I always give Jh the benefit of the doubt. After thinking it through and rereading what Darvas did, I have come to a couple ideas. Darvas would wait for the first reaction(intermediate term down trend) and enter for the next intermediate term uptrend and WAIT it out until the stock showed that the long term trend has changed. The key here is that he would enter on the first pullback. WJO also states that the third base usually fails. SO, if one were looking to enter stocks as an investment, looking for a VE, then entering on the first base or maybe the second base is where one would look for moves that precede the VE. SSTk, happened to be coming out of the first base....a stock usually has 2 or 3 bases....so this would be a great candidate to hold longer looking for an eventual VE. Also, the length of time it took to traverse the channel was very short. Another indication that the IT trend up has not ended and most likely a VE will continue. All in all, entering stocks with high quality following its first reaction(intermediate term down trend) and holding for a possible VE down the line makes the most sense to me. Once you get into the second or third base, the quality and risk goes up imo.
Yes Darvas was "catching" stocks as they came into more and more broader public view. In my commentaries, I refer to this as "phases". Most stocks that make the seven filter Universe I use, can only make it into the Universe AFTER they hiw the second or greater phase or stage. By requiring 5 trades in 6 months to get into the Universe, it is also true that prior phases have occurred. To optimize making money, you enter late in a cycle and leave early. In this way you only own during max velocity of price. The greater benefit is the increase in cycles per year. Another benifit for beginners and intermediates is that they have "confirmation" before entering. this switches emotions from the CW set (fear, anxiety and anger) to the PEP emotions of comfort, support and confidence. below are the VE rules (brief version) 1. If close is in the zone (between the old and new LTL), then advance the channel points to set up a steeper channel. 2. if close is in the old channel and outside the zone, you have an FTT; annotate accordingly. Channels and RTLs must be drawn correctly. A person cannot just draw lines. Knowing where point 1 is does not come easily. I see a lot of charts drawn by others. Most look like the person just decided to begin somewhere and see how it turns out. It does not turn out well at all. A lot of these people discuss trading with (meaning not having) no foundation for building a system. What a struggle it would be to give these people a "shape up".
Another invention that WJO used to figure out when a VE was likely was when the stock gained 20% in less than 8 weeks. He would hold the stock longer. With the precision of channels, we could use better rules. It would def be a struggle to "shape up" traders with no foundation. It has been a long journey and if someone told me it was going to be this tough before hand, I would have stayed far away.....HA. Anyway, with the advent of watching channels and cycles, I think I finally have turned the corner. Also, I prefer to enter on dry up. So if there is a FBO after volume picks up, it allows me to exit the FBO at break even. Only problem is when entering on DU, its not entering late...its entering early and sometimes takes a while for the stock to finally get the frv and get going.
Here's a channel breakout that worked for a small real money scalp. I went short on the 2nd test down.
jack hershey: very interesting material! I would like to learn more but not sure where to start. I like to focus on sim-trading ES and observe NQ, but not many markets at the same time, Will those wonderful materials be suitable for my purpose? I like to learn step by step, starting from basics and big picture and then learn deeper stuff but flexible to change if need. May you please help to advise how I should start? Thank you very much for your time!
You may read about trends. A long is ________ A short is ________ BUT what about all the other, not covered, items? Start simply and first uncover the omissions and errors. As you see eight items were left out when you filled in the two blanks above. Look at the definitions you used. Even those are incomplete as well.
Oh! An old Spyder gang member! I couldn't find the context of my question anymore but I (think) undestand what you mean. Especially if I put the VE discussion which apeared in this thread into context. But let's pretend I don't know. Would you mind for the benefits of others to explain/show in a graphic or chart what you mean? Thanks for your help!
Trendlines typically begin from the highest high or lowest low. The FTT doesn't have to begin from the highest high or the lowest low.