It is easier to use an “on-off” histogram, which simply displays one color for Permission Long and another for Permission Short, than to interpret the Permission Stochastic manually. The Permission Screen takes the rules for the Permission Stochastic and translates them to a simple color histogram biasing the signal in favor of the market's long-term direction
Interpretation: If the histogram is dark green, the trader has a Permission Long and is able to take any long trades generated shorter term. The opposite is true for the dark magenta Permission Short. Use on a multi-data chart for spread trading. Plot one Permission Screen in sub-graph 2 for data 1 and in sub-graph 3 for data 2. If both screens match, don’t trade. If the screens oppose, take a spread trade accordingly, going long the Permission Screen histogram green data (above 0) and short the red data (below 0).
Permission Screen Parameters
•Display
•Period: Number of synthetic bars in the Permission Stochastic.
•X: Number of bars that make up the longer term. For example, if you are trading a daily chart, setting X to 5 will give you a five day or weekly stochastic to screen your signals.