The order that VEMA Break and Retest conditions must be met for entry is:
1. Distance to Break (A candle must close outside this distance)
2. Distance to Activate
3. Distance to Confirm
4. Operate on Candle Close
- Expiry Date
- Distance to Break
- Distance to Activate
- Distance to Confirm
- Operate on Candle Close
- Distance to Invalidate
By default, trigger trendlines have no expiry date.
So even though you may draw them to only encompass a certain period of time like this:
They will actually act as though you have the "extend left / right line" settings enabled on the trendline, meaning to VEMA they appear as:
To combat this, the Expiry Date condition can be used. This enables you to pick a date and time in the future that you consider this setup to be invalid, and instruct VEMA to stop monitoring the setup at this time.
Here we can see the Expiry Date condition has been added to the trade setup panel on the left, and VEMA will now stop monitoring this trade at noon on the 12th of June.
Note: By default all VEMA logic, including expiry dates, currently runs in UTC.
Distance to Break
Distance to break allows you to define what exactly constitutes a break. It is a measure of how far from the trigger price must close before you would classify it as a break of the desired level.
In this scenario, Distance to Break is set to 4%. For the entry conditions of this trade to be met, price must close more than 4% above Alpha, then come back to satisfy the remaining "retest" conditions (explained below).
Distance to Activate
We like to think of Distance to Activate as the "Avoid getting front-run" condition. It essentially gives you a buffer zone on your trigger trendline, so that if price gets within the percentage you specify, VEMA will see this condition as being met.
In this scenario, Distance to Activate is set to 0%. For the entry conditions of this trade to be met, price would have to close above the white line (4% Distance to Break) then come back and touch the Alpha trigger trendline.
This trade was again set up with no Distance to Activate. Unfortunately, price broke, came back close to the Alpha trendline, but was front-run and began to bounce before hitting Alpha, leading to a missed entry.
To remedy this, we could have used a Distance to Activate of 1.5%. This gives a buffer zone, meaning price doesn't need to hit our trendline exactly, but just needs to come "close enough" (within 1.5% of Alpha) for VEMA to enter, leading to fewer missed trades.
Distance to Confirm
Distance to Confirm is the "Rejection confirmed" condition. It allows you to set a percentage that price must reach after bouncing from your Trigger trendline or Distance to Activate zone.
Similar to our earlier example, this trade would have entered when price hit the trendline, as the Distance to Confirm is set to zero, meaning no rejection is needed to satisfy the entry conditions.
Here VEMA would have waited until price touched alpha (0% distance to activate) then bounced our 2% Distance to Confirm before entering.
Here Distance to Confirm would have saved you from a losing trade, as VEMA never entered due to price not bouncing enough to confirm the retest and satisfy the condition.
Operate on Candle Close
Operate on Candle Close is the "Don't get caught out by wicks" condition. It ensures VEMA will only enter a position if all entry conditions have been previously been satisfied and the Distance to Confirm condition is still met when a candle closes.
In this scenario, we were looking for a Break and Retest off the Alpha trendline. Because we used the Operate on Candle Close condition, VEMA would have entered the trade on the candle following price closing above the 0.45% distance to confirm.
In this scenario, we were looking for a Break and Retest off the Alpha trendline. Because we used the Operate on Candle Close condition, VEMA would not have entered the trade due to price never closing above the 0.3% distance to confirm & preventing us from getting into a losing trade.
Distance to Invalidate
Distance to invalidate prevents trades from staying monitoring indefinitely when your trade setup has been invalidated.
It allows you to set a distance from your trigger in the opposite direction to your predicted price movement, that if price closes further than (Below for longs, above for shorts) VEMA will cancel the setup.
It's important to note Distance to Invalidate will only begin monitoring after the Distance to Break Condition has been satisfied.
Here we can see this trade setup would be invalidated if price closed 4% above Alpha, then came back and moved 4.5% below.
Note that price is currently further than 4% below Alpha. This does not satisfy the Distance to Invalidate condition, as Distance to Break must be satisfied first.