In 2014, I spent about 6 months in a row with this unique traders tool called Market Internals, exploring its possibilities every single day, searching for new and creative implementation ideas for my own automated trading systems (ATSs). With a real obsession with this concept, I finally found almost 40 new ideas (mostly my own proprietary ideas) on how to squeeze the most out of this great tool, and slowly started implementing many of them into my own trading – with great success.

I truly believe that Market Internals can give a trader a small, unfair advantage – if thoroughly thought out and implemented well, especially in new, creative ways. Therefore, in this article, I would like to give you a very brief introduction into the Market Internals world, together with an example of one of my private Market Internals filters – to show you, how dramatic the impact of Market Internals deployment can be – in a favorable way.

Introduction: What are Market Internals (MI)

We all know how hard it is to find a new, viable trading edge. We are also aware that the scope of our possibilities is quite narrow: It doesn’t really matter what trading indicators or other tools of technical analysis we use – most of the time they all use the same source of data anyway. This data consists of Open, High, Low and Close values of the bars in our trading chart, and whatever trading indicator we use, we basically use only a slightly different interpretation of the same O-H-L-C values.

So, if we really want to go a step further and implement a broader view for our trading decisions (trading entry/exit conditions), we have to start investigating outside of the O-H-L-C values. We can, for example, implement information like Volume or Open Interest to our trading entry/exit conditions, which is not a bad idea at all, and many of my ATSs use O-H-L-C values together with Volume effectively.

However, we can still go a step further.

We can do something that many traders have no idea they can even do: We can start making our trading (entry/exit) decisions based not only on the data coming from the underlying market but also on taking into consideration the market (its overall direction, quality, strength and overall “mood”) as a whole!

Just imagine:

Wouldn’t it be fantastic to know where the stock market as a whole is heading, before we enter a position in our emini S&P strategy?

And that is exactly what Market Internals are about: The ability to read the market as a whole and effectively incorporate this much broader view into our trading decisions.

Market Internals: A quick introduction

So what exactly are Market Internals? Where do they come from?

It’s very simple: Market Internals are information about the overall stock market, provided by the stock exchanges (NYSE, AMEX), usually in the form of a standalone data feed.

And this data feed instantly provides us with real-time information about the overall stock market situation.

Using Market Internals we can immediately, in real-time, start receiving information like, for example:

How many stocks from the Dow Jones Index have just moved up and how many down?
Is the volume of all rising stocks from the Dow Jones index higher or lower than the volume of all falling ones?
Or even:

How do ALL stocks move in the entire NYSE? Are most of them rising or falling?
How many stocks have a price that hasn’t changed?
What is the direction of the majority of the volume? Up or down?
Do the 30 stocks in the Dow Jones index correspond with the rest of the market, or does the Dow Jones index now live its own life?
As you can see, there is plenty of information that can be obtained through this standalone data feed about the stock market as a whole (and later on, to be used in our strategies).

All this information can be split into several different categories, and every category has its own meaning and preferred method of implementation. However, because the space for this article is very limited, and the subject of Market Internals could give more than a dozen articles like this, I am going to focus only on one Market Internals category, one of my most favorite, the MI pair UVOL-DVOL.

Market Internals: UVOL-DVOL

This category of MI simply consists of two separate data feeds provided from the exchange:

$UVOL monitors the total volume of all rising stocks on the exchange.

$DVOL monitors the total volume of all falling stocks on the exchange.

By using these data feeds (often called MI indicators), we can monitor the volume on one side or the other, so we can get a better idea where the volume is moving to, i.e. which side is stronger. This is, of course, a very powerful view on the market that can provide us lots of important information (if we know how to use it).

From a practical means, we usually add two different data symbols into our chart (data2 and data3) to start using UVOL-DVOL pair for our trading.

Then we can start using these MI indicators as additional, or even leading filters (or as I usually call them – “Super Filters”) for our existing systems – with the goal to improve them significantly.

Let’s have a look at such a condition in practice. I am going to reveal one of my proprietary UVOL-DVOL MI conditions, which I use as a filter for many of my breakout index or stock strategies (MI can only be implemented on indexes or stocks of futures indexes).

UVOL-DVOL as a filter for significant improvement

To demonstrate the effect that Market Internals can have, I have decided to use the most simple condition that I could think of – a primitive breakout condition high=highest(h,N1). I haven’t done any optimization of the N1 parameter, nor have slippage and commission been included in the results shown below – the purpose of this article is not to present a functional breakout trading system but to demonstrate that Market Internals can be applied to even the most basic systems and get immediate, and very often dramatic, improvements. For the N1 parameter, I have used the first number that came to my mind, number 20.

