Adaptive Price Zone -APZ
A trading tool that helps stock traders to determine stock prices' turning point, aiding them in buying or selling the stock to reap maximum profits.
Adaptive Price Zone Details
Adaptive Price Zone (APZ) is a tool stock traders use to determine stock market fluctuations. The APZ trading technique creates two lines based on the calculations of a short-term, double-smoothed exponential moving average. It's like a car on a highway, except the car is moving left and right randomly, and the highway is bending itself sideways to prevent the car from hitting the barrier. The highway barriers are the adaptive price zone lines, and the car is the price movement.
The key to earning profit in the safe stocks market is to predict where and when the price turning point will occur, then either sell and buy the stock right before it happens. When the price hits the adaptive price zone lines, it means that you should take action immediately because the price is about to reach its turning point. Remember, APZ is a tool, not sorcery. There's still a chance that APZ will fail, and the price keeps barreling up or down indefinitely. The APZ is meant to be used together with other trading techniques, such as price pattern recognition, supply and demand, or even AI-assisted trading.
Example of Adaptive Price Zone
Adaptive Price Zone is a trading indicator tool included inside a trading application package. Once you load a stock price, the app will show you the naked price action with a candlestick graph representing price movement. Two lines accompany the main price graph on its top and bottom.
These two lines are made of Exponential Moving Average (EMA) logarithm, where you average the Simple Moving Average (SMA) exponentially to obtain a faster reaction to the price's movement. The starting point for each line is acquired from the highest and lowest closing prices, which are the farthest points of the candlestick graph's wicks. These calculations create a zone enveloping the main price movement.
Take a closer look at where the main price hits the Adaptive Price Zone lines. If the main price movement hits the top APZ line, it means that the price is going to drop soon, and you should sell your stock to cut losses. If the main price movement hits the bottom APZ line, it means that the price is going to rise soon, so you should buy the stock to sell it at a higher price. The more candlesticks hit the APZ lines, the clearer and sooner the price turn will occur.
Significance of Adaptive Price Zone
The stock market is like an entirely different planet filled with its unique creatures. You have common stocks, large-cap stocks, mid-cap stocks, growth stocks, safe stocks, and so many more. The Adaptive price zone technique is not one-size-fits-all. You have to fully understand APZ's characteristics and determine the perfect market for it to generate the maximum profit.
So, what's the 'correct' market type for the adaptive price zone technique? APZ is best used in safe stocks. Safe stocks or sideways markets, or low-volatility stocks, have a relatively stable price where the price moves at a small increment for a long time. Unlike the growth market where stock prices rise sharply at seemingly unexpected times or the crypto market, prices go up and down wildly.
Sideways moving stocks are usually a big company with a good financial track record and reliability, resulting in small stock price swings over a long time. Honda Motor Co, Ltd. is a top-tier motor company that has been around since forever. Because of their experience, they're able to withstand crisis after crisis, creating a great reputation for being a sideways moving stock.