©2006 Kase and Company, Inc.

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Knowledge Base
Using Time Bars vs. Volume Bars
Kase recommends the use of tick volume bars over time bars because the removal of time from trading generally lowers risk and will cause technical indicators to be volume weighted. First, by removing time from the charts, risk is decreased because the amount to lose per bar is relative to the average change in price from tick to tick rather than the average change in price from one minute to the next.

Second, by volume weighting the indicators by using time bars, two things are accomplished. One, traditionally lightly traded sessions, such as overnight trading, do not get a disproportionate amount of influence on the indicators. Next, suppose there is a high volatility rally in a fifteen minute span, then a fifteen minute chart will only have one bar; however, on tick volume charts, because volume increased, there is the potential to have as many bars as are warranted for the move. This will give the indicators time to generate exit indications, and for momentum indications, they will be able to reflect the fact that momentum is potentially becoming overbought or oversold.
Price of StatWare
Current Corporate Pricing: http://www.kaseco.com/products_services/schedule.htm Current Private Trader: http://www.kasestatware.com/statware/pricing.htm
Building Custom Indicators off Kase Functions
For charting packages which have the functionality that allows users to program their own indicators, certain Kase functions are exposed and explained in order for advanced traders to program alternate indicators off of the Kase algorithms. Please see the specific manual for your charting package to see if your charting package has that functionality.
Why StatWare is not a Black Box
The Kase System is not a black box. The indications generated by StatWare are mostly straightforward; however, there are different discretionary decisions that a trader may have to make. An example of this is time frame, for choppy market periods, traders generally trade lighter volumes and/or trade lower time frames. When a trader wants to switch time frames is dependant on the several factors that are the trader's discretion. Another reason why the Kase system is not a black box is because the signals are visually interpreted which means that a trader must be looking at the chart in order to execute a trade.
Types of Data StatWare Works On
Because StatWare is a technical indicator based on statistics, StatWare works on any time frame, and on any instrument, either commodity, stock or equity. Under most circumstances, the default input settings do not need to be changed.
Controlling Risk
Often when trading, controlling risk is a huge part of trade execution. Here are several ways that risk is controlled using the Kase system. First, when setting up charts, a trader actually sets up two charts. The shorter bar length chart is used for entry, and the longer bar length chart is for exiting. This allows a trader to enter quickly while still guarding against whipsaw trades. For more information on Longs and Shorts Visit http://www.kasestatware.com/statware/KEES_Entry.htm

Second, included in the Kase system is an indicator that suggests where to place a stop order based on the average true range of bars as a substitute for volatility. This means that stop orders are at statistically significant levels that do not allow too much risk while minimizing the chance of getting stopped out prematurely. See the section on DevStops (Link to DevStops) for more information.

Third, when taking a trial of StatWare, Kase offers two phone lessons, which cover the Kase Methodology on Trading. (See Current Pricing List for Cost) In this methodology, we offer several tips on how a trader can better manage their risk by picking appropriate time frames and following the exit and entry strategies that we have developed. These are covered in depth in our manual, which is available upon commencement of a trial.
Trading Time Frames
Kase recommends that you trade on a chart that generates five to eight bars per day. For example, if the stock or commodity trades for 100 minutes a day, then a chart with 14 to 20 minutes would be acceptable. If you are using tick volume bars, then you would use the number of ticks per day divided by 8 to get an appropriate chart. Usually we suggest using Fibonacci numbers because they often better reflect market activity. For instruments with volumes greater than 8000 ticks per day, tick volume bars are generally not used.

