Article Reviews, Trading

Tom DeMark’s Sequential™ System

Was reading about Tom DeMark’s Sequential™ System after reading about his call on CNBC that Apple has bottomed on January 15, 2013 when his system had a reading of 13.

Brief summary of what I gathered. The system has 3 sequential stages:

  1. TD Price Flip
    • Buy setup
      • Close > close 4 bars ago
    • Sell setup
      • Close < close 4 bars ago
  2. TD Setup
    • Buy setup
      • 9 consecutive times where the close < the close 4 bars ago
    • Sell setup
      • 9 consecutive times where the close > the close 4 bars ago
  3. TD Countdown
    • Buy setup
      • 13 times (does not need to be consecutive) where the close is <= the low 2 bars ago.
      • The countdown can start (i.e. include) the 9th consecutive bar of the TD Setup stage.
    • Sell setup
      • 13 times (does not need to be consecutive) where the close is >= the high 2 bars ago.

Essentially the price flip resets the counting to 0, then setup starts counting from 1 to 9, and the countdown counts from 1 to 13 (not 10 to 13, the counting resets again for the 3rd stage), at which point the system indicates an exhaustion condition and an entry can be taken.

The system can supposedly be improved by also looking for a break up/down of a channel (pick your favorite, bollinger, donchian, etc.)

References

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