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PitchforkPrimer TradersZone Course Information Sonntag, 30. Januar 2000 01:47:24
Hello TradersZone, Glad to hear you are going to join us. Here's some more information for you. The course was designed to fill in the details of Dr. Andrew's Action/Reaction trading methods. The "Pitchfork" is his best known method. It became his namesake, and a lot of traders know what it is. What isn't generally known, however, are the rules and techniques he taught for it's use. Those rules are covered in detail in the course. Dr. Andrews also taught several other Action/Reaction trading methods. He used them in conjunction with the Pitchfork. When used together, they are a powerful combination. Those methods are also taught in the course. The course consists of six lessons; each has several parts, or teaching points. Charts, instruction, and comments are exchanged by e-mail. Each lesson costs $35.00, payable by check or money order. To enroll, simply let me know that you want to begin the course. The first segment of lesson one will be e-mailed to you shortly after you let me know your payment is in the mail. Mailing address is: Gordon DeRoos, PO Box 3555, Princeville, HI. 96722 Thanks again for your interest, and please let me know if you need more information. Sincerely, Gordon >
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PitchforkPrimer TradersZone Course enrollment Mittwoch, 2. Februar 2000 01:02:30
At 1/30/00 12:33:00 PM, you wrote: >I would like to begin the course. I sent a money order with the payment >for the first lesson today. > >Thanks, >TradersZone Hello TradersZone, Glad to hear you are joining us. Thank You. I hope you find the course interesting and worthwhile. Here's the first part of lesson 1. Regards, Gordon __________________________________________________________ WELCOME TO THE PITCHFORK PRIMER STUDY COURSE! THIS IS THE FIRST PART OF LESSON ONE. __________________________________________________________ Each lesson of your Pitchfork Primer Study Course is made up of several parts, or teaching points. Each point will be introduced in separate e-mail correspondence, and will be supported by chart examples. You are encouraged to send questions and comments at any time. Also, you'll be asked to e-mail samples of your chart work from time to time. That's done to see whether clarification of a teaching point is needed. Let's begin. Lesson one has two main teaching points: 1: Identifying Andrews' pivots. 2: Drawing the pitchfork. We'll start with a definition of the terms and abbreviations used in this lesson: ANDREWS' PITCHFORK: The nickname given to the unique configuration of Dr. Alan. H. Andrew's Median Line and Parallel Line formation. So named because it resembles a farmer's pitchfork.
PIVOT: A turning point.The extreme price on a bar or line chart where a change of direction takes place. ML: Median Line. The middle line of the pitchfork. MLH: Median Line Parallel. The outer line(s) of the Andrews' pitchfork. __________________________________________________________ THE PIVOT COUNT: Pivot counting the Andrews way is not cluttered up with a lot of subjective rules. Once you become familiar with the count, you'll find it's possible to "eyeball" the charts and quickly find potential buy, or sell candidates. By using Dr. Andrew's counts in your preliminary selection checklist, a considerable amount of time and energy can be saved. The pivot count quickly shows you the best place to draw a pitchfork, as well as other Andrews lines. To begin, look at any stock or commodity chart in order to spot the major legs or waves. They're usually pretty obvious, as on the attached Network Associates chart. You'll note in the definition of course terms that the extreme prices of these legs, or waves, are called "pivots." They are numbered P1, P2, P3 and so on. Dr. Andrews labeled the pivot from which he began his count as P0. Looking at the attached Network Associates chart, you'll notice that prices started a move to the downside beginning in mid to late July. The move, which bottomed out in early October, was composed of 5 distinct price waves; 3 in the direction of the move, and 2 correction waves. The pivot count for that move was 5, as shown on the chart. A point to remember is Dr. Andrew's found that most long-term and intermediate-term price moves will end with a 5 pivot count. Those terms are relative, but for our purposes, the move down on the Network Associates chart will be considered an intermediate-term move. Please study the attached chart of LSI Logic. Locate and label the intermediate-term pivots as you see them. Keep Dr. Andrew's 5P observation in mind. When ready, please return your chart to me. We'll continue from that point. __________________________________________________________
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TradersZone
[email protected] Re: Course enrollment Mittwoch, 2. Februar 2000 01:59:29
Hello Gordon, I was not sure where to put P1, so I chose the bar with the highest close. >Please study the attached chart of LSI Logic. >Locate and label the intermediate-term pivots as you see them. >When ready, please return your chart to me. We'll continue from that point.
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PitchforkPrimer TradersZone Good call Mittwoch, 2. Februar 2000 06:48:19
At 2/2/00 1:59:00 AM, you wrote: >I was not sure where to put P1, so I chose the bar with the highest close. Hello TradersZone, Your pivot count was by the book.....nice job. Also your use of the highest close for pivot 1 was excellent logic. It doesn't appear as if the count will be giving you any trouble. We'll be working with pivots throughout the course, since much of Dr. Andrew's work was based on the often overlooked importance of the interaction of various pivots on a price chart. It's good to see that you have an early grasp of the procedure. Here's the next part of the lesson. Regards, Gordon _________________________________________________________ Lesson One, continued. _________________________________________________________ We'll continue to work with the NETA chart, focusing on prices beginning the latter part of July,'98. We'll use our earlier pivot count to draw a pitchfork. Three pivots are used when drawing the pitchfork. They must be either a high, low, high, or a low, high, low configuration. In this example we will use the P0-3/4 pivots as shown on the attached chart. With a ruler, we locate the mid-point between the low at P3 and the high at P4. We mark that point with a small dot. Then, from the high at P0, we draw a line that extends through and beyond the P3/4 mid-point that we marked. This line is called the median line. (ML) A second line is drawn beginning at P3, and is drawn parallel to the median line. A third line is drawn beginning at P4, and is also drawn parallel to the median line. These lines are called parallel lines. (H) A connecting line is then drawn from pivot 3 to pivot 4. And that's the pitchfork! It's shown on the NETA chart. At this point, please send me a chart of your choice showing several intermediate-term pivots that you've marked. Include at least two pitchforks. We'll go on from there.
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TradersZone
[email protected] Re: Good call Mittwoch, 2. Februar 2000 20:24:15
Hello Gordon, I have attached a chart of AET. I hope it's a good example. Regards, TradersZone >At this point, please send me a chart of your choice showing several >intermediate-term pivots that you've marked. Include at least two >pitchforks. We'll go on from there.
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PitchforkPrimer TradersZone Pivots and pitchforks Donnerstag, 3. Februar 2000 07:12:28
At 2/2/00 8:24:00 PM, you wrote: >I have attached a chart of AET. I hope it's a good example. > >Regards, >TradersZone Hello TradersZone, The chartwork you sent was excellent....good grasp of the count, and your pitchfork procedure was correct. Later on in the course we'll go over Dr. Andrew's techniques which will help you decide which pivots to use for the pitchfork that offers the best probability of staying in tune with the markets. Here's the next segment of lesson 1. Regards, Gordon -----------------------------------------------------------------------------------------------------We'll continue our pitchfork and pivot study using the NETA chart from the previous segment. Dr. Andrews noted that most sizeable price moves form 5 significant, or easily recognizeable pivots before reversing. Some moves end with 3 pivots, and occasionally you'll find 7 or 9. But most, he said, will end with 5 pivots before reversing the trend under study. Whenever he observed that a P4 was formed on a chart, he used what he termed the 0-3/4 ML method to project the likely price level where the P5 would form. Large price reversals, Dr. Andrews observed, often occur after a P5 has formed. This method is an excellent early warning signal for anticipating price reversals at a P5. The pitchfork is drawn using the P0-3/4 ML method as illustrated on the attached chart of NETA. Notice that prices reversed at the ML, forming a P5. Also attached is a chart of Conseco, Inc.. Please label the significant pivots starting at the July high, and then draw one pitchfork using the 0-3/4 pivots, and one using the 3-4/5 pivots. Please return your chart along with any questions or comments.
