Ludi (gladiatorial event) could go on for days or even weeks with different gladiators competing every day.  Arena conditions changed daily as the competitions progressed.  Gladiators adjusted their movement to take advantage of the softer areas turned up from earlier bouts or look for firmer ground for stable footing.  As a result, the angle of attack could vary from day to day. 

The market arena also changes daily as competition between buyers and sellers churns the price points up and down into peaks and valleys as sellers seek softer prices and buyers look for firmer support.  The general direction of trading is represented by a calculated line (regression line) which seeks to fit the best straight line between the daily peaks and valleys of the price points with the line “fitted” to the angle or slope necessary to maintain that best fit.  “Beta” here refers to the slope of the regression line and that slope changes daily as prices move closer or further from the median price calculated for previous sessions. 

Divergence occurs when the slope of the trend line turns away from the direction of the most current prices.  Divergences can be bullish or bearish.  Bullish divergences occur when the price action reflects lower lows while the indicator (Beta Divergence in this case) is showing higher lows.  Likewise, bearish divergence is when the price is seeing higher highs but the indicator is showing lower highs.  Beta Divergence Rank organizes the Divergence Signals into three bullish and three bearish groups.  Bullish Divergence ranks are groups 1,2 and 3 with 1 being the strongest bullish divergence signal and 3 being the weakest.  Bearish Divergence ranks are groups 4, 5 and 6 with 4 being the strongest bearish divergence signal and 6 being the weakest. 

As a Lanista (owner and trainer) you would be responsible for the medical care of your gladiators and you would want the best care for them that you could get.  It is not unlikely that you would negotiate a contract with a medical professional at an agreed upon “retainer” for the right to obtain emergency care at a contracted rate for when it was needed.  This would be a prudent investment based on future expectations.

In trading, stock options are an investment avenue based on future expectations. They are basically the purchase of contracts for the right to trade (buy or sell) stocks within a given contract period at an agreed upon price but with no obligation to execute the trade.  Options are generally purchased with the expectation that the price will move in a direction favorable to your negotiated position.

There are many different strategies for investing in options but they require a good understanding of the process.

The market arena is widely unpredictable. There are so many factors that can affect the overall battlefield as well as the individual competitors. As a gladiator it is helpful to know the rank of stocks relative to other stocks based on various measures.

Deciles are a means of evaluating stocks based on various criteria relative to other stocks. Deciles are used to segregate stocks into ten relatively evenly distributed groups with those having the highest scores of the measured value in decile one and those having the lowest scores of the measured value in decile ten.

Chartacus provides multiple decile ratings of stocks so that you the gladiator can take measure in different ways based on the strategy and tactics you intend to employ.

As a market gladiator, you watch for specific patterns of behavior in order to apply successful tactics to gain advantage. Divergences are those occasions when generally consistent patterns change. They could be minor volatility or they could indicate a change in trading pattern.

Just as price action follows a pattern of peaks and valleys in a generally upward or downward trend, so do other measures such as momentum and volatility. In normal trading activity these other indicators follow a pattern that is similar to that of the price movement. When the pattern of one diverges from the other it could be an indicator of change in direction.

Divergences can be bullish or bearish. Bullish divergences occur when the price action reflects lower lows while the indicator is showing higher lows. Likewise, bearish divergence is when the price is seeing higher highs but the indicator is showing lower highs.

It is important to recognize that while indicators are a tool for spotting changes in price direction but as their name suggests, they are only indicators. They are useful but not definitive.

Gladiators learn by following the Prime Palus (master gladiators) and learning from their numerous experiences and even serving at their side.  There is safety in numbers and following in the steps of the more experienced is a common strategy.

In the market arena the tactic is to ride with market experts who invest in stocks within their domain of expertise.  ETF stocks are trading entities that similar to mutual funds, are themselves a basket of stocks.  ETF funds may follow specific industries, sectors or even investment strategies.

