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Using the Baltic dry index as a trading tool for directional market confirmation.

 

Is it possible to use the Baltic dry index to help my trading?..............Yes it is, read on please

The Baltic Dry Index (BDI) is a number issued daily by the London based Baltic Exchange. Not restricted to Baltic sea countries, the index tracks worldwide international shipping prices of various dry bulk cargoes.

The index provides "an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a timecharter and voyage basis, the index covers carriers carrying a range of commodities including Iron ore grains, coal etc

Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers.. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets following the vital laws of supply and demand,

The supply of cargo ships is generally both tight and inelastic— it takes two years to build a new ship, and ships are too expensive to take out of circulation the way airlines park unneeded jets in the Arizona desert. So marginal increases in demand can push the index higher quickly, and marginal demand decreases can cause the index to fall rapidly. e.g. "if you have 100 ships competing for 99 cargoes, rates go down, whereas if you've 99 ships competing for 100 cargoes, rates go up. In other words, small fleet changes and logistical matters can crash rates...The index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials and metallic ores.

Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods such as steel and food, the index is also seen as an efficient economic indicator of future economic growth and production.

The BDI is termed a leading economic indicator because it predicts future economic activity.

Because it provides "an assessment of the price of moving the major raw materials by sea," according to The Baltic, "... it provides both a rare window into the highly opaque and diffuse shipping market and an accurate barometer of the volume of global trade -- devoid of political and other agenda concerns.

Another index, the Harpex, focuses on containers freight. It provides an insight on the transport of a much wider base of commercial goods than commodities alone.

Other leading economic indicators — which serve as the foundation of important political and economic decisions - are often massaged to serve narrow interests, and subjected to adjustments or revisions. Payroll or employment numbers are often estimates; consumer confidence appears to measure nothing more than sentiment, often with no link to actual consumer behaviour; gross national product figures are consistently revised, and so forth. Unlike stock and bond markets, the BDI "is totally devoid of speculative content," says Howard Simons, an economist and columnist . "People don't book freighters unless they have cargo to move."

The Baltic Dry Index below on January 11th 2016 takes out a 15 year low

Baltic Dry Index Jan11th 2016

Impact of the 2008 financial crisis

On 20 May 2008 the index reached its record high level since its introduction in 1985, reaching 11,793 points. Half a year later, on 5 December 2008, the index had dropped by 94%, to 663 points, the lowest since 1986,  though by 4 February 2009 it had recovered a little lost ground, back to 1,316. These low rates moved dangerously close to the combined operating costs of vessels, fuel, and crews, which meant that operators were running virtually without a profit, but instead were just meeting costs for fuel and wages.

By the end of 2008, shipping times had been already increased by reduced speeds to save fuel consumption, but lack of credit meant the reduction of letters of credit, historically required to load cargoes for departure at ports. Debt load of future ship construction was also a problem for shipping companies, with several major bankruptcies and implications for shipyards.

This, combined with the collapsing price of raw commodities created a perfect storm for the world's marine commerce.

When one compares the BDI chart with a chart of the SP500 or FTSE 100, the future indications provided by the BDI show how deadly effective it is as a trading tool. Furthermore when an rally occurs in the indices which is not showing on the BDI, this can represent a wonderful opportunity to get a short trade on the indices.

 

The beauty of the Baltic Dry index is that nobody can manipulate the data, as it is not traded like a stock of market, it is merely a pure measurement of economic activity.

 

What can traders do to incorporate the Baltic dry index into their trading systems so that it can be more profitable?

 

  • This can be plotting a trend following model such as Mach-Trend or Precision lagless average on the index to confirm signals.

  • The use of data 1 and data 2 in Tradestation can use the BDI trend signals to generate trades for your preferred instruments.

  • Wait patiently for the correct conditions that suit your system before placing trades.

 

 

Systems, Indicators and user functions for Tradestation and Multicharts and NinjaTrader ( See product guide )

 

This collection of user functions and indicators below have been carefully assembled to provide a versatile tool kit for the advanced trader.

