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49 Z340 2165 2B77 1990 1B15 172? 1640 OSCyK 10 28 | | J | \<- weekly segHent | |
Figure 1 The first test 1 5 the iong term trend, or flow of the market. I will enter a trade in the direction In which the long term trend is pointing as labeled {a,b), if it is not flat (c). I will never trade against the long term trend. It is my primary filter. It shows direction. I wil! examine each weekly segment (distance from one vertical line of the histogram, to the next vertical line of the histogram) of the oscillator, computed current to date as was shown in Part III. This first test will be my primary filter. If there is no trend long term, I will not enter any trade based upon this oscillator. I wili examine the overall weekly oscillator looking for divergence - divergence of trend and divergence of tops and bottoms as was shown in Part III, Figures 11 and 12.
2348 2262 2185 2107 2829 1952 1875 179? ll 1728  25..........DO ............... STOC 5 3 4- Figure 2 The second test will examine the intermediate term trend. Criss-crossing the oscillator, Ive shown what the weekly oscillator (WO) segments were showing while the intermediate term trend was oscillating. The long term trend Indicates the flow of the market. The intermediate trend indicates the waves that make up the flow. I wiil be looking at the daily oscillator. What I will be looking for here is overbought/oversold, and direction. The daily oscillator Indicates the waves that go with the major trend and those that go agairist the major trend. As long as the long term trend Is indicating the same direction, I will take trades in which the daily oscillator is in conformance with the weekly oscillator. However I will look carefully at the waves that go against the major trend (labeled a-f), because they are my alert to get ready to enter a trade or add to my position in the direction of the major trend. The probability is that the long term trend wilt reassert Itself, and so dally oscillations that go against the long term trend are excellent signals to get ready to enter a market. Ive marked the approximate entry points with the letter E.
2349 2262 2185 218? 2029 1%2 1875 1797 1728 Figure 3 The third test connes from the last price bar on the daily chart, each day, as they occur. Im looking for a breakout of either the high or the low of the last price bar for my entry. Ive marked the days when that occurred in the past with the letters h(igh) and How). A breakout constitutes a passing of all three tests, and gives me the highest probability for success. Amazingly, as will soon be seen, a large percentage of the trades will approximate 1-2-3 breakouts, and breakouts of Ross hooks, but in many instances I will get a jump, a head-start on the breakout. This head-start means a great deal of extra money in my overall trading. Ive marked the chart to show which breakouts were actually used to enter the trades. This same advantage of getting in ahead of the 1-2-3 breakout is just as easily accomplished by learning to read the detail on the price bars of a chart. I suggest beginning to study the relationships of closes to overall price action as soon as possible, as well as studying the relationship of long, intermediate, and short term trends. The two oscillators I use should help in accomplishing that. Keep in mind that such oscillators are no more than a crutch. The objective is to throw away the crutches as soon as practical.
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