Key Features:
The Stealth Trader platform presents its insights using gauges designed to simplify and expedite decision-making. This guide details the functionality of each gauge, accompanied by practical examples.
Sentiment Spectrum Gauges
Purpose: These primary decision-making tools utilize proprietary algorithms to gauge market sentiment across different time frames: Long-Term, Medium-Term, and Short-Term. Understanding these gauges is crucial for interpreting trading signals effectively.
How It Works: The system measures the real-time flow rate of Bid and Ask orders on the Exchange Electronic Trading Book, weighting them based on proximity to bid/ask levels, order size, and time since origination. These weighted orders over defined intervals form the basis of Trader’s Sentiment, filtered through multiple length intervals to highlight various trading group behaviors.
Filters: Ranging from short (3 intervals) to long (58 intervals), these filters categorize trading patterns, providing insights into the intent of different trader groups—from active day traders to swing traders—represented visually as a Spectrum of Sentiment.
Use of Colors: In the middle of this gauge is a dark-green horizontal line that represents the reference level (i.e., neutral baseline) of the measured sentiment. Generally speaking, if all of the bars in the Sentiment Spectrum are located above this reference level, then the overall sentiment exhibited by the traders of all the activity groups is bullish. The strongest bullish sentiment is presented by a spectrum in which all the bars form an almost perfect triangle pointing upwards.
Another very important characteristic of the sentiment spectrum is the color of the bars. The color represents the rate of change of the sentiment compared to its previous level over one Sentiment Compression Interval.
There are two distinct color palettes used in this gauge:
The blue or bullish palette that consists of colors ranging from dark purple and dark blue colors to very light blue and almost bluish-white colors.
The red or bearish palette consists of colors ranging from dark purple and dark red colors to orange, bright yellow and almost yellowish-white colors.
In either palette, the brighter the color the greater the movement of the traders’ intent towards either bullish or bearish sentiment. This unique way of presenting the picture of the real time sentiment enables you to anticipate the change in buying or selling activities prior to any actual price movements.
There is an infinite variety of shape and color combinations in the spectrum of sentiment. However, by observing the behavior of this informative gauge and associating its shapes and colors with the following price moves, an average-skilled Stealth Analytics© user can develop very accurate anticipation skills in 2–3 weeks of self-training and use.
The Main Spectrum Gauge produces numerous images. Note that the shapes and colors of the Sentiment Spectrums do not depend on the actual security. They are universal and indicate the bullish or bearish sentiment the same way for all securities.
Example: The Spectrum of Sentiment graphically illustrates trader sentiment for a given security, showing how sentiment shifts from bullish to bearish across different trader groups.
The central part of the graph is below the horizontal reference line and is pointing downwards. The colors of the graph are mostly red with a very bright shade of red right in the middle of the spectrum. The outside bars of this histogram are still above the reference line and have a dark shade of purple.
This Sentiment Spectrum could mean that the current sentiment of the S&P 500 E-Mini futures traders is changing from being recently mildly bullish to a pronounced bearish sentiment. Although some infrequent groups of traders (the outside wings of this graph) are still somewhat bullish (the bars that represent their sentiment are still above the reference line), their sentiment is not increasing towards further buying (the color of their bars is purple, which is neutral). At the same time, the more frequent traders (scalpers, day traders, swing traders, etc.) are bearish with an increased intensity in their Sell orders. This is indicated by the bright red and orange-yellow middle bars below the reference line.
The picture that is shown above is of the Short-Term Sentiment Spectrum Gauge. The compression of this gauge is set to 50t. This means that the gauge is designed to display very rapid changes in the sentiment. It could be equivalent to a few seconds or less in fast trading markets.
Multiple Time Intervals
Checking Middle-Term and Long-Term Sentiment Gauges alongside Short-Term Sentiment provides a comprehensive view of market sentiment trends. Understanding these relationships enhances decision-making accuracy.
Other Features:
Ticker Symbol: Displays the currently selected security.
Price Change Indicator: Indicates price movement relative to the previous day’s close.
Volume Indicator: Shows cumulative trading volume for the current day.
Compression Label: Indicates data sufficiency for accurate sentiment measurement.
Extreme Positions: When the Sentiment of any time frame is at its peak, which indicates extreme bullish or bearish activity of the traders, a small dot will appear either at the top or at the bottom of the gauge. Dots at the peak or trough of sentiment gauges suggest potential sentiment reversals, aiding in anticipating market shifts.
These dots indicate possible sentiment reversals when the sentiment cannot get any more bearish or any more bullish (i.e., the sentiment exhaustion point). This creates a sentiment reversal possibility.
The example of this type of situation is illustrated below when the bullish Short-Term Sentiment of the MSFT traders has reached the exhaustion point, indicating a possible pullback in their buying activity.
Effective Use: Spending time observing and interpreting the Spectrum of Sentiment gauges enhances familiarity with their patterns, leading to more precise trading decisions.
By mastering the Stealth Trader, users can develop skills to anticipate market movements effectively, making informed decisions aligned with current market sentiment.
Long and Short Spectrums
You know that a picture is worth a thousand words, well each spectrum tells a story. From now on we will use actual spectrums from the Real Time Navigator. Remember, these are static, now, as we learn about all the information they convey. Once we are confident that you have understood the spectrum, we will use dynamic spectrums to prepare you for registering a lot of information in a short length of time.
