Ray Barros Method Introduction

[BlowFish 10]

I guess it's all down to how Market Analyst defines a swing...%retrace...n bar high....n bar correction etc. Theres not that many ways it can do it. If you know that, it will be straightforward, if not it will require trial and error changing parameters. Pretty sure Clydes code is likely to be able to do it if you know the parameters to give it. It really does have just about every conceivable option for defining a swing.

 

As Market Analyst proclaims a comprehensive set of Gann tools I wonder if it uses Gann's definitions of swings? They are pretty robust and available on the world wide interweb. Or maybe Ray writes about how he defines a swing somewhere?

 

At the end of the day market structure is market structure after all.

[bigbird 10]

Hi everyone, I hope this forum is still alive!

 

I'm still reading the Nature of Trends book and has some questions regarding when a spring/upthrust pattern has failed and therefore to favour a congestion. Hope to keep this forum alive for discussions.

 

I have 4 basic questions:

 

a) In chapter 3 of the book, acceptance is defined by “The close”, “WPC” and “LCC”. An upthrust is complete when the price “accepts” below the psz. In this situation, do we use “The close” only, or we also consider “WPC” and “LCC” as well?

 

b) These 2 questions refer to the chart.jpg file. The sample chart is copied from figure 1.9 (page 12) of the book. Ray's intend is to illustrate how an upthrust has failed and now favour a congestion.

1) How much must E retrace in order to conclude that the upthrust has failed and we now favored a congestion?

2) Do we shift the upper congestion boundary up to C only at the moment congestion is favored?

 

c) This question is related to chart1.jpg. In reality, things may not be as simple as chart.jpg. Referring to chart1.jpg, for example, when the line turns to form wave DE, does it mean we now favour congestion? Or when the Wave D1-E1 is formed? It seems that D1-E1 is a better candidate to use to decide congestion. But, DE can be a good point of decision when E retraces much more into the psz. Therefore, how do we decide for this more complicated case, at each retracement, that the upthrust has failed and a congestion is favoured?

 

 

Thanks a great deal!

[gassah 10]

Hi bigbird,

 

 

a) An upthrust is complete when the price “accepts” below the psz. In this situation, do we use “The close” only, or we also consider “WPC” and “LCC” as well?

 

For the upthrust, acceptance is a conviction bar below the PSZ. The bar has to have a normal range with an open and close within the top/bottom 1/3 of the bar and volume has to be at least normal. 1/2 the candle body has to be below the PSZ. Price also cannot accept above the maximum extension prior to coming back into the range. Acceptance in this regard is two consecutive closes above the ME, one bar has to be a conviction bar and it doesn't matter what order they come in. In addition, the potential upthrust must follow a prolonged trend. The longer a trend is in force the more likely the reversal pattern will actually lead to a reversal.

 

b) These 2 questions refer to the chart.jpg file. The sample chart is copied from figure 1.9 (page 12) of the book. Ray's intend is to illustrate how an upthrust has failed and now favour a congestion.

1) How much must E retrace in order to conclude that the upthrust has failed and we now favored a congestion?

 

D must come down to at least 78.6% of AB.

 

2) Do we shift the upper congestion boundary up to C only at the moment congestion is favored?

 

Yes. When 78.6% of AB is reached or after the line has turned back up after reaching 78.6%.

 

c) This question is related to chart1.jpg. In reality, things may not be as simple as chart.jpg. Referring to chart1.jpg, for example, when the line turns to form wave DE, does it mean we now favour congestion? Or when the Wave D1-E1 is formed? It seems that D1-E1 is a better candidate to use to decide congestion. But, DE can be a good point of decision when E retraces much more into the psz. Therefore, how do we decide for this more complicated case, at each retracement, that the upthrust has failed and a congestion is favoured?

 

The above should have answered your question, D1-E1.

 

Feel free to keep on asking and to visit Ray's forum.

 

Rob

[brownsfan019 17]

Rob - is this area of the forum ever going to evolve from more than 1 into thread? If not, maybe time to shut er down and just make it a single thread in the TA part of the forum.

 

If you want the area to get any momentum, you'll need to be the one that starts it. I've learned that myself.

[bigbird 10]

Yes. When 78.6% of AB is reached or after the line has turned back up after reaching 78.6%.

Hi Gassah,

 

Is there any requirement on how much the line should turn up after reaching 78.6%?

 

Thanks.

[gassah 10]

Is there any requirement on how much the line should turn up after reaching 78.6%?

 

No, it just has to turn.

[bigbird 10]

Hi Rob,

 

It's me again!

 

I have a few questions related largely to WPC, LCC:

 

QN 1

As you have said, for an upthrust to be complete, there should be a conviction bar.

In standard Barros Swing time frames, I understand that this can be applied on 12-period Barros Swing on the monthly data, 13-p BS on the weekly data, and 18-p BS on the daily data.

