ARF Pattern
Have a look at below chart pattern:
A = Strong trend
B = Shallow retracement
C = Continuationbreakout
Below is a chart image showing this pattern:
WehavetalkedaboutSuperpattern,T20etcpatternswhichwasanattempttomakethisobservation objective andscannable.
Forexample,astrongtrendfollowedbylessthan4-boxretracementisaSuperpatternthatprovides affordable tradeopportunity.
Butfrompricepatternperspective,strongtrendfollowedbyshallowretracementandbreakoutisastrong priceaction.
Shallowretracementrestrictingtoabsolutenumbersuchas4-boxor8-boxmaynothelpalways. HavealookatpatternsX,YandZinbelowchart.
Bullish Breakout =Double-top buy
Length of column is important there.Let’s keep it 9 keeping lower time frame in mind. Length of column of X is 9.
2- Retracement
Let’s calculate retracement in %age terms for this pattern.
In above example,length of previous column of ‘X’ is 9 boxes. There are 3 boxes in current retracement column of‘O’.
Therefore, Retracement %age = 33.33% (3 / 9).
3 – Follow-through breakout
Follow-through = Immediate Double-top buy
You will be asked for below mentioned information in dialogue box of ARF pattern
CL is Column length.
Default parameter sare 9 and 40. Length of breakout column is 9 –meaning, all columns having 9 or more boxes will be qualified. Retracement %age is 40 – meaning, retracement move of 40% or less will be qualified.
Clear?
Vice versal is for Bearish ARF.
If column length is 80 boxes and retracement % age is 40% -Follow-throughbreakout after 32-box or less retracement will be qualified for the pattern.
9 and 40 parameters are decidedbasedonlotofdataanalysisthatwedidatourendondifferent timeframesandinstruments.Ofcourse,you should experiment.
Understanding the logic behind the pattern is more important.
What I have explained is part 1 of the pattern.Part 2 and more about the pattern in next newsletter.
