TD line and projectionHere you can see how to use Tom Demark trendline (that connnects peaks / thorough of more or less equal height / value) and projections.
Best of breakout occur with gaps. Prebreakout candle has to close close to the trendline and make a minor pullback before the break occurs.
If breakout candle has long rejection shadow - it will not work.
Projection are drawn from the lowest closing price to the TD line and then projected from breakout point.
You can also see how to use missed pivots that mark new trends (buy upon pullback to the next pivot) - after Rob Booker.
TD
Where will the trend end? TD Trend Factor and TD PropulsionBITFINEX:BTCUSD
Dear friends!
I continue describing Thomas DeMark’s technical tools. I have already explained such tools as:
1. TD Retracements
2. TD Lines of demand and supply
3. TD D-Wave
4. TD Sequential and TD Combo
Today, I am going to deal with TD Trend Factor and TD Propulsion. These are two independent technical tools that in combination help you quite accurately identify the trend reversal moment and potential targets. But first, I’d like to unveil a small secret of DeMark. Following long experiments with Fibonacci numbers, DeMark found out the two most important of them. These are 0.382 and 0.618. By subtracting one from the other and dividing the result by 4, he found the value of 0.059.
Later, for many years using this number in practice to calculate levels of support and resistance, he came to the conclusion that the most frequent ratio that occurs in trading is 0.0556. Therefore, when calculating the resistance levels, an upward percentage of 0.0556 * 100% = 5.56% is used. When calculating the support levels, a downward percentage of 100% - 5.56% = 94.44% is used to analyze micro-movements or prices whose count goes more than two digits after the decimal point, DeMark suggests using a coefficient with a shifted decimal point, i.e. 0.556% and 99.444%, respectively.
TD Trend Factor basically aims at identifying the trend reversal level and confirming its relevance. To do this, we first need to find out the reference point.
For a bearish trend, it is determined by the following conditions:
1. Identify the bar that marks the peak of the bullish trend
2. If the high bar above the previous bar, the starting point is at this bar’s high
3. If the high bar closes below the previous bar, the reference level is the closing price of the bar with the peak.
To explain it better, I’ll give an example:
The above chart presents Bitcoin all-time high. Its peak is at 19891 USD. You see that this bar’s close is lower than the previous bar’s close, so, the reference level is the high bar’s close.
This level is at 18960 USD. So, based on this level, we shall build the levels of TD Trend Factor for a bearish trend. The simplest way is to calculate them in Excel.
Therefore, I’ve got the following calculations:
18960*94.44% = 17905
17905*94.44% = 16910
16910*94.44% = 15970
You can be calculating in this way until the result is close to 0. With rounding to integers, there are the following levels
18 960
17 906
16 910
15 970
15 082
14 244
13 452
12 704
11 997
11 330
10 700
10 105
9 544
9 013
8 512
8 039
7 592
7 170
6 771
6 394
6 039
5 703
5 386
5 087
4 804
4 537
4 284
4 046
3 821
3 609
3 408
3 219
3 040
2 871
2 711
Eventually, as the history has proven, the low of the bearish trend came at 3215.2 USD, that is just a few dollars below one of the levels indicated above.
You might say that this is a coincidence but try to carry out this experiment on other trends and you will see that it works.
If we analyze the earlier history BTCUSD price chart, we’ll see that the TD Trend Factor levels of the downtrend had excellently worked out before that (see the chart above). In addition, it is clear that the lower the price is moving, the thicker becomes the grid. This construction fully matches to the market behavior; in a bearish correction, the deeper the price falls, the stronger the resistance becomes and the shorter is the range of price swings.
For a bullish trend, the same rules are applied, only in vice versa. .
To find a reference levels, we need identify the bar that marks the low of the bearish trend and:
1. If the low bar closes below the previous close, the reference level is at the low.
2. If the low bar closes higher than the previous close, the reference level is the low bar’s close.
I’ll explain on the example.
The above chart represents the low at 3215.2 USD that we have already marked before.
If we zoom it in, we’ll see that the close is a little higher than the previous bar’s close, so the reference level will be set based on condition 2, at 3283.4 USD.
The levels will be calculated in the same way, only the coefficient will be 105.56% instead of 94.44%.
Finally, there are following levels:
3 283
3 466
3 659
3 862
4 077
4 303
4 543
4 795
5 062
5 343
5 641
5 954
6 285
6 635
7 004
7 393
7 804
8 238
8 696
9 179
9 690
10 228
10 797
11 397
12 031
12 700
13 406
14 152
14 938
15 769
16 646
17 571
It makes no sense to mark all the levels in the chart, but to estimate the relevance of the calculated levels, I’ll mark the closest ones to the recent price movements.
