Identify if the market is in a markup (bullish) or markdown (bearish) phase. You only want to trade in the direction of this major trend. 2. The Intermediate Timeframe (The Setup Locator)
To avoid analysis paralysis, Shannon recommends focusing on three distinct timeframes depending on your trading style (e.g., swing trading vs. day trading). 1. The Higher Timeframe (The Trend Finder) Determines the dominant, long-term market trend. Chart Used: Weekly or Daily charts for swing traders.
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He focuses on specific moving averages, such as the 10-day and 50-day moving averages, to identify key zones where price is likely to pause or reverse. Identify if the market is in a markup
Shannon's second book is dedicated to the . However, the roots of this concept are in his first book. AVWAP allows you to start the VWAP calculation from a specific starting point—such as a major earnings gap, a swing low, or the start of a new trend.
Always trade in the direction of the larger trend. If the is in a structural Stage 2 Uptrend, you should exclusively look for buy opportunities on the 15-Minute Chart when it emerges from a short-term Stage 1 base. 4. Executing High-Probability Setups: Step-by-Step
+-------------------------------------------------------+ | HIGHER TIMEFRAME | | (Daily Chart: Identifies Trend & Stage) | +---------------------------+---------------------------+ | INTERMEDIATE TIMEFRAME | LOWER TIMEFRAME | | (Hourly Chart: Locates | (10-Min Chart: Triggers | | Key Support Zones) | Low-Risk Entry Point) | +---------------------------+---------------------------+ The Trend Locator (Higher Timeframe) Daily or Weekly chart. The Intermediate Timeframe (The Setup Locator) To avoid
: A trade is considered high-probability only when the short-term timeframe aligns with the longer-term trend. Review Insights
This is the most profitable stage to own a stock. Buy breakouts and pullbacks to key moving averages on lower timeframes. Stage 3: The Distribution Phase
This structure allows you to capture a large daily move with minimal point-risk. The Higher Timeframe (The Trend Finder) Determines the
Use higher timeframes to define trend and structural context, and lower timeframes to time entries and manage risk. Align trend, momentum, and price structure across timeframes before trading.
Using different charts to find agreement.
To implement this strategy successfully, you need to structure your workspace correctly. Shannon recommends utilizing specific moving averages to gauge the health of trends across different horizons. Key Indicator to Use Long-term trend identification 50-day and 200-day Moving Averages Hourly (60-Min) Chart Intermediate trend and patterns 20-period and 50-period Moving Averages 5-Minute / 15-Minute Chart Intraday entry and exit execution Anchored VWAP (Volume Weighted Average Price) The Power of the Anchored VWAP
Use shorter timeframes (Hourly/10-minute) to enter a position with a tighter stop loss.
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