You are previewing MIDAS Technical Analysis: A VWAP Approach to Trading and Investing in Today's Markets.
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MIDAS Technical Analysis: A VWAP Approach to Trading and Investing in Today's Markets

Book Description

"If you are already familiar with MIDAS and interested in rediscovering the powerful trading method developed by the late Paul Levine, then this will become your book of reference. The authors walk you through the wonderful MIDAS world and explain its variations with copious charts and examples. If you are new to the MIDAS method, I recommend first reading the introductory chapters, then jumping to the very practical, money-making Chapter 8, then applying the principles yourself (computer code is provided in the appendices). Armed with 'hands-on' knowledge, you will then access the wealth of information that this book provides in helping you correctly read the markets."

— Pascal Willain, independent trader and inventor of volume-based indicators, author of Value in Time

"As the first person to ever write about the Commitments of Traders Report way back in 1973, I have seen the data abused and usually greatly misunderstood. Most people writing on the subject just don't understand it and you will be misled. Chapter 12 in this book sets the record straight. I am delighted to give a 100% endorsement, the truth of the COT report is here, simply stated and easy to understand. Don't put this book down. Take it to the checkout and buy it."

— Larry Williams, private trader, author

"Coles and Hawkins have masterfully combined the 'art and science of Technical Analysis' into a well-illustrated and comprehensive tome encompassing the MIDAS method. They have captured the essence of Paul Levine's MIDAS Technical Analysis method and then further expanded it into a new dimension. This book will give any trader the unconventional alternative edge they need to take advantage of the stock market and exploit profits."

—StockShare Publishing LLC

"The authors pick up where Levine left off, boldly and competently tackling both the theoretical aspects of Levine's MIDAS method, as well as providing concrete practical trading applications. There were some delightful diversions as well, including a superb overview of how to mechanically apply the statistics in the CFTC Commitments of Traders report. It is a privilege to be sourced on some of the pages, as this book has earned its reference status."

— Bob English, Austrian Economist, Market Technician, and Trader

"The MIDAS curves can be used in any markets over any timeframe. They are flexible, robust, and powerful. Andrew Coles' and David Hawkins' work on the MIDAS curves is pure gold."

— Jayanthi Gopalakrishnan, Editor, Technical Analysis of STOCKS & COMMODITIES magazine

"In this extremely well-developed book, Hawkins and Coles have drawn together a number of ideas, their own and existing methods, in order to construct a concise and disciplined method of analysis and trading. I am particularly delighted to see the recognition of volume as a powerful and often neglected tool. This integration of methods should serve as a profitable tool for those who are willing to do the work to understand why markets move. A well-thought-out technical treatise that belongs in the library of any inquiring technician."

— Richard W. Arms, author, advisor to institutions, and developer of many tools such as The Arms Index and Equivolume charting

"I started using MIDAS from the time Paul Levine began publishing his articles in instalments. In the intervening years, I have made MIDAS my own. And I did think it was unlikely that Coles' and Hawkins' book would bring fresh insights. Boy was I wrong! This is an amazing book. Most books tend to be practical to the exclusion of the theory – theory that is so necessary if we are to adjust a tool when it 'stops working;' or tend to be so theoretical as to be impractical. MIDAS Technical Analysis straddles both worlds with ease. As a result, the book is both a reference work and a practical 'to do' volume. What I like most about Coles and Hawkins is they have taken Levine's original idea and conquered new realms with it: they have incorporated MIDAS with other technical tools so that the work should appeal to traders of many and varied disciplines. In my view, this is a must-have book and it shall certainly occupy a space in my shelves."

