How to Compute the Point of No Return Boundaries

By Lawrence

imageI have introduced the concept of Point of No Return some time ago here. It is not a complex concept but many traders find it difficult to apply the concept in their own trading. I will try to explain how point of no return is calculated in general and how to figure out the right one for the markets you trade.

 

Content

  • Point of No Return (PoNR) is a Function of STOPD
  • The Reference Price Levels
  • The Volatility Measurement Methods
  • Combining Volatility with Reference Prices to Get PoNR Boundaries
  • If You Suspect That We Are Talking About Breakout Plays, You Only Got It Half Correct
  • Upper and Lower Boundaries Do Not Necessarily Share the Same Construction Rules
  • Summary

 

Point of No Return (PoNR) is a Function of STOPD

This should not be a surprise to anyone who is familiar with my work on Special Theory of Price Discovery (STOPD) that PoNR is a natural extension of STOPD. In any market in a given timeframe, there is a pair of price levels that define the Point of No Return (PoNR) boundaries. One for upside breakout and another one for downside breakout. Once the breakout happened, the natural range expansion will likely materialize quickly.

Equipped with this knowledge, it means you will know the absolute boundaries for which counter-trend moves should not breach. You will also know where to hop in the boat for a significant directional ride. In short, knowing the PoNR boundaries equals to having a clean cut method to switch between normal mode and exception mode in trading.

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Comments
  • spooz2 March 24, 2016 at 8:04 am

    Further explanation by a by-th-numbers example would be very helpful.
    Can you make the PoNR’s boundaries part of the Battleplan each AM?

    • Lawrence March 24, 2016 at 9:07 am

      I will continue to write about the PoNR concepts and provide the daily timeframe levels for forex and the indices.

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