Unholy Grail to Success

[saliva]

Quote from yayt:

Why do Keltner & Bollinger divergences usually indicate a reversal? I mean, considering the formulas of each, what is the underlying reason behind this?

Although I'm somewhat familiar with their calculation, I have never reasoned why divergence might indicate a reversal. I just know from many years of experience that there's a high degree of correlation between the two (at least in terms of momentum, or the lack thereof).

Quote from Spxdes:

From your example chart, it seems as though you don't really need the keltner bands. Rather than when both bands are touching to show momentum strength, couldn't you just assume strength is there when price is hugging the bollinger bands?

Also, when the keltner bands and bollinger bands diverge, isn't it the same as price failing to touch the outer bollinger band?

Fair enough. But, keep in mind that prices don't always hug the BB line in such a clean fashion. Sometimes, they go up or down in a step manner. Yes, a divergence will obviously occur when price moves away from the outer edge, but it requires more than one price for its cause. More often than not, the next price usually shoots up again to hug the BB line and the Keltner line will continue heading higher. By using the Keltner, I find it easier to see the changing sentiment underlying the shift in a given trend.

Anyway, I'll be happy to discuss the merits of using Boll/Kelt elsewhere, but it really lies outside the scope of this thread.

 

[saliva]

TRAP: Perspectives in Micro (Intro)

In order to fully appreciate the concept of Micro, I suggest you review the earlier post written about Price Swing. In rudimentary terms, Micro is a cluster of price swings. A price swing starts with the analysis of support and resistance. The support line is used as the base and the resistance, once it has been penetrated, becomes the termination point of a price swing. Each price swing is then assessed on the basis of momentum to determine a given trend.

[edit]
Important note: Allow me to be blunt. I don't like to bitch anymore than I have to but there's a good reason why this thread was written in a chronological order. If you're new to this thread, start from page 1 and don't skimp on details!

 

[ram]

Great thread. Thanks, saliva.

 

[phineas j. w.]

Saliva,
When you condense/blend the 5 minute bars from each price swing, into a single candle formation. Do you just rough out the OHLC of the candle formation OR do you use:

. . O: opening price of the bar at the beginning of the Price Swing
. . H: High of the price swing
. . L: Low of the price swing
. . C: Closing price of the bar at the end of the Price Swing

Wasn't quite sure from you earlier chart example.
Thanks for sharing,
Phineas

PS: ignore if I'm jumping ahead!

 

[saliva]

Quote from phineas j. w.:

Saliva,
When you condense/blend the 5 minute bars from each price swing, into a single candle formation. Do you just rough out the OHLC of the candle formation OR do you use:

. . O: opening price of the bar at the beginning of the Price Swing
. . H: High of the price swing
. . L: Low of the price swing
. . C: Closing price of the bar at the end of the Price Swing

Hi Phineas,

It's really quite simple. In order to blend two or more candlesticks, you need only the following information:

• The open of first candlestick
• The close of the last candlestick
• The high and low of the pattern

 

[saliva]

Candlestick & Momentum

 

[Anna K.]

great thread, thanks. subscribed.

 

[saliva]

TRAP: Micro & Trendline

As noted in the above post, The shelf life of Micro begins with one S/R and ends on another S/R. Hence, S/R provides a pair of coodinates or values (x₁, x₂) on an x-axis. Trendlines, on the other hand, give us a sense of where the high and the low of the price swing will likely occur. Hence, a trendline or a channel (two parallel trendlines) provides a pair of coodinates or values (y₁, y₂) on a y-axis.

When it comes to price swings, the single most important factor to remember is the flow of price rhythm. Here, you are looking for a consistency of both momentum and time (vertically and horizontally). Everything should flow right on through without interruption or uneven skip. Consider the following chart.

Now the same chart is overlayed with channels. As you can see, x and y coordinates coupled with price rhythm provides a better representation of price swings. Also I'm throwing in a pointer on how best to draw a channel. It appears that not a whole lot of traders around here understand how to draw a proper channel.

[edit]
Important note: Allow me to be blunt. I don't like to bitch anymore than I have to but there's a good reason why this thread was written in a chronological order. If you're new to this thread, start from page 1 and don't skimp on details!

 

[saliva]

That pretty much wraps up my short introduction on PMT and TRAP. Don't worry though, this ain't the end of the discussion. From here on out, I will provide more in-depth examples into each of the specifics outlined in both PMT and TRAP. If you have any question regarding any of the things mentioned so far, feel free to ask.

 

[tonyww]

Hey Saliva, enjoying the thread. I have come across one particular problem with trendlines on short trends, by the time you have a couple of reference points the trend is often half over and especially if you are waiting for the "next" high point to draw in the parallel line rather than taking it from the first high point. I may have mis-understood you there.

I am sure more this will be covered as you unvail more detail, but just wanted to make an observation.

TWW