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TradersZone
[email protected] Re: Pivots and pitchforks Donnerstag, 3. Februar 2000 15:45:48
I have attached the CNC chart. When the price moves below the P0-3/4 ML before making a P5 low, is the lower parallel line the next likely level where the P5 should occur? On the CNC chart the price closes above the P0-3/4 ML the day after breaking the ML. Is that a confirmation that the P5 low has been made?
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PitchforkPrimer TradersZone Good Questions Freitag, 4. Februar 2000 06:33:20
At 2/3/00 3:45:00 PM, you wrote: >I have attached the CNC chart. >When the price moves below the P0-3/4 ML before making a P5 low, is the >lower parallel line the next likely level where the P5 should occur? (That's right , TradersZone. The function of parallel lines is to provide the next level of support or resistance for those times when prices do not stop or reverse at the ML. Dr. Andrews, by the way, looked for prices to reverse at any ML, and form a new pivot in the process.) >On the CNC chart the price closes above the P0-3/4 ML the day after >breaking the ML. Is that a confirmation that the P5 low has been made? (That was a good sign, but too close to call. (imho) Please see chart for TL use as a confirmation signal.) Dr. Andrews used several techniques to help him deal with probable reversals. Some are special situation type methods, and others are used in conjunction with the pivot count, pitchfork lines, or Action/Reaction lines. We'll be covering those rules in the last part of the course. I'm sending another chart for you to study and work on. Please identify the main pivots in the down move that started in April, and also draw at least 2 pitchforks. When ready, please return to me. Regards, Gordon
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TradersZone
[email protected] Re: Good Questions Freitag, 4. Februar 2000 19:10:43
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PitchforkPrimer TradersZone Median Line Technique Sonntag, 6. Februar 2000 01:07:35
Hello TradersZone, Nice work on the charts you returned. Everything was by the book. It appears that you have the procedures well in hand. Here's the final portion of lesson 1. The concept is basic, but it does the important job of helping a trader stay on the right side of the market. Will you be continuing the course? Regards, Gordon The first lines Dr. Andrews drew on a new chart were the long-term and intermediate-term median lines. After identifying the significant pivots, he drew his first median line beginning with P0-1/2, and worked forward on the chart, using each subsequent set of 3 pivots. Each ML served to vector prices....acting as a magnet, if you will, that drew prices towards it. He said that prices will head for the new ML over 80% of the time. Parallel lines are not drawn when using this procedure. It's prime function is to determine the direction and price level of the new ML. Recall that Dr. Andrews anticipated a price reversal at each new ML. The attached chart of LPX illustrates this technique. Try this on some of your own charts, and then please send me an example.
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TradersZone
[email protected] Re: Median Line Technique Montag, 7. Februar 2000 19:27:18
I found a chart with 9 pivots, I hope it doesn't matter. Is it necessary that the move is made of swings with higher highs and higher lows in an uptrend (lower highs and lower lows in a downtrend)? For example, in the attached chart the point P6 is lower than P4 and P7 is lower than P5. Another question: For how long are median lines valid? I noticed that the P2-3/4 ML from my chart served as support and resistance two years later in 1998 (see attached chart LOW2.GIF), but on the other hand I don't want to clutter my charts with too many lines from the past. I would like to continue the course to the end. I will send the money for the remaining 5 lessons tomorrow. Did you receive my first payment yet? Regards, TradersZone
LOW2.GIF
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PitchforkPrimer TradersZone Mittwoch, 9. Februar 2000 05:47:10
At 2/7/00 7:27:00 PM, you wrote: >I found a chart with 9 pivots, I hope it doesn't matter. >Is it necessary that the move is made of swings with higher highs and >higher lows in an uptrend (lower highs and lower lows in a downtrend)? >For example, in the attached chart the point P6 is lower than P4 and P7 >is lower than P5. ( When using this ML technique, TradersZone, the main object is to note the price level of the new ML, for that is the next probable reversal area. The pivots need not be in Elliott formation having swings as you noted above. Your ML procedure, by the way, was correct. I noticed how often prices headed for each new ML, and then reversed. Later in the course, we'll see how Dr. Andrews handled those times when prices reversed before reaching the ML area.) >Another question: For how long are median lines valid? >I noticed that the P2-3/4 ML from my chart served as support and >resistance two years later in 1998 (see attached chart LOW2.GIF), but >on the other hand I don't want to clutter my charts with too many lines from the past. (One of the interesting things about Dr. Andrew's lines is that no matter how far out his lines are projected, they will continue to cause prices to stall-out, or reverse when reached. Also, whenever several of his lines intersect, there is a very high probability of a price reversal, whether prices converge at the intersection, or are some distance >from it. The probability is higher, though, when prices are at the >intersecting lines. A line that has, in the past, provided frequent support or resistance, is probably a pretty good line to keep on your chart. You're right, though, charts seem to get cluttered up very quickly.) > >I would like to continue the course to the end. I will send the money >for the remaining 5 lessons tomorrow. Did you receive my first payment yet? (Glad to hear you're going to continue to the end. Thank you for the prepayment. Your first check hasn't arrived yet, will let you know when it does.) Meanwhile, here's the first segment of the next lesson. Regards, Gordon
In this lesson, you'll be introduced to Dr. Andrew's sideways count. The sideways count was his "old reliable;" a tool that worked so well, so often, that it was one of the very first studies he performed on his charts. The sideways count gave him a reliable gauge that told him ahead of time how far a stock or commodity was likely to move. Sounds too good to be true, perhaps, but as you work with the sideways count, you'll discover for yourself how often the projected price targets are reached...often within tics. Markets frequently spend a lot of time in congestion. Here's Dr. Andrew's way to use that congestion to our advantage: Looking at the Brightpoint attachment, please note the channel lines starting in January. You'll see that most of the pivots from Jan-May were within this channel. Now look at where I've placed circles. At each point where prices touched a channel line, and then reversed direction and went all the way back to touch the opposite channel line, a circle was drawn. Put another way; if prices touch one channel line, but then don't go all the way back to touch the opposite channel line, a circle is not drawn. At first glance, this technique can often be unclear, so we'll pause here for some chart work. Please e-mail me a chart that shows where you've drawn channel lines to identify sideways price action, and also where you've placed the channel line circles.
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TradersZone
[email protected] Re: Mittwoch, 9. Februar 2000 18:48:37
>At each point where prices touched a channel line, and then reversed >direction and went all the way back to touch the opposite channel line, >a circle was drawn. Put another way; if prices touch one channel line, >but then don't go all the way back to touch the opposite channel line, >a circle is not drawn. Shouldn't the last circle on your Brightpoint chart be left out? The price didn't return to the opposite channel line after that day. This is my chart:
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PitchforkPrimer TradersZone Thanks for the question Mittwoch, 9. Februar 2000 23:14:37
At 2/9/00 6:48:00 PM, you wrote: >Shouldn't the last circle on your Brightpoint chart be left out? >The price didn't return to the opposite channel line after that day. Hello TradersZone, The last circle is appropriate, but I can see where the wording in the explanation is confusing. I have changed that paragraph to read: Looking at the Brightpoint attachment, please note the channel lines starting in January. You'll see that most of the pivots from Jan- May were within this channel. Now look at where the circles were placed on the channel lines. They are in alternate sequence. Note that each circle was drawn only after prices had first been at the opposite channel line.The Brightpoint chart illustrates this procedure. Thanks for pointing this out, TradersZone. If the wording is still unclear to you, I'd appreciate your input. Meanwhile, here's the next segment of this lesson. Regards, Gordon We'll continue to use the Brightpoint chart for this portion of the sideways count study. To review; the pattern we're looking for should be a recent rectangular shaped sideways trading range that contains most, if not all, of the congestion price action. Take a look at the attached chart and note how well defined the price channel for Brightpoint is. You'll probably notice that it is deeper than the channel you studied on the chart in the preceding segment. This comparison is made to illustrate that while the first channel example covers a longer period of time, the second includes all of the price ranges, and is the preferred method. Please look at where the circles were placed on the channel lines. To review, a new circle is drawn only after prices have first been at the opposite channel line. Recall that circles must be in alternate sequence, eg; upper line/lower line/upper line/lower line, etc., one circle at a time. Note that the price range within the channel is $4 3/4. (High 21 1/2, Low 16 3/4) There were two circles drawn on the lower line of our sideways channel before prices broke down. Using that information, our next step will be to use some simple arithmetic in order to come up with two downside price targets. We'll cover that procedure in the next segment. Please let me know when you are ready to continue.