None of the items below have lots of flashing lights, bells or buttons as you find in the "Holy grail" type worthless advertisements, and all have been carefully chosen because they actually work as trading tools.

 

Some have been coded by myself while others are the work of some of the best technicians worldwide.

I have re-coded most of these into Easy language format. (ELA, ELS)

 

There are some free items here which you can try out by sending me a mail and specifying which ones you wish to try out. Of course if you require something that is not here I would be very pleased to hear from you.

 

If you need any indicator, functions or systems coded into Easy Language, Metastock, vb.NET or C# format, then feel free request it.

 

                                                                      Request FREE indicators or ask a question

 

Please sample my free products before buying so you can assess that my programming is reliable, stable and accurate in its execution. Roger

© Roger Medcalf 2005 - 2010 ... You may not reprint text or images without permission

Compatible with....

Indicator

Volume flow indicator (VFI)

Designed by Markos Katsanos this oscillator has many excellent qualities. Useful as a trend confirmation indicator, an overbought oversold oscillator, divergences between the price and the VFI are usually very reliable

VFI gets the vote of confidence from Precision trading systems as being a "must have" tool in the discerning traders kit

Please click below to see some more detailed examples of charts with the VFI plotted...More details and examples

 

FREE   Stocks, Futures, Bonds, Forex (needs volume to run)

 

 

Author: Markos Katsanos. (Open EL code)

Compatible with....          Indicator + function

Demand Index

An excellent oscillator that is versatile in its applications, computing its values from price and volume. It can be used as a divergence indicator and a trend following indicator. I have added a smoothing length feature to suit the needs of the individual user.

I find this indicator very useful for observing intra-day price action in actively traded stocks and futures...........More details and examples

FREE  Stocks, Futures, Bonds, Forex, Indices etc

Author: James Sibbet. ( Open EL code )

 

Compatible with....         Indicator + function

Precision Lagless Average

A Lagless moving average with no overshoot that outperforms all other known industry standard moving averages. Comes with features including length changing algorithms and an anti-reverse option to minimise over trading in congestion areas, the result of 9 weeks intensive and complex coding after someone told me that the Hull average was better than the Jurikes JMA. In one session I was able to improve on the Hull average, but it took me a lot longer to improve on the Jurik JMA offering.......More details and examples

 

Price $297 (Pay-Pal)  Buy this item

Stocks, Futures, Bonds, Forex, Indices etc

 

Author: Precision Trading Systems. (Protected EL code)

 

Compatible with....    Indicator + function + signal

Precision Stop

Trend following system and indicator that self adjusts its distance to suit noise levels and volatility factors, making it more "intelligent" than Parabolic SAR, or ATR type indicators.

Can be adjusted to suit any time frame from day-trading to long term trend following by adjusting MULTI settings, features include a neat max and min percentage distance setting to cater for individual tastes.

Takes the guess work out of knowing when the trend is up or down, based on your own input values.......More details and example videos

 

Price $125 (Pay-Pal)   Buy this item

Stocks, Futures, Bonds, Forex, Indices etc

 

Author: Precision Trading Systems. (Protected EL code)

Compatible with....          Indicator + function                                     Insync Index

A "consensus" oscillator that highlights trend turning points, computing its values from an array of standard oscillators such as RSI Stochastic and Money Flow index.

It is best applied to range bound markets rather than trending ones.

 

I have added a REALVOLUME true-false feature  for users who use both tick volume and trade volume..........More details and examples

 

FREE     

Stocks, Futures (Unsuitable for Forex)

 

Author: Norm North. ( Open EL code )

Compatible with....           Indicator + function                       Precision divergence finder

A complex piece of code that observes multiple look backs of Demand Index lengths to hunt out when divergences exist.

Often produces stunning signals at exact market bottoms.

This is not an "always in the market" indicator and only flags up when sets up occur that show a real divergence in a market.

