Long Term Secrets To Short-Term Trading

 
 
 
 
 
 
Figure 1.7
Charting creates order out of chaos. 
 

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Figure 1.8
Swiss Franc (daily bars). Graphed by the Navigator 
(Genesis Financial Data Services). 
Figure 1.9
Coffee (daily bars). Graphed by the "Navigator" 
(Genesis Financial Data Services). 

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Why This Is Important 
Once you have this basic understanding of market structure you can identify, very early on, these 
market turns. You will always know that a short-term low has been made when you rally above the high of 
a day with a lower low than the prior day. By the very nature of this penetration, we know the short-term 
down swing has terminated. By the same token, whenever price declines below the low of a day with a 
higher high than the prior day, a short-term high has been formed. This means we can know, during the 
trading session, when these points are established. 
As short-term traders, we also can tell when intermediate-term highs and lows are made. How? 
Simple, if the formation of a short-term high will confirm an intermediate-term high, which in turn 
confirms a long-term high, we can get in at some optimal turning points. 
Figure 1.10 shows how this can all be combined. By going above the high of the day marked at (A), 
we have formed a short-term low that is in turn higher than the prior short-term low. This means the low at 
(B) is a longterm low and we can be buying at the start of an up leg in what is some type of long-term 
move.
Figure 1.10
Pork Bellies (daily bars). Graphed by the "Navigator" 
(Genesis Financial Data Services). 

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It is really all about nesting swings together, fitting the pieces of the puzzle into their proper place, 
to give us an understanding of the structure of market activity. The beauty is you can now identify, at 
all times and for all markets, whether the trend (based on price structure) is up or down and pick your 
points to get in and out. 
For years, I made a pretty good living using just the formation of these points as buy and sell 
entries. These points are the only valid support and resistance levels I have ever found. They are highly 
significant and the violation of these price points provides important information of trend and trend 
change. Thus I can use them for my stop-loss protection and entry techniques. 

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Chapter 2 
It's a Question of Price and Time 
Like a circle being squared, 
Going round and round 
A wheel within a wheel 
Spinning a syncopated sound 
Creating cycles that we find Will o'wisps of our mind. 
All You Will Ever Need to Know about Cycles 
Our charts are a record of price activity over time the horizontal scale being time, the vertical scale 
representing price. An entire technical school is; devoted to the study of time, the cycle watchers. These 
good-thinking people count the number of minutes, hours, days, weeks, months, and years between high 
and low points in search for some master time cycle to tell us price will behave in the future as it has in the 
past. Being a somewhat sleek learner (an even slower unlearner), I spent almost 15 vears of my life trying 
to figure out these time cycles. 
I am still convinced there are cycles in the market. in fact three of them, but they are not time circles. 
The root of the problem of time cycle is, that there always seems to be a current, or dominant. cycle, that 
we can 
see on our chart right now. The rub is, another cycle is Always about to become dominant, overpowering 
the one we have just located and invested in. 
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Although our first problem is cycle dominance, if there are such cycles, they change direction more 
often than a politician looking for votes. In the 1960s and early 1970s, the hope was that a combination of 
high-powered math and high-powered computers would solve this master cycle problem. It has yet to be 
done. Just what the heck cycle we should lay our bets down on at any given time is impossible to tell. But an 
even greater problem is the one of magnitude. 
The cycle crowd deals exclusively with time. But I have yet to find a banker who allows me to deposit 
days, weeks, or months! By that, I mean that a cyclist might ferret out a market low, say an 18 -year low, but 
price does not respond much to the upside, climbing up that vertical scale of dollars, the reward mechanism 
of the game. In theory, calling a major cycle low or high, if you could do it, would produce a move of some 
magnitude. But in the real world where I live and trade, that has seldom been the case; instead the cycle 
quickly faded. Sure, price stopped there-in time-and bobbled along for a few days or weeks, but there was 
not enough price magnitude for a profit. 
I will prove my point with an actual study of past price activity. Figure 2.1 shows the result of a test of 
a timing system for Soybeans. I fired up my computer, asking it to buy when a short-term moving average of 
price crossed above a longer term moving average. This is standard technical stuff. The only variable was 
time, the number of days in the moving average. Thus it is cycle impacted. A moving average is simply the 
average closing price for the last "X" number of days. There are no other variables, only time.