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PitchforkPrimer TradersZone Sideways count Mittwoch, 9. Februar 2000 23:23:15 image001.png
Hi TradersZone, I'm returning your chart....please note comments. Gordon Regards, Gordon
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TradersZone
[email protected] Re: Thanks for the question Donnerstag, 10. Februar 2000 23:30:59
Hello Gordon, thank you, I'm ready for the next lesson. Regards, TradersZone
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PitchforkPrimer TradersZone Next part Donnerstag, 10. Februar 2000 23:56:13
At 2/10/00 11:30:00 PM, you wrote: >Hello Gordon, >thank you, I'm ready for the next lesson. > > >Regards, >TradersZone > > > TradersZone....I sent this yesterday, but will re-send. It was part of my reply to your question regarding the circle. I don't have a record of your return chartwork for this part. If it's a duplicate send, sorry. Regards, Gordon We'll continue to use the Brightpoint chart for this portion of the sideways count study. To review; the pattern we're looking for should be a recent rectangular shaped sideways trading range that contains most, if not all, of the congestion price action. Take a look at the attached chart and note how well defined the price channel for Brightpoint is. You'll probably notice that it is deeper than the channel you studied on the chart in the preceding segment. This comparison is made to illustrate that while the first channel example covers a longer period of time, the second includes all of the price ranges, and is the preferred method. Please look at where the circles were placed on the channel lines. To review, a new circle is drawn only after prices have first been at the opposite channel line. Recall that circles must be in alternate sequence, eg; upper line/lower line/upper line/lower line, etc., one circle at a time. Note that the price range within the channel is $4 3/4. (High 21 1/2, Low 16 3/4) There were two circles drawn on the lower line of our sideways channel before prices broke down. Using that information, our next step will be to use some simple arithmetic in order to come up with two downside price targets. We'll cover that procedure in the next segment. Please let me know when you are ready to continue.
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TradersZone
[email protected] Re: Next part Freitag, 11. Februar 2000 23:41:13
I think the placement of the circles is clear to me now. I have attached another chart with a sideways count. Regards, TradersZone >TradersZone....I sent this yesterday, but will re-send. It was part of >my reply to your question regarding the circle. I don't have a record >of your return chartwork for this part. If it's a duplicate send, sorry.
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PitchforkPrimer TradersZone Sideways Montag, 14. Februar 2000 05:42:27
At 2/11/00 11:41:00 PM, you wrote: >I think the placement of the circles is clear to me now. >I have attached another chart with a sideways count. > >Regards, >TradersZone > Hello TradersZone, Your chart was on target..... Looks like you're ready for the next part. Here it is. Regards, Gordon During this segment, you'll learn how to arrive at two price targets using Dr. Andrew's sideways count. Simple arithmetic is all that's required once the sideways channel and circles are in place. We'll continue to use the Brightpoint chart, which is attached. Note that Brightpoint fell through the bottom channel line at the point where we placed our second circle, so figuring out possible downside targets would have been in order at that time. Here's how that's done: 1: Determine the price range of the channel. In this case, the range is $4 3/4. (21 1/2 - 16 3/4) 2: Count the number of circles on the lower channel line. The lower line is used in this case because that's the line that didn't hold. Prices went through it, returned to check it out, and then continued lower. 3: Multiply the price range of the channel times the number of circles drawn on the lower channel line. (4 3/4 x 2 = 9 1/2) 4: Subtract that figure from the upper channel line price. The result becomes downside price target #1. (21 1/2 - 9 1/2 = 12) 5: Next, subtract that same figure from the price at the lower channel line. That's price target #2. (16 3/4 - 9 1/2 = 7 1/4)
In the case of an upside channel breakout, the procedure is reversed. Please draw a few channels and figure out some downside targets on your own charts. When you're ready, send me two or three examples of your work. As always, send your questions as they arise.
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TradersZone
[email protected] Re: Sideways Montag, 14. Februar 2000 13:43:14
Here are my examples. I couldn't find enough charts with downside targets, so I included some charts with upside targets. Do the channel lines always have to be horizontal? When I look at my charts, I find more channels with an upward slope or a downward slope. Regards, TradersZone
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PitchforkPrimer TradersZone Sideways channels Freitag, 18. Februar 2000 00:55:31
At 2/14/00 1:43:00 PM, you wrote: >Here are my examples. I couldn't find enough charts with downside >targets, so I included some charts with upside targets. > >Do the channel lines always have to be horizontal? When I look at my >charts, I find more channels with an upward slope or a downward slope. > >Regards, >TradersZone Hello TradersZone, The sideways method can be used with either up or down. Sorry, didn't mean to imply that only downside targets should be found. I'll reword that portion of the lesson. Thanks for mentioning it. Dr. Andrews sideways method works only on horizontal channels. Others have mentioned the sloping channels also, and have wondered if there is some method to use with them. I know of none. I've asked other course members for their ideas on how to approach this problem, but so far no one has come up with a method. I would think that there should be a solution, but have not personally taken the time to research it. If some method could be found that works as often as the Andrew's sideways count, it would be a significant find. The Andrew's sideways count doesn't always hit the targets, as you saw on your chart of Bausch & Lomb. It works more often than not, though, and it still amazes me at how often prices reach the targets. Here's an observation to keep in mind: Quite often, after the first target is reached, prices will reverse and head back towards the channel. At times, you'll note that they return inside the channel. They will then reverse again and head back towards the second price target. These reversals happen frequently, and present trading opportunities. I'm including the final segment of this lesson. Regards, Gordon So far in the course you've learned about Dr. Andrew's pivot counting procedure, pitchfork, and sideways count. You've noticed by now how often prices change trend at a P5. You've seen how the 0-3/4 ML method can help locate the probable P5 area. You've seen how often price targets are met using the sideways count method. The tendency for prices to reverse at a median line should be recognized as a high probability event as well. In coming lessons, you'll be shown how Dr. Andrews used these, and other high probability events to trade the stock and commodity markets. The tools and techniques he used will help you put the finishing touches on your market analysis using Andrew's lines.
Before continuing on to the next lesson, let's briefly review what has so far been covered. The attached chart provides an opportunity to illustrate the methods referred to above. Please draw these methods on the chart, and return to me.
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TradersZone
[email protected] Re: Sideways channels Montag, 21. Februar 2000 19:37:43
>Before continuing on to the next lesson, let's briefly review what has >so far been covered. The attached chart provides an opportunity to >illustrate the methods referred to above. Please draw these methods on >the chart, and return to me. Hello Gordon, here is my chart: Regards, TradersZone
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PitchforkPrimer TradersZone Next lesson attached Mittwoch, 23. Februar 2000 01:45:39
At 2/21/00 7:37:00 PM, you wrote: >Hello Gordon, >here is my chart: > >Regards, >TradersZone Hello TradersZone, Good job on the pivots, sideways count, and pitchfork. Looks like you're ready to move on to the next part. It won't be long and things will begin to fall in place. Regards, Gordon Lesson 4, continued. In one of his course letters, Dr. Andrews wrote: "The Law of Physics stated by Newton that Action and Reaction are equal and opposite was first applied to prices by your Course Director's friend, the late Roger Babson, who attributed his earnings of several million dollars to this law." Beginning with this segment of lesson four, and continuing in lesson five, you'll learn how to draw and apply the Action/Reaction trading method as taught by Dr. Andrews in his trading course. The A/R method requires a "centerline," or C/L, from which to start. The C/L can be any of the following: - MPL - ML - MLH - 2P line - 2 Gap line - Peak to low line - Low to peak line These are the primary lines that Dr. Andrews used. He stressed that "some pencil work, and a good eyeball" was needed in order to find the "best fitting" C/L. As with most other chart lines, some work better than others. The task is to find the best fit, as he put it. You will be shown examples of
each of the above CL's in this lesson, and the next. Determining which of the above listed lines to use as the CL is the first step in the Action/Reaction method. The solution often presents itself. With a little practice, a quick scan of the chart under study will be all that's needed to spot the most likely C/L. We'll begin with the attached chart. Note the C/L drawn. In this example, a MPL (multi-pivot line) was used as the C/L. A MPL is a straight line that connects three or more consecutive pivots without passing through prices. The connecting line is then extended. I've circled the three pivots that form the MPL on the chart. There are several other places on our chart where a MPL C/L can be drawn. Please bear in mind that this is just the first step of the process. Identification of likely C/L's is all we're after here. See if you can locate two more, then draw them in and send the chart back to me. We'll take up from there.