I’m trying to apply this on a different period swings on intra-day data. A 5-period Barros Swing on a 5 min chart is equivalent to a 25-P on a 1 min chart. Should I apply the above concept better on the 5-P swing or the 25-P swing?

 

QN 2

It’s mentioned in the NOT book that for normal change in trend patterns, we don’t assume a change in trend until we have acceptance of prices beyond B and we have (in order of importance):

1. The formation of a WPC; and
   
2. The formation of a “+3 LCC”; and/or
   
3. The market accepting prices beyond the maximum extension.
   

Since a 5-P BS on 5 min is equivalent to a 25-P BS on 1 min, which should I better apply WPC, LCC to?

 

QN 3

The context of this question is from Qn2.

Is it true that once market accepts beyond the ME, it does not matter whether there is a WPC or LCC, a change in trend is assumed?

 

 

Thanks!

[gassah 10]

 

QN 1

I’m trying to apply this on a different period swings on intra-day data. A 5-period Barros Swing on a 5 min chart is equivalent to a 25-P on a 1 min chart. Should I apply the above concept better on the 5-P swing or the 25-P swing?

 

I trade the 18d on a daily chart so I'm not certain about the intraday conversions. I've submitted your questions to Ray but will respond as best I can in the meantime.

 

It's best to use the default settings; that is the 1, 5, and 18 periods. The 5d swing on a 5m chart is the equivalent of an 18d swing on a 1m chart. The 5d is one timeframe lower than the 18d. The 1m is one timeframe lower than the 5m.

 

Should I apply the above concept better on the 5-P swing or the 25-P swing?

 

You should pick a time frame and utilize the 18d swings as your trader's time frame and the 5d as the first lower time frame. Your intraday choices are the 18d and 5d swings on an 80,15,5 or 1m chart. Ray doesn't have an edge below 15m so he recommends the 15m as the lowest denomination.

 

QN 2

It’s mentioned in the NOT book that for normal change in trend patterns, we don’t assume a change in trend until we have acceptance of prices beyond B and we have (in order of importance):

1. The formation of a WPC; and
   
2. The formation of a “+3 LCC”; and/or
   
3. The market accepting prices beyond the maximum extension.
   

Since a 5-P BS on 5 min is equivalent to a 25-P BS on 1 min, which should I better apply WPC, LCC to?

 

Apply it to your trader's timeframe (TTF) with an 18d swing.

 

QN 3

Is it true that once market accepts beyond the ME, it does not matter whether there is a WPC or LCC, a change in trend is assumed?

 

No, it does matter that there isn't a WPC or LCC. There isn't acceptance without them.

 

Rob

[bigbird 10]

Hi Rob,

 

Thanks for clarifying, and also relaying some of these questions to Ray!

 

You should pick a time frame and utilize the 18d swings as your trader's time frame and the 5d as the first lower time frame. Your intraday choices are the 18d and 5d swings on an 80,15,5 or 1m chart. Ray doesn't have an edge below 15m so he recommends the 15m as the lowest denomination.

 

:hmmmm: Should the charts be in geometric relationships, i.e., 80min chart, 80/5=15min, 15/5=3min chart (instead of 5 or 1 min)?

 

I thought also that the Barros Swings should be in a constant geometric relationship to one another. In other words, if we use 5 as the "geometric constant", the Barros Swings I should be using would be:

 

• 1st higher tf: 5-P on 80 min (equivalent to 25-P on 15min).
  
• Trading time-frame: 5-P on 15min. This is equivalent to 1-P on 80min,and 25-P on 3min, which means that I can choose to use, besides 5-P on 15min, the 1-P on 80min and 25-p on 3min. Using 1-P on 80min is not recommended, however, as some swings will be missing.
  
• 1st lower tf: 5-P on 3min (equivalent to 1-P on 15min).
  

 

Is this reasonable (i hope my description is not too messy to understand)? I'm not too sure how to apply the 5-p, 18-p swings on the 3 time-frames (80, 15, 3min) so that all 5 time frames from 2nd higher to 2nd lower are in a good geometric relations. Any suggestions?

[gassah 10]

Should the charts be in geometric relationships, i.e., 80min chart, 80/5=15min, 15/5=3min chart (instead of 5 or 1 min)?

 

Yes, you are correct. The 3m is more accurate. The 5m was a rounding up that I've heard Ray do.

 

I thought also that the Barros Swings should be in a constant geometric relationship to one another.

 

That is true and the goal of the 80m chart is to create 5 equal bars. On the 80m chart, the 5d represents the 1 period swing of the daily chart and the 18d represents the 1 period swing on the weekly chart. So you can see what is happening in multiple time frames on one chart.

 

1st higher tf: 5-P on 80 min (equivalent to 25-P on 15min)..

