some views on applied TA as appeared in traderji forum


Well-Known Member
We all know -Saint is transforming himself as TRAINER , so let me go through his view practical aspect of TA. HIS ASPECT STARTS WITH KISS

A) CHARTS ON VARIOUS TIMEFRAME-5min,15min/1hr/day/week/month
B) VARIOUS TYPE OF TIMEFRAME BASED TRADER-intraday ,small time EOD,position
C) candlestick,line chart

4] MAJOR TREND VS NEAR TERM TREND-From a charts perspective,the major trend is seen by looking at the monthly charts.The intermediate trend from the weekly charts,and the near term trend from the daily charts.

What is seen as a downtrend on the daily charts may be nothing but a pullback on the weekly charts,and is not even evident on the monthly charts.What is seen as a downtrend on the weekly charts and a catatrophic crash on the daily may be nothing but a monthly pullback.



SUPPORT is that area where buying interest exceeds selling interest,and therefore a previous decline gets halted at this area and turns back up again.It is marked by drawing a horizontal line connecting two or more bottoms.

RESISTANCE is that area where selling pressure exceeds buying interest.It is an area where previous rallies get halted and turn down again.It is marked by drawing a horizontal line connecting two or more tops.

Support and Resistance are not absolute points.They are areas.

When Support breaks to the downside,we call that a Down Side Breakout or Breakdown.When Resistance breaks to the upside,we call that a Breakout.

When we get a breakdown below support,that area of support now becomes an area of resistance.Have a look at the JNPR charts below.That area of support broke down and that same area is now acting as Resistance.

A breakout above Resistance,and that same area of resistance now becomes a new Support.
Uptrendline acts as Support each time prices decline and come towards it.So too the downtrendlines act as resistance as prices rally to the trendlines and fall from it.Example in the attachment below of DELL.Prices hit the downtrendline and resume its decline.Therefore the dntrendline acts as Resistance.

So too with an uptrend..........

And as was discussed regarding the breakout over resistance and breakdown below support,the same applies here.We have an uptrendline,we have prices taking support at this trendline.And as the trendline breaks,we say that the uptrend is in question.

A break in an Uptrendline is not a merely tells us that this uptrend that we have been trading and making profits from is now in question.So too with the Downtrendline.A breakout above the downtrendline does not mean that the stock is now in an uptrend,it merely means that the downtrend is now in question.
The market moves in trends.We have an uptrend,downtrend and sideways trend.

=That there are different categories to Trends.We call it Major(when we are talking long term and of the monthly charts),Intermediate(off the weekly),and near term or short term(off the daily).

=We know that a series of higher highs and lows is termed a rally.That a series of lower lows and highs is termed a decline,that a series of higher pivot lows and highs is called an Uptrend,and a series of lower pivot highs is called a downtrend.

=And about Supports,Resistances and Trendlines.

Now,before we go ahead with Gaps,and Chart patterns,etc.........let us take a breather.

Let's make this as simple as we can.......We know what an uptrend is,a series of higher pivot highs and lows.Vice versa in a dntrend.Now,for some rules........we only BUY in an uptrend.So long the uptrend is held,we do NOT think of shorting.Yes,one could always do a sniper attack on an intraday basis or at max,on an overnight basis.That is one's decision to make.

The most often repeated line "The trend is your Friend",means we never cross the trend.The trend is UP,therefore we buy declines.When the trend is DOWN,we short rallies.If you can't short for whatever reason,then a downtrend is reason to stay out till we get a change in trend to the Upside.

Therefore,it is very important to be able to detect the change in trends in the first place.Therefore,our minds must work like this.
Look at the charts.Take the weekly charts.Why,the weekly?Because we are looking at intermediate to long term.Are we making higher pivot highs and lows?If the answer is YES,then we are in an UPTREND.And in an UPTREND,we think "BUY DECLINES".That's it!
If the answer is NO,the previous pivot low just got cracked to the downside,we are thinking of getting out of our longs in that particular stock or index.Now we are thinking, "SHORT RALLIES"

In a downtrend,every rally is a shorting opportunity.In an Uptrend,every decline is a buying opportunity.

The market changes from Uptrends to Downtrends,again and again........we are not here to predict tops and bottoms.We are not here to anticipate anything.We are here to follow the trend.And as uptrends change to the down,we change from BUYING DECLINES to SHORTING RALLIES.

It is a rule that you do NOT break.......therefore the importance of first being able to detect the trends and the chnage from one trend to another.And then following the discipline.However juicy a stock is,and whoever tells you,that a stock is undervalued,fundamentally great,and the CEO is the brother-in-law,being a trend tech trader,will listen to all he's got to say,then pull out your charts,realise that maybe he is right,maybe he is wrong,but your charts tell you that this stock is not yet in an uptrend,and that is that.You DO NOT BUY,as you do not buy in a downtrend.

As for the 2nd part of your question.........yes,a risk that all traders take and may not exactly work out.Therefore the stop.However great the probability of success in any trade,we still have stops at important pivotal areas.We are only too happy with success,but if that is not to be,we do not mind the small losses either.

Another clarification,a stock put in lower pivot highs and lows.It is clearly in a downtrend.Then it put in an impressive rally from the bottom.Are we in an uptrend?NO,not yet at least.Then the stock retreats and puts in a higher pivot low as compared to the previous pivot.Now,looks more and more like a change in trend.Then it confirms the trend change by making a higher pivot high as well.The stock is now clearly in an uptrend.Now your brain says,BUY DECLINES.And true enough you get that decline.You bought in ......and horrors of horrors,the stock went on declining to lower pivot low than the previous low.Your stop at the level of the previous pivot is triggerred.You are out,and looking elsewhere for another trade.
A crack in the intradays to the downside does not qualify as a break in that trendline till we get a close below that trendline.
.So long we make higher pivot lows and highs we are looking good.A question on its uptrend and we are not wait for a confirmation of downtrend.If the stock makes new highs,and then goes sideways,and that all important previous pivot low is not taken out,we are still in the trade.But that previous pivot low being taken out is an indication of a change in the present uptrend,and although we do not have confirmation of downtrend yet,we are out and looking elsewhere for more uptrends to capitalise on.
If you've been playing the uptrendline all along,you are not about to tolerate any break in the uptrendlines.One crack and you are out........on the other hand,if you are willing to give it some room,wait for the break of the previous pivot low as that gives you a clearer idea of a change in trend.

Which one do you do?I personally would get out half my position on a trendline break,leaving my stops for the back half a bit below the previous pivot low.If taken out,I am out.

set up :THE BUY SET-UP

Okay,now that we know what an Uptrend is,and that come what may,we will stick to our rules,which is:First detect the change in trend which requires a higher pivot high and low,then once we are in an uptrend,we BUY DECLINES.

Now comes our next point of worry........yes we got our uptrend,and now the declines.But when do we buy?Do we buy on the first day?Is there anything else we are looking for before we come to that decision?

Have a look at the chart of EDUCOMP below.We have a decline after that big bar.Bearish candle No 1,we do nothing.We wait.Bearish candle No 2,we do nothing.Bearish candle no 3,things looking more and more juicy.Then we get that bullish candle.That first bullish candle is still making lower highs and lows,but is giving us an indication that bulls are gaining in strength.Now we are ready to strike,and yet,we do not move.We now look to buy,we do not buy as yet.We buy when the next candle takes out the previous candle's highs.

We are in the trade.Our stop is the low of that pivot ie 254-2(to give it some room)=252

In EDUCOMP,we are getting our next buy set up as of now.We have three bearish candles and then that bullish candle so far reflecting a change in sentiment and therefore a possible change in direction.And like before,a buy set up means we look to buy,we do not buy as yet.When the next candle takes out this week's high,then the trade is triggered.
Another thing that one has to keep watch for is the gradient of the pullback.Take a look at the chart of BEML.All are pullbacks before the stock moved on to new highs.But look at the angle of the present pullback.

ctually Pivot is widely used concept in day trading. It involves calculating the Pivot, Resistance level R1,R2 and Support Level S1,S2. It is different from what we are trying to do in our Expert Advisor

Pivots are points where the trend is changing. In our case what we are trying to do is identify the peaks and bottoms in the trend (or the Pivots). Based on these Pivots we are trying to identify starting of an intermediate UP TREND.

The idea is like this. When the Trend is up it make peaks are which are higher the previous ones. Also the bottoms / Troughs are higher than the previous ones. In other words the trend make Higher Highs (HH) and Higher Lows (HL).

In the same manner in a down Trend the peaks and troughs are Lower than the previous ones. That is the Trend makes Lower Highs (LH) and Lower Lows (LL).

So far so good .. How does this help?

Normally in after a Downtrend we get a series of LH and LL. Then the Trend may consolidate and an Up trend may start which should provide a series of HH and HL.
So the point when the trend makes HH after a LH provides an indication the Trend MAY change. It is an alert only and not an indication to Buy. The trend change has to be CONFIRMED with other factors like volume, Resistance etc.

The same approach can be used to locate Up Trend, which resumes after a brief consolidation.

What our Expert Advisor does is to marks the HH, HL, LH and LL. It also marks the Alert points. Of course it is not perfect, but found it useful in most cases. the last leg of the ZigZag Indicator is Dynamic which I had mentioned in one of the posts.

Also I had mentioned about the the percentage. I found 2% to be working well in most cases, 4% is better for some the large movement stocks and 5% seems to be okay for weekly charts.

In fact I was trying to make the expert in such a way that we can enter the percentage. It involved creating a custom ZigZag indicator with input function.

higher pivot low doesn't mean we are going to see new highs.It could just turn around and continue its downtrend.Therefore the importance of stops.

And yes,as we put trendlines+support/res to moving averages,and patterns,and afew indicators and volume,.........then we get to drop a few of those that you might have taken now.

But whatever you do,however much you learn,it's important to keep things as simple as possible.
Chart Patterns

Again and again,certain patterns seem to develop on our charts.And we realise that the probability of reversal or continuation is greater with certain patterns.Not saying that the reverse cannot take place.Anything is possible and therefore we have our stops...........but these patterns usually either reverse or continue trends.Knowing abt chart patterns is one more weapon in our arsenal.

Two types:

a)Reversal Patterns:These patterns reverse trends.Eg.Double Top,Double Bottom,Head and Shoulders,Cup n Handle.

b)Continuation patterns:These indicate a possble contination in trends. Eg.Triangles,Bull flag,Bear flag,Pennant

1.Double Top :This pattern can happen on any time frame.........this halts the uptrend and starts a downtrend in that stock or index.
-Also called as M Top,coz it resembles an "M".

-If double tops are bearish,triple tops are even more so.

-Volume is higher on the first peak,and lesser inthe 2nd peak,and starts picking up on breakdown from the 2nd peak.

-There has to be a distance between one top and the other to qualify as a Double Top.Needs at least 3 month difference if you are looking athe daily charts.

-Now take the trough between the two peaks.......breaking that level is confirmation of a change in trend to the downside.

==So,summarising,let us say we are looking at the daily charts of any stock.We need to have a top put in,let us say January,and then another top at the same area,let us say in April.The rally to the first top came in good volumes,and then a pullback on low volumes.The rally to the second top came in relatively low volumes and then the declines coming in relatively stronger volume.It may be a double top,but you cannot call it one till the trough between the two tops is taken out.Then we can call it a double top.Also called as M-TOP.

-How does knowing this help us in our trading?
We have a great uptrend on good volume and a pullback on lesser far so good.Now the 2nd peak formation starts to form with much lesser volume as compared to the 1st peak,and then a breakdown on high volume........this gives us an indication to exit our longs if we are short term players as trendlines get broken to the downside.But without confirmation,we are officially in nothing more than a sideways trend with possible fall downwards.Now the trough gets broken and usually the stock retraces back........We are now officially in a downtrend.The time to short has arrived.Short a half at the retracement,and short the other half below the low of the bar that closed below the trough line.
Target :The distance between the peak of the "M" to the trough of the "M"......add that to the low of the bar that broke the trough line.That's our target point.

2.Double Bottom:Same as above,it halts a downtrend,and starts an uptrend in that stock or index.
-also called as "W"bottom.


3. Head and Shoulders Pattern

---Bearish,reversal pattern signalling the end of the current uptrend.
---Basically looks like the silhouette of a human left shoulder,head and the right shoulder.

---Like the Double Top,strong volume push prices upwards forming the "left shoulder".The pullback is on lesser volume,then another strong rally on good volume,forming the "head"......but this time,the volume causing this rally although forming higher prices,is now on relatively lower volume as compared to the vol. in the rally causing the left the stock pulls back to the neckline,and starts rallying again to form the rt.shoulder,now volume is very noticeably lighter.

---The break of the neckline confirms the H & S pattern(Neckline is the line connecting the two troughs on either side of the head).Volume expansion is noticed as the pattern confirmation takes place.......and the stock or index is now in adown trend.(Reverse happens now......vol. expands on the down fall and decreases on a return move up).

Trading-Wise:ENTRY:The first down day below the neckline confirms the pattern.......short as the neckline breaks or enter short on a weak rally back to the area of the neckline.This line that was formerly strong support now acts as a stiff resistance.Short half on that return move,and the other half below the low of the confirmatory bar.
TARGET:First target would be.......calculate the difference from the head to neckline.Add that to the low of the bar that confirmed the pattern.
STOP:The high of the right shoulder.

One Important Condition:Once the neckline gets broken,expect a return move......but at all costs the price should not re-break the neckline upwards.If this happens,it is called a FAILED H&S PATTERN.Like a failed breakdown,this acts as a bear trap.....and is bullish.So get out if that neckline gets broken back upwards...

-Reverse of the above.
-reversal pattern that ends a downtrend.
-Tradewise,all reverse of above.

VOLUME and the H & S

Volume plays an important role in us calling a particular pattern a H&S.Let us go through the Volume bit.

When the left shoulder is made,in both the h&s and inverted h&s,expect strong volumes.When the head is made,it is on (usually) decreased volumes as compared to the left shoulder.But as Rahul pointed out a key difference,the rt shoulder on a h&s is on usually lower volumes.Volumes increase wnen necklines break,and patterns get confirmed.And as all breakdown patterns,a break below support is accompanied by strong vols.,and then the return rally to what is now resistance is on low volumes,followed by strong vols again,bringing the stk to newer lows.

But,in the Inverted H & S,once again,we have strong volumes in the forming of the lt shoulder.Again,we have decreased volumes in the forming of the Head.But,here,we have increased volumes taking prices back to the neckline,then a dip in volume as the stk tries to make the rt shoulder,and then a burst in volume taking it through the neckline.

Summarising,H&S=Lt shoulder-Strong vols
Head-Lighter volumes
Rt shoulder-Same as or lighter than the head.
*Increase in volumes as neckline breaks to the downside.

Inverted H&S=Lt shoulder-Strong vols
Head-Lighter vols
*Increase in volumes,sometimes higher than before the formation of lt shdr
Rt shoulder-Dip in vols from the rally
*Once again,an increase in volumes breaking the stk out over the neckline.

An important thing to remember is that markets or stocks do not need strong volumes for the breakdown from the h&s as it basically falls with its own weight,but you need strong volumes for a breakout from an Inverted h&s.


-also a reversal pattern,but more obvious at the bottom rather than at the top.
-basically looks like a coffee cup with a handle.
-There is a basing stage,accumulation phase(cup),then a breakout,followed by a pullback,forming what looks like a handle.
-Breaking out of the top of the cup is confirmation of a change in trend.

-Few criteria:The cup should be more rounded than a "V".
The handle should be in the top part of the cup,not too deep.
Cup pattern should take at least 7weeks to form.
Volumes should contract in the handle and expand on b/out.

-From a trade perspective,the buy is at the area where the top of the cup is taken out.Stop:At the low of the handle.Target:Measure the distance to the low of the cup.Add that to the breakout area.

-Occurs at the top,rest all reverse of the above.


-When the trendlines,from left to right,'s called a triangle.When the trendlines start from a point and diverge as we go from left to right of the chart,that's called a Broadening Formation.
-One more interesting feature:In a triangle,volume decreases within the pattern.In a Broadening Formation,volume expands along with wider price swings.
-This is a BEARISH pattern.
-Due to its divergence,the stock makes a high and a low,then high2 will take out previous pivot high,then prices fall to low2,which takes out the previous pivot low.Then prices move upwards to form high3,which is higher than high2 or high1(not necessary,can even be same height at times).
-Three successive higher peaks,and two declining lower troughs complete this pattern.Confirmation is when the low 2 is taken out as prices start making new lows.

-When the trendlines,from left to right,'s called a triangle.When the trendlines start from a point and diverge as we go from left to right of the chart,that's called a Broadening Formation.
-One more interesting feature:In a triangle,volume decreases within the pattern.In a Broadening Formation,volume expands along with wider price swings.
-This is a BEARISH pattern.
-Due to its divergence,the stock makes a high and a low,then high2 will take out previous pivot high,then prices fall to low2,which takes out the previous pivot low.Then prices move upwards to form high3,which is higher than high2 or high1(not necessary,can even be same height at times).
-Three successive higher peaks,and two declining lower troughs complete this pattern.Confirmation is when the low 2 is taken out as prices start making new lows.
We have seen some basics on Trendlines,Supports and Resistance.We realise that a break in an Uptrendline does not mean we are in a downtrend.A break in that Uptrendline merely means that the ongoing uptrend is in question.Breaking a previous pivot low,and then we say we are in a downtrend.

We have seen the basic Buy Setup,which is nothing so far.There are a few things to add to that as we go ahead.

The RISING WEDGE is a reversal pattern,as always the word "usually" comes into play.

Nice one that took place in ARVIND MILLS......see the chart below.Self explanatory.We got higher pivot lows as ARV MILLS made new highs through 2003 and 2004.But newer highs in November 2004 and later was accompanied by lower volumes.This rising wedge took nearly a year in the making......The week ending Oct 14th ,and we got our breakdown bar(indicated in the chart with a red arrow).

Look to short below the breakdown bar with your stops at where the green arrow is placed.Once it cracks,keep moving the stop down to the previous pivot high,so on so forth.

Now we have started Chart the question that may arise is : Do we really need to know this at all?Can't we make beautiful profits even without knowing zilch on Chart Patterns?Well,the answer is a Yes and a No on both.

Our motive as traders trading the trend is to make profits as long as that trend is on,and to detect a change in trend and exit when that is seen.We therefore need not have the art of prediction.We identify a change in trend,latch on to that stk with a good entry,and hold till that trend changes.We therefore follow trends,and not predict them.

So,although you have many books that will tell you on what a first target is(no harm in getting out as prescribed),but the trader trading trends stays in as long as the trend is up unless something else is the bother.

Most importantly abt knowing Chart Patterns,it gives one an idea as to what the general population of tech guys are thinking.We have an ascending triangle.So everyone is expecting a breakout.Well,so are we.But if we get a breakdown,we take our stops and reverse strategy fast leaving those who don't do it in a Pray-Wish-Hope Mode and finally selling off at much lower prices fuelling the move down further putting a huge smile on our faces.

So know the patterns,so that we can all see what everyone is looking at.So that we can trade along with everyone else,or against them.But your basics are the most important.Trade the Trend and out when previous Pivots crack.
When you get out of a trade is entirely up to you.......the fact that this stock put in an accelerated up move,take out your trendlines and draw it.Why?Because we don't want to give back too much when the pullback starts.

We therefore already have a bearish divergences on the RSI and TRIX.What do we do?We get cautious,we get our hands ready on the trigger,but we DO NOT do anything.We wait,and wait.....till we get a break in trendline.Then,we are out.We are always READY to pull the trigger,the Bearish divergences tellus GET SET,and the trendline break tells us GO!!

Now,if your mindset is very long term,and these pullbacks mean nothing to you,then take some profits off the table in a trendline break.But hold the rest till we get a break in the previous pivot low on the weekly charts ie 720.If it does not break 720,the uptrend is still on and you will see higher highs and lows.

So,that decision depends on the type of trader that you are.
even for short term trading,a weekly chart is important.Let us say you intend to get in to a position as a swing trade,maybe 5-7 days.First look at theweekly charts,it MUST be in an uptrend.Now that we have a weekly that is in an uptrend,we now intend to buy.A weekly in a downtrend,we DO NOT buy however great looking the daily chart is,however great the news is,we DO NOT buy.

Have a look at the chart of IND SWIFT below.We have a weekly in a dntrend,making lower pivot highs and lows,DO NOT BUY.Buy only when the weekly gives you a clear cut change in trend,and then buy declines using the daily charts.

Basically,in a nutshell,for starters,keep away from trades where the daily is setting up,and the weekly is still in a dntrend.The desire to predict and get in at lower prices will cost you dear.Get into another stock where we have a weekly in an uptrend,and then buy declines.
...............these basics are enough to give you sweet profits.

But learn the patterns as well.......learn them because everyone else is looking at them,and to know the strengths and weaknesses of your rivals is going to be important for you.