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TradersZone
[email protected] Re: Next lesson attached Mittwoch, 23. Februar 2000 21:23:04
>Lesson 4, continued. > >In one of his course letters, Dr. Andrews wrote: "The Law of Physics >stated by Newton that Action and Reaction are equal and opposite was >first applied to prices by your Course Director's friend, the late >Roger Babson, who attributed his earnings of several million dollars to this law. > >Beginning with this segment of lesson four, and continuing in lesson >five, you'll learn how to draw and apply the Action/Reaction trading >method as taught by Dr. Andrews in his trading course. > >The A/R method requires a "centerline," or C/L, from which to start. >The C/L can be any of the following: > - MPL > - ML > - MLH > - 2P line > - 2 Gap line > - Peak to low line > - Low to peak line Hello Gordon, 2P line, 2 Gap line, Peak to low line, Low to peak line – actually I don't know what these lines are. Are they discussed in Lesson 3? I believe you haven’t sent me this lesson yet? Anyway, I found two more MPLs on the Novellus Chart and drew them in. Regards, TradersZone
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PitchforkPrimer TradersZone Lesson 3 Mittwoch, 23. Februar 2000 23:59:58
At 2/23/00 9:23:00 PM, you wrote: >Hello Gordon, >2P line, 2 Gap line, Peak to low line, Low to peak line - actually I don't know >what these lines are. Are they discussed in Lesson 3? I believe you didn't >sent me this lesson yet. >Anyway, I found two more MPLs on the Novellus Chart and drew them in. > >Regards, >TradersZone Hello TradersZone, My apologies.....I sent you an outdated version of the lesson. Thanks for letting me know. Must have been my bedtime. Here's the correct version. Regards, Gordon Lesson 3. In one of his course letters, Dr. Andrews wrote: "The Law of Physics stated by Newton that Action and Reaction are equal and opposite was first applied to prices by your Course Director's friend, the late Roger Babson, who attributed his earnings of several million dollars to this law." In this lesson, you'll be introduced to the Action/Reaction trading method as taught by Dr. Andrews in his trading course. The A/R method requires a "centerline," or C/L, from which to start. The C/L can be any of the following: - MPL: Multi-pivot line. A line drawn across 3 or more pivots. - ML: Median line. The middle line of the pitchfork. - MLH: Median line parallel. Either parallel line of the pitchfork. - 2P line: A line drawn across 2 pivots. - 2 Gap line: A line drawn connecting 2 gaps without touching prices in between. - Peak to low line: A line drawn connecting the high and low of a price leg.
- Low to peak line: A line drawn connecting the low and high of a price leg. These are the primary lines that Dr. Andrews used. He stressed that "some pencil work, and a good eyeball" was needed in order to find the "best fitting" C/L. As with most other chart lines, some work better than others. The task is to find the best fit, as he put it. You will be shown examples of each of the above CL's. Determining which of the above listed lines to use as the CL is the first step in the Action/Reaction method. With practice, a quick view of the chart under study will be all that's needed to spot the most likely C/L. You'll be shown later how to experiment with possible combinations in order to find the centerline that is most in tune with the market under study. We'll begin with the attached chart. Note the C/L drawn. In this example, a MPL (multi-pivot line) was used as the C/L. A MPL is a straight line that connects three or more consecutive pivots without passing through prices. The connecting line is then extended. I've circled the three pivots that form the MPL on the chart. There are several other places on our chart where a MPL C/L can be drawn. Please bear in mind that this is just the first step of the process. Identification of likely C/L's is all we're after here. See if you can locate two more, then draw them in and send the chart back to me.
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PitchforkPrimer TradersZone Next segment Donnerstag, 24. Februar 2000 02:51:05
At 2/23/00 9:23:00 PM, you wrote: I found two more MPLs on the Novellus Chart and drew them in. > >Regards, >TradersZone Hello TradersZone, Your mpl's were correct. This next segment shows the purpose of the centerline, and how it is used. Your payment in full arrived today, TradersZone. Thank you. Regards, Gordon Lesson 3 continued. Please refer to the attached chart of Novellus. The line drawn connecting the 3 circled pivots is a multi-pivot line, (MPL) and represents the centerline (C/L) we'll be using in this example. Recall in the previous segment that several types of centerlines are possible. The choice is determined by experimenting with the potential combinations on the chart under study. It's best to try to locate a centerline somewhere close to the middle of the price chart in order to have sufficient past and forward data to use with the study. This will become clear as you work with the method. Once the centerline is drawn, the next step is to locate a previous low or high pivot point to use for drawing an action line. Dr. Andrews observed that the low pivot points often seem to work best, but that either could be used. In our example, a line starting at the previous significant low was drawn parallel to the C/L. It is labeled A-1, (Action line 1) because it represents the first "action" line. Dr. Andrews called it an action line because it was drawn as a result of a previous pivot (price reversal) that had taken place. Next, a parallel line was drawn to the right of the C/L, and labeled R1. Notice that it is the same distance from the C/L as the corresponding A-1 line. It is labeled R-1, because it represents the first "reaction" line; a line where prices are likely to stop or reverse. Notice how prices "reacted" at the R-1 line in early '98. That serves as an indication that the centerline chosen for this study should be a good one to use. Not all reaction lines cause such a clear reversal as the R1 on this chart, but many do. That's why it's important to experiment with various centerline possibilities in order to find action lines that produce reaction lines which create the greatest number of pivots, or price stall-outs. This experimentation is often quite time
consuming, but experience has shown that it is time well spent. When a centerline is found that is in tune with the price action of the issue under study, it can be a highly effective tool for use in locating probable reversal areas. When combined with pitchfork lines, the AR method can pinpoint potential reversal areas that are generally not recognized as such by others. Dr. Andrew's techniques for using the pitchfork and A/R lines together are covered in later lessons. In coming segments we'll study other lines that Dr. Andrews used for his centerlines. In the meantime, experiment with the multi-pivot centerline on your own charts. Then please send me an example of your work, along with any questions you may have.
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TradersZone
[email protected] Re: Next segment Freitag, 25. Februar 2000 21:13:56
>In the meantime, experiment with the multi-pivot centerline on your own >charts. Then please send me an example of your work, along with any >questions you may have. Hello Gordon, I was wondering how many Action/Reaction lines could be drawn on a chart? On my attached chart I found at least 6 parallel lines which had a significant meaning for the price. Regards, TradersZone
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PitchforkPrimer TradersZone AR lines Montag, 28. Februar 2000 08:01:28
>Hello Gordon, > >I was wondering how many Action/Reaction lines could be drawn on a >chart? On my attached chart I found at least 6 parallel lines which had >a significant meaning for the price. > >Regards, >TradersZone Hi TradersZone, There's no set number of lines that can be drawn....actually the more you can find, the better. Finding a good centerline is the key. And once you find lines that work, such as you did, any number of parallel lines can be drawn. You are doing exactly what Dr. Andrews did....taking the time and effort to find the best fitting sets of lines. Each chart has them, and each chart is different, as I'm sure you've found. Nice work! Here's the next part. Regards, Gordon Lesson 3 continued. One of Dr. Andrew's favorite techniques dealt with gaps....an often times perplexing price event for many traders. His observations over the years suggested to him that, while gaps show up frequently on many price charts, few traders have a method for including them as an integral part of their chart analysis. That's not surprising, since not much has been published about how to approach the use of gaps in a trading method. Dr. Andrews, however, found several ways to put price gaps to good use. An Action/Reaction centerline which uses gaps as its basis is one such method. Please refer to the attached chart of Cendant. You'll see that a centerline was drawn which passed through the July gap. Note that it also came in contact with several pivots, thereby qualifying as a gap/multi-pivot centerline. It is drawn by starting at the April low pivot, and extending a line across and through the gap in mid-July. It subsequently touches two additional high pivots. Dr. Andrews counted each gap as two pivots. He noted that the more pivots a line touched, the
stronger the line tended to be in the future. Good reason, then, for using the July gap as the basis for an Action/Reaction study. Our C/L is labelled a gap-mpl-C/L. The May '98 high was used for the Action Line starting point. A line was then drawn parallel to the Centerline, as per Action/Reaction procedure. The corresponding Reaction Line was then drawn in. If this particular study had been drawn on Cendant's chart right after the July gap was put in, the potential for prices to go all the way down to the Reaction Line might have seemed very slim at the time. Notice, however, that prices reached the Reaction Line in early September. You'll see this happen time and again as you work with the A/R method. The core of it's effectiveness is a strong C/L. Please send me two examples of a gap/mpl A/R study using charts of your choice.
