BarroMetrics Views: Identifying Pauses
One of the stronger features of the Barros Swing approach is its ability to identify short-term complex correction boundaries. To do this, we need to be aware of three tools:
- The 1-period swing
- The idea that a retracement of a sideways market needs to be at least 78.6% of the boundaries of congestion and
- That complex corrective waves will accept beyond the Primary Buy Zone in a downtrend and the Primary Sell Zone in an uptrend.
We identify complex correction boundaries because:
- They provide us with entry zones and
- Provide us with benchmarks of the short term trend.
A chart will flesh out the ideas:
In Figure 1:
- Acceptance above 1.2536 signals a complex correction bounded by 1.2562 to 1.2506.
- In that event, we’d be selling the Primary Sell Zone of the range 1.2562 to 1.2506 [1.2562 – ((1.2562 – 1.2506)/8)] and looking to buy at the Primary Buy Zone [1.2506 + ((1.2562 – 1.2506)/8). 3)].
- Non acceptance above 1.2536 keeps alive the possibility of a zig-zag correction which means that acceptance below 1.2506 will lead to further downside
This simple idea has prevented many losses because it allows me to identify the zones where I ought to be looking to trade.
Figure 1 EURUSD 5-minute
(NB: I don’t trade the 5-minute chart. But it did provide today an example of a classic pattern)