Many novice traders like to complicate trading.
At first, they usually trade on the advice of friends or co-workers, or on something they have heard or read in the news.
If they survive a hit that is likely to get in their capital, they may soon discover technical analysis as the best way to read the price action.
However, often their beginning in technical analysis is to capture some common graph indicator, such as stochastic, and to think that they have found the Holy Grail to wealth. Unfortunately, this bubble will burst quickly when they realize that this and any other indicator only works at a certain time and with a certain adjustment of parameters.
If it happens to be like you and you’re still in the game (I know it’s not a game. It’s a speech figure), then there’s still hope for you. Let me introduce you to the “Trend Line Indicator” by W. D. Anna, which today can be called a swing.
No matter what market you want to trade, there will be a number of swings and tops that shape trends to varying degrees. These fluctuation patterns occur at any time frame, and they are major components in determining whether a market is bullish or bearish trend.
The trend line indicator, or swing chart, exists in several varieties. You can design a swing for 1, 2 or 3 bars (I wouldn’t mind going beyond that).
The 1 bar fluctuation chart is extremely short and good for fine input settings. However, to determine the trend of any effect my recommendation would be to swing at 2 bars. In addition, it would not hurt to get a broader picture of the trend, also creating a 3-bar chart swing.
To construct the diagram of fluctuations on 2 bars is simple enough. Starting from a clearly delineated bottom or top, you will draw your turn line (trend line indicator) either up for each new high (starting with the second consecutive high-high) or down for each new low (starting with the second consecutive bottom) low) . To demonstrate, let’s start with a clearly delineated bottom to draw a line of a rotating chart at 2 bars.
For a 2-bar chart, we need at least two higher highs in order to advance our line to a new high on the chart. So let’s say our starting bar (with the bottom bottom) is bar # 1. The next bar (# 2) makes it high-high, but not low-low. Our high-high number is only one, so we are not moving up our swing (trend) yet. Now the bar №3 is also making a higher-high, and our minimum bar №1 is still holding. So we can move our line to a new high # 3.
As each new bar makes a higher maximum, we can continue to move up to this new maximum. When the next panel makes a lower-high and a lower-low, our line does not move up, and our number down one. If the price resumes moving up and makes another high-high than our highest high (in this example it will be a bar №3), our line will continue to a new high and every higher-high until we actually get two lower – allows you to change the direction of the line.
So let’s say that once we’ve moved our swing line to each new maximum, we instead get a bar below the minimum. Let’s call this line No. 5. When we move a string to each new maximum to that new minimum, our zero-minimum starts with one. If we get a bar (# 6) that makes even lower-minimum than minimum bar # 5, before making another bar, and even higher-high than bar # 4 (which was the last bar higher when the line was moving up to), our lower-minimum number becomes two and we move the row down from the last higher-high (bar # 4) down to the minimum bar # 6. Now for each bar that makes the lower minimum than the minimum where it is now our line (currently bar №6), we will move the string down to the new minimum.
The point here (pun is not intended) is that we need to count the two highest maxima to start moving up, or counting the two lower minima to start moving down. Once the calculation has been done, we could continue in that direction for each bar that exceeds the price where the line is now located.
There are cases when the bar does not go higher, higher or lower low (the so-called inner rod or “inside the bar” VD Anna). Since they do neither higher nor higher nor lower low, do nothing. The line remains in place.
There are also cases where the bar makes both a higher and a lower minimum (remember that we compare each price bar against the previous one to determine if it is higher or maximum). This bar is called outside. The case with these bars depends on the current direction in which the line was moving. If the line moved to each new top-high level, you would again move the line to the new high of this outer panel. On the other hand, if the line is moving down for each new lower minimum, you will move the string down to the minimum of the new lower minimum of this outer bar.
It should be noted that the outer bars are that even though you will be moving your line up or down (depending on the current direction of your drawing lines), you should count the opposite side of the outer bar as the number one opposite direction . Thus, if the price goes in the opposite direction and exceeds the opposite side of the outer panel, the count becomes two in the opposite direction, and the line must move from the outside (where it sits) to the bar that made the count. of the two.
For example, let’s say we moved the line down to each new bottom low (hence the direction is now down). Then the outer bar forms both lower-lower (lower than where our line is now) and higher-high (higher than the previous one). Since our direction leading to this outer bar has been omitted, we move our line down to the minimum part of the outer panel (since it is actually the bottom-minimum). We also want to assign the highest-highest this outdoor bar with a score of one. Now that the next bar makes it higher-higher than our outer bar, the count goes to two, and the line moves from the minimum of the outer bar to the new higher-high.
Once you’ve done that with the price chart, you’ll see the peaks that are the swing of the top and bottom. You will use these peaks to determine the current market trend.
For example, the bullish trend is a model of higher swings. As long as each swing peak in the market is lower than in the past, the bull trend is valid. On the other hand, the bearish trend model consists of lower pendulums and lower swings. So, no matter where these swing bottoms or tops are formed relative to the previous one, you can immediately identify the current trend.
WD Gann said that exceeding the maximum swing at 2 bars this indicates higher prices. He also said that if the minimum oscillating bottom is lowered to 2 bars, it indicates a reduction in prices.
A trader should not only focus on trading in the direction of the trend, but these swings can also help determine where to adjust stop loss orders. For example, if you are long due to a bullish trend, moving the stop loss below each higher swing bottom protects your position in the event of a lower lower swing level (as this indicates lower prices).
Of course, nowadays there can be a lot left on the table to use these 2 bar swings for stop loss orders. Consider this as an initial guide. One option I can use is to draw a trend line under two or more swinging bottoms (if long), or through two or more swing tops (if short) and use the slope of that trend line as a guide to adjust my stop. loss.
Learning to identify swings and bottoms is a valuable tool for any trader who wants to read well in the market. This is stated in several lessons of W. D. Anna, for it is indeed so important. In my work, everything revolves around swings.