In the case of an ascending dominant channel, its RTL is on the right hand side as you face the channel. In the case of an ascending retrace as you described (that follows and ascending dominant at a slower pace), I consider its RTL on the left hand side. So after a channel that has its RTL on the right hand side always follows a channel that has its RTL on the left hand side, and vice versa.
Continuing with the discussion of tapes, the snippet of price action illustrated in the attached occurs occasionally (actually, more than occasionally). What we see is the end of a pt. 3 channel and the birth of a new one in the opposing direction. What can happen is the tape that breaks out of the first channel has light or moderate slope. Without any interruptions, the slope steepens, yielding a pace increase in the tape. The corresponding volatility expansion makes the tape wider and wider until it no longer capture the price action it's intended to. Without examining the correctness of the approach, my hack in this situation is to push the new point 1 out to the right as the channel unfolds so that the tape will steepen. As I understand it, tapes are intended to capture intrabar movements in price. Unless we do something, our original "widened" tape completely absorbs a point 3 channel, and our annotation has become incorrect. We desired to see a 3-step change in pace. Instead, we see a 4-step (in the example, it's slow-fast-lateral-fast). By pushing point 1 out and steepening the tape, we accomplish what we intended: to find the point at which the tape is broken, and a pace decrease has taken place. Now we have a point 2, and we move on from there. Thoughts, comments, welcome. RT
Me again ... 1. When I have doubts I go to a finer resolution, i.e. 1 minute, that usually clarifies the turning point, the inclusion or exclusion of a bar end. 2. There is always some noise. Some examples: sampling rate, finer fractal contribution, high impact rumors / news.
There are at least 2 definitions of tape that I have read. The first and most meaningful is the tape that describes the current pace of the market. This is the channel that the price bars fill, in other words the volatility in each bar period, approximates the channel width. This helps you to determine the pace so you may use the fractal which is taping as your trading fractal (as soon as you have established this). AKA the Tampa Tape (r.i.p.). Doing this should give you the "two tapes to point 3" that you are seeking and help resolve to the correct resolution. The other kind of tape, used here, is the ASAP channel constructed from 2 adjacent bars. It is only meant to be a temporary construct to establish the right side and is unlikely to continue to be valid for more than a few bars. While I am here, in response to cnms2 - retrace means "to go back over". Therefore a L2R traverse that establishes new ground cannot be considered a retrace. Also the right side of price bars may be smooth and the left side may be rough but left is never right.
Hi, I place a lot of emphasis on tapes. In your first two example a downtape is broken to the upside. The third example is lateral movement. regards, Ivo
Clearly, when the bars overlap initially we have lateral movement. Intrabar, price moves from a sym pennant to an ftp and then to continuation on reducing volume. This still appears to me as one case of continuation on reducing volume and the other as a reversal on reducing volume. Volume on the two preceeding two bars appears identical so how does this help me anticipate the difference between the bar that continued and the bar that reversed? http://www.elitetrader.com/vb/attac...?postid=1702847
Risk/reward is not a derivative of prediction but of price and volume. Increasing price (either long or short) and increasing volume carries the best risk to reward.
I don't think your annotations would become incorrect if your original "widened tape" absorbes another channel. Channels overlap, so this would even be expected. I would have left in the old "widened tape" and would have looked for another p1 and p3 to more accurately reflect the change in pace. What I don't understand is why you would push out the p1 on your new channel. I have never used the break of a tape criteria to mark a point one, nor do I believe your reasoning takes into account that your old p1 (one bar back) is a breakout of a down channel.