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Today someone mailed to me the supreme order system. I have gone through ˙
the
material and find that it is a duplicate of other systems that tell yo to˙
buy
if the market makes a higher high and sell if the market makes a lower lo˙
w and
avoid choppy markets.
Does anyone know who came out with this originally?
˙
What is the Supreme Order?
The word supreme is defined by Webster1s New World Dictionary, 2nd Ed. (1˙
986)
as the "highest in rank; power,... dominant,... highest in degree; utmost˙
...
final, ultimate." The word order is defined by Webster's New World Dictio˙
narv,
2nd Ed. (1986) as "the sequence or arrangement of things or events; serie˙
s;
succession; a fixed or definite plan; law ofarran gement."
/
I have named this order the Supreme Order because it is based on somethin˙
g
that exercises the greatest influence over all market.
(3
movement. I've discovered that in the universe there are an infinite
number of intricate environmental forces with complex feed-back loops
competing to influence price fluctuations. However, the Supreme Order is ˙
based
on the commander, the center from which all market movement emanates. In ˙
other
words, it is based on the one and only force that directly penetrates the˙
heart of all markets, regulates all market movement, and makes all market˙
s
highly predictable. This is a big statement, so let's look at some of the˙
extraordinary aspects of the order.
(1) To identify the exact point of origin of all turning points before th˙
e
actual trend reversals occur, with 100% accuracy, 100% of the time, for a˙
ny
stock or commodity on any time frame is outcome determinative evidence th˙
at
the Supreme Order is the dominant order in market movement, and the most
valuable trading information in the world.
(2) The Supreme Order has universal applicability. It makes no difference˙
whether the markets are stocks or commodities, the ordercan be seen on an˙
y bar
chart: a daily chart, weekly chart, 30 minute chart, etc.
I will now reveal the Supreme Order in markets.
QUESTION: WHAT IS THE SUPREME ORDER?
ANSWER: THE SUPREME ORDER IS THE DOMINANT
ORGANIZATIONAL STRUCTURE IN MARKET MOVEMENT.
THE STRUCTURE IS THE RECURRENCE OF THREE
DIFFERENT TENDENCIES, ONE THAT REMAINS NEUTRAL
AND TWO THAT ALTERNATE IN EXACTLY OPPOSITE
DIRECTIONS.
The order in which market motion unfolds and advances is defined as neutr˙
al
when prices move sideways and defined as alternating in exactly opposite
directions when prices rise and fall.
Neutral market motion is the only structural tendency that does not affec˙
t the
relative value of the trend. It is a tendency that keeps price action the˙
same
or unchanged. (See Figure 1-4 and 1-5 on page 16 & 17)
Pause for a moment, and think about the consequences of knowing the raw
structure in market motion. You don't have to think to hard to come to th˙
e
realization that the consequences are absolutely staggering. For instance˙
, the
well defined up and down oscillating motion of market structure allows yo˙
u to
always stay ONE STEP AHEAD of the market. Think of the possibilities.
Although some losses are inevitable, in the end you cannot lose when you ˙
know
your opponents habits, or when you know the precise pattern of price acti˙
on
that is so innate and so automatic that it will never change.
QUESTION: WHAT IS THE BASIS OF THE SUPREME ORDER?
ANSWER: THE SUPREME ORDER IN MARKETS IS BASED ON THE TWO DIMENSIONAL PLAN˙
E.
In essence, the two dimensional plane explains why markets do what they d˙
o.
The two dimensional plane is made up of two rigid and unyielding structur˙
es
that work simultaneously to set the stage for future market motion and th˙
e
order in which price activity unfolds and advances.
First, the two dimensional plane directly penetrates the heart of all mar˙
kets.
Second, the two dimensional plane regulates ALL market motion by keeping ˙
price
action inside the boundaries of a rigid body of reference.
Third, the two dimensional plane reveals with clarity, simplicity, and
precision the three components of market motion: the direction of a trend˙
, the
duration of a trend, and the magnitude of a trend.
Two dimensional implies the measuring of two planes. So, the two dimensio˙
nal
plane measures the two planes of market motion or price and time.
