Buy and sell Setups

Posted by Scriptaty | 8:26 PM

Buy Setup is a series of at least nine consecutive closes less than the close four price bars earlier. Prior to the first bar of this series, proper “initialization” must occur in the form of a TD Price Flip. This means the close prior to setup close No. 1 must be greater than or equal to the close four price bars earlier; only then can the buy Setup process begin. (Note: For cash currency markets, use the New York close, which is 10 p.m. London time, as the end of the trading day.)

Once a minimum of nine consecutive closes less than the corresponding closes four price bars earlier are fulfilled, these bars are numbered 1 through 9. If that series is interrupted at any time prior to completion, the count is erased and the process must begin anew.

Typically, when a buy Setup is completed and “perfected,” price has a tendency to at least react to the upside or move sideways –– i.e., after a confirmed Setup, the prevailing downtrend corrects for a period of time. To “perfect” a buy setup, either the low of Setup bar 8, the low of Setup bar 9 or a subsequent price bar’s low must be less than the lows of both Setup bars 6 and 7. Until that occurs, the anticipated price “hiccup,” or reaction, is less likely to occur.

A sell Setup is a series of at least nine consecutive closes greater than the close four price bars earlier. Prior to the first bar of this series, a TD Price Flip must occur to initialize the Setup –– i.e. the close of the bar immediately before bar No. 1 of the prospective sell Setup must be less than or equal to the close four price bars earlier. If the Setup series is interrupted at any time prior to completion, the bar numbers are erased and the process must start again.

Typically, when a sell Setup is completed and perfected, price has a tendency to at least react to the downside or move sideways for a while. A sell Setup is perfected when either the high of Setup bar 8, the high of Setup bar 9 or a subsequent price bar’s high is greater than the highs of both Setup bars 6 and 7. Until that occurs, the anticipated price reaction is less probable.

0 comments