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Commitment Gauge (C)

Commitment Gauge (C)

In trading psychology, it's widely observed that traders often buy when they perceive a steep price decline and sell when prices rise rapidly. This behavior typically manifests in increased order cancellations on either the Bid or Ask side of the Order Book.

Stealth Trader measures this behavior through relative cancellation frequencies of buy and sell orders across different time frames using the Sliding Time Window concept. This metric, known as “The Trader’s Commitment,” is crucial for gauging traders’ intentions to buy or sell securities.

Key Features:

The Traders’ Commitment Gauge visually represents this sentiment using a linear indicator scale. It features clearly marked levels at +80 and -80, indicating when a significant majority (over 80%) of traders are committed to buying or selling a security.

Visual Representation: The gauge employs a linear indicator to show relative cancellation activity. A green marker in the top section suggests higher cancellation rates on the Bid side, signaling stronger commitment to sell, potentially forecasting a price decline. Conversely, a marker in the bottom section indicates higher cancellation rates on the Ask side, suggesting stronger commitment to buy, potentially indicating an impending price increase.

Interpretation: The closer the marker is to either extreme (top or bottom) of the gauge, the greater the likelihood of price movement aligned with traders’ commitment levels.

The Traders’ Commitment Gauge is a vital tool in Stealth Trader, providing actionable insights into market sentiment and aiding in informed trading decisions.

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