Now let us say that you do not want to have anything to do with problems with that as well.Example,we have a pullback that is overdone and comes to support and then rallies off to the same previous high and then back to the same level of support.The conventional tech analyst calls it a Double Top,but you are least concerned.You instead draw your resistance and support lines........and wait.A breakout over resistance and you will be in it LONG,a breakdown below support and you will be looking to SHORT.

So,are you really bothered about a Double Top or Bottom?Not required if you are a trend trader.

Another chart pattern,we have a huge move up on high volumes and then a pullback to an area of support,and then a rally on decreasing volumes to a new high,and then back to the support area,and another rally of lesser vols and then back to that area of support again.

What would you do?You would draw your lines of support,a breakdown from there,and you are in SHORT.Do you need to know that this was actually a HEAD AND SHOULDERS pattern?Obviously not.You,being a trend trader,if you were in long would have been unhappy that new highs were coming in decreasing vols and then the 2nd pullback to support would have already put the entire uptrend in question,and will be looking to exit......So therefore,can you as a trend trader manage to make huge profits in the markets,without knowing abt the Head and Shoulders pattern?Surely.........Just drawing trendlines,Supports and Resistances would do the trick.

That is as far as ReversalPatterns go.........but you may need to know something abt the continuation patterns though.Why?It gives you an idea that the trend that you are in so far is doing great........You got a nice move up,and then sideways pattern.If you didn't know that it was an ascending triangle in progress,you could still draw a resistance line and buy the breakout.But knowing that an ascending triangle USUALLY is a continuation pattern before a strong move up,gives one the courage to hold on to that trade.

In summary,is learning chart patterns vital for the survival of a trend trader?No,not at all.........can come in useful,but not vital.........if you feel you can manage without it in your style of trading,by all means do so.No compromises on the Basics we learnt in the beginning.But on Chart Patterns,your call.Skip it if you don't need it.
a great Q : have been using some of the indicators.. as you have mentioned but one thing comes worth noting is that if we are trading daily charts then.. we have to keep a trac of what's the stock doing on the weekly charts(the higher time frame model) and suppose the daily chart is in uptrend(in respect to higher peaks and troughs).. and then crosses below.. its recent pivot low.. and makes a lower pivot high.. it can be said the stock has turned its trend(on the daily time frame).. now at the same time.. the weekly indicator.. does not show the same weekness.. coz any change in trend.. will first b visible on daily charts.. as in this case n then on weekly charts.. now my question is how can we distinguish whether it is just a temperory pulldown.. on weekly charts or start of a trend reversal on a weekly chart..(from bullish to brearish).. as the first signs of weakness can only b visible on the smaller time frame then go on to the bigger ones..and is there any way we can find out that this.. reversal on smaller time frame is indeed a trend reversal on the bigger one.
Ans:simply,we don't........we really cannot say for sure that this correction is going to be that one that will see a correction in the weekly charts as well.

But we have some ways to anticipate it.........few reasons to get nervous on the NIFTY over the last few weeks.We have a way overbought Stochastics ,the last time we saw Oversold was in October last year.We have a negative divergence on the TRIX and the RSI.We know that an important correction is coming,but as trend followers should,we do NOT predict a move.......opening the weekly charts,we have a way overbought Stochs and negative divergence on the RSI.Again,we know that a correction is in the offing,but we ride the trend till we see a break in it.So far,no break,we are fine.......

Now,we get this important break and a finish at the end of the day (monday)below our all important trendline.This intermediate uptrend that we have been playing from October till now is over.Nothing to do with long time frames,they are still very bullish.

As far as we are concerned,we are out of all longs,and now look to short every rally till once again things change to the up.The rally yesterday means nothing,except some intraday gains,and then today another big fall of 826pts.Looking at the weekly charts,nothing but a pullback.....but trendlines and a few indicators and a topping tail on the weekly gets the intermediate frame trader to get out early.

And as trend followers,we are not concerned to get out at an absolute top or bottom.We just want to get as much meat as possible in the middle.

Basically,important to integrate both the time will all come as you pour over thousands of charts.
Q2:1) Is it necessary that any breakout above or below a trendline should be accompanied with good volumes.
I am looking into charts of various companies but i am unable to find any charts which show an uptrend. But today i found one "Sanghvi Movers".
this stock has broken its uptrendline and is again trying to reenter the uptrendline. Please see the chart. If this stock rises above the trendline, should this be accompanied by heavy volumes. What if it doesnt??Should that be regarded as a false breakout. Is there any way by which i can tell whether a breakout is false or not.
Yes,a breakout needs high volumes to sustain it,else as you correctly pointed out,it will end up as a false b/o.But a breakdown can happen without good volumes as markets fall with their own weights.

SANGHVI MOVERS :Not really a good example to study on due to its very low volumes.But in general,yes,that trendline(up) once cracked,that very trendline that was previously support now becomes resistance.And like all resistance we need the breakout over resistance accompanied by good vols.
Q3 :Why? is there a reason a trend line acts as a support( what is the underlying logic behind it) or cause we see it in so many charts we take the number of repitations as a proof and follow it.

- Another thing i noticed was that the price was always bouncing back on intermediate trend line( acting as support) and the short trend line went above the price pattern and number of time acted as the resistance level. Is this also common to see.
It could be as simple as fear and greed.Countries may be different,the year may be different,but human emotions don't change much,I guess.And it gets reflected on our charts.

A chart is never the mapping of what that particular company is about,but of the emotions of hope and expectations ,fear and greed,of the investors in that company.The chart tells us of human emotions,and therefore,as astute traders,we buy into fear and sell into greed,and enjoy the profits made in the difference.

And therefore trendlines,patterns and all the paraphrenalia is learnt to come to that very important assess when fear has truly set in,and is time to buy once we get a signal,or when greed has got a bit out of whack,and is probably time to exit.

And ,Yes,to the second doubt.
Now booking profit is up to u. If u are a trend follower you would book part profits when trend line is violated. then u would exit the rest when the previous pivot low is also taken as that would mean uptrend is in question. Remember trend is valid till the proof of evidence proves otherwise(as Martin pring says)

your stop loss should not be below as once the price moves so much above you should have had trailing stop losses. and in any case if it was below then also if u are a trend follower you should exit by now.

Now candlestick would be a different understanding. it depends where the small black candle has formed. Has it formed within the body of the previous white candle. Above it. Below it. If it has formed within the body then it could be a Harami pattern. above would be a evening star. all these need confirmation the next day.

Also, a confirmation just shows that current trend has ended. It does not tell us if it will reverse, it could move sideways. It might be a small correction a large one. Magnitude cannot be judged. Hence, candlesticks are more beneficial if used with other indicators. A confirmation with trend line being violated, or any other indicator turning negative is more useful. Though u can use it individually too but a confirmation is a must.


Well-Known Member
2nd post from Saint on TA
n an intermediate uptrend,one looks at weekly charts stalking for an entry into the particular stock.We have that pullback to support and a higher pivot low on the daily.We move to enter with a stop below the pivot low made on April 26th.

And we would get stopped out on May 22nd as in most of the counters held on that day.

As in any trend,a trend is not broken with a pullback.And as in all intermediate uptrends,we buy that pullback.Now that it went on to make a lower pivot high and confirming it with a lower pivot low,We would say that we are in an intermediate dntrend.

In hindsight,in retrospect,that trade was too early.......but hindsight and retrospect being key words.As we wouldn't have had that information then,we buy thinking that we're headed to new highs,with our stops in place.

EDUCOMP is now in an intermed downtrend,but the gradient of its downtrend makes it attractive when things go up again.So,it's one for your watchlist.


As per time frames,we can classify Trends into:


Every short term trend has within it one to several intraday uptrends and downtrends.Every intermediate trend has within it one to several short term uptrends and downtrends.Every primary trend has within it one to several intermediate uptrends and downtrends.So too,every secular trend has within it one to several primary uptrends and downtrends.

What we mean by Bull market is a market ina primary uptrend.What we mean by a Bear Market is a market in a primary dntrend.

A SECULAR BULL MARKET has primary uptrends(Bull mkts)greater in magnitude and duration as compared to its primary dntrends(Bear mkts).Expect the bull markets to unfold longer than the bear markets in a secular bull move.

Vice versa for the SECULAR BEAR MKT.A secular bear market has primary dntrends greater in magnitude and duration as compared to its primary uptrends.Expect the bear markets to take longer to unfold than the bull markets in a secular bear move.

A Secular trend usually lasts about 10-25 years.

As it stands now,this dntrend is nothing but an intermediate dntrend.If this rally has legs and we go on to make new highs,that confirms that.If on the other hand,if this rally is unable to go to new highs thereby forming a lower pivot high,we are in danger of a primary dntrend(bear market).A lower pivot high is only a danger of a possible bear.Confirmation of the bear market comes if the fall takes out the lows of 8799.


The Primary Trends are what we in common parlance state as "Bull market" or "Bear Market".Just as a Secular Uptrend is made up of several primary uptrends and downtrends,the Primary Uptrend is made up of several intermediate uptrends and downtrends.Vice versa for the Primary Downtrend.

As we had discussed before,a Primary Uptrend is of greater magnitude and duration if in the broader picture,we are also in a Secular Uptrend.A Primary Dntrend would be of shorter magnitude and duration if it happens in a Secular Uptrend.

So too,in a Secular Downtrend,the Primary Dntrends are of greater magnitude and duration as compared to the Primary Uptrends.

Just take a look at the two charts of the Nikkei and Sensex in the previous page to get things clear.

A Primary Trend lasts anywhere between 9mths and 2 1/2 yrs.


So too, an intermediate uptrend is made up of several short term trends.Again,if we are in a Primary Uptrend,the Intermediate Uptrends are of greater magnitude and duration as compared to the Intermediate Dntrends.

Vice versa in a Primary Dntrend.

An intermediate trend can last anywhere between 6weeks to 9mths.

..we now know what a secular,primary trends and intermed trends are.We know that each larger time frame has within it smaller time frames of trends.Now,to your question.........we have an intermed uptrend,followed by an intermed downtrend,followed by an intermed uptrend,so on so forth.

Few rules:
1)After an intermediate uptrend,the correction should be only 33-66% of that cycle(One intermed cycle=one intermed uptrend and one intermed dntrend).
--Greater the retracement,the increased likelihood that the primary trend has reversed to the down.

2)Substantial increase in volume during the price decline

The above are the basics......if you are playing with indicators as well,then all the negative divergences,moving avg crossovers puts you on Caution Mode.

Basically,this correction from the May top is too deep to be wished away as yet another intermediate dntrend.Calling it a primary downtrend as markets plunged on May22 is being a bit premature.An intermediate dntrend is one till it isn't.But the next wave drop to June 14th lows takes it down to more than 80% correction of the previous intermed cycle.

My personal opinion is that this no more looks like an intermediate dntrend in a primary uptrend.I feel we are starting off the first leg of a Primary Dntrend.We are still very much in a Secular Bull Market though..........

But as always,we can confirm that only once the market drops below 2595.We are at that spot of bother on the charts where the bullish orientated trader sees things going to new highs,and the bearish ones seeing new lows.It would be wrong to say that this IS a Primary Dntrend for sure till confirmation.To say that this is nothing but an intermed dntrend would be dangerous and wrong.........that statement in red should be modified to "This dntrend is nothing but an intermediate dntrend till we get a confirmation that this is a primary dntrend.But the depth of this retracement is giving rise to the possibility that it's looking more and more like the first leg of a Primary Dntrend"
Q & A : f a Security in down trend, but Momentum indicatiors (like Stochastic, RSI) generate buy signal in some interval of time due to oversold position. I want your guidance on following points:

1) To determine the right time to buy.
2) To find out down trend is over or price may be reverse
3) Suggest an indicator to overcome this problem


Hi Moneypick,
Depends on the timeframe of the downtrend...........if we are talking daily charts and the stock is in a downtrend,meaning it is making lower pivot highs and lows,and momentum indicators on that daily charts tell you oversold,it NEVER is the time to buy........The right time to buy would be if we make a higher pivot low and you get confirmation once a previous pivot high is taken out.So,the important thing is always PRICE,PRICE and PRICE.

Question 2 is answered by the answer to question 1 above.

An indicator to overcome this problem?None................stay with price,pivots and trends.An indicator may at best confirm to you what you should already be knowing.For eg.We have a strong uptrend,indicatorrs tell us that we are overbought,what do we do?Nothing .We hold..........The uptrend gets stronger and stronger.The indicators continue to be overbought.We Hold.Now we start breaking previous pivots,we sell,whatever the indicators tell us.

My suggestion:Learn Trends,Pivots and Patterns.........then go with the flow of the trend.But do learn abt the various indicators.Because they may come in handy in shorter time frames,and for the pure fun of it.


We have,at various times and places during this thread,done the below:

a.Trends-Secular,Primary,Intermediate,Short Term Trend

Knowing just these two tell us where we are on that particular chart.As we had discussed many a time before,first we need to know that a secular uptrend is made up of several primary uptrends and downtrends.Each primary uptrend is made up of several intermediate uptrends and downtrends.And each intermed uptrend is made up of several to many short term uptrends and downtrends.Of course,each short term uptrend is made up of several to many intraday uptrends and downtrends.

An uptrend is made up of higher pivot highs and lows,each pullback within that uptrend is called a decline.A downtrend is made up of lower pivot highs and lows.A move up within a downtrend is called a rally.

Why do we know these things?As we had discussed before we need to know that a chart is in an uptrend,because then and only then are we interested in going long.We buy in an uptrend.We could buy the breakout from a sideways consolidation phase,we could buy the declines within an uptrend........but in an uptrend,in anticipation of a certain level,we NEVER NEVER SHORT.The mind must be educated to understand that one does not short in an uptrend.

We short in a downtrend(plz,I know that certain things are not possible in the Indian mkts,obviously one can do only what one is allowed to do_One could short using derivatives,or stay out and wait for an uptrend).In a downtrend,we get a sideways consolidation phase,we short the breakdown.We could also short a rally within that downtrend.When we get a rally in a downtrend,we could capitalise on that move on a smaller time frame by going long.But in that larger time frame,we are looking to SHORT.We are not looking to guess bottoms,we are not looking to anticipate certain areas from where we are going to bounce upwards,we SHORT every rally ina downtrend till that downtrend no more is one and we get a Trend Reversal to the Upside.

Do we only get out of a long position once pivots are broken and the downtrend is confirmed?Nope...........we draw trendlines using the semi-log.A trendline break and we are out half,and a pivot crack,and we are out totally.How to draw the various trendlines has been discussed in various posts in this thread,please do go over it.

d.Chart Patterns:

Alright,we know about trendlines,pivots and trends,is that not enough to know?Isn't this knowledge enough to plunder profits from this markets?YES,and a vehement YES..............But learning some chart patterns can do no harm.In fact,a continuation pattern gives us a good place of entry,and gives us a potential target area.So too with a Reversal pattern,we get an entry and a potential target area.So,do we need to learn Chart Patterns?Well,many just follow pivots and trends,and do not require Chart Patterns,that's basically your call to make.

Our objective as a trend trader is to latch on to a Trend Reversal,and use our knowledge to stay with the trend as much as possible.But the question that hits our head is:Right,we know all this stuff,and now we know that we will buy half on a higher pivot low,and add the other half over the previous pivot high.........but what about stops?Where do we take our profits?Do we take profits at all?Then,of course,how many shares do we buy?
tops :

Whenever there is a trade that we get into,we put in a stop.The stop is that area where we say,"Enough is enough!"The stop is not put in after one has lost 80% of our portfolio and one has given up with life.I see it quite often here where one gets in on a tip because someone says so,and then take a huge loss and then say that the trade was stopped...........A stop is a predetermined level,put in BEFORE the trade is got into,the word BEFORE being an important word.I hope I do not sound lunatic when I say this:

BEFORE the trade,BEFORE the trade,BEFORE the trade,BEFORE the trade,BEFORE..............

That stop that one has determined BEFORE the trade can be a mental stop.A mental stop is one that is not exactly broadcasted to the broker,'s a technical level the break of which one does not stay in the trade any longer.Now,the irony of this mental stop is this:please DO NOT keep the mental stop in the mind.WRITE DOWN the stop.........If one entered SATYAM at 650,with a stop at 620,and a potential target of 750,write it down.

SATYAM,entry-650,stop-620,tgt-750,rew:risk=3.33:1,etc etc

If SATYAM hits 620,that is it,one is out of that trade.One either looks elsewhere,or plans a reentry into Satyam,.........but what one never,ever,ever,ever,ever,ever,ever does is to let the stops get blown through,then hold it,pray to God,run to the nearest temple,church or mosque,pray even harder,and then try to strike a bargain with God if HE manages to pull the stock back up,beat the chest,shout at one's wife,have sleepless nights,all the while allowing it to slide,all because one wants the stock to get back to breakeven.

Trading is a profession.It's a business.It is not a place where one hopes to strike lucky,you could ,maybe once,maybe twice.......but the person who does not have a strategy ,a plan ,will in the long run come to ruin.As the famous saying goes,"Plan your Trades and Trade your Plan."

A predetermined written down stop is vital for long term success,it is vital for our mental balance,and only a disciplined trader adhering to his/her plan can see the multiplication of wealth,and a regular flow of profits.

Once again,to re-stress......a stop is planned and written down BEFORE the trade!


As described many times,this is the stop that we put in before we even put in that trade.This stop can be placed with your broker if in intradays,else,a written down exact point after which no more nonsense is going to be taken from this trade.


As the stock moves higher,we use trail stops.Again,there is software that does it,of which I have no idea.There are very many methods that does it using pivots,or moving averages,or two-three previous bars break method,etc
Whatever the method used,the most important point is that once the trade moves in the direction required,the stop has to move up to breakeven first,and then upwards,till stopped.


When the trade does not go your direction in that specified time,and money could be deployed elsewhere,and the initial stop is also not taken out,one employs the time stop or boredom stop.

So,that covers that.............the moment we get into a trade,and the trade never sees green,and hits our INITIAL stop,that's it.We are stopped out.The trade goes in our direction.We apply TRAIL stops.After getting into a trade,and nothing exactly happens,and that wasn't part of our strategy,then we could employ a TIME stop.

Whether we take a TIME stop or not is our call to make...........but no compromises if the INITIAL stop is hit.

How to exit a successful trade!

Do you stay with your profitable trades as long as possible because the trend is likely to continue and make your profits even larger?

This is easy to understand but not so easy to do when real money is involved. The difficulty is that although your profit may become much larger if you stay with a trade, it may also decrease and even disappear. Human nature is such that it values a sure profit much more highly than the probability of a much higher profit. Thus, traders are inclined to take their profits too soon. This can be fatal to long-term success because big profits are necessary to overcome the inevitable collection of small losses.

There is a good way to let profits run while still guarding against the possibility that prices will turn around and take away much of your accumulated profits before the trend actually reverses. It is called a trailing stop. You include in your plan a method for moving an exit point along some distance behind your trade. As long as the trend keeps moving in your favor, you stay in the trade. If the market reverses direction by the amount of your trailing stop, you exit the trade at that point. You would also offset your trade and reverse position if the trend reversed.

One way to set a trailing stop is to protect a certain percentage of the accumulated profit. That will always insure that you keep some profit on a good trade.


Basically,we use money management rules to restrict how much the market can take away from us.Certain rules that we follow with discipline.Rules that are written and implemented trade after trade,again and again.Rules that help us to stay with the trend and to let profits run as long as possible.Rules that trigger off small losses as compared to the big profits.

Like a warrior,this is the Code that a trader swears by,and adheres to,come what may.

If his stop is triggerred,he is out,he does not sit there reasoning that the economy is growing 15%,and the fundamentals of this company is great,and that it is expecting good earnings............If the stop is hit,that's it.He/She's out of that trade.All thought therefore goes into the trade BEFORE the trade.No more thoughts after the trade has been set in motion.

The mind is set into "NOW" mode,no more planning ,no more thinking.When the stop is hit,the trader is out,...........and that's that!

But,there is more to money management other than stops........stops is an aspect of it.But there is more.....

But before getting into it,just noticed that there always is this great amount of blabber about the number of wins a trader has had,etc etc...............So before getting into things,felt that we all should realise one thing.We are in this business to make profits,we are NOT in this business to can have a Batting Avg of 95% and lose out when you look at profits and losses.You can have a Batting Avg of 30% and come out with stupendous profits by the end of the month.

How is that possible?Well,presume you make an average of Rs200 per trade for 19 trades,and lose Rs5000 in the 20th trade,well,you are sitting pretty with a 95%batting avg and a loss at the end of the month.

Presuming that you have made losses in 14 trades,an average of Rs 400 per trade,and we made Rs10,000 in the other 6 trades,well,we are sitting with a profit at the end of the month although we have been wrong 70% of the time.

So,it's not about about the number of wins that one makes,it's all about making profits............and that verily is the heart and core of money management!

