Shockwave Analysis

The author and co-author of the first edition of Getting Started in Currency Trading, Jim Bickford, did some preliminary work to find the nexus of fundamentals and technicals by identifying chart patterns that occurred with some frequency after a news release. The theory was that the first surge of prices could predict the type of reaction to that surge and that quantifiable chart patterns might emerge that were tradable. The entire pattern was labeled a shockwave. Here is a typical shockwave pattern; a sharp move is initially followed by a slow decay of a value of more than the initial burst.

See Figure below. [caption id="attachment_13147" align="alignleft" width="370"]A News Shockwave Pattern A News Shockwave Pattern[/caption] Jim Bickford published a preliminary study in his book, FOREX Shockwave Analysis (McGraw-Hill, 2007). News Impact, www.newsimpact.com, takes another path to the same end of quantifying news releases. Tip: The study of shockwaves, technically quantifying the chart patterns of news releases, begs for further research.

By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2016. Content published with author's permission.

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