Unlike mutual funds that trade at the end of the market day, ETFs trade all throughout the session.  As a result, their price fluctuates throughout the day.  Generally, they are less volatile than individual stocks.

 

Gladiators are always aware of their proximity to any boundaries in the arena and use different strategies to advance and engage depending on the direction of the activity.

As a market gladiator you must pay attention to the proximity of a stock price to its technical boundaries. If you’re a buyer you will want to advance from low to high, buying shares first at a low price and then selling them at a high price.  If you are a short seller you will want to pull back from high to low, selling at a high price shares you haven’t purchased with expectation they will decrease in price where you will buy them and replace those you’ve sold at a lower price than you sold them.

Generally, stocks follow a trend of peaks and valleys but within an overall direction that is to some degree either upward or downward trending. As they proceed along that trend there is a statistical line (regression line) that can be drawn through those peaks and valleys representing the median price among them. A statistical parallel line of high prices forms the top or high band and a statistical parallel line of low prices forms the bottom or low band of a channel.

The regression line is based on “best fit”, which means the best line you could draw through the prices that would yield the lowest total errors from those prices.  The channels (parallel lines around the regression line) are calculated at some multiple (usually 2 times) of the average error (average variation) found with all prices around that line.  High Channel is two times the error “above” the regression line and Low Channel is two times the error below the regression line.

When the trend is down, many traders like to use the High Channel area to enter into Short Sale trades.  Sellers look for stocks that are at or near the high band of their channel anticipating their direction will turn down once it bounces off of the high channel.   This filter allows you to specify a range representing the percent proximity to the high channel to be included.  When the trend is up, many traders use the Low Channel to enter into Buy trades.  An example of this can be found in our Rudis III of the Colosseum Collection where we select stocks that have a price within plus/minus 1 percent (-.01 to .01) of their low channel.

 

Munera is an overall gladiatorial event which could last days or even months depending on the number of participants.  In a small event the entry or exit of any single gladiator is apparent and can change the value to participants.  In a large Munera there are generally enough participants that the entry or exit of any one is relatively unnoticed and would have little impact on the value to those remaining.  As a market gladiator you want to maneuver in and out of the fray without impacting the price at which you are buying or selling.

Liquidity is generally the ability of an asset to be converted to cash and for stocks this more commonly refers to the ability of a stock to be bought without significant impact to the price.  Higher liquidity reflects a greater amount of value trading in the stock and the likelihood of any individual investor affecting the stock price is relatively low.  Lower liquidity stock with lower value trading the stock can be more directly affected with individual trades.

Liquidity decile organizes stocks into 10 relatively equally distributed groups based on their trading liquidity relative to that of other stocks. Decile 1 are highest liquidity stocks that have a lower chance of price changing with more buying. This provides traders more stable entry and exit points.  Decile 10 are the lowest liquidity stocks with a higher chance of price changing from more trading resulting in unpredictable entry and exit points.

It is always good to understand the tactical movement relative to a strategic advance. Tactical movements are based on a shorter period and can therefore happen quicker than the longer term strategic moves. MACD is an indicator that generally tracks the short term (9 day) moving average against a more strategic average of the difference between 12 day and 26 day averages. When the two are moving in a relatively similar pattern, the trading is generally on a consistent trajectory. When the one crosses the other, we may see a change in direction.

MACD is an unusual indicator to understand. It is plotted as two moving average lines. The first line is referred to as the MACD line and is calculated by plotting the difference between the 26 day and 12 day moving averages. The second line is called the signal line and is calculated as a 9 day exponential moving average of the first line.

MACD Divergence

When the MACD line crosses below the signal line, MACD is indicating a potential bearish signal. When the MACD line crosses above the signal line, MACD is indicating a potential bullish signal.  MACD Divergence occurs when MACD line disagrees with price.  Bullish Divergence occurs when the MACD experiences higher lows while the prices they follow experience lower lows, while Bearish Divergence occurs when the MACD experiences lower highs as prices experience higher highs.

