Blue showing an Up Trend.
BUY LEVEL
Add 1/2 of Bar length
This bar is also called the
First Break Out Bar.
ë
FIRST
Now add 1/2 the length of
BREAKOUT
BAR
the Break Out Bar to obtain
the BUY LEVEL.
Since the First Break Out Bar, the XTL did not a) detect an opposite Trend and b) the Stop was not taken out. Therefore, a long (BUY) position is established when the market trades through the BUY LEVEL.
There are a number of
ways to enter. The
March 95 D-Mark
most ideal would be
as of Mar 2, 1995
to enter on a Buy Stop
35 Per XTL
at the BUY LEVEL.
Blue Bars
î
Note: Prior to trading
through the BUY
BUY
LEVEL, Neutral
î
(Black) bars may be
displayed. Black bars
ë
ë
FIRST
do not alter the trad-
BREAKOUT
BAR
ing strategy.
T-137
GET
Applying Technical Analysis
USING STOPS:
Although there are a number of ways to handle Stops, here is a method we have found useful. Set a stop the length of the Break Out Bar below the low of the Break Out Bar.
We suggest you use the
training mode and find
a STOP method that fits
BUY LEVEL
your trading style.
ç BUY
Add 1/2 of Bar length
If you feel the Stop is too
small, then use twice the
length of the Break Out
Bar. Likewise, if you
ë
Subtract the length of
the Break Out Bar from
feel the Stop is too large,
FIRST
BREAKOUT the low of the bar.
then use half the length
BAR
of the Break Out Bar.
STOP
For example: The First Break Out bar has a range of High=7650 and Low=7630. The length of the Break Out bar is (7650-7630) = 20 points.
Up Trend BUY signals:
To obtain the BUY LEVEL you add 1/2 the length to the Break Out bar. In this case 1/2 the length of the Break Out bar = (20 points * .5) = 10 points. Add this to the high of the Break Out bar to obtain the BUY LEVEL = (7650 + 10) = 7660.
To obtain the suggested STOP, you subtract the length of the Break Out bar from the low of the Break Out bar = (7630 – 20) = 7610. This is the suggested SELL STOP.
Down Trend SELL signals:
For Down Trend signals, you do the opposite. Using the above example, 1/2 the length of the Break Out bar is 10 points. Subtract this from the Low of the Break Out bar to obtain the SELL LEVEL = (7630 – 10) = 7620.
To obtain a suggested STOP, you add the length of the Break Out bar to the high of the Break Out bar = (7650 + 20) = 7670. This is the suggested BUY STOP.
T-138
GET
Applying Technical Analysis
TAKING PROFITS:
Where one takes profits is different from trader to trader. However, once you have some decent profits in the trade, we suggest you use Advanced GET’s built in Regression Trend Channel. You can use them on the auto mode or simply originate it from the previous pivot. These channels are excellent for bracketing a trending market.
One of the major
OEX as of
strengths of the Regres-
Nov 15,1995
sion Trend Channel is to
bracket a trending mar-
35 Per XTL
ket. When a trending
é
market breaks the chan-
nel, this usually indicates
Take Profits when
the end of the Trend.
Trend Channels are
broken.
BUY è
With this in mind, we
suggest that profits
ë
should be taken when
FIRST
BREAKOUT
the prices break the
BAR
channels.
The XTL can also be
used to identify Major
May 96 Bean Oil
Down Trends.
as of Nov 10, 1995
35 Per XTL
The example shown is
the May 96 Bean Oil.
ì ç SELL Take Profits when
Once again, we suggest
FIRST
Trend Channels are
BREAKOUT
that profits should be
broken.
BAR
taken when the prices
ê
break the Regression
Trend Channels.
T-139
GET
Applying Technical Analysis
Trade Continuation:
When using the Regression Trend Channels to protect profits, you may from time to time be stopped out of a market that continues to Trend in the direction of your original trade. When prices break the Trend Channels, it usually indicates the end of the current Trend or at least a temporary change in direction (bias).
It is extremely hard to
March 96 Coffee
forecast whether a
35 Per XTL
breaking of a Trend
Channel is an actual
Take Profits when
Trend change or just a
Trend Channels are
broken.
temporary change.
