This article is going to focus on some very simple signal confirmation techniques you can use to confirm a signal that may have an advisor warning within our Smart Volume Analysis software.
Simple Signal Confirmation Techniques
Many people using Smart never go beyond some of our published methods. In most cases there isn’t a need. Many of you do well enough with the simple and effective four step method that it would be silly to complicate things too much when it’s not necessary. That said however there are many times a trade using the four step method is avoided due to a warning. As good as the VBS (Visual Background Scanner) and Smart Trade Advisor modules are, there are some very simple signal confirmation techniques you can use to confirm a signal. One thing I recommend on trades using v 2.0 of the Four Step Method that have a warning we don’t necessarily avoid trading on is to look to the VBS module for corroboration.
Another powerful way to look at a signal confirmation is to look at the time frame above and one or two deep as well. For example.
Lets say you trade the four-hour chart. You have a signal that you usually take appear but there is a warning on the advisor. It’s not a warning we specifically avoid trading on such as a WRB but nonetheless it’s there. Rather than getting spooked, one thing I do is look at the VBS for the time frame above and the current time frame. If it matches I’ll take the trade.
Another way to confirm a signal that I find particularly useful is to look at the above time frame for a signal (Daily) and look for the directional bias. I also look within the signal as well. By this I mean I look to see what signals may have made up the signal I am contemplating taking. Let’s say I have a Smart Buying signal (strength) on the time frame I like (H4). I can drill down to shorter timeframes to see what might be happening within that signal bar. Let’s say on the hourly I have two strength signals and a weakness signal on the bars that formed my h4 signal. That shows me that the underlying market has been stronger than weaker. Now for the sake of argument lets say the last hourly bar was the weakness signal… that might give me pause for concern taking a long as it shows, at least short-term that weakness has entered the market.
We are coming out with a lot of tools in the next version to do this signal confirmation analysis for you automatically but in the meantime it just takes a second or two to confirm smart volume analysis signals that have a warning. This is a good habit regardless of which method you trade using Smart Volume Analysis.
As always if you have any questions about this or anything related to Smart Volume Analysis send a ticket using the support link on our website.
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