Market Thrust Indicator – Rules, Settings, Returns
In the fast-paced world of financial trading, traders are always seeking new approaches to improve their analysis of the markets — this led to the creation of the Market Thrust indicator. What do you know about this indicator?
The Market Thrust Indicator is a market sentiment indicator that gauges the momentum of the broad market by assessing the number and volume of advancing stocks vs. declining stocks. It weighs the number of advancing and declining stocks by their respective volume and then measures the difference between them to show the direction the market strength lies, which can determine the direction of the market trend.
In this post, we will take a look at most of the questions you may have about the Market Thrust indicator: what it is, how it works, and how you can use it to improve your trading strategies. Read along!
Key takeaways
- The Market Thrust Indicator measures market sentiment by analyzing advancing vs. declining stocks and their volume.
- Unlike price-based indicators, it evaluates market internals to assess overall strength or weakness.
- It calculates the difference between advancing and declining stocks’ volume to indicate market trend direction.
- A smoothed average of the Market Thrust reduces sensitivity to sudden changes.
- The indicator helps assess bullish/bearish trends, identify overbought/oversold conditions, and detect potential market reversals through divergence from price action.
- We have covered every trading indicator there is: technical indicators list.
What Is the Market Thrust Indicator?
The Market Thrust Indicator is a market sentiment indicator that gauges the momentum of the broad market by assessing the number and volume of advancing stocks vs. declining stocks. Unlike technical indicators that focus solely on price movements, the Market Thrust Indicator assesses the components of the broader market as a whole to provide a comprehensive view of the market’s internal strength or weakness.
The indicator weighs the number of advancing and declining stocks by their respective volume and then measures the difference between them to show the direction the market strength lies, which can determine the direction of the market trend. It also calculates an average of the Market Thrust, which produces a smoother line than the Market Thrust line, as it is less sensitive to sudden changes in the data.
The Market Thrust indicator can be used to show the strength behind the movements in the broad market, which is necessary for assessing bullish or bearish trends in individual stocks. It can also be used to spot overbought and oversold market conditions in the general market. Its divergence from the price action of the broad market index may help anticipate a generalized market reversal.
Market Thrust Indicator trading strategy – trading rules, settings, backtest, performance
We have backtested a Market Thrust Indicator earlier: Zweig Breath Thrust Indicator. Please have a look at that article to find out if market thrust works or not.
How Does the Market Thrust Indicator Work?
The Market Thrust Indicator works as a market sentiment indicator, which can help traders get a better assessment of the general market movement. It uses the number and volume of advancing stocks vs. declining stocks to gauge the momentum of the broad market. It does this by weighing the number of advancing and declining stocks by their respective volume and then measuring the difference between them.
Thus, rather than focus on the price movements of individual stocks, as some technical indicators do, the Market Thrust indicator analyzes the broader market dynamics to give a comprehensive view of the overall market. This can help identify where the market strength lies, which can determine the direction of the market trend.
When the Market Thrust’s value is positive, it means that there are more advancing stocks trading with huge volumes than the declining stocks. On the other hand, when the value is negative, it means there are more declining stocks trading with huge volumes than the advancing stocks. An unusually extreme value may indicate an overbought/oversold market, while divergence from the price action may signal a potential reversal.
Who Created the Market Thrust Indicator?
The Market Thrust indicator was created by Martin Zweig, a renowned US financial analyst, investment advisor, and stock trader. This is why the indicator is also known as the Zweig Indicator. It is not to be confused with the Zweig Breadth Indicator or the Breadth Thrust Indicator, which he also created.
According to Zweig, the Market Thrust Indicator was created to measure extreme changes in the market within a short, compressed time frame. It achieves this by finding the difference between the volume-weighted number of advancing stocks and the volume-weighted number of declining stocks.
Why Use the Market Thrust Indicator in Trading?
You use the Market Thrust Indicator in trading because it offers a comprehensive view of the overall market’s internal strength or weakness.
The indicator uses the difference between the volume-weighted number of advancing stocks and the volume-weighted number of declining stocks to gauge the momentum in the broad market, which can help you in deciding which direction to look for trades. If the momentum of the broad market is to the upside, you may look for buying opportunities in the advancing stocks to trade.
How Do You Calculate the Market Thrust Indicator?
To calculate the Market Thrust Indicator, follow these steps:
- Identify the advancing stocks and record their volumes
- Count the number of advancing stocks
- Identify the declining stocks and record their volumes
- Count the number of declining stocks
- Multiply the number of advancing stocks by the volume of advancing stocks
- Multiply the number of declining stocks by the volume of declining stocks
- Subtract the result of step 6 from the result of step 5 to get the Market Thrust. The formula is given as follows:
Market Thrust Indicator = (Number of Advancing x Advancing Volume) — (Number of Declining Stocks x Declining Volume)
What Are the Key Components of the Market Thrust Indicator?