We look at a trade,yummy,yummy trade..........a beautiful clean sideways pattern just itching to breakout.Our plan is to buy the breakout and ride the trend ,trail stopping upwards at every pivot low.Cool.So far so good.We now need to ascertain how many shares we plan to buy.For example,the stop is Rs20 away from our entry point.Right,do we buy 10 shares(which means we lose Rs 200 if stopped),or do we buy a 100 shares(which means we lose Rs 2000 if stopped),or a 1000 shares(which means we lose Rs 20000 if stopped)?

The amount of money lost if stopped is the risk on this trade.Don't let it get past 2% of your equity.Which means,first calculation is:How much Capital do I have in my trading Account?(trad acct only,not the worth of your house and car and jewellery all put together).

Let us say that I have 10 lakhs in my trading account,that means the maximum risk that I can take on any single trade is :2% of 10 lakhs=20,000.

Which is to say that if I enter into a trade,and the trade goes against me,I will lose Rs20000.

So whether you paid 2.5 lakhs for that stock or not,you are not risking 2.5 lakhs,but Rs20000,as that is where your stop is.

Now must it definitely be 2% of the capital...........not necessarily.Can be anywhere between 0.5-2%,but no more than that.I personally use 0.75% of my capital as a stop loss,but that is something you have to tweak to your comfort levels.But,to stress again,no more than 2%!

So,therefore,first I look at my trading capital at the end of the month.I then assess how much my risk would be the next month.For example,let us say I have 10 lakhs at the end of July.Let us say I take 1% loss in each trade.Therefore for the month of August,I would be risking Rs10,000 per trade(to reiterate,that means the amount lost if stopped out).

Now I have my ups and downs in August,and landed up in August with an equity of 10.5 lakhs,now my risk in the month of September would be 1% of 10.5lakhs=10,500 per trade.

So too,if my equity had dropped that month to 9.5lakhs,then my risk of 1% for the following month would be 9,500 per on so forth!!

Right,I now know my trading capital,the amount of percentage risk that I am willing to take,and the amount of money risked for the following month at the end of each how do I calculate share size:

Share Size=(% risk xtrading capital) divided by (entry-predetermined stoploss)

So,therefore,we look at our charts,we get our entry point let us say 200,and our stop loss is at 175.Now presuming our capital is 10lakhs,and our percentage risk per trade is 1%.

Therefore,Share Size=(1% of 10lakhs)divided by (200-175)
=10,000 divided by 25

Therefore in the above example we would buy 400 shares with an entry at 200 with a predetermined stop loss at 175 .The max.we should lose in this trade if stopped would be Rs10,000/=

The 2% rule for assessing position sizing is vital,but there is more to be done.

Now we come to another major part of money management that must be looked into...........just as how crucial having a predetermined stop is and proper share sizing,this part is vital for the survival of our trading account and therefore our survival as traders.

If we were to risk 2% per trade and we get into 20 stocks,a move down would trigger all the 20 stops,........we have put proper stops,great.................we have taken small losses,great.....and yet,our account is down 40%.If our trading capital was 10lakhs,well 4 lakhs has vanished into thin air!!This is unacceptable........and unpardonable as far as the trader is concerned.

We therefore have another set of percentages in place so that we are protected from market what that percentage is basically comes back to the individual trader and his comfort levels.There are many absolute truths in the world of trading,but no absolute methods,all relative to what our psyche allows us.

For example,I believe that a 2% risk is just too much to bear,I am on the other hand comfortable with a risk of there are as many methods as there are traders.Basically tweak to your individual comfort levels.

Now what are these percentage rules of max risk that I am speaking of?

1.In an intraday position,take no more total risk than 4% in that day.Which means that I would take no more than 4 trades at the same time.Why?Because I am risking 1% per trade,and if I take more than 4 trades,I would be risking more than 4% in that day.

Therefore,I enter into TISCO with my stop loss at the previous pivot low at a risk of 1%.Then,I see a great setup in RIL,same thing as above.Now I see a great trade in ITC ,I grabbed that as well.Then a beauty in ACC.Now I have 4 trades running simultaneously,and I risking 4% as of now.I then see a great play in SBI......But my rules prevent me from taking that 5th trade,however juicy that set up.

Now I get a great move in TISCO and ACC,and that gives me the opportunity to raise my stops in the two to breakeven.Now I can take SBI if it still looks great........if it has already run off,well,nothing can be done about it.Missed money better than lost money!!

Also make sure you have your max percent loss in a week after which you wouldn't trade any more,and your max percent loss in a month after which you are no more than a bystander.If I lose 10%,that 's it....I am out for the month.Many put that figure to 6%,or 8%.........once again,your comfort levels.

2.In a swing position that may last up to 4-5 days,once again similar rules come into play.I basically take a max risk of why these figures,well,basically no real reason except years of toying around and tweaking it to comfort levels.As said before you will have to do the same.

So,here again,a risk of 1% per trade allows me to take 6 swings that week.Every time I am able to raise my stop to break even,I am allowed another trade.Else that's that.......

3.In a position trade,that can take up to weeks to months,I tend to take a max risk of 12%,meaning that if you are taking a 1%risk per trade,max number of stocks that can be got into is 12.And then,once you get to breakeven stop in a trade,you are allowed to get into a new position,or add to the previous position.

If you are the type that can take on a bigger amount of risk,fine........but total portfolio risk no greater than 20%.Greater than that,think you would be fishing for trouble.So careful on that one.

It is very important that these rules are in place...........very,very important!!The percentages you as the trader will have to work out.But you MUST have a stop,you MUST adhere to them,you MUST have a risk per trade and share size accordingly,and you MUST have a max risk that you are willing to take,after which you are going to pull the plugs.And you MUST have a point where a bad day or month is accepted as it is ........and all trading comes to an end.If you are out on the 15th day of the month,that does not mean that you sleep and watch TV for the rest of the month.......You come to work as in every other day,you paper trade,and you do it till the end of the month.Your first trade would be the first day of next month.

Discipline is discipline,and rules are rules............These are like commandments in the Holy Scriptures of the Trader.Not observing them is sacrilege,a blasphemy.They,once drawn up,MUST be followed at all cost.
Now that the market is in a short term downtrend and stock tip threads have mostly disappeared I think it is a good time to discuss what is really important in trading - Position Sizing / Money Management Strategies. I Would like to hear/discuss the different sorts of position sizing strategies experienced traders here use for stock trading.

For new traders:

"Position Sizing" is the way you determine the number of shares of a stock you would buy when you decide to initiate a trade (and also how many shares you would continue to hold throughout the duration of the trade). It also decides how much equity will be allocated to a single position. Position Sizing is used by everyone even though they might not think about it (usually traders just buy 100 or 50 shares or any number that they are comfortable with or can afford). But good position sizing is what makes or breaks a trader, it is the strategy that keeps a trader in the business longer. It turns a mediocre trading system into an excellent one (but won't help a losing system).

The most popular/recommended position sizing strategy is to risk not more than 2% on any single position.

New traders - make sure you go thru' previous threads in "Risk & Money Management" section of this forum, there are good posts on risk & money mgmt by Traderji & CreditViolet.

Books on position sizing:

Trade Your Way To Financial Freedom by Dr. Van Tharp
Portfolio Management Formulas by Ralph Vince
The Mathematics of Money Management by Ralph Vince
The Trading Game by Ryan Jones

My Strategy:

I use a combination of percent risk & percent volatility strategy. Here are the rules I use:

- My main aim is to ensure that I stay in the business longer so my trading system gets a fair chance to realise its potential.
- No position should be greater than 10% of my total trading equity
- I don't risk more than 1% of my total trading equity on any single position
- I make sure my positions are "volatility balanced". In other words I make sure that all my positions fluctuate approximately the same each day in the market. I do this using Average True Range of the stock.


Say I am planning to buy HINDLEVER, here is what I would do to determine the number of shares I would buy:

Total Equity : 100,000.00
Max Equity for each trade : 10,000.00 (10% of total equity)
Risk Amount : 1,000.00 (1% of total equity)
Volatility Amount : 500.00 (0.5% of total equity. This is the fluctuation level per day per position)

Average True Range (10 Day Avg) : 5.63
Last Market Closing Price : 173.20 (For simplicity assume this is the entry price)
Stop Loss at : 163.40 (Will get out just below previous reaction low)

Number of shares to buy (percent risk model) = Risk Amount / (Entry Price - Stop Loss Price)
Number of shares to buy (percent risk model) = 1000 / (173.20 - 163.40)
Number of shares to buy (percent risk model) = 102 Shares

Number of shares to buy (percent volatility model) = Volatility Amount / Average True Range (10 Day)
Number of shares to buy (percent volatility model) = 500 / 5.63
Number of shares to buy (percent volatility model) = 88 shares

Number of shares to buy (based on Max Equity for each trade) = Max Equity for each trade / Last Market Closing Price
Number of shares to buy (based on Max Equity for each trade) = 10000 / 173.20
Number of shares to buy (based on Max Equity for each trade) = 57 shares

I will buy minimum number of shares determined from the above three models. So in the above case I would buy 57 shares.

So here is what I basically do. I am still trying to fine tune these things. The above parameters used are what I am currently using but I am in the process of doing trial & error to come up with parameters that fit me well. I would now like to hear what the experienced traders here do.

a successful trader who trades the ongoing trend of the market is he who is able to stick with the present moment,the "now" really does not matter what our intellect tells us where the market is going or not going,the fact is that it really does not matter what we think about the market........The reality is the market move in itself.

Our job as a trader trading the trends of the market is merely to latch on to a trend and stay out of the forecasting business.The problem with this latching on to the trend business is that we don't get to go to a party and show off all our stock knowledge,fundamental/technical skills........In this business,we practically shut our brains and follow the trend.So no glitz or glamour in this,.............nothing to really show off.But you do have banking personnel running after you with ideas on where you should put your money that is growing slowly and steadily in your account!

We therefore use price as everything,now some will tell you of the importance of Price and Time, maintained before,Trading Truth has as many paths to it as there are traders,and to each his own.

Now using price,trendlines to give us warning signals,and pivots that tell us to jump ship when that trend of that time frame is over,and some traditional tech chart patterns,our job is nearly almost over.Coupled with a few indicators,and certain patterns to keep a look out for,we are about done....

Keep things as simple as possible.......I know that isn't a style statement these days especially amongst tech traders.


Well-Known Member
3rd post from Saint

When you get a Wide Range Bar ,especially out of a basing consolidating sideways move,get ready for a big move in that direction.Don't expect it to pullback and give you an opportunity to cimb aboard.Sometimes it does,but in many times,it keeps exploding higher.

What is a WRB?Don't complicate things by adding more critria than the simple fact,a bar that makes a wide move in that time frame and closing at or near the high of that bar/candle.

The beauty of a WRB..........if you get one,buy the pullback,with a stop below the low of that very bar.Else,buy the high of that bar.If we get a WRB,and it reverses,a WRB failure is an ominous sign of a big move down.

Another thing to look at:a WRB with accompanying increase in volume out of a sideways base.

And look out for a WRB that can happen after a big rally........could signify a turnaround soon.

So,look out for the WRB!


The whole idea of waiting for the previous pivot high to be taken out is to allow the charts to tell us what to do.We would not want our intellect and mind to participate in this exercise.We want our eyes to see the very obvious resumption in trend,we want our eyes to see the previous pivot highs being taken out,and we want it to get as automatic as possible.

When we raise the stop loss on getting a bullish candle after many multiple bearish candles,prematurely thinking the pivot has been formed,only to see more bearish candles the next few days and taking us out of the trade,that wouldn't be too smart on our part,would said before anticipating a pivot can be detrimental for that trade.

What we want is to get in and stay in for as long as we possibly can.........allow therefore the previous pivot high to be taken out and then only raise stops.

Simply put,it is a pattern that heads in the reverse direction than what is expected.We expect a neckline of a H&S breakdown to be a bearish sign.We expect a trough break from a Double Top to head south.We expect a Rising Wedge after an uptrend to break down.We expect an Ascending Triangle breakout to head north.We expect a WRB breaking out of a consolidation to initiate a move to the up.We expect a WRB bearish candle in an established downtrend to resume its downtrend and make newer lows.

A failure pattern is something that acts opposite to that which is expected.

An ascending triangle breaks down,that is a pattern failure.An ascending triangle breaks out,and then the next bar negates the breakout bar.That is pattern failure.A wrb breakout from a consolidation that gets negated(negation meaning the low of the breakout bar is taken out),that is pattern failure.A neckline breakdown in a h&s pattern reverts and goes back into the neckline,and takes out the high of the rt shoulder......that is pattern failure.So on so forth.

These are beauties to trade especially if one could go both ways in a trade............beauties because when everybody is looking for a breakout after a consolidation,so are we all.But a negation of the bar sends everyone into the hope,pray mode.Negation of the breakout bar sends us into caution mode.We are out of that trade if the low of the breakout bar is taken out.But as the majority hope and pray for something to happen,convincing themselves on how great this company is,etc etc and the super fundamentals,and growing economy,etc,etc........we reverse positions and benefit from the move down.

Failure patterns break the expected move..........they SHOCK the trader trading the preceeding move.

Learn to identify them,and get out of a trade when you see them in action......and reverse the trade to great profits.
we have BOM DYEING giving us a sideways consolidation on the daily charts,before we get a WRB gap-up breakout that initiated a move upwards.With every newer pivot high,we have been trail stopping upwards.Then we get a nice breakout bar to new highs,and an immediate slap down negation the very next bar.

We have a Breakout Bar Failure......If you were in this trade,get out the moment the low of the previous breakout bar is taken out.If you weren't in the trade but looked on at this mouth watering prospect of neat move down(all this if you could go short).........short the low of the breakout bar failure,and enjoy the ride!

Assessing the trend using pivots is everything,but an indicator or two can be of great help.I was first introduced by Karthik(karthikmarar) to TRIX,and the divergences that it has thrown up gives me that confirmation as an added signal.

Also have a look at ADX,+DI,-DI .........again a great help for a Trend follower.

And of course the Moving Average ,RSI and the Stochastics..........all this info is there on,and all over the web.Added info on TRIX,go to TRIX Tricks by Karthik.TRIX is a momentum indicator that displays the percent rate-of-change of a triple exponentially smoothed moving average of a security's closing price. TRIX is a leading indicator and can be used to anticipate turning points in a trend through its divergence with the security price. It works best in conjuction with ADX. ADX shows whether there is a trend whereas TRIX together with its signal line gives very good entry points.

And of course,this forum is full of individuals who seem to know every nuance of every indicator.

But do remember:price is important,pivots tell us everything,indicators are more of an add-on(good to have some around that tell us that we are on the right path!)

the secret of massive profits lies in great entries,great exits and Money our search for the Holy Grail to Trading,we sometimes fail to realise that there actually is none.That verily is the Holy Grail,I guess........but getting thorough in Risk management concepts is the nearest one gets to it!!

This thread has been all about trend following,and as said before,not predicting them..........our job is to just go with the flow,our learning just to assess the direction of the flow.You'll be surprised at the massive profits that one can make in just going with the flow of the markets.

So,my friends,do keep things simple,get your trends right,put your money management stuff in place,......and allow the market to do the rest!
A chart pattern merely tells us where we might possibly go from here......if we get an ascending triangle after an uptrend,we accept the sideways movement as nothing but a pause in its uptrend.We are therefore expecting a move out of this triangle to the up,and resume its uptrend.Can an ascending triangle break down?Surely........well,this we call a failed pattern.So either way,it qualifies as a chart pattern

The beauty of any sideways movement,be it just some sideways consolidation,or a symm triangle or any of the triangles,is that we get to enter into the stock at minimal risk with a stop just below the base formed.

So,use the chart patterns as a low risk entry point,instead of its predictive value in the future direction that it is headed........a breakout and a pullback gives a great entry as we latch on to a stock threatening to take off.A failed breakout, probs,we reverse directions,and short it to glory.Either way,chart patterns come in handy,although knowing it is not an absolute necessity.

As for forex mkts,you will have to assess what really works there.....I used to trade failure patterns day in and day out in the US markets.In the Indian mkts,classical patterns seem to depends,you have to check it out yourself.
MA:proof of moving average delay below:

For the sake of easy explanation I am oversimplifying the example. However, the steps explained here are equally applicable to real situation also.

Let us assume a share being traded at Rs. 100 and the price goes on increasing by Re. 1 every day (You can take any value you like, eg price = 300 and increase = 1.7 etc. But the values I have taken make the calculation easy). Also assume that the price increases from 100 to 110 and then starts falling by Re. 1 each day till it reaches Rs 95. Thereafter it again increases Re. 1 everyday to again reach Rs 110. This up and down continues. Let us take the first 50 days' data for our example. Let us say we want to calculate 5-day and 15-day simple moving averages and their cross over. The price data, the moving averages and their difference along with the chart are attached as a PDF file with this post. You can download the file, take a print out and follow along with the explanation here.

The 5-day moving average is simply the average of previous 5 day prices starting today. So, in our example the first four days have no moving average, 5th day onwards the values are calculated and entered against the day number. So, the first MA value is against 5th day, second value against 6th day etc. Similar is the case with 15-day moving average, the first value is against 15th day and so on. The moving average difference column starts with 15th day.

You can see from the table of values in the attached file that the price has reached the maximum value of 110 on 11th day and thereafter it is falling. But the 5-day moving average reached maximum value of 108.80 on 13th day and the 15-day MA reached its maximum value of 106.27 on 18th day. This extra time is the moving average lag. Why it happens?

When you take 5-day MA the first time you add values of day 1 to day 5. On the second occasion you add values of day 2 to day 6. In effect, you are removing the first day value and adding 6th day value. As the 6th day value is higher than 5th day value the MA increases. On 11th day you add the maximum price for the first time. On 12th day you add a value which is smaller than the maximum, but the value being removed is still smaller than this 12 th day value. So, MA continues to increase even after the Peak in price is reached. This continues till the latest value added is smaller than the value removed. This happens when the Maximum Price is in the center. As we are taking 5-days prices, the Maximum price is in the centre after half of this period i.e. 2.5 days. This makes it 11+2.5=13.5. So we see the peak in MA on 13th day. Similarly, the peak of 15-day MA appears on 11+(15/2)=11+7.5=18.5 days which is rounded to 18th day. Therefore, the MA peak lags the price peak by half of the averaging period. Similarly, the lowest value of MA lags the lowest price by the same number of days.

We have taken regularly increasing/decreasing prices in this example. In real situation this is not true. So, the actual lag will be a little different from the 'half of the veraging period'. Depending on which side of the price peak (or valley) is changing faster, the MA peak is displaced a little to the left or right. But on an average we can take this lag to be half of averaging period.

Coming to the cross-over of the two MAs we can explain it as follows. Now I have to introduce a little maths here. But it is very simple.

Let us say p1 is short term, p2 is long term. As we have seen above, the short term MA reaches peak (p1)/2 days after the price peak and the long MA reaches its peak (p2)/2 days after price peak. So the time difference between the two MA peaks is (p2)/2 - (p1)/2 which is same as (p2-p1)/2. That means Half of the difference between the two averaging periods. The cross over will occur midway between this difference. So it will be hallf of (p2-p1)/2 or equal to (p2-p1)/4. That is one-fourth of the difference between the averaging periods. In our case the MA period difference is 15-5=10 and 10/4=2.5. So the cross over is 2.5 days (or 2 to 3 days) after short MA peak. We can see from the data and graphs that this is indeed the case.

If you have understood this, then you can try to prove why the histogram peaks appear much before the cross over. I will leave it as an excercise. As the Histogram peak appears much before the cross over, I tried to use it in my MABIUTS-H strategy.

Best way is to test the various systems and latch on to something that you are comfortable with,and which gives you regular profits.More importantly,once you are trading a system is to stick by it,day in day out.

Trading the trend is a different kettle of tries to get in on trend reversal,and if not at least on some sort of a pullback,and then hopes to ride the trend as long as possible till the trend in that time frame reverses.Easier said than done,but it can be done,and to great profits.
making profits having a definite entry,exit,money management systems in place is never gambling........Gambling is anticipating a dntrend and going short in a strong uptrend.Gambling is going long a Sugar Stock that is in a clear cut dntrend quite sure that the price that one gets in is the absolute bottom of that stock.Gambling is not knowing whether to buy 1000 shares or 500 shares,and buying a 1000 shares without knowing why..........gambling is basically doing anything without a set method to the madness.The repeated,methodical and systematic onslaught of the markets .....nah,that's never gambling-Pure Trading.

Multiple Time Frames in Trading

One can learn about trends,one learns to correctly identify when a sideways trend breaks out into an uptrend.One learns about all the pivots and all that is required to correctly diagnose a change in trend........and yet one needs to resolve the confusion that multiple time frames offer to our mind.