The power of the Real Time Navigator must be becoming clear. It extracts all its information about all the traders and displays it in quickly recognizable spectrums. Your job is to use this information to answer the question, "What should I do?"
Long
The overall sentiment of the spectrums below is long. This is indicated by the direction of the bars.
Short
Notice all the short spectrums are below the axis.
Critical Mass
Remember, the four center bars represent 50% of the participants. We refer to these four bars as the critical mass required to determine the sentiment.
Flat
The spectrum is considered to be flat if the length of all the bars is less than two grid marks. This represents less than 10% of the share's market activity.
Exhaustion
There are unique situations where one of the components of the sentiment reaches exhaustion.
Remember sentiment is like emotions, you can only be so happy and you need to step back, take a breath. Well in the market, the number of trades executed in a designated length of time has a saturation point, also. At this point, traders stop their activity and catch their breath before proceeding. Let's look at the two types of exhaustion;
Length (Velocity) Exhaustion: The rate of buying or selling activity has reached a maximum. Length exhaustion is only of concern when entering a trade.
Color (Acceleration) Exhaustion: Increasing rate of buying or selling activities represented by the bright white from the blue palette or bright white from the red/yellow palette. Color exhaustion is only of concern when exiting a trade.
Exhaustion by Length
The exhaustion points indicate a unique moment in time when the traders' sentiment is reversed.
See the spectrum below. All the bars are pointing down. We know that indicates a short market.
The bars are colored from the red/yellow palette. This tells us that there is increased selling activity. The center bar is exhausted by length indicating that shares were shorted at the fastest possible speed. At this precise moment the sentiment of the market is long.
This is a pivotal point and only applies when the exhaustion indicator at the top or bottom of the spectrum is flashing.
Exhaustion by Color
Color exhaustion DOES NOT affect the sentiment of the spectrum. It indicates that the most active traders' acceleration has exhausted. When you want to 'lock in the profit', color exhaustion will indicate the most opportune moment.
How to Read Long Term Sentiment Gauges
Shapes
In the middle of each Sentiment Gauge is the reference level (i.e., neutral baseline represented by a dark-green horizontal line). If all of the bars in the Sentiment Spectrum are located above this reference level, then the overall sentiment exhibited by the traders of all the activity groups is bullish. The strongest bullish sentiment is usually presented by the spectrum where all the bars form almost perfect triangle pointed upwards. The opposite is true for the bearish sentiment.
The following spectrums are good examples of bullish sentiments.
And here are bearish sentiments.
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Colors
In every Sentiment Gauge the color represents the rate of change of the sentiment compared to its previous levels over one Sentiment Compression Interval.
There are two distinct color palettes used in the Sentiment Spectrum:
- The blue or bullish palette that consists of colors ranging from dark purple, dark blue to very light blue, almost bluish-white colors.
- The red or bearish palette that consists of colors ranging from dark purple, dark red colors up to orange, bright yellow and almost yellowish-white colors.
The brighter the color, the greater is the acceleration of the traders’ intent towards either bullish or bearish sentiment. This unique way of presenting the picture of the real-time sentiment enables a trader to anticipate the change in buying or selling activities prior to any actual price movements.
There is an infinite variety of shape and color combinations that a trader can experience by observing the Sentiment Spectrum Gauges. However, in order to accelerate the process of mastering the skill of the sentiment reading, Stealth Analytics includes an extended knowledge base that helps a trader to interpret the readings of any of its gauges through the use of the natural language speech and text synthesizer. At any point of time a trader can right click on a gauge that he/she needs the help interpreting and the Stealth Analytics expert system will show the “Analyze” button as its invitation to give an advice. Once a trader clicks on the Analyze button the built-in expert system takes a snap shot of the gauge position and instantly offers a trader the interpretation of this gauge.
Example
The following is a typical interpretation of the market conditions depicted by the Stealth Sentiment Spectrum Gauge shown below:
As you can see, the central part of the sentiment Spectrum is below the horizontal reference line and is pointing downwards. The colors of the graph are mostly red with a very bright shade of orange and yellow right in the middle of the spectrum. The outside bars of this histogram are still above the reference line and they present in a dark shade of purple.
This Sentiment Spectrum could mean that the current sentiment of the traders is changing from being recently mildly bullish to a pronounced bearish sentiment. Although some infrequent groups of traders (the outside wings of this graph) are still somewhat bullish (the bars that represent their sentiment are still above the reference line), their sentiment is not increasing towards further buying (the color of their bars is purple, which is neutral). At the same time, the more frequent traders (scalpers, day traders, swing traders, etc.) are bearish with an increased intensity in their Sell orders. This is indicated by the bright orange and yellow middle bars below the reference line.
As indicated in the aforementioned, the Sentiment Spectrum is capable of generating an endless number of colors and shapes that could be very reliably associated (by experienced users) with many different market conditions. For example, if the Sentiment Spectrum is at its peak it indicates extreme bullish or bearish activity when the traders’ sentiment cannot get any more bearish or any more bullish (i.e., the sentiment exhaustion point). This creates a sentiment reversal possibility.
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