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# Red and Green Light Software

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The Red and Green Light Software for forex trading from Wizetrade, Globaltec and MBT will be discussed and fully described on this slideshow. This software is used for multiple time frame analysis of the forex.

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• Two of my friends use this softwre with me. we love this software.﻿ Still my favorite is Andy Lank Cash Flow

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### Red and Green Light Software

2. 2. Link to Chart Library Slideshow http://www.slideshare.net/forexearlywarning/red-and-green-light-software- chart-slideshow Software Chart Reading – Part 1 Introduction The red and green light software is a trend analysis tool, nothing more. It is setup with multiple timeframes and should be used by inspecting the largest timeframes first for available trends. You call tell reasonably fast if the market is trending or oscillating and use the additional time frames to set up custom time frames for the current market. Explanation of Software Algorithm The mathematical algorithm behind red and green light software is fairly complex. The red line and green lines are two summation formulas that are historically and exponentially weighted. They are not moving averages but can be fairly well mimicked by the moving averages supplied by Forexearlywarning.com. Exponential moving averages are also exponentially weighted so that is why they mimick the software so well. http://www.forexearlywarning.com/forex-trend-indicators Moving Averages to Mimick Software On the software, the red line represents the sellers, green line represents buyers. The summation formula for each line uses the open, high, low, and close price and sums up the volatility count at each interval point to produce the curves you see. The volatility count is “summed up” via the summation formula and when you look at a chart you can view the red and green hits on the “last” trade to see this in action so the mathematical algorithm is estimating the buying and selling pressure. Here is a snapshot of the volatility count as it is being measured in real time. Snapshots of The Volatility Count Are In The Chart Library Slideshow http://www.slideshare.net/forexearlywarning/red-and-green-light-software- chart-slideshow At a point of intersection of the red and green lines you have a crossover, where the buyers or sellers take control, but only for that time frame. So if
3. 3. you do have a new crossover it is always within in the context of the larger trends and time frames. This is why you can use this software tool for multiple time frame analysis of any forex pair. All of the raw pricing data and volatility counts for each of the 7 time frames comes from your data feed and is put into the two summation formulas and continuous calculations are made with the two summation formulas to produce the red and green lines. The chip in your computer cranks out hundreds and some times over a thousand calculations per minute on all of the price and volatility data from the data feed through the summation formulas, and once again all of the historical data is accounted for in the algorithm using exponential weighting. All data points are accounted for but the data on the right side of each chart is more significant due to this weighting. Although the mathematical model of the red and green lines is fairly complex the final display is simple, a red and green line. Whichever line one is on top is the color of the light. The software is a mathematical model of the spot forex. The software truly displays buying and selling pressure. Summation formulas are statistical in nature, and you have a mean and a standard deviation formula that can be used on forex pricing data and basic price charts to draw regression channels through very easily. Breakouts of the regression channels are represented by fresh crossovers on the time frames. The angle of the chart is proportional to the speed of the movement, and the separation between the red and green lines is the disparity between the number of buyers and sellers. More separation means a wider disparity between the buyers and sellers. Increasing separation can also occur where buyers far outweigh sellers or vice versa. Snapshots of Increasing Separation Are In The Chart Library Slideshow http://www.slideshare.net/forexearlywarning/red-and-green-light-software- chart-slideshow Software Chart Reading – Part 2 As we said in Part 1, the red and green light software is trend recognition software, nothing more, nothing less. If you use it for anything else beside that you are making a big mistake, if you use it to analyze trends you are
4. 4. using it correctly. If you use it for anything else like scalping or trading the news it won’t work. The software is a tool, all tools even mechanical tools like hammers and saws must be used correctly. Use the software to analyze trends which is its intended purpose. For forex trade entries it is actually quite cumbersome and it is not suited for this. Interrelationship Between The Individual Charts and Time Frames. If you start with the long term trend charts on the right and drill down to the left you are expanding the right side of the chart you just looked at as you drill down right to left. Each chart to the left forms a portion of the one you just looked as you drill down. You are expanding or magnifying the right side of the chart you just looked at as you drill down from the larger time frames to the smaller timeframes. You are magnifying, expanding or zooming in on the right side of the chart as you drill down from right to left.
5. 5. An example of understanding the interrelationship between the time frames is if you “zoom in” when taking a photo with a camera this is similar to drilling down from right to left, except that you are only zooming in on the right side of the previous chart to the right. Always drill down the 7 time frames from right to left to understand the magnification concept. A good or at least experienced red and green light software chart reader should be able to look at the charts on the right and have a very good idea of what at the ones on the left look like without looking at them and vice versa. For example if the two major time frames on the right indicate a strong uptrend going up, obviously the smaller time frames will be going up all of the way across the page. Chart Dynamics and Interval Update The midterm and long term charts on red and green light software are dynamic so go by what you see today; forget about what you saw yesterday due to the dynamic nature of the charts. When I say the chart is dynamic this means the entire profile can change, it does not always change but it can, after the daily interval update. The data changes at each and every data point on the chart by 20% on the midterm chart and 4% on the long term chart, every day after the daily interval update, the midterm and long term charts may or may not change. If the profile does change if may be completely in your favor, like increasing separation to indicate that the pair you have bought or sold will continue up or down. The reason each data point changes daily at the interval update on the entire chart is that as data is added on the right daily on the interval update it has to be accounted for on all data points across the page, like domino effect. This way the daily buying and selling pressure can be measured and reflected in the charts. The interval update is the main reason you should not be scalping with red and green light software or using the software to trade the news. This is not what the software was designed for. There are a lot of reasons why you should not scalp the forex market anyway just add this to the list. The reason you would not scalp with this software is the interval update lag on each time frame on the red line. All trend indicators have an interval lag of some sort but on the red and green light software it is more pronounced. In this case the interval update lag is good and can lead to a lot of pips, especially in the case of a “pacman” on the larger time frames or any scenario where you have increasing separation on a larger timeframe.
6. 6. See Pacman Examples On The Chart Library Slideshow http://www.slideshare.net/forexearlywarning/red-and-green-light-software- chart-slideshow A great chart reader also know what the charts look like on the right before the interval update takes place, or should be able to give an educated guess. Just take screenshots of the midterm and long term charts before and after the interval update every day to see how the interval update and software algorithm treat the data. If you are a software newbie this is critical. Interval Update On The Smaller Timeframes The interval update on the short term time frame as well as the minute time frames is different from the interval update on the two largest time frames. On the short term time frame and all of the minute charts the interval update occurs once per time frame. On the short term time frame it would be once per day, on the 90 minute time frame it would be once every 90 minutes. This is related to the interval update as well. On all time frames the green line precedes the red line, mostly on price movement. Then after interval update occurs, check the position of the red line to see if there is a trend present or the red and green lines are skewed on that time frame. Stumbling Upon Multiple Time Frame Analysis When the red and green light software first was released almost all of the users were scalping the smaller timeframes based on color changes due to the poor instructions of GT, the software only had 4 lights, and everyone lost money, it was pretty awful. The big lights method was the name given to the method that red and green light software users used to differentiate them from the traders who used the smaller lights and time frames which were completely misused by many forex traders for scalping. Scalping is wrong for a lot of reasons but the red and green light software should never be used to scalp. After I read the article from Kathy Lien about multiple time frame analysis, I combined this with my experience in the stock market, options market and Wizetrade (for stocks) background and I realized the GT clients were losing money because they did not consider trading within the context of the larger