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Parabolic (Para)
Welles Wilder's Parabolic study is a time/price reversal system. The letters "SAR" stand for "stop and reverse" meaning that the position is reversed when the protective stop is hit. It is a trend-following system. As prices trend higher, the SARs tend to start out slower and then accelerate with the trend. In a downtrend, the same thing happens but in the opposite direction. The SAR numbers are calculated and available to the user for the following day based on the following equation: SAR (tomorrow)= SAR (today) + AF(EP trade SAR today)
where: AF begins at 0.020 (default value) and is increased by .02 each bar that a new high/low is made (depending on the trend direction) until a value of 0.20 is reached; EP = Extreme Price point for the trade made so far (if Long, EP is the extreme high price for the trade; if Short, EP is the extreme low price for the trade). Thus, the Parabolic Time/Price System rides the trend until the SAR price is penetrated. Then the existing position is closed out and the reverse position is opened.
Moving Averages
Trend following indicator Moving average is a smoothing indicator Moving averages are lagging indicators which do not work well in non-trending markets. Results in trading whipsaws
The Exponentially Smoothed Moving Average, ESMA, may be calculated after the Smoothing Constant is known. The first ESMA value is initially set to the first PRICE before the calculation begins. The first PRICE is from the leftmost bar on the screen.
Ichimoku Cloud
Trend following tool. Used heavily by Japanese traders, especially currency traders. It is gaining popularity in the United States. Ichimoku cloud system is comprised of five moving averages.
Kijun (Trend) Line: (highest high + lowest low)/2 calculated over last 26 periods Tenkan (Signal) Line: (highest high + lowest low)/2 calculated over last 9 periods Chikou (Lagging) Span: Most current closing price plotted 26 time periods back Kumo (Cloud)
Senkou Span A: (Tenkan line + Kijun Line)/2 plotted 26 time periods ahead Senkou Span B: (highest high + lowest low)/2 calculated over past 52 time periods, sent 26 periods ahead.
Price closes above the cloud, the trend is up. Price closes below the cloud, the trend is down. Price closes in the cloud, the market is sideways.
Elliott Wave
A trend moves in five waves. A trend can be in either direction. A correction occurs in three waves. Wave 1
In a bullish trend wave 1 is accumulation stage and the very beginning of the new trend. Look for a bullish divergence between price and RSI. Volume is declining as the previous trend comes to an end.
Wave 2
First retracement, retraces wave 1 but does not violate the low of wave 1. This retracement should not retrace more than 61.8% of the original move.
Elliott Wave 2
Wave 3
Usually the longest, strongest wave in the direction of the trend. Higher than wave 1. Volume and open interest accelerates
Wave 4
Countertrend trend wave. Wave 4 should not go lower than the low of wave 2.
Wave 5
Wave 5 is in the direction of the trend. Wave 5 is either the longest, strongest wave or second to wave 3. Wave 3 and Wave 5 are the strongest waves in the direction of the trend.
A wave
In a bull market, A wave is bearish.
Elliott Wave 3
Wave B
Wave B is an up wave. Should not take out the high of Wave 5.
Wave C
Wave C is a down wave. Should take out the low of Wave B.
Most often there is a 5 wave structure within the major 5 wave structure. The placement of the wave identifiers moves if new highs or lows are made. They cant be used in trade systems. They are timing indicators and can identify which moves can be the ultimate high or low, but must be confirmed by other indicators such as RSI, MACD or slow stochastic. Elliott Wave works well with the Imoku Clouds.
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