by Stock & Commodities, June 2012
Ranges are important when it comes to the automated analysis of charts. They capture price movements between parallel support and resistance lines, enabling us to monitor trends so we know when they are accelerating and when they are slowing. Horizontal channels are useful in detecting consolidating ranges, which indicate if prior existing trends are catching on or turning around or if new ones are emerging. Many popular systems like William O’Neil’s CANSLIM approach, Stan Weinstein’s stage analysis, the box system of Nicolas Darvas, and most trend-following strategies depend on horizontal channels to assess when a new trend, phase, box, or stage is starting.
Of all channels, horizontals are the easiest to define, given that most of what we need to identify them are two price levels. However, what those price levels are is subjective. Trader Richard Donchian provided us with the oldest, perhaps most popular but definitely the most useful ways to define horizontal channels.
(continuing in S&C..)
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In our trading desk, identifying consolidation range is already quite easy (=SMA-20 flat), so we don’t need any further close examination since identifying a horizontal channel is often unuseful: when you are sure to have identified, it’s too late because market is already assuming a new trend.
For this reason, we won’t continue in reading the article.
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ITALIANO:
Nel nostro trading desk, identificare un range di consolidamento è già abbastanza facile (= SMA-20 flat), quindi non abbiamo bisogno di ogni ulteriore approfondimento dato che identificare un canale orizzontale è spesso inutile: quando si è sicuri di aver identificato, è troppo tardi perché il mercato sta già assumento un nuovo trend.
Per questo motivo, non si continuerà a leggere l’articolo.