| | | I don't get many false signals. This system is the best that I know of, but I am biased since I created it.
The key is cross validation of the signals.
First of all, trend is the king. This means respect the black trend line and the supertrend indicator within the main chart.
Second is the color guards. They act as support/resistance levels with some fuzziness around them. If have simplified it as saying buy on strength near the green guardrail and sell on weakness near the red one. But in actuality, both red and green are support/resistance levels. It's just that you are more likely to bounce off of a green (ie. it becomes a support) than the red (which is typically a resistance).
Finally it is the lower indicators that momentum indicators analogous to stochastic, RSI, TSI, etc with a bit of ADX thinking thrown in.
With the lower indicators, it is important to respect the levels. A good simplification is to treat them as above midline is a buy and below midline is a sell. But of course the crossovers and how oversold/overbought the signal is matter.
A more intelligent assessment of the lower signals is that above midline is buy and below it is a sell, BUT, if they become oversold/overbought and you see divergence, then act on the divergence, especially if the main chart guardrails and trend confirm your reading.
If a person or algo is able to keep all this in mind and cross validate with the above weighing, then false signals become very rare. They still happen, but a lot less often than you'd expect.
There are fair analogues between this system and the harmonic trading system from Scott. |
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