Top Gun Bar Rules and Strategy

The Top Gun Bar

The Top Gun Bar is a very potent Breakout indicator embedded into the Top Gun charts.

When a Top Gun Bar appears on the chart it implies that the chart is very likely to be setting up to breakout of the consolidation it has been in. The breakout direction is unknown until the price action indicates direction. Traders prepare for this breakout by following the price action and matching it to the set up criteria.

The Top Gun Bar is most potent when it appears while the chart is horizontally consolidated in the same general price range for at least 4 price bars.

Price action typically indicates direction based on whether price can break out to one side or the other of the Top Gun Bar.

The trade direction indicated will vary depending on how price behaves AFTER the Top Gun Bar has painted in.

Evaluating Consolidation

When evaluating consolidation the location of the opens, (which are red lines on the left side of the price bar) and closes, (which are green lines on the right side) of the bars preceding the Top Gun Bar are more significant than the "hollow tails" (the highs and lows of the blue part) of the bars when evaluating the consolidation ahead of the Top Gun Bar. As long as the opens and closes are roughly within the same area of the consolidation, the first criteria of the trade set up can be considered met.

Proper entry for a Top Gun Bar trade is to wait for price to break out away from the Top Gun Bar. The direction is not important, but development of the breakout which ultimately determines the quality of the entry signal is VERY significant.

Set Up

First Direction Breakout Set Up

Trade initiations would obviously be based on the direction of the breakout. For an entry to be indicated, in the subsequent price action AFTER the formation of a Top Gun Bar, Price must Break away from the Top Gun Bar high or low, depending on the direction of the breakout and CLOSE by a minimum of two pips away from that high or low.

If the price action goes up the close must break away from the high of the Top Gun Bar and, if the price action goes down the close must break away from the low of the Top Gun Bar. To complete the set up pattern, the NEXT BAR MUST Similarly OPEN a minimum of two pips away from the high or the low of the Top Gun Bar. If the set up of a buy or a sell breakout is not as described, the trade entry is negated and the breakout is considered failed

First Direction Breakout Failure

Upon the failure of a breakout of the first side of the Top Gun Bar, a trade called the "Opposite End" of the bar is considered to be setting up. When a breakout failure occurs a orange horizontal line is placed on the chart to mark the "Opposite End" entry point.

"Opposite End" Trade Set Up

Once a failure to breakout of the first side of the Top Gun Bar has occurred, the trader can initiate an "Opposite End" trade.

To initiate an "Opposite End" trade, price simply has to trade below the orange "Opposite End" marker line, which is also the low of the Top Gun Bar. No other requirements are necessary for this trade.

General Information

Traders must understand the Top Gun Bar is it is a dynamic area that contains Compound Velocity (CV). This CV is typically released when either side of the bar is violated. Under the right set up conditions the areas above and below the top and bottom of the Top Gun Bar are likely to bring a big price move.

In general the FIRST entry set up or breakout failure MUST be indicated within 8 to 10 bars of the Top Gun Bar or it will lose potency.

Multiple Top Gun Bars may appear at times. This is normal and in no way indicates a more potent signal. Proper usage of the Top Gun Bar is as outlined in this text. Should multiple Top Gun Bars appear use the most recent one as if it was the only one on the chart. Previous Top Gun bars may be counted in the consolidation period should there be any question regarding that

The initial breakout of the Top Gun Channel must be set up with bars that are similar in size to the bars just ahead of the Top Gun Bar and when mentally placed across the Top Gun Channel the bar would fit between the Top Gun Channel without overlapping.

Therefore, if the first time price breaks out of the Top Gun Channel and the bars that caused the breakout are larger than the ones before the Top Gun Bar are longer than the Top Gun Channel is wide; the trade is very likely not going to work properly.

Bars that are longer than the Top Gun Channel is wide are called Long Range Bars (LRB)

Long Range Bars (LRB) in that one bar, typically expend a large portion of the energy we are trying to capture for the entire trade, which is why we stand down and do not initiate this trading strategy with a Long Range Bar in the pattern.

A big point to REMEMBER with this pattern is; the FIRST time the trade attempts to signal an entry, this trade CANNOT be entered IF the bar that breaks out of the channel is WIDER than the channel in essence a LRB.

Entering this trade on a LRB will often lead to a quick reversal and price may even seek to break out of the opposite side of the channel quite rapidly.

When that happens, don't get discouraged, it is most likely a gift! Find an exit for the first trade and wait for price to cross and break out the other side of the bar. That breakout will likely be a more favorable trade direction.

Since it is already known that the area just outside of the opposite end of the Top Gun Bar is rich with Compound Velocity (CV) if price does seek to break out in the second direction, it is acceptable to enter this trade on a LRB since by deduction this could be the stronger of the two directions.

Be mindful that proper entry is still dependant on properly reading the bar closes and opens, in relation to the Top Gun Channel

This is a powerful Top Gun Indicator so, look for entries to trade The Top Gun Bar in BOTH directions.

In cases where the first breakout sets up properly and proves to not be the best direction because it did not produce a "Big" CV move. Look for the trade to set up in the opposite direction!

There will be times when price will break out of the Top Gun Channel, but fails to generate a valid signal. This could be where there was a close that qualified but did not have a qualifying next open. There could also be cases where price breaks out of the Top Gun Channel but does not close or reopen outside the Top Gun Channel. ALL of these conditions will set the opposite end of the bar trade in motion! If the first breakout does not materialize properly then look to trade the opposite end of the Top Gun Bar when price passes through it.

To gain an advantage when trading use the Top Gun Range Numbers in conjunction with the Top Gun charts. When doing so, it will be more likely the trades can be successfully closed by locating the price levels at which the Top Gun system indicate should be stall or potential reversal levels. Be sure you are using the latest Top Gun Range Numbers for that market.

Occasionally, it takes a while for the breakout of the opposite end of the Top Gun Bar to develop. Do not lose track of the trade, because once price does cross the oppose end of that Top Gun Bar the CV we sought earlier could very well appear.

Understandably, over time, this CV potential will naturally diminish as other price levels supplant the significance of the Top Gun Bar and why it formed when it did. While it often does not take very long to seek the opposite direction, avoid trades that have taken more than half the visible bars on the chart to set up. It is highly unlikely the Top Gun Bar would be influencing price that far beyond the point of origin.

While the Top Gun Bar is a powerful indicator of an imminent breakout, it often proves to be best used when the trade initiation direction is similar to the recent chart trend. It is also helpful to view larger timeframe charts to certify the trend direction.

Effective use of the Top Gun Bar would be to incorporate the location of the Blue Line on the Top Gun Charts with Top Gun Range Numbers and initiate in the most recent trend direction when these conditions are favorable.

Identifying Trend Direction Changes

Depending on the duration and strength of the trend, the deterioration of the trend begins with price crossing and closing on the opposite side of the Red Line against the trend direction. Further deterioration is indicated by price crossing and closing on the opposite side of the Top Gun channel against the trend direction. Until these conditions appear traders should consider the most recent trend to still be intact.