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them extensively to this very day. Yes, I do have more precise indications of what characteristics each of the four trends should and should not exhibit. However, the point is that I have internalized these characteristics into my beliefs and references. As you begin developing your strategy on the basis of studies of different resources, you will begin to internalize these characteristics into your beliefs. |
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For example, my brother Frank makes extensive use of trend lines. He can tell you exactly what trend lines a bull market should respectpoints that, if violated, will indicate either that the bull move is in trouble or that it is getting ready to accelerate up. There are more ways to draw trend lines than there are fish in the ocean. Frank, however, knows exactly how to draw his trend lines, because of his research, studies, and experience. While he and I disagree on how to draw a ''proper" trend line, both of our approaches work. We both have a set of tools that we prefer to use because we have the certainty that they will work for us. We have the confidence that they are valid, and this gives us the courage to consistently use them. They help our intuition and allow us to remain persistent in applying our integrity to the trading environment. We remain flexible in looking at new methods. |
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Here, then, is the cornerstone of all my technical analysis. I use these strategies to this day when looking at a market to decide if it justifies more attention. While they may or may not seem simple, let me assure you that when you are trading a 21-tick chart in a fast bond market, simplicity is critical for effectiveness! |
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Over the years, friends who are traders have asked me how I can so quickly determine a trend when looking at a chart. The answer, I suspect, is experience to some degree. However, the experience is based on one fundamental indicator that I faithfully use every day. That indicator is the Relative Strength Index (RSI), as developed by J. Welles Wilder, Jr. and presented in his 1978 book New Concepts in Technical Trading Systems. Welles Wilder developed it for pork bellies, and it is my belief that a valid indicator will work in all markets, and in all time periods. I was fortunate to have studied with Andrew Cardwell, Jr., CTA, who has realized, through intense research, that there is much more the RSI can offer. |
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The fact that an indicator works in all time periods is important. I believe that if an indicator is valid, it will work in all time frames, from a tick chart to a monthly chart. The RSI is used: |
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