Td Line Gap Rebo

Due to the high levels of market volatility over the recent years and the market's tendency of forming a series of consecutive price gaps, creating numerous TD Line Gaps, we have added an additional element to perfect low-risk entries for TD Line Gaps. We refer to these enhanced TD Line Gap indications as TD Line Gap REBO, since we combine the critical TD REBO component to the TD Line Gap indicator. TD REBO is an indicator that identifies upside and downside levels at which market price momentum occurs. TD REBO is calculated by taking a percentage of the previous price bar's true price range and adding that value to (for an upside move) or subtracted that value from (for a downside move) the current price bar's opening price. When price breaks out above the upper TD REBO level, it indicates that further price movement to the upside should continue; when price breaks down below the lower TD REBO level, it indicates that further movement to the downside should continue. For TD Line Gap REBO, we typically use a modest percentage

FIGURE 7.11 The S&P March 1999 futures contract displays three instances where TD Line Gap occurred, instance, price broke out at the opening and produced a profitable return for an option day trader.

FIGURE 7.11 The S&P March 1999 futures contract displays three instances where TD Line Gap occurred, instance, price broke out at the opening and produced a profitable return for an option day trader.

1/11 pTTTi [7/13 ^pT'14 T715 T1^ fT72o ^T"/21 ]!/22 "fi725 |i/26 '¡T/27 ~Ji 12s ~[i/29"

1/11 pTTTi [7/13 ^pT'14 T715 T1^ fT72o ^T"/21 ]!/22 "fi725 |i/26 '¡T/27 ~Ji 12s ~[i/29"

FIGURE 7.12 This chart illustrates three daily TD Line Gap trades for Intel. In each case, price exceeded the TD Line Gap line on or just after the open and was immediately followed by favorable price moves.

S.INTC - Intel Corporation, Daily CQG * 1999,

FIGURE 7.12 This chart illustrates three daily TD Line Gap trades for Intel. In each case, price exceeded the TD Line Gap line on or just after the open and was immediately followed by favorable price moves.

S.INTC - Intel Corporation, Daily CQG * 1999,

factor for TD Line Gap REBO of 38.2 percent of the previous price bar's true range. Chapter 9 discusses TD REBO and TD REBO Reverse in greater detail.

TD Line Gap REBO combines these two momentum indicators to confirm a TD Line Gap breakout. While this method is trend-following in nature and therefore occasionally results in delayed market entries, it serves to confirm the breakout. In order to obtain a low-risk entry point for TD Line Gap REBO, the market must exceed not only the TD Line Gap level, but also the TD REBO level in the same direction. Therefore, in the case of a TD Line Gap REBO upside breakout, the current bar's opening price must be greater than the previous price bar's close, and then price must exceed to the upside both the downward-sloping TD Line Gap line and the higher TD REBO level. In other words, for an upside TD Line Gap breakout indication to be given, we require that not only the open be greater than the prior price bar's close, but that price advances above the TD Line Gap line and the TD REBO upside level as well. When price exceeds not only the TD Line Gap line to the upside but also the TD REBO level upside as well, it indicates that price momentum is positive and presents a low-risk buying (call-buying) opportunity. Conversely, in the case of a TD Line Gap REBO downside breakout, the current bar's opening price must be less than the previous price bar's close, and then price must exceed to the downside both the upward-sloping TD Line Gap line and the lower TD REBO level. In other words, for a downside TD Line Gap breakout indication to be given, we require that not only the open be less than the prior price bar's close, but that price declines below the TD Line Gap line and the TD REBO downside level as well. When price exceeds not only the TD Line Gap line to the downside but also the TD REBO level downside as well, it indicates that price momentum is negative and presents a low-risk selling (put-buying) opportunity.

The following charts demonstrate both TD Line Gap and TD Line Gap REBO. Figure 7.13 shows the TD Line Gap trades for EBAY. Note that significant intraday profits were achieved and the performance would have been further enhanced in each instance by day trading options. By adding the REBO filter, entries would once again not have been as ideal, but would have produced profits as well. Figure 7.14 of Treasury Bonds March 1999 includes three TD Line Gaps. In each instance, the breakout openings which exceeded the TD Line Gap lines were precursors to profitable intraday trades. By adding REBO requirements to the entry, the trades become less profitable, but safer, since REBO serves as an additional confirmation qualifier which ensures a legitimate breakout.

0 0

Post a comment