The key components of the Market Thrust indicator are as follows:
- The number of advancing stocks: Advancing stocks are stocks that have gained in price compared to the previous day in a specified stock exchange, say the NYSE. The number of these stocks shows how much optimism and strength is in the market.
- Volume of advancing stocks: This is the total trading volume of the advancing stocks. It shows the intensity of buying pressure. The higher the volume, the stronger the market conviction.
- The number of declining stocks: Declining stocks refers to stocks that have decreased in price compared to the previous day in a specified stock exchange. The number of these stocks gives an idea of the level of market pessimism and weakness in the market.
- Volume of declining stocks: This is the total trading volume of the declining stocks. It shows the intensity of selling pressure. The higher the volume, the more the selling pressure.
How Is the Market Thrust Indicator Different From Other Indicators?
The Market Thrust Indicator is different from other indicators in that it is a market sentiment indicator rather than a technical indicator. While technical indicators analyze the price movement, volume, or both of a particular stock, market sentiment indicators analyze the broader market by assessing the contributions of its components to the general market condition.
In other words, market sentiment indicators, such as the Market Thrust Indicator, provide a comprehensive view of the whole market’s internal strengths or weaknesses, which can be used to gauge the mood of the market. This helps a trader determine whether what is happening in a particular stock is in line with the mood of the overall market.
What Does the Market Thrust Indicator Measure?
The Market Thrust Indicator measures the momentum of the broad market by assessing the number and volume of advancing stocks vs. declining stocks.
It weighs the number of advancing and declining stocks by their respective volume and then measures the difference between them to show whether there is overall buying or selling pressure in the market, which can influence the overall direction of the market trend.
This can help a trader determine whether to trade a stock or not — it is often better to trade a stock that is moving in the same direction as the overall market.
How Do You Interpret the Market Thrust Indicator?
To interpret the Market Thrust Indicator, you have to check whether the value is positive or negative and whether the indicator is above or below its moving average. If the indicator’s value is positive, it means the overall market is bullish. In that case, it is better to go long on the stock market index or look for buying opportunities in stocks that are trending up.
On the other hand, if the value is negative, it suggests that the overall market is bearish. So, you look for selling opportunities in the stock index or individual stocks that are trending downward.
Can the Market Thrust Indicator Predict Market Trends?
Yes, the Market Thrust Indicator can predict market trends, especially in the major stock market index. The indicator uses the difference between the volume-weighted number of advancing stocks and the volume-weighted number of declining stocks to measure the buying or selling pressure in the market, which can predict the trend in the broad market index.
When there is huge buying pressure, the trend is likely to be bullish. If there is huge selling pressure, the trend is likely to be bearish. For individual stocks, you have to confirm that their trends are in sync with that of the overall market.
How Can You Use the Market Thrust Indicator for Entries and Exits?
To use the Market Thrust Indicator for entries and exits, you have to trade stock index futures or ETFs, as the indicator is not meant to generate entry signals in individual stocks. Being a market sentiment indicator, the Market Thrust indicator only gives an idea of where the momentum lies in the overall market, which can guide traders looking for high-probability setups. It cannot be used to find entries and exits in individual stocks.
Even for broad stock index futures or ETFs, using the Market Thrust indicator for entries and exits should be done with caution. Overbought/oversold signals, zero-line crossovers, moving average crossovers, and divergence signals are some of the signals you can backtest for entry and exit strategies.
What Are Common Strategies Using the Market Thrust Indicator?
The common strategies using the Market Thrust Indicator will be for trading broad stock index futures, such as the E-mini S&P 500 Index Futures, or ETFs, such as the SPDR S&P 500 ETF Trust (SPY) and iShares Core S&P 500 ETF (IVV). Some of the strategies you can use here include:
- Breakout strategies: These strategies aim to trade when the stock index breaks out of a consolidation chart pattern. A zero-line crossover signal in the direction of the breakout confirms the breakout.
- Mean-reversion strategies: These are short-term reversal strategies that aim to trade the price back to its mean after a significant move away from the mean. Market Thrust divergence signal can be used to anticipate the reversals.
How Do You Set Up the Market Thrust Indicator on Trading Platforms?
To set up the Market Thrust Indicator on trading platforms, you first check if the Market Thrust Indicator is one of the built-in indicators in the platform. If it isn’t, you have to get a custom indicator and install it on the platform.
Once it is installed, go to the indicator section of the platform and search for the Market Thrust Indicator. Double-click on it to attach it to the chart. A box may pop up where you input your preferred settings. Note that it is best to set it up on a broad stock index chart, rather than the chart of an individual stock.
