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23 My next entry opportuntly came when I was able to enter a ten lot short on breakout of a third successive new low. Ive shown the count on the chart, i was filled m the open of the fourth 15 minute har at a price of 20 1, My initial protective stop was at 2051. Prices dropped sfiarply and (ast. 1 covered costs based on an average volatility of Ihrce. To do that, I liquidated four of rny ten contracts. As prices moved furtfier ahead quickly I moved my stops to breakeven. When prices continued downward. I began to protect one-had of rny unrealized paper profits in hie trade. 15 ntHUTE jf;i .llll fill.I.M I I P i » I IinI llbhliJ lit] hlhll dOSi 1 Z0Z3 ZQZS zozz & 2010 2Q07 1 2001 1983 As expected after such a sharp move, prices corrected. I began to try selling a breakout ol tfie low of each correction bar. I was filled on a ten lot at 2004 as sfiown by the arrow as prices took out the fow of the second bar ot {Uo correction, ) placed all slops at 2014. 15 MtHUTE IthI I 1 I I 1. My average volatility figure vas now eleven. That nant liguirlating one contryet to crtver costs at a price of 1994. That price w:-js fiit, but not jefore tfie next correction. 205f. .0 Z031 ZOZB Z025 zozz 2013 ZOIb 13 2010 2007 2004 2001 1*300 lUJZ lytrj IJttJ
As pnctis corrccied again, I began to try selling a breakout of the correction bar lows. I was filled short on a ten lot at 1998, I placed protective stops for this lot at 2008, and nnoved 11 other stops to 2004. My average volatility for this entry was six. That meant I would need to liquidate 2 contracts at 1993 in order lo cover costs for this latest ten lor. 15 njMlJTE W ,1, M nt r, ,.i I Ji.il lI.J.. llll The very next price bar enabled me lo cover costs on ail outstanding contracts as prices ticked down to a local low of 1988. 1 pulled all stops to 1998. tiiereby protecting profits and ensuring I would do no worse than break even on rny latest trade, I was now carrying six contracts from my origina trade, nirie contracts from the second trade, and eight contracts from rny last trade. 13 Z037 2031 2031 2020 2025 2022 Z0X3 1 2010 2007 2004 2001 1992 1909 19D6 1 Tfiat meant I moved all slops to 1 95 as soon as ifie doji was compieted. Also, because the doji failed to make a new low, I attempted to sell a breakout of the low in case the trend continued. I subsequently tried to self a breakout of each successive low for The next two price bars. None of these resulted in a fill. 15 (1IHU1E ,i]E hi.I ll, ,.t, 1 nf 11 I I I P . dtll ZG50 ZQS 2QG2 2049 2046 2043 2040 2037 2034 2Q31 2Q28 2025 2022 2019 2016 2013 2010 2007 Z004 2001 1 8 1 5 1 2 1 9 1306 1 Its at tfi;s [HjifU I need to introduce a formation that has always been very impoftno to me. AlthoLtgh I never before had a name for it, since the introduction of Cniidlef;iick trading I have come [o call it a doji. A doji occurs wticfinver the open and close of a price bar are equal, or very close to being equal. It doesnt matter whterc on iha price bar tfie equality occurs, ll cart happen al or close to the high, at or close to the low, or anywhere in betvveen, The main thing is that a doji has meaning. It is part of tfie way a miarkel talks, fly job is to listen, A doji strongly indicates a cfiange of direction may l}e imminent. A doji interrupts a trend by sfiowing hesitation, Ttie market is not sure which way to go. Ive marked (fie (ioji on the next cfiart wilh the fetter "d" beneath it-My usual reaction to a doi is to move my stops ust beyond the extreme. 1
was then stopped out at t995. I had made three points on eight coniracts, nine points on nine contracts, and forty-six points on six contracts, for a totaJ of 381 points. Having already covered all my costs, my net profit was $2,286. The chart below shows where 1 got out al 1995. I then attempted to reenter the market at various times, but was never able to trade a breakout after three successive new highs or Jows. BO 15 niMtJTE ifn.r J.ij.M N ..,,,1 nUh, lihi! Ive just Shown a very simple and basic way to trade. The main feature of this method is the counting of three successive new highs or lows so J can trade a breakout of the extreme of the third in the succession. Ive shown how a money management plan is absolutely critical to my trading. 1 must have the correct money management scheme to go with the rime frame in which I am trading, the amount of commission fm paying, and the market volatility in which Im trading. This is just one of many successfuf ways to trade. Its simply a matter of realizing how to fit tte various patts together. From here on, dojis will become imponant in all the trading 1 show. I wfll also show what f call a reversal bar. Reversal bars are not the same as what others call a "key" reversal. While all key reversals may be reversaf bars, all reversal bars are not "key" reversals. The reversal bars I wi[l show are different. They are a somewhat stronger in meaning than a doji, but they cause me to do essentially tiie some things Before leaving iliis page, notice the 1-2-3 markings. In the next chapler, I will show how to count segnients in ordtr to "obtain additional opportunities. 5 ZOSZ 2031 2031 202 2625 2022 2G15 2016 2013 2010 2007 2004 2001 9 1 5 1 2 IWJ 15 1) f be showing them in conjunction v<ji\U tradrng a thirty niinoie ct-aiit. r, they work jsi as well on a one n>imjte cliart. nr a one moriTls cljart owever, they work just as well on a one n>imjte lart. nr a one rnoriT The iruhi IS always the truth. The only difference is in tho adapiatipn money, risk, and tfade management. When ifiis next series of trades is cornplete, along wihi the dojis and reverstjt bars, it migfit be profital>le (o go back over ifie trijdes on tfio SS.P 5Q0 and the bean oil trades lu see liow differentfy they niigta come out. . v/ould cilso suggest going back over all trades sfiowrt so far, based upon otfier comnfissron rates. It is vitally important to work out viabfe plan (or taking profits and settissg stops baseti upon the realrty of the ovetfiea(f costs that eacfi individual might be facing. Althougii I will show son.e combinations as tiie book goes afong, it is impossFfjk: to ct)ver eve* commission and cost strricture that readers may be living whh. Obviously tle more a person has to pay in overhead, tfie greater the time frame tfiat will have to be traded, and tfie (urther away the stops will liavo to be In order for the trade to develop profitably.
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