Praise for Trading from Your Gut

Triggering Event
The trigger for the rebound swing method is a significant
rebound or pullback inside the range between support and resist-
ance. This is something that you can eyeball with practice. If it does
not look significant on the chart, then it is not significant. Let your
visual impression be your guide. Hold the chart at arm’s length (or
sit back in your chair as you look at your computer) and let your gut
be your guide. Is your first impression that a price going above the
previous day’s high is significant? If not, what price would be signif-
icant according to your eyeball? That should be where you place a
stop to enter the market.
Again, this is a right-brain judgment without a “correct” answer.
You can train your right brain to recognize what is significant—
which I address in the next chapter—but you can’t easily describe it
in rules that your left brain will understand.
Exit Event
The exit is easier. You are looking for one of two things: Either
the trade works out and moves more than halfway toward the resist-
ance, in which case you will exit when the momentum breaks down
and the price drops below the previous day’s low; or the trade won’t
work out and you will exit when the price drops to the stop price
that was placed just below the support level.
Rebound Again
These patterns show up fairly regularly. After I wrote Chapter 4
with the original example of support and resistance, the market once
C
HAPTER
6 • T
RADING
S
MARTS
115
From the Library of Daniel Johnson

---

ptg
again presented a rebound swing trade for CSCO. Figure 6.4 illus-
trates how this one turned out even better.
116
T
RADING FROM
Y
OUR
G
UT
Resistance
Support
Test
Rebound