As always there are few rules that beginners ought to follow:

I am not going to use words like position,swing,intraday here for the simple reason that there are so many time frames and that many traders who trade that timeframe,so not abt to go abt classifying and categorising them.

The Trader who trades the Daily charts:Meaning one who capitalises on the trend as displayed by the Daily charts.Right,.............Look at the Weekly Charts.If the weekly charts are making higher pivot highs and lows,we are in an uptrend.As we had learnt,we look for buy signals in the daily chart.Now what are these buy signals?That depends on your strategy.Here we had discussed about a stock making a higher pivot low and then taking out a previous pivot high as a buy point...........But the point being:Look at the weekly.Analyse the trend.If we are in an uptrend,entry on a buy signal on the daily chart.Exit once we get the sell signal on the daily chart.The sell signal we had discussed here:A break of a previous pivot low in an uptrend,or trailing stop,or some other method that you may have........Once again,the point being:The trade is off the daily charts,the weekly is a guide that tells us the direction that we should follow.We buy the daily,we sell the daily,we position size the daily

We do not have a sell signal on the daily,and then pacify ourselves that we have a strong weekly and it's only a pullback,and the fundamentals are good and CNBC says we are doing great.We get a sell signal,and we have the discipline to cut the trade........Why?Coz we are daily charts traders,that trade does not suddenly shift to some other time frame.

The trader who trades the 15min charts:This trader looks at the 60min charts for a trend analysis and direction.No trend,no trade.Uptrend in the 60,the trader waits for a Buy Signal on the 15.Position sizing on the 15min charts.Trail stops on the 15.Exits as per the 15.One does not look at the 60min and say that it's so bullish and therefore one does not mind the pullback...........coz' simply one is a 15min chart trader.One catches the uptrend on the 15 and one exits when sell signals demand so_One therefore looks to go long on the 15,if the 60 is in an uptrend.One looks to short,if the 60 is in a dntrend.And one sits on hands if the 60min is doing neither.

And so on so forth for all the various time frames...............Never short the 15 when the 60 is in an uptrend.You could make a profitable trade here and there,but the 60 will make you pay dearly at some point.Never enter on the 15,and then get carried away by the uptrend on the 60 and then shift timeframes.For an intraday trader,never disobey the 60min charts.

Weekly Charts:Reliance Inds is in an uptrend,short term ,intermediate and primary uptrend.Higher pivot highs and lows.But take a look at the gradient of the trendlines......reminds of the Bump and Run reversal soon.Therefore if you are planning an entry into RelInds for the long term or the medium term,now definitely is NOT the time.Why not?This latest trendline(the steep one) will not hold,this run-up may get steeper from here,but will not last a few weeks.Now with that info in hand,one does not get in if the long and medium term is the target.Instead,one allows the pullback to happen(a pullback that will hurt a lot of people) and enter when fear is maximum.If that pullback never takes place(sincerely doubt that!),then wait for a long sideways consolidation pattern before seeking an entry for the longer term.

Yes,there are negative divergences on the TRIX and possibly many other indicators........but following divergences blindly,and we might have lost this present run-up from 1300 to 1700.

Daily Charts:We are presently in a short term uptrend in RelInds....this move up may not last,but if you are a person who plays the 60min or daily charts,there is money to be made.

Summary :
1)Weekly uptrend and Daily is in a downtrend,buy on confirmation of the daily getting into an uptrend.

2)Weekly uptrend and the Daily in pullback territory to the trendline,you could buy the dips .....but beware of the gradient getting steeper.Once that happens,think short term.

[There is a difference between a stock making lower highs and lows .......a pullback to the trendline(as in your example) and a stock making lower pivot highs and lows on the daily but weekly still in an uptrend.]

Let us just look at a chart of NIFTY DAILY and WEEKLY.(Attached)

We have a downtrend from February coming into March.As we all know,a downtrend is nothing but lower pivot highs and lows.We then get a mini-rally in the first 2 weeks of March.Is this the time to BUY?BUY here and you are doing nothing but anticipating a move,predicting something and then hoping.......We are traders,we trade the uptrend,and we trade the downtrend.We therefore need to know when that downtrend is no more and we are sitting in an uptrend.

So,we do nothing in the first fortnight of March but again,we are talking of position trading......we wait,and wait for that opportune moment to strike as a tiger would ,waiting and watching his prey-to-be.As expected,a further decline from there,but it does not make new lows.Hmmmm........what's this all about?Are we going to buy now?Well,no again......then,a nice rally taking out previous pivot highs.Surely,this must be the time to go long,better now or never,better long here than miss the whole move?Time to buy?Nope,not yet!But why,we have higher pivot lows and's a screaming uptrend.Why wouldn't we go long here?

Take a look at the weekly charts now........we have a 5 bar decline and then a big bar up.As far as the weekly charts are concerned,one bar up means we have a rally in a dntrend.Means,the daily charts may look like it's ready to fly,but the weekly charts say "not yet!".So we do what most of us hate doing......we wait!

And then comes yet another decline............hmmmm,yet again,it does not make new lows,and instead we have a rally into the close of that week.Now,look at the weekly......We now have something like a bottoming tail,and a probable higher pivot low.Now,we get that feel that our day is coming.......the high on that weekly bar is 3820.If this is taken out,most likely,we have a higher pivot low on the weekly and a possible new uptrend on the weekly charts.Possible,because we get to say that for sure once the previous pivot high of 3902 is taken out.......and that it does,by the end of that week.Over 3902 would be the place to add.

Where there is conflict between the daily and the weekly charts,.........wait!It's sometimes painful to wait and wait ,while our trader friends shout from roof tops.........but as position traders,our opportune moment is when the weekly and the daily is in line and is ready to fly.That point when they both scream that this is no more a downtrend,and a new uptrend has started,that is the point where we pounce,that is the point of entry.........we then hold,and again,wait for Sell Mode to kick in.

Till date,we are in an uptrend.........We have had swing downs and ups,but as a longer term player,we do nothing but hold till a pivot low on the weekly is taken out.So far that has yet too happen..........we are therefore LONG till the time comes to go SHORT.

Various ways of getting out of something,finally right and wrong and what is best is as per your comfort levels.You could use an indicator for an entry and an exit.........maybe a combination of indicators all woven into a system........well,there also is the good ol' way,the very boring simple way,using only price and pivots to dictate an entry and an exit.

As you go along,you will,I am sure,find whatever suits your comfort levels......but for now,let us just have a look at things the simple way.

We once again have the NIFTY,we once again have the daily and weekly charts.Have a look at the attached chart below.

That green arrow is our Entry Point........why there?Once again,we have a downtrend on the weekly charts ,remaining so till June 2006.Then we have a rally,and then a decline.....but instead of the decline taking price to new lows,what do we have here?We have a bearish bar on the weekly charts immediately negated by a Bullish that's a show of force,a sign of strength,and therefore our point of Entry.We enter therefore above 3168.

Now have a look at the daily chart.......What do we have here?We have a higher pivot low,then to new highs,and then an even higher pivot low,and then a newer pivot on so forth.We have 10 pivots of higher pivot lows and highs.Which means,once a newer high is made,we bring up our stops to the previous pivot low,and this we do again and again till we are stopped.Do we have a target?No.........We let the trends and price dictate terms instead of our mind.We merely keep raising stops till we are out.We remove ourselves from the decision making and let the pivots do it for us.

Now have a look at pivot low 10.........instead of making a new high,price now reverses and breaks below the pivot low 10 at 3911.......That is our Exit point,clear and simple.We do not hope,we do not panic,we remove ourselves from this fiasco of fear and greed.We bought when there was fear and disbelief in the markets.We sold when greed had reached a peak,and disbelief that a fall could happen reigned supreme........Our job as traders :We Buy Fear,and Sell Greed.We did not catch the very bottom,nor did we catch the absolute top,but we plucked the meat out of the move,......and we are happy with it,as we look to the next trade,to do it all over again!

We have that last pivot low(no 10) on the 28th Nov 2006.....once it breaks to new highs,raise the stop loss to 3911 which is the pivot low made on the 28th Nov......and then we have the move down on the 11th Dec.Our stop is at 3911,that bar down takes you out of the trade.In short,you are out on the 11th Dec.Do not wait for the low and wait for the next day,etc...

The reason that you are in this trade is no more there........your higher pivot lows and highs just got cracked.You are out on 3911.

There are times when the market would take out 3911,and dump to 3860 and then close above faked out of the trade.But better to take the stop there and then,and get out!If faked out,look to reenter,but DO NOT Hold it past 3911 and look to see how the bar closes.
word of advice from my end:Look for stocks that are already in a weekly uptrend(making higher pivot lows and highs),and then try to angle in on a daily pullback ......don't look for stocks that are in a downtrend on the weekly and monthly charts,and then get all excited abt a tiny move on the daily.Try to get the weekly and monthly charts behind you......and then hold on for a big move.

There are bullish divergences forming on Balrampur Chini on the weekly charts on the MACD........but let's not anticipate bottoms and get bruised and battered in the process.Our job is to make as much as possible in minimum time,not in getting the absolute bottom and then sitting around at the same oh-so-boring-yawn levels........We do not want to be applauded as being the first buyer in Balrampur Chini.We would like to be the most profitable one..........we want to be there when the momentum is there,we want the big move,and we want to hold on to the coat tails of the big movers.We are in it for the meat of the move,that's it.

So,even if it's a short term trade,try to get the weekly chart behind you.
[with due permission from saint i put some pt]
1. why thread is written......purely to help people to use ta and become self reliant in trading ....approach .....slow build up........strong foundation
3. repeating again & one can understand...principle and RIGHTLY apply.
4. when u see.....what u r supposed to SEE.
.....HOW wrong biasedness should not be ur friend......instead.....learn like his baby daughter
.....[with warm guidance]......trend and nontrend.....risk.....continuation and expected reversal.
5. pivot/swing pt is best method to trade ....with eod and cool decision
he has student should doubt[unless some funny dumbhead with zero trade experience]
6.on any chart package u can do......he follows KISS
7.many a hints he gives........when which to use momentum
8.volatility ....probability of particular direction......and validation of a trade.....aptly explained
................most importantly he suggests .....this is the way.......which any trade learner can learn to earn desently from market.....[with part time].........however many a risky based exist ......choice is upto u


Well-Known Member
4th post of SAINT
We have a higher pivot low,we wait for a higher pivot high.....we assess if we are in an uptrend.We have an uptrend on the 5min,and a limp rally within a dntrend on the 60min........we stay out(unless you are adept at a quick sniper attack in and out).Or if everything is in line,we jump in.Therefore,it's our Plan not to anticipate a move,we wait for signs to tell us that we are in an uptrend.It's our Plan to also look at other time frames and see if they are all in line for an entry.

We could be wrong..........but if all our various criteria all line up for a full systems-go,then we are in that trade.It is imperative to follow our Plan to the hilt.There is no such thing as "But I don't feel it'll move up"or " I think the govt is gonna do this or that",or "All my criteria says Short,but Udayan M. says that it's not the rt time to short."

Point being,we have our plan of attack,but it is important that when we are given our green signal,we execute it each and every time.....not sometimes,not most of the times,but each and every time.If our criteria or reasons to get in the trade are all in line,we get in.We have our stops.We do not mind getting stopped out.We are ever ready to flip ,accept our mistake and go the reverse direction.

Importantly,however discretionary our trading style may be,we have to mechanical-ise(not necessarily mechanise) our trading........... fixed entry ,exit,stops, position sizes,adds,where 2 take profits,etc.Where we would stay out,where you jump in frothing at your lips.......And one of the very important things to do is to take that entry signal each and every time..........sometimes at the risk of getting stopped out.Then there are no conflicting thoughts,no dilemmas,no decisions to be made.Trading then becomes associated with fun,and ceases to be a chore.

Therefore,for the beginner,first the Trading Plan....

Time frame discipline is vital in trading.......If you play the 60min charts,your stops are as per the 60min charts.You could look at the daily thereby making a clear assessment of the ongoing trend......but the trade is off the 60min charts.You could however fine tune your entry as per the 15min charts,etc.

I presume from the above paragraph that you basically like to trade the 5min charts,fine tuning your entry as per the 2min charts.No problem,go ahead........but do not,DO NOT,switch your time frames if you are losing.Meaning your entry is at 5820,your stop is at 5800......don't let price blow right past 5800,pull out the 15min or the 60min and comfort yourself.So be very clear abt the time frame of that particular trade......So too,you have wisely raised stop losses to the previous pivot low and adhered to your discipline.Now that trade is up nearly 70pts......and then cracks that pivot.Don't go pulling out your long term intradays and then say that I will sit through this pullback for huger gains.Follow the plan.Get out as planned.Reenter if need to.....Don't worry abt your broker friend making a tiny bit more.Important to ALWAYS follow the PLAN.

The beauty in having a plan and following it to the teeth is that the mind plays no role is not given the opportunity to panic,to get upset .
In your daily journal,etc......break each trade into a good trade and a bad trade.A good trade is that trade where you followed your trading plan to the hilt ,took profits as planned and exitted as planned.A good trade is also that trade where you followed your trading plan,adhered to your stops and exitted as per the plan.

A bad trade is that trade where you did not adhere to your stops and watched helplessly as the stock dumped and dumped,and the only action from your end is to run helter skelter,sweat profusely,pray hope and then finally exit anyway with a huge loss.A bad trade is also that trade where the trading plan was not followed but profits came in anyway.

Believe me when I tell you that the 2nd type of bad trade is the worst.......the market rewards you for your mistakes,you get complacent,overconfident,suckers you into more such trades and then WHAM!comes that trade that takes it all away.......Very careful,my friend.

So however good you feel.........write it down as a Bad trade,forget about it,and then proceed to make the good trades.

.we are trying to latch on to the trend as per the daily charts.We therefore use the weekly charts as reference.Looking at the weekly chart,what do we have?Higher pivot highs and lows signifying that the particular chart is in an uptrend.So what do we do then?We look to buy dips, short,we look at the weekly and we see the weekly in an uptrend,higher pivot highs and lows and all that.Then flip over to the daily chart,we see the daily chart in a downtrend but grinding its way out of it.As far as we are concerned,we remain passive.We do not jump in,anticipate,predict......we wait for some pivot to get taken out or form a new pivot low.Go back to that chart.The first time where you see Higher pivot low,that's the Buy point.......and then it's a Hold all the way till exit.The reentry points are places to add.......if we missed the initial buy,then these areas would be the places to get in.But do not forget......there is a point where the daily charts signified a change in direction.Here we are looking at pivot highs and lows.Once a previous pivot high is taken out,and preferably a higher pivot low as well,we are now angling for an entry to buy into this uptrend.Whether we got in or not,that's the BUY point of that chart........if we missed that point, we look for any dip to get in and ride the remaining trend.Here we are looking at each candle's high and low,merely taking the high out is enough for us.

So ,in summary, when we get a daily uptrend within a weekly uptrend,do not look for pivots to get in.If the chart gives you a pullback,the pullback hasn't violated any pivots,and we are still in a daily uptrend within a weekly uptrend,do a candle by candle analysis.As in the two examples cited by yourself,every candle has a lower high and lower low,.......the moment we get a candle that takes out the previous day's high,that's all we need.We jump in,wait and ride the trend once it takes off again.
Which time frame you prefer to trade depends entirely upon the type of personality you are,..........or you could have them all,but make sure you stick to the rules of each type of trade.For example,you could be holding mutual funds and trading the longer term charts.You could be trading stocks on the daily stock time frame,and could be trading intradays with futures..........Importantly,set up a game plan for each time frame,and stick by it.If initially you find it difficult to manage many time frames,stick to one and only move on to more once you get the hang of multi-managing multiple time frame trades.

Right........we have a chart,we have an uptrend on the weekly charts,therefore we buy the pullbacks on the daily chart.After we have an up bar or two,what is to say that the chart is not going to turn and go down?How do we know?We don't........That is what happened in that reentry,few bars up,and then down it came.Part and parcel of trading.

We merely take our stops,we wait and watch for another entry.......what is presumed is that the reentry will keep making new highs and newer highs,so we buy the pullbacks on the daily within a weekly uptrend.

So we get a pullback on the daily on October 8th,we buy once the previous candle high is taken out.....we get a pullback on Oct 22nd,and the high over that candle would be our next reentry point.

Next we get a similar pullback and we get a reentry point over the high of Nov 12th.But this time,no new highs,instead it pulls back and takes out previous pivot lows.Oct 22nd candle is similar to the Oct 12th candle,why didn't we just buy over that high?Because this pullback has created a bigger fall.......There is now discomfort,there is suspicion,there is we do what we do best,We wait!What are we waiting for?We are now waiting for the chart to tell us something that gets us away from discomfort,away from suspicion,away from caution...we are waiting for something to turn up that makes us excited,makes us want to jump in at any cost.And till that point,we wait and watch.

Nov 23rd:Nah,could very well be a mini rally within a decline.
Nov 26th:Hmm,same as above.
Nov 27-29th:Interesting,a yummy sideways pattern.....Hmmm,wonder if this can go up.Let it confirm.Let us wait.
Nov 30th:Yep,we are off.....Buy here,we now have our higher pivot low,taking out recent pivot highs.We are sure that we are right only once we get to 6000.Till then we assume that we would.And if we are wrong,well then we are wrong.So we have stops.

Nov 11th :We are still holding...

The point of all this:If it's a simple pullback after a neat move,buy the pullback once the pattern takes out the previous day's high....Once pivot lows are lower than the previous pivot low,are we in a dntrend?Or sideways trend?Since we do not know,we again wait for a higher pivot low and high,latch on to it,and ride the trend.
Trade the time frame that you are most comfortable with.We all have different personalities,different do what suits you best,but stick to the rules and disciplines of each time frame.

2) as we can see market declin these days when do you accept market to gain momentum again? and which stocks shuld i track?

thnaks once again for all your help.
As a trend follower,we go with the present we have a daily downtrend,an intermediate correction.....means we wait.Don't try catching bottoms for now.Let the market give us a clear signal first.When will this end?It ends when it does.......either you are benefitting from the short side,or you are standing aside for now.Either way,don't predict the where and when to enter.

Which stocks?Once this correction is over and done,look at the charts again and decide.......For now,stay out.Go for a holiday.Spend time with your family.Get the cash ready.....For the next blast off.
Markets fluctuate,they go up and present we are still very much in a primary uptrend,undergoing an intermediate downtrend.Is the Bull Market still on?Very much......Is it time to buy into Mutual Funds?Why not.....As in all uptrends,we buy declines,which is what we are experiencing right now.



Well-Known Member
Saint's suggestion
LESSON 1:Learn to pin all the blame on to yourself.......not half the blame,not most of the blame,but all the blame.Accept responsibility for your stupidities.Following a set plan of attack,you can conquer the markets.......If you are not able to,something's amiss.Accept blame.Look for your mistakes.Rectify them.Be a success.But first step:Accept responsibility......

LESSON 2:First learn........then set up a Trading Plan.It's vital to have your Plan before you get into the Battle..........There must be set points of entry,exits,adds,position sizing,etc before mkts open........All written down.....When the mkt opens,you no more use your intelligence,your just keep the fingers on the Trigger Button,and follow your Strategy.Once in a trade,you are doing nothing but managing Risks.

LESSON 3:There is no thinking,no emoting,no fear,no greed,no hope,no anticipation,no regrets during market hours..............and keeping that tranquil,serene mind,you seek to put in a perfect trade,one after another.
Your job as a trader is to put in a perfect will come by itself when perfect trade after perfect trade is put up.

What is a Perfect Trade?

A trade where you adhered to your Entry Strategies,raised your Trail stops,Added as per your Strategy,And exitted from the Trade once your trail stops were triggerred,adhering to the Position Sizing in your Plan all the while..........That's a Perfect Trade!

A trade where you entered as per Plan,and was stopped out and you adhered to your Stops.....That's a Perfect Trade!

Making profits and a perfect Trade are 2 different things.........focus the mind on to putting in that Perfect Trade,again and again.

The money will follow.......but you have to reach a point where the mind ceases to stop counting the money in your head.Focus on the Trade when you are a newcomer......Focus on the Trade when you are a Pro Trader.

Can one ever overcome fear,greed,hope,regret and all that.........?Well,we as traders.....we don't strive to overcome these emotions that can lead to our downfall.Instead,we try to focus on the processes involved.........Keeping our processes systematic,we get past fear and greed.By adhering to our strategies,we do not let Hope and Regret have a peek in.

If I am in a stock at 100,with my stops at 94,and I have position sized appropriately.........there is no fear.If stops are hit,I am out.The loss of that money doesn't frighten me,doesn't give me sleepless nights.When the stock is trading at 110,and stops are at 102,the adds are in such a way where the total risk is roughly the same........Fear is not allowed in.

The adds when the trade goes right prevents me from worrying about the stops taken previously,even if hit many times........As the adds keep building up,trail stops are raised........The focus is on the Trails,not on the money earned .....Greed is kept out.