Measuring market movement is very similar to measuring the movement of a ˙
motor
vehicle. For example, the movement of a motor vehicle is considered in
reference to the earth's surface, because the movement of one body can be˙
considered only in reference to another body.
UPTREND: An uptrend is the markets prevailing tendency to extend in an up˙
ward
motion by making higher highs.
DOWNTREND: A downtrend is the markets prevailing tendency to extend in a
downward motion by making lower lows.
NEUTRAL TREND: A neutral trend is the markets prevailing tendency to exte˙
nd in
a sideways motion by keeping price activity unchanged.
SUPREME ORDER HIGH: A Supreme Order high tick is a high with a
lower high immediately before it, and with a lower high immediately after˙
it. Also, a Supreme Order high is the highest high in-between two Supreme˙
Order lows and precedes the actual trend reversal to the downside.
SUPREME ORDER LOW: A Supreme Order low tick is a low with a
higher low immediately before it, and with a higher low immediately after˙
it. Also, a Supreme Order low is the lowest low in-between two Supreme Or˙
der
highs and precedes the actual trend reversal to the upside.
Now we are ready to look at bar charts. A bar chart is made up of many
different price bars, see Figure 1-7. A price bar is made up of tick data˙
and
consists of at least four ticks. For instance, the open tick, the high ti˙
ck,
the low tick, and the closing tick for a single time period. A single tim˙
e
period can last 1 minute, 1 day, 1 week, etc., see Figure 1-8.
Price bars reveal what the market did in the past by showing the trading
range for a single period of time and plotting it on a vertical line. The˙
open
or first tick is the start of the time period. The high tick is the highe˙
st
high the market traded for the time period. The low tick is the lowest lo˙
w the
market traded for the time period. And the closing tick is the last price˙
traded for the time period.
Figure 1-8 A price bar showing the open, high, low, and close plotted
simultaneously for a single time period.
Bar charts are a partial misrepresentation of the Supreme Order. Because
multiple pieces of tick data are plotted simultaneously per price bar or ˙
time
period, one or more trend reversals can be hidden from view, consequently˙
distorting the natural order of price fluctuations by introducing the exp˙
andmg
price bar, see Figure 1-9 below.
The expanding price bar is only evident in relationship between two or mo˙
re
price bars on all time periods except tick data. Tick data which provides˙
the
most accurate presentation of the innate order in market movement never
expands, it only moves up, down, or stays neutral. On the other hand, mar˙
ket
action plotted on the bar chart can move up, down, sideways, and it also
appears to be expanding.
Figure 1-9 below illustrates how only two price bars are required to defi˙
ne
and identif~ an uptrend, downtrend, neutral trend, and expanding trend.
˙
The relative nature of trends plotted on a bar chart get a little more
complicated than your basic trends plotted on a tick data chart. Again, s˙
o as
to make absolutely clear the distinction between tick data and data arran˙
ged
in bar chart format, I will define the terms uptrend, downtrend, neutral
trend, expanding irend, SOH, and SOL relative to bar charts.
UPTREND: An uptrend is the markets prevailing tendency to extend in an up˙
ward
motion by making higher highs and higher or equal lows relative to the
immediate past price action.
DOWNTREND: A downtrend is the markets prevailing tendency to extend in a
downward motion by making lower lows and lower or equal highs relative to˙
the
immediate past price action.
NEUTRAL TREND: A neutral trend is the markets prevailing tendency to exte˙
nd in
a sideways motion by keeping price activity unchanged. A neutral trend ke˙
eps
upcoming highs lower than or equal to the high of the immediate past, and˙
keeps upcoming lows higher than or equal to the low of the immediate past˙
.
NOTE: Relativisticly, any trend activity occurring within the high and lo˙
w of
the immediate past is always considered neutral. Neutral price action doe˙
s not
affect the relative value of the trend, but is required for proper trend
analysis and trend reversal identification.
