UMG General Concepts

Algorithm and Model#

Algorithm is a specific set of rules used to construct technical analysis models on financial instrument charts. UMG utilizes two distinct algorithms, each responsible for building different types of technical analysis models.

Model is a key structural concept in UMG that includes a set of elements such as:

1. A segment of the price chart where the algorithm has been successfully applied.
2. A collection of lines constructed on the relevant price chart segment as a result of a complete and successful application of the Algorithm.

Model's Parameters is a collection of values derived from:

1. The price chart segment and the set of lines created by the Algorithm.
2. Certain parameters may also be calculated using other previously constructed models.

Points, Touches and Breakdowns#

Point is a key element of the model, which is determined in one of the following ways:

• as the high/low of bar on the chart (for example Points 1,2,3,3',4,5 of a model);
• as a specific bar where the price has formed an Absolute Extreme (for example Real Point 6);
• as a forecast of the level and/or time calculated as the intersection of model lines (for example Calculated Point 6, Sacral Point, Supposed Point 6).

Touch is a specific location on the chart associated with the high or low of a particular bar, through which the model's line passes. Significant Extremes or tangent points identified by the Algorithm may serve as reference points for building model lines. In the other case, when Touch is not a model point, it is the contact of the price with the model line, but not the crossing of the line by the price.

Breakdown is either a location where the price crossed, not just touched, the model line for the first time, or a location where the price touched the model's breakdown level for the first time. The breakdown level may be used as stop-loss when trading Point 6 reversal or as an open level when trading Point 6 overcome.

Extremes#

• Significant Extreme. A price extreme that has a Confirming Extreme.
• Confirming Extreme. A price extreme that precedes a Significant Extreme. In essence, an extreme can only be deemed Significant if there is a Confirming Extreme preceding it.
• Absolute Extreme. A price chart extreme that represents the lowest or highest price value in the region between two adjacent Absolute Extremes and is itself a Significant Extreme.
• Local Extreme. A price extreme that does not represent the lowest or highest price value in the region between two adjacent Absolute Extremes and is still a Significant Extreme.

Definition of a Model as "Half-Trend" or "From the Beginning of the Trend"#

For main models other than EAM, the program sequentially checks bars from right to left, that is, into the past, from the bar containing t.1 until one of the following events occurs:

1. A price level intersection of t.2 is found.
2. A price level intersection of t.1 is found.

• If the program checks 50 bars before t.1 of the model and neither intersection is found, the model is considered a model from the beginning of the trend.
• If the program checks less than 50 bars before t.1 of the model and reaches the initial bar of the chart without finding the desired intersection, the model is considered a model from the beginning of the trend.
• If a t.1 intersection is found before a t.2 intersection, the model is considered a trend model.
• If a t.2 intersection is found before a t.1 intersection, the model is considered a model from the beginning of the trend.