And adhering to stops prevents having to hope and pray............and regrets.

Focus on the process,and not the result.........One of the greats in the Investing world once said,Be greedy when everyone's afraid,and Fearful when everyone's greedy........Nothing wrong with that.But as traders,have a strategy and follow it.You will realise that neither fear nor greed touches a Systematic Trader who maintains his/her focus on the Process.
...............all the criteria must line up before putting in a trade.....We want an intermediate uptrend,not an intermediate rally.How do we know?Pull out the Monthly charts.

Question no 1:Are we in a Primary Uptrend?If yes,turn to Weekly charts.If no,then why are we looking for longs and uptrends?Easier to look for shorts and dntrends unless you are trading an over extended move.

Question no 2:If the answer is yes to the previous question,open up the Weekly charts.Is the weekly in an uptrend?If yes turn to the Daily charts.If no,wait for a break of previous pivot highs on the weekly which signifies a change in trend.

The moment the previous pivot high on the weekly is broken to the up,you have your entry long..........the Daily usually lines up giving you an entry point as well.

Question no 3:Open up the Daily charts.

a)Although the weekly has triggerred an uptrend,the Daily has been in an uptrend for some time.Hold off.Keep on a strong watchlist and wait for a downtrend or a decline or a sideways move to enter.

b)Weekly and Daily triggers an entry at abt similar time.Buy with your stops in the Daily Charts.Trail Stops as per Daily Charts.Exit as per Daily charts.Look to reenter long again later.

c)Weekly is in a downtrend within a Monthly Uptrend.But when you have a look at the Daily Charts,it has triggerred a BUY.If you are anticipating that the weekly is going to trigger an uptrend soon and put a Buy,very careful.Strict stop losses and run if hit.Why?Coz' the weekly is still not officially in an uptrend.

Hundreds of other scenarios,I guess..........but the longer term charts have to line up,then only bother abt the Daily charts.

In the case above with HEG,it has formed a Primary Downtrend.It is now in an Intermediate Rally within a Primary Downtrend.......Meaning no trade.

So what do you do with HEG?Nothing much actually........just leave it alone and continue your search for that Intermed Uptrend and then latch on to the trade off the Daily charts.
There are trades where we look only at the weekly charts.......there are trades where we are angling in an entry using the daily charts with the weekly as background.There are 60min trades,etc

The 60min Flow thread talks about the stop and reverse and always in the mkt type of play.GMR,JP,ABAN and SESA are trades taken there,going long and short.

Can you go over a 60min pivot high and take Rs22.22 and be happy with it?Sure.......your call.Do you want to trail stop and then keep taking profits on the way up?Sure.....why not?Do you wish to never take profits?Sure......once again,why not.

That was a play in that thread and got nothing to do with weekly charts or daily charts.......If you are a posn trader,and you don't like 60min and trade the weekly charts,then GMR is not a call.

GMR has triggerred an uptrend on the 60,.....still dntrend on the larger time frames.Please don't get confused..........a trade in that thread is using the criteria as per THAT thread.

Here,we are looking at intermediate uptrend and then buy the daily breaking out of a dntrend.........that basically is what we are looking at in THIS thread.

And,in the 60min Flow,there is no looking at resistance and basically is trying to be in the trade.........forever if possible.

Please do not confuse strategies in different threads...........there are all types of strategies......for all types of time frames.....and for different mindsets.

Please don't look at Thread A and then get confused out looking at the rules of Thread B.
...............................First it's important to analyse if you are trading the weekly charts......which means we honour previous pivot lows and highs on the weekly charts......If it's the weekly pivot low that you are looking at,the last pivot low before the dntrend was on the week ending 20/12/07 at 5676.70.....If and when this pivot breaks,the uptrend is over......No such thing as making lower pivot highs to confirm the end of an uptrend......Break of prev pivot lows and you are out of that trade.

On the other hand,if you are a long term trader,benefitting from the Primary Uptrend,your entry was in July 2003 and still in the trade.........If lower pivot highs are made and then previous pivot lows are broken at 4468,your trade that started at 1140 would have come to an end as the Bear takes over.

And if you were trading the weekly chart uptrend using the monthly as backdrop,then again you would have exitted in the third week of Dec and probably reentering soon once 5300 is taken out.

Any of the ways,the break of previous pivot lows is the end of that uptrend on that time more confirmation is required.

And remember,in an uptrend we are looking at previous pivot a dntrend we are looking prev pivot highs........Break of pivot lows is what we are looking for to exit.
To sum up -

Long only - when immediately pivot high is broken and weekly is up. If you get stopped out , book your loss and look for another opportunity to long but do not short. Follow this untill the weekly pivot low is not breeched.

Short only - when immediately pivot low is broken and weekly is down. If you get stopped out, book your loss and look for another opportunity to short but do not go long. Follow this untill weekly pivot high is not breeched.

Perfect as per text book.

But - sometimes i find the distance between pivot high and low is too far for us get stopped out and yet remain profitable. Sometimes i see prices consolidating in a narrow range and forming a compressing traingle or we see a expanding traingle and prices piercing the ends both ways and making me uncomfortable. Also sometimes in a bigger range - there is zig zag price pattern intraday and it stops me out both ways.

I have written all my experience - i have encountered in actual trading and the instances when i have booked loss. Ultimately - what i feel is i lag some training in position sizing. There is no way we can always be in a right trade in a right direction and at a right time. What best we can do is - if we are wrong we make small losses but if we remain right we make big money by holding on to our trade in right direction.

How can we know that price has peaked/bottomed - when there is sudden fast movement in a particular direction and yet it has not breeched any pivots. If we wait for the break of pivot to close our trade , many times virtually we loose lot of points before we actually know that it has peaked or bottomed out. Is there any way - by which we can know - it is time to come out.

Can there be any confluence of indicators which can help us? I am watching RSI/ADX and they dance but ultimately it becomes very difficult to conclude a trade because these too give wrong moves in the direction of the price action but with volumes of little significance. And same remains true for pivot break out with pathetic volumes in uncertain times.

To reiterate:



WHY?That's the way longer time frames behave.....and this is the way shorter time frames behave.

I have not been advocating too much about weekly trades purely because I don't think the risk can be managed by the readers of this thread who are usually the beginner..........There really is no harm in doing so if you can manage it.
Actually if you are talking about trading the weekly charts,more or less correct........but very wrong if you are trading the daily charts.....You are putting money at great risk by anticipating an entry in a dntrend,and of course the very many false moves.

Saint started off saying that:
1. Higher highs and Higher lows of consecutive bars is a rally
2. Lower highs and lower lows of consecutive bars is a decline. (There is no trend yet!)
3. The top of the area in between the two, i.e Rally and decline, is the pivot.

. Weekly in an uptrend - if you plan to trade on daily. In simple words, a higher timeframe on an uptrend.
2. Price chart - You shud b looking at pivots first. You can see volumes later to confirm breakouts or sense the general buying/selling sentiment.
3. Your stoploss is there to safegaurd you from false triggers. Respect it.
4. Search for higher pivot high and higher pivot low if you want to go long. Only through eye-balling is it possible. No indicators can help you here.
Trade the first change in trend and ride the trend to great profits.

I also know this:Anticipate an upmove in a downtrend.....and you will get yourself whacked!
Tech Mahindra was in a Downtrend,lower pivot highs and lows......then a week back,a break above that previous pivot high,and then sideways consolidation.........and then a breakout.The Daily is now in an Uptrend.

Have a look at the Weekly Charts......still very much in a strong downtrend,all lower pivot highs and lows.

Do we trade or do we keep away?

Intraday Trader :There's always a trade

60min trader:Nice trade,you are going to be long until you get a pivot break in the 60min charts.

Swing trader: Daily chart breakout,you are in long.You are nervous as you know that longer term charts are going to kick in sometime......but hey,why not make hay while the sun shines?Any previous pivot low crack,and you are out..........

Position trader:No trade....Still on vacation.

if you are trying to trade the daily charts.........Entry is off the daily charts,exits are off the daily charts.

Taking the TECH MAHINDRA as an example,you bought the breakout from the consolidation,you are thrilled with yourself,it goes up even more.....and more.You are now convincing yourself that the bottom is in place,the numbers are good,the FM said something about the economy to your liking......In your mind,you have shifted from daily charts to super long charts.....You are thrilled with your buy,but you failed to realise that the weekly is still in a downtrend,and for it to get into an uptrend,it needs to do some grinding here and there.......When pivots crack on the daily ,you refuse to come out of the trade,......till a weekly chart declines takes your profits away....and then some more!!

So what did you do wrong?You entered a swing trade and then made it a position trade.............Cardinal Sin,you never change your time frame.....never,ever....ah,yes,one exception:You bought once previous pivot highs on the daily are taken out to the was a swing trade.It then blasted off.....and you kept trailing stops....and then the previous pivot highs on the weekly get taken out as well,.......I'd still take profits off,but then and only then can you say that this trade which was meant as a swing trade has just become a position trade.

Other than that scenario...........respect that time frame that you are trading.

It's not that we buy so long as weekly and daily are in line...........We want to buy that point when the weekly is in a decline in an uptrend and the daily is in a downtrend,and when pivots signal a change in that downtrend to an uptrend........we want to get in there.

Our job is to Go with the Flow,Ride the either trail stop to the low of 2 bars ago,or 3 as per your rules,or to the previous pivot low,or some other startegy that you have........there will come a time when the Stop Loss would reach Breakeven,or higher.

The trail stop is as per the charts.......not as per where we entered.Bringing stops to breakeven just because we are in some profits is not going with the trend,not going with the flow of the trade.....and cutting a trade short before it was allowed to reach its full potential.

Trade the Charts,..........Have a Plan and follow it!
.this whole game is about probability,assessing risks and taking rewards....Even though we are trading the intermediate uptrend,we are still trying to fine tune our entry as per the daily charts.

Weekly Charts:Higher pivot lows signifying uptrend,took out previous week's high.......right,that's it.Nice....but an entry fine tune as per daily charts.

Daily Charts:Nice rally....If this takes out 588.90,in above that previous pivot high.Else,once a pivot is formed,enter above the high of that pivot formed(in this case tomorrow if that happens).......

You want the daily pivot low to confirm ....and therefore we wait for that pivot to get taken out.......But weekly,so long as an uptrend persists,you are buying declines,and the moment you get an inkling from the daily,you are in....Waiting for the uptrend to confirm is too high risk.

,weekly putting up higher pivot lows and highs.......the weekly is in an uptrend.

Nope.......once you are clear that the weekly is very much in an uptrend,then drop down to the daily charts......once the daily puts in a higher pivot low and high,you are in.

Also,I buy the breakout,and then on it's all adds waiting till the weekly close confirms the breakout.What happens if it was a fake out......dragged you in to the trade and then dumped?Happens,my friend......take your stops,wait and watch,and stalk,......and pounce back in at the next opportunity.
RELIANCE:There was an ascending triangle put up in the 2004-2005 area.......we then get a breakout.We have no idea as to whether this breakout is going to hold.We then have a pullback at the first blue arrow .......the weekly just signalled a higher pivot low.Once that pivot high is taken out,we are long either way,whether this trend holds up or not........simply because that's what we do.We are traders,we look to make profits,we get our signal,we go long,put our stops and wait.

Every blue arrow shows that higher pivot lows are being formed.......first break of the pivots is at the red arrow.

Above every pivot low once it takes out the previous pivot high is your add point.

Once a previous pivot low is cracked,this trend is over......means it's not removing the profits time,it's getting out in toto time.

This trade is for the traders who trade the longer term charts........bigger risks,more left on the table,more profits......traders nevertheless because we don't care to hold it another minute once the trade goes against the rules that we have set for it.
What your eyes are looking at in an uptrend is the pivot lows,.......decisions are based in an uptrend as per the pivot lows.

What your eyes are looking at in a downtrend is the pivot highs....decisons are based in a dntrend as per the pivot highs.

The first crack of a previous pivot low is the end of that uptrend.

The first crack of the previous pivot high is the end of that downtrend.
presume it's a downtrend,and then we get a move up.......that move up is a rally within a downtrend.

Every 2-3 bar move up is not called an uptrend.

Proper perspective as to where we stand is vital........A rally in a dntrend is a rally in a dntrend.

Can we profit from it?Sure,in a lower time frame.........A rally in a weekly downtrend would show up as an uptrend on the 60min or daily charts.

But then that trade is as per that particular time frame.
REMEMBER:a rally within a downtrend is not yet an uptrend........A decline within an uptrend is not a downtrend.

You seem to be excited to take the trade. That is my guess. Excitement is the last thing in trading. Keep it aside and think logically before taking the trade. If you are taking the trade then you must wait for the completion of the candle. In the chart posted by you, the weekly candle. Otherwise, you are anticipating that weekly close is going to be higher that last week's low. But can you anticipate such a close? If you are an experienced trader and if you can read the chart very well, no problem. Otherwise, please make it a habit not to trade on weekly chart, that too on the last weekly candle before the closure of week. What are your plans if it were to close below the low of the last week candle? How does the picture look in such a case? You will have an outside bar having greatly negative implications.
You are not anticipating a are letting it happen before you slide in.Anticipating is when you have a weekly downtrend,a daily downtrend and you think "Yep,we have had this one up day,this is the bottom,the numbers say so,my broker and my astrologer concur on that one...."

In this case,you have a criteria for an will enter only in an uptrend,and therefore once pivots are in line,you are in.You are buying over a pivot high with the stop in a previous pivot low on the daily are therefore staying clear of thegreat evil of anticipation,and trying to go with the flow.

In this case,the weekly may go on to new highs,may be not,is this an uptrend or a dntrend,once again,not enough data.......what you are doing is you are trading this off the daily charts and getting out if pivots break,or if initial stops are taken out.

And as traders,we play probabilities.......So,we buy the high of yesterday,stop below the low of yesterday,and if stopped out,well,all part of trading,we move on........Just like the tiger that stalked and stalked and pounced at an opportune moment,and yet the deer managed to escape......well,he comes back,and gets ready to pounce on another one.

If we had enough data,and the weekly was in a dntrend,would we have taken this trade?Yes,but not as a position trade.
A break over previous pivot highs is confirmation enough for an entry.......A few rupees over the pivot high break and we are in........

Two scenarios as always;either we are going to get a breakout or we're going to get a failed breakout.......If it closes over that resistance,then all's well and fine......If it dips back and closes below resistance,forming a topping tail....then not happy,most likely an exit and see how things pan out before entering again.

By the time we wait for confirmation whether this is a real breakout or a false breakout.......probably the time to sell!!So a definite buy once previous pivot highs crack to the up...
Always the first pivot low that got cracked to the down.....meaning the last pivot low that got formed in the previous uptrend.Breaking that pivot low is the first time a pivot low got cracked ever since the uptrend began......That break is signal to either get out of longs or go short.
Once a previous pivot low is broken,you are looking to sell off your longs and stand aside.....and if within your plan,short the reverse.

Presuming you get a break in pivot lows and you are short,and price goes on to make a lower pivot high as described by yourself,then you could add to your shorts once the current pivot lows are taken out as Price heads even lower.And move your SL to current pivot high.
SECOND LAW: Trends that run counter to the next larger timeframe tend to be abortive.
Simple Law basically........we have all types of time frames.And all types of traders trading all types of time frames.For an intraday trader who trades the smaller time frames,keeping an eye on the 30,60min is vital.Why?Simply because of the above law.A trend that runs counter to the next larger time frame tend to be abortive......Important word:Next.Presuming you are trading the 5min charts,who cares for the weekly,or for that matter the daily.......Don't bother!Focus on the biggies in the intradays like the 30,60min.Presuming you are a trader who trades the daily charts,then the weekly assumes importance.

Therefore,simply put,if you have a 60min trend that is in a downtrend,and as always,a downtrend is noticed by its lower pivot highs and lows,.......and you are looking to go long on the 15min chart as it gives you a buy signal,remember the above Law!It can get aborted and then the downtrend can resume..........That does not mean you cannot trade long on the 15min charts in a 60min dntrend,if you are fast and not taking a whole 5mins to come to decisions,go ahead,trade long,but remember that this is after all a 15min uptrend within a 60min dntrend,and it can abort anytime!So make your quick buck ...and run!Do NOT buy and then hold it with the hope it 's going to the skies!

On the other hand,if you'd rather stay are not wrong either.In the long run,you could be more right than the former(once again,no abolutes,the word could is important).Here,you look to short the 15min charts in a 60min dntrend,and then when the 15min goes into an uptrend,you stay out.....And then short the pivot break again,until the 60min breaks pivots to the high.Then,it's go long,stay out,go long,stay out till 60min pivots break again to the down.
NINTH LAW: Trading ranges that follow new trend changes are likely to terminate in the direction of that new trend.
We have gone through this one before.........We get a new trend,let's say an uptrend,followed by a sideways move,a trading range .......expect it to end in a breakout and continuation of the prior uptrend.

Also remember this.....There is nothing Absolute in Trading......If a trading range does not breakout,then most traders expecting the Law above to work are in for a rude shock.

Either way,trading ranges are sweet........most probably they are going to breakout.Profit from it.If they don't,and they breakdown,Profit from it.If they do,and then'd be long,stopped,and then short.Profit from it.
TENTH LAW: A dominating trend will generally run until the next larger timeframe can provide offsetting support or resistance.
Presuming we are trading the 15min charts again,taking the previous example,higher pivot lows,higher pivot highs.Strong Uptrend.Taking out many resistance levels as Price forces its way upwards.

And then we notice that the 60min comes into an area of supply and starts to stall,this time it does not blast through the resistance,it stalls.At the end of that hour,that 60min bar closes at that area of resistance or below it.Expect the next bar to go down in the 60min charts.

It's our cue to take some off the table.....a 60min correction is nothing but a 15min downtrend.Don't let your mind wander off into thoughts like "Anyway,we are in a 60min uptrend,why can't we just wait out the correction?"We are trading the 15,not the 60.......we have the 60 stopping at resistance.Take off some,and then all once pivots crack.

Never fight the larger time frame.....if it gives indication that a move is over,it has come to its resistance,it's tired,it's going to correct......forget fighting it.Run!!
Now that we are in a confirmed downtrend,our mission is to short any rally and cover off during the declines.......if you are an intermediate uptrend trader and do not do Futures,then your aim is to capture and squueze the trend out of an intermed uptrend,and once that trend cracks and charts put up an intermed dntrend(like now),then sit it out.......Have a good time with your family,enjoy,go for a vacation........but get your cash ready,and once charts signal a resumption of an uptrend,then you are back in business.


Well-Known Member
In Elliott wave many times there are so many options and alternate wave counts it is best to keep Elliott Wave analysis at the background but trade on actual price action....some times Elliott Waves are very clear...I use them only when they are clear.

Elliott made detailed stock market predictions based on unique characteristics he discovered in the wave patterns. An impulsive wave, which goes with the main trend, always shows five waves in its pattern. On a smaller scale, within each of the impulsive waves, five waves can again be found. In this smaller pattern, the same pattern repeats itself ad infinitum. These ever-smaller patterns are labeled as different wave degrees in the Elliott Wave Principle. Only much later were fractals recognized by scientists.

In the financial markets we know that "every action creates an equal and opposite reaction" as a price movement up or down must be followed by a contrary movement. Price action is divided into trends and corrections or sideways movements. Trends show the main direction of prices while corrections move against the trend. Elliott labeled these "impulsive" and "corrective" waves.

Basics of Elliott Wave Theory

The Elliott Wave Theory is interpreted as follows:
Every action is followed by a reaction.
Five waves move in the direction of the main trend followed by three corrective waves (a 5-3 move).
A 5-3 move completes a cycle.
This 5-3 move then becomes two subdivisions of the next higher 5-3 wave.
The underlying 5-3 pattern remains constant, though the time span of each may vary.
Impulse waves (whichever direction,up or down) are labled labeled 1, 2, 3, 4, 5, and corrective waves with A, B and C.

Theory Gained Popularity In The 1970s.In the 1970s, this wave principle gained popularity

The corrective wave formation normally has three distinct price movements - two in the direction of the main correction (A and C) and one against it (B). Waves 2 and 4 in the above picture are corrections. These waves have the following structure:

Note that waves A and C move in the direction of the shorter-term trend, and therefore are impulsive and composed of five waves.

An impulse-wave formation, followed by a corrective wave, form an Elliott wave degree consisting of trends and countertrends. Although the patterns pictured above are bullish, the same applies for bear markets where the main trend is down.
The Elliott Wave Theory assigns a series of categories to the waves from largest to smallest. They are:


To use the theory in everyday trading, the trader determines the main wave, or supercycle, goes long and then sells or shorts the position as the pattern runs out of steam and a reversal is imminent.

Important Rules of Elliott Wave Theory

1) Wave 2 can retrace 99 % of preeceeding impulse Wave 1 but it cannot Retrace the wave 1 fully.