As you see from the above chart, the calculated zones serve not only as strong resistance levels, but as a support as well.
How to use TD Trend Factor
TD Trend Factor is a supplementary tool, used to confirm signals, it doesn’t provide any buy or sell signals by itself. So, you need to use it together with other DeMark's tools:
TD Retracements
TD Lines of demand and supply
TD D-Wave
TD Sequential and TD Combo
And other DeMark's indicators that I haven’t yet described.
One of these tools is TD Propulsion.
The indicator is designed to send signals of the trend extension or exhaustion. This tool consists of two parts. The first element is TD Propulsion Up and TD Propulsion Down,these indicate entry points. The second part is TD Propulsion Up Target and TD Propulsion. As you can guess by the name, these are trend targets. So, let us see how this indicator is built and how it can be employed in practice.
Thomas DeMark says that to confirm a bullish trend, we need to do the following:
1. Identify the points of X and Y – the low and the high of last growth wave in they bullish trend.
2. Identify the Z point – the lowest level of the bearish correction, following the growth wave XY.
If this level is lower than 23.2% of the correction size, than the points of X and Y are correct; if this is not so, one needs to rearrange the borders of the wave.
Next, we shall identify the TD Propulsion Up level
To do it, we use a simple formula:
A = Z+(Y-X)*0.236, , so, in the given example, this is:
A = 12730.6 + (17171 - 5400.2)* 0.236 = 15508.5 USD.
This level marks the first resistance level in the trend continuation. As a rule, this level is not broken out when the trend reverses. Next, we shall find out the level of TD Propulsion Up Target.
To do it, we use a simple formula:
A = Z+(Y-X)*0.472, so, in the given example, this is:
A = 12730.6 + (17171 - 5400.2)* 0.472 = 18286.4 USD.
This level is potential buy zone. As you see from the chart above, this level is very close to the real one and the trend reversed only after just a little more than a thousand of dollars,
I will describe this situation in more detail a little later. Now, I’d like to explain how to analyze a bearish trend with TD Propulsion.
Here, you build everything in a similar way, just like when using other DeMark's tools. For the further analysis, I found out clear borders of the downward wave. They are marked with the points of X and Y in the above figure.
Now, let us look at the start of the bullish correction and the level where it finishes. This is point Z in the chart. You see that this level exceeds the level of 23.2% of the correction, and so, the wave itself and point Z are suitable to calculate the TD Propulsion Down.
To do this, I use the following formula:
A = Z-(X-Y)*0.236, so, in the given example, this is:
A = 4384- (6485.8-3215.2)* 0.236 = 3612.14 USD. This level is TD Propulsion Down.
Next, I identify D Propulsion Down Target.
The formula is:
A = Z-(X-Y)*0.472, so, the there is the following result:
A = 4384- (6485.8-3215.2)*0.472 = 2840.27 USD.
As you see from the above chart, the A level has worked out. As I’ve already written above, this level may signal either the trend continuation or its reversal. And the way how the price goes through this level, very difficult and slowly, is the trend reversal sign. In addition, I should note that both in the first case, when we identified the bullish trend reversal, and in this situation, level A works out. Therefore, it can be applied as a low-risk trading strategy to set the intermediate targets when analyzing the Bitcoin future price movements. To see the full capacity of these tools, we need to study their application together with other DeMark's tools on a real example.
As an example, I will analyze the moment when the trend was reversing at 3215.2 USD. It is clear from the above chart that TD Propulsion Down A level exactly matches to the TD Trend Factor level at 3612.1 USD. When, following the Z point, the BTC price was moving down, it is clear that this level provides a strong support. In addition, the TD Trend Factor level at 3466 USD is not broken out. The price rebounds from it like a rubber ball.
A buy signal here is the bullish Setup (remember TD Sequential and TD Combo). This signal is marked with a red arrow in the above chart. It is confirmed by a typical rebound from the TD Trend Factor level at 3466 USD and the bar closing above level A. After this combination, one could have already entered a long with a short stop beyond level 3466 USD.
You already know what happened next. The risk/profit ratio for such a trade is perfect. Now, for a fair experiment, let us try to find out an entry point in the current market. First, let us build the TD Trend Factor support and resistance levels.
There is already a clear high with the peak at 13764 USD. We see that this high bar closes above the previous bar’s close. So, the reference level will be at the highest high of 13764 USD. Next, we multiply each level and the product of each multiplication by *94.44%.
