“Baskerville’s dog” is a trend continuation new model, described by A. Elder in his book “Exchange Trade Fundamentals”.

According to A. Elder, “Baskerville’s dog” signal arises when a reliable pattern is not accompanied by the market reaction to be expected. That is, prices move in the opposite direction. For instance, the “head and shoulders” pattern indicates that the ascending trend has come to the end. However, if the prices keep on increasing, this yields the “Baskerville’s dog” signal.

Elder explains the pattern name in the following way. The signal is named after the story by A. Konan-Doyle. In this tale Sherlock Holmes has found out the lead to the enigma solution when he has paid attention to the following fact: the family’s dog didn’t bark at the moment of murdering. This fact indicates that the dog knew the murderer. Hence, it was the “familial concern”. The signal itself consists in the absence of any reaction – so to say, in the absence of the “bark” to be expected. When the market “refuses barking” after coming of a quite reliable signal of “good-quality”, this is “Baskerville’s dog”. If the market refuses reversing and keeps on tending upwards, this yields “Baskerville’s dog” signal. 

“Baskerville’s dog”: a signal or the trend continuation pattern?

*According to A. Elder, “Baskerville’s dog” is a signal of the trend continuation.

*Nobody of the technical analysis classicists (Murphy, Swagger, Luca, Neiman, etc.) has included this “signal” into the list of the trend continuation patterns (figures) – such as rectangle, flag, pennant, gusset, triangle, gap, etc. More in detail the trend continuation patterns are described in Masterforex-V Book 2 (see http://masterforex-v.su/002_010.htm, http://masterforex-v.su/002_012.htm).

Our goal is to demonstrate that according to Masterforex-V trading system “Baskerville’s dog” it is not just a signal but also a trend continuation pattern. A. Elder has detected it by intuition, described and named so wonderfully… However, for pity, he hasn’t managed to understand and explain it properly.

The “Baskerville’s dog“pattern problems in their essence – those depicted but unsolved by A. Elder. The riddle solution according to Masterforex-V trading system

·   A. Elder denotes the problem. However, he doesn’t submit the algorithm to its solution. At the same time, at the forex market any trader faces with this problem – i.e., one wonders how, where and why the trend reversal pattern (“the head and shoulders”) abruptly turns into the trend continuation signal (pattern).

·   One of the numerous examples of “Baskerville’s dog“is in detail described in Masterforex-V Book 2. In the corresponding chapter it’s explained how Neiman has managed to miss more than thousand points during several (!) months of the “bear” trend in d1. Neiman, waiting for the “head and shoulders” pattern, opened a deal on “sell” at the very bottom of the “bear” movement. Issuing from his own mistake, Neiman has drawn a paradoxical conclusion. That is, according to Neiman, the best solution would be either to wait for distinctness of the situation or receive other confirmative signals - see http://masterforex-v.su/002_303.htm

*** The circle marks the place where two signals intersect. One, coming from the “head and shoulders” pattern, indicates the trend reversal. The second indicates the “false” breaking through the line of the channel support, which upholds the channel actual direction. Thus, one can see the “bull” trend victory. Many traders, those who wrongly estimated the situation at that moment, have lost their money. The best solution would be either “to wait and see” or to find some other confirmative signals.

The neck line.

       This is just one of the numerous examples of “treacherousness and cruelty” of the “Baskerville’s dog” trend CONTINUATION model. This could happen when one doesn’t understand the crux of the problem, its niceties and the corresponding regularities. All these specificities still remain not described by classicists of the trading technical analysis.

In this chapter Masterforex-V exposes the essence of “Baskerville’s dog” problem, unsolved by A. Elder. E. Neiman, opening a deal on “sell” in the very bottom of the “bear” movement, has fallen into a trap because of this enigma.

*According to Neiman, the “head and shoulders” pattern is formed (see the pattern model in the chart bottom). However, instead of the trend reversal pattern realization, the “head and shoulders” figure has suddenly turned into the trend continuation figure.

“Baskerville’s dog” as the alternative to  the “head and shoulders” pattern

The “head and shoulders” is the trend reversal figure, well-known in manuals of trading.

This chart is taken from the book “Technical analysis of future markets: theory and practice” by J. Murphy’s (see Masterforex-V Trading Academy Library V http://dma.masterforex-v.su).

A. Elder named “Baskerville’s dog” the figure, alternative to the “head and shoulders” pattern.

Drawbacks of A. Elder’s conception of “Baskerville’s dog” signal; how Masterforex-V Trading System overcomes them

1. A . Elder, has introduced the notion of “Baskerville’s dog” into the trader’s vocabulary. However, he doesn’t submit either charts of the signal or explain its behavior. Once more the reader should intently reread A. Elder’s explanations concerning “Baskerville’s dog”, where the reader should try to see its nonsense and logical gaps. Then we will get the clear definition of “Baskerville’s dog” pattern in Masterforex-V Trading System. Besides, we will find out the trend continuation pattern regularities, for the first time described here.