MACD Divergence organizes the Divergence Signals into three bullish and three bearish groups.  Bullish Divergence ranks are groups 1,2 and 3 with 1 being the strongest bullish divergence signal and 3 being the weakest.  Bearish Divergence ranks are groups 4, 5 and 6 with 4 being the strongest bearish divergence signal and 6 being the weakest.

MACD Histogram

The MACD Histogram visually represents the distance between the MACD line and the MACD Signal line within a bar chart to quickly see how close the MACD line is to crossing over the MACD signal line.  The MACD Histogram is generally color coded to indicate which direction the current MACD line is relative to the Signal line.

MACD Histogram Divergence organizes the Divergence Signals into three bullish and three bearish groups.  Bullish Divergence ranks are groups 1,2 and 3 with 1 being the strongest bullish divergence signal and 3 being the weakest.  Bearish Divergence ranks are groups 4, 5 and 6 with 4 being the strongest bearish divergence signal and 6 being the weakest.

Little is actually known about the set of rules by which gladiators fought, but a competitive match was generally expected by enthusiastic crowds filling coliseum seats.  Fate of the loser was determined by the Munerarius (giver of the games) who appealed to the mood of the crowd to determine their fate.  Those who performed competitively and met expectations of the crowd were often spared.

In the market arena the mood of the crowd (traders) is reflected in the performance of a stock relative to other stocks.  Some stocks perform consistent with expectations, with traders buying and selling closely aligned to market trends.  Other stocks do not.  Market Beta measures stock price volatility (deviation from its median price) relative to market trends.  Those stocks that perform most closely aligned to market trends have a low market beta near 1.0.  Those that deviate from market trends have a market beta greater than 1.0. 

Market Beta Decile organizes stocks into 10 relatively evenly distributed groups based on their Market Beta.  Decile 10 are those stocks with price movement generally least in line with market changes.  Decile 1 are those stocks with price movement most aligned with market conditions. Higher market beta usually means more price volatility relative to the market generally.  Higher market beta may have greater return potential but also higher risk as that wide volatility could be in the wrong direction.

In some arenas the flags will hang limp and unmoving.  In others, they will be unfurled and blowing toward one direction or other. With the wind at your back, you advance with greater speed.  Momentum is the wind at your back.  It is that energy of motion associated with a direction of movement that once moving becomes less likely to stop.  In the market arena momentum measures the speed of a price movement over a period of time and is generally an indicator of trend strength.  The trend is likely to continue its course with greater momentum, and increased potential for change with reduced momentum. 

Momentum Divergence

In some arenas the flags will hang limp and unmoving.  In others, they will be unfurled and blowing toward one direction or other. With the wind at your back, you advance with greater speed.  Experienced gladiators know their odds of victory increase when they keep the winds of momentum at their backs.  It is that energy of motion associated with a direction of movement that once moving becomes less likely to stop.  In the market arena momentum measures the speed of a price movement over a period of time and is generally an indicator of trend strength in one direction or the other.  The trend is likely to continue its course with greater momentum, and increased potential for change with reduced momentum. 

Momentum Divergence organizes the Divergence Signals into three bullish and three bearish groups.  Bullish Divergence ranks are groups 1,2 and 3 with 1 being the strongest bullish divergence signal and 3 being the weakest.  Bearish Divergence ranks are groups 4, 5 and 6 with 4 being the strongest bearish divergence signal and 6 being the weakest. 

Momentum Decile

Momentum decile organizes stocks into 10 groups based on the momentum of their trading relative to other stocks.  Decile 10 are stocks with lower momentum and require greater time to measure outcome.  Decile 1 are those with higher momentum and more timely trading action.

It is said that Gladiators were the sport heroes of Ancient Rome.  You can imagine that crowds attending the gladiatorial events knew the fight record of their favorite performers.  If every day you calculated the average of wins and losses for some number of days like 5 days for this  example, and then plotted those daily values on a chart you would have created a simple 5 day moving average of the gladiator performance.

