Wednesday, 29 June 2011

Getting Market Clarity

The so-called Chinese curse, "May you live in interesting times", has become a reality for us all. There has never been anything like this in the financial history of the world. GREAT OPPORTUNITY!!!

As more noise and volatility enters the markets, there are a number of things that I do with my charts to see things more clearly.

My two EMAs are my primary trend identification tools but the bigger CCI also helps. I can up the 45CCI to a 135CCI to get rid of chop. I can also change the range bar or Renko size, either up or down. Making these changes together often gives a little more clarity. This is a "suck it and see" approach and I try some settings, run a back test and then make my choices. THE BASICS STAY THE SAME. My EMAs never change as they have been proven over many years. I may switch backwards and forwards at times depending on time of day or type of day - like using a magnifying glass.

The CCI is just a fancy MA - have a look at the formula. By changing the big CCI periodicity upwards,  I'm looking at a higher time frame trend. By changing the the range bar/Renko size, I'm managing the visibility of vertical development. Dropping to a smaller range bar/Renko can help find a pullback when the larger bars don't reveal them. See today's charts.

You can see my trades on the 2 point box Renko. Lots of trades but choppier. The available trades on the 5 point box Renko were far fewer but targets were bigger and the chart looks easier to trade. The stops, however, were larger too. It's all a trade off.

Having said all this, if the chart is unclear, I don't trade it. There are hundreds of markets available to trade.

1 comment:

  1. Thanks for the post in response to last comment. I have found running a larger range bar - say a 5 period - (with correspondingly larger "big" CCI) and comparing it to a smaller period renko - say a 3 period - (with smaller "big" CCI) helps identify trends a little faster. In essence, the renko becomes like another indicator to identify entry, exits and momentum. You the man EL!