New Research: Essay Four (continued)
© Andrew Coles
“Outer Level” functioning on Monthly and Weekly Charts (continued)
Figure 3 below is a close-up of the August 2011-February 2014 trend over an eight month period. The standard monthly pivots are in blue and the Quadrating Price Levels are in bolded red. Again the reader can compare the two indicators while paying particular attention to Q4, Q3, and Q2.
Figure 3: Eight month chart of DAX with the Quadrating Price in bolded red and standard monthly Pivot Points in blue
There’s no point in duplicating Figures 1 and 2 for the weekly timeframe so here I’ll merely duplicate Figure 3 in the weekly format of Figure 4 below.
Figure 4 is again the DAX cash index, this time over an eight week period between May and June 2013. Again the reader can compare the two indicators while paying attention to Q4 and Q3.
Figure 4: Eight week chart of DAX with the Quadrating Price Levels in bolded red and standard weekly Pivot Points in blue
“Outer Level” functioning on Daily Charts
Although the daily levels are also “outer levels”, I have separated the daily chart timeframe from the weekly and monthly timeframes because the daily pivots are extensively used by day traders. Consequently we’ll need to consider the daily quadrating levels in relation to the intraday “inner levels”, as we’ll see below.
Figure 5 covers approximately 14 trading days in October 2013 of the DAX cash index with the standard Pivot Points in blue and the Quadrating Levels again in bolded red. Although the two indicators occasionally produce coextensive levels, most of the time the levels are mildly or significantly different. Moreover, when there is an overlap it is nearly always between unrelated curves – for example, Q3 with R1 etc.
I have highlighted one bar in Figure 5 with a green box and arrow because it illustrates clearly how different the levels created by the two indicators can be on occasions.
Figure 5: Daily chart of DAX cash index with the Quadrating Levels in bolded red and the daily Pivot Points in blue
As stated above, when using daily pivot point levels, day traders will project the five levels (P, R1, R2, S1, S2) onto today’s chart regardless of their preferred intraday trading timeframe. Traders should also do the same with the Quadrating Price Levels. Thus projected, the latter create what I call the “outer levels” on the intraday chart. (Of course, if the price trend is near a weekly or monthly Quadrate Level then it should always be noted.)
Overleaf I’ll look at intraday charts and the unique “inner level” plotting of the indicator, including its relationship with “outer level” daily pivots.
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