Some Advanced GET Quick Definitions

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This thread is being created with useful Advanced GET simple definitions. We created them a while back. Since this forum is about AGET, thought defining these terms here could be helpful for those doing future searches.

[MR]

Buying with the Trend

Stochastic (Below 25)
XTL (Up-Blue)

This identifies issues that are in a Stochastic oversold condition, where the current price action may be close to a bottom. The XTL (Up-Blue) indicates that the trend is beginning to move up. By combining these two parameters statistical odds are increased for a more successful “momentum” buy opportunity.

[MR]

Selling with the Trend

Stochastic NFB (Above 75)
XTL (Down-Red)

This identifies issues that are in a Stochastic overbought condition, where the current price action may be close to a top. The XTL (Down-Red) indicates that the trend is beginning to move down. By combining these two parameters statistical odds are increased for a more successful “momentum” sell opportunity.

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Type I Buy

Elliott Wave 4 (Down)
Oscillator Pullback
PTI (>35)

This identifies issues that are Type I Buy setups, which means that the profit-taking period after a major up trend may be over and the price is positioned to continue upward. For a comprehensive explanation of Elliott Wave theory, click here.

For Advanced GET Users:

It does not matter whether it is an upward moving sequence or a downward moving sequence, once the Advanced GET software confirms a Wave 3 is in progress, start monitoring more closely for the following conditions:

1. Look for the 5/35 Elliott Oscillator to pull back at least 90%, or to the zero (base) line. Make sure this pull back never exceeds more than 1.40 of the previous oscillator peak.

2. The Profit Taking Index (PTI) should, at this time, be above 35. The PTI is a proprietary indicator that aids in determining the probability for a Wave Five to occur in an Elliott Wave five wave sequence. When the PTI drops below 35, the statistical odds are greatly reduced for a Wave Five rally. In addition, odds will increase for a Fifth Wave failure to occur if the PTI is less than 35.

3. A retracement should hold above the Wave Four Channels. Wave Four Channels are proprietary channels that provides the much needed timing element for Elliott Wave analysis. The ideal Wave Four should complete above one of the blue, green, or red Wave 4 Channel lines. Containment of the retracement levels above the top two channels provide a higher probability for a stronger rally in Wave Five. This step is not as critical as the Profit Taking Index in Step 2.

4. Calculate the stop two Fibonacci levels under the entry level. For example: if your entry is at the 38% level, the stop should be placed two levels under (which is below the 62% retracement area).

5. Look for the fifth wave projection target given by the software. Calculate the potential profit/stop ratio. If this ratio is greater than 1.5, the trade is worth considering.

The logic is the same for an advancing upward sequence as it would for a declining five wave sequence.

[MR]

Type I Sell

Elliott Wave 4 (Up)
Oscillator Pullback
PTI (>35)

This identifies issues that are Type I Sell setups, which means that the profit-taking period after a major downtrend may be over and the price is positioned to continue downward. For a comprehensive explanation of Elliott Wave theory, click here.

For Advanced GET Users:

It does not matter whether it is an upward moving sequence or a downward moving sequence, once the Advanced GET software confirms a Wave 3 is in progress, start monitoring more closely for the following conditions:

1. Look for the 5/35 Elliott Oscillator to pull back at least 90%, or to the zero (base) line. Make sure this pull back never exceeds more than 1.40 of the previous oscillator peak.

2. The Profit Taking Index (PTI) should, at this time, be above 35. The PTI is a proprietary indicator that aids in determining the probability for a Wave Five to occur in an Elliott Wave five wave sequence. When the PTI drops below 35, the statistical odds are greatly reduced for a Wave Five rally. In addition, odds will increase for a Fifth Wave failure to occur if the PTI is less than 35.

3. A retracement should hold above the Wave Four Channels. Wave Four Channels are proprietary channels that provides the much needed timing element for Elliott Wave analysis. The ideal Wave Four should complete above one of the blue, green, or red Wave 4 Channel lines. Containment of the retracement levels above the top two channels provide a higher probability for a stronger rally in Wave Five. This step is not as critical as the Profit Taking Index in Step 2.

4. Calculate the stop two Fibonacci levels under the entry level. For example: if your entry is at the 38% level, the stop should be placed two levels under (which is below the 62% retracement area).

5. Look for the fifth wave projection target given by the software. Calculate the potential profit/stop ratio. If this ratio is greater than 1.5, the trade is worth considering.

The logic is the same for an advancing upward sequence as it would for a declining five wave sequence.

[MR]

Type II Buy

Elliott Wave 5 (Down)
Moving Average (6/4 Above)

This identifies issues that are Type II Buy setups, which means that the 5 sequences in a down direction is over, and the trend will continue in the opposite direction. For a comprehensive explanation of Elliott Wave theory, click here.

