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buying and selling pressure； market fundamentals； news； and expectations。usually remain intact。 However； under this。veneer； the supply/demand dynamics。are in fact being redefined。 Maintaining a trading edge by anticipating these internal market changes。is。imperative to ensuring a trader's。good mental and financial health。
Opposing the Marketplace
Contrary to the widely。accepted notion that markets bottom due to smart； informed buyers。having inside information and therefore accumulating positions。prior to a rally； our research has。shown that markets。reverse a downtrend because of a lack。of selling； and by。default price moves。sideways。or higher。 Similarly； a market top is。not produced by savvy sellers。learning of negative news。prior to a decline and then coordinating their efforts。and forcing price down。 Rather； price peaks。are made when the number of buyers。diminishes and eventually disappears； and by default price moves。sideways。and then down。 At these junctures； unless。the pool of buyers。or sellers。increases； the lack。of intensity creates。a trend change。 To extend or regenerate a trend； it is。necessary for an entirely new pool of buyers in an uptrend and sellers。in a down trend to emerge。 In other words； the fundamentals。that dictate and define long…term price movements。must be sufficiently attractive to entice a new group of adherents。willing to mit funds。to their beliefs。 Trading the markets。is。not a game of lip service。 Regardless。of how vocal you may be in professing your market forecast or how convincing your arguments； the litmus test and the determinant of price movement is money。
It is。human nature to seek。approval for one's。actions。 This。is。ingrained in most。 To contradict the majority is。socially unacceptable。 You risk。being ostracized if you fail to conform to the rules。and the values。of society。 Unfortunately； such behavior does。not necessarily serve you well when trading the markets。
Having been involved exclusively with large financial institutions。for more than thirty…five years； we know it's。impossible for them to mit significant amounts。of funds。after a trend has。been established。 The petition is。too intense and too many price concessions have to be made。 Consequently； we had to be prepared to anticipate trend changes。 In other words； we had to oppose the psychology of the marketplace and be prepared to buy。weakness。and sell strength。 It was。often difficult given the overall sentiment。 But it was。the only way to make large…scale mitments and to do so at propitious。price levels。 Trading discipline and objectivity were essential to thisunterintuitive approach。 TD Sequential was。the first trading method developed to acplish this。goal。 TD bo is。a related approach with more requirements。and greater precision。
Markets。advance and decline in a natural price rhythm that is。often definable。 Although the market does。not alwaysnform to this。price pattern prescription； even when it deviates； the price pattern is。still valuable because it forces。a trader to buy into price weakness。and to sell into price strength。
Determining Market Direction
Before mitting to a trade； you must define the market environment。 Is。the market vulnerable to an advance or to a decline； or is it locked into a trading ranger。 Much research and analysis。have shown that a simple basic。mathematical exercise； which we call TD Setup； will provide a clue to whether the market is likely to rally or decline。 By paring the market's。close on the current price bar with the close four price bars。earlier and then recording a series of similar consecutive price…parison closes； one can draw highly probable conclusions regarding future price behavior。 Specifically； by recording nine consecutive closes。lower than the close four price bars。earlier； a buy setup is。formed； and by recording nine consecutive closes。higher than the close four price bars。earlier； a sell setup is。formed。 Often； the pletion of these TD Setup series。is。associated with minor areas。of price exhaustion—particularly when the TD Setups。are properly price “perfected”。 Specifically； for a TD Buy Setup to be perfected and qualified for a short…term rally； either the low of buy setup price bar eight or the low of buy setup price bar nine must be lower than both lows。of buy price bars。six and seven。 If neither price bar eight's。nor price bar nine's。low meets。this。requirement； then you must await the first subsequent low that fulfills。this。requirement before the price 〃perfection〃 is。met。 Figure 2。1 illustrates just such a deferral。 Note in Figure 2。1 that once a low was。recorded that exceeded the lows。of TD Buy Setup price bars。six and seven； the market experienced an advance of a few trading days。
Conversely； in Figure 2。2； once a high was。recorded that exceeded the highs。of TD Sell Setup price bars。six and seven； the market experienced a decline of a few trading days； Granted； TD Setup price perfections。are often preludes。to speculative trades。of an indeterminable duration； nevertheless； their value may be to forewarn of a likely interruption of an ongoing trend。
Once the minimum requirement of nine consecutive closes。lower than the close four price bars。earlier is。recorded； the TD Buy Setup is plete。 Similarly； once the minimum requirement of nine consecutive closes。higher than the close four price bars。earlier is recorded； the TD Sell Setup isplete。 These setups。serve to provide the trader with the market's。likely trading environment。 Most often they are preambles。to countdown series that； once pleted； identify zones。of price…trend exhaustion。 TD bo is。designed to select only those price bars。of relevance and to ignore those that fail to adhere to rigid selection criteria regarding price relationships。 Specifically； it） addition to the setup phase； a subsequent and more onerous。process。is。followed。
The Buy or Sell Countdown
Once a TD Buy Setup of nine consecutive closes。lower than the close four price bars earlier is。recorded； the buy countdown process。begins。by referring back。to the first price bar of the buy setup and making the following parisons：
1。
The close of that price bar must be lower than or equal to the price bar's。low two price bars。earlier。