Sunday, August 30, 2020

ONE or TWO game plans?


The vertical RED lines and the Yellow Zones show the 2 different possibilities for both price and indicators moving forward.

While the blue oscillator has been moving up when it was below ZERO, it can either continue to climb higher cross ZERO and continue to move up or abruptly make a U-turn and swim back down. 

The plan of trading is always having a PLAN B ...in case PLAN A comes to an END gradually or abruptly. 

Most of the time casualties is due to the failure to consider scenario B is possible and we are fixated mentally on the path despite the change. Rewiring our mind is NOT easy despite what we see.

We need to be convinced that change is happening and PLAN B has to be a serious Option to implement.

IF we think that RED lines zone on the above will continue to go up like the BLUE while it actual fact it is moving down, than we will need to weather the storm until it turn back up.

The different shapes of the Blue Oscillator versus the price trend direction only confirms the NON-LINEAR properties of the trend. The price trend rate of change is NOT uniform at times increasing and decreasing which is captured by the Blue Oscillator. 

At times you will notice the Blue oscillators rises with price and drop in-line with price retreat. 

Other time price and Blue oscillator going different direction with price going up and Blue Oscillator retreating. Follow by the next action where both Price and the oscillator moving in the same direction after diverging.

In other words, the relationship between price and oscillators will be 2 phase ...

1) Agreement in same direction.

2) Disagreement in different direction.

What is the definition of AGREEMENT in same direction? My definition is both and are moving in the same direction but different gradient or slope. Anything not within this is automatically reclassified into DISAGREEMENT.

 

Price UP with Oscillator UP (Agreement)

Price DOWN with Oscillator DOWN (Agreement)

Price Horizontal with Oscillator Horizontal (Agreement)

Price UP/DOWN with Oscillator Horizontal (Disagreement)

Price Horizontal with Oscillator UP/DOWN (Disagreement)


Anything outside of the 3 agreements state = Disagreement.

What do you do when you see the disagreements? Alarm bell goes up and trade more cautiously.


     

 

  

 

 

 

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