TD Combo: A More Stringent Approach to Trend Reversals

Refining the Reversal Signal: An Introduction to TD Combo

For traders seeking an even higher level of confirmation before entering a counter-trend position, Tom DeMark developed the TD Combo. This indicator is a more stringent version of the TD Sequential, designed to filter out weaker signals and identify only the most promising trend reversal opportunities. The TD Combo is not a replacement for the TD Sequential but rather a complementary tool that can be used to enhance a trader's market timing capabilities.

The Stricter Rules of TD Combo

The primary difference between the TD Sequential and the TD Combo lies in the rules for the setup and countdown phases. The TD Combo introduces additional qualifications that a candle must meet to be included in the count, making it a more selective indicator.

TD Combo Setup

The TD Combo setup is similar to the TD Sequential setup, but with an added requirement for the 9th candle. For a buy setup, the close of the 9th candle must be less than the close of the 8th candle. For a sell setup, the close of the 9th candle must be greater than the close of the 8th candle.

TD Combo Countdown

The TD Combo countdown is also more stringent. In addition to the rules of the TD Sequential countdown, the TD Combo countdown requires that the high of each candle in a sell countdown be greater than the high of the previous candle, and the low of each candle in a buy countdown be less than the low of the previous candle. This additional requirement ensures that the trend is still intact when the countdown is in progress.

Trading with TD Combo

The stricter rules of the TD Combo lead to fewer, but higher-quality, trading signals.

Entry and Exit Rules

The entry and exit rules for the TD Combo are similar to those for the TD Sequential. However, because the TD Combo signals are more reliable, traders can often enter with greater confidence and use tighter stop-losses. For a buy combo, a long position can be initiated above the high of the 13th candle, with a stop-loss below the low of the 13th candle. For a sell combo, a short position can be initiated below the low of the 13th candle, with a stop-loss above the high of the 13th candle.

Risk Management

The selectivity of the TD Combo has a significant impact on risk management. By filtering out weaker signals, the TD Combo helps traders to avoid low-probability trades and focus on setups with a higher potential for success. This can lead to a higher win rate and a more consistent stream of profits.

The Psychology of Discipline

The TD Combo is a tool for the disciplined trader. It requires the patience to wait for the highest-quality setups and the fortitude to pass on marginal trades. This can be a difficult psychological challenge, as the fear of missing out can be a effective motivator. However, those who can master the discipline required to trade with the TD Combo are often rewarded with a significant improvement in their trading performance.