For long I wanted to code a Market Internals based signalling system for Scalping, just didn’t have time. Thanks to the lock-down, I spent some time on the system and brought it to life.
The system operates on a very simple logic,
If the # of stocks above (VWAP + 1 SD) (Standard Deviation) in the universe (NIFTY 50 or Top 25) is greater than the number of stocks below (VWAP - 1 SD) go long, if the reverse happens go short.
As you all know its more about getting your bias right, so that you don’t take some probabilistic-ally stupid trades.
So here is a snapshot.
If you see below you get two different colored arrows, light green and dark green, likewise for reds, Dark green has been configured for the the top 25 stocks, and light green for the balance, that way I get to know which segment of the index is turning bullish or bearish. as you can see in the image below, in the morning it was the lesser weightage stocks that turned bullish first and then the heavy weights joined, but the reverse was true when the index fell mid day.
8th April’20 - NIFTY Futs
Working on refining the system more, earlier I used to set it on 1min TF but that gave several false signals, so move to 3 minutes now, lets see how this works.