Mechanical trading systems
Most demonstrate an example
of MTS can be on the system A. Elder.
The system of
"three screens" Al.
Elder
The idea of
the "three screens" based on the understanding that the market is
moving waves, like waves in the ocean. Each
contains a powerful wave of his smaller waves.
They, in turn, provide for themselves even less.
To play successfully you should always choose the moment to enter,
when all the waves travel in one direction.
First Screen
Determines the main trend.
As it is taken, for example, schedule a weekly
scale.
Determination of the underlying trend is based on the weekly chart
and the MACD-Histogram. If the histogram is reduced, it deals only
with properties for sale. A sell signal would be stronger if the
histogram is below zero. When does the upward movement of the
histogram, in comparison with the previous - buy. The purchase will
be more reliable at a value of the histogram above zero.
The tendency to "first screen" like the tide. And
against the tide is better not to swim.
Second Screen
Defines the medium-term trend.
As it is taken, for example, the graph on the
scale daily.
Defines the medium-term trends using oscillators. Oscillators are
stochastic, RSI and other indicators are constructed on the daily
chart. If the first screen shows a bull market, and the oscillator
is in oversold territory, it is a good signal to buy. By contrast,
the weekly bearish trend in the overbought oscillators on the daily
chart, we consider the possibility of selling.
Signals a "second screen" - the wave.
The
system of "three screens" consider only those waves that do not
contradict the boss.
The Third Screen
Determines
short-term trends, breakthroughs fixing prices for the highs and
lows of the previous day.
If the price makes new highs, compared to the previous day,
week-long trend of increases, and daily oscillators are dipped in
oversold territory, it enters a buy signal. If the price makes a new
low in comparison to the previous day, week-long trend of declining
and daily oscillators have risen in the overbought zone, it's time
to order for sale. "Third screen" defines the
swell of the market.
"Ray Elder" or "Stock X-rays»
Elder-ray is an additional tool to the principle of three screens.
It is designed to measure the force of bulls and bears at any given
time.
Calculation of the "Elder-Ray" is based on the following principles:
• Price is an agreement about the cost between the three groups of
traders - the seller, buyer and free traders;
• moving
average is the averaged value of the agreement;
• the highest price is the maximum power of bulls
during the analyzed period;
• lowest price is the maximum power of bears during the analyzed
period.
Elder-ray is out of the windows:
• 1. In the first graph of the prices of
built on it an exponential average of about 13.
When the mean is increasing - a sign of the bull market.
With decreasing EMA - bearish trend.
• 2. In the second graph
is constructed Bullish Force as a histogram. The formula for
calculating the strength of bulls:
Bulls Power = High - EMA, where:
High - the highest price for the period;
EMA - exponential moving average.
When the maximum price is above average,
then Bullish Force is above zero, which is a confirmation of bullish
trend. Otherwise, the bulls are weak.
• 3. The third graph is determined by the
strength of the bears (as well as a histogram):
Rears Power = Low - EMA, where Low - the lowest
price for the period.
If the minimum bid is below the EMA, it signals a strong bearish
trend. Otherwise, the power of the bears is
minimal.
Basic signals for
Elder-ray
• Frequency of purchase.
EMA should grow, and power indicator bears is
below zero. The best time to buy is the period when the power
indicator bears falls below zero, and then immediately got up. If
the top of the price confirmed by new peaks Bullish Force, it is a
good confirmation of the bullish trend. Strong signal will also be
divergence.
• Period of sale. Sell
when the EMA is reduced, and Bullish Force is above zero. Bearish
trend is confirmed by a parallel decline in bottom prices and an
indicator of force bears. Strong signal will also
be divergence.
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