An uptrend with higher highs might not make new highs everyday. So how could we define the end of an uptrend? How could we tell the difference between the end of an uptrend and a temporary correction? This isolated high/low technique aims to help us in this kind of situations.
We call the highest point of an uptrend until the particular day “an isolated Peak” and consider the lowest point of the day before as a signal level. If the signal level is broken in 2 days, we assume the uptrend to be over. If it is not broken in 2 days, the uptrend continues. The same technique also applies to a downtrend and the only difference would be the direction.
conversely it has the same logic of finding an end of a downtrend, called "Isolated Bottom" which can be considered the highest point of the day before as a signal level the same way.
The success rate of this technique is quite high (around 85%). There is no required term for this technique and it can be used in yearly, daily or ticker charts, because the market moves in fractals and repeats itself in every scale.
As in every technique, it might also give false signals in some situations like extreme or emotional decisions of masses. However, it will be very helpful for us to indicate the direction of a trend.
Creator: Tuncer ŞENGÖZ @TuncerSengoz on twitter