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TradersZone
[email protected] Re: AR lines Montag, 28. Februar 2000 15:59:37
>Please send me two examples of a gap/mpl A/R study using charts of your >choice. Hello Gordon, here are my examples. Regards, TradersZone
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PitchforkPrimer TradersZone More on the AR Donnerstag, 2. März 2000 07:11:58
At 2/28/00 3:59:00 PM, you wrote: >>Please send me two examples of a gap/mpl A/R study using charts of >>your choice. > >Hello Gordon, >here are my examples. > >Regards, >TradersZone > Hello TradersZone, You picked some good examples to use for your AR study. Both showed the potential power of this method. Takes time and lots of chart study sometimes to find the best set of lines, but the rewards can be many. Here's something else to look at. Regards, Gordon The Action/Reaction technique requires a strong centerline from which to begin. The key to deciding which set of pivots to use for the centerline is found through experimenting with the various configurations visible on the chart under study. The centerline might be a series of gaps, pivots, an existing median line, or any of Dr. Andrews lines. The task is to search for that centerline which shows the greatest potential for projecting price reversal areas. Dr. Andrews did that by finding a likely centerline near the middle of his price chart. That allowed him to use any of the previous pivots for his action lines. By experimenting, he found reaction lines that did the best job of pegging reversal areas at data points located forward of the centerline. Reaction lines are equal and opposite of the action lines, and serve to project price levels at which a reversal can be expected. That is why the task of seeking out the best centerline is so important. Dr. Andrews reasoned that a series of reaction lines which have pegged price reversals in the past is likely to continue to be in tune with current and future market price action. Having several previous pivots to use as anchors for drawing action lines is thus essential. The attached chart of Lattice illustrates this concept. Please bear in mind that the gap/mpl centerline is not the only centerline one could use on this chart. You might want to study the chart for other A/R possibilities. Try a peak-to-peak C/L, or a multi-pivot C/L. Send me your studies along
with any questions.
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TradersZone
[email protected] Re: More on the AR Samstag, 4. März 2000 00:25:21
>The attached chart of Lattice illustrates this concept. >Please bear in mind that the gap/mpl centerline is not the only >centerline one could use on this chart. >You might want to study the chart for other A/R possibilities. >Try a peak-to-peak C/L, or a multi-pivot C/L. Send me your studies >along with any questions. Hello Gordon, here is my chart. Regards, TradersZone
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PitchforkPrimer TradersZone Peak to peak c/l Sonntag, 5. März 2000 06:41:07
At 3/4/00 12:25:00 AM, you wrote: >Hello Gordon, >here is my chart. > >Regards, >TradersZone Hello TradersZone, Looks like you have the concept down. Takes time and a lot of chart work to find the best centerline. When the reaction lines don't seem to peg reversal areas, chances are the centerline is not the one that is best in tune with the price action of the issue under study. Despite the time required for this method, it was one of Dr. Andrew's stand-bys....AR lines could be found on most of his charts. I'm sending a chart with an example of a peak-to-peak C/L. Regards, Gordon
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TradersZone
[email protected] Re: Peak to peak c/l Sonntag, 5. März 2000 17:12:32
Hello Gordon, I think the peak-to-peak C/L on the last chart I sent to you was not really drawn from peak to peak. I'm sending another example. Regards, TradersZone
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PitchforkPrimer TradersZone Next Lesson Mittwoch, 8. März 2000 07:25:26
At 3/5/00 5:12:00 PM, you wrote: >Hello Gordon, > >I think the peak-to-peak C/L on the last chart I sent to you was not >really drawn from peak to peak. >I'm sending another example. > >Regards, >TradersZone Hello TradersZone, Your peak to peak c/l example was correctly drawn. That's a fairly simple approach, but quite often the peak to peak yields better reaction lines. Here's the first part of the next lesson. Regards, Gordon You'll find times when prices don't quite reach the ML, but instead drift alongside or away from it. The Schiff ML was designed to be used in place of the regular ML whenever that happens. Such price action can be found at any place on a chart, but most frequently occurs after a sharp sell-off, or run-up of prices. Dr. Andrews also used the Schiff ML whenever his regular ML sloped at an unusually steep angle. He said it helped smooth out irregular price action such as that caused by unexpected earnings news, crop planting delays or poor growing conditions, crop production reports, etc.. You'll find nearly vertical price moves over a short period of time on many charts. The Schiff ML method helps put things back in perspective when that happens. We'll use the chart of Sterling Bancorp as an example of prices drifting away from the regular ML. That ML is drawn in black. Prices didn't quite reach the ML, but drifted alongside and eventually away from it. The Schiff ML and parallel lines are drawn in red. Notice how prices were contained within the Schiff pitchfork until they finally broke down at the upper parallel line. The procedure for drawing the Schiff ML is the same as for the regular ML, except the starting point is located midway between the first 2 pivots you'll be using. The Sterling Bancorp chart
illustrates how this is done. Dr. Andrews also suggested using the Schiff ML whenever the regular ML method doesn't seem to be in sync with price action. Practice this procedure on your own charts, and send a couple examples when you're ready.
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TradersZone
[email protected] Re: Next Lesson Donnerstag, 9. März 2000 00:11:43
Hello Gordon, in my charting software (Dynamic Trader) the Schiff ML is drawn by finding the midpoint of the line between pivot A and pivot B, moving this point horizontally to directly above or below (depending on whether A is a low or high pivot) the A pivot, and drawing a line from his point through the midpoint of the BC swing. Are there different methods of drawing a Schiff ML? I was too lazy to draw Schiff MLs by hand with the method you described, so I'm sending my examples with the "Dynamic Trader Schiff MLs" :-) Regards, TradersZone
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PitchforkPrimer TradersZone Schiff Samstag, 11. März 2000 07:02:26
At 3/9/00 12:11:00 AM, you wrote: >Hello Gordon, > >in my charting software (Dynamic Trader) the Schiff ML is drawn by >finding the midpoint of the line between pivot A and pivot B, moving >this point horizontally to directly above or below (depending on >whether A is a low or high pivot) the A pivot, and drawing a line >>from his point through the midpoint of the BC swing. >Are there different methods of drawing a Schiff ML? >I was too lazy to draw Schiff MLs by hand with the method you >described, so I'm sending my examples with the "Dynamic Trader Schiff MLs" :-) > >Regards, >TradersZone Hello TradersZone, Your program Schiff line procedure is fine....it's actually what Dr. Andrews called a "modified schiff ml" and is only slightly different than the one I sent you initially. The one you used is preferred by most course members. I'm sending the modified Schiff lesson and a chart along with this email. The chart example shows how to use it with 0-3/4 pivots. Regards, Gordon
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PitchforkPrimer TradersZone Sliding Parallel Line Montag, 13. März 2000 00:52:52
Hello TradersZone, Here's one of the tools Dr. Andrews used most often when entering, exiting, or reversing market positions. Not many people know about this technique. Regards, Gordon The Sliding Parallel (SH) is drawn whenever prices cross an Andrew's line, and then move along it. For example, if the bottom of a daily price bar range drops through a lower parallel line of a pitchfork, a new parallel line is then drawn from that low and extended to the right. If the next day's price bar drops through that sliding parallel line, a sell signal is generated. Whenever price action dictates a sliding parallel, the next step is to draw a "Warning Line." The warning line is an additional parallel line that is an image extension of the original pitchfork channels. It serves as a warning that if prices penetrate the sliding parallel, the next likely target is the WL. The attached chart of Avis illustrates these procedures. Please try these on your own charts, and send me an example.
