h¢351-417 3¢417-480 BKe480-544 4¢544-598 4K¢598-648 S¢648-725 Sh725-917 6¢
 
Once the master chart is. constructed, it will never have to be changed. If prices riseabove the top of the scale, additional boxes can be numbered with larger increments. Using,ithe standard 3-box method of charting, each January soybean futures contract was plottedin Figure 11-14 and the results are shown in Table 11-8. The profits were consistently goodexcept for 1976. It should be noted that the number of trades increased as the average priceincreased throughout the test period. This can be expected since the box size does notincrease as quickly at higher prices as does the price-volatility relationship. Because of thissteady lag, the sensitivity of the system will increase noticeably at peak levels.
The size of the chart based on the price-volatility approximation taken from Tables 11-3and 11-4 is much smaller than the one used for equal percentage increases. Because the boxsizes increase so rapidly, the formations appear more uniform at all price levels, and thenumber of trades occurring during each contract was reasonably constant. The results of thismethod show that its application to a long-term chart would be practical. Any one contractcontained only a smail number of reversals and was able to generate from one to three trades(Table 11-9).
 
TABLE 11-8 Results Using Equal PercentageIncreases (Method 2)
Tess Net PitTotal Profitable (iby)~ January 1966 — 2 1 +22~ January 1971 4 3 oo 21- January 1972 3 2 48%January 1973 2 1 +93%January 1974 20 9 423%January 1975, 12 7 +554%January 1976 16 7 -175%- Total +548%
* He commissions deducted.
A STUDY IN POINTAND-FIGURE OPTIMIZATION 279
 
FIGURE 11-14 Point-and-figure chart for January soybeans using price-volatility scaling.
 
 
 
 
 
 
 
 
 
 
 
 
 
wesize {¢fou.)2 we=3 203 Xo x9 12)641% KOxXOXOI2 187% an XOX O[XIOX XIS ox eo22, 3! xO 7) OX 4x 2079nc ih ‘ti J tel=, ae108 384% x| 20x366% mi] Oxe ae350% x}e anBs 8 8Ba;;3;i;aBE:igh sg
 
 
  
POINTAND-FIGURE CHARTING
——$—$—TABLE 11-9 Results Using Price-Volatility ScalingeeeeeeeeEeeeeeeeEeEeeE~EEe
Trades
Individual Net P/L*
Contracts Total Profitable (gibu)January 1971 3 ' 28January 1972 2 1 +hJanuary 1973 1 1 +109January 1974 2 1 #32January 1975, 1 ° 24January 1976 3 1 234
Total -144%
OIContinuous
 
* Ig commission deducted
‘The plotted results appear to be much better than the tabulated results. This can beattributed to the increased risk at higher price levels. Although the number of boxes in a los-ing reversal remained small, the value of the loss increased by a factor of 25 from the bottom to the top of the chart. The few profits and losses that occur at higher price levels willbe so significant in the final results that the earlier trading performance is unimportant.
Both variable box approaches offer unique possibilities for identifying trends butincrease the problems of risk management. Some of these effects can be offset by reducingthe invested margin as prices rise. Other techniques are discussed in Chapter 23.
| 12
Charting Systems
 
