Long Term Secrets To Short-Term Trading

Figure 9.1 Classic patterns of trend change. 

---

134 
Swing Points as Trend Change Indication 
Here are a couple of pointers on this technique. Although the penetration of one of these short-term 
highs, in a declining market, indicates a trend reversal to the upside, some penetrations are better than others. 
There are only two ways a short-term high or low is broken. In an uptrending market, the low that is 
violated or fallen below will be either a low prior to making a new rally high, as shown at (A) in Figure 9.2, 
or a low that occurs after decline of a high that then rallies making a lower short-term high; it then declines 
below the low prior to the rally that failed to make a new high, as shown at (B). 
The "better" indication of a real trend change is the violation of the low shown at (A). 
Figure 9.2 Breaking a short-term high or low. 

---

135 
By the same token, a trend reversal to the upside will occur in one of the two following patterns: in 
(A) the rally peak prior to a new low is violated to the upside, or in (B) the market makes a higher low, then 
rallies above the short term high between those two lows. In this case, again, the (A) pattern is the "better" 
indication of a real trend reversal. 
With that in mind, look at Figure 9.3, which shows a 15-minute bar chart of the September Bonds in 
1989. The major trend moves were adequately captured by this technique. 
Figure 9.4 again shows Bonds, this time in April 1998, and again you see how the penetration of 
short-term high and low points enables a trader to be in phase with most of the trend moves for a 10-day 
time period. 
You can use this technique two ways. Some traders may simply buy long and sell short on these 
changes in trend. That's a basic simplistic way to use this technique. A more educated approach would be 
to take buy/sell signals when confirmed by TDW, TDM, secondary data, and so on, thus filtering our trades 
with something other than wiggles and waggles on a chart. 
Finally, we may use this indication of trend to tell us we can buy on pullbacks, and sell on rallies in 
unison with the underlying trend. If our indication of trend is positive, and there has been a reversal to the 
upside, then we can take buy signals from short-term measures or techniques.