Dot Trend rule v.4, 6/1/2006 (based on conversations
||A new trend begins
at a dot1.
- In downtrend,
a dot1-up begins an uptrend, but doesn't end the downtrend. The dot1-up
is the failswing when a powersell fails to make a new low. This looks
like a HH followed by a HL.
- In uptrend, a
dot1-down begins a downtrend, but doesn't end the uptrend. The dot1-down
is the failswing when a powerbuy fails to make a new high. This looks
like a LL followed by a LH.
- The label dot1
will be reserved for the beginning of a trend. In dual trend both trends
have already started, so in dual trend a FS after a dot2 will be labeled
FS rather than dot1. So, in short, a dot1-up can only occur in downtrend,
and a dot1-down can only occur in uptrend.
||A trend ends if
a FS against the trend trades 3 points past the last dot2.
- The FS doesn't
have to be a dot1.
- The 3 points doesn't
have to be reached in one wave.
- In uptrend, a
FS-down that trades 3 points below the most recent powerbuy ends the
uptrend. If any HH is made after the FS-down but before the uptrend
has ended, a new FS-down will be required before the uptrend could end.
If there was a pimple after the powerbuy, the 3 points are measured
from the original powerbuy, not from the pimple.
- In downtrend,
a FS-up that trades 3 points above the most recent powersell ends the
downtrend. If any LL is made after the FS-up but before the downtrend
has ended, a new FS-up will be required before the downtrend could end.
If there was a pimple after the powersell, the 3 points are measured
from the original powersell, not from the pimple.
- The rule for ending
a trend is separate from the rule for starting a trend. It is purposely
harder to end a trend than to start one. Usually the old trend will
not end until some time after a new trend has begun. This means that
two trends are often in effect at the same time, which may be called
- Usually when a
trend ends a new one has already started. Occasionally both trends may
end before a new trend has started, leaving a temporary condition of
"no trend". This is not a problem, because a new trend will
start within a couple of swings
- A gap
open cannot end a trend: If the trend-end level is hit on a gap open,
the trend has not ended unless the next wave also hits the trend-end
level or unless the trend-end level holds past the first hour of trading.
||If a dot1 ends
in a FS which trades 3 points past the last 3 lows/highs, the new trend
- This doesn't have to
happen in one wave.
- For a dot1-up: If any
subsequent wave makes a new high before the trend-end level is hit,
the new trend remains valid.
- For a dot1-down: If any
subsequent wave makes a new low before the trend-end level is hit, the
new trend remains valid.
||NOTE: bold print indicates
changes from trend_rule_v3
||the price movement
from a high to a low, or from a low to a high (see definition of high and
||the highest price reached during
an upwave of the volatility stop
||the lowest price reached during
a downwave of the volatility stop
||volatility stop (2.5*ATR9 subtracted
from the highest close or added to the lowest close)
||Higher high, a wave top that
is above the high of the preceeding wave
Higher Low, a wave bottom that
fails to reach the low of the preceeding wave
||Lower High, a wave top that
fails to reach the high of the preceeding wave
||Lower Low, a wave bottom that
is below the low of the preceeding wave
||a high or low that fails to
exceed the one before (a HL, a LH, an equal wave top or an equal wave bottom)
||When a dot2 wave ends in a FS,
starting a new trend.
||a powertrade, either powerbuy
or powersell (see definitions below for PB and PS)
|| powerbuy: LL in an uptrend.
A second PB can't occur until a HH has been made after the first PB.
||powersell: HH in a downtrend.
A second PS can't occur until a LL has been made after the first PS.
(was P on early charts)
|When a dot2 wave ends in a FS,
and price pokes past the dot2 without ending the trend. In trading terms
dot3 is just a convenient label for a second try at a dot2 after the first
entry attempt may have gotten stopped out. In trend analysis terms the respective
dot2 is still in play. In earlier charts a "P" label was used,
but dot3 causes less confusion.
||A new trend has begun, but the
old trend has not ended.
||In a dual trend condition, the