TD Line Qualifiers and potential filters

EAcpu | 3 reads | 0 comments | 2026-05-03

I recently took another look at the September 2006 issue of Currency Trader Magazine to further study the article on the TD Supply and Demand Line. I know a lot of people have read it here, but I think it needs some people to look into possible filters using price without using any lagging indicators like MA etc.

They start by outlining what most people in our forum already know: how to earn TD points. For Level 1 points, there is one low (or high) candle on each TD point, Level 2 points have two candles on each side of the TD point, and so on.

They then introduced "TD line qualifiers," which use four different parameters to qualify trendline breakouts. They state in the article, "A trendline breakout is valid if any of the four qualifiers are true." Here are the four qualifiers for a supply line breakout and (hopefully) accurate examples of each qualifier.
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Qualification 1: "The price bar before the upward breakout must close downward."
Qualification 2: “The open of the current price bar must be greater than the current TD supply line and the close of the previous price bar, and the trade must be at least one pip higher (than the high – I presume).”
Qualifier 3: “The previous price bar’s closing price plus the previous bar’s “Buy Pressure” must be below the current price bar’s TD Supply Line price level. (The calculation of this is explained in the example of Qualifier 3 below).”
Qualification 4: "The opening price of the current price bar must be higher than the closing price of the two previous price bars, and the TD supply line of the current price bar must be higher than the high of the previous price bar."

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Qualifier 1: The breakout bar is preceded by a downward closing bar.
http://picnac.com/images/6846q1.gif

Qualifier 2: This is very similar to the Mouteki method we are currently using, but with some slight differences. Currently, we do not require that the current bar's open is greater than the previous bar's close, nor that it trade at least one pip higher than the previous high (could be a good filter).
http://picnac.com/images/3356q2.gif

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Qualification 3: First, we need to know how to calculate the "buying pressure" of the previous bar. It's simple: we get the low and close prices of the bar. Assume the closing price is 1.8559 and the lowest price is 1.8531. We take the difference and add it to the end. 1.8559-1.8531 = .0028. 1.8559 + .0028 = 1.8587. Therefore, we use 1.8587 as our "buying pressure" value. If our "Buying Pressure" value is above the trend line, then we do not place a trade because theoretically the buying momentum has "exhausted before breaking the TD line". Likewise, if the buying pressure is below TL, you need to watch for opportunities for trendline breakthroughs.
http://picnac.com/images/1655q3.gif

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Qualification 4: The opening price of the bar that breaks TL is higher than the closing price of the previous two bars. TL is also above (and not touching) the previous bar's high.
http://picnac.com/images/7675q4.gif

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The article also outlines early exit techniques if a trade goes against you, which Mouteki fails to mention:
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"Exit if the bar following the breakout opens below the breakout price level." <o></o>
“Exit if the line following the breakout line opens below the breakout line’s close and closes below the breakout price level.”
“Exit if the bar following the breakout bar fails to exceed the high of the breakout price bar.”

These are supply line breakouts, which in turn can be used for demand line breakouts.

Anyway, I thought I'd clear it up and see what happens in terms of additional filters and possible entry/exit techniques that could be combined with the outline of the Mouteki method we currently have. I also want to provide an outline for those who haven't read this article so they can understand and have their own opinions on what may or may not work.

All quotes are taken from an article in Currency Trader Magazine (September 6).

[UPDATE]: There is some confusion about the open price of the current bar being higher/lower than the close price of the previous bar. In most cases, this may not apply to the Forex market. Thanks to Loki for resolving this issue.

Rocky's post reads: " The article mentions this and states that since the system was originally developed for different markets, some filters may not work. This is an example as this applies to instruments such as stocks that are rising or falling."