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Hi Bill, my embedded responses.
On Jun 28, 2008, at 4:04 PM, bilbo0211 wrote:
> Hi Dennis,
>
>> These two are just a few of the possibilities. They are based on
>> combining two lines that have a probability of being a support or
>> resistance line to get a time target where both could be true at the
>> same time, thus increasing the probability of a reversal.
>
> I don't know if that is the explanation but the projected turning
> points are right on the pivot bar with uncanny accuracy.
See below about why.
> There are several problems.
>
> 1. The accuracy with which the trend lines are placed is critical,
> even if the position is off a small amount, it can throw the
> projection off especially if the lines cross a large distance from
> their starting points. AB has a snap tool that lets you snap drawn
> studies to prices but I could not figure out how to make it work for
> trend lines.
This works fine for me. I almost exclusively use the magnet snap on
all my trend lines.
There is a horse shoe magnet button in the draw tools. Click on it to
toggle it on and off.
And with 5.13 you can use the shift key to toggle the feature while
drawing.
> 2. While most of the projections are right on turning point bars,
> sometimes the turn last for only 1 bar and other times it indicates a
> major change in trend.
>
> I have drawn several hundred square and angle CIT's (the dual angle
> ones occur much less frequently so I have limited experience with
> them) by hand and it works well enough that I want to study it in more
> detail. It seems to work on every trading instrument, market fractal
> and chart type (time, tick, volume, and range) I have tried it on so
> it must be tapping into some underlying market symmetry or cycle.
It has little to do with magic symmetry or cycles. What is happening
is that the support and resistance are drawn by many traders who
believe there is relevance to these, and they may place big limit
orders ahead of time right at those numbers (It is important that they
are trained by the same books). That will cause the price to stop at
that point. If there is enough order volume, the other side will not
be able to break through that point and will give up and the price
will reverse. How much it bounces is based of other traders using
other indicators and if the reaction is big enough to trigger those
also. If many indicators and studies have trigger points in the same
area, you get an avalanche effect that causes a large reaction. OTOH
if there are a lot of studies and indicators close by that are not
supportive of the bounce, it can reverse again and may crash through
the previous limit this time. And as always, news trumps the charts.
The truth is that without people and their opinions of what something
is worth to them to buy or sell, the price will not be defined at
all. It is all about people and the rules they make up for themselves
about what is a good price at any point in time. Human psychology is
as important to understand as anything else.
>> I have thought about how to do various study like indicators in AFL.
>> I do not have the AFL for you, but If I were to try to do these
>> two, I
>> would approach it with using a ZigZag indicator to find the
>> significant peaks to draw from. Then using a simple solution of two
>> linear equations to find the crossover points.
>>
>> The question is how many of these do you want to draw?
>
> For researching this technique, I want to draw them all but for
> trading purposes, I only need the ones in the future.
>
>> The latter would require a lot more smarts in
>> the AFL to decide how to use the information.
>
> It should not be too hard to analyze the data, I need to calculate all
> the CIT points; catalog all the pivot point, even the very smallest;
> and correlate them. Then see if there is some (hopefully obvious) way
> of filtering out most of the less important ones.
That is a good scientific approach.
The other way is to actually hand draw lots of them (no peeking ahead)
and then analyze them in AFL. You just have to define the max line
extension in AFL, because we can not do that yet directly with the
study line tool. Also you are limited to a few hundred names. Almost
seems easier to draw each pair, then have a button that saves the
current coordinates as a persistent variable array, move the lines and
click the button again to have it appended. Would just need a few
ParamTriggers() to handle adding or deleting the lines. The AFL could
draw them all from the list for the past ones. Sounds like fun. Wish
I had time to play with it right now.
Another similar line study is the Wolfe Wave.
>> However, you could also just use the support and resistance lines
>> from
>> different methods and add together all the probabilities of a
>> reversal
>> of each. That would automatically increase the probability as the
>> price approached two or more lines that are converging.
>
> That does not seem to work. Frequently more that 1 set of reversal
> lines cross at the same CIT point, unfortunately, that does not make
> the point any more significant, i.e., it is no more likely to be a
> major pivot than any other point.
Major or minor depends on the strength of the hand that is betting on
that point, and other types of studies that also have their followers
close by. It is a complex landscape of followers of Gann, Fib, BB,
RSI... That is why you have to have good money management routines
for when the expected reversal does not happen.
BR,
Dennis
>> Understanding the underlying principles can lead to simpler
>> solutions.
>
> Agreed, that is one reason I want to study it.
>
> Bill
>
>
>
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