If SWAV is plotted with HA bars smoothed with 3-period MAs, then a green bar appeared last Thursday, Jan 26. That change from Wednesday’s ‘red’ to Thursday’s ‘green’ created a valid 'Buy" signal according to (one version of) Quill’s rules that would be acted on Friday at market open. Here’s the chart, just so we all agree on which bars are which colors.
But if SWAV is plotted with HA bars smoothed with 5-period MAs, that 'Buy" signal goes away, and what you see is SWAV’s continuing long decline.
If you lessen the amount of smoothing by plotting SWAV with 1-period MAs, then a different and more frantic picture emerges.
On Tuesday, Jan 24, the bar is still ‘red’ as before. But look closely at its shape. The upper and lower wicks are long compared to the body of the candle and nearly equal, and the body of the candle is small compared to the size of preceding candles. In short, the candle approximately meets the definition of a ‘Doji’, and we all know what Dojis can signify, namely, buyer-seller indecision as prices close near where they opened (or exactly the same). In classic Candle Pattern Analysis theory, Dojis that occur toward the end of a long trend can often be a highly reliable signal that the trending might change, which is what we see happen on Wednesday, Jan 25.
Therefore, if SWAV had been plotted with HA bars using 1-period MAs for smoothing, we’d have been buying on Thursday and still be in the money (ITM) on Firday, despite it being a down day for SWAV.
However, look back in the chart. If we had been trying to trade SWAV off of minimally smoothed charts, this would have been our third entry in 2 months. Ditto if we had been working with 3-period smoothing. But if we had chosen 5-period smoothing, we’d be on the sidelines since about Dec 7th. So here’s SWAV again, but with a 3-month lookback.
So this is the question you, me, all of us need to decide for ourselves. “Do we want to be trigger-quick traders, or do we want a more leisurely pace for our entries and exits?”
Whether one chooses to trade the ‘ripples’ or the ‘waves’ or the ‘tides’ of a time-price series will be a personal decision. But it’s a decision that, once made, one probably has to stick with, or else one doesn’t have a trading plan and is going to experience a lot of frustration for seeming to never be in the right place at the right time. Frankly, working from more highly smoothed charts and doing less frequent trading is making a lot of sense to me. But also, it’s going to be hard to get used to trusting that “the trend is really my friend”.