You've all heard the cliches, "trade with the trend", or, "the trend is your friend". Sometimes a lot easier said than done. Was there ever a time that all you have ever wanted to know was "what is the trend?"
There are plenty of technical indicators that you can overlay onto your charts, be it your bar charts, candlesticks, you name it, so many in fact I won't even start trying to name them all. However, essentially what we are looking for is a trade. And if we are told to trade with the trend then we need to find the trend so as to trade with it. OK. But what trend are we looking for? Are we looking for the trend of your friend? Or perhaps the trend of the brokers tips that are coming in through on the fax? Well, really, what we should be looking for is the Trend of PRICE. Have you read the William Gann book "How to Make Profits in Commodities"? In this book Gann tells us "Price tells the Trend".
William Gann was a swing trader through and through. "the study of swings in active stocks will convince a (trader) that far greater profits can be made in swing trading than in any other way of trading". "…swing trading…", mmm. "…far greater profits than in other way of trading…", I'd like to see that.
Have a look at this chart of MIM.
Insert MIM chart here.
Note the Triple Bottom at the end of the bear campaign. These Triple Bottoms are a good indicator of a change in trend. Here's what Gann had to say about these Triple Bottoms. "A Triple Bottom is the most important…you will find that the greatest advances start form a Triple Bottom…" The longer the time that occurs between these bottoms indicate a greater importance of the campaign that lies ahead.
The idea here, looking at the MIM chart, is to confirm a change in trend from the bear campaign to the bull campaign as close to the bottom, or Triple Bottom, as possible. Let's study the chart closely. You will see that after the third bottom of the Triple Bottom the swing chart makes a higher swing top, (note *1). This is your first indication that the trend is turning. Now, "…the safest buying point is on a secondary reaction…" Gann. A secondary reaction is, in this case, a higher bottom to the Triple Bottom, (note*2).
What's important to remember is that the earlier you get onto the swing the more you'll make and the less you'll risk. HotTrader clearly defines these entry points. I have noticed that two days after beginning to write this article MIM has gone on to continue its uptrend. MIM has now broken above its previous weekly swing tops, which is a good sign.
Happy trading,
Solomon Thallon
HotTrader, Australia
source : http://www.afsd.com.au
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