Ledges

A Ledge consists of a minimum of four price bars. It must have two matching lows and two matching highs. The matching highs must be separated by at least one price bar, and the matching lows must be separated by at least one price bar. The matches need not be exact, but should not differ by more than three minimum tick fluctuations. If there are more than two matching highs and two matching lows, then it is optional whether to take an entry signal from either the latest price matches in the series (Match 'A') or those that represent the highest and lowest prices of the series (Match 'B'). A Ledge cannot contain more than 10 price bars. A Ledge must exist within a trend. The market must have trended up to the Ledge or down to the Ledge. The Ledge represents a resting point for prices, therefore you would expect the trend to continue subsequent to a Ledge breakout.

This is how to determine what constitutes a Ledge:

We look for a correction or congestion that is at least four bars in length, but no more than ten bars in length.

The Ledge is characterized by a "squaring off' of highs and/or lows, the flatter the better. Perfect squares are best.

We trade the potential breakout in the direction of the trend.

We can go back only as far as the first leg of the previous price swing to find a matching high or low.

What we have done here is to allow the market to tell us what it is going to do and when it is going to do it.

The Ledge becomes possible because the market decides to move sideways for a number of bars on the chart, thereby making it possible for us to position ourselves for an anticipated continuation of the previous price move. Our entry exists with our buy or sell orders at natural support and resistance points.

We mark these off as soon as we can draw a line across two highs and two lows, just so long as they match. We will enter a trade only if prices break out of the Ledge by trading through the high or the low. We will not enter a trade if prices gap past our entry point.

once there are more than ten bars on the chart, we stop trying to trade the ledges. we wait for the market to start trending again or for a full blown trading range to develop.

Why does this entry technique work so well? Because it takes advantage of natural support and resistance points. A breakout of a natural support or resistance point will usually be associated with good momentum. There should be enough explosive force to give a profitable short term trade.

In order to show more clearly what we are doing with this technique, two charts containing Ledges follow:

Find two matching highs.

-Find two matching lows. Then sell the breakout of those lows.

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It doesn't matter which comes first, as long as the two matches are separated by at least one price bar.

Hie mafches do not have to be exact. They can be offby 1-3 ticks, but no more than that Exact matches are best. If there's any doubt, leare it alone,

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