• : January 25, 2021
• : Prashant Shah

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:

Butfrompricepatternperspective,strongtrendfollowedbyshallowretracementandbreakoutisastrong priceaction.

Shallowretracementrestrictingtoabsolutenumbersuchas4-boxor8-boxmaynothelpalways. HavealookatpatternsX,YandZinbelowchart.

The length of retracement is different interms of number of boxes. But size of retracement is less compared to length of previous column of X. All these patterns qualify for:

Bullish breakout and strong trend->Shallowretracement->Follow-through breakout

Keeping this in mind, ARF pattern is designed.

A=Anchortrend R=Retracement

F = Follow-through

Pattern:

1 – Breakout

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

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.