For Advanced GET Users:

Once the Advanced GET software confirms a Wave 5 is in progress, start monitoring more closely for the following conditions:

1. Look for prices to be near the Fifth Wave projection.

2. Make sure the 5/35 Elliott Oscillator confirms a fifth wave by providing clear divergence, with the 5/35 Elliott Oscillator pulling back to zero (base-line) in between.

3. At the end of a 5 wave downward moving sequence, use a 6/4 DMA (Displaced Moving Average) Channel or a RTC (Regression Trend Channel) to buy on a crossover of the upper channel or 6/4 DMA Channel line.

4. The 6/4 DMA Moving Average Channel is a simple combination of two moving averages displaced or shifted to the right. Both moving averages will have a “Length” set to “6” and the “Offset” set to “4.” Set one moving average “Source” to “High” and change the color to “Blue;” the other set the “Source” to “Low” and make “Red” the color.

5. A Regression Trend Channel (RTC) is simply the standard deviation of the linear regression price data. It is calculated using the actual prices of the bars in the trend. The idea is to draw an upper and lower channel from the linear regression line by using the standard deviation of the prices. The break of a Regression Trend Channel is usually used as an entry or exit signal.

As long as the momentum in the market continues, the DMA stays out of the way. When the price bottom or tops out in Wave Five, it eventually breaks (crosses) the DMA or RTC. This provides a confirmation to enter a position. This also provides a defined stop above the highs.

The logic is the same for an advancing upward sequence as it would for a declining five wave sequence.

[MR]

Type II Sell

Elliott Wave 5 (Up)
Moving Average (6/4 Below)

This identifies issues that are Type II Sell setups, which means that the 5 sequences in a up direction is over, and the trend will continue in the opposite direction. For a comprehensive explanation of Elliott Wave theory, click here.

For Advanced GET Users:

Once the Advanced GET software confirms a Wave 5 is in progress, start monitoring more closely for the following conditions:

1. Look for prices to be near the Fifth Wave projection.

2. Make sure the 5/35 Elliott Oscillator confirms a fifth wave by providing clear divergence, with the 5/35 Elliott Oscillator pulling back to zero (base-line) in between.

3. At the end of a 5 wave downward moving sequence, use a 6/4 DMA (Displaced Moving Average) Channel or a RTC (Regression Trend Channel) to buy on a crossover of the upper channel or 6/4 DMA Channel line.

4. The 6/4 DMA Moving Average Channel is a simple combination of two moving averages displaced or shifted to the right. Both moving averages will have a “Length” set to “6” and the “Offset” set to “4.” Set one moving average “Source” to “High” and change the color to “Blue;” the other set the “Source” to “Low” and make “Red” the color.

5. A Regression Trend Channel (RTC) is simply the standard deviation of the linear regression price data. It is calculated using the actual prices of the bars in the trend. The idea is to draw an upper and lower channel from the linear regression line by using the standard deviation of the prices. The break of a Regression Trend Channel is usually used as an entry or exit signal.

As long as the momentum in the market continues, the DMA stays out of the way. When the price bottom or tops out in Wave Five, it eventually breaks (crosses) the DMA or RTC. This provides a confirmation to enter a position. This also provides a defined stop above the highs.

The logic is the same for an advancing upward sequence as it would for a declining five wave sequence.

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XTL

The XTL (eXpert Trend Locator) is a study developed by Tom Joseph that uses a statistical evaluation of the market. The XTL is designed to tell the difference between random market swings (noise) and directed market swings (trends).

The XTL is a simple but powerful tool that is not complicated to use. When there is no major trend, the bars are plotted as regular bars in black (no trend). As soon as a potential trend is detected, the color of the bar is changed to Red (downtrend) or Blue (up trend). If the bars are blue in color, then the trend is up. If the bars are red in color, then the trend is down. The first bar to change from a regular bar to an up trend or downtrend is called a breakout bar.

For Advanced GET users:

An entry is taken when the bar following the breakout bar is the same trend color as the breakout bar, and the range exceeds 150% of the breakout bar in the direction of the trend. You would place a stop below the low of the breakout bar if the trend is up, and you would place a stop above the high of the breakout bar if the trend is down. As the market moves in the direction of the trend, you would use a trailing stop to follow the trend. To find an exit, you can use a variety of exit methods, but we recommend using the Regression Trend Channels or the 6/4 DMA Channel technique.

Please note that the XTL is not a mechanical trading system. The XTL is one of the many studies (methods) available in GET. An XTL trade is particularly effective when used in conjunction with other tools, studies, techniques and methodologies used to identify a Type 1 or 2 Buy or Sell setup.