first to be affected were the moving average, or mathematical trending methods, as
well as easy-to-program indicators, followed by systematic optimization. Morerecently, econometric analysis, cycles, and pattern recognition have been the subject ofnew computerized research. Many quote services that offer graphics can convert a barchart to a point-and-figure chart at the push of a button. Yet the techniques normally usedin classic charting, such as trendlines, channels, and special patterns, have not yet beenbombarded with automated analyses.
The systems included in this chapter are those that might be used by a traditionalchartist. They do not all require the presence ofa chart to be followed, but they are clearlyinterpretations of natural price patterns. The time that it takes for a price to move from onelevel to the next is not significant in many of these charting systems; it is only the level itselfthat is important.’The only restriction is that the systems presented could all be verifiedand tested using a computer.
SWING TRADING
‘The foundation for the largest number of chart-based systems is the swing chart. Similar topoint-and-figure, a swing is an upward or downward movement of a minimum size, regard-less of the time it takes to achieve that move. Unlike point-and-figure, there are no boxes,and the notation does not use Xs and Os. The only difference berween one swing chart andanother is the swing filter. Once prices have reversed from a high or low point by the min-imum amount specified by the swing filter, a new vertical line is drawn in a column to theright of the current one. An example of a swing chart is given in Figure 12-1
Rules for using the swing chart generally follow those of point-and-figure. New buyand sell signals occur at points where the new swing penetrates the level of the prior swingin the same direction. Secondary signals are given if the new signal is in the same directionas the existing trend. Stop-loss orders can be placed at trend reversal levels or at a point offixed dollar loss. _ :
‘A swing method is very different from a moving average technique because it does notrequire prices to move to a new level to maintain the existing trend. In a swing philosophy,prices can move sideways or stand still within a trend. Analysts will find its attributes simi-lar to a breakout method. -
‘The following systems are all unique, but at the same time they are clearly simple variations of the swing method of charting
Te rapid growth of computerization has had a great impact on technical trading. The
A Classic Chartist’s Swing MethodOriginally, all swing charts were the product of analyzing a price chart. They were observedpatterns that preceded the more modern percentage retracements that now need a pocketcalculator. A classic technique for finding the swing highs and lows uses the followingsteps! and is shown in Figure 12.2. is
* Based on William F. Eng, “A Mechanical Trading System,” Technical Analysis of Stocks & Commodities (uly 1986)Further information can be found in Eng, The Technical Analysis of Stocks, Options & Futures (Probus, 1988). 
282 CHARTING SYSTEMS
FIGURE 12-1 Standard bar chart with corresponding swing chart. (a) Bar chart,(b) Swing chart. '
‘Swing Filter eminimui ReversatSize)
iv] ihMlil i \
(a) (6)
 
1. Begin at a bar (or new day) where the highs and lows are both higher than the highsand lows of the previous bar (an upswing), or both lower than the highs and lowsof the previous bar (a downswing).
. Ifan upswing, connect the highs of the two periods.
” If the next period continues to have higher highs and lows, connect the highs.
” Continue until a bar occurs that has a lower low without making a higher high. Thisindicates a possible swing change based on the pattern of the next bar.
5. If the next bar has a lower high and lower low, the highest high of the swing is con-
nected to the new lowest low and a swing change has occurred.
AWN
EeFIGURE [2-2 Constructing a classic swing chart.
Higher high
Swing line
 
First lower low
Second low lowSwing Reversal occurs when two oN
days of lower lows without higher highs occur.
 
Source: William Eng,“A Mechanical Trading System,” Technical Analysis of Stocks & Commodities, 4, no. 7 (July1986). © 1986 Technical Analysis, Inc. Used with permission.
SWINGTRADING —_~ 283
 
6. If the swing reversal fails, the upswing continues when a new higher high andhigher low occurs.
This particular method is called a “2-day” (2-period) technique, because it requirestwo periods to identify a swing change. The greatest benefit of this swing method is that itfinds fast changes in market direction; however, it is recommended for its ability to iden-tify stop-loss points and control risk rather than for its entry timing.
The Livermore System
Known as the greatest trader on Wall Street, Jesse Livermore was associated with everymajor move in both stocks and commodities during the 30-year period from 1910 to 1940,Livermore began his career as a board boy, marking prices on the high slate boards that sur-rounded the New York Stock Exchange floor. During this time, he began to notice the dis-tinct patterns, or habits, in the price movement that appeared in the columns of numbers.*
‘As Livermore developed his trading skills and eventually took his position as a profes-sional trader, he maintained the habit of writing prices in columns headed Secondary Rally,Natural Rally, Up Trend, Down Trend, Natural Reaction, and Secondary Reaction. This mayhave been the basis for what is now considered a swing chart.
Livermore’s approach to swing trading required two filters, a larger swing filter and apenetration filter one-half the size of the swing filter. Penetrations were significant at pricelevels he called “pivot points.” A pivot point is defined in retrospect as the top and bottomof each new swing and are marked with letters in Figure 12-3.
‘As mentioned earlier, the swing chart differs primarily from the point-and-figure chartby having no box size. By measuring the change in trend as a reversal of the minimumswing filter size from the last high or low swirig, the pivot points are always posted at theexact price at which they occurred. In point-and-figure charting, using a 10-point box, aprice rally that fails 5 points above the previous box will not be posted; a point-and-figurereversal is measured from the last posted box; therefore, the size of the price reversalneeded to indicate a directional change may vary up to the size of one box.
Livermore’s trading technique is a unique interpretation of the swing chart. Positionsare taken only in the direction of the major trend. This trend is defined by confirminghigher highs and higher lows (uptrend), or lower lows and lower highs (downtrend),where the penetration filter is not broken in the reverse direction. That is, an uptrend isstill intact as long as prices do not decline below the previous pivot point by as much asthe penetration filter size (seen in Figure 12-2). Once the trend is identified, positions areadded each time a new penetration occurs, confirming the trend direction. A stop-loss isplaced at the point of penetration beyond the prior pivot point. Unfortunately, the penc-tration filter is not the same as a pivot point, and Livermore never revealed how it was cal-culated. It seems, however, to be a minor percentage (for example, 20%) of the currentswing size.
Failed Reversal _
In the Livermore system, the first penetration of the stop-loss cails for liquidation of thecurrent position. A second penetration is necessary to confirm the new trend. If the secondpenetration fails (at point K in Figure 12-4), it is considered a secondary reaction withinthe old trend. The downtrend may be reentered at a distance of the swing filter below K,guaranteeing that point K is defined, and again on the next swing, following pivot point M,
2 Edwin Lefevre, Reminiscentes of a Stock Operator (Books of Wall Street, Burlington, VT, 1980). First publishedby George H. Doran in 1923. -3 Jesse Thompson, “The Livermore System,” Technical Analysis of Stocks & Commodities (May 1983) 
etiam acs RanNgpE
284 CHARTING SYSTEMS
 