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TradersZone
[email protected] Re: Sliding Parallel Line Dienstag, 14. März 2000 22:57:37
Hello Gordon, this is my chart with the sliding parallel line and the warning line. Regards, TradersZone
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PitchforkPrimer TradersZone Circuit City SH Donnerstag, 16. März 2000 06:56:06
At 3/14/00 10:57:00 PM, you wrote: >Hello Gordon, > >this is my chart with the sliding parallel line and the warning line. > >Regards, >TradersZone > Hello TradersZone, Your chart of circuit city was a good example for this study. I may have mentioned it earlier, but Dr. Andrews used this technique on a regular basis. The next part of this lesson covers another of his favorite tools, the mini-median line pitchfork. Here it is.... Regards, Gordon The "Mini-Median Line" was one of Dr. Andrew's favorite market entry and exit tools. Though most often drawn using alternate closing prices, alternate highs and lows can also be used in order to avoid whipsaws in narrow trading range markets. 2 to 4 days is usually the maximum between pivots 2 and 3, and P1 can be a day or more back from P2. Dr. Andrews used Mini-Median Line pitchforks for buy and sell signals whenever he expected a reversal. Some examples include a probable P5, or when prices are at a Warning Line, ML, MLH, major ML extension, or a sideways channel price target. When prices cross the Mini-Median Line Parallel (MMLH) a sliding parallel (SH) is used for order entry.
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TradersZone
[email protected] Re: Circuit City SH Donnerstag, 16. März 2000 23:15:37
>The "Mini-Median Line" was one of Dr. Andrew's favorite market entry and >exit tools. Though most often drawn using alternate closing prices, >alternate highs and lows can also be used >in order to avoid whipsaws in narrow trading range markets. 2 to 4 days is >usually the maximum between pivots 2 and 3, and P1 can be a day or more >back from P2. Hello Gordon, wouldn't it be better to use "real" median lines on intraday charts instead of drawing Mini-Median Lines on daily charts for better timing? Could it be that intraday charts were simply not available when Dr. Andrews was alive? Regards, TradersZone
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PitchforkPrimer TradersZone intraday charts Samstag, 18. März 2000 01:24:00
At 3/16/00 11:15:00 PM, you wrote: >Hello Gordon, > >wouldn't it be better to use "real" median lines on intraday charts >instead of drawing Mini-Median Lines on daily charts for better timing? >Could it be that intraday charts were simply not available when Dr. >Andrews was alive? > >Regards, >TradersZone Hello TradersZone, You're absolutely correct....intraday charts were not available when Dr. Andrews was a trader. I'm reading between the lines here, but if you plan to day-trade using the course techniques, ie the pitchfork, then I agree that the regular pitchfork would be more useful on intraday charts. Otherwise whipsaw would be a significant problem. Please get back to me if I didn't address your question, because this is a very important technique. The mini-median line pitchfork and sliding parallel showed up on most of Dr. Andrew's charts. Regards, Gordon
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TradersZone
[email protected] Re: intraday charts Dienstag, 21. März 2000 22:03:22
Hello Gordon, You are right. I'm planning to daytrade S&P futures using the course techniques among other things. Regards, TradersZone
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PitchforkPrimer TradersZone Next segment Freitag, 24. März 2000 00:34:08
Hi TradersZone, Here are a couple Andrew's techniques that will help anticipate the breakout direction of a sideways channel. They work often enough to warrant keep handy. Regards, Gordon In an earlier lesson you were introduced to Dr. Andrew's sideways count. You saw how frequently the sideways count method provided high probability price objectives after the breakout from the established channel took place. In this segment of lesson 4, you'll be shown 2 congestion area techniques that can help you determine the probable sideways channel price breakout direction. Both rely on the use of pivots. The first uses the pivot points that are circled on a sideways channel. Dr. Andrews observed that whenever a sideways channel results in at least 5 circle contacts, the eventual price breakout would very often be in the direction indicated by the location of the 5th circle. If circle 5 is at the top of the channel, for example, the eventual price breakout would likely be to the upside. If circle 5 is at the bottom of the channel, look for a downside breakout. Dr. Andrews noted that this technique can be subject to false breakouts, but that such breakouts are usually followed shortly after with a confirmed breakout in the direction indicated by the location of the 5th circle. He emphasized that this study is best considered as a rule of thumb observation. He viewed it as a supporting indicator for use with a short-term pitchfork as prices approached a channel line. There are 2 charts attached that show how this works.
The second technique in this part of lesson 4 deals with a sideways channel that is building shortly after a P3 has been formed. Dr. Andrews noted that whenever that happened, the probabilities were high that prices would breakout in the same direction they were moving prior to the formation of the sideways channel. The attached "P3 to sideways example" chart shows this procedure.
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TradersZone
[email protected] Re: Next segment Freitag, 24. März 2000 20:52:35
Hello Gordon, here is my example for the 5 circle sideways count. Regards, TradersZone
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PitchforkPrimer TradersZone Lesson 5 Montag, 27. März 2000 06:07:31
At 3/24/00 8:52:00 PM, you wrote: >Hello Gordon, > >here is my example for the 5 circle sideways count. > >Regards, >TradersZone > > Hi TradersZone, Good example of the 5th circle tendency to predict the direction of a sideways breakout. Any luck finding a chart showing the P3 to sideways rule? I'm sending the first part of the next lesson. This trendline method is a useful tool with all of Dr. Andrew's course lines. He used it all the time, but especially when looking for confirmation of other course method trading signals. Regards, Gordon The Course Trendline __________________________________________________________ Next we'll discuss the trendline. Seasoned traders agree that the trendline is one of their most important tools. No matter what kind of trading program or technique they use, the trendline on a chart is a must. But one of the biggest mistakes made by amateurs and professionals alike is inconsistently drawing or defining the trendline. Dr. Andrew's trendline procedure is simple, consistent, and accurate. It works extremely well with the pivot count, and with the pitchfork. For an uptrend within the period of consideration, draw a line from the lowest low, up and to the highest minor low point preceding the highest high. The line must not pass through prices in between the two low points. Extend the line.(Attached chart of Brightpoint) For a downtrend within the period of consideration, draw a line from the highest high point to the lowest minor high point preceding the lowest low so that it does not pass through prices in between the two high points. Extend the line. (Brightpoint chart) That's all there's to it. It's simple, consistent, and it works well with other Andrew's lines. It also
helps eliminate personal bias and haphazard analysis. Practice drawing these trendlines on your own charts. Send me any questions you might have, and then e-mail a chart of your choosing which shows at least two uptrend and two downtrend lines that you've drawn. _______________________________________________________________________
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TradersZone
[email protected] Re: Lesson 5 Dienstag, 28. März 2000 12:02:24
Hello Gordon, here is my chart with trendlines. When a trendline is broken in an uptrend and the price is going above the trendline again, should I draw a new trendline and delete the old one? Attached is another chart with the P3 to sideways rule, I finally found an example for it. Regards, TradersZone
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PitchforkPrimer TradersZone Price failure technique Freitag, 31. März 2000 08:14:12
At 3/28/00 12:02:00 PM, you wrote: >Hello Gordon, > >here is my chart with trendlines. >When a trendline is broken in an uptrend and the price is going above >the trendline again, should I draw a new trendline and delete the old >one? Hi TradersZone, Take a look at the chart I'm returning....I added some lines for you to consider. With the course trendline, once it's broken a new one should be started. There's a technique that ties in with this coming up soon. Meanwhile, here's an important technique to work on. It deals with those times when prices don't reach the ML. Regards, Gordon Dr. Andrew's Price Failure Rule: "When prices fail to reach the ML as shown by a space between the P of reversal and the ML, the probability is that this price reversal will go further than it did on it's approach toward the ML." (Extract of original course material) A price failure very often indicates a sizeable reversal will take place. The pitchforks drawn on the chart of Home Depot illustrate the concept of price failure. Dr. Andrews routinely drew a new pitchfork on his chart after a new significant pivot had formed. He knew that prices had a high probability of reaching the new ML before stalling out or reversing. If prices reversed before reaching the ML, thereby forming a new pivot, he termed it a price failure. The underlying idea here is that Dr. Andrews fully anticipated his median line would act as a price magnet. To conclude that a price reversal resulted in a price failure, Dr. Andrews used
these primary signals:....a subsequent price penetration of a short-term multi-pivot line, and/or a return of prices to, and penetration of the parallel line formed at pivot 3 of the pitchfork. (The circles on the Home Depot chart denote the parallel line penetration signal. To avoid clutter, the mpl lines were not drawn.) One possible use of this method is shown on the attached chart of Conseco, Inc.. Look for similar examples on your own charts, and please send me a copy.
