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or for traders。who want to operate against the prevailing trends。
Aggressive Settings for TD bo and TD Sequential
Figure 2。3 demonstrates。how effective price…exhaustion techniques。can be in identifying market tops and bottoms。 The bane of trend followers。has。always。been lack。of liquidity； price gaps； and slippage。 By anticipating price…exhaustion zones； one is。both prepared and able to sell into market strength and buy into market weakness； which provides。a trader a distinct timing advantage。 It is。difficult psychologically。to act against the prevailing trend； but at the same time it is。more rewarding because there is。no lack。of supply。when the market is。declining； just as。there is。no shortage of demand when the market is advancing。 Although TD Sequential and TD bo are capable of identifying areas。of likely。price…trend exhaustion； when they are silent and give no indication of likely price reversal； it behooves。a trader to apply the aggressive versions。of both to gain an enhanced trading edge； because their more liberal requirements。make them more sensitive。
Both TD Aggressive Sequential。 and TD Aggressive bo。 possess。the same core parameters。as。their respective parents； TD Sequential and TD bo。 However； their countdown requirements。are less。restrictive and consequently identify price…exhaustion opportunities more frequently。 Specifically； instead of relying on TD Sequential’s。strict parison of a close versus。the high two price bars。earlier to identify upside price exhaustion and； conversely； a close versus。the low two price bars。earlier to identify。downside price exhaustion； the aggressive version merely pares。highs。to identity a likely top and lows。to do likewise at a prospective bottom。 Figure 2。7 shows。the Philadelphia Gold and Silver Index （XAU） from August 1； 2005； through May 30； 2006； and illustrates。the advantage of applying TD Aggressive Sequential vis…a…vis。standard TD Sequential—the frequency of price…exhaustion occurrences increases as。do potential trading opportunities at extreme price tops and bottoms。
Although the setup series。are identical for both TD。Sequential and TD Aggressive Sequential； the countdown parison requirements。are different。 As。a result； the countdown pletions。are different for each。 This。would bee readily apparent were you to pare the location of the thirteen on the TD Aggressive Sequential chart with those for TD Sequential over the same period。 Note that TD Aggressive Sequential recorded a single thirteen top — in October 2005 — and a single thirteen bottom — in March 2006 — and that TD Sequential failed to record a thirteen price…exhaustion indication during the entire period。 That's。because the more liberal construction of TD Aggressive Sequential allows。for speedier countdowns； and the pletion of itsuntdown almost always。precedes。the pletion of conventional TD Sequential countdown。 Obviously； times。when both versions。of TD Sequential speak。simultaneously have greater import than when one occurs。without the other。 Nevertheless； expect to see the aggressive version if the conventional TD Sequential is。there。 In fact； count on seeing the aggressive version at or near the extreme price…exhaustion level； although the basic。version is。more likely to occur when the extreme exhaustion levels。are tested。
What to Do Next
Sufficiently often； markets。have responded to both perfected setups。as。well aspleted countdowns。to justify their use。 As。we discussed and demonstrated earlier； markets。usually react immediately to perfected setups。 The extent of the response depends on whether that setup has。exceeded the extreme level of the opposite setup—the TD Setup Trend （TDST） level in the other direction。 Figure 2。8 is。yet another chart of XAU showing declines。in August and October 2005 that held above the TDST lines。associated with the sell setups。begun in May and September 2005。 When the buy setups。fail to penetrate the sell setup TDST levels。such as。in these two instances； the declines。are usually pullbacks。within the context of an uptrend。 As。these two examples。illustrate； the market often supplies insight as。to when to expect the setup to be succeeded by a resumption of the prior move and a price reversal and when to expect the trend to continue。
When a countdown thirteen has。been recorded； some markets。respond immediately； whereas。others。meander in a trading range only to resume the prior trend。 How does。one distinguish between the two expectations？ Typically； if there is。no appreciable response to a thirteen within twelve price bars； the likelihood of a failure increases。 However； if then is a close above the close four price bars。earlier and additional price…range follow…through occurs。with next the price bar； the chance of a trend enhancesnsiderably。
Many will question the ability of TD bo to identify levels。of price exhaustion and consider it voodoo analysis。to try to do so； that is。their prerogative。 This。reaction is。not unexpected。 However； we believe that to dismiss。such a timing device is。a mistake they。make at their own peril。 This。approach is。intended to provide fundamentalists。and technicians。alike with a timing device and； if nothing else； an element of trading discipline。 Granted； the indicator is。by no means。a substitute for sound fundamental analysis。and trading experience； but it certainty is。a viable adjunct to a trading regimen。 Its beauty is。its。versatility and application globally to all markets and time periods。 Once fundamental screens。have identified attractive trading opportunities。and conventional technical analysis。hasnfirmed them； installing TD bo as。an overlay serves。to fine…tune trading activity。and ideally should enhance trading results。 If TD Sequential or other DeMark。Indicators； particularly short…term indicators； are introduced； you should be able to improve timing trading opportunities。even further。
CHAPTER 3
Charting With Candles and Clouds
NICOLE ELLIOTT。
Ten years。ago when I joined a Japanese bank。as。an experienced technical analyst； I arrived armed with my bar charts； now conveniently drawn by puters。and displayed on puter screens。 The traders。there asked me why I did not use candle charts； a tool they considered much more effective。 An English dealer kindly lent me hispy of Steve Nison's Beyond Candlesticks （Wiley & Sons； 1994）。 I read it surreptitiously； at home； and discovered what the more enlightened British； European； and U。S。 chartists。had already。seen。 Bars。and candles。are actually one and the same； what varies。slightly is。the display。format。 Candles。are clear； easy； and above all fast。 This。is。precisely what makes。them so superior。
Their advantages。are clear： speed； speed； speed。 I look。at between 200 and 400 charts。per day； so speed is。of the essence； dandles inform faster than bar charts； and they。also provide more detail and use more of the available information。
Candle Basics
First； a candle has。a skinny bit： high to low points。as in a bar； and a fat bit （the real body）： the difference between the opening price and the closing price。 In official markets it is easy to know exactly。at what price an instrument started trading。 In over…the…counter markets。it is。a lot more difficult； as。it is。with markets。t