FIGURE 12-3 Trend change.
Second penetrationconfirms major uptrend
      
Penetration gives
downtrend signal enetration of stop-loss
begins uptrend
Second penetrationconfirms majordowntrend
 
when prices reach the penetration level below pivot point L. It is easier to reenter an oldtrend than to establish a position in a new one.
Percentage Swings
The minimum swing value, which is the only determinate of the swing high and lowpoints, can be more robust if it is a percentage of price rather than a fixed number of pointsor fixed dollar value. Many markets have doubled in value over the past 10 years—in stocksthe price of a technology issue could have increased 20 times and then split. A fixed valuefor finding the swing highs and lows'will be far apart at low price levels and too frequentat higher prices, unless that minimum is calculated as a percentage, p. ‘
 
FIGURE 12-4 Failed reversal.
Penetration of stop-lossends downtrend
=] 7 “Secondary reaction” itfailure to confirm uptrend
   
   
Sell at swing filter -Confirms major if uptrend fails
downtrend,
 
 
Sell again when downtrendis confirmed
 
 
SWINGTRADING —_~ 285
Minimum swing value MSV, = p x price,
The most basic systematic approach to trading a swing method is simply to buy whenprices move up from the recent lows by the minimum swing value (MSV), and sell whenprices fall by the MSV from the recent high. The risk of each trade is always equal to the cur-rent value of MSV.
 
