Understanding TD Sequences
Developed by renowned technical analyst Thomas R. DeMark, TD Sequences (or TD Count) are powerful indicators that identify potential trend exhaustion points in financial markets. This left-trading approach helps traders anticipate reversals before they occur.
Key Characteristics of TD Sequences
- Trend Exhaustion Identification: Pinpoints when prevailing trends lose momentum
- Left-Side Trading: Signals potential reversals earlier than right-side indicators like MACD
How TD Structures Work
Buy Setup Structure
- Trigger: A candle closes below its 4-day prior closing price
- Count progression: Requires 9 consecutive candles closing below their respective 4-day prior closes
- Completion: Full TD9 buy structure forms (count resets if interrupted)
Sell Setup Structure
- Trigger: A candle closes above its 4-day prior closing price
- Count progression: Requires 9 consecutive candles closing above their respective 4-day prior closes
- Completion: Full TD9 sell structure forms (count resets if interrupted)
Note: Structures can occasionally extend to TD13, indicating stronger reversal signals.
Practical Setup Guide (Using Sina Finance as Example)
- Enable TD indicator in your charting platform
- Disable "Show only 9 and 13" filter
- Numbers displayed on candles represent active TD counts
Trading Strategies with TD Sequences
Strategy 1: Cost-Averaging Approach
For Buy Signals:
- Enter long position at TD9
- Set initial stop-loss at structure's lowest point
- Add position at TD13 while moving stop to new structure low
For Sell Signals:
- Enter short position at TD9
- Set initial stop-loss at structure's highest point
- Add position at TD13 while moving stop to new structure high
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Strategy 2: Trend-Confirmed TD Trading
- Range-bound Markets: Use TD for short-term swing trades
- Uptrends: Combine TD buy signals with MACD confirmation
- Downtrends: Pair TD sell signals with RSI divergence
Pro Tip: Always confirm TD signals with supplemental indicators like MACD divergence for higher reliability.
Strategy 3: Indicator Combinations
KDJ + TD Combo
- Long: KDJ golden cross + TD9 buy structure
- Short: KDJ death cross + TD9 sell structure
Bollinger Bands + TD Combo
- Upper band touch + TD9 sell = stronger reversal signal
- Lower band touch + TD9 buy = enhanced bullish confirmation
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Frequently Asked Questions
Q: How should I set stops for TD9 trades?
A: Use either:
- Psychological stop based on risk tolerance
- Structural stop at the setup's extreme price
Q: Can TD sequences work in all market conditions?
A: They perform best in trending markets but require confirmation in ranging conditions
Q: What's the difference between TD9 and TD13?
A: TD13 indicates stronger momentum and potentially more significant reversals
Q: How reliable are TD signals alone?
A: While powerful, always combine with volume analysis and other indicators for best results
Remember: This guide provides educational content only. Trading involves substantial risk - never invest more than you can afford to lose.