There are the following values:
12 999
12 276
11 593
10 949
10 340
9 765
9 222
8 709
8 225
7 768
7 336
6 928
6 543
6 179
In the above chart, I marked these levels and I have noted that the last bar closes above the previous bar’s close; and its low at 9728.2 is close to the TD Trend Factor level at 9765, which itself is a bullish signal. For the Bitcoin price prediction, based on this signal, I may already assume a reversal and point Z to calculate the levels of TD Propulsion.
It is clear from the above chart that the Z point is a little lower than the level of 23.2% of the correction from the wave XY with the coordinates on the price scale of 3405.3 and 13764. Therefore, the Z point is relevant for this wave. So, we can calculate TD Propulsion Up (A) and TD Propulsion Up Target (B), according to the coordinates and the formula studied above:
A = 9728.2 + (13764 – 3405.3) * 0.236 = 12172.85 USD.
A = 9728.2 + (13764 – 3405.3) * 0.472 = 14617.51 USD.
Next, I attach the TD Sequential indicator and select the timeframe where setups are worked out most accurately on the historical data. For the BTCUSD pair, the indicator performs the best in the five-day timeframe.
As a result, you see that the BTCUSD is now in a bullish setup, where the fifth bar is formingg, out of nine in total. It means that before a the bitcoin trend could reverse and a bearish trend should starts, there at least four bar more to be formed in the bullish trend, not counting the currently forming bar, that is, there are more then four weeks ahead. In addition, there is a strong support level at the Z level at 9728 USD, below which, one might set stop losses, and the first target for ta take profit is at 12172.85 USD, the second target profit is at about 14617 USD.
Besides, I can define the possible BTCUSD scenarios and suggest an adequate response to a particular market situation.
The chart above outlines three possible scenarios for the BTC future trend.
1. The first scenario, a pessimistic one suggests that the BTC ticker shouldn’t break through the A level and rebounds downside. This is a clear trend reversal sign. We should take the profits and enter short trades with a stop above the A level.
2. The second scenario is neutral. According to it, the ticker should break through the A level and stop close to the B level. In this case, we will take the profit at the B level and expect either the reversal below the A level to enter shorts, or reaching the B level to enter new longs.
3. The third scenario is the most optimistic and the least possible, in my opinion. The ticker breaks through the levels of A and B with large volumes and without strong delays. In this case, we should just follow the trend, moving the stops, covering the TD Trend Factor levels, calculated before, based in the low of the bearish trend.
Here, I am about to finish describing Thomas DeMark's tools, TD Trend Factor and TD Propulsion, but I am not finishing writing about his studies. In my next training article, I will deal with more unique tools by the famous trader and explain how to apply DeMark's indicators to cryptocurrency trading.
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I wish you good luck and good profits!
How to filter good and bad entry signals? TD REI and TD POQBITFINEX:BTCUSD
Dear friends!
I continue describing Thomas DeMark’s technical tools.
Today, I am going to deal with more DeMark’s technical tools, TD REI and TD POQ that are included in the group of indicators TD Oscillators.
Major problem of all oscillators
The main problem that DeMark sees in the use of oscillators is that average traders exaggerate the value of the divergence of the indicator with the price position.
As a rule, people, who do not understand how an indicator works and based on what principle it alternates, do not care what the composition and the recommended interpretation of this indicator might be. They try to interpret its vague signals that aren’t basically signals and must be confirmed by other indicators. A good example is a famous indicator, RSI.
In May, this indicator showed a bearish divergence in the daily timeframe (see the chart above) and, according to all rules, the trend should have reversed, and the price should have started declining. According to DeMark, the main problem in interpreting such signals is that users do not take into account the time that the indicator is in the overbought and oversold stages. DeMark notes that if the indicator is in the overbought or oversold zone for more than 6 bars, this indicates the strength of the trend, which means that this signal is false.
It is clear from the above chart that the two overbought zones lasted for more than 6 bars, which indicates the trend’s strength, and so, the oscillator’s correction in these cases will be a false sell entry signal.
The number of bars may be different for other oscillators. Everything depends on the indicator’s parameters and the peculiarities of its composition. Therefore, in each particular case for each timeframe, one should perform an own analysis of the number of bars in the overbought or oversold zones.
To facilitate the analysis of all these parameters, DeMark developed his own series of oscillators that will described below.
Introduction to TD REI indicator
First, I’d like to write about TD REI, or Range Expansion Index. This indicator is designed to filter out false signals when the price is trading in the range or in a strong trend, it should send a reversal signal only if the market sentiment really changes.
