FX TECHNICAL ANALYSIS
Trading with the Marabuzo Line
WHAT IS A MARABUZO LINE?
Before we can see the relevance of the Line we have to look at what a Marabuzo actually is. The term is applied to the real body of a candlestick that is larger than the norm. That
is a fairly nebulous
concept and there is no hard and fast rule that can be applied here. An evaluation of the chart being studied and the time period being used will determine the relevant numbers. Even that result will have to be reappraised to reflect different market conditions. Sideways,trendless trading will create less sizeable movements,
therefore
a relevant Marabuzo will, naturally, be of a smaller size than in volatile markets where all candlesticks are larger. Let us be clear; this style of analysis, like all Technical Analysis, is not a science but a reasoned
application of principle.
Once a Marabuzo has been determined then the Marabuzo line can be drawn from the mid-point of the body; in other words halfway between the open and the close. In other words, a 50% retracement. As a candlestick chart is only a bar chart with the open and close filled in,the Marabuzo line could be drawn using a bar chart just as well, but for graphic purposes it is clearer when applied to candlestick charts. One of the first things learnt when beginning technical analysis is the importance of retracements points and whether
the preference if for
Fibonacci or Gann percentages, 50% is the most important of these levels. The major difference here is that the 50%retracement is applied not to the high and low of a movement but to the open and close of a time period - to a practioner of candle charts, the key features. A horizontal line is drawn between the two and is extended to the right (into the future) where it will act as a support
32 FX TRADER MAGAZINE October - December 2011
greater than the average produces the best results. For example; EURUSD gave an average open/ close difference of 84-pips during May. Therefore a difference of 122 or greater would have been of immediate interest. It is important though to keep a rough eye on changing market conditions to make alterations to these numbers. One
or resistance point. As mentioned at the beginning of this article a 50% line such as this is not drawn on every candlestick body but is used only on those judged to be greater than the norm. While it is a subjective measurement, I have found using an open/close difference roughly 50%
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