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TrendDynamics A P P
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I EDynamics
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STRATEGIES :: TACTICS :: ANALYSIS

Tool Synergy: Integrating the Line Continuation

and Whole Period Counts
by Joseph Hart

H E L    C           C     (the LCC), which is based on a buying and

T selling pressure model (see TDA 1:4:1f.), gives us, with the Whole Period Count, a second
way to measure the relative success or failure of price to negotiate important points of change
(POCs).
The Whole Period Count model (the WPC), introduced in TDC 1:2:10–11, considers the
ability of price to develop a significant whole period count above and through a POC to be
a reliable indicator of a trend change up. The LCC model is another way to measure buying
and selling pressure at important POCs. We use it primarily to indicate reversals of buying
or selling pressure but by measuring successive line extensions up or down through a POC,
it also helps to delineate the difference between a valid trend change and a reversing upthrust
or spring.
In this issue we’ll examine how these models differ, how they resemble one another—and
how to integrate them. Each reflects and gives us a handle on supply and demand and the
balance of speculative power at a given point in time. But is either one sufficient? Is one
superior? Should we jettison one in favor of the other?

Normalizing Price Swings

In the second lesson of the Course (TDC 1:2:6–7), I presented a swing chart (reproduced
here as Figure 28, overleaf, top) that illustrates a concept so simple, so obvious and
fundamental, that few traders are initially impressed by it. I wrote, “Swing-defined trend
changes ideally show structured changes to both lower tops and bottoms or to higher tops
and bottoms.”
As it happens, although almost every primer on technical analysis shows one way or another
this simplest model of trend, no book I’ve read (and I’ve read hundreds) provides explicit
information on how, exactly, to normalize price swings—that is, how to sort out those swings
that comprise similar efforts of price movement, including swings hidden by static timeframes.
What is lacking, in these books, is a way of assessing the relative value of swings in price, and
[]
  of providing a common benchmark
for their analysis.
H

Trend Dynamics
A P P L I E D
J
By contrast, normalizing price
swings is an explicit and integral part
  of Trend Dynamics analysis. It’s why
F L
we begin by assigning a threshold
I Y
time value to line changes of 5 and 18
D days; because these key intervals mir-
K
X ror weekly and monthly trends and
B G M the forces that drive them, we’re able
to study, quantify, and understand
E
what these trends are, and what they
C
portend.
A
Some of the most advanced trades
executed by effective professional
Fig. 28. Higher tops and traders today are not particularly complex. Rather, they’re grounded in
bottoms; lower tops
and bottoms.
basic tactics their practitioners have refined and executed to perfection
over years of practice. I’m reminded of something Bill Koller, the three-
time NCAA wrestling champ, once said about wrestling—something that
applies to technical analysis in general and to trading in particular as well:
“The most primary and basic moves, refined and done to perfection,
become the most advanced moves.”
As I hope to illustrate in what follows, such advanced analytical tools as
the WPC and the LCC are not particularly complex. They’re based upon
a clear understanding of basic, even primal supply and demand relation-
ships. And therein lies their value. Their solid grounding in price action
insures their tactical utility over the long run.
Fig. 29. Defensive demand. Offensive and Defensive Supply and Demand
To analyze price action at a POC is
H to try to determine the very mo-
J ment when demand so overwhelms
supply that the underlying trend,
F L
no matter how tenacious it has been
or seemed, changes. When local
I price action at that POC indicates
Trend D
change up K
trending as opposed to upthrust-
B
G M ing price behavior, as when the
trend is down and the POC is a top,
E
it often foreshadows changes on a
C
A larger scale.
 Another glance at Fig. 28, above, tells us that the period described by the 
A-to-H swings is a battleground between supply and demand, yet one
where there is an obvious preeminence of demand over supply. But if we
look another version of the same chart, in Fig. 29, opposite below, we can

Trend Dynamics
A P P L I E D

detect two different types of demand.  

One is a demand that defends the existing trend and staves off supply
offensives that threaten to reverse the trend. This I call “defensive demand.”
We see evidence of it in the bottoms at E, G, and I of Fig. 29.
At D, F and H, in Fig. 30, right,
however, we can see a different kind H
of demand: Here we see periods J
where demand reaffirms its con-
F L
trol over direction by pressing and
expanding the trend to new highs. I
D
This I call “offensive demand.” K
In the bull markets we especially B
G M
like to trade in, I like to see both
types of demand, offensive and E
defensive. This duality shows up as C
A
structures characterized by both
higher bottoms and higher tops—
the structures we classify as ideal  trends. Fig. 30. Offensive
Incidentally, without the defensive demand component our chart would demand.
look like that of Fig. 31, below, or perhaps like that of Fig. 32, p. 236 top.
These swing charts show that offensive demand, expressed as buying and
selling pressure, acting in the absence of defensive demand, will not
produce a running trend. Instead, absent defensive demand in the form of
higher bottoms, we are faced with difficult trading ranges at best.
Fig. 31. Higher tops
The Whole Period Count as Defensive Demand with no higher bot-

Assuming a change from down to

up, the price that determines the H
F
count in a WPC model is the low of
D
a given price bar. (It is the ability of B
these lows to hold above the POC
that triggers a WPC.) Thus the WPC
can be classified as an expression of
defensive demand: a WPC is an ex-
pression of the ability of defensive
demand to stave off supply offensives C
that seek to press price back under A
E
G

toms.
 
the POC. Othe right half of Fig. 33, below bottom, we see defensive
demand as higher-period bottoms above the POC at C, E, G and I. This is

Trend Dynamics analogous to the higher swing bottoms at C, E, G and I of the swing chart
A P P L I E D
on the left half of this figure.
 
