Tracking Down Trades

(adsbygoogle = window.adsbygoogle || []).push({});To paraphrase the Ralph Waldo Emerson quote with which W.D.

Gann opens his first book, The Truth of the Stock Tape, no man can learn what he has not prepared himself to learn. Preparation is the key to finding good trades, as I will demonstrate using Santos (STO:ASX) as an example.Chart 1 — Santos Daily Bar ChartImagine you started looking at this stock in October 2007.

You look back and see four successful trades in a row and think, 'Typical. I always miss the good runs.' What do you do? Do you give up and look for another market, or do you do some analysis and see if there might be some more good trades coming up.This is where preparation is the key.
If we go back to August 17th, the day after the low, and apply the ProfitSource Elliott Wave hi-lite, we can see in Chart 2 that it gives us a Time and Price Projection around 15.72 on October 19th.Chart 2 — Santos Elliott Wave ProjectionOn Friday October 19th the market opened at 15.74 and made a double top.

Would you be looking for any more long trades after this point? The Smarter Starter Pack gives us a rule for what to expect after a double top is confirmed. We look for the market to complete 200% of the range between the two tops. Chart 3 shows this, penipu using the ABC Pressure Points tool in ProfitSource.Chart 3 — Price Projection from Double TopThere are several ways in which you could trade this move.

Using the Overbalance in Price rules from the Number One Trading Plan you could enter on October 22nd, but you would be stretching the rules a bit as this would be outside the 33% entry limit. It would be better to wait for the first lower swing top and go short there.

Alternatively, the market gave us an ABC short trade on October 29th which reached the 100% milestone right on target. This explains why the market went beyond the 200% range from the double top. Try re-creating this ABC trade in your software to see it all come together.David Bowden tells us to mark the Estimated Point C at the 50% point of the A-B range.

This enables us to rate the strength of the trade. (For those readers who own David's Final Six-Day Trading Incubator Course, listen to David's lesson on the Swiss Franc to see the importance of this). We can do the same thing on a larger scale, looking at the range from the August low to the October double tops as an A-B range and marking our 'Estimated Point C' at the 50% point, which is 13.32 (see Chart 4).Chart 4 — 50% Resistance Pointclick chart for more detailNotice how the market found support at this 50% level for some three weeks before eventually moving upwards again. For those who have done some study of Gann's work on balancing time, see if you can work out why the market had to wait to complete a 50% retracement in time from the October 19th top.

All this is giving you additional confidence to take the next ABC long trade that comes along.You can keep this analysis going. The market found resistance at the 50% level of the run down from the Double Tops to the low of November 16th, failing to close above the 50% point.
It then ran down to make a new low on December 21st, at the price and time which the Elliott Wave hi-lite indicated for the completion of Wave 4, while balancing time from the August low to the second of the double tops on October 19th.Since then the market has offered two unsuccessful ABC trades.

There are reasons why you wouldn't take the first, as the market has just made a low and you are expecting an upward move. Unsuccessful trades are part of trading. Stop loss orders and money management rules ensure that the losses are outweighed by the profits you would have made over the previous few months.Most of this analysis is straightforward and can be done by anyone who has studied the Smarter Starter Pack.

I encourage you pick a stock and do some work like this on it.Please visit our site one can pick the right stock. (adsbygoogle = window.adsbygoogle || []).push({});