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    Arthur Merrill - FILERED WAVES Bloomberg

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    Minh Nguyễn
    Arthur Merrill - FILERED WAVES Bloomberg

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    © All Rights Reserved
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    Arthur Merrill - FILERED WAVES Bloomberg

    Uploaded by

    Minh Nguyễn
    622 views25 pages
    Arthur Merrill - FILERED WAVES Bloomberg

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    Arthur Merrill - FILERED WAVES Bloomberg

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    622 views25 pages

    Arthur Merrill - FILERED WAVES Bloomberg

    Uploaded by

    Minh Nguyễn
    Arthur Merrill - FILERED WAVES Bloomberg

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    The document discusses the basic theory and application of filtered waves and swing trading, which use percentage or volatility filters to classify trends and identify patterns in financial markets.

    Arthur Merrill and others developed early theories of filtered waves, which use percentage filters to remove noise from price data and classify patterns. Average true range (ATR) can also be used to quantify market swings.

    Waves are used to define trends and support/resistance levels, making it easier to identify trading opportunities like trend trades, breakouts, and reversals based on the wave structure.

    Filtered Waves 21st century

    (Back to the Basics)


    Bloomberg, Nov. 2007

    Copyright 1996 2007 Linda


    Raschke and LBRGroup Inc.
    All Rights Reserved.

    Copyright Notices
    This presentation is copyrighted:
    1996 2007 LBRGroup / Linda Raschke.
    All Rights Reserved.

    Certain chart images are copyrighted by Aspen Research Group.

    Certain chart images are copyrighted by Tradestation


    Technologies.

    Certain chart images are copyrighted by CQG.

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    2
    Filtered Waves Basic Theory
    Arthur Merrill, 1977
    Arthur Merrills filtered waves used a percentage of price movement
    (5%) to filter out the noise. His work was important because he
    dedicated a whole book to the concept of classifying patterns by the
    wave structure.
    Gann was probably the most popular predecessor of swing charting.
    Welles Wilder documented the use of ATR (Average True Range)
    functions to quantify swings as opposed to percent functions. This
    was applied to a system called the Volatility stop and reverse
    system.
    Merrills work was far more comprehensive, in that not only did he
    classify previous market structures, he also developed classic
    actuarial tables, or probability grids, to measure the median %
    increase/decrease and duration of bull and bear markets.

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    3

    Wave Structure

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    4
    Market Structure as measured by Swings

    Waves eliminate noise and thus make is easier to determine TREND


    Additionally, the absolute support and resistance are one more way
    of adding structure. While Art Merrill used a percent function, we use
    an ATR function. A new Up Wave starts when price moves 3 ATRs
    up from the lowest low or lowest close over 15-period look-back. A
    new Down wave starts when price moves 3 ATRs down from the
    highest high or highest close over 15-period look back period.

    Once market swings have been quantified, relationships, turning points,


    and trend can once again be classified, counted, examined and
    expressed in numbers. We can start to build a probability grid,
    evaluating trade management strategies.

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    5

    MER waves define structure and trade opportunity. Some wave patterns lead to small wins, some have
    above average odds of a bigger win.

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    6
    BNI Wave structure is one of the primary basis of a trade.

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    7

    NEM - trading opportunities based off wave structure. Trend trade, Power Buy, Trend Scalp, Failure
    Test up, Failure Test down, Breakout coil (trend reversal), Trend Scalp

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    8
    Wave Structure Dollar in an up trend

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    9

    Waves structure still shows uptrend

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    10
    Uptrend still intact, volatility contracting

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    11

    Trend Reversal Down when Power Buy fails

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    12
    Up waves are now shorting opportunities

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    13

    The first trend reversal up

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    14
    Trend Reversal from up to down again Weekly chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    15

    The trend in 30-year yields reversed on the daily charts at the end of 2005.

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    16
    Dow 5 minute, 3/10 oscillator supports the structure in the waves.

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    17

    Swing Exercise Weekly Dollar Index: Trend reversal from Up to Down. (note:
    momentum oscillators can be misleading )

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    18
    Failure test after downtrend, reversal back to uptrend

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    19

    A failed bear flag is the same as a failure test or failure swing. The reversal
    point is what we call a U- turn Buy

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    20
    Yield chart extreme example of reaction up in downtrend. Despite the sharp
    swing up, the wave structure for rates remained in a steady downtrend in 2004.

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    21

    How can structure aid in identifying the sweet spots in the data?
    Trailing stops only degraded any edge extracted from
    relatively simple rules. There are no combination targets
    and stops, even with the use of one filter, where it is
    more profitable to trail a stop then playing for a small
    win. However, when using two time frames, there are
    sweet spots in the data that do lead to bigger wins or a
    higher then average expectation of greater trendiness.

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    22
    Sweet spot with detail on short time frame

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    23

    Trend reversal on hourlies precedes trend reversal on higher time frame.

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    24
    Comparison of different structural points small target versus large target

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    25

    Japan Index Trend reversal is a Process!

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    26
    Russell 2000 Weekly Chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    27

    Russell 2000 Daily chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    28
    SP 500 Weekly Chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    29

    DJ Transport Index Weekly Chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    30
    DJ Transport Index Daily Chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    31

    DJ Utilities Index Weekly Chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    32
    Brazil Daily Chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    33

    FXI Daily Chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    34
    Japan Index Weekly Chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    35

    Weekly Dollar Index

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    36
    Dollar Index Daily Chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    37

    Dollar Index Hourly Chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    38
    Goldman Sachs Spot Index - Weekly

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    39

    GSI Daily chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    40
    GSI Daily chart with more data

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    41

    Hourly chart of Crude

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    42
    Hourly chart of Gold

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    43

    Copper Weekly Continuation

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    44
    Copper Intraday detail of failed A B C

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    45

    Wheat - Daily

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    46
    Wheat hourly chart

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    47

    SP E mini 3600 tick chart structure

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    48
    SP E mini 800 tick chart structure

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    49

    SP E mini 800 tick chart resolution!

    Copyright (c) LBRGroup 1996-2006. All Rights Reserved.


    50

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