ARC Analysis

Understanding ARC Analysis

• ARC stands for Average Range times Constant, a concept introduced by Welles Wilder Jr. in 1978.
• This methodology helps traders identify support and resistance levels by multiplying a constant with the Average True Range (ATR).
• Modern adaptations of ARC include the Super Trend indicator, which simplifies the identification of price movements. 📈

How ARC Analysis Works

• The key calculation involves adding or subtracting the product of the constant and ATR from the last extremum point on the price chart.
• The Super Trend indicator, derived from ARC, adjusts traditional support and resistance levels by ignoring certain values based on the previous day’s levels.
• This ensures that during uptrends, only increasing support levels are considered, while downtrends focus on lower support levels.

Variations of ARC Analysis

• ARC Ichimoku is one notable variation that employs the ARC calculations to determine various Ichimoku lines:
• Tenkensen: An ARC based on a 9-period ATR.
• Kijunsen: An ARC calculated using a 26-period ATR.
• Span A and Span B: Further ARC-derived lines shifted forward to provide insights into future price movements.
• These indicators are combined with traditional Ichimoku signals for making informed trading decisions. ⚡

Trading Signals from ARC Analysis

• The classic signals derived from Ichimoku can be applied to ARC Analysis:
• Tenkan-Kijun Cross: Indicates potential upward or downward trends.
• Kumo Breakout: Suggests possible trend reversals when price moves above or below the cloud.
• Chikou Span Confirmation: Confirms the prevailing trend when it crosses above or below the price.

Benefits of Using ARC Analysis

• Provides a systematic approach for traders to analyze price action and market trends.
• Combines the established ATR methodology with innovative adaptations, enhancing trading strategies.
• Offers traders a way to visually and mathematically assess key support and resistance levels in real-time. 🎯