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Thread: P&F Super Pattern

An effective price pattern defined using properties of P&F charts.

#Superpattern #Pointandfigure #Definedge

 Point & Figure is an oldest charting method where price is plotted vertically, and the chart moves only when price moves. It is a different way of looking at the price, the objective box-value and reversal value offers advantage of identifying objective price patterns.
When price is moving up, it is plotted in a column of 'X'. When it is going down, it is plotted in a column of ‘O’. Normally, three-box reversal criteria is used to define the trend & reversal. Unlike a bar or candle, the P&F column can have multiple sessions in it.
Link to know more about the subject:
https://t.co/2xtLAVPBvm

See below chart. Price is in a strong uptrend, P&F chart would produce a long of column of 'X' with more number of boxes in it.
If such a trend is followed by some time bars without meaningful price correct, P&F chart would not move, and it will remain in column of 'X' in such a scenario.
If there is a price correction, P&F chart would turn to column of 'O'. If price correction is not large or significant, boxes in 'O' column would be less.
If it turns out to be a shallow correction and price bounces back immediately, it indicates that weak bulls are shaken and weak shorts are in - in a strong uptrend. There is a trade opportunity when price goes above previous high.
Column of ‘X’ in a P&F chart would go above previous high. It is known as a basic Double-top buy pattern when column of X goes above high price of previous column of X.
The strong trend should not be a corrective move. There has to be a breakout before that.

So, the pattern is: Breakout, strong trend, shallow retracement & follow-through price action.

How it is defined clearly and made objective on a P&F chart?
Breakout = Double-top buy

Strong trend= More than 10 boxes of 'X' after breakout

Shallow retracement = Not more than 4 boxes after strong trend

Follow-through = Double-top buy after correction
The trade plan is also objective. Buy upon follow-through breakout (double top buy) and place a stop-loss below the bottom of shallow retracement.

Initial stop-loss in affordable and risk-reward is high that makes it a tradeable pattern with positive expectancy.
Vice versa for bearish super pattern. The objective definitions can help us in trading this price pattern on any instrument and timeframe. I suggest Daily chart for EOD segment and one-min timeframe for intra & derivative trading. One-min on P&F is v different & useful timeframe.
The pattern was introduced in my book on P&F charts. It has clear entry-exit and risk management rules. The logic and definition is Super, hence I gave that name. I have defined many such price patterns using important properties of different charting methods.
This simple looking pattern & combination is a result of lots of efforts & experience. More filters & variations are possible. It can be traded objectively, or chart analysis can improve the results. It can also be traded in combination with candlestick patterns or other methods.
The pattern can help in identifying stocks in momentum, strong breakout and offer affordable RR. Most of the momentum indicators are in favor during such breakouts. The pattern and setup has stood the test of time for me. Its not about P&F, its about objective price setups.

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Prashant Shah
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@Prashantshah267
Thread: Super trend indicator:

Developed by Olivier Seban, Super trend is an indicator plotted on the price chart like a moving average.


Let us discuss three important components of this indicator.

1: Range-price.

In every bar or candle, we have four prices - Open, High, Low, Close.

We have the option to select any price of above to define the trend.

For example, we may define an uptrend as today’s close being above yesterday’s close.

We can also calculate range price of every bar. It is also known as Average price or Mid-price.

Range price = (High + Low) / 2


Have a look at the images below.

In the first Image below , the closing price of each candle is connected to the closing price of the next candle.


In the below chart, the “range-price” or the mid-point of each candle is connected.
SUPERTREND
Prashant Shah
Prashant Shah
@Prashantshah267
Thread: Camarilla Levels

Continuing our discussion on pivot levels, we look at the Camarilla levels which is another widely followed tool.

Word ‘Camarilla’ is borrowed from Spanish. It translates to a group of confidential & private advisers of the King or person in authority.


The Camarilla equation was first developed by a bond trader named Nick Scott in 1989. It is said that he didn't disclose the equation, but people studied the levels & reverse engineered it to find the formula. There r different versions of this formula.

We discussed about ‘Range’ in the earlier thread. The range is basically the difference between High & Low of the session.

High – Low = Range of the session
Continuing with the same levels as an example, If High of the day is 105 and Low is 95, Range of the session is 10 points.


Range shows us activity during the session irrespective of the trend.
Narrow range = Not much movement
Wide Range = Strong activity

Camarilla calculation depends on the Range of the session.

Let’s expand the range to 110%. If Current range is 10, let us make it 11.


Let’s now divide this Range in four parts.

9.17%, 18.33%, 27.50% and 55% of the range.

So, if Range is 10 points:
10 x 9.17% = 0.92
10 x 18.33% = 1.83
10 x 27.50% = 2.75
10 x 55% = 5.50
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Prashant Shah
Prashant Shah
@Prashantshah267
Thread: Alligator indicator

#Alligator #Indicators #Definedge


Alligator indicator is created by Bill Williams. He was a popular trader and author.

Before we discuss the indicator, let us understand an important concept.

Here is a chart showing 10 day moving average at bar A. Price of the stock is 100, Moving average price is 90.


What if we shift this moving average to 5 bars further? See the chart below.

Moving average at bar B is moving average price of bar A (5 candles behind). This is shifting of moving average price. What does it mean?


Simple explanation is – shifting the moving average can help one compare current price with past period moving average easily. It results in smoothening instead of increasing the moving average parameter. This is also known as Forward Displaced moving average.
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Prashant Shah
Prashant Shah
@Prashantshah267
Thread: Decoding 2-period RSI

#trading


2-period RSI is a popular concept introduced by Larry Connors.

Many traders are using this method in their strategy.

There are two simple rules in the strategy that Larry Connors explained.

For buying:
• Price should be above 200-DMA (Long-term trend is up)
• 2-period RSI should be below 10 (better below 5)

For selling:
• Price should be below 200-DMA (Long-term trend is up)
• 2-period RSI should be above 90 (better above 95)

He also recommended exiting trades in profit. Exit if stock goes above 5 DMA after buying and exit of stock goes below 5 DMA after shorting. You can use DMA, higher period RSI such as 5 period or 14 period, ADX, Super trend etc. Possibilities are endless.

Bottom line is that he recommended exiting into profit instead of trailing. He did not recommend stop-loss because it can hurt the overall profitability according to him.

Let’s focus on the 2 rules stated above.

What is the logic of the system? It is a pullback trading system.
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Prashant Shah
Prashant Shah
@Prashantshah267
Thread: 5 Important bullish & bearish chart patterns in technical analysis.

Triangles, Broadenings and Rectangles.

#trading #investing

Many traders analyse and practice western chart patterns. There are many such patterns and enough is talked about them in various books and resources.
Long back, I read a book “Encyclopedia of Chart Patterns” by Thomas N. Bukowski. It’s a brilliant work (Must read).

He backtested many patterns & ranked them based on their performance. Most imp is that he separated the patterns based on their performance in uptrend & downtrend.
I read about those patterns at many other places & in different theories and I realised that most of them are-

-variations of broad category of patterns. I have bifurcated these patterns in various categories.

Triangles, Broadenings & Brackets or Rectangle patterns are most common & effective patterns. Below are 5 bullish & bearish proven, time-tested patterns of these categories.

Bullish Patterns:
Rectangle Breakout:
Horizontal pattern breakout. Price remains between two horizontal lines before upward brkout. Its a decent continuation breakout pattern when appears in uptrend. Reversal pattern when appear in downtrend (Decent Risk-reward). Tend to pullback
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@shuchi_nahar
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In detail and lucid terms

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