Vic Sperandeo

Chapter 7 about identifying trend changes. Or better yet, detailed one but I do not want to sound too demanding
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Actually it is really nothing new. A double toppish kind of pattern, combined with an trendline break. His main accomplishment I think is his definition of drawing a trendline; from the top of my head: for an uptrend, draw a line from the lowest low to the last low preceding the highest high (!) without the trendline going trough any of the prices in between.

After the trendline breaks half the time the price tries to penetrate the previous high and then fails (Vics 1,2,3, also Turtle-soup kind of thing imo).
If it failes even before penetrating completely you have kind of a Joe Ross/Ken Roberts/? 1,2,3 reversal.

But basically all these patterns come down to a double top kind of thing. Sometimes it penetrates the previous top a little, some time it failes exactly at the previous top, and sometimes a litte before. Even Livermore watched a stocks behavior at a previous high/low. The key is to get in early enough but not jump in before a signal. IF you get in at a reversal (entry) AND stay in LONG ENOUGH you can make lots of money on being less then 50% right.
But do not get in too early. You should at least see some kind of consolidation pattern before even considering a counter trend trade.

This is just my interpretation of that chapter of Vic's first book
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BTW It was one of the first trading books I ever bought
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Quote from Walther:

Would some of you , gents , post a rough description of Vic's
Chapter 7 about identifying trend changes. Or better yet, detailed one but I do not want to sound too demanding .
Walter
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Vic defines change of trend with three conditions being met.

1. Break of trend line.
2. Test of high in up trend or low in down trend.
3. Break of reaction low in prior up trend, or break of reaction high in prior down trend.

When these three conditions are met, a change of trend has occurred. It's as easy as "1-2-3".

Banker
 
Quote from Maverick1:



5287,

Those chapters were immensely helpful to me too. As Vic points out, even the biggest educators out there sometimes fail to precisely and rigorously define how to to draw a simple trendline.
As you say, it is indeed, akin to being able to read, or even, knowing the alphabet :)

The change of trend is, no doubt, where big cachingos can be made, but of course not everyone has the mental makeup to deal with it. You can only think in terms of odds as Vic says, given the duration of the trend and the other technical setups. I have found analysis of time and price fibonnaci work to be excellent complements to Vic's solid method. A change in trend cannot be identified with absolute certainty ex ante of course, but if you only trade when all the signs are pointing in one direction, then you can trade well providing you also protect your capital. One of the things I really admire about Vic is that he starts out his book with perhaps the most important chapter, on risk control and the preservation of capital. How many trading book authors out there start their books by focusing on risk? In my experience, it is typically at the end of the book... for ex, in Rick Bensignor's New Thinking in Technical Analysis he has his mm chapter as last chapter with Courtney Smith's insights.

One stock that is potentially changing trend right now is VLO. Looks like a decent short. One could have a plan to reverse and go long above the recent pullback should it suddenly turn around and head higher. This is just an example, not trying to promote ideas here.

Maverick
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Probably a good time to take profits on VLO. Displayed interesting relative weakness over the last few days and put in a low of 36.37 today. The selloff today was further evidence of a change in trend, but the stock can also pullback here.

Mav.
 
That what's is new: defining OPERATIONALLY what a trend is. Others just use fuzzy terms or descriptions so that in practice you don't know how to draw a (good or pertinent) trendline :).

Defining something NEEDS A PRACTICAL PROTOCOL. It is the same for other concept like Randomness for example and that's what Shewart DID remark about his fellows statisticians that do not work in industry like him : they just stay in abstraction and never define by a PHYSICAL OPERATION what randomness is. He innovated by saying that there must be such a definition for practice if not so a concept is useless.

So that you can remember the process for going from abstraction to realisation is called Reification. For example you are a reification process of God if one believe in God of course :).

Quote from opw:



Actually it is really nothing new. A double toppish kind of pattern, combined with an trendline break. His main accomplishment I think is his definition of drawing a trendline; from the top of my head: for an uptrend, draw a line from the lowest low to the last low preceding the highest high (!) without the trendline going trough any of the prices in between.
More...
 
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