The Tour de France, Stage 19 — Albertville to Saint-Gervais Mont Blanc. One of the murderous mountain stages where the contenders are separated from the pretenders. It’s the critical point in the race where dreams are crushed, leaders overtaken and reversals take place.
Like a volatile market, this closing mountain stage poses a basic question: who is brave enough — or desperate enough — to attack?
Thanks to Sequential Decline, you have an immediate indication as to whether buyers (or sellers) at the front of the pack are losing steam — presenting an entry opportunity.
A key to reversal victory that everyone else can’t see
Across the 21 stages of the 2016 Tour de France, there were 14 stage winners, and countless lead changes. Of the 21 stages, 11 were classified as mountain stages — which meant a grueling pace at steep inclines. A great place for a crash and a huge opportunity to reverse the direction of the race.
Every market has its equivalent of mountain stages with steep inclines and death-defying descents. For retail and institutional traders alike, these are excellent opportunities to profit. They are also fabulous chances to clear your account out.
Fortunately, when buyers (or sellers) are in the lead — and candles are on fire — there is a way for you to tell when the prevailing group is losing steam. It comes in the form of sequential decline — when buyers or sellers become successively less interested in the price levels they’ve hit. With each tick, the number of contracts assumed becomes sequentially lower — showing a significant drop-off.
When this happens, it’s like seeing the leader of the pack look back with fatigue and panic in his eyes. They’re fading, and a swing is about to ensue.
Reveal your opening stages before everyone else
You can tell the tone of the race for any particular stage simply by watching the riders in the pack. If the race is ‘on’ and a breakaway is being reeled in — frantic smashing of the pedals is the order of the day. Often enough, while the respective teams position their leaders, calm enters the pack as riders jockey for position and grind the stage out.
When the market is ‘smashing the pedals’, you can spot the signs easily enough as candles shoot for extremes. It’s the edge of this phase that you’re watching for, and particularly the edge of these candles that you should be watching for Sequential Decline to rear its head.
As price gets ready to leave the Value Zone headed for Value Area High (VAH) and Value Area Low (VAL), be prepared that the aggressive buyers (or sellers) may be backing off. If price barrels through VAH or VAL, you’re in an extreme — in overbought or oversold conditions — and you should be ever watchful that a reversal back to the Value Zone is imminent.
Like a racer in the pack watching the leader in front, this is your time to move.
Reliable swing entries that lead the peloton
Making a move during any race is a big decision, often made by the greats using instinct and intelligence brought to them by their team. When sizing up a move on the market, you have the benefit of the insight brought to you by Order Flow Sequence Tracking Intelligence.
When you see Sequential Decline at the tip of a candle, you’ll know the time has come. To finalize your entry, you’re now looking for another form of confirmation. This is usually brought to you with Responsive Activity: the opposing side (institutions) stepping in to help drive the swing.
Now you have wind at your back, but you’re not quite ready to hit the gas. Take one last look to make sure you’re at a pricing extreme, in VAL or VAH. Better yet, approaching a VRL (Volume Rejection Level). These are the points of acceleration you’re looking for since they represent Support, Resistance and Reversal areas.
A better alternative to watching candle tails
Many believe that simply looking at the tails of candles will tell them what they need to know. The challenge with this approach is that it’s often late. Tapering activity often takes place on the preceding candle with confirmation to follow, with fatigue showing up on the next candle.
Your first sign that a swing may be imminent often comes at a bull or bear candle that’s solid. Sure there may be a tail, but you want your first flag of opposing fatigue to come just as the last push is made — not when they’re gasping for air along the side of the road and everyone has passed the opportunity/leader by.
The challenge with price-based indicators designed to spot swings like these is that they don’t factor the volume that precedes swings. If you’re using an indicator to signal swings, your timing will be about the same as simply watching for long tales. Late.
Seize victorious swings before anyone knows they’re about to hit
Tour de France winner Greg LeMond was famous for not wearing a watch and for refusing to take time/pace updates from his entourage. He raced his way into the record books and biking immortality simply by feeling his way through the race and the mountains. (Oh, and putting up God-like times.)
When dealing with steep candles in either direction, you have the benefit of Order Flow Sequence Intelligence and the reversal signs that come with Sequential Decline. This is your best indication that the buyers or sellers previously in the lead are about to be overtaken.
Simply monitor bull or bear candles (or groupings) and keep an eye out for reversal blocks with declining buyers (or sellers) at the tips of a candle. When you see three or more, you’ll know that these once attacking positions are now backing away from price.
Once you have confirmation with responsive activity, dig in with an entry and a clean race towards profits — while everyone else fades into oblivion.
Noft Traders offers a Funded Trader Program. To learn more, visit their informational page at NOFT-Traders.com.