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COUNT BACK LINE™  

This volatility based indicator was developed by Daryl Guppy. This volatility based entry indicator that is defined by ‘significant’ price bars that capture changes in volatility. Here it is shown as a stop loss tool. It can also be used as a very effective trend break entry tool. The applications of the count back line are discussed more fully in TREND TRADING.

APPLICATION

 

Used to set a stop loss point based on the current volatility of the stock. Used to verify and manage continuation of a trend. This can be applied to up trends for long side trading, or to down trends for short side trading. 

It can be applied as a stand alone indicator to protect trading capital in the early stages of a developing trade. End of trend is signalled by a close below the count back line. The count back line provides trailing stop loss price level that is directly related to changes in trend volatility. The position of the CBL entry line is calculated the most recent high in the uptrend trend. (Most recent low  in an down trend) The GuppyTraders Essentials CBL tool automatically plots the value once the user selects the highest bar in the current up trend.  

 

TACTICS

  • Apply to developing trends after the breakout

  • Can be applied as a stop loss in a mid trend entry.

  • Enter as close as possible to the CBL stop loss level. This reduces risk.

  • Use the count back line to verify trend continuation.

  • Sell after a close below the count back line.

  • Check for previous compatibility before applying.

RULES

  • This is an end of day technique, so act only when there is a close below the count back line (Long side trading)

  • Use as a stand alone indicator as a protect capital stop loss.

  • Construction rules are automatically applied by the GTE CBL tool.

ADVANTAGES

  • Sensitive to significant changes in volatility independently of time

  • Provides exact stop loss exit conditions that are based on changes in volatility


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