Category: Technical Analysis - Page 11

Trading models based on channels: Wolfe Waves

Price channels are a clear example of resources that can be used to define both entry points and exit points. In addition they allow to analyze the current situation in the market in such a way that they allow the trader to make better decisions. Once the channel is formed, we can obtain a lot of information related to the price movement inside the same channel, however the problem occurs when the market does not move in a defined channel, a situation in which it can be difficult to detect breakout points and therefore the reaction of the market can take us by surprise.

For these cases the investor can use the so-called “advanced channel models“, among which we can highlight the Wolfe Waves, which can help us to identify potential entry and exit points of the market based on channels, even when in appearance there is no clearly defined channel.

The Camarilla Equation – Formula and Definition

by rcanessa

The Camarilla Equation is an interesting market analysis tool similar to the pivot points but is little known among the majority of traders. For this reason, in the following article, we will explain in detail about the fundamentals and use of this tool.

Camarilla equation was discovered by the trader Nick Stott in 1999, and until recently it was a secret formula to determine price levels similar to the pivot points, but according to many traders, these levels are more effective. It assumes that the market has the tendency to revert to a point of balance that might be called midpoint, pivot, and so on. Based on this idea and using the formula of the equation is possible to calculate 8 relevant price levels in which is likely to produce changes in the market trend.

As mentioned at the beginning of the preceding paragraph, the Camarilla equation was secret until it was somehow released. The equations for calculating the 8 levels are:

Stages that characterize a bullish or bearish market

by rcanessa

The phases that characterize the bull and bear markets are as follows:

– Bull Market

This type of market is produced when the advance of prices reaches a level higher than the previous advance. Likewise, when no secondary trends become established below the latest peak. We can identify three phases in a bull market:

Accumulation phase: At this stage falls occur in the market as the investors sell because the economic news are mostly negative. There is a moderate activity that begins timidly to recover.
Recovery or expansion phase: In this case the activity begins with a modest progress and it produce a shy rising in market prices.
Distribution phase: There is great activity in the market. There are major upward movements in market prices and trading volume and investors take long positions without objection.

Stochastic RSI Indicator

by rcanessa

The Stochastic RSI was developed to increase the sensitivity and reliability of the regular RSI indicator especially when the trader wants to trade during periods when the RSI is in overbought/oversold condition.

The creators of this indicator – Tushar Chande and Stanley Kroll – explain that very often the RSI oscillator remains at the levels 20 and 80 for extended periods of time without even reaching the overbought and oversold areas where many traders look for opportunities to enter the market.

Therefore, when the RSI is combined with the stochastic oscillator, a new indicator, the Stochastic RSI, offers better and clearer signals for opening and closing positions.

Elliot Waves Theory – Description and Features

by rcanessa

Elliot Waves Theory – Offering Great Predictions!

The Elliott Wave theory developed by Ralph Nelson Elliott (1871-1948), is based on the principle that price movements of financial markets can be described through the waves that form it and the study of the graphic formation of these waves. It is based on Dow theory and is a significant advance on this. In other words, it analyzes the different movements or «waves» in any period of time, both the bullish and the bearish waves.

After the death of Elliott, this theory was almost forgotten and years later was AJ Frost and Robert Prechter who with his book Principles of Elliott Waves (1978) made it popular.

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