New article: Indicator for Constructing a Three Line Break Chart

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New article Indicator for Constructing a Three Line Break Chart has been published at mql5.com:

Previous articles considered Point and Figure, Kagi and Renko charts. Continuing the series of articles about charts of the 20th century, this time we are going to speak about the Three Line Break chart or, to be precise, about its implementation through a program code. There is very little information about the origin of this chart. I suppose it started in Japan. In the USA they learned about it from "Beyond Candlesticks" by Steve Nison published in 1994.

As well as in the charts mentioned above, the time range is not taken into account when constructing the Three Line Break chart. It is based on newly formed closing prices of a certain timeframe, which allows filtering minor fluctuations of a price in relation to the previous movement.

Steve Nison in his book "Beyond Candlesticks" described eleven principles of plotting this chart (p. 185). I have consolidated them into three.

• Principle №1: For construction select an initial price and then, depending on whether the market moves up or down, draw an ascending or descending line. It will mark a new minimum or maximum.
• Principle №2: When a new price falls below the minimum or exceeds the maximum, we can draw a descending or ascending line.
• Principle №3: To draw a line in the direction opposite to the previous movement, the minimum or maximum have to be passed. At the same time, if there is more than one identical line, then the minimum or maximum is calculated based on two (if there are two consecutive identical lines) or three (if there are three or more consecutive identical lines) of them.

Let us take a closer look at the example of a classic chart construction based on historical data (fig. 1).

Fig.1 Example of constructing a Three Line Break chart (EURUSD H1 27.06.2014)

Author: Dmitriy Zabudskiy