ABC Points Criteria

Last modified 13:35, 19 Oct 2012

sitmicon34.gifThis content is provided in support of the Safety in the Market (SITM) module for Your SOFTWARE and may not be applicable to your package. For more information, go to the Modules topic of this help.

ABC Points Hi-Lites Scan Criteria Settings

Select ABC Points from the Hi-Lites Search Criteria group.

The user settings are made in the Search Criteria Parameters Definition Area located in the lower right side of the Search Criteria work area.

When the criteria is created, it will be included in the Search Criteria Expressions list.

ABC Points Search Criteria

The following Search Criteria settings can be altered by users:

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Entry Limit

The entry limit, also known as the Enter By level, is calculated by multiplying the reference range by either 25% or 33% (or another user defined amount) and adding it to the point C value.

The resulting level must not be exceeded when entering the trade, as it indicates an overbought market in long trades (or oversold in short trades).

Users can select 25%, 33% or manually enter another amount (not recommended) in the Other text box.

The exact level suitable for individual trades and traders, as well as a discussion of risk and reward, can be found on pages 107-108 of the Smarter Starter Pack manual (3rd Edition).

Point Size

Point size is the value of minimum fluctuation for the instrument selected.

Select Automatically Set Point Size to adopt the system data's default.

  • For stocks this will be .01 or 1 cent.
  • In the case of a futures contract, this will be the value of Minimum Fluctuation (to check this select Action, Actions for "Symbol" and Information. When the Detailed Symbol Information dialog for the futures symbol opens, click on the Futures Specs button in the bottom left to open the Detailed Futures Information dialog box. Minimum Fluctuation is the second group of settings on this dialog box.)

If you wish to manually adjust the value of the point size, de-select Automatically Set Point Size and enter the desired value in the area with the heading Point Size.

Days of Data to Load

Set the number of days over which to calculate ABC formations.

Swing Periods

Enter a value to scan on for multi-day swing chart patterns.

The default is 1.

Popular settings include 2-day and 3-day swing chart patterns.

Direction

Choose Long or Short depending on your trading strategy.

Filters

The following ABC trading specific Filters can also be set:

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Scan for confirmed "C's" only

Check this option to require the Point C of each ABC formation to be confirmed.

This will require at least one additional trading interval after Point C that confirms Point C as a swing point.

Selecting this option may also eliminate some ABC formations where the point "C" is only a potential Point C.

This feature is mainly useful for back-testing.

Include Overbalance in Price Trades

Overbalance in Price means that the current favorable A-B range swing so greatly exceeds the previous swing range movement in the same direction (not necessarily an ABC formation) that the ABC formation can be identified as a potential ABC trading formation even though the relative level of point B's swing does not exceed the previous swing top or bottom.

Normally if the current point B does not exceed the level of the previous swing in the same direction, the formation will not be identified as an ABC formation.

Selecting Include Overbalance of Price Trades allows these ABC formations to be identified because it ignores the normal rule when the overbalance of price level is met.

An overbalance in price can be the first indication of a pending change in trend. Use this filter so that ABC formations that are affected by this situation are not disregarded by the normal ABC criteria. In this way valuable trading opportunities can be identified.

The multiple by which the A-B swing must exceed the previous swing (i.e. its overbalance) is defined by the user. The default is 3.

This filter is not affected by the Entry Level setting, and will work with either 25% or 33% (or Other) Entry Limit settings.

Allow for Expanding Ranges

The normal entry limit for a legitimate ABC trade is calculated by adding 25% of your A to B reference range on to Point C (for a long trade).

When the market is in a clearly defined trend, i.e. higher swing tops & bottoms in a long market or lower swing tops & bottoms in a short market, the current A to B reference range will be larger (expanding) when compared to the previous swing in the direction of the trend.

By selecting this option, users can override the Entry Limit set on the Settings tabbed page when such an expanding range is encountered. The result is to identify some ABC formations which would otherwise be ignored because of the 25% limit.

Exclude Abnormal Ranges

Overbought and oversold situations can prove dangerous for the novice Smarter Starter Pack Trader. When a market has moved a great distance in either an upward or downward direction over a short period of time the market could be in these overbought or oversold territories, making the next ABC trade potentially more dangerous.

The Exclude Abnormal Ranges filter will overlook any legitimate ABC formation if the A to B reference range exceeds a certain number of times the average swing size.

Selecting Exclude Abnormal Ranges will cause the software to first average the range of the number of previous swings set by the user (the default is 50), and then exclude any ranges where the current range exceeds the previous range by a user defined multiple (the default is 1.5) of the previously calculated average range for the security.

The Starter Pack Software will not automatically apply this filter, however users can select it and save the setting as their default.

This filter is not affected by the Entry Level setting, and will work with either 25% or 33% (or Other) Entry Limit settings.

Note - This filter can significantly reduce the number of trades identified.

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