Forex training books : forex trend signal software :: forex trend signals

The ability to identify various point and figure (P&F) patterns and to look up their relative
frequencies of occurrence can be advantageous when calculating possible subsequent
column values.
Again we will employ our 7,000,000+ closes database as our statistical sample. We
will use a reversal amount of three boxes and a seven-column pattern. We will limit the
maximum number of figures (Xs or Os) in each column to nine (that is, quantities
greater than nine are rounded down to nine). The minimum number of figures in each
column is set at three because of the reversal algorithm mechanism. Thus there are
seven possibilities for the number of Xs or Os in each column.
Each pattern consists of seven columns. This generates 823,543 possible patterns.
In our initial computer tests, we discovered that the lateral congestion patterns
like 3333333, 3343333, 3334333, and 3333433 dominated the top of the
frequency count. Therefore, we found it necessary to impose a few conditions to filter
these lateral patterns.
First, we mandated that the center column have the greatest number of figures
among all the columns. This eliminates the redundancy of shifting the pattern one
column in either direction. Second, the fourth column must have a minimum of six
Xs or Os. These two conditions reduced the number of possible patterns nearly by
half to 470,596.

All traders are familiar with the concept of false signals, perhaps more intimately than
they wish to admit. This undesirable phenomenon involves the following sequence of
events: (1) a buy or sell signal is generated by some mechanical means, (2) the trader
enters the market at the designated price level, and (3) a breakout in the opposite direction
occurs. False signals have also been labeled failures. Regardless of the nomenclature,
they can be very disheartening and costly.
Although the effect of false signals can never be completely eliminated, their detrimental
impact can be significantly reduced by the use of confirming signals and the
proper positioning of stop-loss limit orders.