The process of manual drawing out is highly subjective. Many times, we don’t trade what we see, but what we “want to see”. As a result, we draw lines pointing to the direction that we wishfully want price to move towards. While there are no right/wrong ways to draw , there are, however, systematic/unsystematic ways to draw . This tool will systematically draw out based on fractals.
This tool will also plot out symbols (default symbol “X”) to signify points of crossings. This can be useful for traders considering to use as part of their trading strategies.
Here is an interesting observation on the price actions of NASDAQ on a 5 second chart during regular trading hours on July 14, 2022.
It’s a phenomenon. People like to see straight lines connecting HL/LH, etc., so it's possible for the market as a whole to psychologically react to these lines. However, it is important to note that is is impossible to predict the direction of price. In the case above, price could have tanked below auto-drawn . based should only be taken as references and regarded as price levels. No studies have ever proven that the slope of can indicate price's future direction.
More about fractals:
To understand more about fractals:
in "technical analysis" does not refer to the recursive self-repeating patterns that appear in nature, such as the mesmerizing patterns found in snowflakes. The Markets Hypothesis claims that market prices exhibit properties over time. Assuming this assertion to be true, then fractals can be used a tool to represent the chaotic movements of price is a simplified manner.
The purpose of this exercise is to take a tool that is readily available ( ie . in this case, TradingView’s built-in fractals tool), and to create a newer tool based on it.
- period (denoted as ‘n’ in code): It is the number of bars bounding a high/low point that must be lower/higher than it, respectively, in order for to be considered valid. Period ‘n’ can be adjusted in this tool. Traditionally, chartists pick the value of 5. The longer it is, the less noise seen on the chart, and the may also be exhibited in higher timeframes. The drawback is that it will increase the period of lag, and it will take more bars to confirm the printed .
- Others: Intuitive parameters such as whether to draw historical , what color to use, which way to extend the lines, and whether or not to show points of crossings.
- generic alerts
- adjustable line width
- separate line formats for new & old lines
- can specify maximum number of trend lines to show
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