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Notice: The bar after the "buy" bar made a lower high. We've seen this before and would refer to the correction as having created a Ross Hook. However, HERE WE ARE CONCENTRATING ON THE FACT OF THREE CONSECUTIVE HIGHER HIGHS FOLLOWED BY A CORRECTION.

If the "buy" is taken, we end up with a losing trade because the next bar makes a lower low. No matter, our next attempt at entering the market would be to enter at a price that is one tick above the "buy" bar because the buy bar has become a Ross Hook.

If we are filled there, we will cover costs and take a small profit as soon as we can by selling off part of our position.

Notice that the trend continued long after any cost covering. Later, I will show two of the best ways to hang onto that trend once we are profitable.

I want to point out that just because we would have to exit the trade on our first entry attempt, we do not walk away with our tail between our legs like some whipped dog. We "stay in the water" until the trend develops to the point where we could make money. Losing money is part of trading. We have no way of knowing where the trade will be over until we see that we have to exit. The very same principles would have applied had this been a daily chart, or a sixty minute chart, or a fifteen minute chart.

Chapter 24

Trend finding - 2

In this chapter we will see the simple count method in action in conjunction with The Law of Charts (TLOC) signals. What we review here is a typical series of trades. Nothing spectacular, just the normal way we expect to make money with our trading. Sometimes we will win, sometimes we will lose. Sometimes we won't make all that much. Perhaps if we see the "reality" of trading as it is actually done, we'll gain the correct perspective on trading. The chart we will be reviewing is in fifteen minute intervals. Although we will get some signals from the simple count, we will end up taking some trades based on signals from TLOC.

The first 15 minute bar is shown by the arrow at the lower left of the box. From that point until the bar at which I've shown the next arrow, we are never able to count three consecutive new highs, or three consecutive new lows. Therefore, there were no trades possible on that

The next day, following our rules, we would go short after three consecutive new lows (those are the first set of bars numbered 1,2, and 3. At the fourth bar, we sell a breakout of the low of the third bar (Short arrow).

We see that the bar at which we go short ends up a reversal bar (open lower, close higher). Prices go almost immediately against us closing one tick above the high of the previous bar. According to our trading rules we must exit the trade, but can also begin to count the bars as they move up. We number the reversal bar up as bar 1. Then follows a bar labeled 2, which makes a higher low and a higher high. That causes us to have a Ross Hook on the second bar 1. In the event prices correct and then move down again, we would attempt to enter on or before the Ross Hook is taken out. Following bar 2 is the bar I've labeled as 3. It, too, makes a higher high. However, we must wait for a correcting bar (a bar making a lower high) before we can enter based on the simple bar count method. If you look closely, we do have an entry opportunity based on TLOCs, and that is a breakout of the congestion prior to prices taking out yesterday's high (that congestion is a Ledge — dotted lines). I've labeled the buy point as B

Obviously, our second trade would have made money, and we would have exited based on a lower low being made on the second bar after the high of the day was made. The high of the day is the first #1 point.

Our next trading opportunity comes when we get confirmation from the simple count in conjunction with a breakout of a 1-2-3 high formation, and are able to go short on the breakout of the #2 point of the 1-2-3 high. I've shown the simple count and the 1-2-3 count on the chart. The 1-2-3 is from TLOC, shown in lighter print. The darker print is the simple count based on three consecutive lower highs.

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