— Ray Barros, CEO, BarroMetrics Investments Inc

Table of Contents

  1. Cover Page
  2. Title page
  3. Copyright
  4. Dedication
  5. Contents
  6. Introduction
  7. Biographical Sketch, Paul H. Levine
  8. Acknowledgments
  9. PART I: Standard MIDAS Support and Resistance Curves
    1. CHAPTER 1: MIDAS and Its Core Constituents
      1. MIDAS and Its Two Key Backdrops: VWAP and Fractal Market Analysis
      2. The MIDAS Approach as a Genuine Standalone Trading System
      3. Summary
    2. CHAPTER 2: Applying Standard MIDAS Curves to the Investor Timeframes
      1. Definitions of Timeframes—The Triple Screen Trading Methodology
      2. MIDAS Curves within the Triple Screen System
      3. The Basic Behavior of the MIDAS Support/Resistance Curves
      4. Equivolume Charting
      5. What Price Should Be Used?
      6. Support/Resistance Becomes Resistance/Support
      7. Distinguishing an Uptrend from a Trading Range
      8. The Foothill Pattern
      9. A Trading Range Turning into a Downtrend
      10. Tracking a Trend with a Hierarchy of MIDAS Curves
      11. MIDAS S/R Curves for Entry Setups and Triggers
      12. Same Launch Point, Different Timeframes
      13. Special Start Points—The Left Side
      14. Special Start Points—The Initial Public Offering (IPO)
      15. Special Starting Points—The Down Gap and Its Dead Cat Bounce
      16. Special Starting Points—The Highest R and the Lowest S
      17. Summary
    3. CHAPTER 3: MIDAS Support and Resistance (S/R) Curves and Day Trading
      1. Multiple Trend and Timeframe Analysis
      2. Part One: The MIDAS System as a Standalone Day Trading System
      3. Part Two: Using the MIDAS System alongside Other Technical Indicators
      4. Capturing Today's High and Low with Standard MIDAS S/R Curves
      5. Summary
  10. PART II: The MIDAS Topfinder/Bottomfinder
    1. CHAPTER 4: The MIDAS Topfinder/Bottomfinder on Intraday Charts
      1. Levine's Two Insights Governing the MIDAS Methodology
      2. Part One: The Quantitative Features of the TB-F Algorithm
      3. Part Two: The Engineering Aspect of TB-F Curves
      4. Summary
    2. CHAPTER 5: Applying the Topfinder/Bottomfinder to the Investor Timeframes
      1. A Most Unusual Indicator
      2. The Basic Program of the TB-F
      3. What Is an Accelerated Trend?
      4. Discovering the Topfinder/Bottomfinder
      5. Using the TB-F
      6. An Interesting Mathematical Observation
      7. Fitting the TB-F Curve in Chart Views Other than Equivolume
      8. Fitting to More than One Pullback
      9. Nested TB-Fs: The Fractal Nature of the Market
      10. TB-F Curves on Different Timeframes
      11. Bottomfinders Are Sometimes Problematic
      12. What Comes after a TB-F Ends?
      13. Summary
  11. PART III: The Longer-Term Horizon, Other Volume Indicators, and Broader Perspectives
    1. CHAPTER 6: Applying MIDAS to Market Averages, ETFs, and Very Long-Term Timeframes
      1. Using MIDAS with the Indices—The S/R Curves
      2. The Validity of Volume Data
      3. Using MIDAS with the Indices—The TB-F
      4. Using Exchange-Traded Funds Instead of Market Indices
      5. MIDAS Applied to Long- and Very Long-Term Timeframes
      6. Back to 1871
      7. Inflation Adjustment
      8. A Closer Look at the Very Long-Term
      9. The Very Long-Term Horizontal S/R Levels
      10. The Bavarian Deer Herd
      11. What Can Be Said about the Very Long-Term Future?
      12. Summary
    2. CHAPTER 7: EquiVolume, Midas and Float Analysis
      1. The Basic Principle—“Volume Leads to Volume”
      2. Why Does Price Projection Work?
      3. The Connection between Price Projection and the Topfinder/Bottomfinder
      4. Using Price Projection
      5. Steve Woods's Float Analysis
      6. Volume Periodicity
      7. Summary
    3. CHAPTER 8: Putting It All Together
      1. Trend Following
      2. Calling Bottoms
      3. Base Breakouts
      4. Summary
  12. PART IV: New Departures
    1. CHAPTER 9: Standard and Calibrated Curves
      1. Discovering the Calibrated Curves
      2. Examples
      3. Summary
    2. CHAPTER 10: Applying the MIDAS Method to Price Charts without Volume
      1. MIDAS and Cash Foreign Exchange Markets
      2. A Comparison of the MIDAS S/R Curves Using Cash FX Intraday Tick Data and Intraday Futures Volume Data
      3. A Comparison of the MIDAS Topfinder/Bottomfinder Curves Using Cash FX Intraday Tick Data and Intraday Futures Volume Data
