Basic Swing Indicator Construction :
A-RAW STAGE
1-On a M30 chart, draw boxes worth 7 M30 candles on a rolling basis
2-For each box, there is a ‘major move’ within the box. It is the highest high and the lowest low extremes of the box. Mark them with a swing. It is ok if the highest high and the lowest low extremes of the box are of the same candle.
3-Eliminate swings that do not have their end at the end of the box, but keep a marker at the opposite side on all end of box, regardless if their swings are accepted or not.
4-Hide the boxes
B-STAGE 1
1-For successive raw upswings, keep tracking until you get a raw downswing. Sum up the entire upswing by a single line. Continue the process, down->up->down…etc. Raw swings here are thinner, Stage 1 swings are thicker, hopefully you can see them
2-Hide the raw swings.
C-Stage 2
Backtrack as much as possible, code up (obvious) logic to join up these gaps. Simple thumb of rule is always maintain the lowest/highest extreme and adjust the ‘wrong’ swing.
D-Stage 3 (final)
There are 6 types of swings
-Down Retrace = previous swing is up and current swing is down, previous swing low NOT broken by current swing
-Up Retrace = previous swing is down and current swing is up, previous swing high NOT broken by current swing
-Down Trend = previous swing is up and current swing is down, previous swing low IS broken by current swing AND current swing’s end candle did close beyond previous swing low
-Up Trend = previous swing is down and current swing is up, previous swing high IS broken by current swing AND current swing’s end candle did close beyond previous swing high
-Down Reject = previous swing is up and current swing is down, previous swing low IS broken by current swing BUT current swing’s end candle did not close beyond previous swing low
-Up Reject = previous swing is down and current swing is up, previous swing high IS broken by current swing BUT current swing’s end candle did not close beyond previous swing high
Classify them and color code them any way you like.
FYI sorry for using so many images. I not sure if this site supports inline images thou, but I think this is the best I could do without cluttering up screen.