2) In the five waves impulse sequence Wave 3 cannot be the shortest

3) 0-2 trendline has to be clear till completion of 3 rd wave and 2-4 trendline has to be clear till wave 5 is completed.

4) After completion of wave 5, 2-4 trendline has to be broken violently.

5) The adjuscent waves of same degree will never be similar if 2 nd corrective wave is simple,expect 4 th wave to be complex wave.

6) Wave 4 can never travel in the wave 0-1 area...meaning wave 4 can never break into wave 1 territory....
The above rules are compiled combining Prechter and Neely versions of Elliott Wave Theory.
EXPLANATION:Say in case of uptrend, the trend line that has been drawn from the start point of wave 1 and the end point of wave 2, (this will be upward sloping line).. is not
penetrated before completion of wave 3.

Generally, if we draw a parallel channel line using above trendline touching the high of wave 1.. then we can get possible termination point of wave 3.
Of-cource wave 3 can go beyond that as well.

Same goes for the trend line draw using end points of wave 2 and wave 4. This TLine shd not be broken when Wave 5 is in progress.


Well-Known Member
ST IS ANOTHER GOOD TRADER WHO HELPED MANY IN APPLIED TA,his imp contribution is in Thoughts on Day/swing trading already available in 4 shared . So other one his comments on TD sequence & use of oscillator will be put forward.
Oscillators such as Stochastics,RSI,ROC are important tools in the hands of a trader trading on technical analysis. But oscillators are generally used in a wrong way and the common reaction of traders is to sell if the oscillator goes into overbought zone and buy once it moves in oversold zone.

The above is too simplistic way of trading with an we will discuss some nonconventional ways.

I would like to share an important phenomenon regarding oscillator overbought/oversold conditions. Whenever an oscillator like Stochastics,( or even RSI,ROC etc ) stays above the overbought limit for more than 5 bars without taking a dip from overbought to neutral zone....the market has a lot of steam left further to go up, market then continues upward journey,then comes down,then goes into overbought zone again but shows negative divergence and then only it comes down...till then it keeps making higher tops. This is a very strong bullish signal to trade.....

Mirror image for oscillator staying in oversold region for more than 5 bars...

The above phenomenon was what was happening towards the later part of the session yesterday (26-06-09)

I am posting Bank nifty fut 5 min chart of 26-06-09 which is used for day trading.....the top panel is a stochastic oscillator....I have marked 80 and above as overbought zone

The market goes from overbought to oversold and so on so forth in a trading or sideways market selling in overbought and buying in oversold zone is a good strategy....but somewhere markets start trending and that is where the trouble starts for our oscillator trader.

Observe in the chart that when market stays in overbought region for more than 5 bars is extremely overbought and selling it is needs to dissipate this overbought reading and till then it will blast off on the upside and our oscillator trader will keep on selling in a market which is blasting off ....The correct action here is BUY....not sell...
Slow line is basically the moving average of the fast line...done for if you are a very aggressive trader...start counting from fast line...if you are a bit relaxed type...start counting from slow line...the aggressive trader counting on fast line will have more trades,early entries but also more whipsaws.....part of the game we are in.

To understand the correct way of trading on oscillators let us study the Nifty futures 60 min chart. The stochastic oscillator is doing a great job till May 09end...calling each top and bottoms and our oscillator trader is on a high and feels that he has figured out everything in the markets and he is on his way to top the next batch of Market Wizards......But market has its own ways...we all know that....All of us have been there....

The problem areas for the oscillator trader are as under :

1) Up trending market from 27-5-09 ,1:00 bar to 2-6-09 ,11:00 bar

2) Up trending market from 9-6-09 ,3:00 bar to 12-6-09 ,12:00 bar

3) Down trending market from 12-6-09 ,3:30 bar to 16-06-09,12:00 bar

4) Down trending market from 17-06-09 ,3;00 bar to 18-06-09 ,3:30 bar

If he can handle the above 4 markets successfully,our oscillator trader is the king....

Let us see how he can handle these periods...I will explain first two cases,rest 2 are mirror images...

1) 27-05-09 ,1:00 bar onwards.....

On 27-5-09 at 1:00 bar the stochastic oscillator goes into overbought zone and that is a mouth watering trade for our trader friend to go short ( most will trade like this and repent later ). He goes short and gets killed in the subsequent market acyion.

The Oscillator Entry Qualifiers For Short Tradeare as under :

1) The oscillator should have gone to overbought zone.
2) Wait for a bar where the oscillator comes out of overbought zone and comes in neutral zone....
3) In doing step No 2 the oscillator should not have stayed in overbought zone for 5 bars and more
4) Wait for a downclose ( meaning close less than earlier day's close)
5) Ensure that by that time oscillator does not go very near oversold region
6) Sell when the low of the downclose bar is broken on downside.....

If you observe all 6 qualifiers you will see that there was no shorselling opportunity in this uptrend.....our trader friend is home safely....and made money in longs....

2) 9-6-09 ,3:00 Bar onwards

Oscillator went into overbought territory and stayed there for 9 no shortselling ideas to be entertained....

Here the market will move to neutral zone,dissipate the extra bullish pressure ,then go to overbought region,fulfill all 6 qualifiers,give negative divergence and then change its direction to down...let us see what it did...

Come to 12-06-09 ,12:00 bar...after dipping into neutral territory the oscillator has gone to overbought zone stayed there only for 1 bar 1:00 it dips again into neutral zone,gives a downclose...Now all qualifiers satisfied...the low of the 1:00 bar cracked in 12-6-09 , 3:00 bar and that is an ideal sell entry....mkt never looked up after thatAlso note the classic negative divergence here,the mkt making new higher top oscillator making lower top....all perfect...
Whichever timeframe you are this example we were trading 5 min so 5 bars of 5 min timeframe.
The other two are mirror images in downtrend.Our friends can easily figure them out well ....................

NOTE:for sell we want that the oscillator has not stayed in OB zone for 5 bars or more....if it has stayed for 5 bars or more we will not sell on its flip as the oscillator though has come down,the market will make still higher tops and take out our stop loss...

We want a mild overbought reading ( meaning oscillator to stay for less than 5 bars in OB zone) to see the other qualifiers for perfecting a sell entry.

The Oscillator Entry Qualifiers for a Short Trade are as under :

1) The oscillator should have gone to overbought zone.
2) Wait for a bar where the oscillator comes out of overbought zone and comes in neutral zone....
3) In doing step No 2 the oscillator should not have stayed in overbought zone for 5 bars and more
4) Wait for a downclose ( meaning close less than earlier day's close)
5) Ensure that by that time oscillator does not go very near oversold region
6) Sell when the low of the downclose bar is broken on downside.....
he Oscillator Entry Qualifiers for a Long Trade are as under :
The oscillator should have gone to oversold zone.

Wait for a bar where the oscillator comes out of oversold zone and comes in neutral zone....

In doing step No 2 the oscillator should not have stayed in oversold zone for 5 bars and more

Wait for an upclose ( meaning close more than earlier bar's close)

Ensure that by that time oscillator does not go very near overbought region

Buy when the high of the upclose bar is broken on upside....

An oscillator is in the OB zone when the values are greater than some fixed level say 80 (some people may use other levels as 70 or 75), similarly it is said to be in over sold zone below 20/25/30
The oscillator trade entry qualifiers can be used to perfect the trade entry on any timeframe...we have seen 5 min and 60 min TF let us see daily TF example...

The chart posted is a Bank Nifty chart for Dec 07-March 08 period...

The stochastic oscillator went into overbought region in a strong bull market on Dec 04,2007 and if we apply the entry qualifiers.we are saved from a premature short trade and susequent stoploss....The oscillator stayed in OB region for 8 days indicating market very strong...the bull pressure needs to dissipate.......

The stochastic again went to OB zone on 31-12-07 but again qualifiers saved us....the indicator stayed in the OB region for 7 bars....hmmm not yet good time to sell....bull pressure needs further dissipation.....

Finally the indicator goes in OB region again on 15-1-08 stays there only for a day ,next day gives a downclose and flips to the neutral we look for a sell opportunity......The low of the downclose bar was cracked on 18-1-08 and that gave us a great sell and the market never looked back and crashed by more than 3000 points and the rest is history....

Is this qualifier never fail...holy grail ? Nothing in trading is failproof...but this qualifier will save you from 80 % of oscillator whipsaws.

for day trading you have to go for 5 min or 10 min timeframe and use 8,3,4 stochastic will identify buy and sell zones pretty have to see stochastic chart for the underlying ie nifty and if nifty is taking off from oversold region buy calls/sell puts.....and if nifty is coming down from overbought area,buy puts/sell ATM calls....
Pivot based trading methods are great ...they are trend following methods and work very well in trending markets...where as oscillators are trading or sideways market indicators....they work well in sideways market...we have both types of different tools for different jobs...

We must have as many indicators pointing toward a particular direction as possible even if we are trading pivot based methods to stack the odds in our favour....a PL break and oscillator giving a valid sell from overbought zone is a very potent sell signal...

I use oscillators as confirming indicators....not as trading systems...but I have traded quite successfully on oscillators alone and I know that if handled well they give you great edge in trading.
For those who are interested in learning more about oscillators,their construction,use etc...can go through " New Market Timing Techniques" by Thomas DeMark.It is a Wiley publication and one of the best books on Technical Analysis....

He has developed many unconventional oscillators and my favourite is TD REI...DeMark's language is very difficult to understand and that is why I chose to work with stochastics and did not introduce REI in this thread.

I suggest you work with hourly timeframes and try various settings but I find that the 8,3,4 setting work pretty well in hourly timeframe for swing trading...
But keep in mind that oscillators are not holy grails of trading...they can and do anything else in trading.

trading on oscillators has a major problem that in periods of strong trends the oscillator remains in OB/OS region for extended period of time and one tends to trade against the underlying strong trend....the strong OB/OS condition of the market needs to get dissipated by coming into neutral territory and again going into OB/OS region and staying for less than 5 bars....this needs to happen 1-2 times before market trend comes to an the process we get divergences and actually divergences are not the cause but effect of such OB/OS condition....

Note that the qualifiers not only keep you out of trouble most of the time but they also warn you for strong market action and new tops/bottoms in case of extreme OB/OS conditions.


Well-Known Member
ST 's comment :We as traders donot have to think whether the market is going up on short covering or any other reason....our job is to read the market correctly,position ourself to take full advantage of the move and take our profits when mkt tells us that the move is about to end or ended.....reasoning part we leave to the analysts.....

Conventional way of selling once the oscillator moves in OB area is incorrect....if the oscillator stays in OB area for extended period of time (more than 5 bars) actually is a strong buy signal .If we observe the qualifiers I have mentioned (These are developed by Thomas the credit goes to him...I am only applying these to our markets) then we would have avoided sell entry in yesterday's gallopping markets.....

As the indicator suggests,I feel that the market has more steam left and will go still higher .
Note that market remained in overbought region for 14 bars on 15 th indicating bullish pressure is excessive and it needs to decipate but in the meanwhile market will continue its upward march.....this background view helped us to buy all dips on 17th....and even on 17th,market remained in OB region for 8 bars....still indicating strong northwards movement...and market kept its word by going higher.
Normally I found that the day/swing trading I do,a 8-12 period oscillator works well...the five bar settings have been found out by long research by Thomas DeMark who has developed the method.....I have been using it with other oscillators like RSI and they work pretty well .....same chart with 10 period RSI does work well....As I tried pride's setting on my chart,it seemed to work continued with it....

As you change the timeframe,the period for which the indicator stays in OB/OS region excessive OB in 30 min if you see in 5 min bars you will observe probably two consecutive periods of OB ( more than 5 bars)....I always see what it looks like on larger TF and if both TF indicate more than 5 bars on OB/OS territory,then the move we get is much more robust and dependable.....we can call this TFA but I have found that multiple TFs give much better trading results....

I trade this set up as a set up critaria for any other system I trade...never traded this set up as stand-alone but traded on 30 min oscillator and this set up combination with good results in past.......
Last 3 occasions we had the indicator staying above OB region for more than 5 bars meaning excessive overbought reading.....and the qualifier kept us away from taking any sell signal (in fact it asked us to buy...)....

Today the oscillator went into OB zone,stayed there for less than 5 bars...and the point marked as "A" satisfied all the qualifier conditions namely :

1) Oscillator staying for less than 5 bars in OB zone

2) Oscillator had come to neutral zone

3) A bar with downclose (meaning close less than close of earlier bar)

4) Break of low of this bar

5) At the time of break,the oscillator has not gone to OS area.

With all the qualifier conditions satisfied,we got a sell signal on cracking of low of bar marked "A" may be worth noting that the oscillator qualifiers kept us away from selling when selling was not right and it gave a sell signal duly qualified today when selling was right.
I follow 5 bars because I have found them working well....but I dont think there is some rigid principle about 5 bars....if someone based on his indicator and timeframe settings finds 6 or 7 bars...that is perfectly needs to get comfortable with whatever parameter one uses based on the actual experience with the indicator.....

This image has been resized. Click this bar to view the full image. The original image is sized 762x382.

If we see market action on 30th and 31st....the oscillator remaied in overbought zone for 15 bars....this indicated a strong upmove on last day of the settlement the upmove,many thought it is a last minute short covering etc....nothing of that sort,market was setting up for the upmove all throughout the day......

Now let us come to smaller timeframe(5 min)...and see what market was doing...

This image has been resized. Click this bar to view the full image. The original image is sized 762x382.

Market on 30th and early part of 31st was indicating a strong upmove....but in the midsession market went in correction mode and drifted held support on 5 min and 30 min timeframes very well....and after 3:00 the tsunami started....look at the channel break,near vertical upmove,observe the positive divergence in oscillator chart ,the fact that this upmove started with a bang( the starting 5 min bar is of 23 points against average ATR of 11 points).....all indications of getting on board quickly and stay in long position till the end of day.....

The above analysis indicates that behind seemingly random moves of the market there is lots of set ups going on and if we understand these ....the moves will not come as a surprise (it came as a rude shock for some.....) but they will come as expected moves which we can trade profitably....
Supports on 5 min and 30 min were held,no damage there....and I have been trading with these setups for a long time and a OB reading for more than 5 bars in larger timeframes will in 80% cases will make new the upmove yet not dont change their minds too will make new tops 2-3 times...

But that does not mean that we go on buying even when market was going down but we should have been short and should reverse to long on channel break.

.at the 1st arrow from left,there is no sell signal,if you read the theory in first few pages,if oscillator stays in OB region for more than 5 bars,then indicator coming out of OB region is NOT a sell signal....

At 2nd arrow from left...the oscillator just touched OS area and reversed...this you may consider as noise but the higher TF,volumes gave some indication to avoid this noise....Volumes are often neglected but they tell a lot about the move....a limping move on low little suspect and get out on first sign of trouble......

At 3rd arrow all TFs agree.....and market took off....

This technique is not fail proof but it helps understanding the market action .There are whipsaws on this like any other method....

If you had observed the market action around 4644-42 it was showing tremendous resistance for going down...I remember 2-3 times bears tried hammering it but it bounced back....this indication you can get only if you are a good screen reader....but there are other factors apart from what the screen was showing you....

1) 30 min in OS area

2) 5 min showing reversal,it also showed a positive divergence.

3) NF breaking the downsloping channel.

4) Market Profile indicated possible bottom for the day as 4645-50 area,it went down a little more and reversed

It is always amalamation of 3-4 factors which give us reliable reversal...but the signal one can get on break of downward channel....4644 was a level corrosponding to I had once talked about cotton being pressed into a gunny some point it refuses to take any more ....

Cannot explain this phenomenon....only screen time and experience will teach you that....but it happens and one can see it in the live market.
"Just want to add the following qualifiers developed by Thomas DeMark (in New Commodities Timing Methods book) to perfect the entry based on oscillators,which I follow in my trading .These are :

1) The indicator should have come up above the oversold level by remaining less than 5 bars below the level for buy signal,mirror image for sell (this you have mentioned in your post above)

2) It gives an upclose compared to the previous day.

3) On the next bar,upclose days high is taken out on upside then take a buy entry.

Posting yesterday's Nifty futures 5 min chart.See the volumes on downthrust bars and see volumes on antitrend rallies ( shown in circles)...volumes drying up on upmoves and strong volumes on downthrust bars means downmove still in forece so no need to take profits in a hurry...reversal not likely to happen any time soon.....Hope it helps..

After divergence trail your stop for taking profits to nearest 5 min PH...divergence is a warning and not a reversal signal unless a move takes over PH with good volume....

1) Stochastics in overbought zone and drifts to neutral pauses a little....then again climb back to new highs and stochastics going to lower high giving negative divergence ,stays there for less than 5 bars and comes to neutral zone and if all qualifiers are satisfied,that presents a good sell enrty.

2) Stochastics fluctuates in neutral zone...nothing to be done as we would like to trade overstretched conditions...and overstretched conditions yet to take place...

3) Stochastic parameters depend on the timeframe and the stock you trade...experiment with various parameters and if a particular parameter catches most of the turns...that is a good hard and fast rule here...

Yes it is always dangerous to sell when stochastics is in overbought region for 5 bars and above...irrespective of the timeframes and whether it is now or 2 years will continue making new tops 80% time...and 20 % time it may come down...but we always trade 80% chance of a thing happening.

I have been trading on these and I remember my trader friends blindly following the OB/OS and selling in extreme OB areas...but finally taking their losses most of the times....with these qualifiers we stack the odds in our favour....

you are right...there is a negative divergence in weekly charts....the indicator was in OB area for more than 5 bars...then came to neutral zone,then again to OB area,stayed there for less than 5 days.....already give a downclose...and if 4353 is broken,we will have a downtrend....


Well-Known Member
Next we try to understand TD sequence to short at top(with distribution) and opposite ie. long at bottom after accumulation atleast 9 bar mechanically
Sequential is a mechanical trading system developed by Thomas Demark. It consists of several stages:

1. Setup
2. Requisite filter (Intersection)
3. Countdown
4. Entry into the market
5. Position closing (exit)

Buy or Sold Setup is considered to be formed if within at least 9 consecutive bars, the closing prices are lower (higher) than the closing prices four bars preceding each bar of this sequence. There must be no less than nine bars in the setup.

Requisite filter (Intersection)
Intersection is designed to filter-out false setups. To confirm a buy (sell) setup the high (low) of bar 8 or 9 must be higher (lower) or at the same level as the low (high) of bars 3,4,5,6 or 7. If there is no intersection on bar 8 or 9, then the countdown stage is delayed until it happens.

The setup is canceled in the following cases:

If "looping" (will be described later) occurs.
If one of the following closing prices is higher than the highest daily top in the case of the Buy Setup; or less than the lowest daily bottom in the case of the Sell Setup.

The countdown begins once the setup intersection has occurred (but not earlier than bar 9 for this Setup). For the Sell (Buy) Setup the countdown reveals the correlation between the closing price and the high (low) price two bars before. The closing price should be higher (lower) than the high (low) price two bars before. Once thirteen prices have been fixed (not necessarily sequential) the signal appears.

The countdown stage cannot be completed before twelve bars appear following the setup stage (the ninth bar is supposed to be on the countdown stage), but generally, it takes approximately 15-30 bars.

The countdown and the setup are canceled in the following cases:

If another opposite setup has been formed.
In case of "looping" (if another setup in the same direction is formed).

Enter the market
There are three methods of opening a position:

At the close of the bar which ended the countdown. This is the most risky method because there is a great chance of "looping".
Following the flip: in order to buy (sell) the closing price should be higher (lower) than the closing price four bars before.
Following two-bars flip: in order to buy (sell) the closing price should be higher (lower) than the closing price two bars before.
The third method is a compromise between the first and the second method.

Exit from the market
To determine the Stop Loss levels, Thomas DeMark used a range of the day with the lowest (the highest) price over the whole setup period and the Buy (Sell) signal countdown.

There are two methods to define the range:

The bar's low is subtracted from the bar's high or from the previous bar's close if it is higher. In the case of the Buy (Sell) signal the Stop Loss level is calculated by subtraction (adding) of this value from the bar's low (to the bar's high).
The second method is more "conservative". The bar for the Stop Loss level is chosen in a similar way. For the Buy position however, the Stop Loss level is calculated by subtracting the difference between the close and the low prices from the bar's low. For the Sell position the Stop Loss level is calculated by adding the high price and the difference between the high and the close.
It is very important to define levels at which to fix profit in case of favorable price behavior. There are two ways to close a position with profit:
If a new Setup stage has been finished and the price could not reach the highest/lowest price level registered during nearest inactive setup.
If there is a reversal signal.

Sequential is effective not only on daily charts but Thomas DeMark recommended it only for this period.
Tom DeMark discussed his TD
Pressure Ratio indicator.

