GC 5

f

These boxes sfuju a critical jrea nf tradjinj [jyer a span of 3 days, Trices congistEd and i;4iuired off 5 tines at lhat sone approxinate ley*: 1.

if

llll

I I

IT \-L

iLlI

IH HI

iUllii, :illi lE

11-0 9:Z0 0- 3075 H- 337? L- 3875 C- 3G77 U-

1 ll h

G 7-

The boxes Ive marked off demonstrate a critical area of conoesrion,

The first box shows that 3 great deal of trading lonk place at ihat price eve] actualty causing a pcnnam shaped cprrociion prior to the cfost?.

The second box shows that on the following day, prjccs resumed at that congestion Eevel right at the open. Tfie trade was to erder long on a breakout of the congestion sliown in tiie second box. I ignore the spike highs and/or fows. What f"rn interested in is the fact that prices traded hi d.o same level so often.

The third box sliows that later tliat same day, prices traded tlierc again, only this lime after making the low cf lhat day

3315 3910 3305 5 0 3G% 3830

3B70

3G50

-1

300 3Q3S 38 3G 25

3315 3310

3805

Tfie lows of tliat fuunfi box are at just about itie middle of tfie congestion stiown in itic third box, A shnrt position was put on at die [akeout of ttie : estion shown in the fourth box. As can h( seen, ftrices mafle a nice move, Lind aittiough gold didiVi run, 1 v/as able to cah all itiree contract-sets.

The fiftfi box shows the congestion level at the end of tlie day tfiat att[]rt)\imately matches tlie congestion area made earlier at four. I nor irade long the fQllowirig day basetJ solely upon a breakout of ihe congestion iri" box five, biicause it Is not ttie congestion closest to the higfi.

GC S niNUTE

on Id

I uoiiId »[it trade 1 Ijased on box iiiipibcr f iue,

IIn T

.di.i

IU ,

i Ji,

1 IJI

Ll U

1.

,L I, „ !U

11-0 *J:ZO 0- 3875 11- 3077 L- 3B75 C- 3077 U-

III

JnLi

l.ll

IM ,1J

3]25 35ZG 3S15 3JIG 3G5 35

0 T-

3\¹ 3b% 30G5

75 3b70 3RG5

3B45 33-10 3335 3330 3325 3020 3315 3310 3305 3300

Instead, I would await furdier developmerus. Id hkc to see it trade again at (hat level, and ttien take the most logical breakfnji ol that rtfea.

SP 5 MI MUTE

ll- J

lE M I h;

Rr I I L I . 11

IbOO 13:00 0-31100 H-3M60 350 " > U-

ft 1 5 5 ic trade in the SAP.

I Itii.

.l4Jii

0 1- 3 7-

3ivge

3165G 31600 31550 315GQ 31450 31100 3135G

3130G 3IZ5Q 31£0Q 31150 31100 3105G 31000 30950 30300 30D50 30000 30750 30700 30650 30600 30550 30500 30150

his Chan shows an aimost perfect trade in the S&P. Prices congcsieti fjgh; after malrinci tiie high .irid just prior to the close. The next morning saw a gap up open, and then pnccs trading right hack into tfie congestion area, Thion prices played dippydoo for awhile and linally broke oliI. The S&P ran all [he way to tfie end.

US s nimJTE

11-03 10:50 0- 3Z01 il- 3Z01 L- WO C- 3201 U-

0 7-

S30G 3230 3228 9226 3224 S222 3220 3213 3Z16 3214 3212 3210

32ea

3206 3204 3202 3200 3130 912G 3126 3124 3122 3120 9110 9116 3114

AiPiougfi I do not trade bonds on (he five minute cfiart, I just had to show tfiis classir: example of v/hat Im talking about, h iust happens to be a day wfien rfiere was enoogfi activity in tmnds for ifieni to "form up" on the

five minute cliart.

Prefcrrofj Pat(efns I prelor boxy, fai, sqLfartaci off coriQesiions over any other kind,

Next, 1 prefer repetitive congestions in the same area, such as on the S&P chart and the goid chart in the prevjoos. figures.

I prefer that the boxed off section not be too high bom tof] ])o:tom I tgnore spike [irghs or lows, and prefer dusters opens and rJoses higlis and lows all withm a very narrow range on the individual ftve minute bars."

I feei it is essentia! to have software that will enable viewing of at least three day s worth of trading at one time. This means being able to see 240 five rnmute pnce bars on the screen at one time That way its posabfe to see vicrc the daily liigfs and lows were over die last three days. Alerts can then be set accordiiigfy

Chapter 16

Tfie Tfiicd CoatriRt Set

Wfien Ive [:(3vered costs on the first contract set. and nirtje a modest profit on thi: secojuJ contract set, what do I do with tlie ifiird contract s<j[? Mow do t IfNtJe il

want id be in the market when it rLins. For ttie most part, the major profits Im going lo make occljc wfujn the market does .

Heies fiow it v/ofks. Im qujck to take profits to ctJver my costs, picking up tfic phone as soon as I approach $100± on a trade. At tfiat linie I iquidate contract-set 1 move at least one of my contract sets to liieak-even. Actually, I [ ( moving both die remaining coEUract seis to hreiik-even. Its a matter nf comfort level. Often, I will liquidate contract-set number two at the sarrie time as 1 liquidate contract-set nurntjer on[.

If 1 fiavent already liquidated it, as soon as I see anotficr $1001 on tfie tra(ie, I liquidate contract-set 2. If the market goes novhore, I w.ll probably be stopped out at breok-cven. This wilf happen fairly often. Tlio market may then go on to make fat profds witfi0.:t me. 1 dont sweat it.

I may take § 100 ± on contract-sot fi2, and then get stopped out on contract-set ff3. If I do, I have lost nothing. Paper profits are just tisat, paper, cant take tfiem to the bank.

However, two or three times a rnontli in eacti market, sornetimes more, a market wit: fiave a good run, Thats wtiat Ive been V-aitnig tor. Ive been staying patiently in the water. Ive been dippiriy my toe in each tinie I trade,

looJmg to sue tf this is my day. havt made a few tiucks whi

{ may have cost me a few bucks, or wait fc:r niy day n"i tne sun,

On the days Ihe market runs and Im able to stay wiih ii, my breakeven stop fiavn helrl, Nov the ritarkct starts to nxive in a dtrL-ction to fpakc mo irofils.

Will 1 get al oi :he njove? Probably not. Wi.l t tie able to call the top or boitorii? Definitely not, I wont eon try. I will be satishod to make a [irofit. Making profits is die goal of my overall plan. Why an 1 here? To make a buck - bui not to sulfer while doing so. Have I made it clear> ALL RIGHT, here goes. Lei me pot everything in the context of another real life [)1 .