Пин-бар и 80-20 — простые графические модели в работе

In the master class "Be a Trader with iLearney"

Often traders in search of the Grail make life difficult for themselves, trying to put into practice complex strategies, which "sellers of happiness" once gave results. Probably, this is how human beings are built, because in search of "easy money" they are subject to emotions and periodically forget that trading - is, first of all, hard work. In fact, behind the complexity of the trading system in most cases lies its misunderstanding, which leads to automatic operations. Such work is best done by a robot, not a human. In my opinion, a strategy should be simple and understandable to the one who uses it. It should be modifiable for the existing market conditions, which are set by macroeconomic factors.

Simple models of technical analysis

In this respect, the best option may be simple graphical modelswhich I understand as combinations consisting of 1-2 bars, the occurrence of which can give a trader a clue about the market situation. My assumption is based on the fact that changes in quotes do not depend on the signals given by indicators or on the duration of waves. The market changes under the influence of supply and demand, and in order to understand their structure at a certain stage it is not necessary to use any technical analysis tools.

This concept already underpins the VSA analysisI see one major flaw in its application: all studies focus on the behavior of the big players. Which are also often wrong.

A clean chart at certain points in time allows us to identify "market overheating" which can be used regardless of the preferences of banks or investment firms.

Practice of pin-bar application

Simple models to identify excess demand or supply in a market I include pin bars и model 80-20.

Figure 1. Example of a PIN bar.

The occurrence of a pin bar is characterized by the presence of the following conditions:

1. Its opening and closing should be within the previous bar. In this case, the closer they are located in relation to each other, the better.

2. It is distinguished by a long shadow protruding beyond the previous bar. The higher the new formed extremum is, the more analytical value the model has.

This graphical configuration indicates that the market tried to update the previously formed maximum (minimum), but the strength of buyers (sellers) was not enough for this. As a result, a reversal follows, which can be used to opening positions from the opposite side of the pin bar the next day.

In particular, Figure 1 shows a daily chart of the currency pair US dollar/Canadian dollar, on which a familiar configuration was formed. Selling from the pin-bar minimum was able to allow the trader to get a positive financial result. An important feature of the chart is the formation of two simple graphical patterns at once.

Model 80-20

It was originally formed model 80-20The main parameters of this model are. The main parameters of this model are:

1. Bar opening should be in the lower (upper) 20% of the trading day range.
2. Closing bar is located in the upper (lower) 20% of the trading day range.

As a rule, the occurrence of this configuration indicates that during the day there was a significant growth (fall) of prices, which could be caused not only by objective, but also by subjective (emotional) reasons. For example, triggering of stop orders. The next day investors calmed down and soberly assessed the situation. As a result, it may be followed by reversal of upward (downward) movement yesterday's trading sessions.

In my opinion, the larger the range of the bar in the 80-20 model, the more emotional its coloring appears to be. Moreover, if a bullish (bearish) market was observed before the formation of the key configuration, it may signal investors' attempts to "jump into the last carriage of the departing train". That is, the situation when novice traders try to catch the elusive trend, while experienced specialists look for opportunities to open positions on its reversal.

According to the strategy proposed by Linda Raschke, by... models 80-20 It is possible to enter the market from the level of yesterday's extremum. However, for moderate investors, it makes sense to wait for a pin bar to form after the pattern in order to open a position with less risk.

Thus, on the basis of a fairly simple and most importantly understandable pattern it is possible to build an effective strategy of work. However, any trading system includes not only the entry point, but also determining the level at which to place a protective stop order, as well as identifying the level at which the position will be closed. Of course, as a trader who uses this strategy, I have my own thoughts on this subject. But before I express them, I would like you to share your thoughts. What stop-loss and take-profit levels seem to be optimal for you? Should I use combinations of these models to form medium-term or long-term positions? In fact, there are a lot of questions. And in order to answer them, we need a constructive discussion.