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The Hunt Volatility Funnel, Something new and Original or Just a Symmetrical Triangle

The Hunt Volatility Funnel, Something new and Original or Just a Symmetrical Triangle

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Published by Francis Hunt
The Hunt Volatility Funnel (HVF), Something new and Original or Just a Symmetrical Triangle - Francis Hunt explains how the HVF is a new way at looking at an old Continuation pattern set up.

He explains why it is more tradeable:

1. A fixed trade entry, Loss Stop Level and Target
2. A Volatility based approach
3. Full money management and Risk:Reward prior to entry for a trade...

...And so Much more
The Hunt Volatility Funnel (HVF), Something new and Original or Just a Symmetrical Triangle - Francis Hunt explains how the HVF is a new way at looking at an old Continuation pattern set up.

He explains why it is more tradeable:

1. A fixed trade entry, Loss Stop Level and Target
2. A Volatility based approach
3. Full money management and Risk:Reward prior to entry for a trade...

...And so Much more

More info:

Categories:Types, Research
Published by: Francis Hunt on Mar 19, 2013
Copyright:Attribution Non-commercial

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10/17/2013

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What is new about, a HVF surely this is just a traditional symmetrical triangle along standing technical analysis set up?When looking at what I will present as examples, many of the examples laid out will be exactly that. traditional symmetrical triangles.The key element here is the approach to the set up and how it is handled, I look at the set up differently.Also
whilst all HVF’s qualify as traditionally defined triang
les (mostlySymmetrical ones). all symmetrical triangles are no
t HVF’s
 So to repeat The Hunt Volatility Funnel set up is a subset of triangles as definedby technical analysis.So let us clarify the difference between the two. Firstly there is a broad church on
defining and exploiting ‘Symmetrical Triangles’ in terms
of traditional technicalanalysis, with some variations, particularly on targeting.The key features that define traditional technical analysis revolve around thefollowing:1.
 
Trend line theory is key and all triangles are essentially bound by twotrend lines. (Note: Ascending Triangles have a flat resistance level andDescending Triangles have a flat support level, but most of our examplesare symmetrical)2.
 
As trend line theory is key, a minimum of 2 points are required toestablish the trend line, with 3 or more being preferable3.
 
The trend lines have predominance in establishing, the amplitude fortargeting, and the point from which this amplitude is to be projected from,namely the break of the trend line. See the chart below as an exampleSymmetrical Triangle as analysed by traditional technical analysis
 
4.
 
The trend line touch points have no specific criteria to qualify, apart frombeing aligned with the trend line drawn. I mention this in respect to itsrelevance to the price behavior in the pattern itself.By this I mean for example two points on the lower base trend line canoccur concurrently without a requirement for a reciprocal move to thetop trend line, or as I may refer to it going forward as an inflexion point occurring on the higher trend line in between the two lower points.In the example above, the trend environment prior to the set up is not explicitly referred to in terms of expected outcome, the trend prior to the
pattern is upward and the first point taken on the pattern is at point ‘B’
and is on the lower trend line.I have seen a variation of amplitude calculations for a symmetricaltriangle.The most common is that represented in the Black dotted line from thefirst high point down to the trend line.Symmetrical Triangle target amplitude variationsHowever, I have also seen Targeting amplitudes run from when the priceaction first crosses in between the trend lines. An amplitude is run fromthis crossing over the lower trend line to the upper trend line whetherthere is price action engaged at this upper point or not (usually not)Another alternative is the first time the price behavior having crossedover between the trend lines first interacts with say the bottom trend line.In this instance the amplitude is extended from the first trend touch point vertically across to the other trend line, in this example the top trend.All these derived amplitudes are projected up from the break of the toptrend line, at the point this occurs, in this example in a purple box
 
 The Hunt Volatility Funnels uniquenessIn many ways it is more how we elect to look at the set up that is different rather than the particular price behavior of the pattern itself.For this reason I have taken the same price action and set up andcontrasted how they maybe viewed by Technical Analysis and throughHunt Volatility Funnel Theory.Traditional technical analysis looks at the symmetrical triangle set upabove and as the name suggests the price action is viewed through theaperture of trend analysis, namely that there are two competing trendsseeking to manifest and the predominant one will see the other trendbroken with momentum.By viewing this particular set up through the mindset of trend lines, trendlines and their limitations dictate the manner in which the set up is traded.Namely:1.
 
An angled line dictates when a break has occurred2.
 
Whilst Stop losses are rarely discussed in this set up, it is assumedthat the stop is placed just outside the opposite trend linevertically below (above) the point of break and entry.The problems with this approach are:
 
An angled line is given precedence over a price level, A price levelis that which people and market participants react to. So bydefinition a horizontal price level line is subordinated by a linerepresenting various price points at different time frames.
 
As it is not know when the break may occur the actual price for thebreak is not known, this rules out the use of pending orders at thebreak level, as these cannot be know till after the fact 
 
By definition from the point above, the trader actually has to bepresent, observing and in a position to enter a trade at market asand when the break occurs
 
As these breaks are sudden and high momentum at the point of 
break, ie. ‘impulsive’, trade fills maybe
poor and slippage mayoccur or even entry failure till the trade has moved too far, and thetrader is left wondering whether to chase the trade. Not an idealposition to be.
 
Loss stops cant be determined till the break occurs, as the stopplacement is vertically below the entry (upside break) just belowthe lower trend line
 
The same applies for target calculation as this is dependent onbreak level for the projection to be placed at the right point on thedescending trend line.

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