Signal invalidation

When is a signal invalidated?

A signal candle as given by TrendMaster is not valid forever. There are a few criteria we can put on these signals that will invalidate them. These are the scenario's for a signal to become invalidated:

  • A signal in the opposite direction is given (green invalidates red and vice versa).

  • Price dips below a green signal candle's low or above a red signal candle's high.

  • Time

Most of these speak for themselves and probably don't need further clarification. However, that last one is a special scenario. Since TrendMaster is a trend following indicator a signal candle can also be invalidated over time. There is no rule set in stone for this, but if the trend we are waiting for takes a long time to form it becomes increasingly unlikely that it will form at all. As a general rule of thumb you could consider a trend invalidated if it doesn't form within 9 periods.