EXPANDING TREND: Expanding trends visually distort the natural order of m˙
arket
motion. Naturally two prices cannot occur at the same time, as evidenced ˙
by
tick data activity. However, when multiple pieces of price data are plott˙
ed
simultaneously for a single time period, price action is open to the
possibility of unfolding in higher highs and lower lows relative to the
immediate past. This phenomenon is the result of extremely volatile and r˙
apid
market conditions that cause multiple trend reversals to be plotted
simultaneously. (See Figure 1-12, 1-13, and 1-14)
SUPREME ORDER HIGH: A Supreme Order high price bar is a high with a lower˙
or
equal high irnmediately before it, and with a lower or equal high immedia˙
tely
afier it. Also, a Supreme Order high is the highest high in-between two
Supreme Order lows and precedes the actual trend reversal to the downside˙
.
SUPREME ORDER LOW: A Supreme Order low price bar is a low with a higher o˙
r
equal low immediately before it, and with a higher or equal low immediate˙
ly
afier it. Also, a Supreme Order low is the lowest low inbetween two Supre˙
me
Order highs and precedes the actual trend reversal to the upside.
We have finally arrived at the moment of truth. First, we'll define the t˙
erms
trend reversal and turning point.
TREND REVERSAL: The word trend means, "to extend... in a specific directi˙
on;
the general or prevailing tendency or course, "as defined by "Webster's N˙
ew
World Dictionarv. 2nd Ed. (1986). The word reversal means, "a change to t˙
he
opposite..." as defined by Webster's New World Dictionarv~ 2nd Ed. (1986)˙
.
TURNING POINT: The term turning point means, "a point at which something
changes direction... a point in time when a decisive change occurs. "as
defined by Webster's New World Dictionarv, 2nd Ed. (1986).
A turning point and a trend reversal mean the same thing; a change in the˙
trend that occurs when the prevailing trend reverses to the opposite
direction.
QUESTION~ WHAT IS THE EXACT POINT OF ORIGIN OF A TREND REVERSAL?
ANSWER: THERE'S A PRECISELY DEFINED AND IDENTIFIABLE
PIVOTAL POINT IN THE PRICE/TIME DIMENSION WHEN A
DECISIVE CHANGE IN THE TREND OCCURS. MARKET
STRUCTURE CANNOT CHANGE FROM AN UPTREND TO A
DOWNTREND OR FROM A DOWNTREND TO AN UPTREND
WITHOUT CROSSING THE PIVOTAL POINT IN THE PRICE/TIME DIMENSION.
QUESTION: WHAT IS THE PRECISE PIVOTAL POINT IN THE PRICE/TIME DIMENSION.
ANSWER: RELATIVE TO A DOWNTREND, THE PRICE BAR
WITH THE LOWEST OR EOUAL HIGH RELATIVE TO THE
IMMEDIATE PAST, SIGNALS THE EXACT POINT OF ORIGIN
OF A TREND REVERSAL TO THE UPSIDE. RELATIVE TO AN UPTREND, THE PRICE BAR ˙
WITH
THE
HIGHEST OR EOUAL LOW RELATIVE TO THE IMMEDIATE
PAST, SIGNALS THE EXACT POINT OF ORIGIN OF A TREND
REVERSAL TO THE DOWNSIDE.
Let's look at examples. We will start by examining a Supreme Order trend
reversal to the upside. The inverse applies to Supreme Order trend revers˙
als
to the downside.
In Figure 1-10, relative to the downtrend as determined by past and prese˙
nt
price action, the high of present price action signals the exact point of˙
origin of the trend reversal to the upside because it is the lowest high ˙
of
the downtrend. The decisive change in the trend occurred when fliture pri˙
ce
action penetrated the lowest high of the downtrend.
˙
In Figure 1 - 12, relative to the downtrend as determined by past and pre˙
sent
price action, the high of the present price action signals the exact poin˙
t of
origin of the trend reversal to the upside because it is the lowest high ˙
of
the downtrend. Again, the decisive change in the trend occurred at the pi˙
votal
point in the price/time dimension when future price action penetrated the˙
high
of the lowest high in the downtrend.
˙
Figure 1-12, the SOL is represented by future price action or price bar (˙
c)
because the market first made a new low below the low of present price ac˙
tion
and then penetrated to the upside the lowest high of the downtrend. (See
Figure 1-13)
In all three examples above, the pivotal point in the price/time continuu˙
m or
the exact point of origin of the trend change was always identified with ˙
100%
accuracy before the actual trend reversal occurred. Now that is very powe˙
rful
information. This knowledge allows you to buy ticks away from the lowest ˙
low
of a valley and sell ticks away from the highest high of a peak. Nothing ˙
else
in the trading world today can make such a claim.
