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In his book "Four Steps to Trading Success" John Clayburg intoduced
the concept of Directional Day Filter.After the first five minutes of
the market day has passed,he records the highest and the lowest price
of the day thus far.Then he adds the two recorded prices and divide by
two.Then he drows the resulting price as a horizontal line.
After 1 hour the market reaches a critical point.
At this point it is critical to determine the amount of market
activity that has occurred both above and below the line marking the
average of the first five minutes of trading.
If there is substantially greater activity above the average line than
below the line at this time of the session,the odds are significantly
in favor of the trend for the rest of the day to be higher.
Conversely,if there is more market activity below the line than
above,there is a greater tendency for the market to trade lower for
the remainder of the trading session in question.
My question is if there is a way to measure this 1st hour market
activity above and below the average line.
Clayburg says that : 'The measure of activity to which I refer on
these charts is defined as strictly the number of trades that have
occurred above or below our average line.This does not refer to the
number of closes,the number of highs,the number of lows,the number of
complete bars,and so forth.It is strictly an observation of the
general amount of trading activity that has occurred on either side of
this critical average line that we calculated earlier'
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