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21 SP 5 HIMUTE Ill begin with some very sariple rules: I must see throe bars in a row of higher hiighs. Wlien I that. I will attempt to buy a breakout of ihe ttiifd higli. If i cannot gel in and the nuirkci corrects attor the tfirrd bar, that third bar will constitute the point of a Ross hook, and J will go long if and when it is taken out. My initial stop will ba pfaced below the low of the last correction, and then will fje brought up to just below tfie " -atest correction. I will cover rny costs as soon as I favo four ticks in the trade. As you can see, I was long as prices took out the high of the third successive bar of higher highs. I was fong as shown at the "buy" arrow. 4: - Stop lierc 30775 3G?5G 3G650 30625 30575 38550 33525 500 3475 33450 2m?s 400 38375 38356 383Z5 33300 30275 30250 33225 33200 SP 5 HimTE Notice lhat almost as soon as 1 got in, I was able to cover costs with, tcur ticks IJ5 the S&P. At ttiat point, I was trading "free" of costs. The very next bar saw the start of a two bar correction that did not takr out rny stop. If lfie correction vOjld have tieen as many as (our bars, 1 wonid fiave, if not already stopped out, exited n>y long position and entered the market on the short side, I consider tfie lounti bar of new extreriies in any direction to be tiie start ot a new trend. 4r,.r. <"3tcp Jiere I r 3G00Q 3C775 3[17G0 3G725 700 30r>75 3Ca25 30575 30550 3B525 3B500 38475 38-150 38425 304G0 303V s 38350 38325 38300 38275 30250 38225 3BZ00
SF 5 niMLJTE SF 5 mmn Onco I hnvc RKtablished a fojr bar upward trond, I now considor any move to the downside as being a corecction. When I am experiencing a correction, [ atieoifjt to enter at the breakout of ihe extreme of the correcting bar. In this case, I would be trying to buy a breakout of the high of the first correction bar to (he downside. Failing an entry at a breakout nf the high of the first eorrecEion bar, I would try to buy a breakout of the hig of the ne>;t correction bar. In this case I was filled at a breakout of the high of the second bar of correction, "ve shown tills buy point wtjh tfie arrov*/. It came on tfie bar following ifie second bar of correction. When filled I moved all stoos as indicated on the chart. <- fill stops here 3 8 3 300DO 3377S 30759 30725 30700 3CG7S 30650 38625 3B600 3G575 30S50 33500 30175 33150 38425 30100 38375 38350 5 30275 33250 30225 30ZOO 32 I did not buy tfiH next correction. In all honesty I folt that the trade was yetting too fisky. Tho market looked nwnfiiy tOfipy. At ihe tinte tfie next correction was made (a one bar correction] what I was looking at was as shown on this chart. As can be seen, prices were still in a trading range, and although I was not risking a great deal of money, tliis was not the most awe inspiring chnit I have ever seen. I feU il was better to wait for further dcvoloprnerits. What l was hoping for was a good breakout of die trading range t was iii. However, I was deierrriined to stay wilh rny trades as lone as the uptrend was intact. If J fi 11 stoiis 39825 3880 30775 38759 30725 30700 30675 30650 30625 30600 30575 30550 30525 30500 33475 33450 30425 30400 33375 30350 33325 30300 33275 30250 30225 33200 3 9
SP 5 HIMUTE Suddenly, S&P began to mnve. It made ihree nice size bars up resulting tn a breakout of the trading range as it closed out the third bar up. I was now looking for a retracement. Most of the itme, when prices take a trading range, there wifl be some sort of retracerrieni, I was determined to not miss my chance to add to my position, i began trying to buy breakouts ot the lighs of the correcting bars. I was filled as shown. As soon as I covered costs. I moved all stops as shown. K\ I 2 <- stops: - 1 3 a s 38825 387V5 3Q7S0 33725 3B7G0 38675 38650 3Gb25 38600 3B575 38550 3B525 38500 3B475 3B15G 36125 33375 3B350 3B325 33275 38250 3D225 38200 SP s mrtuTE "ve shown where I added to my position and where 1 trailed my stop untif my final exit late in the day. 3BB25 <-Bug 3BB00 7/5 here <-t}ieii here < (77 and liere tn hert; to liert f roR IiEre Stops uent 3 0 9 3352b 8750 30725 3B7Q0 30675 38G50 30625 38600 38575 30550 5 385GG 33475 33450 30400 30375 3035G 30325 33300 38275 38250 38225 30200 Here are some clarihications. U a bar makes a new fiigfi and also a nev; fovv (an outs-do tnir}, I do not consider it to be a correction unless tl-e close is below the previoiis bars low (the opposite would be true m ctn upside correction to a down market). 1 a bar is an inside bar, 1 do not consider ii to be a correchon bar. Later, Ill point it out, when doing tiiG sonmcnt count an inside bar Will be considered a correction. For now. it is not.
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