Harmonious trade and Relative Strength Indicator

Scott Karney, is the founder and president of the company "HarmonicTrader.com" developed a lot of "harmonious patterns, like" Bat "," Krabi "and" ideal model Gartli. He also, as the author of two books - "Harmonious trader" and "harmonious trading in financial markets", defined the system of recognition of pricing models and methodology for measuring the Fibonacci series, which are included in a "harmonious trade." Scott is a member of the Association of market analysts and the American Association of Professional Technical Analysts.

Methods of harmonious trade using Fibonacci ratios to determine the extent of relative price action. The two most important Fibonacci ratio directly obtained from the Fibonacci series - 0.618 and 1.618. These numbers are the primary methods of harmonious trade relationship and used to obtain secondary and tertiary relationships to recognize harmonious pricing model. (See "Harmony models" in the number 32 and "harmonious trade" in the number 50)

For this article, I proillyustriruyu a simple technique using the expansion of the price movement of 1.618 in conjunction with the Relative Strength Index.


1,618

Designing 1.618 Fibonacci ratio is significant because it usually indicates a depletion of the price action. Often, when the market exceeds the level of expansion of 1.618, it is usually the extreme price action, which is difficult to maintain long. When designing a 1.618, I know that in this area formed the trade opportunity. Since this level of 1.618 represents a price effect, which is an extreme, perhaps the rapid emergence of a turn. I usually look forward to when the price reached 1,618 in the design of a potential zone of a turn before entering into transactions.

Relative Strength Index
As defined in all textbooks on technical analysis, relative strength index is a very popular oscillators. Initially it was submitted Vélez Vaylderom in an article published in the journal of futures commodity contracts in June 1978. The name "Relative Strength Index" a bit misleading because RSI does not compare the relative effect of two market-based instruments among themselves, but rather measures the force of a single internal market. RSI is as follows for the price oscillators, which ranges between 0 and 100. RSI is often rises above 70 and falls below 30. It usually forms these tops and bases before the respective market-based instruments.

Byche design 1.618

1.618 Byche design often occurs at the extreme sale. When the market declines, the price effect can often be pereprodlennym. Point 1.618 of design can provide profitable opportunities for entry into the market.

I am selling a mini contracts S & P 500 in intra-day basis and looking for expansion of 1.618, confirmed by the extreme values of RSI to find intra-day trade opportunities. In the following example, the September contracts S & P 500 Mini (ES03U) after the abrupt sale of excellent form of intra-day expansion of 1.618.


Example 1
It is important to note that I prefer to use only the expansion of 1.618, which are formed during normal market trading hours (9:30 - 16:00 ET). In this case, the earlier sale has a good turn, and this was confirmed by the value pereprodannosti RSI, which was below 30.

Medvezhye design 1.618

1.618 Medvezhye design is a very important Fibonacci ratio, because it is an excellent area to record the gain or enter into a short position. As I said above, this level of 1.618 represents the extreme price area. Often, when the price reaches this design, it is faced with considerable resistance. If this happens, the direction of motion is usually changed. Although the area of 1.618 may be exceeded, it is important to understand that this movement above this area it would be difficult to maintain long. In combination with indicator RSI 1.618 can be extremely effective measure Fibonacci. Therefore, it is important to closely monitor the behavior of the market in this area and be ready to open short positions.

When we investigated another intra-day model for the September mini-contracts E & S 500 (ES03U), Relative Strength Index affirmed the short-term resistance. After the morning's sharp rally, ES focused on enhancing the level of 1.618 at around 992.75 and the RSI showed perekuplennosti value, while above 70. The market turned around at 993.

Interesting to draw attention to this example, that the RSI has double meaning perekuplennosti above 70 for 20 minutes, providing further confirmation of resistance harmonious intra-day expansion of 1.618. These situations should be taken into account, because the size of a harmonious RSI and price action clearly indicate the status of perekuplennosti market.

Conclusion

Combining the methods of harmonious trade and standard indicators is an effective means of measuring the price action and the identification of potential trade opportunities. Many software packages provide tools to automatically conduct such measurements. It's enough to choose the measurement tool Fibonacci ratios. The use of Fibonacci ratios in combination with other indicators such as Stochastics and MACD, can also be a very effective approach.

Forex Magazine
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