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Ron:
Very good example.
(1) Isn't this really a case of knowing the turning point after the fact
since it is probably difficult or impossible to know which of these
numbers will be square with each other ahead of time.
ans: I have to plead guilty to this one. This is what comes from reading
to much hyped marketing material about "You can make a million dollars in
your spare time trading from home" junk mail. The way that I use this is
to add a column with the number of actual days next to the market data,
along with the numbers for the underlying security prices that correspond
to the time square. I also plot this on a graph. This way I see the time
and price relationship to what is actually going on with the market I am
looking at. I agree that it is impossible (at least for me) to know what
"numbers will be square with each other ahead of time". The way that I
use it is to observe price action at a particular time and at a specific
level. If my other indicators support certain action at that price and
time I will make a decision to trade based on the information.
(2) Assuming you always go from Low to High, wouldn't you have many
possible lows
that you would have to consider so that you would have many different
possibilities running at the same time?
ans: I have my spreadsheet set up so I can input whatever open, high,
low, or close I am interested in looking at. It will then automatically
recalculate the relationships and let me see the time and price levels on
a chart of the underlying security. The part about this that makes it
difficult to quantify as a "hard" rule is, where do you start from? I
think this goes to why many people have difficulty with applying some of
these concepts. There is always educated guess work that goes into doing
it. And as I mentioned before it is very easy to show a historical
example of how "If you had subscribed to my Toy's r Us 2000 Holy Grail
Day Trading System, You would have become a millionaire on just this one
trade alone!!!"
This is just another way to try and extract some information from market
data to facilitate a decision making process. It is another tool to put
in your trading kit.
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