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My apologies, I should have been more clear. I understand what a frequency distribution is. What I don't understand is this particular frequency distribution on your chart is. What is the timeframe that it is drawing data from (e.g. current bar, whole day, last hour, etc.)? Also, what are those ranges in reference to (e.g. what is Range 100-149)? I'm also curious how you apply the frequency distribution to the "know" when to look for a reversal.
As Anthony Robbins would say, "Ask a better question..." LOL!
Net change for the purpose of this frequency distribution is the maximum of HIGH - OPEN and OPEN - LOW.
I am using the D1 or daily chart period.
You can see that over the last 250 days, there were only a few times that the net change was greater than 299. This occurred 24 times. So... when the net change of the EURJPY exceeds 200, I begin to take notice and start looking for signs of reversal. At 250 pips or more, there is a really good chance (statistically) price is going to reverse.
In the chart, the net change from open to low was 217 pips. At the time I posted the chart, the net change was 163 pips. That is a difference of 54 pips.
I enter long within 20 pips of the bottom. Worse case, I would have made 34 pips. Best case is 54. I'll take those pips anytime and I do!!
I coded an indicator to alert me when net change hits a threshold. Why stare at charts all day/night when the computer can do the work?
I know price will usually hit the threshold on the pairs that I trade. All I do is WAIT. I only need a couple of trades per day to hit my daily goal.
Okay, that was very helpful. One additional question. The statistics you use to complete the frequency distribution, is there a specific resource for that information or do you obtain that by doing your own data mining?
TRO, how do you judge when a BLACK SWAN event has gone in your favor? In other words, what qualifies as a BLACK SWAN event?
The reason I ask this is that the potential trades marked with arrows are just some potential signs of reversal (specially the first one, back and forth quite a few times). I guess once you see this kind of candle patterns, just take the risk since R/R is good?
Thanks TRO...your high/low of the day reversal trade in particular appeals to me. Genius in its simplicity. Thank you for your generous contributions to this thread...I think I've learned more practical knowledge about trading reading this thread than the $1000's I've spent at Amazon on trading books!