Before I present the charts with this indicator, I want to pay tribute to its developer @ e2E4mfck. The matter is that the TD indicators are not available in the Tradingview standard library, therefore, I had to look for those that were published in the public library and only thanks to such enthusiastic programmers can you get acquainted with these wonderful tools by DeMark.
So, you see the TD REI indicator in the chart above, at its bottom. The TD REI oscillator typically produces values of -100 to +100 with 45 or higher indicating overbought conditions and -45 or lower indicating oversold. Besides, the TD REI counts the number of bars, and, if the price is in the overbought or oversold area for more than 6 bars, the indicator shows this and indicates a strong trend.
On the other hand, this indicator is more responsive to the price changes, and, while the RSI is still in the overbought area, or in the neutral area, the TD REI has already a few times entered the oversold area, thus sending a buy signal (in the above chart, all buy signals on the indicator are marked by circles, and by green flags on the price chart.
It stands to reason that this indicator is much more complicated than it may seem, based on the above example. It also has many peculiarities, which I will describe later.
First, I’d like to describe its mathematical model, so that you can understand the indicator’s signals.
Mathematical model of TD REI indicator
The TD REI value is calculated by adding the respective differences between the current day’s high and the high two days earlier and the current day’s low and the low two days earlier.
To make it clearer, the calculation formula looks like this:
X = (H – H2) + (L – L2), where
H is the current high
H2 is the high two days earlier
L is the current low
L2 is the low two days earlier.
Besides, two conditions must be met:
Condition 1
• the current day’s high must be greater than or equal to the low five or six days ago,
or
• the high two days earlier must be greater than or equal to the close seven or eight days ago.
Condition 2
• the current day’s low must be less than or equal to the high five or six days ago
or
• the low two days earlier must be less than or equal to the close seven or eight days ago.
If neither of the conditions is met, a zero value is assigned to that day’s bar.
If both conditions are met, then there will be a different formula:
TD REI = (Y / (H5 - L5)) x 100
Where:
Y = (Sum X1 next… X5)
H5 is the high over a five-day period
L5 is the low over a five-day period
Differently put, TD REI a kind of shows the price movement, adjusted to a trading range over the five days.
TD REI filter for signals
Like any other indicator, TD REI is not a Grail and sends false signals too. To filter out these false signals, Thomas DeMark suggests using the TD POQ indicator, (Price Oscillator Qualifier).
To be fair, I must note that this indicator can be used together with any oscillator, based on the price action, (for example, MACD, RSI).
TD POQ conditions to validate the TD REI signals:
Buy signal:
1. TD REI has been in the oversold condition (below -40) for six or more bars;
2. The last complete bar should close below than the previous bar
3. The current bar’s open should be equal or lower than the highs of the previous two bars;
4. The market should be trading above the open price and break through the high iver the last two days.
Sell signal:
1. TD POQ has stayed in the overbought condition (above + 40) for six or more bars;
2. The last complete bar should close higher than the previous bar’s close
3. The current bar’s open should be equal or higher than the low for over the last two days
4. The market should be trading lower than the opening price and break through the low of the last two bars.
To explain how you can use the TD POQ to filter the entries, I’ll describe the examples of a buy and a sell signal.
Buy signal:
1. It is clear from the chart above that the first condition is satisfied, the price has been in the oversold area for more than 6 bars.
2. The last complete bar closed lower than the previous bar’s close (green dots below the red ones in the chart)
3. The current bar opens lower than the highs of the two previous bars (the current opening price is the same as previous bar’s close, it is market with green dots; and it is lower then the two yellow dotted lines)
4. When the price breaks through the highs of of the last two bars, there is a buy signal (it is marked with the red cross).
As you see from the chart, there is a reliable early signal to enter a trade.
I must note that the TD REI is a good supplementary tool for other Thomas DeMark's indicators. It is clear from the above chart that the signal perfectly matches to the start of a bullish set, indicated by TD Sequential (the developer is @andyhitchman) on the five-day timeframe (but it also matches on the shorter timeframes).
Sell signals
Now, let us analyze the sell signal on the example of the BTCUSD all-time high.
First, I’d like to note that the TD REI indicator, starting from 8000 USD recorded on November 20th, 2017 (in the BTCUSD price chart) was in the overbought condition for more than 30 bars and has never sent a false sell signal! In my opinion this fact alone is the evidence of the TD REI efficiency.
Now, let us analyze the sell signal produced on December 19th.
1. As I’ve already said that the indicator had been in the overbought zone for than 6 bars before the signal emerged. We can put a check.