Less than 5% of the time a bar chart will make a Supreme Order trend reve˙
rsal
difficult to identify because it is hidden within the market activity of ˙
(chart of an outside day)
\
A SOL price bar is a low with a higher or equal low immediately before it˙
and
a higher or equal low immediately after it. A SOH price bar is a high wit˙
h a
lower or equal high immediately before it and a lower or equal high
irnmediately after it. At times a SOH or SOL price bar may NOT be percept˙
ible
during expanding price action. But, by looking at the intratime period pr˙
ice
action of the expanding price bar, we can bring into view all the price
activity that made up the expanding price bar and determine the correct
sequence and number of turning points.
C
TRADING LOGIC
Trading Rules
The Supreme Order is extremely simple. An uptrend is characterized by a s˙
eries
of higher highs and higher or equal lows relative to the immediate past T˙
he
uptrend is reversed when the highest or equal low of the uptrend is penet˙
rated
to the downside. A downtrend is characterized by a series of lower highs ˙
and
lower or equal highs relative to the immediate past. The downtrend is rev˙
ersed
to the upside when the lowest or equal high is penetrated. Sideways price˙
action is neutral, because it remains the same or unchanged relative to t˙
he
immediate past. Expanding price action is nothing more than volatile, fas˙
t
market conditions with one or more trend reversals plotted simultaneously˙
.
Only two rules are required to trade the Supreme Order. The trading rules˙
you
are about to learn, view making sound investment decisions as on a contin˙
uum.
The rules employ a sliding scale or trailing stop with flexible buy and s˙
ell
parameters that recognize and manage uncertainty by self adjusting to ref˙
lect
the unpredictable elements of market activity. Instead of focusing on rig˙
id
rules, it considers probabilities and permits objective assessments of
likelihood's.
The rules mimic a reversal type of trading system because each trade clos˙
es
out one position and opens another. You are always in the market, either ˙
long
or short; and the trades always reflect the actual direction of the trend˙
. The
first step of the trading rules initiate a long or short position and the˙
second step activates a close and reverse trailing stop.
Next, let's take a look at the trading rules and some examples.
LONG ENTRY RULE
STEP 1- RELATIVE TO A DOWNTREND, PLACE A TRAILING
STOP TO BUY ONE (1) CONTRACT AT ONE TICK ABOVE THE
HIGH OF THE PRICE BAR WITH THE LOWEST OR EQUAL
HIGH RELATIVE TO THE IMMEDIATE PAST.
STEP 2- AFTER GOING LONG, IMMEDIATELY PLACE A
TRAILING STOP TO SELL TWO (2) CONTRACTS AT ONE TICK
BELOW THE IMMEDIATE PAST LOW. THEN AT THE CLOSE
OF THE TRADING PERIOD AND BEFORE ThE NEXT TRADING
PERIOD COMMENCES, ADVANCE THE SELL STOP TO ONE
TICK BELOW THE LOW OF THE PRICE BAR WITH THE
HIGHEST OR EQUAL LOW IN THE UPTREND.
˙
The trailing stop is used to protect capital, enter all positions, close ˙
all
p0sitions, and reverse all positions. In the above example, the long posi˙
tion
remains active as long as the trailing stop is not touched.
iSHORT ENTRY RULES
STEP 1- RELATIVE TO AN UPTREND, PLACE A TRAILING
STOP TO SELL ONE (1) CONTRACT AT ONE TICK BELOW THE
LOW OF THE PRICE BAR WITH THE HIGHEST OR EQUAL
LOW RELATIVE TO THE IMMEDIATE PAST.