According to A. Elder’s definition, “Baskerville’s dog” signal arises when a reliable pattern is not accompanied by the market reaction to be expected, prices being moving in the opposite direction. For instance, the “head and shoulders” pattern indicates that the ascending trend has come to the end. If prices keep on heightening, this yields “Baskerville’s dog” signal.

Issuing from A. Elder’s explanations, one can understand just the following.

a). The “head and shoulders” pattern, which hasn’t turned into the trend continuation figure, is named “Baskerville’s dog”.

*A. Elder regards this pattern as the trend continuation signal.

*According to Masterforex-V Trading System, it is a new model of the trend continuation. It’s not described by anybody of the technical analysis classicists in contrast to other figures of the trend continuation.

b) All signs of the trend continuation new signal, enumerated by A. Elder, evoke astonishment. They are so vague and ambiguous. Once more you should look at the “head and shoulders” pattern. Apply to it all Elder’s criteria of the reversed pattern of “Baskerville’s dog”. It will make you wonder that all criteria enumerated by Elder fit for both the figures.

* “A reliable figure is not accompanied by the market reaction to be expected”.

* “Prices are moving in the opposite direction” (in the case of the “head and shoulders” pattern prices also move in the opposite direction).

* “If prices keep on increasing, this yields “Baskerville’s dog” pattern” (there is no clear criterion of the upwards-directed movement maximum level).

*”If the market “refuses” to reverse and keeps on tending upwards, this yields “Baskerville’s dog” signal”. 

2. A . Elder doesn’t submit clear criteria of one model transferring to another (from the “head and shoulders” to “Baskerville’s dog”).

3. A . Elder doesn’t present a criterion of the false breaking through the level, after which both the models start developing.

4. A . Elder doesn’t estimate “Baskerville’s dog” pattern movement potential. As regards every trader, there logically arises the question. What must be the tactics of the work under the condition of “Baskerville’s dog” pattern when the “head and shoulders” maximum is broken through?

*Must a trader install “the stop with reversal” (close the deal on “sell” and open on “buy”)?

* For how long to keep the deal on “buy”?

* Under the condition of breaking through the “head and shoulders” pattern, could it be better to wait through a short-term increase in the currency pair?

5. A . Elder writes about the signal but not about the trend continuation pattern. He doesn’t clearly describe features of this signal (pattern) – in contrast to “Baskerville dog” pattern description, submitted in Masterforex-V Trading System.

6. A . Elder introduces the signal (pattern), which post factum analysts can interpret any way they like:

* If the trend reversal has occurred, the analysts write that there was the “head and shoulders” pattern

* If the trend reversal hasn’t happened, the analysts write that there is “Baskerville dog” pattern (Elder’s signal of the trend continuation).

One must admit that it’s a safe bet for analysts (chartists) all over the world. Such demagogy is possible because A. Elder has presented no clear criteria of the pattern in question.

*The given Chapters of Books 2 and 3 by Masterforex-V submi clear criteria of “Baskerville’s dog” pattern. *Such criteria permit us to write not only about the signal (A. Elder) but also about “Baskerville’s dog” model of the trend continuation (Masterforex-V Trading System).

* Naturally, the model’s name is not changed; it remains the same as A. Elder has designated it - “Baskerville’s dog”.

7. A . Elder’s logic of describing “Baskerville’s dog” signal depicts Chartism’s essence.

* It’s a magic “rescuing stick” for analysts. As the criteria are vague, each variant of the movement (upwards- or downwards directed) can be interpreted as the true one and solely correct - after the movement coming to the end.

* For traders it is the dead-end of disappointment. Really, for trading traders it’s important to understand the algorithms of the movement and calculate the deal opening in the on-line regime but not after the end of it.

Chartism is more minutely described in Masterforex-V Book 2: http://masterforex-v.su/002_302.htm and http://masterforex-v.su/002_303.htm.

Examples of “Baskerville’s dog” pattern in the short-term trend .

The kernel of the problem consists in the following.

*At forex the movement is zigzag-like.

*The charts given below perfectly demonstrate numerous examples of “Baskerville dog” pattern in short-term timeframes. It is the reversal imitation and a new breaking through the current trend peak – see http://masterforex-v.su/002_302.htm; http://masterforex-v.su/002_303.htm

*** Breaking through the maximum

Examples of “Baskerville’s dog” pattern in the medium-term trend h1 and a possible alternative to it – the “head and shoulders” pattern (the dotted lines mark the possible variants of the medium-term trend h1 reversal – the “head and shoulders” figure).

The “head and shoulders” at h1

The technique of solving the problem of “Baskerville’s dog” trend continuation in Masterforex Trading System

To understand “Baskerville’s dog” pattern, it is necessary to start from the point where A. Elder has stopped. For this purpose one must do the following.

a) It’s necessary to find out where, when and why there can happen the false breaking along the trend. It is accompanied by the abrupt reversal towards the opposite direction

 *either towards the correction (“Baskerville’s dog”),

  *or towards the trend reversal (the “head and shoulders”).

