4TH POST 4-19-2007

Here is an important point I need to mention about 3 bar equilibrium. Just as you should not count inside bars there is a flip side to that. For everything there is a balance and the balance to not counting inside bars is this. A range bar counts as 2 bars. At this point I hope I don't have to go into what a range bar is (see LCM).

Also I want you to remember that no technique is to be traded alone. Care should be taken to look at any indication within in the totality of market structure. There are six keys to knowing where a market is as far as structure is concerned.

1. Most recent top and bottom
2.Most recent pivot
3. Three bar equilibrium
4. Range bars
5. Fibonacci
6. Volume

1. Most recent top and bottom tells you where the market is in relation to trend.

2.Most recent pivot tells you the likely direction and strength of the current move within the most recent top and bottom.

3. Three bar equilibrium tells you if the most recent pivot will test the most recent top or bottom and the first level you should look to take profits.

4. Range bars present a level of support or resistance that a market must get through on the way to the next top or bottom. It is one bar support/resistance.

5. Fibonacci tells you if a move is a temporary bounce or a real reversal as well as providing logical entry/exit points.

6. Volume tells you if a move contains enough energy to be sustained.

This is something that many of you intraday traders don't want to consider even though I repeat this over and over. An intraday trade must be considered in the context of what's going on with the daily, weekly, and monthly charts, Just as daily charts must be consider the context of the weekly and monthly charts. There is a hierarchy of power and you must always look up to the next level of power.

Monthly trumps weekly. Weekly trumps daily. Daily trumps 4 hr. 4hr trumps 1 hr. 1 hr trumps 30 min, ans so on. Oh yeah, there are also quarterly and annual charts. Quarterly trumps monthly. Annual trumps quarterly.

When something does not work like you think it should, 9 times out of 10 it did work the next leve up and you bumped heads with it. You did not pay attention to the hierarchy. The larger wave trumps the smaller wave. Nothing else even makes sense.

Well, I think I've given you enough fat to chew on for today. I've got to get busy on the new website which is under construction.

Take care, Jerry.
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