Simple Moving Averages

For stocks, moving averages of their stock price represents their performance over time and are plotted on varying periods including 10,20,50,100 and 200 days.  Each represents a different period of time with shorter periods being more responsive to price changes and longer periods reacting more slowly.  The short term and long term general direction of price movement is represented by these moving averages.  Change in direction will first be seen in the price moving away from the longer period averages that don’t respond to short term changes as quickly.  If the change in direction continues it will eventually be seen in the shorter term averages as they follow the new trend.

Exponential Moving Averages

Unlike regular moving averages, Exponential Moving Averages are calculated with greater weight given to more current points, which makes this moving average more responsive to price changes.  Like Simple Moving Averages, each of the exponential averages represents a different period of time with shorter periods being more responsive to price changes and longer periods reacting more slowly.

Moving Averages Filter

Moving averages are used by trend traders who like to buy uptrends after prices dip to or below the moving averages or sell downtrends after prices rise above or at the moving average.  This filter allows you to select stocks based on the percent proximity their price is to a specified moving average.  You can select one or more moving average period and specify a closer proximity to include those that are generally conforming to their average.  Or you can specify a higher range to see which ones are currently apart from their averages.

Advancing through the ranks is slow and challenging as the gladiator competes in a limited number of contests. They know who left scars and who walked away with them.  They probably kept a mental count of Ludi (gladiatorial games) appearances as well as that of their opponents, a kind of running net tally of wins and losses to know who was on a roll and who was faltering.  In the market arena those ‘appearances’ are the volume of trades for a stock and the On Balance Volume Indicator is the running tally.  Volume from winning days (buying days where the stock price closed above its previous session) are added to the OBV and volume from losing days (selling days where the stock price closed lower than its previous session) is subtracted from the OBV leaving a cumulative measure of price direction.

Like most indicators, OBV follows a pattern that under normal trading is generally consistent with that of the stock price, moving up as the price increases and down when the price retreats.  Divergence occurs when the pattern of the OBV line moves away or in a different direction or magnitude than the price line.  ‘Price follows volume’ is a common expression that conveys the expectation that changes in trading patterns are first seen in the change in volume.  When the price is on an upward trend and OBV diverges to a downward trend (prices reach a higher high but indicator is at a lower high) then the volume of selling has overtaken the volume of buying and could mean the price will also be turning down in coming sessions.  When the price is on a downward trend and OBV diverges to an upward trend then the volume of buying has overtaken the volume of selling and could mean the price will also be turning up in coming sessions.

Traders use OBV to detect potential changes in price trend when the OBV diverges from it. Both price and OBV trending in the same direction is a good indicator the trend will continue. Traders watch for a divergence between price and OBV that may signal a change in direction.

OBV keeps a running tally of volume based on the two trading actions of buying and selling with buying considered bullish and selling considered bearish.  Bullish volume (those days where the price closed above its previous session) is added to the OBV and bearish volume (those days where the price closed below its previous session) is subtracted from the OBV.  OBV Divergence ranks stocks into Bullish and Bearish groups with three levels of divergence strength in each group.  Bullish Divergence will be represented by level 1 thru 3, with 1 being the strongest and 3 the weakest.  Bearish Divergence is represented by levels 4 thru 6, with 4 being the strongest and 6 being weakest.

It is likely that many of the nobles in the seats of the arena held bets on the outcome of competitions.  The fame and popularity of gladiators generally carried with it an expectation of performance relative to the performance of their opponents.  There surely “odds on” favorites and likely those wagers among nobles were relative to those expectations of performance.  Wager on a lesser performing participant carried with it greater risk, even with any deference to the odds of chance.

Price Decile is one of many different measures that can be used to compare relative stock value.  Price is the assumed value of a stock that buyers are willing to pay and sellers are willing to offer at any given time.  On Chartacus, Price Decile is the only advanced filter that also includes stocks from the OTCBB.