 

I've never heard Ray do anything like the 25-P on a chart. I would stick to the 5d and 18d swings. He did say in a webinar that if you are using the 5d on the 80m for your trend then you can use the 15m and 3m (or 5m) to further refine your entries.

 

Rob

 

 

]

[bigbird 10]

Hi Rob,

 

Thanks.

 

I've never heard Ray do anything like the 25-P on a chart. I would stick to the 5d and 18d swings. He did say in a webinar that if you are using the 5d on the 80m for your trend then you can use the 15m and 3m (or 5m) to further refine your entries.

 

Based on your reply, is the below setup correct?

 

18D on Daily === 2nd higher

5D on Daily === 1st higher

18D on 15 min === trader's time frame

5D on 15 min === 1st lower

5D on 3 min === 2nd lower

 

Thanks.

[gassah 10]

 

Based on your reply, is the below setup correct?

 

18D on Daily === 2nd higher

5D on Daily === 1st higher

18D on 15 min === trader's time frame

5D on 15 min === 1st lower

5D on 3 min === 2nd lower

 

I'm sorry but I wasn't clear before. The time frames are based on time. So if you are using the 80m to define the trend then the 15m and the 3m are the next lower time frames and the daily is the next higher. If you are using the 15m as your TTF the next higher is the 80m and the lower ones are the 3m and something below 1m. You can have the 5p and 18p on each one and use what you are comfortable with.

 

Rob

[bigbird 10]

Hi Rob,

 

I'm sorry but I wasn't clear before. The time frames are based on time. So if you are using the 80m to define the trend then the 15m and the 3m are the next lower time frames and the daily is the next higher. If you are using the 15m as your TTF the next higher is the 80m and the lower ones are the 3m and something below 1m. You can have the 5p and 18p on each one and use what you are comfortable with.

 

I'm sorry, but I do not understand still.

 

According to page 60 of the Nature of Trends book:

 

• 2nd higher TF = 12-month swing (which I assume to be a 12-period Barros swing on monthly chart)
  
• 1st higher TF = 13-week swing (13-period Barros swing on weekly chart)
  
• trader's TF = 18-day swing (18-period Barros swing on daily chart)
  
• 1st lower TF = 5-day swing (5-period Barros swing on daily chart)
  
• 2nd lower TF = 1-day swing (1-period Barros swing on daily chart)
  

Therefore, I have thought that a TF is uniquely defined by a n-period Barros swing on a m-period chart, and each TF must be in a somewhat logical relationship from one another.

• 1st lower TF is 5 times of 2nd lower TF (as there are 5 days in a week)
  
• traders TF is 4 times of 1st lower TF (4 weeks in a month, about 18days)
  
• 1st higher TF is 3 times traders TF (as there are 3 weeks in a quarter)
  
• 2nd higher TF is 4 times end TF (as there are 4 quarters in 1 year)
  

 

:question:Therefore, given the 80min, 15min, 3min and 30seconds charts, what period Barros Swings should be plotted on them so that the whole series from 2nd higher TF to 2nd lower TF can be seen:question:

 

Thanks!

[gassah 10]

You don't need all the swings on all the charts. If your TTF is the 80m, you'll have the 5p and 18p swings on it. The 18p identifies the trend and will be used for the lagging change in trend patterns. The 5p will be used for the forecasting patterns. When you have the zone and setup on the 80m then you'll go down to the 3m to find conviction bars. You don't need swings on the 3m chart, just candlesticks and volume.

 

The next HTF is the 18d line on the daily chart. Stats are kept on this line to determine OB/OS and to estimate where corrections will end.

[gassah 10]

Here's an example.

 

Rob

[bigbird 10]

Hi Rob,

 

You don't need all the swings on all the charts. If your TTF is the 80m, you'll have the 5p and 18p swings on it. The 18p identifies the trend and will be used for the lagging change in trend patterns. The 5p will be used for the forecasting patterns. When you have the zone and setup on the 80m then you'll go down to the 3m to find conviction bars. You don't need swings on the 3m chart, just candlesticks and volume.

The next HTF is the 18d line on the daily chart. Stats are kept on this line to determine OB/OS and to estimate where corrections will end.

 

I think I'm getting it, I hope. We use only the 5p or 18p, and a 5p on a TF chart is equivalent to a 1p on the next higher TF chart, a 18p on a TF chart is equivalent to a 5p on the next higher TF chart. The 18p swings should be used as the trading time frame (since it will then be possible to determine WPC, LCC).

