12-24-2007, 10:48 PM
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Re: barros swings, ray waves
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I didn't see where on his blog he explains how he creates his buy zones. Anyone have more info? |
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Ray didn't named the system 'BS'  for nothing.
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CHAPTER 5
FORMULAS FOR CONSTRUCTING
1
BARROS SWING CONSTRUCTION
The smallest swing in any timeframe is the 1 period. In the BS these are drawn differently
to the other swings in the same timeframe.
1-Period Swings
To draw a 1-period swing start at an extreme low or high. For the purposes of this
illustration, let’s assume we start from a low.
FIGURE 1 Dow Jones Industrial, Cash, Daily
In the chart above, let’s say we start the swing on Mar 12th, from the low we draw the line
its high and continue to do so until Fri Mar 21st. On Monday we have a low below the
previous day’s low. Accordingly we draw the line down from the high of Fri to the low of
Monday and continue to do so until we get a day where the high exceeds the previous
day’s high. At that point we draw the line up and so on.
Inside days are ignored.
For outside day’s the drawing of the line is delayed until the day following the outside
day – if the high of the outside is exceeded, we draw the line up; if the low is exceeded
we draw the line down.
CHAPTER 5
FORMULAS FOR CONSTRUCTING
2
Periods Greater Than 1
3-period: Using the same data. We start from the low and turn the line up when:
we exceed the highest high of the past 3 days (including today) + 10% of
the adjacent 1-period swing
FIGURE 2 Dow Jones Industrials, Cash, Daily
In Figure 2, the magenta lines represent 1-period swings. At the completion of trading on
Wed Mar 12th, the 3-d line will turn up on breach of highest high of the past 3 days (incl.
Today) viz, 7739.4 + 60 (10% of the 1 period swing which was 600.35 points).
The line will continue up until the market takes out a low that is the lowest low of the past
3 days +10% of the adjacent 1-period swing.
Reverse to turn the line down.
5-period: The same principles apply except that the filter used is 10% of the
adjacent 3-period swing and the line turns when the 5-period extreme is exceeded + 10%
of the adjacent 3-period swing.
Note that this means that for every timeframe, we first need to calculate the 1-period
swing irrespective of the swing size we are considering.
CHAPTER 5
FORMULAS FOR CONSTRUCTING
3
ADDITIONAL RULES
To circumvent the situation where the market fails to move sufficiently to turn the line
because it fails to reach the filter, there are two additional rules.
1) The swings (except for the 3-d) represent 1-p swings of high timeframes e.g.
the 5-daily swing represented the 1-period weekly. Hence any time we turn
the 1-period weekly line, the 5-d line must also turn.
At the end of this chapter, I have outlined the various relationships.
2) For a down swing, the price at which the line turns up can move down but
not up; in an up swing, the price at which the line turns down can move up
but not down.
e.g. Let’s says the line has been going up and we are looking to turn the line
down. The lowest low of the past 5 days is 100 and the 10% filter is 10. The price at
which the line would turn would be (100 –10) = 90
The next day the market moves down and gets to 97. In other words it exceeds
the low at 100 but fails to reach the low minus the filter price at 90. The question is:
at what price would the line now turn?
Because of this rule the price remains frozen at 90; otherwise it would be 97 – 10 =
87.
PERIOD RELATIONSHIPS
DAILY DATA
05-d = 1-p weekly
18d= 1-p monthly
WEEKLY DATA
13-W = 1-P QUARTERLY
MONTHLY
12-M = 1 PERIOD YEARLY
30-M = 1 PERIOD 2.5 YEARS
60m = 1 PERIOD 5-YEARLY |
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