Price Decile organizes stocks into 10 relatively equal groups based on their stock price. Deciles are numbered 1 to 10 with those in decile 10 being lowest value stocks and those in decile 1 being highest value stocks.

This filter is useful when trying to find stocks of a certain value that may be the ready to move up or fall down to the next level (ie. if you’re looking for the next “BIG” stock you wouldn’t be looking at those that have already reached the highest values).

The filter is also useful for matching price value to your risk tolerance. It is important to recognize that those with lower prices generally come with greater risk. They can move quickly in either direction on smaller price changes because even a small price move represents a large percentage change in overall value for lower priced stocks.

Every battle is a series of advances and retreats with each participant expending energy on the attack and conserving energy when stepping back.  A continuous series of attacks may drive your opponent back but risk over-extending resources such that you are eventually driven back and defeated.  In the market arena, those advances and retreats are the peaks and valleys of daily trading.  Relative Strength is another momentum indicator that follows the rate of gains (peaks) compared to rate of losses (valley) over a period (generally 14 sessions) and normalized into a bounded metric 0-100.  RSI of 0 indicates prices consistently moved lower over the period with no gains. Conversely, RSI of 100 means prices consistently moved up for the period with no losses.  These are the extremes. 

RSI Divergence

While useful as a measure of price sentiment or momentum, RSI is also used to spot overbought or oversold conditions. RSI above 70 is considered overbought meaning buyers have controlled the trading and driven the price to a level that exceeds what is generally understood to be the stocks fair value.  RSI below 30 is considered oversold meaning sellers have controlled the trading and driven the price to a level below what is generally considered its fair value.  Many traders watch for overbought or oversold conditions to find stocks that might turn back toward what is generally accepted as its fair value.  When the RSI diverges from the direction of the stock price, such a reversal may be coming.  If the stock is in an extended trend direction that turn may not occur until later if at all.

Chartacus considers a divergence to be that condition where an indicator diverges from the stock price.  There are multiple classes of divergence based on the relationship between the indicator and stock price compared to their prior session values.  Class A divergences are considered the strongest.  A positive Class A divergence occurs when the stock low price is lower than the low of the prior session (trending down) but the indicator has is higher than the previous session (trending up).  Class A negative divergence occurs when the stock high price is higher than the high price of the previous session (trending up) but the indicator has a lower high than it did in the prior session (trending down).  In both cases the price movement is not confirmed by the movement of the indicator which suggests a weakening and potential reversal in trend direction.  Filter for Bullish Divergence by selecting 1 (strongest), 2, or 3 and for Bearish Divergence use 4 (strongest), 5, & 6. 

RSI Decile

This filter organizes stocks into 6 relatively evenly distributed groups based on their RSI. Those with highest RSI are in group 1 and those with lowest RSI in group 6. Use this filter to select stocks based on their overbought/oversold conditions or to select stocks based on the sentiment of their trading activity.

In combat the wrong move can result in retreat or defeat.  The gladiator must recognize the direction of engagement in order to defend or advance at the right times.  Moving into an advancing opponent may be more costly than settling on a defensive position.  Taking a defensive stance when the opponent is pulling back may result in missing an opportunity to advance.  Similarly knowing the direction of a price trend is important to the market gladiator.  Entering a buy trade in a downward trend would be more difficult to realize a gain.  Entering a sell trade in an upward trend could mean settling for less than where the stock price is going. 

As noted in High and Low Channel, stocks generally follow a trend of peaks and valleys but within an overall direction that is to some degree either upward or downward trending.  This trending direction is the Slope.  An upward trending slope generally means the stock price is reaching higher highs and higher lows compared with prior sessions, continuing the upward price movement in subsequent trading sessions.  A downward trending slope generally means the stock price is hitting lower highs and lower lows than prior sessions resulting in a downward price movement over a period of trading sessions.  The successful market gladiator will use slope when trading strategy relies on trend direction.

Chartacus slope is based on prices trends over the last 90-day calendar days.

