Standard Deviation Channel

Standard Deviation Channel is built on base of Linear Regression Trend representing a ussual trendline built between two points on the price chart using the method of least squares. As a result, this line proves to be the exact median line of the changing price. It can be considered as an equilibrium price line, and any deflection up or down indicates the superactivity of buyers or sellers respectively.

Standard Deviation Channel consists of two parallel lines, equidistant up and down from the Linear Regression Trend. The distance between frame of the channel and regression line equals to the value of standard close price deviation from the regression line. All price changes take place within Standard Deviation Channel, where the lower frame works as support line, and the upper one does as resistance line. Prices usually exceed the channel frames for a short time. If they keep outside of the channel frames for a longer time than usually, it forecasts the possibility of trend turn.

Linear Regression Channel

The linear regression channel, similar to the Bollinger Bands, is a technical analysis tool that can be used to trade the binary options market.  The linear regression channel is a statistical technical analysis tool that captures the recent ranges and creates a statistical boundary where prices are likely to trade over a specific period of time.

Linear regression is a statistical approach to determining (via modeling) the relationship between one or more variables, where the model depends linearly on the unknown parameters to be estimated from the data.   The conditional mean of the given values (say prices of a financial instrument) are a function of that particular instrument or another instrument.  In essence, one specific variable is dependent, to a degree, on another specific variable.  The degree of dependence is called the R (squared), which is denoted in a percent format.

The linear regression channel is a channel that is created using a specific amount of data points where a regression line is created using the R (squared).  Parallel lines are then drawn that are one or two standard deviations away from the mean line.  The channel incorporates a larger percentage of the recent range of prices and theoretically will be bound where most of the price action over a future period of time.  This is accomplished by increasing or decreasing the standard deviation.  The larger the standard deviation, the more price and potentially future prices will be incorporated into the bands.  The linear regression channel can be used as a mean reverting indicator, where the bands on each end are support and resistance for price action.  In the hourly chart of USD/JPY, the linear regression channel incorporates the majority of price actions during a 20 period range.

  

The linear regression channel can be used successfully to trade hit or miss options, range options, one-touch options or above or below options.  For above or below options, an investor can use the high end of the linear regression channel to buy below options, and the low end of the linear regression channel to purchase above options.  For range trading, the channel should be an excellent strategy.  Placing a trade, this pays off if price action trades in a range in the future should be statistically significant.  This strategy is based on the idea that the current range will continue to perpetuate in the future is not other news is added to the market.  A two standard deviation range will incorporate 95% of the current prices, which should act as a very strong guide for future trading.  For example, a range box can be placed in front of the price action with a length that is similar to the trend channel.  

These strategies using the linear regression channels have a lot of statistical merit and should be tested using numerous financial instruments to find the binary option and instrument that match an investor’s risk profile.

triple bottom

Model of the triple bottom is mirror-like triple top. The rules for it are also mirror-like. Another type of triple is Triple Top

Speed Resistance Lines

Speed Resistance Lines are a figure for which it is difficult to define the general rules by quantity of maxima, minima, to the purposes of movement, etc. Therefore, it is usually allocated separately.

Speed Resistance Lines is the consecutive whiten trend movement, which corrections pass under different corners from an index point of trend movements.

At construction of Speed Resistance Lines, the following rule is used:

1. The minimum of a trend and the reached maximum of a trend are the reference point.

2. The line, which shares on pieces 2/3, 1/2 and 1 /3, is drawn. Speed Resistance Lines are drawn through these points. Break of line's thirds is considered a strong signal on sale.

Usually after break the first line as supports, there is a fast achievement of a following line, and the first becomes the resistance of movement. When the second line is broken, it also becomes resistance, and support becomes the third.

Thus, the prices for some time become "locked" between two lines.

Usually it is considered, that break of the third beam is a signal on purchase at a turn of an ascending trend or a signal on sale at a turn of a descending trend.

Example of "Speed Resistance Lines"

The situation with a descending trend will be mirror-like.

Triangle

There are 4 kinds of triangles in technical analysis:

• Ascending triangle
• Descending triangle
• Symmetrical triangle
• Extending triangle

Triangles usually form over a period between three days to three weeks. They take longer to form than flags or pennants and will often form after a major price move.

When a pattern develops that displays a series of peaks that are progressively lower and a series of higher troughs, it generally indicates that indecision exists in the market. Usually, the price will break out of the pattern with an equal amount to the base of the triangle and in the same direction as the original trend. Just like with symmetrical triangles, the move from the apex to the equal base of the triangle can be expected.

The two trend lines should indicate at least four points of contact before a break out can occur. In these types of patterns, with a horizontal trend line, the direction the break out will follow can be predicted. For example, buyers are generally more aggressive than sellers when an ascending triangle is present and each attempt made to pull back will stop at earlier stages.

Triple top

Triple Top is a pattern in which a currency has reached a price three times previously, yet has been unable to sustain movements beyond those three peaks. A triple top signifies a strong resistance level.Another type of triple is Triple Bottom

• Point A - first top
• Point B - local minima
• Point C - second top
• Point D - local minima
• Point E - third top
• Point F - signal to sell

Example of a "triple top"