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PitchforkPrimer TradersZone Chart Freitag, 31. März 2000 08:18:00 image002.png
Hi TradersZone, Forgot the chart..... Gordon
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TradersZone
[email protected] Re: Price failure technique Samstag, 1. April 2000 20:10:00
>One possible use of this method is shown on the attached chart of >Conseco, Inc.. >Look for similar examples on your own charts, and please send me a >copy. Hi Gordon, here are my charts with price failures. Regards, TradersZone
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Gordon TradersZone Next segment Mittwoch, 5. April 2000 23:56:24
Hi TradersZone, Good price failure examples you sent...any comments or questions about it? Here's the next part....another old standby Dr. Andrews kept handy. Regards, Gordon In this segment you'll learn how to use the "Fan line Technique." To draw the fan lines, you'll apply the course trendline method which was introduced in an earlier lesson. It might be well to emphasize that the practical application of the course trendline method requires practice and experience, both of which will serve you well in this technique. Dr. Andrews used fan lines as an adjunct to his pitchfork, sideways channel, and action/reaction methods. In the fan line study three trendlines are drawn from the original reversal pivot of the price correction under study, typically a P0 or a P5. You'll notice on the charts included with this study that each fan line is at a flatter angle than its predecessor. When the third fan line is broken, the rule is that the correction has ended and a new trend is under way. Try this technique on some of your own charts, and then please send me a sample.
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TradersZone
[email protected] Re: Next segment Donnerstag, 6. April 2000 23:43:15
Hi Gordon, No, I don't have any specific question about the price failure technique. I guess the next likely target after a price failure would be the warning line? I have attached two charts with fan lines. Is it possible to calculate a fourth "target" fan line, if the third fan line is broken? Regards, TradersZone
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Gordon TradersZone Re[2]: Next segment Freitag, 7. April 2000 00:33:12
Hello TradersZone, Tuesday, April 06, 2000, 11:43:15 AM, you wrote: TZ> Hi Gordon, TZ> No, I don't have any specific question about the price failure TZ> technique. I guess the next likely target after a price failure TZ> would be the warning line? TZ> I have attached two charts with fan lines. TZ> Is it possible to calculate a fourth "target" fan line, if the third TZ> fan line is broken? TZ> Regards, TZ> TradersZone That's right, the warning line is the next price target. Additional warning lines can be drawn if needed, but usually one will do it. If prices go through the first warning line, another can be drawn, but most likely a new pitchfork could be drawn instead, which would be preferable. Helps stay current with recently formed pivots. When prices break through the third fan line a buy or sell signal is given. Not sure what you mean by fourth target fan line. I'm a little dense today. Your chart work was good...this is another handy tool for spotting the high probability of a price reversal or trend change. Best regards, Gordon mailto:
[email protected]
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Gordon TradersZone The Gap Trade Freitag, 7. April 2000 00:48:58
Hello TradersZone, This trading signal doesn't show up very often, but past observations have shown that it's well worth watching for. Dr. Andrews placed a lot of emphasis on the importance of price gaps, something many traders overlook. This is one of his gap uses. Best regards, Gordon mailto:
[email protected] The Gap Trading Technique. Price gaps can be a dilemma for many traders. The general rule denoting market strength or weakness after a high volume gap often comes up short after the initial reaction is over. Many "gappers" simply run out of steam. A high volume gap in itself seems to offer precious little evidence that a profitable move is about to get under way. Dr. Andrews used price gaps somewhat differently than others. He counted a gap as 2 pivots. You'll see how that works in the following technique which uses a gap to arrive at a price level for a buy or sell order: Using short-term, daily price pivots, label the pivot immediately preceding the gap as p0. Count the gap as 2 pivots, labeling it p1 & p2. After p3 has formed, and prices reverse towards a short-term p4, draw a horizontal line 2 price tics or more (individual preference)to the right of p3. Enter the market only if prices reach or penetrate that line within a few days after reversing from p4. Please look over your own charts to see if you can find places where the gap trade technique could have been used. Send me a sample when you're ready.
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TradersZone Gordon Re: The Gap Trade Sonntag, 9. April 2000 00:19:25
Hello Gordon, this is my chart with a gap trade. Regards, TradersZone
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Gordon TradersZone Re[2]: The Gap Trade Sonntag, 9. April 2000 06:55:38
Hello TradersZone, Thursday, April 08, 2000, 12:19:25 PM, you wrote: TZ> Hello Gordon, TZ> this is my chart with a gap trade. TZ> Regards, TZ> TradersZone Good example...the gap trade technique shines when an issue in at or near a P5. Similar to the one on the chart you sent. Here's another trading signal tool.... Best regards, Gordon mailto:
[email protected] Dr. Andrews used several techniques which helped him determine whether a P5 was near at hand. You'll recall that he observed most price moves ended or had a significant reversal at a P5. This technique uses alternate closing prices after a P4 has been formed. As with many of his studies, the number 5 is used. The chart accompanying this segment shows that there were 5 alternate closes to the downside after P4 was put in. Dr. Andrews noted that whenever 5 or more alternate closes followed a P4, the probabilities were high that a P5 was near at hand. An added feature to this chart study is the sideways channel. Notice how the 2nd target price and the 5th alternate close nearly coincide.
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TradersZone Gordon Re: Re[2]: The Gap Trade Mittwoch, 12. April 2000 20:07:30
Hello Gordon, This is a chart with an example for the 5 alternate closes. Regards, TradersZone
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Gordon TradersZone Re[4]: The Gap Trade Donnerstag, 13. April 2000 08:24:18
Monday, April 12, 2000, 8:07:30 AM, you wrote: TZ> Hello Gordon, TZ> This is a chart with an example for the 5 alternate closes. TZ> Regards, TZ> TradersZone Hello TradersZone, Good chart example of this Andrew's tool....another of his very unusual observations that work more often than not. Here's the final part of this lesson. Best regards, Gordon mailto:
[email protected] In this trendline method, Dr. Andrews once again used the number 5 as the basis for locating a probable reversal area. He found this technique to be especially useful whenever a clear, or obvious pivot count didn't show up on the price move under study. Trendlines are drawn using the course trendline method. When the 5th trendline is broken, the probability is high that the trend under study has ended. A mini-median line pitchfork, and/or sliding parallel could be used for pricing a trading order. The accompanying chart of Compaq Computer is an example of how the trendline study could be used. The pivot count beginning at the October low is difficult to nail down. There were several small areas of congestion, but no sizeable corrections while prices advanced. The count was unclear. By following the price action using the course trendline technique however, the trader would have been alerted to the possibility of a change of trend when the 5th trendline was broken in early February. Try this technique on your own charts. When you're ready, please send me an example of your study.
