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85

Trading By The Boole - Part V CHAPTER 5 Selecting Trades

In the final chapter of this part of the Manual, I will be discussing nnethods for selecting trades.

To end this part of the Manual, I want to show several methods for entering trades. They are ail based upon things that I have already shown for position trading.

Flag of the Week

The flag of the week method simply stated says that I always look to trade the short side of a market when the trend is down, and I look to trade the long side of a market when the trend is up.

That is too great a simplification and needs some refinement. The first refinement is one Ive shown earlier. I call it the "signal of the week."

The flag of the week comes from the weekly oscillator. How to compute the weekly oscillator has been discussed in an earlier part of the Manual. The concept of the weekly flag is that as long as weekly segments are rising, positions on the long side are favored. Conversely, as long as weekly segments are dropping, positions on the short side are favored. Why? Because the flag of the week helps keep me in tune with the larger overall trend of the market. It keeps me in mind of the weekly price action.

Flag Of The Day

The flag of the day is a 7 day moving average set forward 5 days in time (7 bar offset 5. How to compute an offset moving average has been discussed in an earlier part of the Manual. The concept of the flag of the day is that as long as prices remain above the 7 bar offset 5, positions on the long side are favored. Conversely, as long as prices remain below the 7 bar offset 5, positions on the short side are favored. Why? Because the 7 bar offset 5 helps keep me in tune with the intermediate term daily trend of the market, tt keeps me close to the intermediate price action.

Now I know a lot of good stock market traders who trade successfully from a 39 week moving average. I aiso know some good long term futures traders who trade successfully from a 25 week moving average.

So the 7 bar offset 5 represents a quite excellent medium range moving average by which to gauge daily futures trades.

The idea, then, is to look for strongly trending markets (45° or greater} and trade them in the direction of the trend as long as they are on the correct side of the 7 bar offset 5 and/or the weekly oscillator segment.



Trading By Tine Book - Part V

The 7 bar offset 5 can be an excellent tie breaker when the weekly oscillator segment is flat and the daily oscillator (the five period stochastic) is giving a buy or sell signal.

What do I mean by strongly trending markets? t mean markets that are moving at no less, and preferably better than a 45 degree angle to the horizontal line at the bottom of the daily price chart. I want steeply angled trends that show good containment by the 7 bar offset 5.



DEUTSCHE MAR

Figure 19

&17B

1 J 1 A

Figure 19 This figure shows what I mean by a sharply angled trend as opposed to one that is moving along at less than a 45 degree angle. Notice also that there are many penetrations of the 7 bar offset 5 on the low angled trend, while there is good containment by the 7 bar offset 5 on the sharply angled trend.



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