Finding the Swing High and Low Points
The following Easy Language program, KSWING, plots the swing high and low based on apercentage minimum swing value. For percentage swings, the interest rate yield should beused rather than price.
IKSWING: Finds most recent swing highs and lows.Plots values on a TradeStation chart. Copyright 1994-95, P.J. Kaufman. All rights
reserved.
Inputs for KSWING:swing = price swing in %)
input: swing(2.5);
vars: peswing(0), last(0), curhigh(O), curlow(O), swhigh(0), swlow(0),highbar(0), lowbar(0), chighbar(Q), clowbar(0), lowp(0), highp(Oy,xclose(0), xhigh(O), xtow(0), divide(4);
peswing = swing / 100.;
("divide" positions the high or low market on the plot |divide = 4;
factor = 1;
{INITIALIZE MOST RECENT HIGH AND LOW}
if currentbar = 1 then begincurhigh = close; (current high!curlow = close; (current low)end;
(SEARCH FOR A NEW HIGH -- favor reversals}
if last<>1 then begin - .
(REVERSE FROM HIGH IF MINIMUM % SWING)
if Tow < curhigh - curhigh*pceswing then beginlast = 1; (last nigh fixed}swhigh = curhigh; (new verified high!highbar = chighbar;curlow = low;lowp = low;clowbar = currentbar;plotifcurrentbar-highbar}(highLcurrentbar-highbar] + highp*pcswing/divide,“swinghigh");end
else begin
“Sf high > curhigh then begincurhigh = high; {new current high}chighbar = currentbar;end;
end;end;
{initialize new lows){swing low for plot}
[SEARCH FOR A NEW LOW - favor reversal}
if last <> -1 then begin -
(REVERSAL FROM LOW IF MINIMUM % SWING)
if high > curlow + curlow*pcswing then beginlast = -1; 
CHARTING SYSTEMS286swlow = curlow; .
Jowbar = clowbar;curhigh = nigh; {initialize current high}
highp = high; (swing high for plot!chighbar = currentbar;plot2(currentbar-Yowbar](towl*swinglow");
end
else begin |if low < curlow then begin
curlow = low;clowbar = currentbar;end;end;end;
currentbar-lowbar] - lowp*pcswing/divide,
Wilder’s Swing Index _swings is presented with trading rules in Wilder's Swing
f determininy * .An automated way 3 eed chat the five most important positive patterns in an
Index System.‘ Wilder has determineuptrend are:
1. Today’s close is higher than the prior close.2. Today’s close is higher than today’s open.3, Today’s high is greater than the prior close.& Today’s low is greater than the prior close.5. The prior close was above the prior open.
Ina downtrend, these patterns are reversed.‘The Swing Index (SD combines these five factors,
between 100 and +100 as follows:
then scales the resulting value to fall
(C= Cons) + SIC 0) +. 25(Cinn = On| KSsr=50 (eee Mwhere Kis the largest of |H, ~ C,-sl and [lp — Cr-al .
Mis the value of a limit moveRis calculated from the following two steps:
1. Determine which is the largest ofa |, - Gal
vb. (G-1-44- - c A,-L,2. Calculate R accordifig to the corresponding formula:a R=|H,- Gal Sle Gal + 25|C-4 - Oilbe R= |b Gaal — SIH, ~ Gal + 25/C 1 ~ Onl
c R=(H,~L) + 25|G-1 — O-al
the usefulness of the SI c: iforme combine factors that have-a great deal of interest. The SI calculation uses three
|. Greensboro, NC, 1978).4), Welles Wilder, Je, New Concepts in Technical Trading Systems (Trend Research, Green:
 
 
annot be determined without proper testing, the _.
 
 
SWING TRADING war
price relationships, the net price direction (close-to-close), the strength of today’s trading(open-to-close), and the memory of yesterday’s strength (prior open-to-close). It thenemploys the additional factor of volatility as a percentage of the maximum possible move(KM). The rest of the formula simply scales the results to within the required ~100 to +100range. In the first step of the calculation of R, the concept of the true range reappears.
The daily values are added together to form an Accumulated Swing Index (ASI), whichsubstitutes for the price chart, allowing ready identification of the significant highs andlows, as well as clear application of Wilder's trading rules.
Terms used in the trading rules are as follows:
 
  
HSP High swing point—Any day on which the ASI is higher than both the previousand the following day.
LSP Low swing point—Any day on which the ASI is lower than both the previous andthe following day.
SAR Stop-and-reverse points (three types)—Index SAR points are generated by theASI calculation, SAR points apply to a specific price, and Trailing Index SAR,which lags 60 ASI points behind the best ASI value during a trade.
The Swing Index System rules are:1, Initial entry:
a. Enter a new long position when the ASI crosses above the previous HSP.b. Enter a new short position when the ASI crosses below the previous LSP2. Setting the SAR point: —
a. On entering a new long trade, the SAR is the most recent LSP; the SAR is reset tothe first LSP following each new HSP A trailing SAR is determined as the lowestdaily low occurring between the highest HSP and the close of the day on whichthe ASI dropped 60 points or more.
b. On entering a new short trade, the SAR is the most recent HSP, the SAR is resetto the first HSP following each new LSP. The trailing SAR is determined as thehighest daily high occurring between the lowest LSP and the close of the day onwhich the ASI rose by 60 points or more.
Keltner’s Minor Trend Rule
One of the classic trading systems is the Minor Trend Rule published by Keltner in his bookHow to Make Money in Commodities (The Keltner Statistical Service). It is still followedclosely by a great part of the agricultural community and should be understood for its sim-plicity and potential impact on markets. Sophisticated analysts must always remember thata large part of trading activity is the result of straightforward decisions that do not use hightechnology.
Keltner defines an upward trend by the failure to make new lows (comparing today’slow with the prior day) and a downtrend by the absence of new highs. This notion is con-sistent with chart interpretation of trendlines by measuring upward moves along the bot-tom and downward moves along the tops. The Minor Trend Rule is a plan for using thedaily trend as a trading guide. The rule states that the minor trend turns up when the dailytrend sells above its most recent high; the minor trend stays up until the daily trend sellsbelow its most recent low, when it is considered to have turned down. To trade using theMinor Trend Rule, buy when the minor trend turns up and sell when the minor trend turnsdown; always reverse the position. - . .
The Minor Trend Rule is a simple, short-term trading tool, buying on new highs andselling on new lows. It is a breakout method in the style of swing trading and can be used 
288 CHARTING SYSTEMSas a leading indicator of the major trend. It requires frequent trading in most markets, withtisk varying according to the volatility of the market. Keltner’s Minor Trend Rule is the basisfor a number of current technical systems that vary the time period over which prior highsaad lows are established and consequently increase the interval between trades and thetisk of each trade. An advantage of the Keltner approach is that it imposes no arbitraryrestrictions on the analysis of prices (¢.g., breakouts of 100 points).
 
