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"Assumptions allow the best in life to pass you by." [John Sales]
Ken
bill fiedor wrote:
> Wordy people are wishfull people [bill fiedor]
>
> Jim Greening wrote:
>
> > All,
> > Before I discuss trend lines and channels as I promised, I want
> > to say a few words about the type of charts. Most people use H,L,C
> > bar charts for their charting. I don't, I use CandleVolume charts. I
> > always thought that having an arbitrary time period such as a day for
> > the x axis of a price time chart didn't make a lot of sense. When
> > Arm's wrote his EquiVolume book back in the 60s he made his x axis a
> > function of volume per unit time. This made a lot of intuitive sense
> > to me. The more volume in a given trading period, the wider the bar.
> > I've been using volume based charts every since then. When MetaStock
> > started using CandleVolume charts I switched to them. In CandleVolume
> > charts, the width of the candle is a function of volume, just like
> > Arm's equiVolume charts. I thought the additional information on the
> > candlestick should be valuable, although I'll be the first to admit
> > that I have never gotten any consistent results based on only
> > CandleStick patterns. I keep using CandleVolume charts because I like
> > the way they look and maybe, just maybe, I'll run across that magic
> > pattern some day <G>.
> > The reason I go into this, is that if you are using trend lines
> > or channels for signals, you will get different signals and different
> > results with H,L,C bar charts and CandleVolume charts. I'm very
> > comfortable using CandleVolume charts and happen to think that they
> > give better results than H,L,C bar charts. Having said that, I also
> > have to say that I have absolutely no proof of that. I've never done
> > a systematic study and haven't seen any done by others. But I feel
> > they are better and it's important to go with what you believe <G>.
> > For constructing trend lines I prefer Trader Vic's methodology.
> > For a Trader Vic up trend line, start with the lowest low in the
> > timeframe being considered. Draw a line to a low before the highest
> > high in the time frame and extend the line to the right. It's
> > important that you pick the right low to draw the line to. It must be
> > before the highest high in the timeframe and it must be the one low
> > that will allow you to draw a line that doesn't intersect any data
> > before the highest high. A down trend line is just the mirror image.
> > You start with the highest high in the timeframe being considered.
> > Draw a line to another high before the lowest low such that the line
> > does not pass through any data and extend the line to the right. To
> > construct the trend channel, draw a parallel line on the other side of
> > the data that only touches the data at the extreme point. That is it
> > doesn't intersect any other data points. This is easy with MetaStock.
> > You can hold the CTRL key down, then hold the left mouse key down once
> > you are on the original line and drag a parallel line to where ever
> > you want it.
> > I use these Trader Vic type channels for my long (years) and
> > intermediate term (few months to over a year) channels. I use the
> > channels to get my buy signals and set my stops. If they are wide
> > enough, I may even use them for setting my targets, but that will be
> > the subject of a later post. Right now I want to just concentrate on
> > how I construct my trend channels. There is a problem with using
> > Trader Vic type channels for Short term (days to few months) channels.
> > That problem is that you will tend to get too many false breakout
> > signals for a data set that hasn't gone through one or two significant
> > corrections. To try to overcome this problem for short term channels,
> > I use the Standard Deviation channels built into MS6.5. The problem
> > with this type of channel is to know where to start and end your
> > channel. I did not want this to be arbritary, so after some
> > experimenting, I decided on the following. For up trend channels, I
> > start my channel immediately to the left of the lowest low in the
> > timeframe being considered just like Trader Vic. Then I end my
> > channel immediately to the right of the highest high in the time frame
> > being considered. Initially, I set the deviation at 2 and extend the
> > channel to the right. Anytime a new high is hit, I'll drag the right
> > end of the channel just to the right of that new high. As soon as I
> > get a decent reaction in the stock data, I'll check to see if I should
> > change the deviation. I'll use 1, 1.3, 1.5, 1.8, or 2 for the
> > deviation, using the lowest number that will bound all the data
> > between the end points without intersecting any. After a few months
> > with at least two good reactions, I switch to Trader Vic type trend
> > lines.
> > That's it. That's the way I construct my trend channels so there
> > isn't any arbitrary settings. Any questions or suggestions?
> >
> > JimG
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