As Demand Index uses volume, to perform at its best this indicator needs real volume enabled..............More details and examples

 

Price $167  (Pay-Pal)   Buy this item

Stocks, Futures, Bonds  (Unsuitable for Forex)

 

 

Author: Precision Trading Systems. (Protected EL code)

Compatible with....              Indicator + function                     Trade Volume Index  ( TVI )

Beautiful piece of work by Steve B Achelis, which I used in some of my early systems. Makes for a smooth analysis of volumes flowing in and out of markets and has always been one of my favourites.

I have altered the code to allow length changes and smoothing.

.

Adds the "Volume dimension" to your price analysis in a clear and precise manner. This indicator is a valuable addition to system filters to confirm trend direction...........More

 

FREE

Stocks, Futures, Bonds, Forex, Indices etc

 

Author: Steve B Achelis. ( Protected EL code)

Compatible with....              Indicator + function                                    Q-Stick

A Simple and yet very efficient way of defining if a trend is in a bull or bear phase. Probably the best piece of work that Chande ever turned out, and yet seemingly forgotten by the whole world.

Setting lengths to 80 or more makes for a smooth analysis of trend, and the crossing of zero indicates trend direction.

 

See how early it signalled a bear move in the example when it crossed zero. Can be used as an short term oscillator with lengths less than 10 and often gives very early signals...More

 

FREE  

Stocks, Futures, Bonds, Forex, Indices etc

 

Author: Tushar Chande. ( Protected EL code)

Compatible with....                Indicator + function Precision Volume (Tick volume for real-time )

An indicator I made for measuring demand-supply imbalances.

This indicator will only work correctly if used on real time data with tick volume enabled.

 

Early warning indicator ( Requires confirmation )

An oscillator type indicator which measures demand and supply imbalances in an easily understood form

 

Above zero = Demand > Supply over sampling period

 

New indicator highs or lows over a chosen long length of (100 bars+) often foretell a strong move is coming..........More

 

FREE     

Stocks, Futures, non-traded Indices (Unsuitable for Forex)

 

Author: Precision Trading Systems. (Protected EL code)

Compatible with....           Indicator + function           Precision Index Oscillator ( Pi-Osc )

 

Highly sophisticated "consensus" indicator comprised of many different component signals. A real technicians tool that measures everything from divergences to probabilities to unique chart patterns in a single market indicator. 

Best results are given when analysing range bound and choppy markets rather than trending ones.

 

Some of its components use real volume so for this to perform at its best this indicator needs real volume............More

 

Price $397  (Pay-Pal)   Buy this item

Stocks, Futures, Bonds  

 

Author: Precision Trading Systems. (Protected EL code)

Compatible with....

 Indicator + function

Precision Mach-Trend

Designed to reduce whipsaw trades in trending periods and help the user reduce costly F expenses.

Mach-Trend is superbly simple to use, and is suitable for all ranges of traders. Calculated using advanced mathematics, this indicator will reduce your F and improve your overall performance. Mach-Trend pro has adjustable price and length, and Mach-Trend Platinum has fully available parameters enabling advanced optimisations for the sophisticated user.

 

Coming soon....more information

Stocks, Futures, Bonds, Forex, Indices

 

Author: Precision Trading Systems. (Protected EL code)

 

Compatible with....           Indicator + function                              Precision Gravity System

 

A complex piece of code that observes multiple phases of planetary orbits, to calculate extreme points of price sets. The relative gravity of the "sun" and "moon" are calculated using advanced physics mathematics.

The first system of its kind to be introduced to stock market trading systems, its is still under developments.........more

 

 

Coming soon

 

Stocks, Futures, Bonds  (Unsuitable for Forex)

 

Author: Precision Trading Systems. (Protected EL code)

Compatible with....           Indicator + function

  Money flow index MFI

 

Highly effective volume indicator showing money flowing in and out of securities. Works well as an over bought oversold oscillator and can be used for divergences as well. Ranging between 0 to 100 the MFI crossing above or below 50 can be used to identify a bullish or bearish condition of a trend changing even.....More details and examples

 

FREE

Stocks, Futures, Bonds, Forex, Indices

 

Author: Unknown. (Open EL code)

     

 

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