Cumulative Net Foreign Transactions
Foreigners account for around 40-60% of the PSE's daily value turnover, which is why a lot of traders would always look at daily net foreign transactions. With VAI, we can create a new indicator to see the cumulative effect of net foreign transactions for the past x periods.
if we see the bars:
- above zero - it means foreigners have net bought for the past x periods
- and trending up - continuous foreign buying
- and trending down - foreigners have started selling
- and flat - no new foreign transactions
- below zero - it means foreigners have net sold for the past x periods
- and trending up - foreigners have started buying
- and trending down - foreigners are still selling
- and flat - no new transactions
- On a day with net foreign buying, the bar will turn green and red if its foreigners are net sellers for that day.
Aside from foreigners owning a big chunk of daily volume, the more important thing to know about foreign institutional orders is that they are done by allocation, meaning they give more importance to reaching a certain % exposure to Philippines than buying at a low price; foreign orders tend to push prices higher but also exaggerate selling when they want to get out, so be careful of extremes in both direction. Peaks will not last forever and bottoms may give good buying opportunities when foreign selling have exhausted.
For the script below, we used 30 days but feel free to customize it.
//Cumulative Net Foreign Transactions
Set NFS = NetForeign
set positive = nfs > 0
set negative = nfs < 0
set cumNFS= (sum(nfs,30))
set bullish = if(positive,cumnfs,0)
set bearish = if(negative,cumnfs,0)