trough reversal will depend on the
type of trend. The longer the trend,
the greater the significance of the
peak/trough reversal will be. A series
of rallies and reactions that show
up on the hourly charts will be nowhere
near as significant as a reversal in a series of intermediate
peaks and troughs, where the rallies and reactions might
last for several months. If we observe a reversal in a series of
intermediate rallies and reactions, then we would be able to
infer a primary trend, where the expected decline or advance because the low was below the previous low. However, there
was no sign of lower peaks, since the mid-April high was the
high for the move. This is why it does not usually pay to go
with half-signals. It was not until early August that a rally
peak did not make a new high, and this was confirmed with
a new low, signaling a new bear trend. I cannot say that things
will work out this well every time, because they will not.
However, it is surprising how well this simple tool can help
in improving trading results.
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