 

To really confirm whether I have understood, suppose my trading TF is the 18p on the 15min, and following Ray's convention on page 60:

 

• 2nd higher TF: 18p on Daily
  
• 1st higher TF: 18p on 80min
  
• Trading TF : 18p on 15min (lagging change in trend patterns)
  
• 1st lower TF: 5p on 15min (forecasting patterns)
  
• 2nd lower TF: It is not necessary to draw this swing, but for completion sake, the swing would be 18p on 30s or 5p on 3min. It looks like using 18p on 30s is a better option, but I do not know why:question:
  

 

Are the above okay:question:

 

Rob, I hope I'm not too much of a trouble to you.

[gassah 10]

The 18p swings should be used as the trading time frame (since it will then be possible to determine WPC, LCC)..

 

You can also use the 5p on the TTF chart for WPCs. The count is 3 bars vs. the 9 for an 18p swing. Sometimes there will be a sideways market on the 5p, but not on the 18p, where this will be useful. See attachment.

 

To really confirm whether I have understood, suppose my trading TF is the 18p on the 15min, and following Ray's convention on page 60:

 

• 2nd higher TF: 18p on Daily
  
• 1st higher TF: 18p on 80min
  
• Trading TF : 18p on 15min (lagging change in trend patterns)
  
• 1st lower TF: 5p on 15min (forecasting patterns)
  
• 2nd lower TF: It is not necessary to draw this swing, but for completion sake, the swing would be 18p on 30s or 5p on 3min. It looks like using 18p on 30s is a better option, but I do not know why:question:
  

 

Are the above okay:question:

 

Seems reasonable, but I'm a little outside my area with the intraday stuff.

 

Rob, I hope I'm not too much of a trouble to you.

 

No problem at all. Besides enjoying this it helps me learn the material. You haven't even gotten to the good stuff yet.

 

Rob

[gassah 10]

Hi bigbird,

 

Ray has responded:

 

"For intra-day TFs, the TTF is always the 5d.

 

The reason is the 5-period swing on the first division by 5 is equivalent to the 1-day swing. Since there is a geometric relationship between the TFs, thereafter, the 5-p represents the 1-p of the preceding HTF."

 

Sorry for the confusion earlier.

 

Rob

[gassah 10]

Ray also said to drop one TF down for the forecasting patterns. In your previous example then:

 

SHTF: daily with 5p

FHTF: 80m: 5p

TTF: 15m: 5p for lagging patterns

FLTF: 3m: 5p for forecasting patterns

SLTF: 30s: trigger bars

 

Rob

[bigbird 10]

Hi Rob,

 

Ray also said to drop one TF down for the forecasting patterns. In your previous example then:

SHTF: daily with 5p

FHTF: 80m: 5p

TTF: 15m: 5p for lagging patterns

FLTF: 3m: 5p for forecasting patterns

SLTF: 30s: trigger bars

 

Thanks for relaying!

For 5p swings, I would use WPC = 3 like what you have advised, what about LCC, do we stick to LCC = 3:question:

In your experience with Barros Swings, is it true that most of the time, when there is acceptance beyond the ME, a WPC or a LCC would have happened:question:

Thanks.

[gassah 10]

Yes, stick to an LCC of 3. According to Ray the WPC usually happens last. FWIW, I really like the ME for breakouts. There are so many false breakouts that occur between the high and ME that it prevents a lot of bad trades. Once it gets moving beyond the ME odds are much higher that the breakout is for real.

 

Rob

[gassah 10]

I just clarified something else with Ray. The second lower timeframe is the actual bar on the TTF chart. In your situation the 15m bar has to be a conviction bar. You can enter earlier on a 3m bar but by the time the 15m bar closes it has to be a conviction bar. So you can eliminate the 30s chart altogether.

 

Rob

[gassah 10]

The second lower time frame is the actual bar on the TTF chart.

 

This statement applies to somebody trading the daily 18d. The 5d is the FLTF and the bar is the SLTF. For somebody trading intraday with a 5d swing I assume the bar is the FLTF.

[bigbird 10]

Hi Rob,

 

This statement "The second lower time frame is the actual bar on the TTF chart" applies to somebody trading the daily 18d. The 5d is the FLTF and the bar is the SLTF. For somebody trading intraday with a 5d swing I assume the bar is the FLTF.

 

Based on what you said above, therefore, for my example,

 

SHTF: daily with 5p

FHTF: 80m: 5p

TTF: 15m: 5p for lagging patterns

FLTF: 3m: 5p for forecasting patterns

SLTF: 3m bars (or we can use 5p of 30s, but not necessary)

 

Right? Thanks.

[gassah 10]

Sounds good.

 

There is something I'm not sure about for your TTF. When there's a setup on the daily for me I can enter on one of the 80m bars and if by the close the daily bar looks good I will stay with the position. If the bar ends poorly Ray suggests exiting.

 

If you use the 15m then you can do the same thing with a 3m bar. What about when you are using the 3m for forecasting patterns? Can you anticipate with the 30s bars? I assume so.

 

Rob