MINESWEEPER AN ENTRY AND STOP PLACEMENT TECHNIQUE

This technique attempts to buy more insurance by placing the actual entry above a Confluence area, rather than simply above a Node. The stop would have a greater degree of protection since is located below a Confluence area. You might say the bush is larger and thicker. This is what a line chart of Minesweeper B would look like. You have several choices of entry, above the first .382 Node, above Confluence, or even above the Primary .618 Node (not shown.) You have choices for your stop as well. Below Confluence, below the .618 Node, or against the low at Point 1.

Both Minesweeper A & B are typically employed by dropping the Time Frame to achieve morereactionlowsfromwhichtocalculate,theDiNapolilevel,aftersupportismanifest. This is a good example of why it is so helpful for daily-based players to have access to hourly charts, even ifthey are developed from a delayed data feed. See CHAPTER 1.

Hank saw the market just miss his entry so without telling anyone, later that day he canceled his entry and went in at the market on a 10 lot (not shown because he didn't tell us.) He put a Bonsai 55 point stop under his entry level. He got both fills back at the same time. The floor loves Hank. So does his dentist, he went through another bite plate.

Dan got his fill and his stop was never hit. He opted for the .618 Primary resistance Node as his LPO, since the market was overbought. Because his closing order was in the market prior to the next day's open, he did even a little better than he expected.

Carl was too nervous to watch the market after the big thrust down bar that filled Dan's order. He was very relieved when he came back from tending the garden, to see that he was never filled.

THE TRADE CONTINUES (Chart 13-11):

On the second dip down, Dan waited for a Minesweeper entry after the low was formed at 758.30. He did this for two reasons. Dan saw the thrust down on the hourly chart and it made him nervous, since it was the secondtime down after up thrust. Although he didn't use the 3X3 on an hourly chart, this formation was looking a bit like a Double RePo sell. He also could not discern a reasonable stop level.

Carl left his orders as they were, reasoning that nothing significant had changed to impact the original trade criteria. The daily Trends were still in his favor!

Hank was not playing this one. While he watched the screen, he was once again busily calling relatives and friends trying to raise capital.

Let's see how this trade worked out:

Carl was filled and his stop was never hit. He and his partner took an almost perfect OP out on the trade (See Chart 13-13).

Dan's Minesweeper entry was filled and his stop against the preceding low was never hit. He noticed the RR track about an hour after his initial entry and doubled up his position by recalculating the Fibnodes and entering more long positions at the .382 Node. He blew out all his positions on the same OP in Chart 13-13 that Carl got out on. Chart 13- 12 shows his entry and stop points. Upon reexamination of his trade criteria, Dan realized he had missed the Agreement between the Confluence area Carl and he had gone long against and the XOP of the down move, as shown on Chart 13-12. He wasn't concerned about it, however, since he had just booked $12,000 per contract in two days. He needed some R&R and was off to another vacation, this time to Bangkok. After making some notes about the trade, which he always did, he was offto catch a plane.

WASH AND RINSE: A CONFIDENCE BUILDER

This pattern is more in the category of a hint or a clue than a tactic. Let's say you have consolidation above a DiNapoli Level but the market has refused to get in gear and move to the upside. Then, suddenly, all stops have been cleaned up (taken out) and on a lower Time Frame chart, you begin to get some thrust. The fact that the D-Level has been briefly penetrated is not of concern.

There are a variety of examples showing the Wash and Rinse phenomenon in this book. Some are shown in Chapter 15. The Wash and Rinse does not have to occur at a D-Level, it's just easier to play if it does.

Why does this work? The idea here is that once the market has been cleaned up, the floor has no incentive to go lower. Another possibility is that a search of lower levels by market participation has found substantial buying. A third more cynical interpretation would indicate that whatever entity, or trader(s) that wished to accumulate a significant position is now satisfied (by buying the consolidation as well as the sell stops). This entity or individual, now satisfied, has no incentive to hold the market back by acting to force a consolidation area to be formed. In any case, all those who were stopped out, who wish to participate, must reenter at higher levels. All intraday Trend indicators start to point up and it's time to get involved. If you exited 1 or were stopped out, it's time to reenter, by using one ofthe entry techniques described above.

FREQUENTLY ASKED QUESTIONS:

Which technique is best? What should I use?

That's up to the psychological make up of each trader. There is no single answer. When you become thoroughly familiar with each tactic by observing market action and the consequences that each action would have created, you will inherently choose one or the other. Experience in a given market situation will also tend to dictate the appropriate strategy.

Most of my trades are variations on Bushes. I use the other strategies when they seem more appropriate.

Minesweeper B seems complicated. You give up a lot before you get in, so why even bother with it?

It is more complicated but still relatively easy to employ, particularly ifthe context, or set up, is on longer Time Frame charts, say hourly and above. Whether or not it is costly depends upon how much support develops on, or around the selected entry Node. Refer to the Minesweeper section earlier in this chapter ifyou don't understand this point.

Isn't the Minesweeper technique just a variation of Bushes, after you see support where you initially wanted to enter?

Yes! I've attached a different name to this strategy and treat it differently to illustrate its applicability.

While all the examples above are shown for long entries, they work equally well on the short side.