AUhough its not necessary, I also fike to see the trade as being in an established trend.

That means that it has had a leg up (or down, a correction, and then has taken out a Ross hook.

I like it even better wficn 1 am in a profitable positJon that has not been taken out by the correction as shown belovy.

f like it best when Im nursing a profitdble position on the tirst feg anc am able to add to my position during tlte coriectiun prior :o tfu; fujuks boin.g iaker> GUI. Heres a RULE: A correction can last for cinly tfiree bars. Beyond that. 1 consirler it the start nf a new trend

-fa 1

:./.:. buy licre b4 ihc liOok

......Prof it stop

not tl;cn out -

If Im huking overnight in a currency I place a stop m tfie Forex. If it is a metal, sugar, ur cocoa, I place a slop iri Londar]. The stops arc plactd to f>roteci profits. If Im not in a profitable position by tfc ckis<:, I do not fujid overnight even if tfic contract made an entry signal thai W4jnld causr:! rne ;o want this to be a paii(ion trade.

..........(" fiSj « fi)

......Profit stop

not tdken out.

iLll In

f 1 holding oviirmght iri a gram, or cnjrle oi:, but also with metals .inrl sofis, I consider spreading off against a back month lu [jnvcrit being SLJrprrscd by a gap against rne. Of course, I then lose tfie fiencfit of any nvornigfn grip tfiat wcHd liave been m my favor. What f g.ve up is tfie price of being af)le to sleep well.

1 do not hold overriight for bonrls or the S&P. if ) trading Eurodollars, f spread against a back month wfien Im staying overnigfit.

Oi->ce conversion has been made to a position trade, I fiang umu it as long as I [jossibly can by placing stO[)s just below a curve fttted moving average, or at natural suriport . The longer able to stay in ihe trade, [fie less f look at it inlraday. It tlie trarle lasts past tfie first coirectiori on tlnj diiily cIilUI, 1 nuit monitoring it intraday. My technKpies lor !fiat a/e best explained in IVading by the Book, available from Trading Educators Ltd.

Chnptcr 25

SB 6G MINUTE

Sixty Minute Day(r;uling

Ive shown how I iratie five, fifteen, and Ifiirty minute cfiarts. Next, show how the same techniques can be used profitably on sixty minute charts.

Tfiere is probably nothing rnore difficult to trade than sugar when its in a tradirig range. It has to be one of the more treacherous contracts around. What makes it especially difficult to trade is the annoying problem of the bad ticks that come frorn the New York exchanges. Youre never quite sure of whorj price really is. I did Ifiis scries of trades for tho purposes of writing this book. The New York exchanges should be ashamed of the garbage data they put out. That, coupled with the rotten fills obtained when trading there, make trading there all tfie more difficult. I can only hope some of the powers that be in New York will read this book. In my opinion, one of the best things that could happen would be for all traders to boycott tfie IMew York exchanges until Ihey gel their act together. To odd insult to injury, the fees in New York are higher than in Chicago both for trading and for live data.

SD bO MlhUTE

f 1

Heres ho.v SLiqar looktd wficn I strirEed this series of trades

D3fi 2 B28

BZQ 816 BIZ BOO

BOO 7% 73Z 708 781 78Q 776 772 7G8 7M 760 75G 75Z 7ia 711

[}\V

I . I i I 3

20 21 22 23 Z4 2Q 29 30 31 3 4 5 6 ? 10 11 IZ 13

I started out by connecting die segments going in each drrection and marking the Ross firioks on my chart. Connecting segments is a very important part of my trading. As I go along, t wili bo more detailed iri my explanation. Hopefully, by the limie this manual is done. I will have explained it completely, The first thing to nonce is that thrre is an intervening lower high between the lirst two highs that I connected- in tlie case shown above, f had to corviect three higfs to achieve two segments.. There m,ay he more than one intervening bar between the highs flows for an ufitrend) connected.

An important difference to notice is that 1 did not have to start out vvith three successive lower highs and lower lows. All I need to initiate a trade is three successively lower lows. For an uptrend, I need three successively higher highs, each segment created by connecting two not necessarily successive lows.

B36 B32 628 821 B20 B16 BIZ BOO 804 7% 792 788 781 7BG 776 772 7bfl 761 766 756 752 718 714 710 73G

<

-<Buy

ZO 21 22 23 2 28 ? 30 31 3 -1

6 7 10 il 12 13

B3& 832

BIZ 808 B01 80G

796 792 788 784 78Q 776 77Z 768 7b 7GQ 756

74Q 744

740 736

111111 i I

zoz\

Z3 24 2S 29 30 31 3 4 5 G 7 10 U 12 13

B60 855 850

840 835 830 825 820 815 BIO 805 BOO 7% 730 785 780 775 770 765 760 755 750 745 740 735

Before □ definitive trend could be established through either a bar count or a segment count, prices took out a local high hook and 1 got long a ten lot at 823. Average volaiilkty rounded oU was 6 ticks. That rneant I would have to cash four contracts to cover costs. I pfaced a MIT order at 82 , and a protective stop at 817,

The reason got long where I did was that I wanted to get a jump on the breakout of the Ross hook located at the highest high on the chart, I hoped that the publics entry into the r-narket at that breakout vould drive prices even higher. An entry at 323 offered nie seven [>oints to tlici point of the Ross fiook, sufficient for rne to cover costs in case prices tnpperJ nut there.

I easily miade costs and liquidated four contracts witl a windfall profit ol arte tick at 830.

Prices nioved up to a high of 851, so 1 moved my stop to protect at least fiall rny profits. My profit protection was at 837. Because the breakout took out the highest high of the last three days, 1 begaj\ \a consider holrJitg the trade overmglit as a positron trade. By the i;iiTie tfie maiket was ready to close, I had made up niy mind to stay in tfie trade.