If you were among the crowd attending a gladiatorial event you would likely have a favorite gladiator and know their fight record.  Using our example from Simple and Extended Moving Averages, if you were to calculate the average of wins and losses on a regular basis and then plot that on a chart you would have a moving average of the gladiator performance.  Crowd size would of course be a factor in the gladiatorial performance with enthusiasm of larger crowds providing greater support to their favorite performers and noisy resistance to those less appealing.

Like Simple and Extended Moving Averages, Volume Weighted Average represents stock price performance over time and are plotted on varying periods including 50 and 100 days.  Each represents a different period of time with the shorter period being more responsive to price changes and longer period reacting more slowly.  Unlike Simple and Extended Moving Averages, the Volume Weighted Average factors in the enthusiasm of the crowd being the volume of shares traded over the averaged period of time.  Volume is seen by many traders as an indicator of the strength of a change with higher volume seen as more confirmation of that change and lower volume having less credibility as a confirmation of change.

Volume Weighted Moving Average uses both price and volume to establish an average based on the two values over a period of time.  Change in direction will first be seen in the price moving away from the longer period averages that don’t respond to short term changes as quickly.  If the change in direction continues it will eventually be seen in the shorter term averages as they follow the new trend.  As with Simple and Extended Moving Averages, Volume Weighted Averages are used by trend traders who like to buy uptrends after prices dip to or below the moving averages or sell downtrends after prices rise above or at the moving average.

This filter allows you to select stocks based on the percent proximity of their price to a specified Volume Weighted Moving Average(s).

Gladiators develop a battle stance that defines their basic combat posture.  But in the arena a gladiator will use a wide range of tactics from wild and unpredictable jolts to more controlled and deliberate swagger, emanating from that battle stance.  The wide swinging Gladius (long gladiator sword) can be a quick end of an opponent while a more narrowly confined chop from the blade may require greater patience.  The successful gladiator must also recognize when these tactics are being used by their opponent and respond appropriately.

Volatility is generally a measure of how far a stock price moves away from its median price, its battle stance.  A stock with large price swings away from the median price is considered highly volatile and unpredictable. A stock with price that remains relatively close to the median is considered less volatile and more stable.

Wider swings can result in quick large gains or losses (depending on direction) in shorter time. Smaller swings in price offer greater stability but typically require greater patience as they take longer for price to move in either direction.

Volatility Decile organizes stocks into 10 relatively equal groups based on the volatility of their price movement.  Decile 10 contains stocks with lowest volatility. Decile 1 contains stocks with highest volatility. Select which volatility sets you want to include.

Gladiators advance based on their successes and popularity measured by their winnings and the size of their audiences.  The Spectacula (seats) are full when interest in the gladiator is high and less so when the Ludi (contest) features lesser figures.  Audience interest may be nasty resistance or glorious support.

Buyers and sellers comprise the market audience and their interest in a stock is measured by its price and volume of trading activity.  Volume is a measure of how many shares have traded over some period of time.  When trading you want to make sure a stock has enough interest that you can enter and exit when you decide to do so.  Very low volume stocks may not provide as timely an exit as desired. High volume stocks with greater interest provide greater opportunity for entry and exit.

Volume Decile organizes stocks into 10 relatively equal groups based on the volume of their trading activity. Low volume stocks are decile 10 and high volume stocks are decile 1.

Used in combination with other filters such as Price Decile for example, Volume Decile could be used to isolate stocks with higher activity than might be typical of stocks in their general value.

During competition an opponent may fake an attack with a couple steps then switch direction for the real advance.  A skilled gladiator learns to give a nod to the fake and defend the attack.  A false advance is generally a step or two in one direction while a true threat is generally confirmed by multiple steps in the attacking direction.  The commitment of an advance is measured by the number of steps in a given direction. In similar fashion, R-Squared (R2) is a measure of commitment of a given price direction. 

