Arps Price Magnets™

One of the most effective tools for generating support/resistance levels is the Arps Price Magnets Up/Down set of indicators. These indicators are based on a revolutionary new concept developed by Jan Arps’ Traders’ Toolbox to define price projection zones based on price swing analysis. The indicator is fully automatic and plots on the price chart a set of horizontal lines that define significant future support/resistance targets based on price patterns generated by previous swings.

The Arps Price Magnets Up indicator projects resistance zones above the market and Arps Price Magnets Down projects support zones below the market. More than 75 percent of the time, these Price Magnets will draw the prices to them and provide resistance/support when the prices reach them. On those occasions when prices do not stop and reverse at the Price Magnets but trade on through them, the price movement usually continues with increased strength while the Price Magnet resistance levels become support levels and support levels become resistance levels.

If a new swing pattern is detected that qualifies as a Price Magnet swing, a revised Price Magnet target line is calculated and plotted on the price chart. A specific Price Magnet line continues to be valid and plotted on the chart until the price reaches the Price Magnet target or until price action has created new magnets that have a greater relevancy to current price.

In the example shown above, the blue lines are Price Magnets Up and the red lines are Price Magnets Down. Observe where the lines began plotting. This is the point in time where the Price Magnets algorithm calculated the location of the next Price Magnets support/resistance level. Notice also how Price Magnets cluster, showing strong support or resistance at that level.

The fact that a Price Magnet line may stop plotting does not mean that the support/resistance level is no longer valid. The projection for support/resistance at that level is still valid until the price reaches it.

NOTE: Before overriding any default input settings, be sure you have read the section "Using Input Settings" at the end of this documentation.

Inputs include the following:

Strength (Default = 5, Range = 1-10) This input defines the magnitude of the swings to be used in establishing the Price Magnet targets, and, therefore, the sensitivity of the Price Magnets indicator. The larger the Strength input value, the more significant the price swing needs to be to establish a new Price Magnet line. Higher values will produce magnets that correspond to longer-term trends, and you will probably see fewer of them. Some users prefer to run the Price Magnets indicator more than once on the same chart using different Strength values and different colors for the target lines in order to see both the major and minor price targets.

Lookback(Default = 70, Range – 20-200) This input defines the interval (in number of bars) over which the indicator will search for the price swing pattern that will define the target zone. The total number of bars on the chart should be no less than approximately 8 - 10 times the value of Lookback.

Normally, a little experimentation will be necessary to establish the optimum values for Strength and Lookback for each chart window. The default Lookback value is set for 70 bars, but, if you have a daily or weekly chart with less than 300 bars, you should reduce the Lookback value.

As you watch the Price Magnet support/resistance levels develop in real time on your charts, you will be amazed at the uncanny way they draw the price to them. In downtrending markets, you will often see a stairstep effect as the Price Magnet Up target lines follow the trend down. In this situation, the first time you see a Price Magnet target zone being drawn at a price level higher than the previous one that was on a stair step down, prices are usually ready to turn, and this new Price Magnet zone is often penetrated with increasing momentum. A comparable relationship can be seen in uptrending markets.