BarroMetrics Views: Angles of Ascent
In this Blog, I review ‘angles of ascent’ as a tool for measuring momentum.
As a general rule, I seek to avoid indicators in my trading. So, I don’t use momentum indicators like RSI, MACD etc. Instead to assess momentum, I prefer to use ‘angles of ascent’ as shown by the Linear Regression Line.
In an uptrend, there are 4 main angles:
- 12:00 - 1 (unsustainable thrust)
- 12:05 - 2 (normal thrust)
- 12:10 - 3 (below normal thrust)
- 12:15 - 4 (sideways trend)
In a down trend the angles are at:
- 12:30 - 1
- 12:25 - 2
- 12:20 - 3
- 12:15 - 4
In uptrends, you are unlikely to see perpendicular moves (position 1). A Linear Regression Line that is between 12:00 and 12:05 is so steep, you are likely to see either a pause or pullback before making a new, final high. In position 2 (normal momentum, 12:05 and 12:10), you may or may not see a pause or pullback before a final high. In position 3 (12:10 to 12:15), the slope shows a sloppy directional move and probably you will see a sustained sideways move before making a new high.
The trade I made on the AUDUSD yesterday illustrates how I use the angles. For reasons, I won’t go into here, I was keen to sell the AUDUSD. Figure 1 shows my entry zone as being the Primary Sell Zone in the potential sideways action. My stop for the trade? Above 0.8615
Figure 2 shows a 15-min chart with Linear Regression Bands. At ‘A’ I had a setup and entry within a zone. But I did not take the trade because Linear Regression Line did not show a decrease of momentum in the (1) position. When the market gave a sell signal at ‘B’ (see Figure 3), we see that the Linear Regression Line showed a decrease in momentum. When the entry setup and trigger came, I was happy to take the trade.
FIGURE 1 290-min AUDUSD
FIGURE 2 15-minute AUSUSD
FIGURE 3 15-minute AUSUSD
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