Thomas DeMark's Approach, Part V: TD Sequential

Sequential is Thomas DeMark’s best-known mechanical trading system. It aims to catch the exhaustion of a trend: the point where a long run of selling (or buying) has run its course. Every rule is defined in advance, so two traders applying it to the same chart get the same signal. DeMark recommended using it on daily charts.

A Sequential signal builds in stages:

1. Setup
2. Intersection
3. Countdown
4. Entry
5. Exit

The rules below are for a buy signal, with the sell-side version in brackets.

1. Setup

A buy (sell) setup forms when at least nine consecutive bars each close lower (higher) than the close four bars earlier. Nine bars is the minimum; the run can be longer.

2. Intersection

Intersection confirms that the setup is genuine. For a buy (sell) setup, it occurs when the high (low) of bar 8 or bar 9 is at or above (at or below) the low (high) of any of bars 3 to 7.

If neither bar 8 nor bar 9 intersects, the next stage waits until a later bar does.

A setup is cancelled if:

• a new setup in the same direction forms (DeMark called this a “loop”), or
• a later bar closes above the highest high of the buy setup (below the lowest low of the sell setup).

3. Countdown

Once the setup has intersected, and not before bar 9 of the setup, the countdown starts. For a buy (sell) signal, count every bar that closes at or below the low (at or above the high) of the bar two bars earlier. The bars don’t have to be consecutive. When the count reaches 13, the countdown is complete and the signal is given.

The countdown can’t finish sooner than 12 bars after the setup (bar 9 of the setup can count as the first countdown bar). In practice, 15 to 30 bars usually pass between the end of the setup and the end of the countdown.

The setup and countdown are both cancelled if a setup forms in the opposite direction, or if a loop occurs.

4. Entry

DeMark gave three ways to enter, from most to least aggressive:

• At the close of the bar that completes the countdown. The earliest entry, and the riskiest, because a loop can still cancel the signal.
• After a two-bar jump: the close is above the high (below the low) of the bar two bars earlier. A compromise between the first and third methods.
• After a “flip”: the close is above (below) the close four bars earlier. The most conservative entry, since it waits for price to turn.

5. Exit

Stop loss

The stop is based on one bar: the bar with the lowest low (highest high) during the whole setup and countdown. DeMark gave two ways to set it:

1. True range method. Calculate that bar’s true range: its high minus its low, using the previous close instead of the high if the previous close is higher. For a buy, place the stop that distance below the bar’s low. For a sell, place it that distance above the bar’s high.
2. Close-based method (more conservative). For a buy, subtract the distance between the bar’s close and its low from its low. For a sell, add the distance between the bar’s high and its close to its high.

Taking profit

There are two ways to exit with a profit:

• A new setup completes, but price fails to reach the extreme recorded during the nearest earlier setup.
• A signal in the opposite direction appears.

Using Sequential today

Sequential is a counter-trend system: it looks for the end of a move, not its continuation. It works best combined with tools that show the trend has started to turn, such as a qualified TD-line breakout (Part II) or a divergence on the DeMarker indicator (Part IV).

Part 5 of 5 in the Thomas DeMark’s Approach series. Previous: Part IV: The DeMarker Indicator.

Screen for it on MarketInOut

Our formula language includes DeMark TD-Line breakouts, with the qualifiers from Part II. They are a good way to confirm that a trend flagged by Sequential has turned. For example, NYSE and Nasdaq stocks that just broke above a level 1 TD-Line:

exch(nyse,nasdaq) and type(stock) and td_ubm1

Rewritten in October 2026 from an article in MarketInOut’s original article library.