GENERAL DISCUSSION:

Your success in trading with DiNapoli Levels is dependent upon a comprehensive understanding of what has been taught throughout this book. Your ability to recognize how different Time Frame charts of the same data impact your trading strategy is of the utmost importance. Spend as much time as you require internalizing this subject. The dividends paid will be many.

MOVING THE TIME FRAME

To some of you this will be absurdly obvious. Others among you will really struggle with the visualization of the way Time Frame interacts with DiNapoli Level creation. If you have trouble with this process, it will become clear as you work with graphics software and display the same data in different Time Frame charts.

We'll start very simply. The half hour Chart 11-1A, has an eight price bar up move. The line Chart, 11-1B, shows all the information from the bar chart that we need for D-Level creation. Chart 11-1C shows the proper labeling of Focus and Reaction Numbers for this Market Swing.

AN IDEALIZED TRADING EXAMPLE

Let's try to apply some of the techniques we've learned so far, in an everyday trading situation. We'll assume we've dropped the Time Frame sufficiently to locate a Confluence area, as shown on Chart 11-3. We'll also assume the following criteria regarding Trend. The Stochastic (not shown) has given a "sell" while the MACD (also not shown) remains in the "buy" mode. The Trend therefore remains intact to the up side. Furthermore, for the sake of simplicity, we'll say the Trend will remain intact to the up side, even if price action were to break to the area of Confluence.

The questions: Where would you enter, and where is your stop?

Ponder the questions before considering the solutions outlined below. There is more going on here than is obvious. Incidentally, there is more than one correct answer.

Hyper Hank: Joe, I'd sell the market right where it is and take profits at the Confluence area. Then I'd go long.

This answer is correct only if Hank had the ability to lower his Time Frame sufficiently to observe the Trend on the Market Swing down. Hyper Hank needs a down Trend to justify his sell, and while a lower Time Frame may give an MACD/Stochastic "sell," it's an assumption on Hank's part and beyond the specified criteria. Also, any offset to his short position or any order that would initiate a long position, should not be placed at 'K' Confluence, but rather above Confluence in order to increase his chances of being filled. Hank also did not answer the question fully. He said nothing regarding stop placement. He's so anxious to trade, he doesn't consider protecting himself. My advice would be for Hyper Hank to settle down and regroup 1 , otherwise he is about to'learn an expensive lesson.

Conservative Carl: Joe, I'dput my buy at the .618 retracement of Reaction 2, andplace a stop beyond the old low at Reaction 2.

This solution assumes the Trend would still be up at the .618 of Reaction 2, and the criteria given, only guaranteed an up Trend to Confluence. If we assume the Trend would remain up at his entry point, I would recommend that Carl:

A. Should put his sell stop at, not below #2 (assuming he has a broker that commands
respect in the pit).

B. Should buy above the Primary Node, (which is, as he stated, the .618 retracement of
Reaction 2), not on it.

If Conservative Carl had qualified his entry, depending on the Trend remaining intact, this solution would be acceptable, but perhaps overly cautious. The problem with waiting for deep retracements to manifest, is that the context (in this case Trend) may be history at the entry point, and Minesweeper A or B would have to be employed for a proper entry. See Fibonacci Tactics CHAPTER 13.

Diligent Dan: Joe, I'd enter just above Confluence and depending on my money management criteria, my stop would be below Confluence or below F5 of the Primary Node. IfI choose the later stop placement criteria, I'd keep my eye on the Trend. If the Trend broke to the down side, I'd exit at the market or calculate the resistance DiNapoli Levels at that point, and take my first opportunity to exit my long, at or below a resistance Node.

Good answer Dan, but you are missing something.

Hyper Hank is back!: I'd put my buy above thefirst .382 support Node and my stop below

Confluence.

That would be my choice as well, but give me a reason. I don't want to miss the move!

Diligent Dan is back!: Hyper's second solution isJoe'spreference because there's Agreement between the OP of the down move, and thefirst .382 retracement area.

You can see from the progression of ideas that there is more than one acceptable answer possible from analysis employing the same methodology.

ADVANCED COMMENTS:

It's probably a little advanced at this point but I'll be more specific about my stop placement.

If the higher Time Frame Trends supported a long entry, (better, safer context than what was given), my initial stop would likely be below the primary .618 '*' Node.

If the higher Time Frame Trends did not support the trade, then my stop would be just below Confluence.

If the trade criteria included a Directional Signal up rather than just a Trend up, I would have entered just above the first .382 Node, even if there were no Agreement, since a Directional Signal is stronger thanjust a Trend up. I would also buy stop the old high, or the high at C // the Directional Signal were particularly strong (like a Double RePo Failure). If I were filled on both the 'Or Better' buy (at the first .382) as well as the 'buy stop,' that would be fine. I don't mind doubling size on Directional moves.