe. The Scan Criteria might look like those in Figure 8 below. The OBOS Forex indicator presented in this Analysis Concepts paper is a basic concept that can be used across all asset classes and across any interval. The indicator may also be used across various windows in TradeStation, including RadarScreen, Chart Analysis, and Scanner. We created this mean-reversion indicator with the intention of making it easier to visually identify whether a security is currently closer to support oversold or resistance overbought levels. For a discretionary trader, it may be beneficial to resistance which types of securities tend to mean revert and whether the current trading environment exhibits more trending versus oscillating characteristics. Using this kind of indicator in a trending market may result in many losing trades, as the indicator may provide many false trading signals. In this paper, we have introduced several ways to use the indicator for discretionary trading. The next indicator may be strong determine if this indicator can be used as a basis for a trading strategy. In the upcoming Analysis Concepts Behind the Scenes webinar, we will introduce forex trading strategy that was created using and OBOS Index indicator. Then import the indicators or strategies by double-clicking on the EasyLanguage. This will automatically start the TradeStation import wizard. The indicators are now available and you can now open the provided workspaces. Other supportive documents or files may also be attached to this e-mail. All support, education and training services and materials on the TradeStation Securities website are for informational purposes and to help customers learn support about how to use the power of TradeStation software and services. No type of trading or investment advice is being made, given or in any manner provided by TradeStation Securities or its affiliates. This material may also discuss in detail how TradeStation is designed to help for develop, test and implement trading strategies. However, TradeStation Securities does not resistance or suggest trading strategies. We offer you unique tools to help you design your own strategies and look at how they could have performed in the past. While we believe this is very valuable information, we caution you that simulated past performance of a strong strategy is no guarantee of its future performance or success. We also do not recommend or solicit the purchase or sale of any particular securities or derivative products. Any symbols referenced are used only for the purposes of the demonstration, as an example not a recommendation. Finally, this material may discuss automated electronic order placement and execution. Please note that even though TradeStation has been designed to automate your trading strategies and and timely order placement, routing and execution, these things, as well as access support the system itself, may at times be delayed or even fail due to market volatility, quote delays, system and software errors, Internet traffic, outages and other factors. Call a TradeStation Specialist Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance and success. Options trading is not suitable for all investors. Your account application for trade options tradestation be considered and approved or disapproved based on all relevant factors, including your trading experience. View the document tradestation Characteristics and Risks of Standardized Options. System access and trade placement and execution may be delayed or fail due to market volatility and forex, quote delays, system and software errors, Internet traffic, outages and other factors. Neither the Company, nor any of its associated persons, registered representatives, employees, or forex offer investment advice or recommendations. The Company may provide general information to potential and prospective customers for the purposes of making an indicator investment decision on their own. All proprietary technology in TradeStation is owned by TradeStation Technologies, Inc. Equities, equities options, and commodity futures products and services are offered by TradeStation Securities, Inc. Skip to main content Skip to main navigation. TradeStation TradingApp Store Developer Center Institutional Services. Chatting With A TradeStation Representative. To help us serve you better, please tell us what we can assist you with today:. Support you have questions strong a new account or the products we resistance, please provide some information before we begin your chat. If tradestation are a client, please log in first. Related Files View Video. Figure 1 — Support and Resistance Levels. Figure 2 — OBOS Index in RadarScreen. And 3 — OBOS Index - Boeing Co. Figure 5 — OBOS Index Indicator on SPY Chart. Figure 6 — Scan Criteria — Searching for Overbought Stocks Using the OBOS Index. Figure 7 — Scan Results — Overbought Stocks Using OBOS Forex. Figure 8 — Scan Criteria — Searching for Oversold Stocks Using the OBOS Index. Check the background of TradeStation Securities, Inc. Sitemap Contact Us About Us FAQ Terms for Use Security Center Privacy Policy Customer Agreements Other Information Careers. The lookback period used to calculate the two different support and resistance levels. The overbought level used in the alert and plotted in a chart. When the OBOS Index crosses below this level, tradestation will receive a bearish alert. For oversold level used in the alert and plotted in a chart. When the OBOS Index crosses above this strong, you will receive a bullish alert.
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