"Elementary Particles" price charts


Part 2

Technical analysis is a set of algorithms using indicators and construction lines. Huge number of technical indicators. Their main purpose - to identify the properties of price movements, which are not visible to the "naked" chart.

Building a clear sequence

Construct a clear algorithm. Trader found formation Rally (the first and second candles). At the beginning of the third day he opens a portion of its funds go long. Stop order is placed at the level of Low first candle. The value is determined by the position of a trader on the basis of their own money management rules, but given the situation stop. Trader notes two levels: Low and High first candle second. A formation appeared Rally minimum and maximum. Mark the boundaries on the chart. Now traders monitoring for further price action. Any new information between the marked level it should be ignored.

Within this zone the trader can increase long. The emergence of a new formation Rally, which has a maximum over and above those held by High second candle shows the continuation of the trend. This is the true formation Rally. When the formation of the true rising stop moved to the minimum of this formation, the Low its first candle. The boundaries are marked by a new high (High) and a minimum of the last candle (Low) the previous candle.

Perceiving only true combination Rally and ignoring all internal formations, the trader can persist for as long as the pulse. But there is a small caveat. Sometimes during the day prices break the stop level, but end the day at around exceeding the minimum formation Rally. In this case there are two options. If a trader is in front of the terminal and make transactions throughout the exchange session, it will place a stop order at the mentioned rules and monitors their execution in the case of price lower than the minimum of the true Rally. If the opportunity to continuously monitor the price movement is not, and in the information used by the end of the day (Close), a stop-loss orders can not be. If the Closing value exceeded the minimum true Rally, it should be at the opening of the next day to place a stop order at the level of the previous day and to keep the position. If this was a reversal day, the stop will not work. And if he still fulfilled, the additional risk in this small.

Summing up

Let us sum up. Trader must allocate the true formation. All the formations inside the true, are ignored. With the new formation of the true reflection of the continued momentum. All false formations - is a pause in the development of the movement in prices, they are ignored. Filled stop is not enough to change the overall trend.

Reversals in the trend - it is a long process. The proposed algorithm only tracks "sustainable momentum" in the movement of prices and helps to exit positions during market pullbacks. It can be successfully used on Day Trader very short intervals, in minute charts and up. Stop orders are placed on objective data and a reasonable distance. All the arguments are similar to Rally adjusted downward trend and Reaction. If casually acquainted with the proposed methodology, the question may arise: how does it differ from the old and well-known rule of all futures speculators - to place a stop order on the minimum or the maximum of the previous day? Significant difference. In our case, the stop is at the point, rebounding from a market received new momentum. All stop levels are at a minimum true formation Rally or maximum true formation Reaction. Placing stop orders at these levels does not provoke their frequent false positives. Sometimes advantageous to keep the current loss, you close the position. That is why the testers trading systems necessarily compare their strategy with the strategy Buy & Hold.