ALGORITHM I

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

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

1. Find Point 1. Search for a Confirming Extremum.

1.1. The program searches for the first possible extremum that satisfies N1 rule. This extremum is a candidate for point 1.

1.2. When a candidate for point 1 is found, all bars to the left (i.e., in the past) of the bar containing the candidate extremum are checked until one of the following events occurs:

1.2.1. The point of the last intersection of the price level with the candidate for point 1 is found . In this case, the program searches for an absolute extremum that confirms point 1 from the intersection of the price level with the candidate for point 1 (inclusive) to the bar of point 1 (exclusive). There are two possibilities:

1.2.1.1. If the extremum is not found, the program searches for a new candidate for point 1.

1.2.1.2. If the extremum is found, the candidate for point 1 is confirmed. The program then checks for the absence of extremums equal to point 1 from the beginning of the preceding to point 1.

1.2.1.2.1. If such an extremum is found, this candidate for point 1 is discarded (the program continues to process other candidates for point 1).

1.2.1.2.2. If such an extremum is not found, the program proceeds to process the next bar after point 1 according to point 2 of the Algorithm.

1.2.2. The program has reached the starting point of the chart (i.e., after the starting point of the chart, the levels of points 1 and 2 have never intersected). The program searches for a confirming extremum from right to left to the starting point of the chart. The options are similar to the sub-items 1.2.1.1. and 1.2.1.2.

1.2.3. The program has checked 50 bars preceding the bar of the potential point 1, and none of the above events have occurred. The program searches for a confirming extremum from right to left in the area of 50 bars before the potential point 1. The options are similar to the sub-items 1.2.1.1. and 1.2.1.2.

2. Searching for Points 3 and 2.

If the program returns to this step during the construction of an alternative model, this branch of the algorithm stops.

The bar being analyzed after point 1 (or in cases of repeated application of the step specified in the algorithm) is checked for non-exceedance of the level of point 1.

2.1. If the level of point 1 is exceeded, the program discards this point 1.

2.2. Searching for Point 3. If the level of point 1 is not exceeded, the bar being analyzed is checked by rule N1 as an extreme.

2.2.1. If this bar is not an extreme according to rule N1 (as a potential point 3), the program checks the next bar in accordance with step 2.

2.2.2. If this bar is an extreme according to rule N1 (as a potential point 3), then

2.2.2.1. If this step (step 2) is applied again after confirmed candidates for point 3 have been found (i.e., such point 3, for which there is a point 2 between point 3 and point 1), but for one reason or another they were rejected, and the algorithm returned to the search for point 3, then the exceedance of the level of the previous candidate for point 3 by this extreme is checked.

2.2.2.1.A. If the check is not passed (i.e., if the level of the previous candidate for point 3 is not exceeded), then the program processes the next bar in accordance with this step (step 2) and further according to the algorithm.

2.2.2.1.B. If the check is passed, then the program proceeds to sub-step 2.2.2.2.

2.2.2.2. Searching for Point 2. The program searches for an absolute minimum (if point 1 and point 3 are high) or maximum (if point 1 and point 3 are low) in the range from point 1 to point 3 (hereinafter segment 1-3) as point 2 (hereinafter point 2). Then this bar is checked for "extremity" according to N1 rule. Two variants are possible :

2.2.2.2.A. If the bar is an extreme, then this is a potential point 2, and the potential point 3 becomes a confirmed point 3. In this case, the program proceeds to step 3.

2.2.2.2.B. The bar is not an extreme. In this case, the program begins to search for another candidate for point 3, for which it returns to the beginning of step 2.

If the program has processed 50 bars in a row in accordance with this step (step 2), and potential points 2 and 3 have not been found (i.e., the program has not yet moved to another step of the algorithm), then this potential point 1 is discarded.

If there are 150 or more bars between the potential point 1 and the bar being analyzed, and the program has not yet moved to another step of the algorithm, this potential point 1 is discarded.