FOREX Sperandeo Method
Trendlines - Method Sperandeo
subjective opinion , or "vydavanie desired movement for real" - the main problem of many traders in the Forex market / FOREX. Presented in this article trading strategy "Method Sperandeo" will build a more objective trend lines and use them to identify reversals in the forex market .
Forex traders are engaged in the construction of trend lines to mark directed movement of prices and find the moment of changing the direction of the current trend .
order to carry out the construction of trend lines are much more objectively, I would suggest using a step by step method, which is offered by Victor Sperandeo (Victor Sperandeo) . A very simple method trendline Sperandeo was named "Changing trends in one, two or three" (1-2-3 change of trend).
process of constructing a trend line by the method "Changing the trend in the one-two-three":
descending line joins the trend consistently lowers the resistance, or in other words - price highs. rising trend line joins successively higher points of support or in other words - price lows. By basic definition, the trend line should be drawn through at least two maximum or minimum of two . But the whole difficulty in the construction begins as soon as the trader needs to determine what a maximum or minimum needed to carry this trend line.
If we follow the method Sperandeo , descending trendline connects successively lower price highs, which precede the lowest low of the price movement. And on this basis, the rising trend line connecting successively higher lows, which precede the highest high of the investigated price movements.
Fig. 1 shows examples of correct and incorrect construction of a downward trend line.
trend line drawn from point A to B, was conducted properly, as point B corresponds to the maximum preceding the lowest low of downward movement. The trend line, which is held from point A to C, was built wrong, because point C was formed much later than the lowest low of the chart. Soon it will be clear why it is so important to the local maximum preceded the current minimum price movement.
change of trend "for one, two or three"
In this approach, we can speak of a trend change only when three conditions (see Fig. 2):
1. The line of the current trend must be broken - a point
2. Price on the chart, should once more test the global minimum or maximum, as was the case in point 2.
3. Price on the chart to break the level which corresponds to the local maximum or minimum, prior formed again (in the second test) the bottom or top of what we see in point 3.
It now becomes clear, why the trend line should be built that way , that it passes only through those local maxima, which previously preceded the minimum price movement on the chart. If we used a trend line, which was held from point A to C (see Fig. 1), the time trend change has already completed a half, and we only got a warning.
But if the price would go lower and still made a lower low in the month of April, in this case, we would enjoy this line of speakers, because they now have it connected highs that preceded the minimum price movement .
As we have said before - a trend line is carried through several consecutive points to increase or decrease the resistance or support. Then, after breaking through the consideration the price trend line is re-tested minimum (or maximum) price movement on the chart. In other words, we are waiting for the completion of the formation of figures " double bottom " (or "double top ").
Using technology trendline on Sperandeo:
There are several variants of this approach. One strategies proposed by Victor Sperandeo , is that the asset purchase produced during re-test trend line (point 2 in Fig. 2), and stop loss is considered a minimum price movement . Then, after the price has passed the point 3, the trailing stop-loss move just below the level that corresponds breakout point considered a local maximum.
In addition, defining moment of change in this way the trend can also make decisions based on other techniques. For example, if you were registered breakout downtrend on the daily range, you can use it as a signal that you are using it to open a long trading position. Repeated testing (point 2) - a critical moment, and only after the price was a success point 3, you can open an additional long trading position.
If the current trend reversal took place is always so beautiful, as was shown in Fig. 1, trading would be the easy thing. But often, a movement that corresponds retested price trend line tends to be very small, as you can see in Fig. 3. In this case, the price gap down broke the trend line rising (point 1). Then the market price again tried to test the maximum, but could only partially fill the gap (see point 2), and again fell below the support level (see point 3).
Fig. 3. The re-testing - a shallow
If you examine a large number of price charts, it becomes clear that the ideal market price spreads are very, very rare. Often the price on the chart or immediately changes its direction of motion opposite to her, or outside the scope of consolidation. In this case, you need to go to the same analysis, but on a larger time interval. If the graphs in the range of D1 does not get an accurate idea of ??the direction of the current trend, you should use a weekly or monthly intervals. Fig. 4 reviewed by an example of a reversal of the upward trend on the monthly chart.
Fig. 4. Reversal of the trend on the chart
little more objectivity:
The trend is nothing but a collection of successively higher points of support or lowering the points of resistance. The construction of trend lines through them, the method eliminates the influence Sperandeo not an objective opinion on the analysis. In addition, great importance has the last resistance (or support), which precedes the global maximum (or minimum). Break the trend line is an important event, and further price movement after breaking through these levels, which complies with these key points of support or resistance, is also an important confirmation of trend change in the market.
These movements on the chart can be compared with the stairs. Until such time as the previous step is not completed, the market still can not determine the direction of his future movements, and often it is in the area between the global maximum (or minimum) and predschestvuyuschey point of support (or resistance).
Based Technology Sperandeo, local maximum, which is located between the global minimum and its re-testing - there is a potential breakout point. The breakthrough at this level - indicates the ascending direction of the market. And so, if there is breakdown of the level that corresponds to the point of resistance between the global maximum and a retest, the market price starts to fall. Well, if these levels are important not punched, then the market are most likely located in the old trading range and the trend will resume the fastest.
B. Sperandeo has developed a very important rule trendline and determine when to change it . He proposed a way to make this element of the analysis of price charts more objective. Of course, there are small movements repeated testing, and those that allow this to form a "double bottom" or "double top", and we can not predict the magnitude of pre-rollback when re-testing.