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An introduction to the “Big Movements” type of analysis

Instances in which a financial instrument has seen unusually substantial movement (either up or down) is called a “Big Movement.” Both trend followers and swing traders will benefit from this style of analysis.

It could be an indication of a new trend formation for trend watchers. For swing traders, it could be a hint that a correction is on the way.

Autochartist takes note of each instrument's typical number of consecutive candles, and the trader is notified when an unusual movement happens.

Statistical Details

Autochartist builds a histogram of consecutive candles by looking back up to 600 candles for every instrument, every direction, for Hourly, 4 Hourly and Daily candles. This means that for each instrument, we keep track of five different distributions.

Below is the probability distribution for the example shown above, USD/JPY 4 hourly candles:

From the above histogram, note that during the last 600 candles, we only get 1 “consecutive” bullish candle roughly 50% of the time, indicating that the USD/JPY H4 graph alternates between bullish and bearish candles 50% of the time. We can also observe that we get two consecutive bullish candles about 30% of the time, and three consecutive bullish candles about 10% of the time.

If we add these numbers up until we reach a 95% threshold, everything above that is considered "out of the norm" by more than 2 standard deviations.

That means that if the USD/JPY H4 chart shows 4 or more consecutive bullish candles, Autochartist will generate a "result.”

Each symbol, data interval, and direction can produce a unique probability distribution. Furthermore, because we generate new distributions every day using a changing window of past data, the results may alter over time.