Here's a description of the indicator from AT Mag:
Numerator is the sum of all the accumulation (days the close was above the open) over a certain number of days,
multiplied by the volume - that is the "Buying Pressure".
Note: "Selling Pressure" is the sum of all of the distribution over the same number of days, multiplied by the
volume. Denominator is the absolute value of the sum of the Buying Pressure and Selling Pressure.
The ratio gives you a measure of the Buying Pressure as a percentage of the total activity. This ratio
(oscillator) should fluctuate from 0 to 100.

A. Set Up Criteria

1. For a Buy signal. Nine consecutive daily price closes which are lower than the close four days earlier.
For a Sell signal. Nine consecutive daily price closes which are higher than the closes four days earlier.
2. An Absolute Prerequisite
The day prior to the first day of a nine consecutive set up sequence must:
for a buy signal have a close higher than or equal to the close four days earlier,
for a sell signal have a close lower than or equal to the close four days earlier.

B. Count Down

For a buy signal, following the successful completion of the count down we wait for thirteen closes which are lower than the close two days earlier (not consecutive, in fact extremely unlikely to be so).
For a sell signal, after successful set up, wait for thirteen closes which are higher than the close two days earlier.

C. Entry

On successful completion of set up and count down we now have a choice:
a) Enter on the close of the day that the count down is completed, i.e. the close of the thirteenth defined close. This is the most aggressive and highest risk entry but most closely approximates the exact high or low of the trend about to be reversed. However, it is the entry most likely to be whipsawed if the Sequential fails.
Entry after reversal
b) On a close higher for a buy (lower for a sell) than a close four days earlier after the count down has been concluded, i.e. post reversal.
c) On a close higher for a buy (lower for a sell) than the high (low) two days earlier after conclusion of the count down, i.e. a compromise between a) and b).

(it is has been copied pasted ,,,pls donta sk me the site ,,,because this is all old stuff since it wsa required so i posted here)

it is infact true it showed exit on top ,,,,and entries at bottom ,,, but still some loop holes rea there and could be worked out!!

Regarding the system, it always looks to predict the reversal point in the current trend with 9 consecutive bars. Yes, the number 9 is where the perfect setup has taken place and suggests reversal point. This indicator can be used in any time frame.9 consecutive bars is a sub -set of the system but final signal is NOT on 9 bars. Also" recycling",we are going too fast. TD Combo is a slight variation of TD sequential.This is a trend anticipatory system. Does it mean that it can identify all bottoms and tops ? NO but when it speaks,it speaks with absolute accuracy and gives a sell signal right at top or buy at exactly at the bottom bar.

.He has done work on Sequential,Combo,Trendlines,Oscillators retracements etc.I have worked with sequential in time frames from daily,hourly,5 min etc but I find daily and hourly work pretty well .

system has three components,

1) SET UP : Sell Set up is a series of minimum 9 consecutive bars in which the close is equal to or higher than close of the bar 4 bars ago. These have to be consecutive bars.If after 2-3 bars,the relationship is broken,you have to start this phase all afresh
Also set up requires min 9 bars,but set up continues afterwarda 10,11,12,13,14 bars and so on.
BUY set up is a mirror image of sell set up ie it requires minimum 9 consecutive bars whose closing is less than or equal to closing of the bar 4 bars back.

2 ) Intersection : This stage requires that the 7,8,9 bar of set up must intersect (range overlap ) with bars 3,4,5,6 bars back.This ensures that the next phase is postponed till mkt applies some kind of brakes to the price activity and there is no run-away mkt action.

Step 3 : Count down : After 9 set up bars,and intersection,the countdown phase starts.The buy countdown requires that the close should be less than or equal to the LOW 2 bars ago.These bars are not required to be consecutive.In fact they will very rarely be consecutive, Yoy require 13 such countdown bars.After 13 bars,whenever the mkt closes above the open,it is a BUY signal.

For sell count down,the countdown bar's close should be greater than or equal to HIGH 2 bars ago.After 13 sell count down bars,when mkt closes below the open is a SELL signal.

See the attached chart,set up and count down phases are marked.Intersection is very clearly visible.
To facilitate identification of Set up and Count down bars,I have developed a small utility in Metastock.Go to indicator builder and make new indicator "Set Up" with following formula


Also make another indicator BUY COUNT DOWN with following formula


One more indicator SELL COUNT DOWN with following formula


And plot these on separate windows above yr charts.You get 0 or 1 toggle and you can identify and count the bars with the cursor,makes it pretty easy and boring work of comparing close to close or close to high/low is done by the programme. Be careful with syntax.
my observations as under :

1) You have marked only Buy and Sell setups.I dont see Countdown markings.

2) There are 2 buy set ups and though I am unable to count exact length ,the second set up looks larger ( in length pointwise) than the first set up,this is called Recycling .
Profit objectives you mentioned are from DeMarks Trendline research.He has also developed three qualifiers for identifying valid or failure trendline break.

For sequential he recommends to hold the position at least till a set up in opposite direction is complete. In this process if the mkt breaks the up/down TDST,then he recommends to hold till countdown 13 in the opposite direction.
After 9 set up bars,the mkt has a tendency to go sideways or take a correction.This is known as " Power of 9" in sequential.But the graph shown has completed 9 set up bars and also turning down from a TDST level.So though not a full fledge sell yet,it is indicating a downmove.
Power of 9 indicates market making a short term top/bottom and going in the reverse direction or sideways.It does not indicate the final reversal as if it was then the mkt would not proceed to the sequential count down 13 bars. Set ups are to be traded differently,In following two ways :

1) Lets say you have a previous buy set up and now you get a sell set up with 9 bars completed but the TDST leven obtained from the earlier buy set up is not exceeded and is providing a resistance,you can be reasonably sure to get a good downmove atleast if not trend reversal.

2) In the above example suppose in first 3-4 bars the buy TDST level is broken,then you can be very sure that the mkt will accelerate on upside,and go to complete 13 countdown and hence you can take a buy position on break of buy TDST.



Mkt took a good resistance at BUY TDST at 4340=30 and reacted a little but did not challenge a SELL TDST at 4168=50 and in the next attempt broke above BUY TDST at 4340=30 confirming a BUY .
My observations are under :

1) Daily Nifty Future : on 11/8/2008 the nifty future closed above BUY TDST at 4586 and the next day high of 11/8 was broken.This is a valid break of TDST on daily and the upmove likely to continue after a correction

2) On NIFTY Fut Hrly chart : Sell TDST 4496 broken on downside indicating a downmove.BUY TDST at 4589 will provide resistance to the upmove.

The above two timeframes giving conflicting signals. We let the market resolve this conflict and speak loudly which it will do soon .

Interviw of thomas demark.. where he soke abt his system at length...

Over the course of several conversations, DeMark explained the genesis of his analysis approach, his predisposition toward countertrend trading and the process of developing objective trading tools.

AT: Do you think you have a natural inclination to be countertrend, or was that simply an outgrowth of your early work experiences?

TD: I tended to look at things that way because I was always working in an institutional environment. In that kind of situation you’re dealing with size positions and you want to go the other way [sell into uptrends or buy into downtrends] to get your trades off efficiently.

AT: So you were never someone who focused on the longer-term trend and looked to enter on small corrections or pullbacks?

TD: Pullbacks still represent exhaustion, so that’s a viable technique. But you don’t want to be a typical trend-follower because of the price vacuums and gaps, which result in slippage. Trading commodities helped me a lot, because it made me realize that if you’re trying to catch a trend, you have slippage all the time. But if you go against the trend, slippage goes your way — it works in your favor.

AT: Do you think your techniques are applicable across markets and time frames — say, stocks and futures, and intraday bars as well as daily or weekly bars?

TD: Yes, all time frames and all markets. I don’t believe in developing a system or indicator for one market.

AT: You haven’t found that some techniques only work in certain situations or markets?

TD: No, I haven’t seen that, but I’ve never gone in that direction. I think of those kinds of things as optimized.

AT: Was your approach to break indicators open, so to speak, to see how they work and then try to improve on them?

TD: Yes, I did that with everything. There are certain concepts that have value, but I think people sometimes apply them incorrectly.

Amarket can basically do two things: It can trend up or down, or it can move sideways. But you can’t use the same indicators or techniques for both situations. Indicators like oscillators work in sideways markets but not in trending markets, and trend indicators like moving averages don’t work in sideways markets.

So I tried to find a different way to apply moving averages to address the reality of this situation. I don’t use traditional moving averages, but I use the concept of moving averages. For example, I’ll start the process when there’s a high lower than the prior 12 highs — that’s when I know the market is in a downtrend; the opposite would be true for an uptrend.

At that point, I’ll begin calculating a five-day moving average of the highs. If the market closes above the moving average and opens above that close the next day, that constitutes an upside breakout. But the moving average is only active four days, unless the market makes another high that’s lower than the prior 12 highs. Basically, the market has to provide evidence it’s in a trend — a high lower than the prior 12 highs or a low higher than the prior 12 lows — before I’ll apply the moving average. And when that prerequisite is no longer in effect, the moving average is cancelled.

AT: Do you have a preference toward a particular time frame or trade length — short-term, intermediate, long-term?

TD: Well, I don’t think it’s useful to think of things that way. Rather than thinking in temporal terms, I think it’s better to think of things in terms of percentage moves. For example, short-term might be a 5- to 10-percent move, intermediate might be a 10- to 25-percent move and long-term might be a greater than 25- percent move. In some cases, a trade might meet a long-term projection in a single day. If you accomplish your objective, you should get out of your trade, no matter how long it took.

AT: One of the early indicators you developed when you were at NNIS helped identify likely buyout candidates. How did that come about?

TD: I created a lot of models to measure buying pressure and selling pressure. The indicator was an outgrowth of an attempt to improve on the accumulation-distribution tools being used at the time. As it turned out, the indicator was finding buyout candidates before they were announced.

People were using close-to-close calculations, multiplied by volume, to calculate price-volume indices like on-balance volume. The problem with an indicator like that is you didn’t know when it would break out. Also, you couldn’t relate it from one stock or commodity to another.

The indicators I was developing were all volume weighted, but instead of a conventional close-to-close approach, I was comparing the close to the open and relating it to the high and low of the day. So, for example, if a stock opened on its low and closed on its high, you knew it was all buying pressure. The approach was to take the close minus the open, divided by the high minus the low, multiplied by the volume [(C-O)/(H-L)*V].

Now, that basic formula provided a cumulative index, but it wouldn’t tell you when a stock would rally or decline if you got a divergence; it also wouldn’t tell you which stock was better than another stock.

So I took the buying pressure divided by buying pressure plus selling pressure, which told me what percentage of the activity was buying pressure. Then I calculated the rate-of-change over different time periods — say, a 13-period, an 89- period and a 144-period calculation. This was the TD Pressure Index.

In the process of putting together this indicator, I noticed something interesting, which I hadn’t expected: Markets make their lows not because of buying coming into the market, but because of selling leaving the market.

That’s important. You can see the dissipation of selling as a stock goes lower — the change in the number of shares bought vs. the number of shares sold. Say you start out with 20 shares bought vs. 40 shares sold. As price moves lower you’ll see 18 shares bought vs. 20 sold, and then right at the low you’ll see 16 shares bought for 8 shares sold. The selling dries up. At tops you’ll see just the opposite: It’s not that people are selling at the highs, it’s that the buying evaporates, so by default, prices come down.

By taking the rate-of-change of the ratio of buying pressure divided by the combination of buying and selling pressure I was able to identify buyouts when the indicator got to a high extreme. There were five or six stocks out of a total of 32 I found over a three-year period where I went to management — we were managing their pensions in some cases — and told them, “Look, we can tell by this indicator that you’re going to be bought out.” One company told us, “There’s no way — we know where every share is in the U.S.” As it turns out, they got bought by a foreign buyer. They used to call me the Grim Reaper.

AT: Do you ever do a top-down kind of analysis, where you first look at sectors and then move down to analyze the most tradable stocks in that sector?

TD: Yes, you can look at the signals in terms of a sector index, for example, and then look for setups in the individual stocks.

AT: Have you done any research regarding market tendencies on certain days of the week, or leading up to certain times of the year?

TD: I haven’t really done much work there. I think there’s something to Mondays, because they often represent a premeditated move in the market. A gap on a Monday is significant because it gives you an indication of direction, especially if the gap holds. On Mondays people have had the weekend to think about things, and the major institutions have meetings before the opening. If they make a decision on a particular stock that has longer-term implications, it can cause a stock to gap open.

AT: Do you believe in using any kind of discretion in trading, or do you favor completely mechanical approaches? Do you see other people who are successful — perhaps using your tools — who blend in discretion?

TD: There are essentially three ways of looking at the market. Most people operate on the first level, which is to look at a chart and guess. There’s no consistency. The second way is to use indicators; there’s some subjectivity involved, but at least you have a roadmap. The third level is to use indicators in a very systematic approach.

Ninety-nine percent of people operate on the first level, three-quarters of a percent operate on the second level and the last quarter-percent operate on the third level. My feeling is that the typical chartist is a chart artist. I want to be a chart scientist. When I was developing techniques, I wanted everything to be mechanical.

But having said that, I know traders who use my techniques on a discretionary basis — they use them as confirmations. There has to be some discretion involved. Fundamentals ultimately dictate long-term moves and if you go against them, you’re going to be wrong.

AT: What are some simple techniques people can use to identify exhaustion points in the market?

TD: I have one approach called TD Camouflage that works especially well short-term. It’s based on being able to see “hidden” buying or selling pressure as market bottoms or tops are forming.

When they talk about the market being up today or down today, all quote vendors, newspapers and other financial media report price change relative to the previous day’s close. But what’s more important is price relative to the current day’s open.

A camouflage buy indication occurs when you get a close below the previous day’s close, but above the current day’s open. For example, if a market closed down relative to yesterday’s close, all the media would report that it was a down day. But if the market is up from the open, there’s really buying coming in. You can extend the approach by making sure today’s low is less than the low of two or three days ago. The reverse occurs at highs. If you look at the S&P futures, most of the turning points have TD Camouflage signals (see Figure 1, below).

[Tom DeMark Camouflaged Price Action]

If you look at July 11, the S&Ps closed down for the day. People think, “The market was down, it’s not going to turn up.” Well, it also closed above the open that day, and it turned the next day. Under the guise of a down market, the evidence of accumulation was being camouflaged. Now look at the high on July 19. It closed above the previous day’s close, below the opening and the high was greater than the high two days earlier. Again, that was the turning point.

It’s really perfect for short-term trades. If you’re a very short-term trader, you can use this to get in on the close and get out the next opening. The probability is very high for that kind of trade.

AT: How would you advise people to approach technical trading so they can identify these kinds of relationships and develop strategies?

TD: Well, you can start out by reading a good, basic book on technical analysis — I think Darrell Jobman’s book [Handbook of Technical Analysis: A Comprehensive Guide to Analytical Methods, Trading Systems and Technical Indicators (1995, McGraw-Hill)] is good — but you really have to study price action first hand.

You also want to turn off the news. There’s always an excuse for what happens in the market. You always hear things like IBM went up because earnings were good, or it went down because earnings were good, but they weren’t as good as expected. It’s stupid.

AT: Do you find it useful to treat the long and short sides of the market differently?

TD: No, I don’t think you can do that. My approaches are symmetrical.

AT: Don’t you see a difference in the way rallies and sell-offs behave?

TD: Seventy-five percent of the time the market will be in a trading range and any oscillator will work. It trends up 15 to 18 percent of the time and down 8 to 10 percent of the time. The reason is that buying is a cumulative process and the analysts become more bullish as the market goes up and people buy more on margin, but selling is a one-decision event. That’s why markets go down more quickly than they rise.

AT: But since that makes a difference in how markets move, don’t you think that calls for a difference in designing indicators and strategies?

TD: Well, you have a point, but I don’t think so.

AT: Can you describe the trendlinebased projection technique you used to make the interest rate call that caught Greenspan’s eye.

TD: Take the lowest low beneath the most recent trendline and calculate the difference between it and the trendline, and add that amount to the breakout point.

AT How did you make trendlines mechanical?

TD: For a down trendline — a TD Supply line — you take the most recent high preceded and succeeded by a certain number of lower highs and connect it to the next most recent high preceded and succeeded by the same number of lower highs. You can adjust the number of bars to make it longer or shorter term. Level 1 would be a high preceded and succeeded by one lower high, a Level 10 line would be a high preceded and succeeded by 10 lower highs.

You always connect two points only, and connect the two most recent according to these rules. Most people are accustomed to starting at the left side of the chart and connecting the most distant point and connecting it to the nearest point. But by connecting to the two most recent pivot points, you’re able to keep adjusting to the market.

Then you can use qualifiers to determine the effectiveness of the breakout. If a qualifier is there, it will probably breakout successfully. If a qualifier isn’t there, an intraday breakout will probably fail. Failed breakouts like that can be good one-day trades: You fade the unqualified breakout and follow the position with a stop.

AT: What are the qualifications you use for breakouts?

TD: There are a few. I’ll give you a couple of the basic ones. First, in terms of upside breakouts, there should be a down close the day before the breakout (see Figure 2, below). I’ve also experimented with a close less than the open.

[Tom DeMark Confirming Breakouts]

The second qualifier is an open above the trendline and above the previous day’s close, because in a situation where you might have a very steep down trendline the market could open above the trendline, but not above the previous day’s close, and trade one or two ticks higher. The move above the previous day’s close confirms the move. Also, for these confirmations, the open can never be the high — for an upside breakout.

AT: Are these rules the same for horizontal support and resistance and trendlines?

TD: Yes.

AT: How would you describe the logic behind these concepts?

TD: In the case of the first confirmation technique, if everyone’s piling into the market right before a breakout, there won’t be any money to propel it after the breakout. You’ll have an edge if you require a down close the bar before an upside breakout. If the previous close is down, there will be skepticism when it does break out, because most people have been getting short. People are creatures of habit. If the market has been moving down, they’re not going to cover or reverse until the close, so you’ll see a lot of vacillation around the breakout level. What often happens is that you’ll see capitulation in the last hour before the close and the market [will close] really strong when these people finally bail out of their positions.

I used to get burned by breakouts just like everyone else. I’d see a strong day the day before a breakout and think, “Ahh, it’s going to follow through.” So I’d buy the breakout and, invariably, it would close down on the day. So I had to figure out why, and I thought, “Well, if I’m buying on the previous day, or on the breakout, everyone else probably has already, too.” So, I decided I had to look for a down close the day before.

When there’s an up close before the breakout, the breakout will probably fail because everybody is already in the market because they’re all looking ahead to the market breaking out the next day. If everybody is already in, how can it go higher? It’s all psychology and common sense.

AT: Given that this technique is so reliant on what the closing price is indicating, would you use it on intraday bars?

TD: No, it’s really for daily bars. The close doesn’t have the same significance on intraday price bars — you could create seven-minute bars, for instance, and where a seven-minute bar closes is really irrelevant.

AT: Have you found indicators — that is, mathematical formulas — or price patterns to be more useful in trading?

TD: Price patterns. When I first started in the business, there were moving averages and trendlines, and that was about it. And then technical analysis exploded and ran the whole gamut.

At one point everyone [when I was at Tudor Trading] was working on neural networks and artificial intelligence, blah, blah, blah. They created hundreds of systems, and the best ones were the same three or four that I started with, despite all the research.

AT: What was the basis of those systems?

TD: Price patterns and qualifying moves, like we’ve been talking about. The basic concept is finding market exhaustion, which is the opposite of what most people do. Ninety-nine percent of commodity trading advisors, for example, are trend-followers.

AT: But some of them still make money. Don’t you think it’s possible to trade trends successfully?

TD: Sure. But my feeling is that there’s so much competition to get in on a trend you’re going to pay up for a buy, and then go through a drawdown immediately. I’d rather avoid that.

AT: What do you consider your best short-term indicator or trading technique?

TD: Sequential, applied to intraday charts.

AT: Sequential can be a bit confusing to people who aren’t familiar with it. Can you give us a brief overview?

TD: Again, you’re trying to find exhaustion points. First you need a setup — something that tells you whether the environment is right for a low-risk buy or sell. In the case of a Sequential buy setup, you need nine consecutive closes less than the close four days earlier. The market could turn at that point.

However, if it continues to go lower, you go into the “countdown“ phase: You take the close of day 9, and every subsequent day, and compare them to the lows two days earlier. When you have 13 closes less than or equal to the low two days earlier, it’s a low-risk buy point.

In an uptrend, where you’re finding a low-risk sell point, you need nine consecutive closes greater than the close four days earlier. There are a few variations and qualifications, but that’s the basic concept. It works on intraday data, too. I know traders who use it on oneminute bars. (See “Sequential signals”, for examples of Sequential.)

AT: When did you develop Sequential?

TD: In the mid-1970s.

AT: How long did it take you to develop it?

TD: Oh, maybe from 1973 to 1978. That was a very fertile period for me.

AT: Was that a process of studying printed charts?

TD: Yes. I developed almost all my techniques by hand.

