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Seeking explanation on Line break charts...


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 Ralph07 
London UK
 
Experience: Advanced
Platform: NinjaTrader, TT
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Hi all,

I am wondering if anyone can help me understand how Line Break charts are constructed. I understand the basic principle; being that if a 3-bar line break chart is being used, then a new candle is only constructed when price breaks the last 3 highs/lows.

However, what I don't understand is how the bar after that is constructed if the market continues to move in the same direction.

For the sake of example, I've posted an example below, taken from NTs help online help. Its an example of a 2-line break bars
https://imageshack.com/d/585/xeks.jpg/


The bar labelled 1 is what breaks the last two highs, therefore a green candle is drawn. However, what criteria is used to transition from candle 1 to candle 2? Similarly, what criteria is being used to establish the high of candle 2, and therefore move on the candle 3?


Thanks.

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  #2 (permalink)
 
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 Fat Tails 
Berlin, Europe
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There is a good description of three-line break charts by Suri Duddella.

The document is attached below.


Seeking explanation on Line break charts...-suri-duddella-three-line-price-break-charts.pdf

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Last Updated on July 3, 2013


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