TD Sequential indicator – a trading system for puzzle lovers
A trading system based on the book by Thomas DeMark (by the way, the author and several other well-known technical analysis tools) is considered unique and independent. It is based on the TD Sequential indicator, about which there is an article on the MQL5 website (the site of the developer of MT platforms) that suggests building a neural system with this indicator. The new generation of Expert Advisors is still far away, and TD Sequential itself at first glance seems more than strange. Nevertheless, he is loved, discussed and experimented with. If someone succeeds in making money with it, share in the comments how you did it.
TD Sequential indicator: description, settings and strategy
The indicator is non-standard. Its author suggests considering the trend as a cyclical pattern. Unlike the wave theory, the model assumes the division of the trend area into three main repeating phases. The segment begins with a reversal pattern, after which there is a directional movement, followed by the 3rd phase, ending with a reversal pattern. By the way, there are the most questions with the 3rd phase.
TD Sequential Phases:
- Phase Price Flip… A reversal pattern preceding the main phase, at the appearance of which the indicator builds resistance and support levels and from which the candles of the main phase begin to count. It is constructed as follows (for a downtrend reversal pattern):
- The Close price of the penultimate candlestick must be greater than the similar price 4 candles ago.
- The Close price of the last candle should be less than the same price 4 candles ago
The figure below illustrates this clearly.
- Phase Setup… Consists of 9 consecutive candles (blue numbers), which satisfy the condition “Close price of the current candle is less than the same price 4 candles ago”. If this condition is not met on any of the 9 candles, the countdown stops until the next reversal pattern.
- Phase Countdown… Consists of 13 candles, the sequence of which does not matter (gaps are allowed). It also compares prices, but of those candles that are numerically next to each other (2 candles ago). Read more about the principles of calculating candlesticks for the 3rd phase in Demark’s book. Attempts in practice to understand the principles of building the 3rd phase did not lead to anything.
Demark offers to open deals in the following cases:
- At the beginning of the first main phase. TD Sequential draws levels after the reversal pattern, from which the price pushes off. On the next candlestick after the end of the pattern (6 candles), you can open a deal with a horizon of up to 9 candles (end of the phase). If a reversal occurs on one of the candles and the numbering gets lost, manually close the deal.
- At the beginning of the second phase. Since there is no strict sequence here, the range of volatility can be larger. This means that for this phase, you need to set longer stops and set horizons of 10-15 candles or more.
There are no strict recommendations regarding timeframes, although Demark himself suggests working with daily intervals. In practice, complete signals for complete phases rarely appear. The best option is to trade by pattern and levels at the beginning of the first main phase. There are two versions of these indicators on the Internet, the settings in which are not recommended to be changed. At least until you understand how the candlestick numbering works.
Output… In general terms, we think the essence of the indicator is clear. If you need its template, write in the comments – we will send both of its options to the mail for free. It is noteworthy that both of them, superimposed on each other, show different results. Therefore, we emphasize once again: if you can deal with it, you are a real professional! And blog readers will be very interested if you share your own observations in the comments.