Six-category classification as a trend and pyramiding case study

How the six-column ledger assigned price

Daily prices were recorded vertically and assigned horizontally to one of six activity classes: secondary rally, natural rally, uptrend, downtrend, natural reaction, and secondary reaction. That six-category-classification is a vertical price log. Each qualifying swing is assigned to a class so the column in use, not a narrative, states the market condition.

For active issues near 30 or higher, only a swing of 6 points or more was treated as large enough to enter a class, so smaller oscillations were filtered out. A pivot-point is a swing extreme that becomes a reference level only after an opposite move of at least six points has printed.

When the character of activity changed

A change in the character of price action was defined as a three-point-penetration: a move of three points or more through a previously marked pivot-point.

A natural-rally is a countertrend advance inside a classified downtrend that fails to break the last pivot high by three points. A natural-reaction is a countertrend decline inside a classified uptrend that does not break the last pivot low by three points.

What the Homestake Mining walk-through showed

The Homestake Mining walk-through used a 6-point swing chart. It was framed as a demonstration of major-trend identification, not as a finished trading system.

Case-study orders were placed in 1000-share units from a 300000 starting balance, with risk kept near 10 percent of capital and a stated round-turn charge of 700 per 1000 shares.

Stops, a pyramiding-add, and a secondary-reaction

After a stop-out, the procedure usually waited for the next major signal instead of reversing. A configuration-reversal is the sole exception to that wait: reverse only when that stop print also shows a higher high and higher low, or a lower low and lower high.

Additional short units were a pyramiding-add. They were added when a later swing low was broken by 3 points and classified as continued downtrend activity, with the protective stop kept 3 points above the most recent classified high.

A secondary-reaction is a decline that starts from within three points of the last high but not above it. When that decline retraced 6 points or more from the last high, it was treated as a major-trend change and could authorize a new short after the prior uptrend class.

Reversing from short to long

The walk-through reversed from short to long only after a higher-high and higher-low structure printed. It then added long units on later 3-point breaks of classified highs while trailing stops under the last reaction low.