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Replies to #17489 on Cycle Trading

JLS

02/24/17 2:50 AM

#17492 RE: rotor1 #17489

Let's see if I got this.

First, a little note. I wouldn't ignore shadows on a weekly interval chart but I often do on a daily chart, especially when up and down candles are neighbors. My reasoning behind that is that during any given day the market can (and often does) act very irrationally: oops trades are what often cause shadows, and I don't want to put too much significance into those.

What is an oops trade? One that is based almost entirely on total fear or greed (or both) and is quickly regretted and erased by the market.

Measured move ...

Basically you look for a horizontal range showing consolidation, measure the height of that range, then add that measurement to the top of the channel to obtain your target upon upward breakout.

That's what Bulkowski does, with modification. (There was a time when he and I emailed back and forth quite a bit as it related to the software he wrote.) Assuming you know how he developed his methods, he reduces that measured goal by the probability of reaching that goal (which he obtains by statistical analysis of historical charts).

For example; if the height of the horizontal channel is reached 50% of the time after the upward breakout, then he sets the distance to his expected upward target at 50% of the height of the channel.