Since March of 2011, The BOT Trading System has been discussed in this blog. A tweak here and there, improving definitions and rules. then the addition of the BOT levels and the signals.
The 12/27/12 trading day sums up the BOT philosophy with all the parts in play. An early failed break out (FBO) at the Long BOT, a range run, a control bar BO at the Short Break out Target (SB or Short BOT), and the four pushes into the BO Levels, the fourth being the reversal about mid range of the BO-10 and BO-15 levels.
People continue to ask, "why five point BO levels"? This was a perfect response day: PA moves in pushes designed to create exits, entries, traps, continuation, reversals, etc. (EECTR). It is our opinion that PA must move a minimum of five points (beyond the BOT range) to create the opportunities mentioned, and PA must move 10-15 points to exhaust most runs. On significant swing days, the exhaustion may exceed +20.
Control bars creates a micro trading range. The 50% level of that range is considered a critical area for PA to test: a FBO, PA resumes the prior trend. If PA breaks the level, then a new trend is likely.
Similar action can be seen at the MB (middle BOT) or around the mid range of two BO Levels where PA will often find resistance (prior to the next level) and develop a reversal pattern.
EECTR's will be around the BOTs and/or the BO levels. That, is why they are viewed with importance. On 12/27 we opened with a 2 bar doji (2BD) at the the Middle BOT. The MB is not necessarily 50% of the LB-SB Range. At times, it will be nearer one or the other giving support to a BO in that direction. By B3 we have a FBO with a gap to the LB. B4 does not penetrate higher and challenges the 50CB of B3. We have a known risk ( the gap to the LB) for a short entry. B7 breaks the MB and begins the bearish gap to the EMA. B10 is the first major CB and the CB top and bottom have been added to the chart, as well as the 50CB near the SB. These areas are important. Look at PA in this area over the day. The elements we use (BOTs, 50CBs, etc.) are important for a reason.
PA breaks the SB and pushes to four notable EECTR levels. The gap to the EMA and 50CB FBO makes any long a scalp, and frankly, a trade with limited potential. There is truth in the saying "trade the trend". While we would never suggest you hold a position for five or six points against you, The BOT System would support a look at such a stop. While most traders would cut their loss earlier if PA has clues to support an exit, the "five/six" creates opportunities only seen by professionals and large institutional traders. Look at the four levels down and the BOT levels. Professionals can enter any of the levels. even add at the next for an average hold value, and hold for the PA reversal. The BOT System was developed to be predictive and reflective. Finding those area the P&I group make decisions.
A reversal at level four (and BOT values with a signal) ran back through the levels for four bullish EECTR's. The P&I group turned averages into gains, or they sold down the market and bought up the market. Pick your opinion. Either way, they made money.
Where PA is important, you will find professionals and institutions. Your likely to find an element of the BOT System too.
Thanks for explaining the reasoning "behind" the BOT system.
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