Here is the basic code that I will use to demonstrate the impact of the Market Internals “Super Filter”. The test will be completed on the EMD.D market, 15 minute timeframe, from 3/22/2006 – 3/21/2016:

If high = highest(h,20) then buy this bar at close;

setstoploss(600);

setexitonclose;

Here are the results:

Net Profit: $79,440

Profit factor: 1.17

Avg. Trade: $36.52

Max Drawdown (close to close): $12,650

Net Profit / Max DD: 6.28

Number of trades: 2175

Now let’s move to the implementation of a very simple Market Internals condition that is based on the following rules:

Calculate the difference between UVOL and DVOL,
Calculate a 30 bar simple moving average of this difference,
If the UVOL-DVOL difference is above the moving average of the UVOL-DVOL difference AND high = highest(h,20), a Long position is opened,
The position is closed by the end of the day or when the 600 USD stop-loss is hit.
In a moment, I will show you the outcome of the application of this code to the original system. But first, I need to mention that I have used several small add-ons, like for example, taking into consideration the zero line of the UVOL-DVOL difference to cancel the “Super Filter” in certain situations – all of this is included in the code and the workspace that you can download at the end of this article. Yet the basic idea is exactly as I have described it – to work with the UVOL-DVOL difference and with the moving average of this difference.

Let’s take a look at the results after application of the Market Internals “Super filter”. First, the performance report:

Net Profit: $76,000

Profit factor: 1.38

Avg. Trade: $63.81

Max Drawdown (close to close): $7,790

Net Profit / Max DD: 9.76

Number of trades: 1191

And finally, the comparison table showing the results before and after the application of the Market Internals based “Super Filter”.

Metric / Before MI / After MI / Improvement

Net Profit / 79,440 / 76,000 / -4.3%

Profit Factor / 1.17 / 1.38 / +17.9%

Avg. Trade / 36.52 / 63.81 / +74.7%

Max DD (C-to-C) / 12,650 / 7,790 / -36.8%

Net Profit Max DD / 6.28 / 9.76 / +55.4%

Trades / 2175 / 1191 / -45.2%

I believe that the numbers speak for themselves – maximum drawdown has improved by almost 40% (36.8%), Average trade by +74.8%, and the Net Profit to Maximum DD ratio by +55.4%. All really great improvements, and I see similar improvements of Market Internals very often.

Conclusion

I have been using Market Internals for my own trading since 2014.

Here is what I have generally achieved by implementing them into my own trading strategies:

Reduce max. Drawdown
Improve Avg. Trade
Improve Net Profit / Max DD ratio
Smoother equity curve
Overall improvement of portfolio performance
Getting additional psychological confidence by knowing that I only trade in highly favorable market conditions.
I was really surprised that Market Internals are used by so few traders, yet, when I present them the Market Internals possibilities, they usually get quite excited and implement it to their own trading systems with instant positive impact.

With the constant bombardment of tweets, Facebook posts and e-mails a piece of advertising received in the mail is a refreshing change and grabs attention. Of course a standard letter simply will not make the mark – an attention-grabbing format is a must and a good start is to choose a direct mail idea that is sent out in a chunky envelope.

Our love of a good book has not diminished with the introduction of e-readers. We are still impressed and intrigued by a glossy cover and the fact that we can pick a book up and investigate further.

This is why direct mail is not dead – just like those books a well-designed and attention-grabbing direct mail piece will work for any advertising campaign and here is why:

A chunky board envelope or mailing wrap will rise to the top of the post tray, arouse curiosity as to what is inside and beg to be opened. That is just a starting point – you also need an entertaining and effective direct mailer inside the box to keep the interest.

A pop up product is a great way to impress and get your message across. All pop up products are sent out compressed into the chunky boxes and they spring free as soon as released. This action alone gains 100% attention. Soon becoming a talking point, a pop up product is shared with co-workers and colleagues beating any digital marketing format hands down.

Add a few pen holes to your direct mailer and you have a desk-top tool as well that will continue to broadcast your company details for a long time. Comparing that to an e-mail that is deleted in a second and never seen again it makes sense to invest in good direct mail campaigns.

Good graphic design is a must too to ensure that you get the best out of your mailing campaign, a printed calendar as part of your design gives your pop up product longevity too.

