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9 point: hook. Chipicr i I Fihcria [he Tratic ve sisiccl thru I want to trade the thrust of the breakout of a particular the breakout of a tradmg range, a 1-2-3 \\kjh or low, a ledge, or a Ross Atl these events are based on tho daily cliart. also villiog lo tratlc the breakout of ttie local high of low of the last three days taken as a yroup, or a breakout of an individual imjh or low oi ihe ast three days, chart. hese, TOO, are based upon what is happening on the daily In all cases, I do not want to trade a gap opening tfiat takes out the high or low. Finally, Im willing to trade a breakout of the first congestion after the open, even if tfiat congestion is a part of yesterdays ending congestion. The breakout based upon tiie Intraday congesnon on the five nunuie chart is a clue to what (oNows. A Trading Filter A trading filter serves several purposes. It allows me to use a small stop. It helps me avoid false breakouts. It anticipates die breakout and helps me to get into the trade earlier than I rriight nornially have done. Ill state what it is, and then give an example. As a market approaches one of my major or intermediate entry points, I wilt take a breakout of tfie congestion thai normally occurs just prior to such a breakout, I wili trade only in ifie direction of the anticipated breakout. There are more refinemerds to this filter, and tfiey vvi!l all be covered m detail as we progress throirgii tlie nianuah But first, lets visit a Ilew ntarket. When I see a bar on the daily cfiart that is similar to tiie one above, representing a single days price action, seeing soaieihing that fas squeezed an eruire days price action into a single picture. This picture i deceiving as to what actually happened iii die market. IS very I see an open depicted here, but wtiich direction did tfic iraLling take after the open? Did tfie market trade lower before it traded higficr? Did The market initially break tu ttie upside, make its high, and then trade lower all day only to rally to the close at the end of tfie day? Did the market perhaps open low, trade to its fiigfis, reverse ilseif on some piece of news, tfien trade to its lows ami finally rally agaiii to vs/Jiere I see the dose? The answers to ttier.o fucstions are part of the reason why simulated systems based upon daity charts hardly ever work whan one tries to tfade tiiem. In fact, Ive never yet seen orie that did work. The mrfii figure shoves a picture of the daily crude Oil chart The [.ince bar in crude oil for that day is similar to the picturt; on tle preceding page. That f]iclure is telling the truth insofar as possitile if ones universe lias a time frame of one day. 420G 1100 3500 3100 3300 200 100 zm 2 eoo 2700 2600 Z5G0 2100 230D ZZOO ZlOO 2000 IBDO 1700
E3iJt if ones univRrsR has a time / of five minutes, then that same price bar is seen to ccinsist of many price bars, and itiose price bars looked like the boxed section of the (igijro bo.ow. 5 rtlMUTE Seen here a opening to Ujo douii-side, fa 1 ioued by ief 5 n imite 1 [y, tollouef! by a ratlier erratic day of tradinr/, by d slr-oiit/ rally ir) tJie fnial liour of tr<Tdinif. Z IG 11 \z Yesterday lose 2 5 InNll There are a couple of congestions during the day 1 will be kioking at. Based upsin vhat Ive covered so (ar, is \\ possible to guess wliicti ones they 3[i70 3SbO 3SS0 3530 3520 3510 350G 31 0 3100 3170 31 GO 3150 3110 3130 3120 3110 3100 3390 33G0 3370 33&0 3350 3310 3330 3320 CL 5 HIMUTE JlKii Ih interested in the tuQ areas narked on tliE cliart. Uiiy? liecause the first one represents a breakcjtit (if the lujli of Idroe Tlte second one is a LrftAkDLit of tlie luifji} tuG days a(fo. Baib are congestions just prior  I 3570 3560 3550 3510 3530 3520 3510 3500 3190 34 DO 3170 3150 3150 3110 3-30 3120 3410 3400 3390 33B0 3370 3350 3340 3330 3320 2 9 10 2 3 Wiiat i:; iniportant about the earlier congestion sfiown is that it represents a tjreakout of tfic high of three days ago. Tfie second congestion shown represents a breakout of the high of two days ago. Boh are sicnificani events- are arid w will he ifUerested in them?
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