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TradersZone Gordon Re: Re[4]: The Gap Trade Mittwoch, 19. April 2000 12:41:08
Hello Gordon, this is my example with 5 trendlines. Regards, TradersZone
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Gordon TradersZone Re[6]: The Gap Trade Donnerstag, 20. April 2000 01:27:26
Monday, April 19, 2000, 12:41:08 AM, you wrote: TZ> Hello Gordon, TZ> this is my example with 5 trendlines. TZ> Regards, TZ> TradersZone Hello TradersZone, Good example of the 5 TL technique. Always reminds me of how the fairly simple tools often do a better job than many of the sophisticated studies out there. That was the last part of lesson 5. Lesson 6, attached, is made in one mailing. You'll find Dr. Andrew's trading rules along with a wrap-up review which uses several of his rules. You might have questions about some of the rules, so feel free to send them as they arise. Best regards, Gordon mailto:
[email protected]
Dr. Andrews had an abbreviated set of trading rules on several index cards that he carried around with him in his shirt pocket. He said every trading day turned up something new on his charts, and by having his rules in his pocket, he was reminded of the need for a methodical approach to his analysis. Quite a comment coming from the man who wrote the rule book. In this, the final lesson of the course, Dr. Andrew's original trading rules and observations are presented. Let's work with a few of them at this point. Using charts of issues you follow, please send me an example that illustrates your interpretation of each of the following rules: Rule #4. Anticipating major P's. Rule #7. Penetration rule. Rule #8. Price failure rule. Rule #11. 1-ML2/3 AR Centerline. Rule #12. Sliding Parallel rule. Rule #15. Mini-median line parallel to buy or sell. Feel free to include any other course techniques you choose to apply, but please include examples of the above as a minimum. Use more than one technique on a chart if your analysis supports it. Send as many charts as you like, along with your questions/comments. ############################################################################ Lesson 6 - Dr. Andrew's Trading Rules. This lesson covers course rules and significant observations as taught by Dr. Andrews in his original trading course. The rules are those that he used in his own trading, and are provided to serve as a checklist for use with the course trading methods you've learned. Rule #1. Where prices are always headed Rule. You course members are among the fortunate few to be able to draw a straight line and know that prices are headed toward that ML. Very few investors have ever applied this ML principle of statistics to price fluctuations, and we've never seen this in any books on investment. You are among the very few who
know that prices are always headed toward the newest ML. Rule #2. The Rule of coming opposites applies all through life. In the bible we find, "Blessed at they that mourn, for they shall be comforted." As investors, we know that any losses can be recovered by using course methods. Rule #3. "Turn your mind about," or "Rethink, for all good is at hand." We should mentally prepare ourselves for the coming reversal in prices, and other affairs. Here's one way for example, that you course members who know the ML rules can use: When prices are skyrocketing upward, we do this preparation by thinking "If prices pivoted here today at this price, I'd draw a new ML bisecting the distance between todays price and the price from which the rise started." And we know now that if this is a Major Pivot, prices will fall rapidly to this new ML. Profits from such drops are big and quick. Rule #4. Rule for anticipating major P's. If, during congestion, or after a rally or decline, you can count four previous P's, the fifth one is highly probable to be the one from which a new trend starts. Rule #5. Rule for easily detecting the major P from which you can make a quick, big profit is to watch for the EP formations. Rule #6. The other reversal rule is that prices tend to reverse at or near any ML, as well as at any extension of each ML. And also at any MLH or extensions of MLH. Rule #7. The Penetration Rule is that whenever prices gap past, or plunge through any ML, there is a high probability that they will quickly return to it temporarily, and then resume the trend they had before they gapped or plunged through. Rule #8. Price Failure Rule; When prices fail to reach the ML as shown by a space between the P of reversal and the ML, the probability is that this price reversal will go further than it did on it's approach toward the ML. Rule #9. The price failure rule is negated when the next price trend is also a failure in reaching the ML. This is almost invariably a signal of a big, fast move in the direction indicated by this last "space." Rule #10. When alternate median lines of comparable length slope in the same direction, the trend is firm, and rapid price changes take place. Rule #11. When 1-ML2/3 is exactly reached at P4, it can be used as a highly reliable centerline for the A/R method. Rule #12. Frequently, after crossing a lower MLH, prices continue to rise along the MLH. Since the crossing of the MLH signals a further drop is likely, use a sliding parallel along the bottom of the most recent crossing. If prices drop past that sliding parallel line, a sell signal is generated. Rule #13. ML's between P2 and P3 can start from a nearby or a remote P1, since prices tend to reverse at each of these ML's. Try several such P2-P3 ML's to discover the best fit. Rule #14. The distance of each MLH from its ML is the distance of the next warning line. Use these warning lines whenever a SH has signalled a buy or sell. Rule #15. Use the MMLH as a buy or sell signal when you expect a reversal because of a P5. Also when prices are at a WL, ML extension line, or where course lines converge, or intersect. Rule #16. Converging lines that meet prices have shown the highest probability of a trend reversal. Rule #17. Two to four days is usually the maximum between P2 and P3 for a MML. P1 can be a day or so back from P2 and 3. Rule #18. The most reliable Action/Reaction centerlines seem to be: MPL, 2P line, 2 Gap line, peak to low, or low to peak. Rule #19. When prices pass through R lines, look for a pull back and then a continuing move in the direction of the pass through. Rule #20. Use gaps as Action lines from the centerline.
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TradersZone Gordon Rule #4 Freitag, 5. Mai 2000 00:37:55
Hello Gordon, here is my example for Rule 4. And I have a question: What are EP formations? >Rule #5. Rule for easily detecting the major P from which you can make >a quick, big profit is to watch for the EP formations. Regards, TradersZone
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Gordon TradersZone Re: Rule #4 Freitag, 5. Mai 2000 02:12:42
Tuesday, May 04, 2000, 12:37:55 PM, you wrote: TZ> Hello Gordon, TZ> here is my example for Rule 4. TZ> And I have a question: What are EP formations? >>Rule #5. Rule for easily detecting the major P from which you can make >>a quick, big profit is to watch for the EP formations. TZ> Regards, TZ> TradersZone Hi TradersZone, Good use of the warning lines....also, the EP material is part of lesson 4. Rather than go back through the files to see when (or if) it was sent, I'm sending it along with this reply. Glad you brought it up. Best Regards, Gordon mailto:
[email protected] Tuesday, May 04, 2000 2:08 PM Dr. Andrews used a fairly common price chart formation that he found useful at probable P5 market tops and bottoms. The formation, generally called a wedge or pennant by chartists, is referred to in Dr. Andrew's trading course as the "Expanding Pivot." (EP) One of the few chart formations used in the course, he regarded it as among the most dependable indications that a market top was forming. Closely related to the EP is his "Inverted Expanding Pivot" (IEP) which he noted could often be observed at market bottoms. Both are regarded as intermediate and longterm reversal indicators. Dr. Andrews found that both formations were most reliable when they occurred after a sharp, rapid price move coinciding with the formation of a probable P5. He said it wasn't unusual for the formation to take several weeks to complete, and that conservative traders could best avoid the whipsaw associated with congestion patterns by trading only in the direction of the probable price
break out of the EP or IEP formation. The attached charts illustrate these formations. Please look over your own charts for an example of the EP and IEP, and send me a copy.
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TradersZone Gordon Re: Rule #4 Freitag, 5. Mai 2000 23:21:27
Hello Gordon, Thank you for the lesson with the EP material, I couldn't find it in any previous email. Here is my example for Rule #7. Regards, TradersZone
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Gordon TradersZone Re[2]: Rule #4 Samstag, 6. Mai 2000 08:08:27
Wednesday, May 05, 2000, 11:21:27 AM, you wrote: TZ> Hello Gordon, TZ> Thank you for the lesson with the EP material, TZ> I couldn't find it in any previous email. TZ> Here is my example for Rule #7. TZ> Regards, TZ> TradersZone Hi TradersZone, Glad you mentioned it earlier....except for the EP, IEP, and his sideways channel, Dr. Andrews didn't have much to say about chart patterns and formations. These are good ones to use though. Your study of the penetration rule was good. Later.... Best Regards, Gordon mailto:
[email protected] Wednesday, May 05, 2000 8:01 PM
