There is a new category of technical analysis available for trading in the CURRENCY markets. It is called Shift Theory and this new technique is based on the Change of the Ratios that break down the three main types of chart conditions:
- Choppy Markets
- Above The Trend Of The Markets
- Down Trends Of The Markets
What Change Theory Proportions do is focus on the important data and ignores the data that is responsible for false signals and noise. The Theory of Change of trade of approach works better than any other form of technical analysis, because it focuses on the science of pricing analysis. The majority of technical analysis today focuses on the closing price as the main piece of data being analyzed. The main problem with that is the closing price is a moving target. Many traders do not realize that indicators are nothing more than measuring tools and they need to be treated that way. When it comes to measuring the price that you need stable data to get an accurate reading. I like to use an example of trying the weigh-in scales. If you keep jumping around while you try to weigh yourself then it is almost imposable to get an accurate reading. That is exactly what the closing of the price. Changes each time there is an increase or down tick and that changes the reading of most indicators and that results in a great amount of noise and false trading signals.
The Change in Trade Proportions are based on the undeniable facts of the market trends. Some examples are:
- Prices in a chart can only go to more if they make a new high.
- Prices in a chart can only go lower if they make a new low.
- Choppy markets of bars that have a high percentage of overlap.
As a trader Shift Theory Ratios are an excellent tool to keep traders disciplined and sticking two sound trading principles. As an example, we cover the reading and the directions of Change of Ratios give in 3 types of market conditions:
- Up Trending
- Downward trend
When market conditions are choppy the Inside Shift Ratio is the argument that measures that type of market condition. How is the Inside Shift Ratio does is measure the current bar percentage that is overlapping the previous bar. All choppy markets have a high percentage of bars that overlap each other. It is easy to see in a chart, but most of the indicators, you just can’t measure these types of conditions, since they are based on the closing price.
If the market is up trend then the Top of the Change of Ratio is the indicator which measures the type of price change. In the trend of the markets of the bars in a graph should be making higher highs and that is an undeniable fact on the rise in the maps of the moving markets.
During the markets, the Less Change of Ratio is the indicator that measures the strength of the downward trend. Again, this is based on the undeniable fact that the low of the markets should make lower lows, with the order to go below.
At the end of these techniques work and the proof is in the back of the test. A dirty secret of many of the indicators is that they really don’t work and that is the reason why no one is willing to show again the results of the tests. So if you want to find the best FOREX trading indicator, then you need to take a look at the Theory of Change of the Proportions. If you want consistent and proven results, then, as a traders you must focus on the important data and ignore the data that is responsible for the noise of the signal and the lag.