AT: Do you think that perhaps having to do things by hand — rather than having the software on your desktop do it for you — helped you, in that you developed a unique approach and understood your techniques down to the smallest detail?

TD: Definitely. The real laboratory was my trading. If I didn’t trade, I wouldn’t have been as intimately involved in the market. I was losing money, and I had to develop things — necessity is the mother of invention. And I didn’t have much money back then. I would tell my wife, “This is my tuition.” I just kept pressing as much as I could. The result of pressing a bad position was that I acquired knowledge.

So, it was a twofold learning process: Examining charts — something you were forced to do because you didn’t have computers — and second, losing money. Those were the two catalysts.

If I’d had then the kind of computing power available now, I think I wouldn’t have had the same kind of investment I had in the whole process. I wouldn’t have been as closely connected to things.-chintan 786
sequential EOD signals we will get once in 3-4 months and hourly signals we will get once in 15 days.What do you do in between ? May be we can share other indicators,qualifiers etc about other research done by DeMark. And remember our biggest reward and satisfaction is a good trade done with professional precision and confidence and profits booked from that trade.

Absolute retracements - this is the derivative in use of Fib. As per TD, we should use Fib ratio percent directly to current or relative price rather than move...

How most of us use it:
for a market that rallied from 40 to 60, the 38.2-percent retracement level would be calculated by multiplying the price move (20 points) times the ratio (.382) and subtracting the result (7.64) from the high (60 - 7.64 = 52.36).

TD's method for it:
Multiplying a high close of 60 by the 61.8 percent downside ratio would result in a support target of 37.08. This �absolute� approach removes the subjectivity normally associated with selecting price moves and applying Fibonacci ratios.

Break out qualifiers:
First, in terms of upside breakouts, there should be a down close the day before the breakout. TD has also experimented with a close less than the open.

The second qualifier is an open above the trend line and above the previous day�s close, because in a situation where you might have a very steep down trend line the market could open above the trend line, but not above the previous day�s close, and trade one or two ticks higher. The move above the previous day�s close confirms the move. Also, for these confirmations, the open can never be the high � for an upside breakout.

Moving Averages from TD's point of View:
TD uses the concept of moving averages. For example, He�ll start the process when there�s a high lower than the prior 12 highs � that�s when we knows the market is in a downtrend; the opposite would be true for an uptrend. At that point, we�ll begin calculating a five-day moving average of the highs. If the market closes above the moving average and opens above that close the next day, that constitutes an upside breakout. But the moving average is only active four days, unless the market makes another high that�s lower than the prior 12 highs. Basically, the market has to provide evidence it�s in a trend � a high lower than the prior 12 highs or a low higher than the prior 12 lows � before I�ll apply the moving average. And when that prerequisite is no longer in effect, the moving average is cancelled.

Has anyone tried all these derivatives of basic technical analysis on Indian market and stocks?
DeMark variation (The TRADING Systems Lab):

1. Prepare to go long today if
a. the true high from four days ago is higher than the high from either two, three or five days ago, and
b. yesterday’s close is lower than the close two days ago, and
c. today’s open is lower than the high four days ago.

2. Prepare to go short today if
a. the true low from four days ago is lower than the low from either two, three or five days ago, and
b. yesterday’s close is higher than the close two days ago, and
c. today’s open is higher than the low four days ago

3. Go long today with a stop order at the true high of four days ago, plus 0.1 percent.

4. Go short today with a stop order at the true low of four days ago, minus 0.1 percent.

5. Risk 2 percent of available equity per trade.

6. Exit all trades with a loss if the market moves against the position by 4 percent or more.

7. Exit all trades with a profit if the market moves in favor of the position by 12 percent or more.

8. Exit all trades after five days, counting the day for the entry as day one, and no matter how late in the day the trade was made (i.e., a trade executed at 2:50 p.m. on Monday would be exited Friday the same week).-apurv 7164

Comment:True high is a high of the bar or the close of earlier bar whichever is higher and true low is low of the bar or the close earlier bar whichever is lower.
I have used DeMarks trendline research,qualifiers and the target calculation in my own trading with very good results.I have also used sequential,Combo and the Oscillator research with good success.The things I could not get proper handle on are retracement,daily range projection,and small systems like TD carrie,TD trap,TD Mehan etc they did not work in very precise manner.

TD Point reversal,TD Double TD Point,TD Camoflage etc work pretty well in our mkts.


TD on retracement - An extract from "'The New Science of TA"

More important than the ratios themselves is the selection of the price points required to calculate the retracements. .........

Assume a recent low has been recorded. To establish reference points for retracement price objectives, extend an imaginary horizontal line from that recent low toward the left side of the chart to the last time a lower low has been recorded. Next refer to the highest price between these two points; that is the "critical price". By substracting the recent low from that value, price retracement levels can be projected. ...........

If price moves to a new high/low then he suggests the multiplication method as pointed by u. Otherwise establish the reage as mentioned above.
TD use:( for buys )

1. wait for the "9" formation
2. wait for countdown of 13 condition based bars
3. if the 13th or any bar beyond that has a close greater than the

make sure that the intersection takes place in 8th,9th or subsequent bar and start count down from that bar.

STOPLOSS :Identify a lowest low in set up and countdown stage(or further till you get a buy by close>open and substract that days range from the low of that lowest low day.This is your stoploss on closing basis.So if the mkt gives 2 closes below that level OR if mkt gives one close below that level and on the next day the close below the SL level day"s low is broken on downside in either of these conditions the stoploss is triggered.Get out fast if stoploss is triggred because in the words of Paul Tudor Jones "when the system fails it really fails ".
Regarding win/loss ratio and winning trades /loosing trades it gives over 70 % success rate. It catches the top and bottoms very well but I have never been able to sit on the position for next 4 months to realise full potential of the trade. The stoploss normally is about 100-150 nifty points and it can give profits of over 400-500 nifty points..I use it as an indicator because lets accept it very few traders can hold the position for 4-5 months and hold it for gains of over 500-600 nifty points with 150 points stoploss and I am not amongst them so never realised the full potential of the system.The system gave a buy signal exactly on the day of the bottom in July 2008 and already in profit over 500 nifty points,I have traded this signal but have I realised the full potential ?The answer is NO I have traded in and out atleast a dozen times thus reducing the gains !!!

Let me sum up by saying that I have made much more money on the system than I have lost on it and I am happy
Set up indicator compares the bars closing with closing 4 bars ago and if the close >or= close 4 bars ago it will tick up and if close <or= close 4 bars ago it will tick down.So with yr cursor count 9 consecutive up ticks or downticks to identify sell or buy set up.

Sell and buy countdown indicator is a 0 or 1 toggle.All bars with indicator showing 1 is a bar where countdown condition is satisfied.So after 9 set ups and intersection count 13 set up bars to get buy/sell signals.

All my Sequential buy charts show 9 set up bars and 13 countdown bars.Only when I am posting trading on TDST alone they will not have countdown bars as they are not being traded there.Only TDST levels are traded.

Hope the above will make the charts more clear .If not then go to physically counting the bars after checking the relationship 2 or 4 bars ago as we used to do earlier but it is quite tedious doing manually so I now use indicators.
Recommend that you read DeMark's "New Commodities Timing methods" book for more detailed information on various aspects.
While reading one of the magazine I found below mentioned stuff from TD.

Buy Precondition:
1. Previous days close < Close day before it's four trading ago i.e. less than close 5 days ago
2. Day before Previous days close < Close day before it's four trading ago i.e. less than close 6 days ago
3. Previous days close < opening of same day

Buy SetUp:
1. C > Previous Close
2. C > Close four trading session ago
3. Today's C > today's O

Sell conditions are reversed.

If I classify this correctly, this is what TD called price flip. Still not sure. I have also prepared small formula for this which is as mentioned below and could found some interesting results (at least for short term trading). Need to do more research.

Give your opinion, please.


//**** Setup Buy Signal ****/

Con1 = Ref(C,-1) < Ref(C,-5);
Con2 = Ref (C,-2) < Ref(C,-6);
Con3 = Ref(C,-1) < Ref(O,-1);
Con4 = C > Ref(C,-1);
Con5 = C > Ref(C,-4);
Con6 = C > O;

Buy = Con1 AND Con2 AND Con3 AND Con4 AND Con5 AND Con6;

//**** Setup Sell Signal ****/

Con1 = Ref(C,-1) > Ref(C,-5);
Con2 = Ref (C,-2) > Ref(C,-6);
Con3 = Ref(C,-1) > Ref(O,-1);
Con4 = C < Ref(C,-1);
Con5 = C < Ref(C,-4);
Con6 = C < O;

Sell = Con1 AND Con2 AND Con3 AND Con4 AND Con5 AND Con6;
-apurv 7164

After the intersection of the setup has occurred (but no sooner than the ninth bar for this setup), the Countdown begins.

For a sell (buy) setup the countdown reflects the relationship between the close and the high (low) two bars earlier. The closing price must be greater (less) than the high (low) two bars earlier. As soon as 13 such prices are recorded (not necessarily consecutive), a signal emerges.

The Countdown phase can’t complete earlier than in 12 bars after the setup (it is suggested that the ninth bar is also included in the countdown phase), but as a rule there are 15-30 bars between the setup and the completion of the Countdown phase.

Countdown and setup are cancelled in two cases:

1. if a reverse setup has developed;
2. �cycling� occurs, i.e. a new setup in the same direction, direction develops.
.I would add the following :

1) Countdown cannot start before 9 bars of Set up are completed.In other words the first countdown bar at earliest will be at 9th set up bar provided the intersection is done in 9th,8th or 7 th bar of set up.If not the countdown is started after the intersection happens.Note this happening in RPower graph I posted few posts back.Here intersection happened after 9 bars of setup and hence the countdown starting was delayed.

2) Recycling means that before 13 countdown gets over,a second set up developes in the same direction.Then the question is we have the countdown on the old set up or the new set up ? The answer is measure the pointwise distance travelled by both set ups.( here the distance is not upto 1st to 9 th bar of set up but setup continues till you get a flip ie set up it could be in 10th,11th 12 or sebsequent bars.

Now the rule is if the second set up length (pointwise distance travelled) is more than 1 st set up but less than 1.618 of the first set up ,then ignore 1st set up and start countdown on 2nd set up and if the length of 2nd set up is less than length of 1st set up or more than 1.618 of 1st set up then ignore second set up and continue the count down on 1st set up only .

Little confusing and complex ? Well would try to explain with a chart and marking on it after the mkt hours.
.Pl incorporate these conditions.

The entry on the price closing >close 4 bars ago is more safe but too late.Lot of move is lost before this happens.De Mark has suggested another entry which I find very good. It is as under :

On or After 13 th countdown bar,enter whenever the mkt closes above the open.

Also incorporate the TERMINAL COUNT It says that only for 13 th countdown day,the condition of close<low 4 days back is relaxed and made more liberal and the condition is the low <low 2 bars ago.

For Intraday charts,the set up condition is close<or= close 4 bars back.Don't say Sell signal was active for 12 days,say that the set up and countdoen process continued and the 12 th countdown(CD) bar was on 2-6-08 and 13 th was qualified on Terminal Count on 3-6-og giving a SELL signal.It is the counting process that leads to sell signal.

The DeMarker indicator is an attempt to overcome the shortcomings of classical overbought / oversold indicators. The DeMarker Indicator identifies potential price bottoms and tops. It accomplishes this by making price comparisons from one bar to the next and measuring the level of price demand.
i am postin the metastock formula for AMA(adaptive mov avg).this goes totally flat during range bound markets.

Periods := Input("Time Periods:",1,1000, 10);
Direction := CLOSE - Ref(CLOSE,-periods);
Volatility := Sum(Abs(ROC(CLOSE,1,$)),periods);
ER := Abs(Direction/Volatility);
FastSC := 2/(2 + 1);
SlowSC := 2/(30 + 1);
SSC := ER * (FastSC - SlowSC) + SlowSC;
Constant := Pwr(SSC,2);
AMA := If(Cum(1) = periods +1, Ref(CLOSE,-1) + constant * (CLOSE - Ref(CLOSE,-1)),PREV + constant * (CLOSE - PREV));
Intersection is an essential phase of sequential ,apart from set-up and count down. And no, intersection not happening is not a theoratical discussion ,I have come across number of cases where intersection does not take place in 7,8 or 9th bar but happens in 10 or 11th or further bar and the countdown starts from there.

Intersection ensures that brakes have been applied to a moving car and the exercise is not carried out in a run a way market and safeguard against premature entry.
Yes the oversold/overbought concept based on number of days it stays in that zone is really good. I have used this concept in even daytrading.Whenever I see oscillator reading in oversold zone for more than 5 bars,the down move always accelerates,so sell with a small stoploss and it is very profitable.

I have used this analysis on oscillator like RSI and found very useful.
TD Sequential and TD Combo are to be applied simultaneously to all charts.My experience is that Combo identifies top/bottom in very strong vertically moving markets and Sequential in normal type of mkts. In strong mkts,combo speaks first and then sequential speaks on a secondary top/bottom.I have seen instances where either sequential or combo speak but when both speak togather,it pays to listen very carefully.
My experience with DeMark sequential and Combo methods is that they do wonders in identifying major turns of the market. But these are long term signals. We get signals once in 5-6 moths or more....not many people want to learn a method which gives 2 trades in a year.
So, first a quick overview of the rules.
1. To begin TD sequential buy count, you need a price bar that closes higher than the bar 4 bars previous, immediately followed by a bar that closes lower than the bar 4 bars ago. This creates the price "flip". This lower bar becomes number 1 in the count.
2. Each subsequent bar then closes lower than the bar 4 bars earlier, until you have a count of 9.
3. The count is not complete until either the 8th or 9th bar of the count closes below the close of the 6th or seventh bar. If they don't you will need to wait till you have a bar close that satisfies this rule, preferably within the next 9 bars.
4. OK, so now you have your price exhaustion. You set a stop loss from the lowest price recorded in this series that is same range as that bar i.e range of bar =12 pips therefore stop is 12 below this low on the close. Note: this stop is on the close of a bar.
5. Your price target is the high of the 1st bar of the count.

That all seems simple enough. Now comes the filter that will give you the winning edge!

If you are familiar with Elliot wave theory, you will know that waves are broken into 2 categories; impulsive and corrective.
If you don't know how to tell the difference I suggest you read some of the fine EW theory post on this forum.
The cardinal rule I have found using TD sequential profitably is;

Only take the trades that result from corrective waves.......never take a trade off an impulsive wave, especially a 3rd wave!

Seems incredibly simple, but it works well.
A couple of other tips;
Best time frames to trade; 1min, 5min, 15 min, 1hour, 4hour, daily.
If your trade reaches it's price objective and slices through it like butter, move stop up to T1, and stay in the trade, it will often go another 61.8%. Otherwise, take your profit at, or just before, the price target. Remember, the Pro's trade this system, when you see price storm to the target, stop dead and reverse, you'll know what I mean.
This system works well for me intraday trading forex and indices. But it works really well on commodities daily, and many stocks.
............. his clients wanted to move size without rocking the boat too much. That is why he had to go for trend anticipatory and exhaustion identifying techniques rather than trend following techniques as when everyone is buying large institutions distribute their stock and vice versa.

He experimented with number of combinations of set up and counting his attempt to find exhaustion bottom and tops and this 9/13 worked well. This he had done manually with thousands of charts. This is a method of 1980 when computers were not so widely used even in US.

My view is when the market gets set up in a trend....its final top/bottom is decided , the course it takes depends on news, Government policies,economic data etc and if no major change in supply/demand equation, then it will top/bottom at a level which is decided well in advance based on how the trend gets kicked a football when kicked in the air, has a fixed trajectory depending on how strongly it is kicked. Sequential and Combo help us to zero in on this final location of top/bottom .I tend to hold this belief because many times Sequential and Combo both different techniques ( and different ways of counting ) identify the tops/bottoms on exactly the same bar...isn't it amazing ?

There is cycles angle also to it...we all know that cycles exist in the markets and sequential is a mechanical way of finding cycle tops/bottoms rather than going with 60 days,180 days etc fixed days cycles. This way we continuously monitor the progress of the market in the current ongoing cycle.

Regarding Fibonacci...... 9 (set up bars ) +4 ( bars back close ) =13 also 13( number of Countdown bars ) ...and 13 is a Fibonacci number.
The innovative approach proposed by Tom DeMark has changed the cyclical analysis
to a precise and scientific technique based on some mechanical calculations.
These allow us to identify in the cycles very significant price
tops and bottoms, which can become trend reversals in the market.

By those instruments the trader can choose a certain market position by
minimizing the risk .

There are two Trading Systems: the �SEQUENTIAL� and the �COMBO�.

They provide two indicators to enter into the market. The first entry signal comes
during the first cycle creation ;
it is weak and it is considered a set up for the second stronger entry signal
coming during the creation of the second cycle.

The first indicator is verified when the calculation produces 9 (sometime 8 )
consecutive bars.

The second one is verified when the calculation produces 13 (sometime 12)
NOT consecutive bars .

We have seen that the best time frame to consider is the �daily� (medium period) ,
which give a lesser margin of error .

Possible future set ups, that we can see during or after the count of 13(12) bars,
can make stronger the first set up.
For example, DeMark says that a very strong entry signal is verified when we have a
setup formation of 9(8) bars after
the count of 13, that is 9(8)+13(12)+9(8) bars.

In other words, to enter into the market after that configuration is not very risky .

If after the 13 bars what we are expecting does not happen, it is highly probable that the
cycle will continue to grow.
Therefore we will need to wait for a new set up and a new counting of 13 bars.

In any case we must always check both, the counting of the �buy� indicators and of the �sell�
indicators and evaluate at each time what it is the best thing to do. Because sometimes an entry
signal coming from one side can be neutralized by an entry signal coming from the opposite side.



On the fifth day preceding the first day of setup, the daily closing bar needs to be higher
than the daily closing bar of the day before the first day of Setup.


On the fifth day preceding the first day of setup, the daily closing bar needs to be lower
than the daily closing bar of the day before the first day of Setup.


Cancellation means that the setup can be removed. As a consequence, the entry signal counting
goes back to its zero setting.

This can happen when:

REVERSE SETUP: it can occur when a contrary setup takes place after the setup and before the
completion of its counting phase.

LOWEST - HIGHEST SETUP: it can occur after the setup and before the completion of its counting phase.
This means that a daily closing bar lower than the lowest closing bar of the setup occurs during the
successive phase of the counting for the SELL signal.
Or a daily closing bar higher than the highest closing bar of the setup occurs during the
successive phase of the counting for the BUY signal.

RECYCLE (optional)

The setup is replaced by a subsequent setup going in the same direction. This only involves the
zero setting of the counting that might have started. The RECYCLE happens under the following

A SETUP in the same direction of the first one takes place.
The high-low value of the second Setup (the difference between the highest maximum and the lowest
minimum of the Setup) is greater then the true range of the first Setup.
But �not too much,� says DeMark: in the sense that the true range of the second Setup is
smaller then the true range of the first Setup multiplied by a value between 1.618 and 3.

When one or both conditions b. and c. do not take place, the second Setup must be ignored,
i.e. the first Setup and the subsequent counting for the entry signal both go on living.


The 13th bar price needs to be higher than the 8th bar price

According to DeMark, the closing bar value of the 13th or subsequent yellow bar needs to be higher
than the bar closing value of the 8th yellow bar for the SELL signal; or lower for the BUY signal.
Then DeMark states also that the value of the 13th or subsequent yellow bar needs to be higher than
the closing value of 2 previous daily bars for the SELL signal; or lower for the BUY signal.


It takes place directly on the 13th (or 12th) bar.
We have an entry signal when, after the counting for the BUY Signal is finished, a counting
yellow bar is made on the opposite direction, that is to say on the counting for the SELL Signal.
In the same way we have an entry signal when, after the
counting for the SELL Signal is finished, a counting yellow bar is made on the opposite direction,
that is to say on the counting for the BUY Signal.

We have an entry signal when, after the counting for the BUY Signal is finished,
a Setup bar is made on the opposite direction, that is to say in the Setup SELL.
In the same way we have an entry signal when, after the counting for the SELL Signal is
finished, a Setup bar is made on the opposite direction, that is to say in the Setup BUY .

Further complicated rules can be used to understand when it is the right time to enter
into the market. But we use Sequential and Combo according to the analysis of the multi-cycles,
which we consider an effective tool.


Well-Known Member
Comments by oilman5
To me Demark is Hebrew ,i am totally ignorant how to use. But oversold/over bought with william%r - i used many yr. Basically countertrend i trade based on M/W pattern ,mostly watching countless hr on chart. In simple saucer or inverted saucer i find with simple price check bar by bar more helpful . Ofcourse divergence helps me to countertrend- so incase of distribution whenever sharp fall starts an known resistance i join in short OR i miss the trade.
the concept of oversold staying at bottom clearly indicate down pressure. But ST has explained well some markup time for consolidation.

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