Line Continuation Counts as Offensive Demand
Where the WPC derives from higher-
H period lows (higher bottoms) that
F
form above the POC, the LCC de-
D rives from higher-period highs that
B
press above and through the POC.
Thus the LCC is an expression of
offensive demand; and therefore the
buying pressure delineated by the
line continuations at B, D, F, and H,
on the right half of Fig. 33, below, are
C E G
A analogous to the higher tops at D, F,
and H that we see on the left half of
that figure.
Fig. 32. Higher tops with
no higher bottoms. Signs of Treachery
The lowest-quality WPCs tend to be those that also have low LCC values.
Why? Because when a WPC is triggered above a POC with a low LCC value,
it tends to be very highly congestive in nature; it may well contain a lot of
inside-period price action. As with the set or price bars attempting to
Fig. 33. negotiate up and through an 18D POC, shown on Fig. 34, opposite top,
(Left) Higher tops such a WPC may be less reliable and thus more treacherous to trade. Even
and bottoms.
(Right) Translating though the WPC is 9, the LCC presents only 2 units of buying pressure.
swings to periods. Similarly, the lowest-quality LCCs tend to contain low WPC values. The
reason is simple: Defensive demand
H H is lacking when buying pressure trig-
gers a high LCC count in the face of a
F F low WPC. In Fig. 35, opposite below,
D D we see plenty of buying pressure as
I the LCC shows 6 units through the
B I B
18D POC, yet we see not a single
G G
WPC. The absence of defensive de-
E E mand implies that the 18D POC is
18D POC
C C not being delineated as a new sup-
port area. This too makes for a more
A A
treacherous trading situation.
 Summary 
Some of our most useful and sophisticated analytical tools are based upon
simple, basic concepts. This is the case with the LCC and the WPC, which
Trend Dynamics
A P P L I E D
are used independently and together to detect and evaluate trend changes,
 
as well as reversals at critical POCs; and to make sense of them in terms of
period relationships. The principle underlying both these tools is simplic-
ity itself: that the principle of higher tops and higher bottoms (or lower Fig. 34. High WPC, low LCC.
tops and lower bottoms) can be applied with equal efficacy in the dual Fig. 35. High LCC, low WPC.
realms of period relationships and swing relationships.

B2
The question remains: Should we B1
emphasize one tool over the other,
jettison one in favor of the other? I
don’t think so. We prefer to trade 5
7
bull-market structures that demon- 4
6 9
strate both offensive and defensive 3
2 8
demand in swing relationships— 18D POC
1
“higher bottoms and higher tops.”
Likewise we should prefer trend-
change models where both offensive
demand (the LCC) and defensive de-
mand (the WPC) characterize the
period relationships at POCs. Each
tool has its uses. Each provides a good
if different measurement of the pre-
dominance of demand over supply at 5 6
critical points of change. Each allows 4
us to see in period relationships some- 3
2
thing analogous to the “higher bot-
1
tom, higher tops” requirement that
we use to define attractive structural
trends in swing relationships.
18D POC
  The following draft outline or blueprint of Trend Dynamics was put together
by several students in an attempt to provide an approach to mastering Trend

Trend Dynamics Dynamics material and then applying it effectively. Tyler Keys drafted the
A P P L I E D
outline. Wayne Beyer, Jerry Guevara, Rick Nickerson, Alex Hoar, Mike
         McGraw, and David Kiser offered comments and suggestions. We present it

with our thanks. —Ed.

How to Build a Futures -Trading Business in Record Time

A Trend Dynamics Blueprint

The basic Trend Dynamics Course material alone contains nearly 400 pages
of material. It includes a good many new concepts. For some students, some
of these new concepts, such as “floating line changes,” for example, are difficult
to grasp at first (in this case, because we’re used to seeing swings in terms of
fixed timeframes). And for some students the process of integrating Trend
Dynamics concepts into a workable whole is difficult.
This overview is intended to help our fellow students get the most out of
Trend Dynamics materials. It is presented in three parts. Part I is an overview
of the three components of Trend Dynamics. Part II sets out the essential basic
concepts of Trend Dynamics. Part III provides suggestions on how to turn
those concepts into trading confidence and sustained profitability in the most
effective way possible.

PART I : CURRICULUM OVERVIEW

The Trend Dynamics curriculum is comprised of three core learning
components: The Trend Dynamics Course proper, the monthly newsletter
Trend Dynamics Applied, and the TD Online forums.

Component I : The Trend Dynamics Course

The 23 lessons in the Course set forth basic Trend Dynamics principles of
technical analysis of futures markets and the fundamental trading strat-
egies and tactics that derive from them.

Component II : Trend Dynamics Applied

In this monthly newsletter the strategies and tactics dealt with the Course
are refined and fine-tuned. The newsletter is published exclusively for
Trend Dynamics Course graduates.

Component III : The TD Online forums

These Internet forums [see box, p. 240] provide an interactive experience
in which Trend Dynamics trades are identified and stalked in real time.