The chart Kase recommends must be balanced against a trader's personal trading style and the amount of risk that the trader can afford. For this reason, it is common to use charts that are a longer or shorter bar length than what Kase suggests because it may not be commensurate with the goals of the company or the trader.
Using the KaseCD
The KaseCD is a highly accurate momentum indicator, and it is derived from the KeesPO. It generates a histogram of momentum, which has two types of exit indications. The first exit indication is divergence, which is a very strong exit indication and has been shown to be more than 80% accurate in back testing. The indicator also gives overbought and oversold indications, or KaseCDPeaks. These exit indications, although not as accurate as divergence, have also been found to catch a substantial amount of market turns.
The Purple Bars on the Histogram
The KaseCD has bars, which are purple from time to time. When the histogram turns purple, it has entered a statistically high period of momentum. Therefore, a market turn is highly eminent. Once the indicator makes a peak with a matching price peak, an exit signal is generated. At this point, "KaseCD" will be put on to the chart to indicate a KaseCDPeak. This exit signal is indicative of over bought and sold conditions. (Please note that some charting packages do not support text, and therefore, this signal must be watched for manually.).
The Red Dots on the Histogram
These dots indicate peaks in the histogram. They have no other significance except to aid traders to visually find peaks and make spotting divergence easier.
The Warning Line
The red dotted line is the warning line. The warning line is used to indicate where the average true range of the market is. This also gives the trader an idea of when the market is getting close to the stops, and therefore, the trader should be more astute.
DevStop 1
DevStop 1 is the first significant DevStop level. A stop order should be placed at this stop after a warning signal has been generated. Therefore, if a trader sees divergence on an indicator, then the trader should exit part of the trade and move the stop in closer to DevStop 1. This allows a trader to preserve the majority of the gains on the trade because there is no sense in allowing DevStop 3, the furthest stop, to be hit if the trader knows that a market turn is eminent.
DevStop 2
DevStop 2 is rarely used. It is not as preferable as DevStop 3 because DevStop 2 has a higher probability of being hit by random market activity. Sometimes it is used under choppy market conditions in order for a trader to preserve more gains while trying to trade a treacherous period. It is depicted on the graph as the second level of blue dots. They are usually a darker blue, but this can vary with charting packages.
DevStop 3
DevStop 3 is where a stop order is most often placed. This level is usually where your stop order is from the beginning of a trade until warning signals are generated. Upon receive an indication the market is going to turn, a trader would exit partially and move the stop order into DevStop 1. It is far enough away from the market to prevent being hit on random moves while still being close enough in to preserve as much gains as possible. Remember, the DevStops are placed by the market in terms of the volatility of that market. If DevStop 3 has too much loss associated with it, consider trading a lower time frame or a different instrument. This is indicated on the chart as the darkest and largest blue dots that are furthest away from the market.
Displaying the DevStops
The DevStops flip periodically to try and show the stops relative to either a long position or a short position. The frequency of this flipping is controlled by two moving averages built into the indicators. The inputs for the periods of these moving averages are L2 and L3. These are defaulted to 10 and 21, but these values have no intrinsic importance. If you find that the stops are flipping too frequently, try alternate values. Lower values or values closer together will generally cause the indicators to flip more frequently. Larger values and values further apart will generally cause the DevStops to flip less frequently. Sometimes, it helps to simply switch L2 to the L3 value and vice versa. This action will cause the DevStops to flip no matter what the market conditions.
Using Two Charts to Trade
When using any entry system, Kase recommends using two charts to trade. The first chart is a longer bar chart and should be five - eight bars per day. This chart is usually referred to as the monitor chart. This chart should also be adjusted up or down depending on your trading style and risk appetite. This monitor chart is used to exit trades and is the chart a trader primarily uses. The second chart should be 1/3 as long as the higher time frame chart. This chart is usually referred to as the timing chart. This chart is primary used to enter the market.

Once a valid second entry signal is generated on the timing chart, a trade is entered. While watching for exits on the timing chart, a trader watches for an entry signal on the higher time frame. If the monitor chart generates a valid entry indication, then the trader no longer watches for exits on the lower time frame and now watches for exits on the higher time frame. This process of "rolling" to the higher time frame is a way to get into trades quickly without incurring a lot of extra risk on whipsaw trades.
Valid Entry Signal
When looking at the KeesLong and KeesShort indicator, a valid entry signal is generated when an "L" or "S" is placed on the chart. In some versions of the indicators, a 1, 2, or 3 is placed on the chart. These signals are all equivalent. Generally, we recommend entering on second signals from a lower time frame. (Please note that some charting packages do not support text, and therefore, these signals will appear differently, which is covered in he manual for those respective packages.).
Waiting for Second Signals
When entering a trade from a lower time frame, Kase recommends waiting for second signals. Second signals are taken off the lower time frame, or timing chart, to ensure that the trend has a substantial degree of strength. Then, this trade is moved up to the higher time frame, or normal monitor chart, when it gets its first signal. This allows a trader to enter a trade very rapidly without substantially incurring more exposure to whipsaw trades.
1st, 2nd, and 3rd class signals
The Kase Easy Entry System (KEES) differentiates between three different types of entries. They are called 1st, 2nd, and 3rd class signals. First and foremost, all entry indications are equal. A 1st class signal, indicated by a "1" on the chart, is an equivalent entry indication to a "2" on the chart. The same applies to 3rd class signals, indicated by a "3" on the chart, with respect to either of the other two indications. This is exemplified by the fact that in later systems, the 1's, 2's and 3's have been replaced with simply an "L" or "S" on the chart for long or short.

