How to filter noise out of Technicals and Fundamentals part 1

2018년 1월 27일

Part 1 Technical


If you are new like me you probably have tons of conflicting information bombarding you at all times.

I have come up with a method of filtering the noise i would like to share.

* Technical noise filtering
step 1:
Renko blocks.
Renko blocks are simple they do not measure time. Renko blocks measure movements in price (example: 1 block = 10 pips if price moves 20 pips down you get a block down if price moves 10 pips up you get another block up).
you can google Renko block plugin's they are available for most platforms free.

step 2:
Combine your Renko chart with your favorite indicators. (I like a 6 period MA that paints red if pointed down and blue if up with a donchian line for up and down trend filtering.)

step 3:
compare larger size Renko blocks to smaller and scale in.
For example:
1: I look at 200 pip Renko Blocks for the direction is should be looking to go buy or sell wise.
2: If there is a string of Blocks up the odds are in favor of another block going up the odds increase the more blocks in a row we get.
3: The objective is to buy low sell high and vise versa ergo we need to find the bottom of our 200 pip Ranko block to do this we make another Renko chart of 20 pip Renko Blocks.
4:Compare your Renko charts noting how long the tails on the previous 200 pip Renko blocks going up were.
5:Look at the at the 20 pip Renko block charts and try to find out where the Bottom of the tail on the 200 pip Renko box might go.
6:We are looking to buy into a trend not "predict" a trend. wait for a good dip then buy as it trends up.

lets use an Example

EUR/USD Technical analysis example 1/27/2018

1:

[IMG]i67.tinypic.com/22xrb5.jpg[/IMG]
This 200 pip Renko chart depicts dates from the European debt crisis downtrend in 2014 to the current uptrend.

as we can see from the 200 pip Renko Boxes the EUR/USD is clearly going up. The objective is to place a buy order
at a point where the price is not likely to retrace to. As we can see the uptrend is very strong the up boxes have small tails or none at all.

2: lets open a chart with smaller Renko boxes for this example i am going to use 20 pip Renko Boxes.

[IMG]i65.tinypic.com/145p3s.jpg[/IMG]
This chart is from dates Dec 28th 2017 to Jan 24 2018

As we can see from this 20 pip Renko block chart the 200 pip up blocks form a lot like stairs when we look inside them.
They do this because the market only seems to do one of 2 things
1: consolidation (a point in time where entering the market either long or short is likely to lose)
2: Trend (a point in time where entering the market has a higher probability of going in the same direction)

As someone new to Forex I like to think about consolidation zones as graveyards because they are where all my trades go to die ;)
The term "graveyard" will now refer to consolidation zones for effect.

So we want to get on the trend and avoid the graveyard how do we know when we are out of the graveyard?
The best answer is we don't. The second answer is count the number of whipsaws that happened before the last few up trends and average them. (A whipsaw is a high and low point they tend to gravitate right into your stop loss before heading right into your take profit they are the main characteristic of a graveyard.)

Lets average the Whipsaw characteristics for the current EUR/USD 1/27/2018

as we can see from our 20 pip chart we usually get 5 Whipsaws per graveyard. They usually retrace to about half the uptrend but
few break back above the uptrend before whipsawing down again so we can be somewhat safe to say we are out of the graveyard and into the trend if:
*we had a few whipsaws
*the price retraced down half the previous uptrend
*the price is now above the uptrend

Part 2
https://www.tradingview.com/chart/EURUSD/1b8k0NPi-How-to-filter-noise-out-of-Technicals-and-Fundamentals-part-2/