Trading tools: Lefort Indicators
Eric Lefort is a French trader and author of trading books. He is part of the team that runs a French active investor website and gives training seminars and presentations. Many of his tools are popular with active investors in France.
The Lefort indicators are not a trading strategy. They are tools for different purposes which can be combined and which can serve for trading all instruments (stocks, market indices, forex, commodities… in a variety of time frames. Hence they can be used for both day trading and swing trading. Below each of the Lefort indicators are described and illustrated in detail. All indicators are available in each WH SelfInvest trading platform.
The REPULSE indicator
The REPULSE is an indicator which can be used as a decision tool only if the market is in a trend or if it is showing an impulse. The indicator gives "live" information if it appears the trend might be interrupted. By indicating divergences it forces the trader to take a decision: add or change the stop or (partially) close the position.
The indicator uses three horizons. Each horizon serves a different purpose. Let’s look for example at the CAC40 market index in a 5-minute time frame:
The Repulse(1) in red, examines impulses, short linear movements.
The Repulse(5) in blue, examines successive oscillations, waves.
The Repulse(15) in green, examines big trends with longevity.
In this screenshot the repulses converge or diverge on three separate occasions. Each of these occasions corresponds with a crucial point in time on the price chart. At these points in time the trader should make a decision to maintain his short position or close it.
The RETRACEMENT 90 (RET90) indicator
The RETRACEMENT indicator monitors trends and impulses. Particularly its horizontal line is important as it indicates the middle of the ranges of the last 90 periods. The horizontal indicates the long term equilibrium which traders can use as a decision tool. It is also the level around which important retracements or trend reversals can happen in the case of a trend or an impulse.
In this example a market in a positive trend goes below the RET90. The trend continuation only happens at around 13h30 when the market moves through the RET90 again.
The STPMT indicator
STPMT stands for La Stochastique Pondérée Moyen Terme or medium term weighted stochastics. The STPMT indicator is a tool which concerns itself with both the direction and the timing of the market.
The STPMT indicator helps the trader with:
The general trend by observing the level around which the indicator oscillates.
The changes of direction in the market.
The timing to open or close a position by observing the oscillations and by observing
the relative position of the STPMT versus its moving average.
In this screenshot we see the STPMT (red line) and its moving average (blue line). The dotted lines are the components of the STPMT.
The oscillations of the STPMT around its moving average define the timing to open a position. The moving average determines the direction. In the above screenshot, as long as the moving average STPMT is moving upwards a position can be bought. The buy is then timed to coincide with a point in time where when the STPMT is below the moving average STPMT (green ovals).
The CYCLE indicator
The Cycle indicator is derived from the STPMT. It is the STPMT – the STPMT moving average. It is indicates more clearly all buy and sell opportunities. On the other hand it does not give any information on market direction.
The Cycle indicator is a great help in timing as it allows the trader to more easily see the median length of an oscillation around the average point. In this way the traders can simply use the time axis to identify both a favorable price and a favorable moment.