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If we are determined to trade a mechanical system, then the trade must be entered. Note that our exit signal will keep us from disaster. We exit a portion of our contracts as soon as we see a bar making a lower low than the previous bar, a portion when two reversal bars are in effect, and the rest on the second bar to make a lower low.

Taking it from the double top, the first bar after the double top makes a new low, liquidate one part of the contracts. That same bar ends up being a reversal bar, exit a second part of the contracts. The next bar gaps down, exit all contracts, or exit all contracts using the violation method shown earlier.

But should the trade have been entered at all? That's a tough decision and one that we each have to make on our own. There were no coordinating signals from TLOC. But then, neither were there any on the previous trade. There was a coordinating signal based on rising lows and another on simple counting. My opinion is that the trade was worth the attempt. We don't win on every trade. But we were able to keep any losses very small.

Let's continue with the next trade. It comes during the fourth hour of trading. Notice that even though we might still be long, we begin counting segments to the short side. In fact, the moment we have 3 segments to the short side might be our clue to exit any remaining part of our original position.

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