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.