ALGORITHM II

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The N1 rule (N1 requirement) for Algorithm II is as follows:
 If point 3 is low, then the level of point 5 should be higher than point 1. 
 If point 3 is high, then the level of point 5 should be lower than point 1.

For an accurate understanding of the algorithm, you should get acquainted with UMG General Concepts.

Step I. Search For Point 3 of the External Attraction Model (EAM) and the Sarting Point of the Previous Trend.

1.1. The program looks for the first possible extreme, satisfying Single Bar Rule. Such an extreme is a candidate for potential point 3 ( potential t.3).

1.2. Next, the program checks the bars from right to left (i.e., in the past) from the bar containing the extreme candidate for point 3 to one of the following events:

1.2.1. Found the last intersection (breakthrough) point by the price level of the candidate for point 3.

In this case, the report displays:

PREVdata: FullDataPrev

The program proceeds to substep 1.3.

1.2.2. The program reached the starting point of the chart (i.e., the price did not intersect the level of point 3 after the starting point of the chart).

In this case, the report displays:

PREVdata: NoFullDataPrev

The program proceeds to substep 1.3.

1.2.1. The price checked 300 bars preceding point 3, but the level of step 3 did not intersect at this segment. The program looks for an absolute extreme (opposite to step 3) on the segment from the 300th bar before point 3 to point 3. The program proceeds to substep 1.3.

1.3. The program looks for an absolute extreme (opposite to point 3 extreme) on the segment:

- from the last intersection by the price level of the candidate for point 3 (inclusive) (if came from 1.2.1.), or :: - from the starting point of the chart (if came from 1.2.2.), or

- from 300 bars(if came from 1.2.3.)

to point 3 (excluding).

1.3.1. Absolute extreme found. The candidate for point 3 is confirmed; moreover, the found confirming extreme is the assumed (if coming from 1.2.2. or 1.2.3.) starting point of the preceding trend.

The program checks for the absence of extremes equal to point 3 between the assumed starting point of the previous trend and point 3.

1.3.1.1. If such an extreme is found, this candidate for point 3 is discarded, and this point 3 is discarded.

1.3.1.2. If such an extreme is not found, the program proceeds to step 2.

1.3.2. Absolute extreme not found. This point 3 is discarded.

Simultaneously with step 1, the program launches the search for the next potential point 3.