Archive for August 2012

Calculating the T Theory Daily Volume Oscillator

August 11, 2012

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Calculation of the T Theory Daily Volume Oscillator

One alternate method  is a chart of the oscillator, which may be found on chart #20.8, which is found near the bottom of page 2 of MY CHARTS.  This is a reasonably accurate chart of the oscillator.

The data for the oscillator is from the following website.

http://www.mcoscillator.com/Data.html

On the right side is an .xls file that calculates Terry’s oscillator, column Q is the T-Theory © oscillator

Using McClellan’s data is easier, but it isn’t as accurate due to the source of the data.  Terry relied exclusively on the WSJ’s closing data.

The following is only part of the spreadsheet but the volume oscillator is the column in bold print (McC, UV-DV, OSC).  This is the “Q” column in the spreadsheet.

McClellan Volume Oscillator
NYSE 10% 5% McC McC VOL UV-DV FOR UV-DV FOR
UV-DV TREND TREND UV-DV SUMMATION OSC UNCH’D OSC TO 0
(x 1000) UV-DV UV-DV OSC INDEX TOMORROW TOMORROW

And the third method is to calculate the oscillator as told by Terry Laundry. 

To calculate the progression of the blue Volume Oscillator as depicted in my daily chart above you  need to recalculate the  18 day and 36 day Volume oscillator values  that are noted in the chart for each successive day beyond this chart’s history.  The formulas used are very simple because they are based on exponential moving averages and use recursive equations that are easy to implement in any spreadsheet software package.  Click on the chart PDF image for a  view of the daily August 28 2009 volume oscillator indicators at the top of the chart.

I am providing  these examples of daily calculations  in the daily chart which you can use to check your own calculations or restart the process. I won’t have time to answer specific questions but of course I will make any corrections and listen to suggestions on improvements.  If you have an arithmetic problem, it should be easy to find someone that understand the simple math involved.  Using a simple spreadsheet is best; it is easy to set up, fast to use, and makes the arithmetic  error free.

Super trader Marty  Schwartz who used this oscillator for some decades claims that one is better prepared to use the day to day pattern for finding bottoms or  tops if you plot the oscillator values by hand on real graph paper. Watching the pattern for tops and bottoms evolve from one day to the next gives one better perspective  on how this volume oscillator tends to anticipate changes in price trends.  The computer generated chart is helpful, but he claims the day to day plot helps to get the better feel for it’s leading characteristics.

Each day after the market close you will need to obtain the net on balance  volume data for the NY Exchange. This can be obtained anywhere but is conveniently available on the web in a market summary section. The data is almost always in a Market Diaries section. See this recommended page

Markets Diary: Closing Snapshot – Markets Data Center – WSJ.com

Be sure you  find the number of millions of share traded on the advancing stocks (called the Up volume) and  the number of millions of share traded on the Declining stocks ( called the Down Volume) . These numbers will typically run in the range of 300 to 1200. The Up Volume minus the Down Volume = the net volume for the day (in millions of shares) is the only day’s number needed to complete the calculation. The number should be positive on an up day, negative on a down day and tends to vary in the range of  plus  900 to minus 900.

But to keep the  final number in a better range  for plotting by hand on graph paper, I take this raw net volume and divide it by 10. So this Reduced Net Volume Change  figure is the value  we actually use in the calculation. When charted the volume oscillator generally falls in the 100 plus or minus range which more convenient for plotting.

The Calculation of the next day’s 18 Day Volume Oscillator  is simply a modification of the prior day’s value of the 18 Day Volume Oscillator using the new day’s Reduced  Net Volume number:

Today’s 18 Day Volume Oscillator = 90% of Yesterdays 18 Day Volume Oscillator +1 times Today’s Reduced Net Volume.

Today’s 36 Day Volume Oscillator = 95% of Yesterday’s 36 Day Volume Oscillator 0.5 times Today’s Reduced Net Volume.

To Illustrate the calculation I will discuss how the next days Volume Oscillator value would be calculated from the  August 28 2009 data in the chart.

For August 28 2009 the chart notes the  18 Day VO= 259.8 and the 36 Day VO= 227.9. The blue Volume Oscillator we really want is always  equal to 18 Day VO -36 Day VO,  that is (259.8-227.9)  = +31.8 according to the chart but should be 31.9 according to readings. The discrepancy is just a round off error in the chart’s  print process.

Monday August 31 saw the Up Volume was 273 million shares, and the Down Volume was = 1094  million shares; the  Net Volume for Monday would be 273-1094= -821 and the Reduced Net Volume  therefore would be plus -82 (-82.1 more precisely but not necessary).

The August 31 18 Day Volume Oscillator is always = 90% of Yesterdays 18 Day Volume Oscillator (259.8) +1 time Todays Net Volume (-84).

So = 259.8 times 0.9 (which is 233.8) + (-82) times 1 (which is -82)= 233.8 + -82 which equals 137 for the 18 Day Volume Oscillator

The August 31 Day Volume Oscillator always  = 95% of Yesterdays 36 Day Volume Oscillator  +0.5 times Todays Net Volume .

So  227.9 times .95 (which is 216.5) + -84 times 0.5 (which is 41) =216.5-41 which equals 175 for the 36 Day Volume Oscillator

So for August 31 this sample calculation, the final  Volume Oscillator calculation would be Today’s 18 Day VO – Todays 36 Day VO, that is  137-175= -37 .

For Sept 1 up volume=90 mill  Down vol =1533   Net =-1443; Net Reduced=-144

18 day vo=136(151 times 0.9)-144= -8;  36 day vo= 166 (175 times 0.95)-72( -144 times 0.5)=94;  VO=  -8-94= -102

will continue these daily calcs  this week here.

Terry Laundry

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All Rights Reserved By The T Theory® Foundation ©

Many thanks to Paula Burke for permission to re-post Terry’s old T Theory® explanations.  The period while Terry was blogging on TypePad was amongst his best work.  TypePad is the source of the above material.