This study automatically looks for the occurrence of Arps “Fox” Wave 1-2-3-4 megaphone patterns. When the correct pattern occurs, the study draws an “entry” line and a “target” line, along with a line showing the approximate target arrival time.
This stop is a modified version of Wilder’s Parabolic Stop concept, providing more control over the input variables and reducing whipsaws in choppy markets. The concept was described in an article by Dennis Myers in the April, 1995 issue of Stocks and Commodities Magazine and is based on a trailing exponential moving average whose sensitivity increases with each bar after entry, up to a maximum value, MAX.
This is a highly effective volatility-based adaptive trailing stop which captures the majority of the position profit while minimizing whipsaws. The input value, “STOPSENS”, adjusts the probability for the next bar’s expected range to stay within the limits projected by the stop algorithm. It is usually best to determine this sensitivity value empirically by experimenting to find the best value which keeps the stop point just out of range of the typical pullbacks in price within the trend. Typically, we find that an input value range between 1.5 to 5 works well, with the smaller value giving a closer stop.
In the late thirties a Dr. Andrews developed what he called his “median line” theory, which later evolved into a price pattern known as Andrews’ Pitchfork, because it resembles the shape of a pitchfork.