      4. Options in the Cash Foreign Exchange Markets for Higher Timeframe Charts
      5. Options One and Three—Replacing Cash Forex Markets with Futures Markets or Currency ETFs/ETNs
      6. Using MIDAS S/R Curves in Markets without Volume: The Daily and Weekly Cash FX Charts
      7. Using MIDAS Topfinder/Bottomfinder Curves in Markets without Volume: The Daily and Weekly Cash FX Charts
      8. Summary
    3. CHAPTER 11: Four Relationships between Price and Volume and Their Impact on the Plotting of MIDAS Curves
      1. Relationships between Price and Volume Trends and the Four Rules Affecting the Plotting of MIDAS Curves
      2. Applying the Rules to Applications of Standard and Nominal MIDAS S/R Curves
      3. Using Relative Strength or Ratio Analysis
      4. Summary
    4. CHAPTER 12: MIDAS and the CFTC Commitments of Traders Report
      1. An Overview of Open Interest and Open Interest Data Options
      2. The Orthodox Interpretation of Changes in Open Interest
      3. A First Look at Standard MIDAS Support/Resistance Curves with Open Interest
      4. Pursuing MIDAS and Open Interest More Deeply
      5. Concise Overview of the Commitment of Traders (COT) Report
      6. Understanding the Main Players in the Legacy Report
      7. Identifying the Key Players in the COT Report
      8. Choosing the Appropriate Category of Open Interest
      9. MIDAS and Total Open Interest
      10. Choosing between Commercial and Noncommercial Positioning Data
      11. Measuring the Market with Commercial Net Positioning Data
      12. MIDAS and COT Report Timing
      13. Comparing the Commercial Net Positioning Indicators with MIDAS using Noncommercial Net Positioning Data
      14. Additional Reading
      15. Summary
    5. CHAPTER 13: Price Porosity and Price Suspension
      1. Porosity and Suspension Illustrated
      2. Identifying the Cause of the Two Phenomena
      3. Solving the Problem of the Two Phenomena
      4. Summary
    6. CHAPTER 14: A MIDAS Displacement Channel for Congested Markets
      1. The Problem: Mean Reversion in Sideways Markets
      2. The Solution: Applying a Displacement Channel to Sideways Markets
      3. MIDAS Displacement Channel Methodology
      4. Trading Implications of the MDC
      5. Additional Forecasting Implications
      6. Additional Benefit: Applying the MDC to Trending Markets to Capture Swing Highs in Uptrends and Swing Lows in Downtrends
      7. Second Benefit: Applying the MDC to the Problem of Price Porosity
      8. Comparing the MDC with the Moving Average Envelope
      9. The MDC in Relation to Topfinder/Bottomfinder (TB-F) Curves
      10. The MDC in Relation to the MIDAS Standard Deviation Bands
      11. Features of the MDC in Relation to Other Boundary Indicators
      12. Summary
    7. CHAPTER 15: MIDAS and Standard Deviation Bands
      1. The MIDAS Standard Deviation Bands in Sideways Markets
      2. The MIDAS Standard Deviation Bands in Uptrends and Downtrends
      3. Band Adjustment for Shorter Timeframe Analysis
      4. The MSDBs and Narrowing Volatility
      5. Comparing the MSD with the MIDAS Displacement Channel
      6. Alternatives to Standard Deviation
      7. Trading with the MIDAS Standard Deviation Bands
      8. Summary
    8. CHAPTER 16: Nominal–On Balance Volume Curves (N-OBVs) and Volume–On Balance Curves (V-OBVs)
      1. On Balance Volume for the Uninitiated
      2. Nominal–On Balance Volume Curves
      3. The Dipper Setup
      4. Volume–On Balance Volume Curves
      5. Further Chart Illustrations
      6. Summary
    9. CHAPTER 17: Extensions, Insights, and New Departures in MIDAS Studies
      1. MIDAS Curves and Volume-Based Oscillators
      2. Correlation Analysis as an Effective Overbought/Oversold Oscillator
      3. The Contributions of Bob English
      4. Summary
  13. APPENDIX A: Programming the TB-F
    1. Moving Averages and the Starting Point Ambiguity
    2. The Need for Do Loops
    3. The So-Called Interpolation
  14. APPENDIX B: MetaStock Code for the Standard MIDAS S/R Curves
    1. Standard MIDAS S/R Curves for Daily and Higher Timeframe Charts *
    2. Standard MIDAS S/R Curves for Intraday Charts *
  15. APPENDIX C: TradeStation Code for the MIDAS Topfinder/Bottomfinder Curves
    1. TradeStation Implementation of Paul Levine's Topfinder/Bottomfinder (TBF)
  16. Notes
  17. About the Authors
  18. Index