can anybody explain me the 4 bar and 2 bar rule? i am unable to understand inspite of reading saint's notes again and again. need help.
4 Bar Rule
Conditions for 4 bar rule to apply.
1. Chart Time Frame: 30 Minute.
2. Min no. of 'Completed Bars' needed: 4.
3. Each bar must be HH, HL for longs or LH, LL for shorts.
If the above two satisfies, then move SAR to the low of 2nd bar in long positions and high of 2nd bar in short positions.
Eg: For Long positions.
Bar 1: -------
Bar 2: HH,HL
Bar 3: HH,HL
Bar 4: HH,HL(completed bar)
Shift SAR to Bar 2's Low.
Bar 5: HH,HL (No need for completion of this bar provided, the bar satisfies HH HL)
Shift SAR to Bar 3's Low
Bar 6: HH,HL (No need for completion of this bar provided, the bar satisfies HH HL)
Shift SAR to Bar 4's Low
----goes like that---
Note:
Inorder to apply this 4 bar rule we need the 4th bar completed in 30min.
There after the 4th bar we don't need the bars completed to shift SAR to the bar before the last completed bar provided, we get a new high(in case of long) or low(in case of short) from the incomplete bar.
In short, we only need the 4th bar completed to apply 4 bar rule and no need of 5th, 6th, etc to shift SAR to
Exception:
In certain circumstances we will shift SAR to 2nd bar even before the 4th bar is completed.
For doing this we need the below conditions satisfied.
Condition 1: In 60min Chart, We need the 2nd bars high(in case of short) or low(in case of long) same as 60 min bar(last completed bar) high(in case of short) or low(in case of long).
Condition 2: The last 60 min bar should be a Wide Range Bar (WRB).
Condition 3: The negation of that 60 min bar in the very next bar is bullish for long positions and bearish for short positions.
Hari.