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Hello all,
I regularly have challenges trying to determine whether a wedge is a parabolic wedge (reasonable entry) or a wedge in a strong trend (not a reasonable entry). This is not helped by the fact that both parabolic wedges and strong trends form gaps and potentially have breakouts/climactic behavior, so look very similar. Does anyone have advice for determining how to differentiate between these? One example to conceptualize this is below.
Hi,
really a good question. The only thing I know is:
In parabolic moves, distance between trend and EMA increases.
Hope there are more detailed answers to come to this topic.
Hi Peanut!
Some things to look that may give a PW are:
- 3 consecutive climaxes
- Tight Channel
- Gaps between legs
- Curve may or may not be parabolic (important point in BTC course).
- Often leads to reversal if occurs at start of session
And Hardy made a good point that price often speeds away from the EMA as in Al's slide. However, sometimes EMA doesn't help, like in these situations:
But it's still clear that this (bull move) is exceedingly climactic, with multiple climaxes and tight. It also helps to compare price action to previous days to see how big the bars were to help gauge how climactic today is.
You're right, in a strong trend there are also climaxes and BOs, but they are never "too big" to make traders think exhaustion. They are only big enough to trap CT limit traders while with-trend traders just keep adding on. Again it really helps to compare today's price action to previous days to gauge the extent of today's climacticness.
Hope that helped!
CH
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I think, in the case of a normal wedge, the local changes are linear and in the case of a parabolic wedge, the local changes are approximately to the power of 2. Like comparing a line graph and a parabola graph.
best regards.