 The reader should keep in mind that the onset of both the models is identical.

b). One must get clear criteria of the distinctions in the further movement after the false breaking through the trend. That is to find the level, which indicates the unambiguous choice between the trend continuation pattern (“Baskerville’s dog”) and the trend reversal pattern (the “head and shoulders”).

c). One must develop a graphical model of “Baskerville’s dog”, not presented by A. Elder.

d). One must describe regularities of the trend continuation pattern (“Baskerville’s dog”) - as regularities of other models are submitted in the classical literature (the rectangle, pennant, gusset, etc.).

e). One must solve the problem of the potential of the movement along the current trend of “Baskerville’s dog” pattern. In case of breaking through the “head and shoulders” peak, every trader is confronted with a dilemma of great importance:

*either to wait for the current (“bull”) trend continuation, sustaining losses for a while,

*or to install the “stop with the reversal”.

f). It’s important to dwell on the timeframe synthesis.

*The short-term trend reversal (e.g., the “head and shoulders”) can be the reversal or the correction wave in the medium-term trend.

* There arises the question: what are the criteria of the synthesis of the short-, medium- and long-term trends from the viewpoint of “Baskerville’s dog” pattern?

The solution to the enumerated problems, given in Masterforex-V Trading System, furnishes the clue to

a). “Baskerville’s dog” pattern enigma, unsolved by Elder, Neiman and other chartists

b). and to the problem, most important to every trading trader – i.e., what’s about the movement towards the direction, opposite to the current trend.

* The correction wave (“Baskerville’s dog” pattern) can be formed at the short-, medium- and long-term trends.

* There can occur the trend reversal (the “head and shoulders”, “Diamond”, etc.) - at which of timeframes.

Definition of “Baskerville’s dog” pattern of the trend continuation according to Masterforex-V Trading System  (A. Elder doesn’t submit it)

“Baskerville’s dog” is a pattern of the trend continuation. It becomes formed as the result of a failed attempt at forming reversal figures – such as the “head and shoulders”, the “upturned head and shoulders”, “Diamond”, “Thorn (pin)”, etc. That is, the breaking occurs after the peak correction of such pattern comes to the end.

 The signs of “Baskerville’s dog” pattern are the following:

*a new breaking through the maximum in the “bull” trend – such patterns as the “head and shoulders”, the “upturned head and shoulders”, “diamond”, “thorn (pin)”, etc.  cease to exist;

*a new breaking through the minimum in the “bear” trend.

Thus, in contrast to Elder’s definition, in Masterforex-V Trading System we propose the following.

*We submit the clear definition of the trend continuation new model, introduced by A. Elder. It’s not just a vague notion of signal. Above the example of Neiman’s error illustrates the very idea of the “signal”. That is, the “head and shoulders” pattern becomes formed nominally. However, the common sense suggests that trends don’t reverse in such a way.

*We extend this model as alternative not only to the “head and shoulders” pattern (as A. Elder has done it). We also apply it to other patterns of the trend reversal (such as “diamond”, “thorn (pin)”, etc.), which begin with the false breaking through the previous peak in the current trend.

Below we step-by-step examine the enumerated problems, not solved by A. Elder.

“Baskerville’s dog” pictorial model, not depicted by A. Elder but given in Masterforex-V trading system, (one of several variants of “Baskerville’s dog” patterns)

“Baskerville’s dog” pattern variants, examined in Masterforex-V trading System 

There are several variants of “Baskerville’s dog” patterns.

*Each of them clearly depicts the further movement algorithm.

*Nobody of the trading technical analysis classicists has described such patterns of “Baskerville’s dog”.

*The understanding of such patterns is the necessary condition for the successful trading at forex.

*For those who are not students of Masterforex-V Academy, this institution submits the prompts concerning “Baskerville’s dog” patterns.

The clue to “Baskerville’s dog” pattern variants, furnished by Masterforex-V Trading System

1.   One must issue from the “head and shoulders” classical model by Murphy.

2.   One must in advance find out several variants of the currency possible movement from the upper reversal (C-point), directed downwards.

3.   Each of such variants of motion makes a pattern of “Baskerville’s dog”. They make models of the trend continuation under the condition of the breaking through the “head and shoulders” peak.

4.   According to Masterfdorex-V, “to follow the market” means the following.     

 *Before the beginning of a trading session one must clearly see the possible variants of the medium-term trend development. For each of them preliminary calculations must be performed separately.

*When the trading session starts, at short-term timeframes one must be the first to choose the only possibility among the variants of the trend further development in the medium-term timeframe. The option must be picked out among the variants, calculated before the trading session beginning.

5. Already during 3 years the daily training in the one-line regime is available in Masterforex-V Internet Academy for students from more than 50 countries all over the world.