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I've been noticing that when it forms a "shelf" like that, buying a move out of the top or the bottom is pretty reliable. Just may be onto something here. Keep up the good work.
Hondo/Lolu: Are you drawing those redline from the bars or the indicator? I assume it's the bars because the indicator would distort the SR as defined by the price action by a few ticks. Sort of like built in slippage.
You can break these rules and make-up your own rules. For example, I broke the rule of chart type by using renko and sbsrenko chart types (hondo's rule is a 9-range chart), and that is what I'm going to work on.
I agree with Lolu, you can make up your own rules. I trade the 6E which happens to move in 10's quite often, so I chose a 9-range chart. Each bar is about 10.
Next, I made the line width on the indicator equal 90 simply because it was a good bit wider than 10. The idea is that price action that occurs behind the indicator is basically "noise".
(I'll see if I can post the ZiNonLagma file in the downloads area)
So once you've set up everything as you like it spend a little time looking at several days of data. It helps if you squint to blur the screen. Now you can see moves where the market has committed to one direction or the other. And that's what it is really all about. Identifying a commitment of the market.
Well, I don't know exactly yet, but I do know a few basics:
1] Determine overall trend
2] Only take trades in the direction of the trend
Next, define some rules for entering. Right now, one rule I've made is to identify spots where the indicator makes a "shelf". I am defining a "shelf" as at least 4 indicator bars in a row (they are really hash marks as line style is set to hash). Then I draw a red line across the top or bottom of the shelf, depending upon trend. If the trend is up, the line is drawn across the top of the shelf.
Another rule I'm using right now is to place a buy stop above the line (up trend). The buy stop entry point is 3 ticks above the red line. In other words, I'm buying out of the top of the shelf in a up trend.
So it's the indicator, not price bar, as the main reference point. Although that doesn't strike me as a comfortable thing to do, you;ve given me an interesting idea and I'm going to test it a bit next week. My impressions are this may have some success with slower bars but who knows? Avoiding noise is always a challenge.
I'm going to make the bars totally transparent and trade off the fractals from the indicator, but not necessarily the ZNlagMA. I'll post a chart or two on another thread to keep this one clean for you.