STEP 2- AFTER GOING SHORT, IMMEDIATELY PLACE A
TRAILING STOP TO BUY TWO (2) CONTRACTS AT ONE TICK
ABOVE THE IMMEDIATE PAST HIGH. THEN AT THE CLOSE
OF THE TRADING PERIOD AND BEFORE THE NEXT TRADING
PERIOD COMMENCES, ADVANCE THE BUY STOP TO ONE
TICK ABOVE THE HIGH OF THE PRICE BAR WITH THE
LOWEST OR EQUAL HIGH IN THE DOWNTREND.
˙
The trailing stop is used to protect capital, enter all positions, close ˙
all
p0sitions, and reverse all positions. In the above example, the long posi˙
tion
remains active as long as the trailing stop is not touched.
Figure 1-17 illustrates the buy and sell signals generated using the trad˙
ing
logic. The example starts with a downtrend as characterized by price bars˙
(a)
and (b).
˙
- Implement STEP 1 of the long entry rule by finding the lowest or equal ˙
high
of the downtrend, in this case it is the high of trading period (b).
Therefore, at the close of trading period (b) place a stop (bi) to buy on˙
e
contract one tick above the high of (b).
- The end of the downtrend and the start of the uptrend is indicated when˙
the
lowest high is penetrated at point (A). Now, a long position is taken and˙
all
the trading activity up until the close of price bar (c) is considered
relative to price bar (b).
- Immediately afier going long, implement STEP 2 of the long entry rule a˙
nd
place a trailing stop (si) to sell two contracts one tick below the low o˙
f
price bar (b). The trailing sell stop is intended to close out the long
position
and reverse the position to the short side when the trend changes in the
opposite direction.
- At the end of the trading period (c), cancel stop (sl) placed below pri˙
ce
bar (b) and replace it with stop (s2) by advancing it to one tick below t˙
he
next higher or low at price bar (c).
- At the end of trading period (d), cancel stop (s2) and replace it with ˙
stop
(s3) by advancing it to one tick below the next higher or equal low at pr˙
ice
bar (d).
- At the end oftradingperiod (e), cancel stop (s3) and replace it with st˙
op
(s4) by advancing it to one tick below the next higher or equal low at pr˙
ice
bar (e).
- At the end of trading period (f), cancel stop (s4) and replace it with ˙
stop
(s5) by advancing it to one tick below the next higher or equal low at pr˙
ice
bar(f).
- The end of the uptrend and the start of the downtrend is indicated when˙
the
highest low or the low of price bar (f) is penetrated at point ~) by pric˙
e bar
(g). At this point, we close out the long position and enter short at the˙
price of one tick below the low of price bar (f).
- Immediately after going short, place stop (bi) to buy two contracts at ˙
one
tick above the high of price bar (f).
- At the end of trading period (g), cancel stop (bi) and replace it with ˙
stop
(b2) by lowering it to one tick above the next lower or equal high at pri˙
ce
bar (g).
- At the end of trading period (h), cancel stop (b2) and replace it with ˙
stop
(b3) by lowering it to one tick above the next lower or equal high at pri˙
ce
bar (h).
As you can see from the above example, trading the Supreme Order trend
reversals is very simple. All you are doing is selling the highest or equ˙
al
low of the uptrend and buying the lowest or equal high of the downtrend. ˙
The
trading methodology performs best on markets with sustained long lasting
trends with a duration of two or more time periods and large distance bet˙
ween
trend reversals. (See Figure 1 - 18)
˙
Figure 1 - 18 illustrates ideal market conditions. The distance between t˙
he
exact point of origin of every Supreme Order trend reversal is large. The˙
re's
a direct correlation between profits and the distance between the exact p˙
oint
of origin of the trend reversals. The larger the distance between trend
reversals the greater the profits, and the smaller the distance, the smal˙
ler
the profits. Figure 1-19 illustrates the other extreme.
The trading logic does not perform quite as well during choppy market
conditions when the swings have a duration of less than two time periods ˙
and
little to no distance between trend reversals. The price activity in Figu˙
re
1-18 generated four entry signals. for the same number of price bars Figu˙
re
1-19 generated 12 entry signals. This is indicative of very choppy,
non-directional price action. Even though trading was more active in Figu˙
re 1
- 19, you would have generated substantially less profits.
˙
˙
(
˙
(.
( _
"1
Mitch Ryder
Ynos@xxxxxxxxxxxx
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