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81 2280 2224 2168 2112 2056 2080 1944 1B88 1832 bell 1776 1/ 1728 Figure 13 shows another way this area could have been traded. I didnt do it that way, but the results would have been better. Once a triple top had been made with the third top penetrating the inner envelope, I could have sold the next day and would have been stopped out with a nice profit the same day that I made the losing buy shown in Figure 12. The initial objective for these trades is always 50% of the distance between the upper and lower extremes of the inner envelope. If the trade reaches the 50% mark, then the stop is moved to the low of the bar that reaches the 50% objective. The stop is then trailed by moving it to each new higher low on long positions, and each new lower high on short positions. The final objective is to exit at such time as the opposite inner envelope is penetrated, and prepare to reverse position. If the trade makes a one-two-three high or low in the middle of the range, then I trade the breakout, but I am prepared to stay with the trade a very short time.
Trading By Tine Book - Part V Im ready to reverse positions entirely if the trade breaks through the outer envelope as it wou\6 have in Figure 13. Generally, I have to day trade the extremes of the range. The best type of market to trade in this manner is where there is sufficient profit potential to warrant the risk. Since the initial objective is only 1/2 way across the inner envelope, I would never trade a tight range in this manner. bo% The preceding chart of Bean Oil and the following charts of the Bonds, the Deutschemark, and the Yen will illustrate what I mean. I want to have plenty of room for trading the "bounce" from high to low and vice versa. 0
9116 9018 8921 8823 86 8628 0531 8501 8404 8307 8210 ii-). khout buy (Figure 14 j The Bonds formed a very broad trading range as shown by the envelo-The-<fistance from top to bottom is 145 ticks or $4,531.25. Now thats trading room! Ive marked the trades once the M formed on the seventeenth day of the chart and it could be known that the Bonds were probably In a trading range. After exiting the trade on the last "stopped out," I could have reversed and gone short....but I didnt. However, I am short as described earlier on the breakout of a ledge. There are also ample illustrations here of Ross hooks, ledges and 1-2-3 highs and lows. Look for them.
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