To understand the bar charts (2 bars)
We have seen, in the previous article, as the pushes of the market from the simple analysis of one can be estimated single bar. Today we will speak about the study of the relationship between two bars, limitedly to the more interesting cases.
We begin with saying that in the relationship between two bars the overcoming of a minimum or a maximum covers particular importance, this is an evident signal of force: in the previous sitting the market has not had the force to go beyond a determined level, then if today it is exceeded means that the pushes have been greater. All the strategies of trading based on the momentum (the push of the market) in some way have to that to make with breakout of an end of one the bar.
The first relationship that we analyze is that one between the range of the two bars. A particular case is given from inside the bars and outside the bars.
Inside the bars are particular bars whose range is all including in that one of the previous bar. The meant one is clearly one contraction of the volatility. For the mathematical characteristics often the idea is used that to a volatilità contraction corresponds one immediate outbreak of the price. For this reason, in some markets, this type of configuration comes taken advantage of for a strategy of trading and is particularly profitable. Quite Jeff Cooper has constructed a pattern formed from two consecutive bars inside that the name of boomer of Jeff Cooper takes exactly.
Outside the bars form the opposite configuration exactly because the second bar has a range that goes is to of under of the minimum, than to of over of the maximum. These bars represent a highest increase of volatility often which had to forts set in action speculative. Strategies exist that take advantage of the outside between which one has been put to point from Larry Williams.
Other important fact in the appraisal of the relationship between two bars is the gap. A gap is formed when bar is space between the minimum of one and the maximum of the other. The gap sure it represents an excess of the market that must be interpreted with much attention. Apparently directionality would seem an element strongly, but often, instead, it is legacy to forts sets in action speculative and therefore, in these cases, it has a fort upgrades them of reversal, much to create the saying that all the gap stretch to being sluices from the market. Like all the things that regard the trading, these affirmations must be estimated situation for situation and sure they do not serve effectively in order to operate.
These described are situations base that every trader would have to learn to see on the diagrams, even if will not serve, alone, to the construction of a strategy of trading, they are a valid way in order to understand what says the market to us and in order to perceive of dynamics.
