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>Date: Thu, 29 May 1997 21:13:32 -0700
>Reply-To: realtraders@xxxxxxxxxxxxxxxxxxx
>Sender: owner-realtraders@xxxxxxxxxxxxxxxxxxx
>From: "schong@xxxxxxxxxxxxxxxxxx" <schong@xxxxxxxxxxxxxxxxxx>
>To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>Subject: Re: Gann Swing Chart(using Time, explanation)
>X-Mailer: Mozilla 3.01Gold (Win16; I)
>
>James Charles wrote:
>>
>> I just downloaded a wonderful ela file that plots Ganns Lines and I
>> don't know whom to thank for it because I lost all my e-mail[again].
>> I want to thank the author.
>>
>> Also, I shyed away from Gann & Fibonnacci, and I would like to learn
>> them now. Can anyone share how one can trade with, or make best use of,
>> this very nice indicator?
>>
>> James
>
>
>James and everyone here's the transcript of the program written
>in laymen's term :-
>
>
>An explanation of the algorithm :-
>----------------------------------
>
> upswing
> -------
>
> If we are in a upswing(trending-up) as long as prices
> keeps making new highs relative to the current swing the
> swing line is updated to reflect the new high. Lower lows
> during an uptrend at the same time a higher high is made
> is ignored, a situation that can only occur if we have an
> outside bar. Insider bars are completely ignored.
>
> The decision to consider the possibility of a swing reversal
> is only done if the current bar has not made a higher
> high compared to the highest high recorded so far during
> the present upswing.
>
> For the swing line to reverse around it must satisfy
> two conditions, using a 2 bar swing :-
>
> i. 2 consecutive unbroken lower lows must exist
> ii. the lows in (i.) must ALL be lower than the
> low of the highest bar for the current upswing.
>
> NOTE: The highs are not considered in this situation.
>
> downswing
> ---------
>
> If we are in a downswing(trending-down) as long as prices
> keeps making new lows relative to the current swing the
> swing line is updated to reflect the new low. Higher highs
> during a downtrend at the same time a lower low is made
> is ignored, a situation that can only occur if we have an
> outside bar. Insider bars are completely ignored.
>
> The decision to consider the possibility of a swing reversal
> is only done if the current bar has not made a lower
> low compared to the lowest low recorded so far during
> the present downswing.
>
> For the swing line to reverse around it must satisfy
> two conditions, using a 2 bar swing :-
>
> i. 2 consecutive unbroken higher highs must exist
> ii. the highs in (i.) must ALL be higher than the
> high of the lowest bar for the current downswing.
>
> NOTE: The lows are not considered in this situation.
>
>
> further discussion
> ------------------
>
> These rules are not perfect. They are designed to
> filter off noise and bring out the trend in the
> market movement clearly.
>
> There could be situations where you can find
> justification to override the swings, in your mental
> mind of course, .eg when we have a wide ranging day.
>
> I've incorporated the filter (ii.) which is not in
> Gann's original material. In most cases the result
> would be the same with and without filter (ii.). The
> difference would occur only when we have a number
> of inside bars within a bar, lets call it SWING PIVOT,
> which is also the swing top or swing bottom.
> Filter (ii.) essentially says buy/sell on breakout
> of this SWING PIVOT as long as it's in the direction
> of the prevailing trend.
>
> An UPTREND is present if we have higher swing tops AND
> higher swing bottoms and likewise a DOWNTREND is
> present if we have a lower swing tops AND lower
> swing bottoms. The market is trendless within this
> context if we have anything else. This method encourages
> the trader to trade with the trend.
>
> A way to enter a trade during an uptrend according
> to the definition above, upon confirmation of the
> swing bottom, is to look for a 1 bar
> reaction if we are using a 2 bar swing and to go
> long once the high of the 1 bar reaction has been
> taken out. Further opportunity to go long exist
> when the high of the most recent swing top is
> exceeded, a pyramid opportunity. The strength
> of the trade can be accessed by comparing whether
> the swing bottom overlaps the previous alternate
> swing top. Ray Barros posted an article on how to
> gauge the type of trend to the Realtraders forum.
>
> Sometimes the swing bottom can be anticipated before
> it is confirmed using retracement studies, turning
> point studies between the swing tops and bottoms but
> never lose sight of the prevailing trend.
>
> Because we have trend within trends and so on
> it is good practise to get confirmations from
> different time-frames using the rules above,
> .eg 5, 10, 30 minutes time frames can be used with the
> shortest time frame used for entry.
>
> However, it my personal opinion the greatest
> benefit of combining more than 2 time frames can only
> be achieved if you are an intra-day trader or a hybrid
> of intray-day and position trader. Anybody wants to
> confirm this point?
>
> You will notice that if you were to follow all
> the rules above you could miss the first leg
> of a new trend in the opossite direction which
> could be substantial.
>
> This is where Gann's "OverBalancing of Price and Time"
> could help. The market could hint that the trend
> is about to terminate by looking at the size of
> reactions within trend.
>
> This is the reasoning, in an uptrend as the market
> actions progresses the size of the reactions in
> range and duration generally gets smaller and smaller.
> In the initial stages of the development of an uptrend
> comparing the reactions to future reactions there
> are usually more bears relative to subsequent
> reactions which would account for the larger reactions.
>
> As the market developed further some of these bears
> would be converted to bulls. This process continues
> until we have a reactions that is larger in magnitude
> in range and/or duration. This first instance when
> this occurs is an indication that the market could
> be reversing the trend. When you see a signal day
> together with "OverBalancing of Price and Time" it
> if further confirmation that a good top has formed.
>
> NOTE : There is quite a bit of flexibility in
> customising this method of trading to suite
> your personality, .eg filtering the type
> of trend using Ray's classification.
>
>I would appreciate it if I can get feedback with how you
>guys are getting around with this technique in your
>choosen market. I acknowledge that there might be
>further improvements that can be introduced to further
>reduce noise without sacrifising too much profit away.
>
>One thing that comes to mind is to allow a mininum points
>filter which can be calculated based from the swings
>generated by the program and calculating the average
>swings range minus 1 standard deviation. This would
>be a much better approach to implement rather than
>trying to increase the "filter" from 2 to 3 therefore
>optimising noise reduction with mininum profit sacrifise.
>Get my drift.
>
>cheers,
>
>Clement Ong
>
>
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