Constructing median and action-reaction lines from pivots

Start with the build sequence

Editorial: TradersWeek reads this archive workflow as a build sequence. Number the selected swing pivots, lock a median line, then add an equal-offset action-reaction pair. After that, every later idea is only a test of a named intersection.

Number the pivots

A pivot is a distinctive swing high or low selected inside the chart window. The selected pivots are numbered P0, P4, P5, and so on.

A run of four pivots that completes into a fifth pivot is treated as a separate signal condition on the same chart.

A 0-4 line uses the extremes of a five-wave swing and adds an explicit zero pivot to the numbered wave points.

Lock a median line

A median line is a course line through selected swing pivots. It can be used alone or at an intersection to mark a candidate turn.

After five upward pivots, a turn is marked at the intersection of a median line and a warning line. A warning line is an extra parallel used with a median line after a completed five-pivot advance to mark a candidate reversal zone.

Add an equal-offset action-reaction pair

Action-reaction construction starts with a center line that joins a selected P0 pivot to a P4 pivot.

The action line is a parallel to that center line through a prior pivot. The reaction line is a matching parallel on the opposite side at the same distance, preferably in unused chart space. That unused space is virgin territory: chart space that price has not already occupied.

Under Babson action-reaction theory, those equal-offset reaction lines are expected to act as support or resistance and to bound how far a later swing is imagined to run.

Test only named intersections

A buy or sell placement can be specified at the intersection of a median-line parallel and a two-pivot line. A two-pivot line is defined by two chosen pivots and can intersect a median line or a median-line parallel at a placement point.

When price crosses a reaction line to form a fifth pivot, a later order can be placed near the return of that reaction line to a median-line intersection.

An exit can be placed near the intersection of a median-line parallel and a reaction line when price stops tagging the median line and instead clings to the parallel. A median-line parallel is a line parallel to the median line, used when price clings to the parallel instead of the median line, or when it crosses another course line.

Easier constructions in a larger toolkit

The compiled toolkit includes more than twenty line types. Action-reaction lines and a 0-4 line are singled out as comparatively easier constructions.