Donchian’s Four-Week Rule
In the mid-1970s, Playboy’s Investment Guide reviewed Donchian's Four-Week Rule as“childishly simple . ... was recently discovered to rank premiere among a dozen widely fol-lowed mechanical techniques.” ‘And the rules are simple:
1. Go long (and cover shorts) when the current price exceeds the highs of the previ-ous 4 full calendar weeks.
2. Go short (and liquidate longs) when the current price falls below the lows of theprevious 4 full calendar weeks.
"3. Roll forward if necessary into the next contract on the last day of the month pre-ceding expiration.
In 1970, The Traders Note Book (Dunn and Hargitt Financial Services), rated the Four-Week Rule as the best of the popular systems of the day. Based on 16 years of history, thepest performers were December wheat, June cattle, May copper, August bellies, Januarysoybean oil, and May potatoes.
"The system satisfies the basic concepts of trading with the trend, limiting losses andfollowing well-defined rules. It bears a great resemblance to the principle of Keltner'sMinor Trend Rule, modified to avoid trading too often. Over the years this technique, clas-sified as a slow breakout system, has shown the greatest longevity. The system is so simplethat the only comments about it must also be simple: can a Four-Week Rule work for allmarkets? If price volatility increases dramatically, the high and low for a 4-week periodcould become astronomical, while at the same time lower prices could cause narrowranges in another market. That characteristic is both a key to its success and a problem forTsk control, The solution may be a price level-modified rule (called adaptive) thatreduces the number of weeks (or days) in the high-low measured period as prices andvolatility increase. A change of this sort would keep tisk on a more even level but still relateto the basic volatility principle of the original system. This approach is discussed in Chap-ter 17 (‘Adaptive Techniques”).
Modified for the Final Three Months
One system based on the Four-Week Rule uses only the last 3 months of each futures con-tract. Beginning 3 months before the delivery month, plot the highs and lows according tothe FourWeek Rule. For example, trading December silver, start on September 1 and plotfor 4 weeks, The first time the market price crosses the high or low of that 4-week period,take the appropriate long or short position and place a stop-loss of 2%% of the entry price.If not stopped out, liquidate the position on the last day of the month prior to delivery. Ifstopped out, reenter a new position using the high and low established during the origi-nal 4 weeks.
‘The theory behind the modification is that breakouts are more valid and larger in theperiod just prior to delivery. An advantage of the system is that it trades very little and has alow commission burden. The disadvantage is that the stop-loss counteracts the nature of thebreakout system and imposes an artificial risk level on a method that uses highs and lowsestablished by the market itself. This feature is likely to harm the robustness of the concept.
SWING TRADING 289
The N-Day Rule
Computers have allowed us to take many simple ideas and examine them in great detail,sometimes to excess. One of the earliest applications of computer power was to chan ethe Four-Week Rule into the V-Day Rule, the predecessor of the n-minute and n-tick mulesThe rationale seems logical. If the Four:Week Rule works but the equity drawdown is toolarge, shortening the time period should improve results.
__ The N-Day Rule states that a buy signal occurs when the current price exceeds thehighest price of the past N days; a sell signal occurs when the current price falls below thelowest price of the past N days. The determination of Nis critical to the success of this sys-tem. The most obvious approach to finding /V is by testing a broad range of values (as willbe shown in the next section). It has also been suggested that N could be variable based onthe relationship of normal volatility to current volatility.
v.NaNwhere NV, is the number of days used for today’s calculationNis the initial number of days used for normal marketsV, is the normal volatility measured over historical dataV. is the current volatility measured over a fixed period shorter than the normalvolatility, Vz
As the current volatility increases, the number of days used in today's calculation decreases.This may also be classified as an adaptive technique.
Testing the N-Day Rule
