ABSTRACT
The longer one thinks about the chart so casually tossed off in Figure 210 the more he realizes that it embodies a profound and natural understanding of trends and the market. Consider — wave up, wave recedes; wave up, wave recedes, and so on. As long as the trader or investor is not chased from his position by the corrective wave he will under normal circumstances ride the trend to its natural end. But locals and hedge funds and those who profit from volatility know that the previous low is where investors and traders set their stops. So in the ordinary flow of trading if they see an opportunity to take out an important low they will do it. If possible. And it is sometimes possible. And the low sometimes falls from the natural flow of trading.
