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Rotations that exceed the 2SD are worth attention, usually representing a shift in the market balance or perspective. Especially if one lines up with a key area of interest you might have marked.
There are some stats which I put together which I also use to assist in entry position, depending on what the larger context of the trade is (if I am looking to go with or fade a 2SD rotation)
Here are some stats (based of last 3yrs of ES RTH, minimum 4t rotation calculation);
Using something like Jigsaw or Bookmap might assist in seeing areas where pull-backs may start to form.
Once a rotation pulls back gets to its mid, it has really become 50/50 so you have to decide what your risk is, or have already build a position via scale in/outs.
For Rotations over 1SD (but under 2SD) there is a high probability (70%) that they will hit their mid, but only 5% of trades reach 2SD so there is an edge in being skilled in catching the turning point of a 1SD rotation back to its mid.
I don't just blindly trade the rotations though, I wait for an area of interest then use these rotational probabilities to build a position (small scale in/out) to buy time and see if it plays out in my favour, goal being to move the risk point further away.
Thanks you for sharing, this is quite interesting. But, isn't this expressing the same information as plotting volatility/ATR bands on the price panel? Please forgive my ignorance here. Also wouldn't the rotations be different for each periodicity and therefore meaningful only to the periodicity which you are trading?
Wilson
I haven't done any analysis around ATR so I'm not too sure what its outcomes would be. You could possibly do a statistical study on individual ATR shifts and calculate a distribution to see what constitutes large single ATR moves.
I suppose the difference is this would be a derivative function of price where the rotations are a direct function of price movement.
The indicator attached to this thread is optimally used with tick based charts like renko, as time based bars can contain multiple rotations inside them which would get lost.
For time based bars, the same concept but applied through fractal rotations would be better, I have not made an indicator for this but from other studies the statistical outcomes would be the same.
Thanks Amoeba, your rotation study is great!
Do you happen to have it for Ninja 8?
Would you also happen to have any indicators that would help a Ninja Trader chart look more like FT71. i.e. printing the rotation size and price below the candle on the chart.
NT8 version is something on my list, just time poor at the moment & my primary platform has been SierraChart for a couple years now. I do still use NT for analysis though.
As for the printing rotation size, there is a great indicator already around called PriceActionSwing - have a search for that, I believe they have an NT8 version available too.
Here is a first release for NT8, I have only given it a quick test in historical charts + a little bit of market replay, so if you have time please give it a good check.