ART Trading System

Exerpt from The ART of Trading by Bennett McDowell

Pyramid Trading Points

A trend usually doesn't last for 4 consecutive trading points (the triangles) in the same direction. Look for Reversal trades if that happens.

Art Price Bar Definition
1. Very Bullish - Closing Price on top of price bar
2. Quite Bullish - Closing Price on top half of price bar
3. Bullish - Closing Price on the exact middle of price bar, but above Opening Price

4. Very Bearish- Closing Price at the bottom of price bar
5. Quite Bearish- Closing Price at the bottom half of price bar
6. Bearish- Closing Price on the exact middle of price bar, but below Opening Price

7 Neutral - Open and Close on the exact middle of price bar

The more volume, the more significant is the price bar.

ART Reversal 1 Bar Signals
- A bullish price bar at the END of downtrend (Low lower than previous low).
- Trade entry - above the high of this bar
- Stop loss - at the low of this bar
- Higher probability
-> 1. Elongated price bar - at least one third longer than previous 5 bars
-> 2. Increasingly high volume - compared to previous 2 price bar.

ART Reversal 2 Bar Signals
- A bullish price bar with low above the low and high above the high of the previous bar.
- No volume requirement.
- Trade entry - above the high of 2nd bar
- Stop loss - at the low of 2nd bar

3 Methods of Trading ART Reversal Bar Signals

1.Trade as a possible beginning of new trend
- Keep stop in place until 1st correction
- Once trend resume and form a new high, move stop to the first pull back.
- Keep doing this until get stop out, or
- If you see a sharp increase, look for another reversal bad to get out.

2. Trade as a correction in the current trend.
- Exit at the next ART Reversal Bar.