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

Introduction xiii
Andrew Coles

Biographical Sketch, Paul H. Levine xix
David G. Hawkins

Acknowledgments xxi

Part I: Standard Midas Support and Resistance Curves

Chapter 1 MIDAS and Its Core Constituents: The Volume Weighted Average Price (VWAP) and Fractal Market Analysis 3
Andrew Coles

MIDAS and Its Two Key Backdrops: VWAP and Fractal Market Analysis 4

The MIDAS Approach as a Genuine Standalone Trading System 20

Summary 26

Chapter 2 Applying Standard MIDAS Curves to the Investor Timeframes 29
David G. Hawkins

Definitions of Timeframes—The Triple Screen Trading Methodology 29

MIDAS Curves within the Triple Screen System 31

The Basic Behavior of the MIDAS Support/Resistance Curves 31

Equivolume Charting 32

What Price Should Be Used? 35

Support/Resistance Becomes Resistance/Support 35

Distinguishing an Uptrend from a Trading Range 39

The Foothill Pattern 40

A Trading Range Turning into a Downtrend 41

Tracking a Trend with a Hierarchy of MIDAS Curves 43

MIDAS S/R Curves for Entry Setups and Triggers 46

Same Launch Point, Different Timeframes 48

Special Start Points—The Left Side 50

Special Start Points—The Initial Public Offering (IPO) 53

Special Starting Points—The Down Gap and Its Dead Cat Bounce 55

Special Starting Points—The Highest R and the Lowest S 57

Summary 59

Chapter 3 MIDAS Support and Resistance (S/R) Curves and Day Trading 61
Andrew Coles

Multiple Trend and Timeframe Analysis 62

Part One: The MIDAS System as a Standalone Day Trading System 68

Part Two: Using the MIDAS System alongside Other Technical Indicators 82

Capturing Today’s High and Low with Standard MIDAS S/R Curves 119

Summary 120

Part II: The Midas Topfinder/Bottomfinder

Chapter 4 The MIDAS Topfinder/Bottomfinder on Intraday Charts 125
Andrew Coles

Levine’s Two Insights Governing the MIDAS Methodology 126

Part One: The Quantitative Features of the TB-F Algorithm 126

Part Two: The Engineering Aspect of TB-F Curves 135

Summary 159

Chapter 5 Applying the Topfinder/Bottomfinder to the Investor Timeframes 161
David G. Hawkins

A Most Unusual Indicator 161

The Basic Program of the TB-F 162

What is an Accelerated Trend? 162

Discovering the Topfinder/Bottomfinder 163

Using the TB-F 165

An Interesting Mathematical Observation 166

Fitting the TB-F Curve in Chart Views Other than Equivolume 167

Fitting to More than One Pullback 170

Nested TB-Fs: The Fractal Nature of the Market 178

TB-F Curves on Different Timeframes 180

Bottomfinders Are Sometimes Problematic 185

What Comes after a TB-F Ends? 187

Summary 188

Part III: The Longer-Term Horizon, Other Volume Indicators, and Broader Perspectives

Chapter 6 Applying MIDAS to Market Averages, ETFs, and Very Long-Term Timeframes 193
David G. Hawkins

Using MIDAS with the Indices—The S/R Curves 195

The Validity of Volume Data 198

Using MIDAS with the Indices—The TB-F 201

Using Exchange-Traded Funds Instead of Market Indices 202

MIDAS Applied to Long- and Very Long-Term Timeframes 205

Back to 1871 209

Inflation Adjustment 209

A Closer Look at the Very Long-Term 211

The Very Long-Term Horizontal S/R Levels 213

The Bavarian Deer Herd 214

What Can Be Said about the Very Long-Term Future? 215

Summary 218

Chapter 7 EquiVolume, MIDAS and Float Analysis 219
David G. Hawkins

The Basic Principle—“Volume Leads to Volume” 219

Why Does Price Projection Work? 221

The Connection between Price Projection and the Topfinder/Bottomfinder 223

Using Price Projection 224

Steve Woods’ Float Analysis 227

Volume Periodicity 230

Summary 237

Chapter 8 Putting It All Together 239
David G. Hawkins

Trend Following 239

Calling Bottoms 249

Base Breakouts 251

Summary 254

Part IV: New Departures

Chapter 9 Standard and Calibrated Curves 257
David G. Hawkins

Discovering the Calibrated Curves 257

Examples 258

Summary 267

Chapter 10 Applying the MIDAS Method to Price Charts without Volume: A Study in the Cash Foreign Exchange Markets 269
Andrew Coles

