This is the second email in our series, "What the Signals Mean."
In our previous email we discussed Breakouts and Breakdowns.
If you missed that email you can view it here:
Following a Breakout or Breakdown Signal, the software stops calculating support and resistance levels, and instead monitors the momentum of the market.
Once the momentum has dissipated, the software issues an "Exhaustion" signal (indicating that the move is "exhausted") and recalculates support and resistance.
The difficulty in trading any extended move is trying to figure of when the move is over and when the market is just consolidating its gains (or losses) before the trend continues.
Before I created my DecisionBar software I was a technical trader...a chart reader...and a pretty darn good one, if I do say so myself.
During an extended market move, market technicians look for signs that will tell if the move is over or if the market is likely to continue its move. One of the most reliable chart patterns is a Bull or Bear Flag. This consolidation pattern is a tight parallelogram moving against the major trend.
Bull or Bear Flags allow you to enter in the middle of a move, as each time the market moves out of the flag, it can be considered an entry signal.
The problem with trading chart patterns is that they are one-dimensional. A pattern can succeed or fail, and unless you consider the other forces working on the market you are "trading blind." (I'll do an email on chart patterns in the near future.)
I created my DecisionBar Trading Software to give myself a better idea of the forces acting on the market and to give myself a "Map of the Market" so I could make better trading decisions.
Here is a portion of the same chart with my DecisionBar Trading Software applied.
I'm going to briefly take you through a trading sequence, by the numbers, so you can see that DecisionBar trading is real trading that allows you to make the most informed decisions possible. For purposes of this discussion, I'm trading just the signals and not using stops.
I'll try to make this brief, but please follow along, because I believe the thought process can help your trading whether or not you decide to try my DecisionBar Trading Software.
At the beginning of the sequence I am holding a short position from a previous Breakdown.
1) I get a Long Exhaustion signal. I know that previously broken support (Pivot 1) can now provide resistance, but the market has already overcome this resistance on the signal bar. I decide to take the trade, so I close out my short and enter long.
2) The market overcomes resistance at Pivot 3 and DecisionBar issues a Long Breakout Signal. I hold Long.
3) Following the Long Breakout, the market moves back down and tests previously broken resistance (at the level of Pivot 3), now support. The software issues a Short Exhaustion Signal.
Now I have to decide if I hold the current long trade, exit the current long trade, or exit the current long trade and take the short trade? The logical decision is to hold, since support appears to be holding.
Should I decide to exit the long trade, the DecsionBar software will give me a chance to re-enter long by issuing a reversal signal once it determines support has held.
4) Holding my long position when the Long Breakout signal is given is a no brainer.
As I've said many times, DecisionBar is not a black box. It puts you right in the middle of the trading process and allows you to make the most informed decisions possible.
Essentially, I've programmed the thought process of a professional trader into DecisionBar Trading Software.
If you are ready to become a successful DecisionBar trader, there will never be a better time than right now to get my DecisionBar trading software.
For details and to sign-up, please visit our website at:
Les Schwartz and the Staff at DecisionBar Trading Software.