Hi all,
If I understand correctly from the DOK instructions I am allowed to post a question here on the forum before continuing with my DOK on Chapter 2.
I have been applying the theory from Chapter 2, but can’t seem to find many Swing Points and Strong Continuation as defined in Chapter 2. So I wonder if I am applying the theory correctly?
I added a chart of the ES 5m 20/02/19 where a KME took place at 1500 GMT. According to my interpretation of the rules in chapter 2, the price action did not meet requirements for any swing points or strong continuation.
I added a second chart of ES 5m 19/02/19 what I believe is a correct Swing Point #1 in accordance with chapter 2 (for arguments sake I have called the Market Open WRBHG a KME, as marked on the chart).
Rules & Definitions
WRB = Wide Range Body, an interval that has a body larger than each body of the prior three intervals
WRB Hidden Gap = a WRB where the interval before and after the WRB do not share a tick. This represents a key change in supply and demand involving key market participants
Swing point 1
When the KME occurs it produces a first WRB Hidden Gap (WRBHG) in the same interval as KME. After the KME one of the following must occur:
• Price action after first WRBHG continues in the same direction. Also the price action after the first WRBHG must fill in the price action of any prior unfilled WRBHG. This change in price direction must occur prior to the formation of any next swing point.
• Price action after the first WRBHG continues in the same direction as the first WRBHG and then fills in the range (highest high to lowest low) of any prior three consecutive same direction intervals. Again, this change in price direction must occur prior to the formation of any next swing point.
The KME interval must have its close below the price of any prior down WRBHG or below the range of any prior three consecutive declining same direction intervals. Opposite for bearish.
The body of the KME interval that produces a WRBHG becomes a WRB Zone.
Swing Point 2
The KME interval is not a WRBHG and it must occur amongst contracting volatility intervals that occurred before the first WRBHG interval. The first WRBHG interval that occurs after the KME must be larger than the contracting volatility intervals.
• Price action was declining, then reversed direction through a first WRBHG interval. This WRBHG must share at least one tick with the three contracting volatility intervals and it breaks out above these three intervals. (This is bullish, opposite for bearish)
• After the first WRBHG u need three consecutive higher closing intervals prior to the next wing point. (the WRBHG counts as one of these intervals). This must occur after KME (This is bullish, opposite for bearish)
Strong Continuation 1:
Definition
Two or more WRBHG’s in the same direction. The first WRBHG is a breakout interval above most recent reaction high (bullish) (see definition below) or below most recent reaction low (bearish). The other WRBHG must have occurred after the first WRBHG before the next swing point.
Rules:
• KME can occur before first WRBHG, but must occur between the reaction high/low and the first WRBHG. If the KME occurs before the first WRBHG it must not be a WRBHG itself.
• The KME must not occur after the first WRBHG breakout
• Only the first WRBHG breakout interval can qualify as a WRB zone.
Reaction High
Price action with a minimum of two consecutive up intervals with higher closes before the reaction high and then price decline after the reaction high with a minimum of two consecutive down intervals. (Opposite for reaction low)
Strong Continuation 2:
v1,v2
v represents a WRBHG that is a is volatility spike that breaks out of the prior contracting volatility (minimum of three intervals). v1 is the most recent, v2 the one before that.
Definition:
Price action was rising (minimum of two up intervals with higher closes) before and below the close of up v2. This is followed by contracting volatility. This is followed by up v1 after which price action continues rising (minimum of two up intervals with higher closes) after and above the close of v1 prior to the next swing point. (opposite for bearish)
Rules:
• Only one of the v1/v2 is required to be a WRBHG
• Both v2 and v1 must be a volatility breakout above/below contracting volatility
• V2 WRB needs to breakout above prior three intervals, but v1 must breakout above all intervals between v2 and v1.
• The contracting volatility between v2 and v1 does not retrace the range of v2 and it’s prior three contracting volatility intervals.
• Contracting volatility between v2 and v1 intervals does not have WRB with bodies larger than the bodies of v2 or v1.
• V2 and v1 WRB are the same color
• V1 must occur at/after KME. If using v2 as WRB zone it must occur at/after KME
Thank you in advance
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