cluster analysis


cluster analysis

There are several types of market analysis, and cluster analysis can be called one of the  most complex. It is based on the strong interconnection of different currencies with bitcoin loophole each other, which implies a change in one currency in response to a change in another. In this regard, for successful trading, a trader needs to understand what a correlation is and how it manifests itself.

During cluster analysis on the selected timeframe, the volume profile for each candle is analyzed. A cluster is a group of elements with similar or identical properties that are combined into a single object. When trading within a specific time frame, specific prices will exhibit homogeneous elements that are represented by long or short positions in assets. Combining such elements, you can get clusters. That is, a cluster is the total volume for long and short positions of an asset, which takes into account a certain timeframe and quotes.

Thus, cluster analysis is aimed at studying positions and volumes that are associated with certain price levels. Using it, a trader can predict the movement of an asset in one direction or another. For cluster analysis, a special chart is used with the trading volume overlaid on each candle.

What information can be obtained using cluster analysis

Cluster analysis provides a lot of information for further forecasting.In particular, a trader can judge:

The volume that was traded at each price level inside the candle;

What volume was traded at the Ask price;

What volume was traded at the Bid price;

What is the difference (delta) between Ask and Bid volumes;

What is the total volume of all traded contracts;

Market profile view.

Despite the fact that cluster analysis requires more time, it is the most accurate, because it takes into account each transaction. To select a cluster for each price, special mathematical calculations are used, taking into account such criteria as time interval, volume, etc.

How to apply cluster analysis?

How to apply information about the exact size of traded volumes for each level? They can be used for:

Building volume levels of resistance and support. In other words, on the price chart, you need to find accumulations of large volumes and tie them to important price levels, since the market will always actively react to them.

Understanding the prevailing market trend. To determine the direction of the market, you can use the delta.

You need to understand that market movements are triggered by market orders and stopped by limit orders. Entry into the market of large players is accompanied by limit orders, which stops the trend or entails a market reversal. This is due to the inability of the market to redeem all limit orders.

What are the bars

For cluster analysis, it is very important to be able to determine the types of bars, since this information is used to create trading systems.Depending on the location of the main volume in the candle, the bar can be braking or pushing.

A push bar (bullish and bearish) triggers a move as it pushes the quotes.

The braking bar (bearish and bullish), as the name implies, slows down the movement and even reverses the market.

What is a market profile

The market profile is a set of data on the volume of contracts executed at a certain price level. An example of a market profile can be seen in the figure.

Market profile

Cluster analysis is a volume profile, but for a specific tick or candle with an indication of the number of transactions. It can be seen in the image.

cluster analysis

A simple trading strategy using cluster analysis

First, let's determine the level of concentration of the maximum volume. Set the volume profile on the flat chart. The picture shows a red bar - the ROS level, where 1758 contracts are concentrated.

After that, we are waiting for an exit from the flat movement, since after that the quotes will definitely approach the selected level and in 80% of cases they will rebound from it. Knowing this, when the quotes reach the level, we will open a position by placing a protective order outside the flat. Thus, the deal is opened on a rebound from the level.

Cluster indicators

For cluster analysis, you can use technical indicators that will help determine the direction of a trend or a market reversal point, as well as a flat movement. For cluster analysis, you can use two types of indicators:

Impulse (signal). These indicators


Leave a Reply

Your email address will not be published. Required fields are marked *

Recipe Rating