Rotation factors

         Use the rotation factors question to identify trending markets which have a strong directional bias.

Example:

         The total rotation factor for the day is greater than four (4).

Questions from Traders:

         What level of rotation factor leads to further market strength the next day? What levels can we establish for continued market strength?

Setting Up the Search:

Click on the parts of the box below where appears for explanations of features.

Answers:

         In our example we used a rotation factor of four as the definition of a market in a solid up-trend mode. In our 3-year database, this type of day occurred 26.2% of the time. We then tested to see what percentage of the time there was follow-through strength the next day. We refined the original search to see how often the next day’s value area was established higher than today’s value area. The refined search should read: <Value area is above yesterday’s value area (tomorrow)> or <value area intersects above yesterday’s value area (tomorrow)>. Just over 68% of the time, the value area following a day with a rotation factor of +4 was established at higher levels.