[MR]

Relative Strength

The Relative Strength differs from the RSI. The Relative Strength is appropriately named because it provides a measurement of an issue's strength relative (as compared) to the market, a sector, or a group. A RS of 50 means that the issue is neutral or equal to the market, sector or group. Above 50, means the issue is outperforming, and below 50, it is underperforming. Strong RS values are associated with up trends, and weak RS values are associated with down trends.

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Stochastic

The Stochastic indicator is a momentum indicator developed by George Lane. It is designed to indicate when the market is “overbought” or “oversold.” Lane’s premise is that when a price increases, the closing prices tend to move toward the daily highs and, conversely, when a market’s price decreases, the closing prices move toward the daily lows.

A Stochastic indicator is plotted as two lines, the “%K” line and “%D” line. %K is calculated by finding the highest and lowest point in a trading period and then finding where the current close is in relation to that trading range. %K is then smoothed with a moving average. %D is a moving average of %K. Stochastic uses a range scale of 0 to 100. Any move of the %K and %D line above 80 (some use 75) is considered approaching an “overbought” condition, where the price is close to a top. Any move of the %K and %D line below 20 (some use 25) is considered approaching an “oversold” condition, where the price is close to a bottom.

A general sell signal is generated when you have a crossover of the %K and the %D when both are above the band set at 80 (or 75). A general buy signal is generated when you have a crossover of the %K and the %D when both are below the band set at 20 (or 25). A more reliable signal occurs when the %K and %D has already turned from the extreme to the direction of the new trend when that %K and %D crossover takes place.

The are a few general observations about the Stochastic indicator: (1) the %K line will often change direction before the %D line, but when the %D line changes direction prior to the %K line, a slow and steady reversal may often be expected; (2) when both %K and %D lines change direction and the faster %K line subsequently changes direction to retest a crossing of the %D line but does not cross it, stability of the prior reversal may occur; (3) when a strong move is underway and the indicator reaches its extremes around 0 and 100, a following pullback often retests these extremes, and provides a better buy or sell signal; (4) Many times, when the %K or %D lines reaches the extremes of the 0 to 100, and it begins to flatten out, it makes it harder to identify when the next trend will occur.

False Bar

The False Bar is a proprietary indicator that looks to improve on trading signals given by the Stochastic indicator. If the Stochastic indicator is giving an overbought or oversold situation these signals are not valid if the False Bar is present. In Advanced GET, these bars are displayed graphically on the Stochastic study as a bar either above or below the Stochastic lines.

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Stochastic (Above 75)

This identifies issues where the Stochastic (set at a 21 period %K = 3% and %D = 3) lines are above 75. A Stochastic reading above 75 is considered approaching an “overbought” condition, where the current price action may be close to a top.

[MR]

Stochastic (Below 25)

This identifies issues where the Stochastic (set at a 21 period %K = 3% and %D = 3) lines are below 25. A Stochastic reading below 25 is considered approaching an “oversold” condition, where the current price action may be close to a bottom.

[MR]

Profit Taking Index (PTI)

PTI is a proprietary indicator designed to help identify if “normal” profit taking is going on in a major Wave 4 pullback. Wave 4 corrections are “profit taking” sequences. A Wave 4 pullback is considered a higher probability trade setup because if the Wave 4 pullback maintains control, it will lead most often to a major Wave Five completion of that five wave sequence. The key is the profit-taking must be “normal” and the PTI is one important indicator that helps gauge that Wave 4 profit-taking action.

[MR]

Regression Trend Channels

A Regression Trend Channel (RTC) is simply the mathematically standard deviation of the linear regression. The RTC is made up of three parallel lines. The center line is a linear regression. This center line is bracketed by two additional lines that represent the standard deviation of the linear regression price data. The RTC is calculated using the actual prices of the bars in the trend.

How to Use RTC:

The break of a RTC represents a change in trend or a change in bias and so can be used as an entry or exit signal.

In many ways it is similar to a moving average. The difference with the RTC there is there is no lagging the linear regression trendline and, secondly, it is helpful because it often identifies a change in trend or bias more quickly than a moving average.

Terms: A linear regression trend line is the straight-line mathematical measurement of the relationship between sets of price data that plot out as a trend line. More simply, a linear regression trend line is a straight line that best fits a set of points. With bar charts the points used to calculate the trend line can be derived in many different ways. For example they can based on the high, low, or midpoint of the bars.

A standard deviation is a measure of the dispersion of a frequency distribution that is the square root of the arithmetic mean of the squares of the deviation of each of the class frequencies from the arithmetic mean of the frequency distribution. What is important for our purposes is that one standard deviation from the mean captures 68% of all observations and two standard deviations captures 95% of all observations (assuming normal distribution).

[MR]

Elliott Oscillators

An oscillator is simply the difference between two moving averages, a short term moving average and a longer term moving average. One common oscillator is the 5/35, which is a 5 period moving average and 35 period moving average.