If a pop up does not appeal to you then there are other ideas – extending products, moving picture products and flicker styles – all chunky in design and taking interactivity and attention-grabbing to a different dimension.

Keeping hands busy is a great way to get your message across and choosing a direct mail format that will be picked up again and again and shared with others is just like that book in the store – tempting and inviting.

Opening up a direct mail piece spreads a little happiness too – often the surprise element of a posted piece is enough to get your company noticed.

YouTube is one of the most visited websites on the internet. Which means that if you are looking to promote yourself or your business, it is a great place to be active.

The other good news is that the production costs of good quality videos can be very low. Especially if you are creating information type videos, where you can create a presentation in Microsoft’s PowerPoint or Apple’s Keynote and convert them to video format.

So, let’s look at some of the major benefits:

1. Online Discovery

Getting found on the internet can be a major headache and expense. With YouTube, you can get discovered directly in the YouTube search engine, plus you can get discovered in Google’s web browser. And, for some products and services, it is easier to get a high search engine rank for a YouTube video, than it is for a website.

Plus, videos are very easy to share through other online mediums, such as social media, websites, blogs, mobile apps etc. All of which adds to your collective online discovery.

2. Connecting Directly with People

Video allows you to connect with people in a very direct and personal way. This is great for boosting your online relationships, which at times can be very impersonal in nature.

Building relationships is at the heart of effective online marketing. As it is through these relationships that trust and authority can be built. Which in time, translates into a higher probability of sales and being recommended.

3. Entertainment as Education

People love “how to” videos. If you can make some element of your videos entertaining as well as educational, then you’re onto a winner.

This is the kind of thing people keep coming back for time and again, and they readily share with their friends and colleagues.

4. Encourage People to Take Action

With the annotation feature on the YouTube video editor, you actively encourage people to participate. For instance, to give it a thumbs up or comment, or to click on an associate web link, or to share on social media.

5. YouTube Promotion

You can encourage YouTube to promote your videos for free, by using a common and unique hash-tag message in the description of all of you related videos. These will appear in the right-hand side of the screen, under recommended videos section.

6. YouTube Advertising

You can also use your videos as paid advertising on YouTube. At the time of writing, the cost of advertising on YouTube is significantly less than using standard Google AdWords. Yet, YouTube uses the same search network.

7. YouTube Channel Subscribers

You can create your own channels in YouTube which people can subscribe to. This allows you to build up a network of followers that get notified every time you publish a new video to that channel.

Many people have gone into network marketing as a way to earn a good income. You can earn an income in two ways. The first is by selling products directly to customers, the second is by earning a percentage of the sales made by people on your sales team. The second method requires you to recruit your own sales team and to train them properly. The more effective your sales team is, the higher your profit potential will be.

When you are looking for a network marketing program to join, make sure you look for a business that you are interested in promoting. You will need to be passionate about it because you will need to recruit and motivate your sales team to sell. You should market a product that you personally believe in because you have to convince your customers that they can benefit from it. If at all possible, buy the products and try them for yourself so you can draw upon personal experience.

Part of effective selling requires you to look for ways of getting the word out on the market about your products. You should design a website for your products that contains useful information about the advantages of the product. Describe what kinds of problems that your products can solve. Let your potential customers know how your product can help them. Provide details of any ingredients or specifications. Describe how the products are used. Be as informative as possible so your site visitors will know exactly what they are buying.

Another thing you can do is produce a product demonstration video, including a link to your product website where viewers can purchase your product. Often times, allowing customers to see the products in action will help them understand the product better. You can use videos to sell as well as recruit.

The same can be said about using social media to promote your products. In your social media accounts, talk about the products and ask for feedback and testimonials about the products. Immediately respond to any questions directed to you about the products. You can also use social media to recruit your sales force. Direct your viewers back to your website for any additional information they might be looking for.

Do not forget your friends and family in your recruiting efforts. You can get them together at your home and do a recruitment presentation. Do not get too discouraged if not many people show interest. It is often hard for someone to make a decision on the spot about a business commitment. Just do the best you can in describing your program and the potential benefits that come with it.

Make an effort to stay in communication with your sales team. Offer your recruits any help they need in sales promotion and marketing. If they need sales training, look for training options for them. Hold team meetings over the web so your sales force can discuss any problems and issues they may experience. Keep in mind, the more they sell, the more you make.

It is important that you take care of your network of sales people in order to maximize your profit potential. Be proactive with your sales team so they will feel like you are there to support them. This will increase profits for everybody.