As far differences, the KEES system looks at two traditional indicators and two proprietary indicators. If more indicators are giving permission to enter a trade is offset by requiring fewer bars in the direction of the trend. For example, the 1st class signal is when a trade is permission by both the Kase proprietary indicators and one of the traditional indicators; therefore, it only requires one bar before generating an entry indication. However, a second class signal, which is less strongly permissioned, requires two bars in the direction of the trend in order to generate an entry. Finally, three third class bars, bars that are only mildly permissioned to enter a trade, are required to generate an entry signal.
Entry Signal Colors
The colors in the KEES system indicate if a bar is permissioned long or short and if the bar is permissioned as a 1st, 2nd, or 3rd class entry. The colors vary with which charting package they are generated on. However, generally speaking, the blue shaded bars represent bars permissioned long, and bars that are shades of red or purple are permissioned short. Furthermore, there is one color that the bar is a 1st class bar, and therefore, the 1st class entry rules have been satisfied. This color is generally a more standard shade of blue or red for long or short. There are darker shades to indicate 2nd and 3rd class entries.
Using KasePivot
The KasePivot is an indicator, which locates minor and major swing tops and bottoms based on traditional definitions of swing size. The indicator enables a trader to quickly identify these swing tops and bottoms in order to perform various technical tasks. The indicator is included in the StatWare package to facilitate various aspects of technical trading. The indicator can be used to identify trends, where trend is defined as a market that is making higher high and higher low swings for up trends, or lower highs and lower low swings for down trends. The indicator can also be used to simplify doing swing counts or utilizing Elliot Wave Theory for forecasting. A final use for the indicator is to place stops at old minor swing lows. Though this method is not as superior as using the Kase DevStops, it is mentioned here for informational purposes.
Using the Kase Peak Oscillator
The Kase Peak Oscillator is a highly accurate momentum indicator. It generates a histogram of momentum, which has two types of exit indications. The first exit indication is divergence, which is a very strong exit indication and has been shown to be more than 80% accurate in back testing. The indicator also gives overbought and oversold indications or PeakOuts. These exit indications, although not as accurate as divergence, have also been found to catch a substantial amount of market turns.
The Blue and Red Line on the Histogram
The blue and red line on the Kase Peak Oscillator reflects overbought and oversold levels. The red line is the PeakMax line, and it is the greater of the value 100 and two standard deviations beyond the mean of momentum. The blue line is the PeakMin line, and it is the lesser of the value 100 and two standard deviations of momentum. When the momentum histogram goes beyond either the red or blue line, it has entered a statistically high period of momentum. Therefore, a market turn is highly eminent. Once the indicator makes a peak with a matching price peak, an exit signal is generated. If the market is beyond the PeakMin line, then a PeakLocal (PL) signal is indicated. If the market is beyond the PeakMax line, then a PeakGlobal (PG) signal is generated. (Please note that some charting packages do not support text, and therefore, these signals must be watched for manually.) These exit signals are indicative of over bought and sold conditions.
The Purple Bars on the Histogram
The KaseCD has bars, which are purple from time to time. When the histogram turns purple, it has entered a statistically high period of momentum. Therefore, a market turn is highly eminent. Once the indicator makes a peak with a matching price peak, an exit signal is generated. At this point, "KaseCD" will be put on to the chart to indicate a KaseCDPeak. This exit signal is indicative of over bought and sold conditions. (Please note that some charting packages do not support text, and therefore, this signal must be watched for manually.)
Using the Candlestick Indicators
Candlestick indicators are not generally used for intraday trading. They are more commonly used for position holding, trading on day charts or higher time frames. Candlestick indications are often associated with market turns; however, there are many candlestick patterns that do not occur with a market turn. Therefore, they are helpful, but cannot be relied upon. They are an indication to the trader to watch for a market turn, but action on candlestick patterns is uncommon solely on the pattern itself.
CandleStick Filter
The Kase candlestick indicators have be adjusted to point out only the candlestick patterns which are most likely to be associated with a market turn. Therefore, there is a tolerance setting in the indicators, which indicate the level a standard stochastic must be at in order for the indicator to flag that there is a candlestick. This setting is usually 75.