"Elementary Particles" price charts


Part 1

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

Shortcomings of the classical approach

To identify the properties of price movements choose a sequence of candles or bars. In constructing the indicators use the opening price (Open) and close (Close), and maximum (High) and lowest (Low) value prices. Often use only the closing price. The question arises whether it is possible to analyze only "naked" chart.

There are different methods of plotting price. The most popular - line (Line chart), bar chart (Bar chart) and a candle (Candlestick chart) graphics. In addition to these simple and quite intuitive graphs, there are other types that show quantitative or percentage change of closing prices. These include graphics Kagi (Kagi charts), Renko (Renko charts), point-of-digital (Point & Figure charts) and three-way break (Three Line Break charts). Last chart types used in the "naked" form, and each of them has its own algorithm for the use and interpretation. These charts usually use different construction line. Technical indicators are also used in conjunction with the first three types of graphs. Each bar or candle characterize events in one period, for example, for a day or a week. But in a bar or candle is very little information, and in fact even holds Day Trader position several periods. Therefore, to identify trends or receive a signal about its changing trader has to analyze a number of bars or candles. So - we have to use technical indicators.

Is it possible to analyze charts of candles or bars, using their relative position without using the indicator as we know, the greatest success in this matter have made Japanese and Steve Nison introduced and popularized this technique in the West. The principles of the analysis of candles. First of all, we study separately each candle. Its configuration is dependent on the relative position of four prices - open, close, high and low. One candle can be up to sixteen configurations (big black candle, big white candle, doji, hammer, hanging man, etc.). And candles can form a formation of two, three or even four candles. It is in the interpretation of such formations and consists candlestick chart analysis. In fact, the analysis of candles can be seen as an attempt to find the "elementary particles" on the chart and use them to make the structure of chaotic movement of prices. But the desire to reveal the structure has led to the fact that the "elementary particles" is too much, because the number of possible formations is huge - more than a hundred.

Four combinations of candles

Attempts to break the price chart on the "building blocks" and give the chaotic structure of the movement in prices made repeatedly. To identify patterns in the movement of prices of individual candle is not suitable. Rather, it is the smallest "elementary particle" with parameters (Open, Close, High, Low). Analysts are interested in the interaction of these small particles, some larger particles. Bill Williams, author of "Trading Chaos" and "New Trading Dimensions", offered by such particles considered fractals. According to him, there are only four, and each fractal consists of five candles - quite cumbersome "elementary particle".