It suggest that if a bar reaches more than 100% of the range (high to low) of the previous bar, range, then the market will come back to the mid-point of the bar that caused the more than 100% move within the next few bars.
On Market Pulse, we follow this on up to 15 different time frames and as soon as the current bar on all these time frames lights up Red (Over 100% up) or Green (over 100% down), we will start to look to fade this move knowing that more times than not in our opinion, the market price will likely find its way back to the mid section of the 100% bar that caused this price move.
We have learned that it can take the same bar to 2 to 4 bars out. Meaning if you are trading a 30m chart, then this price move back to the mid section could be 30 to 120 minutes away. Keep this in mind as you trade.
Consider other models as you trade -
Past performance is not necessarily indicative of future results.
Next -> Fade Models
Futures, Options on Futures and Forex trading involves a substantial degree of risk of loss and is not suitable for all individuals. An investor could lose the entire investment or, in some cases, more than the initial investment. Past performance is not necessarily indicative of future results.