Thus far we have taken a review/examination of what has been provided to us by the accepted principles of trading.
To use the PYRAPOINT technique, please realize that we are not asking that you discard any of your learned good trading rules. We do ask that, since we are operating on a totally calculated line and square, that you follow what we have learned to be a very highly accurate set of simple rules. The nice part of this technique is that it can overlay any theory or system, which may presently be of interest or use by you. Even if you choose not to use PYRAPOINT as your primary theorem, please look at the rules and squares for confirmation. WE ARE BETTING THAT YOU WILL CHANGE YOUR PRIMARY UNIT!
The rules which we use are self-evident on your chart of the square for the price parameter in which your commodity or stock is trading. We operate upon the theory that if we can successfully trade the square representing the parameter currently trading then, in all probability, we will have success in the next square as well. Thus, the rules, which we submit for this square, will be universally acceptable for any commodity or stock, which you will be trading. The only preface which we caution is to fit the TIME unit and the PRICE unit into scales, which are “common sense” to the parameters of price and volatility. In other words, use a square size, which will reflect the manner in which the unit is trading. Again, you won’t be wrong so long as you heed the Pythagorean Principles explained in prior pages of this book. Another way of confirming this “common sense” is to realize that it would take a considerably smaller square to reflect the action of an hourly chart of a low-volatility commodity or stock than it would take for a daily or even a weekly, especially in a high-volatility status. Again, this should not be a primary worry for you. PYRAPOINT and your own judgment will suffice as soon as you become acquainted. Actually, you can see the picture with very little experience. The worst scenario, which you might have, is working with a square, which is within a square. It is all repetitive, “ever onward, and ever outward”. You are simply the recorder of a very Universal and Wonderful Law. At this point we are going to assume that you have the ability to build a square from the data extended to you, and that you are ready to find out what all of these lines really represent.
RULE #1. Begin your calculation from any significant top or bottom.
RULE #2. As price travels up (or down) from a picked significant point, you will stay long (or short) so long as price does not violate the calculated 45-degree line per a close. If you choose to use a closer stop, know that you have the choice of penetration of the 45-degree line with a chosen amount of risk. As an example, corn is often traded on 3.25 cents as a stop below the 45, or of course, a dollar amount is also in order.
RULE #3. When this calculated 45 is broken, know that this is the first notice of at least a temporary trend change. Expect your next objective to be the top (or bottom) of the calculated square.
RULE #4. When a price square is broken, know that you are then in the next square or parameter of influence. Note: Remember the basic square construction. If you break the bottom square in a down-move, realize that you are in the bullish side of the square directly below you. Therefore, expect the 45 coming upward in the lower square to be the next objective. It will become your next support. Obviously, the opposite set of data is applicable if the move is to the upside; the 45-degree line in the square above becomes a point of vibration or resistance.
Breaking this 45, your next upward objective becomes the top of the square, just as you experienced with the example just given for the lower square. (We will clarify these rules in the charts at some length.)
RULE #5. Expect trend changes of significance at EOS (end of square); this is the portion of the square, which is based upon TIME. You will recall that we stated that “TIME” was dominant in influence over PRICE. Approximately 85% of the EOS’s will produce some kind of reversal. Now, this may only be a reversal to the next support or resistance, but it will usually be there. One other note should apply here: a reversal can be a pivot from downward to upward; it can be a pivot from upward to downward, or the third option is that it can be an ACCELERATED MOVE (still it is a trend change of note). A fourth option can reflect the end of a trend to a sideways trek for PRICE, usually during a digestive interlude.
RULE #6. We do use momentum indicators along with our squares to better ascertain if we should expect a broken 45 to proceed to the first objective (the bottom of the square) or if we should expect our target zone to fall to the lower 45 for support, assuming a downside break. The opposite is obviously true for an upside break. The indicators most often used for confirmation are our own application of the make-up numbers of Relative Strength Index, Stochastic, and the standard make-up of Accumulated Swing Index.
As you learn the PYRAPOINT technique, and indeed use it in your trading, undoubtedly you could find some additions, which fit your particular mode of trading habits. However, we sincerely believe that if you learn and apply that which is presented herein, that you will find these rules to carry you well with any chart anywhere, and with any commodity or stock. It has shown us the true Universality of the System.
Fellow trader, as soon as we are convinced that we have given you a fair and usable background as to the reasons, the core data, and the use of the PYRAPOINT technique, it is our intention to share with you enough charts to be examples of the principles to which we have addressed. Please be advised that these charts are taken from our daily work and are examples of our ongoing analogy. They have in no manner been “selected”, nor are they programmed to be “after-the-fact”. We have all experienced chart work, which just didn’t make sense on a daily basis apart from the example of the particular day. For reasons stated above, we will obviously not be all encompassing, but we have tried to share at least one idea and interpretation on each chart. Some the charts are ongoing in design, meaning that a question is posed at a certain juncture, and then answered as the facts unfolded. We hope that it will assist questions, which you may have. Given the nature and complexity of trading, we need to KNOW WHERE WE ARE AT A GIVEN TIME, WHAT WE SHOULD EXPECT AS A MODE FOR EACH PRICE LEVEL, AND WHAT TO DO WHEN IT CHANGES -- AND IT WILL CHANGE!! JUST BE READY!!
Let’s proceed on to some “HANDS-ON” charting from our files. To do this, we have adopted the following INPUTS and SIGNALS for our charting education.