What Timeframes Work Best for the Market Thrust Indicator?
The timeframes that work best for the Market Thrust Indicator will depend on your strategy, trading style, and backtesting results. If you are a day trader, you may want to trade on intraday timeframes like the hourly, 30-minute, or 15-minute time frame.
But if you’re a swing trader, the daily and 4-hourly timeframes may be more suitable. The only way to know the best timeframe for whatever trading style and strategy is to backtest the various timeframes for that trading style to see the timeframe that offers the best performance.
Is the Market Thrust Indicator Suitable for All Market Conditions?
No, the Market Thrust Indicator is not suitable for all market conditions. The indicator is not even suitable for finding entries and exits in all markets. It is a market sentiment indicator that gauges the momentum of the broad market index, not individual stocks.
For such broad stock indexes, the indicator works best when the market is trending or in a big range with sizeable swings. It does not work in tightly consolidating markets.
How Do You Combine the Market Thrust Indicator With Other Indicators?
To combine the Market Thrust Indicator with other indicators, you have to decide what you want to do with the indicator. If you want to use it to check the general direction of the market so you find individual stocks in that direction, then you must combine it with the technical indicators you will need to analyze the trend and momentum in the stocks you want to trade.
However, if you want to use it to find entry setups in broad stock index futures or ETFs, you may have to combine it with trend indicators and any other indicators that can help you analyze the stock index. Whatever you do, make sure you have a strategy and backtest it to confirm its edge.
What Are the Limitations of the Market Thrust Indicator?
The limitations of the Market Thrust Indicator include:
- It is a market sentiment indicator, not a typical technical indicator.
- It analyzes the broad market index, not individual stocks
- It cannot be used to find entry and exit points in individual stocks
- It must be combined with other indicators or other forms of analysis if you want to use it for trading individual stocks.
How Can the Market Thrust Indicator Help Reduce Trading Risk?
The Market Thrust Indicator does not directly help reduce trading risk, as it cannot determine your entry and exit points if you are trading individual stocks.
However, it can indirectly help you to reduce risk by showing you the direction of the overall market so you look for setups in stocks that trend in that direction. Trading in the direction of the overall market offers a better probability of success than trading against it.
Can the Market Thrust Indicator Be Used in Day Trading?
Yes, the Market Thrust Indicator can be used in day trading the stock index futures or ETFs if it is traded on a suitable timeframe for day trading.
Common day trading timeframes are the hourly, 30-minute, 15-minute, and 5-minute timeframes. If the Market Thrust indicator is used to create a strategy that offers an edge on any of these timeframes, then it can be used for day trading.
What Is a Bullish Signal in the Market Thrust Indicator?
A bullish signal in the Market Thrust Indicator can be a bullish divergence, an oversold signal, an upward zero-line crossover, or an upward moving average crossover. However, for any of these to be a valid bullish signal, it must occur in the right market setting.
The market must be in an uptrend and the signal occurs after a pullback or the market is in a range and the signal occurs when the price is at the lower boundary of the range — need not say the market here refers to a broad market index future or ETF.
What Is a Bearish Signal in the Market Thrust Indicator?
A bearish signal in the Market Thrust Indicator can be a bearish divergence, an overbought signal, or a downward zero-line or moving average crossover.
However, for any of these to be a valid bearish signal, it must occur in the right market setting — the market must be in a downtrend and the signal occurs after a pullback or the market is in a range and the signal occurs when the price is at the upper boundary of the range.
How Can the Market Thrust Indicator Confirm Trend Reversals?
In a broad market stock index, the Market Thrust Indicator can confirm trend reversals by forming a divergence signal, which occurs when the price action and the indicator are out of phase.
A bullish divergence occurs when the price is trending higher but the indicator is either flat or trending lower. Similarly, a bearish divergence signal occurs when the price is trending lower but the indicator is either flat or trending higher.
Are There Different Versions of the Market Thrust Indicator?
No, there are no different versions of the Market Thrust Indicator.
However, there is a closely related indicator from the same author called the Breadth Thrust Indicator, which measures the market breadth by dividing the advancing issues by the sum of the advancing and declining.
What Historical Data Can Validate the Market Thrust Indicator’s Effectiveness?
The historical data that can be used to validate the effectiveness of the Market Thrust are the volume and price data. While the price data is used to identify the advancing and declining stocks, the volume data is used to measure their respective volumes.
How Do Experienced Traders Use the Market Thrust Indicator?
Experienced traders use the Market Thrust Indicator to gauge the buying and selling pressure in the overall market so they can trade accordingly.
For instance, if the general market is bullish, they look to find long setups in bullish stocks or stock indexes.