The Commodity Futures Knowledge Network ®


This valuable trading technique should help you greatly in your trading, if applied properly. This "market structure" trend direction method is basically a pattern recognition method which is amazingly simple but at the same time it's powerful.

It's the best way we have found to identify market direction and define a bullishly or bearishly structured market. It is based on the observation that if you look at a bar chart of any market, you will see a bear market consists of mostly a series of lower highs and a bull market consists of mostly a series of higher lows.

These higher-lows and lower-highs are referred to by Commodity Traders Club as Swing-Lows and Swing-Highs, also known as Pivots, or Pivot-Points.

A swing-low is defined as a low day (or bar) with higher prices both in front and behind the low day (or bar), thus forming a swing-low. This swing-low must also be above the previous swing-low, thus forming a higher swing-low.

A swing-high is defined as a high day (or bar) with lower prices both in front and behind the high day (or bar) forming a swing-high. This swing-high must also be under the prior swing-high thus forming a lower swing-high.

The concept of buying higher swing-lows or selling lower swing highs are being used by the most successful large traders. This concept has been used by them for a very long time. These traders don't talk much about this simple but potentially profitable technique. Very few traders are familiar with this powerful, yet simple technique.

Merely buying higher lows and selling lower highs by themselves can dramatically improve your trading results. You also need to know where to place a target so you can get out of the market once your profit objective is reached. You need to know where to place a protective stop-loss if the trade is wrong. For this we strongly recommend you use "Drawdown Minimizer Logic®" which is explained in detail in CTCN Special Report #2. Drawdown Minimizer Logic is a mathematical method of sharply reducing drawdown based on past "adverse excursions."

A sample chart showing how to use swing-highs and swing-lows (aka market structure) to trade successfully is in print copy.

The concept of only selling short providing a LOWER "Swing-High" has occurred, and only buying upon the occurrence of a HIGHER "Swing-Low" can be very profitable.

This method appears highly profitable when used on old charts, using some subjectivity on the past data. Old charts and hindsight combine to make it look highly profitable. However, doing it in real-time trading is more difficult.

Selling providing there are 2 or 3 lower days (or bars), instead of just one on each side of a high point qualifies as a more significant Swing-High, and can be very profitable. Of course, the reverse is true for a Swing-Low buy. The more days (or bars) on each side of the swing day (or bar) is better to more clearly define the Swing-High and Swing-Low.

The problem is the fact the more days (or bars) on each side there are, it's likely more of the move is over by the time we can get into the market. Conversely, the fewer days (or bars) of each side of the pivot bar means the move has likely not progressed far. However, it's more likely to be a false or minor Swing-High/Low and consequently less profitable, or a loser.

It's fairly easy to identify and draw buy and sell arrows/dots at Swing-High and Swing-Low points on charts. However, doing it in real-time trading is not as easy as it appears on a back-data bar chart.

Nevertheless, the Swing-High and Swing-Low concepts (aka Market Structure) are in our opinion the best trend identification tool for trading the commodity futures markets successfully. It will "work" in any market, the actual market makes little difference. Of course, as always, trending markets make it work a lot better.

The concept of buying/selling Swing-Lows/Swing-Highs is simple and can be amazingly successful but needs to be combined with a good stop-loss method to give you protection on false signals. It's recommended you use CTCN's copyright "Drawdown Minimizer Logic®" to scientifically set stop-loss levels. "D.M.L." is used by CTCN's Swing Catcher® technical analysis software system but it's not used by CTCN's Real Success method. However, it may successfully be used with it. Click-here for our free "D.M.L." Special Report 2 ... Drawdown Minimizer Logic

P.S. - This profit potential and informative Special Report is regularly priced at $50.00 (but free to traders via this webtrading world wide Website). It may seem like too much money for a few pages of information. However, you should not judge something by its size but by its content and value. Swing-Highs & Swing-Lows are actually worth a great deal of money. It will help you greatly in your trading.

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