Deon gave me this FRL on SUL as a good trade which it was, however I've been told by other more recent students that if the FRL runs into price action before it, it's not legitimate.

Is that correct?

HI Sue,

I would suggest putting a 1 period MA of closes onto the price action, this will give you some idea whether there is a strong trend in place.

Peter Varcoe

Hi Peter,
Just want to bounce some logic on the 1MA.
This I understand is used a visual to ensure the MACH D will work and price will not walk thru the FRL.
As the MN in this example is 8.8% approx the Mach D testing is not used and 2atr10 is used as a confirmation not the MACH D.
Why use a 1MA?

Can I rephrase Sues question?
Can you put a FRL on where it backs into price action?

Cheers

Tony

yes, I think Tony worded it better

Can you put a FRL on where it backs into price action?

Hi Guys,

Just as trends can start, establish themselves and then fall away more sharply, so too they can start sharply and then flatten off, with this in mind, can you think of a reason why you wouldn't be able to put a FRL onto SUL?

When you look at this FRL, there are 5 touches on it so how valid is it?

Tony, with the 2xATR(10) as confirmation, my understanding is that as long as the entry, being 1/2 ATR(10) above the RV, is equal to or higher than 2xATR(10) from the start of the drive into the break, the entry is confirmed.

I have not done sufficient testing with this strategy to offer comment on it, but Knowing Rob, he will have done plenty, but it is up to all students to do enough testing that they can confirm the strategy for themselves and to ensure they can make it work sufficiently well to be profitable to their individual satisfaction.

The 1MA is used to see where the closes are, as the MA is using these for its calculation, and I have used and recommended it to people to use if in doubt about whether there is a strong trend or enough movement around the closes to make the MA and therefore the MACD a viable tool for that situation.

Moving averages measure the closes, the MACD measures how the short and long term moving averages move around each other, so what happens in a sideways move or weak trend is that the closes normally form within a narrow band, causing both the short term and long term moving averages to close up. Then whe there is a price break, the short term MA moves rapidly in response and triggers a MACD crossover, even though there is not neccessarily a change of direction, therby giving false confirmation.

Using a 1MA can help determine whether there is sufficient ROM in the closes to keep the MA's and MACD alive as a viable tool.

I hope that was not too complicated.

Peter Varcoe

Is it because the last 20 weeks or so are fairly flat and a bit too sideways??

I would have thought that 5 touches would have made the line more valid?

Sue Bj.