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I'm confused a bit by what the signal bar actually is. In this slide it says the bear bar is a bad signal bar. Why wouldn't the first bull bar that's closing on its high be the signal bar and then the following bar would be your entry bar?
You're obviously getting filled on the second bar ( as it illustrates with the green box). You probably wouldn't take the trade without that first bull bar. So wouldn't the first bull bar be the signal bar?
It is a good question. You have to remember that you are seeing a visualization of a process. It is not how computers necessarily see it.
If you consider that highs and lows are formed to create patterns, the strongest patterns will have the beginning of a move be from the lows (if bullish move), or the highs (if bearish move). When this happens, the beginning of an "impulse" or strong setup bar will then have its high or low protected at 1 tick beyond the beginning. If the beginning of a move is not in the direction, as in this case the bottom of the move is from a bearish bar, then the bottom may not be as strongly protected - thus making the bear bar a poor signal bar.
Hopefully helpful and good trades to you!
So you are saying that it is a signal bar because the open of the bull bar is 1 tick higher the the close of the bear bar?
If so once this happens, the bear bar became a signal bar?
Please advise, thank you!
No.
Please reread the paragraph carefully. There is a signal bar, and an entry bar. Sometimes these can be the same, ie for market order entries.
An important element is whether the high or low of the beginning of a move begins well. If the bottom of a bull movement has a low defined by a bear bar, as in this case, that is a poor signal bar to begin with. These types of moves are often tested more rigorously than if the initial movement was a bull bar.
Good trades to you!
Okay, i get what you're saying. Thank you Eric!