MIDAS and Cash Foreign Exchange Markets 269

A Comparison of the MIDAS S/R Curves Using Cash FX Intraday Tick Data and Intraday Futures Volume Data 270

A Comparison of the MIDAS Topfinder/Bottomfinder Curves Using Cash FX

Intraday Tick Data and Intraday Futures Volume Data 273

Options in the Cash Foreign Exchange Markets for Higher Timeframe Charts 275

Options 1 and 3—Replacing Cash Forex Markets with Futures Markets or Currency ETFs/ETNs 276

Using MIDAS S/R Curves in Markets without Volume: The Daily and Weekly Cash FX Charts 277

Using MIDAS Topfinder/ Bottomfinder Curves in Markets without Volume: The Daily and Weekly Cash FX Charts 280

Summary 283

Chapter 11 Four Relationships between Price and Volume and Their Impact on the Plotting of MIDAS Curves 285
Andrew Coles

Relationships between Price and Volume Trends and the Four Rules Affecting the Plotting of MIDAS Curves 286

Applying the Rules to Applications of Standard and Nominal MIDAS S/R Curves 290

Using Relative Strength or Ratio Analysis 294

Summary 296

Chapter 12 MIDAS and the CFTC Commitments of Traders Report: Using MIDAS with Open Interest Data 297
Andrew Coles

An Overview of Open Interest and Open Interest Data Options 298

The Orthodox Interpretation of Changes in Open Interest 299

A First Look at Standard MIDAS Support/Resistance Curves with Open Interest 300

Pursuing MIDAS and Open Interest More Deeply 302

Concise Overview of the Commitment of Traders (COT) Report 302

Understanding the Main Players in the Legacy Report 303

Identifying the Key Players in the COT Report 304

Choosing the Appropriate Category of Open Interest 307

MIDAS and Total Open Interest 308

Choosing between Commercial and Noncommercial Positioning Data 312

Measuring the Market with Commercial Net Positioning Data 315

MIDAS and COT Report Timing 318

Comparing the Commercial Net Positioning Indicators with MIDAS using Noncommercial Net Positioning Data 319

Additional Reading 327

Summary 328

Chapter 13 Price Porosity and Price Suspension: The Causes of these Phenomena and Several Partial Solutions 331
Andrew Coles

Porosity and Suspension Illustrated 332

Identifying the Cause of the Two Phenomena 333

Solving the Problem of the Two Phenomena 334

Summary 342

Chapter 14 A MIDAS Displacement Channel for Congested Markets 345
Andrew Coles

The Problem: Mean Reversion in Sideways Markets 346

The Solution: Applying a Displacement Channel to Sideways Markets 348

MIDAS Displacement Channel Methodology 349

Trading Implications of the MDC 349

Additional Forecasting Implications 349

Additional Benefit: Applying the MDC to Trending Markets to Capture Swing Highs in Uptrends and Swing Lows in Downtrends 350

Second Benefit: Applying the MDC to the Problem of Price Porosity 353

Comparing the MDC with the Moving Average Envelope 355

The MDC in Relation to Topfinder/Bottomfinder (TB-F) Curves 356

The MDC in Relation to the MIDAS Standard Deviation Bands 356

Features of the MDC in Relation to other Boundary Indicators 356

Summary 357

Chapter 15 MIDAS and Standard Deviation Bands 359
Andrew Coles

The MIDAS Standard Deviation Bands in Sideways Markets 360

The MIDAS Standard Deviation Bands in Uptrends and Downtrends 361

Band Adjustment for Shorter Timeframe Analysis 363

The MSDBs and Narrowing Volatility 363

Comparing the MSD with the MIDAS Displacement Channel 364

Alternatives to Standard Deviation 365

Trading with the MIDAS Standard Deviation Bands 368

Summary 370

Chapter 16 Nominal–On Balance Volume Curves (N-OBVs) and Volume–On Balance Curves (V-OBVs) 371
Andrew Coles

On Balance Volume for the Uninitiated 371

Nominal–On Balance Volume Curves 373

The Dipper Setup 377

Volume–On Balance Volume Curves 377

Further Chart Illustrations 378

Summary 381

Chapter 17 Extensions, Insights, and New Departures in MIDAS Studies 383
Andrew Coles

MIDAS Curves and Volume-Based Oscillators 384

Correlation Analysis as an Effective Overbought/Oversold Oscillator 389

The Contributions of Bob English 391

Summary 400

Appendix A Programming the TB-F 403
David G. Hawkins

Appendix B MetaStock Code for the Standard MIDAS S/R Curves 411
Andrew Coles

Appendix C TradeStation Code for the MIDAS Topfinder/Bottomfinder Curves 413
Bob English

Notes 417

About the Authors 433

Index 435