Chart Setup & Training
Interpreting the Indications
Triple Screen Example
Rabbit Sample Charts
User Sample Charts
edits since original (download revised template):
-- 21 Apr: Renamed the Fibonacci retrace & extension DYOS more clearly; added options for more Fib values, incl. labels for current Fib set. See discussion below for images.
18 Apr: added notes on background color and time frames; added link to volume bars article
-- 08 Apr, added notes to interpretation and triple screen; added more examples;
Last Spring, I had the pleasure of collaborating with Alan Robinson, who you may know as "rabbit" at the Ensign Echat rooms, on EVRAA, a Wyckoff interpretation of volume plotted directly on a chart.
This past year, Alan and I had great fun working on a visually intuitive template Alan calls "X-Swing". X-Swing overlays multi-time moving averages and uses prior swings to alert the user of trend reversals and congestion zones. Cross-overs are used as future support and resistance, a key difference that distinguishes this approach from typical moving average methods. It also includes a chart-only VolSum, highlighting potential volume exhaustion points with a yellow bar on the chart. The use of alerts and DYOs automates finding these key levels and marking them on the chart.
The template can be used on all time frames and all instruments, with only a small change to the Auto-Trends and Pesavento Pattern studies for instruments with small ticks, such as the Euro. Shown above is XSwing on a Daily YM chart. This folder directory list has numerous examples in various time frames for further study.
- Here is an image of the complete chart objects list
- 180-bar Bollinger - Black dots and heavy black lines. These define the dominant swing extremes.
- Two moving-average pairs:
The MA pairs are used to generate "future support and resistance" lines as well as give a visual indication of the general price trend.
40ma, 120ma (weighted) - Red and Blue Stars
10ma, 13ma (simple) - "gold" hashed
- Prior 40ma swing reversals
Prior 40ma swings are marked with horizontal thickish purple lilnes and often show support and resistance.
- Prior 40/120ma cross: two lines types drawn
(1) Horizontals (thin red/white lines) act as future support/resistance
(2) Verticals (orange) for reversals (or mid-point inflections). This in particular are worth study. Here is an example.
- Fibonacci Swing retrace "blocks" where swings are determined using the 10/13 ma reversal points (gold, red, fuchsia, purple). Below is a guide to the retrace colors.
Note: the new template adds optional values and labels to the chart. To turn on the additional fibs, you must open and check the optional boxes on each of the DYOS labeled "Fib" (four of them). If you don't want to use the labels, delete the numbers in the "Label" field on the far right.
Note: It is assumed that you are familiar with Fibonacci retrace methods. If not, here is a a short introduction.
- Optional Auto Trend study: This is not "turned on", however, it uses 10/13 reversal points, ie, larger swings. To turn it on, select "Auto Trends" study and check the Trend Line box.
The central idea of this template is to do the work for you, the the lines, stars, and colors lead your eye to quickly process without much thought.
Note on background color: If you use a black background, be sure to change the 180ma Bollinger Band study [click for image of what to do] so that these most important bands are visible. Alan uses a light grey (silver) background with black/white candles. Some examples in this article are in white so as to print, but use what works for you as long as the colors stand out.
Note on number of bars: A chart with 2000 bars should be sufficient to allow the 180 Bollinger Band to calculate properly.
Learning this template
A useful way to quickly train your eye to "see" the features is to apply the template to a set of DEMO charts and playback at 10x speed, initially not with an intent to trade it, but rather, to allow your eye to spot the patterns, jotting notes where you see tags, crosses, and reversals. As you gain familiarity with the template, slow the playback to your preferred speed for trade-training.
The template does not include the indicator pane shown in the triple time frame example as you can readily add your own favorites by layering them into the X-Swing template.
Note on layering templates: If you do layer this template onto another, be sure to maintain the object list order as moving (or removing) studies can destroy the intended alerts (Fibonacci, S/R lines, etc).
Combining the very long (180), medium (120/40), and very short (10/13) averages are intended to quickly let your eyes assess the bias.
- The 180 bar Bollinger Band stands out the most. A critical idea to bear in mind is that price likes to move to the center line, but it rarely lingers there, preferring instead to swing to the opposite extreme. For this reason, reversals at the outer bands and traverses of the mid will often result in the strongest moves and the three bands serve as swing targets.
The outer bands define the maximum swing potential in each time frame. Price, and moving average, reactions at the mid-band give clues as to whether the move will continue or reverse.
General Bollinger Band rules apply, so in addition to band tags look for squeezes. To better see the value of the 180-BBand, compress the bars closely, as in this example. Because of the very long 180-bar period, a look at the next time frame for more clues helps to refine the signal.
- The 40/120 "stars" MA pair are meant to be seen as working in tandem. Their cross is often significant as future support, for which white and red horizontal extensions are drawn.
Additionally, the cross relates well to the 180 bands for timing, uncannily marking tops and bottoms, and when near the mid-band, the half-way point of a move. Orange vertical bars are drawn to indicate these.
In the triple-screen example, note how the vertical drop-bar indicated price tests of the 180-mid on the 700V and 250V and a test of the lower 180BBand on the 10m chart. Here is another example.
- The fast 10/13 pair has various uses. Look for 10/13 (and 40/120) proximity to the 180-BBands, which often indicate imminent slowing or even reversal of the price swing in progress. The 10/13 reversal tops and bottoms are also used to project retrace levels, for which "color blocks" are drawn on the chart. This is done using auto-trends and Pesavento Pattern studies, neither of which are actually drawn on the chart.
- Here is a folder of rabbit's most recent xSwing charts, where you can study the precise timing that can be achieved with this approach.
Triple screen is the name Alexander Elder gave to viewing price in three time frames, an approach Alan suggests for X-Swing. For day-trading, he uses 10m, 3m, and 1m charts, or their equivalents in tick, volume or range.
The smallest time frame will lead the swing start and end. The higher time frames will provide the targets. These two points are very important and should be validated for yourself by using playback.
Selecting the three time frames
The following example uses three time frames to select and manage a trade: 10-minute, 700-Volume (3m equivalent), and 250-Volume (1m equivalent). Volatility, of course, can change the volume chart values. Here is a discussion of volume bars for those not familiar with this price format.
A simple rule of thumb is to divide the average daily volume by the total number of minutes traded during the day to estimate a 1-minute volume-bar equivalent.
100,000 Avg-Daily-Vol / 450 minutes = 222 volume bars per minute, rounded to 250
The second time frame is 3x the first
222V x 3 = 666V, rounded to 700 volume
3x the second, or 3m x 3=9m, rounded to 10m
[it may be helpful to open the three images in a separate window]
created: 04 April 2006