Identifying Pauses

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:

  1. They provide us with entry zones and
  2. 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.

24-5-2010-9-19-48-am-euus-5min.jpg

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)

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