Analyzing cryptocurrencies using the Tic-Tac-Toe
Results of the last experiment. Determining targets, reversal and length of the trend.
In the previous training block, as part of a large experiment with price charts, we started studying such a rare chart as Tic-Tac-Toe.
In this post, I will continue to talk about one of the oldest technical analysis tools and its use, and give a couple examples.
Two weeks ago (September 10, 2013), I made a bitcoin forecast using Tic-Tac-Toe.
In the forecast, I talked about apparent sideways movement, which can be seen in the Tic-Tac-Toe chart.
First of all, this was evident from the support line that was built in the chart. Given that the MACD indicator did not show an inclination to fall or grow, I made a conclusion about the development of sideways movement.Bullish convergence in Japanese candlestick chart confirmed this assumption.
As a result, in the chart above, we see that the ticker really went into sideways movement and stopped its fall. The BTCUSD is moving in such a narrow corridor that in the Tic-Tac-Toe chart, this dynamics fits in just four crosses of $ 108 each.
Thus, this chart remains within the equilateral triangle, which can be seen in the chart on the right side, moreover, we see that there is space for another pair of crosses, which means the possibility of growth to 7000 USD within the figure.
Thus, the experiment confirmed that the Tic-Tac-Toe is ideal for a global analysis of the situation, because thanks to its properties, the entire history of the movements of the instrument looks very compact and informative. Using this type of instrument, we can define global graphical patterns of classical technical analysis and support levels.
In addition, Tic-Tac-Toe allows you to determine the length of the current trend.
There are several approaches for this, which we will consider below:
1. Count the number of columns in the previous trend before the reversal.
Based on this rule, to determine the trend, we need to calculate the number of columns that determined the length of the previous wave. The resulting value will be equal to the minimum number of crosses or zeros in the current trend column.
As seen in the chart above, the number of columns in the descending wave was nine, therefore in the next ascending wave we should see at least nine crosses, which is happening right now.
2. Count horizontally
We take the base of consolidation in the widest place. We count the number of characters in this base. In the case of calculating targets for a bullish trend, we multiply this value by 3, in the case of a bearish trend - by 2.
As you can see in the chart above, the widest column consisted of 9 crosses. To calculate the target for the future bullish trend, multiply this amount by 3 – we have 27 crosses. In the chart, each cross has a step of 108 USD, i.e. the length of the trend will be:
9 x 3 x 108 = 2916 USD
As seen in the chart above. The target was set with almost absolute accuracy.
3. Count vertically
This counting is similar to horizontal, only for the calculation, we take the first reversal column, which is the basis of the trend.
In the example above, we see that the bullish trend was based on a column with nine crosses, which means that the target should also be at 2916 USD, if we count from the base of the trend.
The chart above shows that this target was not realized, although it missed by a thread.
In case of a bearish trend, we do the same but multiply by 2.
4. Breakout of 8/1 of the Gunn’s Fan.
Another more original way to determine the end point of the trend is the Gunn’s Fan. For this, the initial point of the fan must be put on the very last cross of the upward trend or at the zero of the downward trend. The last point for the formation of the fan is the last value of the reversal column. As a result, the fan will be formed in the chart with the extreme line 8/1 being the trend line, which, when crossed, will mean a change in the market movement.
In the chart above, I showed an example where the control points on which Gunn's fan is built are marked with red crosses. As we can see, the first point is the highest cross of the last growing column in the bullish trend. The second control point is the last zero of the first falling column in the bearish trend. As we can see, the exit from the fan zone at the intersection of the 8/1 line denoted quite clearly the change of the declining wave by the growing wave.
We see a similar picture when calculating the length of a bullish trend.
As we see in the chart above, the exit from the previous wave of growth at 100% falls under our rule of breakout at level 8/1 of the Gunn - I marked with a green check mark.
Green crosses mark the extreme points of two transitional trends on which the Gunn’s Fan was built.
It should be noted that there are no false breakouts here. If a level breakthrough has happened, then we are building a new fan, which will start from the reversal point of the very impulse that the fan has broken through.
Thus, if we construct a fan on each reversal pulse, we see the following.
The chart above shows how the last impulse growth broke through the fan (marked by a green circle) - this is a sign of the trend change. However, the movement was so short that, in the end, the ticker returned back to the bearish wave.
However, we must build a new fan.
The first impulse wave broke the fan down, which again means a change of trend and the need to build a new fan.
So we reached the last fan, which remains active at the moment (see the chart below).
In the chart above, we see that with an increase of 7200 USD, the bearish local trend will be broken and a reversal will be marked. If there is no breakout and market returns back to the support levels, then the next time, there is almost no need for the bulls to make an effort for a reversal signal, because the exit is already at 6700 USD.
I would like to warn you that this method was developed by me personally and tested only on the BTCUSD. In the case of other trading instruments, the results may differ.
Tic-Tac-Toe is an excellent tool for:
• Determining support and resistance levels;
• Working with graphic patterns;
• Trend trading and identifying reversal signals.
Tic-Tac-Toe filters the market noise well and rarely give false signals.
The main and, perhaps, the only drawback of this chart is the strong delay in the signals.
Here I conclude the training block dedicated to Tic-Tac-Toe. In the next post, you will see the continuation of the experiment. We will discuss the Range chart.
Good luck and good profits!
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Price chart of BTCUSD in real time mode
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