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Action Signals

Action Signals were proposed by JM Hurst as a part of his trading methodology, and are used as a means of generating trading decisions on the basis of a cyclic phasing analysis.

An action signal consists of two parts:

• An action which should be taken when the signal is triggered.
• An event which is called a signal, and which triggers the action.

Because the signal occurs first, let's consider that first. Here is a list of all possible signals:

• Price crossing an FLD (either crossing from below to above the FLD, or from above to below)
• Price crossing a VTL (either crossing from below to above the VTL, or from above to below)
• Price crossing a particular level (again, either crossing from below to above the level, or from above to below)

Of course these signals are all based on cyclic tools, which is why they are so important.

When a signal is triggered, an action should be taken. In its simplest form there actually only two actions:

• Buy
• Sell

But there are some subtleties to the action to be taken. They are:

• Act immediately.
• Take delayed action.

And there is an additional action that can be taken in Sentient Trader - that is to alert you to the signal by means of a simple message box, and take no other action.

An immediate action means that as the signal is generated, the action should be taken. This usually means that a trading order should be placed ahead of time at the price level of the signal. That means that as price crosses the signal level an immediate action is taken, and the instrument is bought or sold.

A delayed action means that at the close of the bar during which the signal was triggered (after trading closes in the case of EOD trading, or at the end of the minute, 5-minute, 1-hour, or whatever timeframe one is trading in the case of intraday trading), the action is taken. The action in this case is the setting of an order, a small distance beyond the high or low of the bar during which the signal was traded. This requires that price keep moving in the direction of the signal in order for the action to actually be taken.

It will be obvious from the above discussion that action signals are an intermediate step between the phasing analysis and the generating of trading orders. The next step in the trading process is of course the generation of trading orders as a result of the action signals. In the case of an immediate action signal the order is generated before the signal is triggered, in other words as soon as the action signal itself is generated. In the case of a delayed action signal the order is only generated after the signal is triggered. For this reason you will often see several delayed action signals on a chart, but will see immediate action signals less often, because they have already been converted into orders. If you have chosen not to accept the trade orders generated by immediate action signals (after an analysis is updated, or when handling the actions compiled into a Scan Report) then there will be no order, but the Action Signal will be plotted on the chart. And one does sometimes see immediate action signals on real-time intraday charts, because Sentient Trader is waiting for the trading platform to confirm that the order has been placed.