Thursday, October 18, 2007

Short Entry on TD Sequential Failures

Paul Tudor Jones said that when the TD Sequential or TD Combo doesn't work, "it really doesn't work". For this reason, it is sometimes suggested that one go short as soon as a TD Sequential or TD Combo closes below its stop-loss point. I have been looking into this recently and have put together some charts.

Notice how the stop-loss area can be treated as the same stop-loss short postition after the TD Sequential failure. In some cases, the price bounces back and reaches into the stop-loss area. In such a case, this offers someone a late entry point to go short or allows someone who already is short to add to their position.

Given that large short-covering spikes can be so incredibly nerve racking, having a well defined entry and exit strategy would be helpful to those who want to play both the bull and bear sides of the market.

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