Revolutionize Your Technical Analysis with Color-Based Market Divisions
Table of Contents
- Introduction
- Understanding Market Separations
- Dividing the Market Based on Color
- Dominance by Number and Size
- The Importance of Being in Sync with the Dominant Color
- Short Setup Example
- Conclusion
Introduction
In this article, we will delve into the concept of market separations and explore the idea of dividing the market based on color. Traditionally, the market is often divided into smaller time slices to better analyze its movements. However, we will discuss an alternative approach where we look at the market through the lens of color. By eliminating separations based on color, we can gain a deeper understanding of the market's fluid movement.
Understanding Market Separations
Before delving into color-based separations, it's important to understand how market separations based on time work. Typically, the market is divided into various time slices, such as two-minute, five-minute, fifteen-minute, hourly, daily, and monthly intervals. This division is done for convenience to analyze the market's movements in smaller, digestible pieces. However, these separations are artificial and created by traders. In reality, the market is a continuous fluid movement without any inherent separations.
Dividing the Market Based on Color
An alternative approach to market separations is to divide it based on color. Instead of focusing on time intervals, we can focus on consecutive bars of the same color. By combining consecutive bars of one color into a fluid movement, we eliminate the artificial separations created by time divisions. This can lead to a different perspective and potentially better trading choices.
Dominance by Number and Size
When considering color-based separations, it's important to analyze the dominance of one color over another. Dominance can be determined by both number and size. Number dominance refers to when one color has a significantly higher number of bars compared to the other color. Size dominance, on the other hand, relates to the relative size of bars. In this context, we examine the dominance of consecutive green and red bars.
The Importance of Being in Sync with the Dominant Color
Being in sync with the dominant color is crucial for maximizing trading success. When your plays align with the dominant color, you increase your chances of winning trades. It's essential to identify the dominant color and ensure that your trades are in line with it. By doing so, you can significantly improve your trading performance.
Short Setup Example
Let's explore a short setup example to illustrate the importance of being in sync with the dominant color. Imagine a scenario where you have a short setup under the fabulous four and the 200-period moving average. Additionally, the stock has moved up to the declining 20-period moving average. In this case, the dominant color is green, and being in sync with the dominant color would suggest taking a short position. However, if you go against the dominant color, there is a higher likelihood of getting stopped out.
Conclusion
In conclusion, while traditional market separations based on time intervals can provide valuable insights, there is an alternative approach to consider. Dividing the market based on color can offer a different perspective and potentially lead to better trading choices. By understanding the dominance of one color over another and aligning your trades with the dominant color, you increase your chances of success in the market.
Short Setup Example: The Importance of Being in Sync with the Dominant Color
In trading, it's crucial to be in sync with the dominant color of the market. Let's take a look at a short setup example to understand why this is important.
Imagine you have identified a short setup under the fabulous four and the 200-period moving average. Additionally, the stock has moved up to the declining 20-period moving average, indicating a potential reversal. However, before entering the trade, it's essential to consider the dominant color.
In this scenario, the dominant color is green. Green bars have been consistently outnumbering red bars. Therefore, being in sync with the dominant color would suggest taking a short position. By aligning your trades with the dominant color, you significantly increase the probability of having winning trades.
On the contrary, if you were to go against the dominant color and take a long position, there is a higher likelihood of getting stopped out. The dominance of one color over another is a crucial factor to consider when making trading decisions.
By analyzing the dominance of colors and ensuring your trades align with the dominant color, you can enhance your trading performance and increase your chances of success in the market.
Conclusion
Dividing the market based on color provides an alternative perspective to traditional time-based separations. By eliminating artificial separations and focusing on the dominant color, traders can make better trading choices and improve their chances of success.
Understanding the dominance of one color over another, whether by number or size, is essential in aligning trades with the market's movement. Being in sync with the dominant color increases the probability of winning trades.
Remember, the market is a fluid movement, and while separations based on time intervals can be useful for analysis, considering color-based separations can provide a deeper understanding of the market's dynamics. By combining these approaches, traders can gain valuable insights and make more informed decisions.
So, the next time you analyze the market, consider the dominant color and let it guide your trading choices for higher chances of success.
