Exactly How Bullish Percent Index Is Used In Day Trading
The indicator Bullish Percent Index was created by Abe Cohen around the mid 1950s
. It was then refined by Earl Blumenthal and Mike Burke. It is a simple width indicator that can present six visibly defined signals in virtually any day trading market. The half a dozen easy to spot signs are the bull confirmed, bear confirmed, bull alerts, bear alerts, bull correction and bear correction.
The Bullish Percent Index formula is rather hassle-free. Obtaining the BPI entails dividing the # of stocks on P&F purchase signals by the total # of stocks. A stock is plotted on a
P&F chart with the aid of a 2% logarithmic scale with a traditional three-box reversal. Check out examples at day trading blogs.
In day trading, when the Bullish Percent Index drops beneath 30% and then increases and forms a new X column, it is showing the day trader a Bull alert. This signals the day trader that the oversold market shape is going to improve. In this circumstance, taking a long position with vigilance is advisable to a day trader. Alternatively, the alternative state is called the Bear alert. In this scenario, a Bullish Percent Index is over and above 70% which has a three-box decrease of 0s soon after. In this day trading shape, a day trader is okay to take short positions but constantly with vigilance.
If the Bullish Percent index is on a Point & Figure buy signal and is increasing, it regarded as a Bull confirmed signal. A P&F buy signal that's climbing is a Bull confirmed signal. It is represented by a column of Xs that's taller than the earlier line of Xs. A Bullish percent index on a dropping P&F sell signal is viewed as a bear confirmed signal. In this example, a day trader should go short.
A dropping buy signal implies a corrected bullish market. Its contrary takes place any time the sell signal is matched with a column of Xs or is climbing. In day trading, these are not essentially reversal signals. The Bullish Percent Index is just signaling the day trader that the bullish day trading market is losing steam whenever the Bull correction signal takes place and he ought to be purchasing soon enough.
by: John Smith
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