2. The last candlestick closed as a doji, the closing price is almost equal to the previous bar’s close. This condition is NOT fully met, so we need an additional confirming signal.
3. In the above chart, you see that the current bar, of December 19th, opens lower than the high of the previous two days, so, we also put a check.
4. The market broke through the lows of the previous two bars and is trading lower (I marked the breakout with the red cross).
Therefore, as there is not a fully confirmed signal, it is important to employ this indicator with other Thomas DeMark’s tools.
For example, in the previous article (see here), I described a good tool, TD Propulsion.
In that article, we defined the TD Propulsion Up Target level for the bullish trend at level 18286.4 USD.
If we attach it to the present chart and add the calculations of the TD Sequential indicator, we shall see that this very bar closes lower than the TD Propulsion Up Target level, and at the same level, a bearish set up starts, based on the TD Countdown indicator.
Both these signals are confirming signals and, finally, suggest sell trades.
Analysis of the BTCUSD current market situation
Now, let us analyze the current BTCUSD price trend. In the previous article, when I was writing about the TD Trend Factor and TD Propulsion indicators, I finally outlined three possible scenarios for bitcoin trading.
At that time, it was difficult to determine the BTCUSD future trend.
Remember, there were three scenarios:
1. BTC price should rebound from level 12172.9 USD and go down
2. The price should rebound from level 14202.4 USD and be trading flat with a possible decline in future
3. The BTCUSD should continue moving up.
Now, if I apply the TD REI with the TD POQ filter to this chart, the situation becomes clearer.
As you see from the above chart, the last TD REI signal satisfies all the four conditions of the TD POQ filter (the overbought condition continues longer than six bars, the last bar’s close is higher than the previous bar’s close, the current bar’s open is higher than the lows of the two previous bars and the lows of those bars have been broken through).
In addition, as the fourth condition suggests, the market was trading lower than the reversal bar’s open (blue dots). Therefore, the first scenario, a more pessimistic one, becomes more likely. As I wrote in the previous article, the BTCUSD price is likely to hit the TD Propulsion Up level (level A). In fact, the market has already worked out this target so far, having not reached just a few dollars. Considering the bullish set up on the five-day timeframe, according to the TD Countdown, the btcusd may be trading flat for some more time. The BTCUSD may even try to hit level again 12172.9 USD, but, in general, it is not enough to invest your entire deposit into entering a buy trade.
As experience proves, the combination of TD REI signal and the TD POQ is a strong signal and I don’t recommend ignoring it. The BTC price is likely to rebound and continue its downward correction, according to the pessimistic scenario. After all, it doesn’t suggest that the bullish trend will necessarily end. However, my overview of the TD REI indicator won’t be complete if I don’t describe a situation, when the TD POQ filter doesn’t work.
The above chart represents such an example. You see that the TD REI has been in the overbought area for a long time, however the reversal bar (marked with the red arrow) doesn’t satisfy the last condition, the bar doesn’t break through the lows of the previous two bars. It is clear from the above chart, that the price hasn’t reached the level, marked with blue dots.
It suggests that the sell signal is false, and so, when the indicator reaches the oversold area, one might use this opportunity and enter a new buy trade, to increase the bullish position (I marked the buy zone with a green flag in the chart).
In case of a bearish trend and an unconfirmed buy signal, one may act in a similar way. However, you must always bear in mind that it is better to employ DeMark’s tools together. Only when all the indicators send the same signal, you can avoid trading mistakes and safely put entries.
I am not finishing writing about Thomas DeMark's oscillators. In my next educational posts, I am going to describe such indicators as:
TD DeMarker,
TD Pressure,
TD Range expansion Index,
TD Rate of Change.
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I wish you good luck and good profits!
Mikhail @Hyipov
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How The Crypt Alpha Uses The TD Indicator To Identify A Trend Hey Guys,
This video is for educational purposes not too many people have been using the TD Numerical Indicator to help identify a trend. This is a indicator that usually signals either a continuation or a reversal that can help you make your trading decisions. The TD Numerical indicator gives us a 1-9 count to the up side then it signals a trend reversal by highlighting the 9. After this we can expect a 1-5 candle pull back. The higher time frame you use it (ex weekly) the more accurate it becomes. Sometimes on the daily or hourly you may have to do some mental tweaking to adjust the signals as it usually sends signals a one or two days early.
I hope this helps, Subscribe for more videos and information from @TheCryptAlpha
Also Be Sure To View My Previous Charts They Are Linked Below!
Ciao!