Therefore, we recom-
ì
ê
mend taking profits. If
SELL
the original Trend con-
tinues, you can still get
back in as shown be-
low.
As long as the Major Trend displayed by the software does not change (in this case the bars should not change from (Down Trend) Red to (Up Trend) Blue), you can re-enter the market in the original direction when prices break the newly drawn Trend Channels.
Neutral (Black) bars are okay and does not alter the strategy. The new Trend Channels are drawn from the previous pivot.
March 96 Coffee
New Trend Channel
from previous pivot. î
The new entry is
taken on the break of
Stop
the Trend Channel.
ë SELL
é
Previous
pivot.
35 Per XTL
T-140
GET
Applying Technical Analysis
Guidelines for Trade Continuation
1. The Major Trend displayed by GET should not change. Example: In a downward trending market, the bar colors should be Red (down) or Black (neutral) and should NOT change to Blue (up) indicating a possible change in bias (up trend). The opposite applies to a market in a rally phase.
2. Once a Pivot is established, draw Trend Channels from this pivot as shown on the previous page. You could also use the Auto Channels feature in GET (please note
that the Auto Channels key off the most recent pivot selected by the user — Major,
Primary, etc.; you may have to adjust this setting to get the proper results).
3. Once the prices break the newly drawn Trend Channel in the direction of the original trend, a new trade can be established with a stop above/below the previous pivot (as illustrated below).
March 96 Coffee
35 Per XTL
Stop
Take Profits
when Trend
Channels are
broken.
ì
ê
SELL
é
Previous
pivot.
NEW TRADE:
Once you re-enter the market, treat this as a new position. When
the trade becomes profitable, use the Regression Trend Channel
to protect profits.
T-141
GET
Applying Technical Analysis
Using Different Settings for XTL
On this page we will show the difference in entries using a 21 period XTL and a 35
period XTL. The 21 period XTL setting offers early entry in the markets. However, the main disadvantage of using a 21 period setting is the numerous false signals that are generated as shown on the next page.
May 96 Crude Oil
USING 21 period
using 21 period XTL
XTL:
Usually the First Break
Out Bar is generated a few
bars earlier by using the 21
period XTL.
This in turn can also pro-
vide numerous false sig-
è
BUY
First Br
nals as shown on the next
è
eak
Out Bar.
page.
May 96 Crude Oil
USING 35 period
using 35 period XTL
XTL:
Add half the length
When using the 35 period
of the Break Out
XTL, the false signals are
Bar to obtain the
kept to a minimum.
BUY LEVEL.
BUY è
The First Break Out Bars are
usually generated later (by a
First Br
è
eak
bar or two) when compared
Out Bar.
to the 21 period XTL setting.
T-142
GET
Applying Technical Analysis
Using Different Settings for XTL
USING 21 period
July 95 Coffee
using 21 period XTL
XTL:
In this example, the July
95 Coffee is in a Major
Down Trend.
é é
FALSE BUY
The 21 period XTL pro-
SIGNALS
vided two different Buy
Blue Bars
Levels which turned out
to be False signals.
The major drawback of
using the 21 period XTL
is the potential of False
signals.
USING 35 per XTL:
July 95 Coffee
using 35 period XTL
Using the 35 period XTL,
the False Signals were
avoided. This is the major
é é
advantage of using the 35
period XTL.
NO FALSE
With these examples, we
SIGNALS
have shown both the ad-
No Blue Bars
vantages and disadvan-
tages of using the 21 pe-
riod and 35 period XTL.
You, the user will have to
make a decision on which
one to use based your
style of trading.
T-143
GET
Applying Technical Analysis
March 96 Jap Yen
Examples on
35 Per XTL
using XTL
ì
Take Profits
when Trend
SELL
Channels are
broken.
ê
IBM – Stock
35 Per XTL
é
Take Profits
BUY
when Trend
ì
Channels are
broken.
ì
í
SELL
June 96 SP 500
Take Profits
when Trend
35 Per XTL
Channels are
broken. ê
î
BUY
BUYî
Prices did not break ì