The Sequence System is designed to accomplish a critical task: Determine if buyers or sellers are in control of a stock.

Identifying who has the upper hand is essential to consistent profitability in the market. The system uses five logical, straightforward technical tools to establish a hypothesis and ultimately decide on the best course of action: Buy, sell, or stand aside and wait for a stronger signal. Stocks communicate what is most likely to happen in the near future, and these five tools help to decipher this language.

1. Pace
Pace refers to the speed at which a price move occurs. For example, a $2 move that happens in 10 minutes is much more powerful than a $2 move that takes three hours. A strong pace in the direction of the trend followed by a countertrend move on weak pace indicates that the trend is likely to continue.

2. Volume
A stock's trading volume is indicative of the power underlying a price move. Generally speaking, the more money there is behind a move, the better the likelihood that it will continue. A strong price move that occurs on low volume relative to the recent past is viewed with skepticism. If there is a powerful increase in volume accompanying a strong price move, the stock has a better chance to continue its trend.

3. Support/Resistance
In order for trends to remain intact, certain price levels must be tested successfully. The most significant price levels are those that a lot of money committed at them. On the charts, these levels include swing highs and lows, consolidation regions, trend lines, moving averages, and Fibonacci retracements. The system often executes trades at these levels and uses them to determine the risk: reward ratio of trades. Confirmation or failure at support and resistance is an important indicator of the sustainability of a trend in both an individual stock as well as the general market.

4. Trend Placement
Price trends often unfold in three waves. As a general rule, the most durable moves are the earlier waves of buying (or selling). There is less confirmation accompanying earlier waves, and thus fewer traders are willing to risk their capital. But the smart money is typically moving in at this stage. As more and more traders catch on to the trend, it evolves into a second and then a third wave, with pullbacks in between. As the trend progresses to later stages, more traders take positions, which leaves fewer to push the stock further in its trend. Eventually, no one is left to buy (or sell), and the trend reverses.

5. Reversal Period
Throughout the trading day, price tends to correct its prior trend at certain time "zones". These zones are typically at the top of the hour and half past the hour, and are often optimal times to enter and exit trades. Combining time with price is a powerful aspect of the Sequence System, and is essential for winning consistently.

These five tools provide a framework for deciding when to trade, what side to trade, and how to size positions. The system uses these tools not just to analyze stocks, but also sectors and the market as a whole. It takes the largest positions when all five criteria are pointing in the same direction in several stocks, sectors, and the general market. At minimum, pace, volume, and support/resistance must be pointing in the same direction for a trade to be valid, and the system may enter small positions. Overall, however, the strongest opportunities appear when all five criteria are lined up.