The dog/leash principle

We use the dog /leash principle in our daily call as one of many quick evaluation tools to determine an educated guess on the following days most likely price behavior.

Like most of the daily call edges it is principle based and as such transferable to other time frames just as well (weekly call, monthly call, intraday market evaluation)

In laymen's terms it is a standard deviation tool that measures from a simple moving average as a base instead from the mean.

The idea is to imagine yourself to be a dog owner walking on the moving average with a dog (representing price) on a retractable dog leash:

which allows for the dog (price) to run away from you(the moving average) to a certain point when the tape ran out and than more likely than not yanks the dog(price) back to you (SMA)

As just one of many evaluation criteria for the daily call, this tool/filter under which to measure price behavior gives you a easy gauging tool on "measuring" if price more likely is to go

sideways (is near the moving average)

going up (price is below the SMA and

extended in its leash length)

going down (price is above the SMA and

extended in its leash length)

While this filter might look simplistic even crude at first glance it is its simplicity and strength within a larger group of various filters in the daily call that provides its strength.

The goal is not accuracy of price level determination but rather the ease of use making an non biased decision within seconds for evaluation that allows for the daily call to be more accurate than most would assume.

Its application ease is its strength and sophistication can be improved by back testing your specific trading instrument for the typical :leash length" before a turning point and accounting for volatility and range at the time the daily call is undertaken.