Weekly breakouts, a limited case of the N-Day Rule, were tested by Hochheimer and sum-marized in his report as the Weekly Price Channel. Weekly breakouts produce a slow trad-ing system that depend on major moves for profits. About 75% of those furures marketstested in this 1982 study* showed higher risk (some very high), than the crossover systemstested earlier (also see Chapter 21).
The original purpose for the Weekly Rule was to look at prices only on Friday. The closeon Friday is considered in the same sense as the daily close—more important because it isthe evening up at the end of the day. Traders are attributed with the feeling that holding aposition over a weekend is the only thing worse than holding it overnight. This evening upwill prevent false signals that may never occur midday or midweek.
‘Typical trading rules for a Weekly Price Channel system would be
1. Buy (and close out shorts) if the closing price on Friday exceeds the highest closingprice of the past N weeks.
2. Sell (and close out longs) if the close on Friday is below the lowest closing priSell (and close o8 y vest closing price of
Because this model is always in the market, itis possible for the risk to become veryhigh. The commitment to a new long position is the difference between the highest andlowest closing prices of the past V weeks. In addition, even if penetrated, the position isnot liquidated until the close of Friday. This could be a very risky proposition; however,that risk is offset by the smoothing effect of only acting once each week. It may be thathigher risk is better than being subjected to more frequent false signals.
’ Andrew D. Seidel and Philip M. Ginsberg, Commodities Trading (Prentice-Hall, Englewood Cliffs, NJ, 1983),
“Frank L. Hochheimer and Richard J. Vauj i: is . Vaughn, Computerized Trading Techniques 1982 (Merrill L 7‘Frank L Hochheime ing Techniques 1982 (Merrill Lynch Commodi 
neni
290 CHARTING SYSTEMS
Alternate rules were tested by Hochheimer in his study. Buy and sell signals were takenat the time that the intraday new high or new low occurred. No comparison was availableto determine whether the risk was greater or less than the conventional approach.Hochheimer also tested the Weekly Rule with the week ending on days other than Friday.It was not apparent that any one day was better. ;
Traders will find this basic breakout method is important as a benchmark study. Chap-ter 5 (“Trend Systems”) included the N-Day Breakout as one of the basic trending methodsin “Comparison of Major Trend Systems,” and shows 10 years of results for the Eurodollar.Included with the study is program code to help enter this program into a computer toallow further testing.
Avoiding Problems Programming the Weekly Breakout
The Weekly Rule is often thought of having signals only on Friday, however, when pro-gramming this method, it is important to remember that a number of weeks end on Thurs-days due to holidays. Identifying the last day of the week in advance is a problem for acomputer program. Although we can find the day of the week by simply using the function@DayOfWeek for Easy Language, or @HKDAY in Quattro, we have missed the day if the infor-mation returned jumps from Thursday to Monday.
The simpler and preferred method, using most intelligent market charting systems, isto request weekly data, or a weekly chart, rather than daily. The built-in conversion pro-gram will correctly change days to weeks. By looking at the high, low, and close of theweekly bar you can decide whether a signal has occurred, and executing on the close willbe the last price of the week, regardless of the day on which it occurs.
‘WILLIAM DUNNIGAN AND THE THRUST METHOD
Dunnigan’s work in the early 1950s is based on chart formations.and is purely technical.Although an admirer of others’ abilities to perform fundamental analysis, his practicalapproach is contained in the statements:
“If the economists are interested in the price of beans, they should, first of all,learn all they can about the price of beans.” Then, by supporting their observationswith the fundamental elements of supply and demand, they will be “certain thatthe bean prices will reflect these things.”” : X
Dunnigan did extensive research before his major publications in 1954. A follower ofthe Dow theory, he originally created a breakaway system of trading stocks and com-modities, but was forced to drop this approach because of long strings of losses eventhough the net results of his system were profitable. He was also disappointed when his 2%Swing Method failed after its publication in A Study in Wheat Trading. But good often_‘comes from failure and