R-squared

If you’ve been studying this Ludus you will recognize something we’ve repeated a number of times is that stocks generally follow a trend of peaks and valleys within an overall direction that is to some degree either upward or downward trending. As they proceed along that trend there is a statistical line (regression line) that can be drawn through those peaks and valleys representing the median price among them. The regression line is based on “best fit”, which means the best line you could draw through the prices that would yield the lowest total errors from those prices.  The channels (parallel lines around the regression line) are calculated at some multiple (usually 2 times) of the average error (average variation) found with all prices around that line.  High Channel is two times the error “above” the regression line and Low Channel is two times the error below the regression line.  R-squared is a metric that measures how consistently prices follow the regression line.

R-squared values (or R2) range from 0 to 1.0, where 0 means the price fails to fall on the line and 1.0 means the prices are always on that straight line.  A perfectly trending stock is closer to the 1.0 value and therefore has high predictability.  You can predict the next price in the line or at least very close to it.  R2 of 0.0 means the line and its direction have zero predictability of price direction.  It is often the case that 0.0 or very low R2 values means the stock is moving laterally (sideways-neither up or down), consolidating, or transitioning to the next trend.  Any value .70 or higher means the current trend is strong and your odds of being profitable on a directional trade consistent with the direction of the current trend line is high.  You can use this filter to limit stocks based on their adherence to their current trend line.  An example where this filter is used is Rudis III of the Colosseum Collection.

R70 Consecutive Counts

Higher R-squared values (R2) mean greater consistency and predictability of the regression trend line.  Values of .70 or higher indicate a strong trend with greater probability of continuing.  This filter limits stocks to a selected number of consecutive sessions with R2 at or above .70.  The more consecutive counts mean greater consistency of the existing trend.  Use this filter to limit stocks to those with a count of R2 at or greater than .70 for a select number of sessions for a potentially consistent trend in line with your trading strategy.

R90 Consecutive Counts

As previously noted, higher R-squared values (R2) mean greater consistency and predictability of the regression trend line.  Values at .70 or above indicative of a strong trend with greater probability of continuing.  But very high (.90 or greater) R2 values could mean the trend is nearly perfect and those conditions rarely hold long for stocks that have good liquidity.  As a result, an R2 value at  .90 or above could mean the trend will correct itself (i.e. change course). 

R2 Divergence Rank

R2 Divergence occurs when prices achieve higher highs but the R-Squared (R2) metric does not indicating, that the current price move may be more related to a fast ascension but less related to the consistency of the trend and suggesting a pullback is imminent.  Likewise, if prices achieve lower lows but R2 achieve higher lows, then the price trend may be well outside of the actual trend line seen for the last 90-days again suggesting a pullback into the more consistent trend.

R2 Divergence Rank organizes the Divergence Signals into three bullish and three bearish groups.  Bullish Divergence ranks are groups 1,2 and 3 with 1 being the strongest bullish divergence signal and 3 being the weakest.  Bearish Divergence ranks are groups 4, 5 and 6 with 4 being the strongest bearish divergence signal and 6 being the weakest.

You can imagine that a Lanista (gladiator owner and trainer) would keep a watchful eye on the progress of his trainees making note of any change in performance over a period of time looking for any advancement or decline of skills from prior levels. He would be able to recognize when the outcome of a training session indicated one trainee had improved or another had regressed.  He would likely schedule their appearances based on that assessment of their rate of change.

Rate of change is also used in the market arena to measure the current price compared to a prior price (12 sessions earlier in this case) and identify any divergence of the current from the prior.  Generally speaking, when the ROC is above zero prices are rising and when below zero prices are going lower.  Like other divergence indicators, the ROC plots a pattern similar to that of the price.  Divergence occurs when the ROC pattern changes direction and magnitude from the price pattern.

ROC 12 Divergence organizes the Divergence Signals into three bullish and three bearish groups.  Bullish Divergence ranks are groups 1,2 and 3 with 1 being the strongest bullish divergence signal and 3 being the weakest.  Bearish Divergence ranks are groups 4, 5 and 6 with 4 being the strongest bearish divergence signal and 6 being the weakest.