Tirone levels is a sequence of several horizontal levels reducing one after another. Tirone levels method is used to find Forex support and resistance indicators within trading range in a particular period of time.
Tirone levels were elaborated by John Tirone. In practice, TL makes reading charts of the price movement easier. Also using this method of technical analysis traders can generate signals for opening positions. For example, if the price reaches TL from upward it is a buying signal. If the approaches from bottom it is a selling signal.
There are two options to calculate Tirone levels.
High and Low are defined for a particular period of time.
The formula to define the upper line of TL is:
Tirone Level 1 = Hhigh I – (Hhigh-Llow)/3
where Hhigh - Highest High — High price for a particular period of time;
Llow - Lowest Low — Low price for a particular period of time;
We deduct Low from High, then the obtained value is divided into three and this value should be deducted from High.
The formula to find the central line is:
Tirone Level 2 = Llow + (Hhigh-Llow)/2
We deduct Low from High, then the obtained value is divided into two and is added to Low.
The formula to find the bottom line is:
Tirone Level 3 = Llow + (Hhigh-Llow)/3
We deduct Low from High, then the result is divided into two and is added to Low.
According to this method we put five lines on the chart. Firstly we calculate the Adjusted Mean.
Adjusted mean = (Hhigh+Llow+Close)/3
where Close — is the closing price of a candle.
To find the upper line:
Tirone Level 1 = Adjusted Mean + (Hhigh-Llow)
The second line
Tirone Level 2 = 2 x Adjusted Mean - Llow
The Third line or Adjusted Mean
Tirone Level 3 = Adjusted mean
The fourth line
Tirone Level 4 = 2 x Adjusted Mean - Hhigh
The bottom line
Tirone Level 5 = Adjusted Mean - (Hhigh-Llow)
Application of Tirone levels
Tirone levels are the set of certain support and resistance level based on trade range of asset (currency, CFD etc.) for a particular period of time. More often, they are used for a more convenient reading charts of the price movement on market.
How to use support and resistance levels? Application of TL is similar to application of Fibonacci retracement. We open a long position as the price approaches TL from top and a short position as the price approaches TL from bottom.
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