Sentiment Indicators: Renko, Price Break, Kagi, Point and Figure
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Sentiment indicators can help traders cope with information overload. Renko, kagi, price break, and point & figure indicators focus on price action to reveal market extremes. Technology has given these techniques a dramatic boost, resulting in better analysis, new trading tactics, and greater precision in entry and exit points. This guide gives traders a one-stop overview of how to use these little-known indicators to shape trading strategies. The book covers the advantages of each tool and when to use one tool rather than another. Traders will come away with a thorough understanding of these chart techniques.
price break charts for clarification. The price peaked on July 14, 2008 at 146.94. Let’s assume that between July and September a trader still wanted to trade crude oil going long. Here’s how the trader would have used price break charts: At any point, by looking at the price break charts, the trader would have counted back three blocks up and selected a buy stop order above the third previous high. On only two occasions, August 21 and September 22, 160 Line Break Series Last Price: 46.47 Next
Visual Correlation of Instruments One conventional approach is to use what can be called contemporaneous visual correlation. This involves scanning the charts of both instruments to determine visually if their movements are synchronous. There are many examples of such correlations. S&P 500, Dow, Cash, and USDJPY The relationship between the equity markets and the yen, shown in Figure 6.1, is an important intermarket correlation that traders follow. These correlations can reach over 90 percent.
in the sentiment. The bearish sentiment is quantifiable, with powerful sequences of consecutive new lows and intermittent retracements. A trader looking to be bearish on an options play would like the conditions depicted in Figure 7.2. The price action demonstrates a retracement up with eight consecutive new day highs. The trader would count back six lines to 829.39 and select a strike price right below it for selling a put. If the trader was also considering a spread, the location of the other
Perhaps it is also the tendency of people to conform to the norm instead of exploring new areas. Despite this, taking another look at Kagi charts is worthwhile because, as we will see, they have the potential to shed new light on key price landmarks for trading. To date, a primary use of Kagi charts has been limited to scanning the charts for key patterns. This approach works well, because it results in identification of relevant support and resistance lines. However, a risk of simply scanning
aspect of a market that is perhaps one of the most complex entities ever evolved by human behavior. Perhaps the most useful approach that has arisen is the characterization of price movement as signatures of fear and greed. In reality, these terms are generic categories that try to capture variations in the emotions involved. Market sentiment, risk appetite, and risk aversion are among the most frequent terms used to unpack the meaning of emotions. We are all familiar with characterizations, such