The WRB I'm referring to is the Wide Range Body. It only deals with the difference between the Close and Open... What you have called length. For example...lets say the Close is 1050 and the Open was 1045. The body is 5 points in length. The bar is something else some traders refer to (not me) and they measure the difference between the High and Low. The only way the difference between the High and the Low equals the difference between the Close and Open is if the High = Close and the Open = Low (it happens). I'll keep using the word prior three intervals and you can call it whatever you want (most recent, last et cetera). Yep...for simplicity...the pt means it was a WRB prior to that interval for that particular chart had closed. Now...lets say your using the 15min chart and your trade signal occurred at 10am est. Lets pretend a WRB formed in the next interval between 10am - 1015am... It became a WRB at 1010am with still 5mins remaining in the interval. You take profits at 1010am and don't get greedy and wait to capture more in hopes its a bigger WRB by the time the interval closes at 1015am. However, once you gain a lot of experience with WRB Analysis... You'll know when wait (get more greedy) and capture a bigger WRB. Yes...in your A and B example... Interval A is a WRB and its classify as above the prior WRB. Hey...you learn fast Next...post a chart of where you would have entered a trade via whatever entry strategy your using and then annotate that chart with what you consider to be pt levels. I'll then let you know if your right or wrong. Take care. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
If I understand correctly, it seems we can calculate WRB without any human effort. A formula should do. Simply: If current "range of open & close" is larger than last 3 "range of open & close", a "pt" mark will occur. It doesn't matter if the open must be higher than the last 3's; nor the close, higher. I'l post a chart soon. Would you prefer if I send the annotated chart through email or PM or just here? To me, it seems email is the best. And what's your email address? Finally do you know if there's any resources (Eg ebooks/websites) which discuss your approach/method?
Yes...you can remove the human element and code it but only if you understand using WRB as profit targets. Also, I don't like the word "range" because some traders may misinterpret it as the difference between High and Low. However, you can use it because I know some that do use it like that but not me. Thus, when discussing WRB's...make it clear what you mean by range, bar or body. Post your charts in this thread so that I can reference this thread at a later date just in case someone else ask similar like questions as yours... Thanks. As for other resources about WRB Analysis outside of me... I'm it. I've been using it since the 80's when I discover it while doing chart work for my old man (ex-floor trader) when I was a teen and haven't seen anyone else discuss it anywhere else. Yet, doesn't mean there's nobody out there thinking the same thing. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Mark, When you're assessing the reversal likelihood of a WRB (or a potential WRB, since you suggested not waiting for the period to end) do you consider volume on the WRB as well? I can see a case for thinking that a WRB without much relative volume behind it might not be so significant. What do you think? If you were using volume candle charts, would you assign more or less significance to single-bar reversal signals (hammers, engulfing candles, etc.)? I've been working on my exits using candle patterns on volume charts, but I've had mixed success. Apart from their role in specific patterns (hammer), do you give a lot of weight to shadows. Thank you. Regards, William
Grob, Are you suggesting that profit should be taken off the table once the stock has confirmed that it's falling from resistance, rather than when initial signs of weakness become evident?
I'm surprised that nobody has mentioned John Sweeney's MFE analysis (Amazon link). One popular way to analyse is to find the profit P such that 50% of all trades (or, if you prefer, 50% of winning trades) have an MFE greater than or equal to P. Then use P as a profit target and exit X percent of the position at a limit price of (Entry + P). You take profits on some but not all of the position. It's flexible, you can express the target in terms of recent volatility or (very popular) you can express it in terms of R's, multiples of the initial trade risk. You can even define a stepladder of profit targets ("scaling out of a position at increasingly profitable levels") by using MFE's. Could be worth investigating. MFE = Maximum Favorable Excursion
Take your pick OBV/OBV 5dma cross MS/TSV cross Channel Break Hi/Lo support/resistance break Volume blowoff 5ma reversal MA cross Double top/bot %5ma/20ma Exhaustion Gap Volatility increase/decrease Volume/Price reversal Option Volume, Put/Call ratio Adv/Dec breakdown Mean Reversion target Other indicator divergences etc It goes on and on.. Best to rely on testing, observation, confirmation Remain disciplined but flexible When in doubt get out
My view is that a person can time exits for maximum profit using any number of systems. The best exit turns out to be the same as an entrance for a short trade. It is an issue of symmetry in trading. During a trade a person can hold through weaknesses if he understands that the profit cycle is not over. Understanding the difference between a retrace (a happening within a trend) and a reversal (the simultaneous end of a trend and the beginning of a new trend) is important. Retraces are followed by retests of R (for longs) and often the R is broken (especially on new higher volume peaks). The key difference between a retrace and a reversal is the volume characteristic which is imediately discernable at the inception of the move. Currently, the thread owner uses this differentiating characteristic to begin a trade, i. e., he perceives a long entry as the same as a reversal of a prior short trend. So I suggested, that since he can discern reversals from retraces (short kind of retraces) that he use this symmetric characteristic as a means of holding through, as you correctly put it "weaknesses" which once end allow a trend to resume to test and often break through former R. As an OT comment, there comes a time for those that trade portfolios, when an additional refinement comes on the table. If is related to your comment. When a person achieves a high money velocity in trading stocks, it comes down to deploying methods that allow persons to maintain high money velocities. Whne "owned" stocks seem to lessen their earning power (money velocity) then that stock is sold to allow cash to be available to enter a stock whose earning power is on the rise. This is akin to only trading the parts of cycles where the stock is accelerating to maximum money velocity and then, later beginning to deccelerate. Looking at a cycle as approaching a trigonometric function, that maximum velocity is in the near range to the axis of the function. So trades begin before the axis is crossed and end after the axis is crossed. Since volume operates at twice the frequency of price and also leads the price, there are interesting applications of derivatives to these functions for the purpose of optimizing crossover trading. This also takes the Q about whether a retrace or reversal is on the table.
Hi William, When a WRB pt level is reached... I don't see it as a reversal potential because there's no confirmation of such. However, I do see it as a possible exhaustion signal that has the potential to retrace without giving any reversal signals. As for volume...WRB represents volume. Simply, when comparing one WRB to another WRB you'll be painted a view of the volume. For example...lets pretend there was a WRB at 10am on the 5min chart and that WRB had a body length of 1.2 ER2 points. Later another WRB at 1025am on the same 5min chart had a body length of 2.5 ER2 points. The WRB price action is showing that volume (if charted) is rising. Reason why WRB Analysis is critical when trading Forex Currencies for those that are into volume analysis. WRB Analysis is essentially the following: * Supply/Demand analysis * Volume analysis * S/R Zone analysis Also, I wouldn't recommend using Japanese Candlestick patterns as exit signals unless your already using the same pattern as entry signals. What I mean is that if you normally don't trade (short) that Bearish White Shooting Star pattern as an example... It doesn't make sense to exit your profitable position if you were Long when a Bearish White Shooting Star pattern appears. I have a simple rule for reversing a profitable position into another trade position is that if I'm already profitable for the trading day along with the pattern being one of my best signals... I'll reverse my current profitable position. However, if either I'm not profitable for the trading day or it's not one of my best pattern signals when it appears while I'm already in a position... I'll ignore that signal to reverse my current open position. Yes...shadows are extremely important to me because they also are s/r zones via the range of the shadow. In my opinion....the most reliable candlestick patterns (there aren't many) involve shadows. Mark (a.k.a. NihabaAshi) Japanese Candlestick term