This article is a detailed guide to TD Sequential (Tom DeMark Sequential) — including how it works, how to use it for real trading, examples, signals, entry rules, stop loss, take-profit logic, plus pros and cons.
This explanation is structured so it is easy to understand. This is not financial advice or trade advice, only explanation.
What Is TD Sequential?
TD Sequential is a trend exhaustion and reversal indicator created by Tom DeMark.
It does not predict trends — instead, it identifies when a trend is likely to end.
It is widely used in:
- Forex
- Stock indices
- Commodities
- Crypto (especially Bitcoin)
Because crypto trends extend abnormally, TD Sequential is extremely popular there.
Why TD Sequential Is Valuable
Most indicators follow price.
TD Sequential is different — it detects trend exhaustion before reversal happens, giving early warning signals.
It helps you:
- Exit before the trend reverses
- Time near-perfect tops and bottoms
- Avoid entering late into trends
- Spot pullbacks and trend resets
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How TD Sequential Works
TD Sequential has two major phases:
Phase 1: The Setup (1–9 Count)
This part measures short-term trend exhaustion.
Buy Setup (Bullish Setup 1 to 9)
Occurs when:
- Candle closes lower than the close 4 candles earlier
- Count increases: 1 → 2 → … → 9
- At count 9, market often becomes oversold, reversal or pullback is likely.
Sell Setup (Bearish Setup 1 to 9)
Occurs when:
- Candle closes higher than the close 4 candles earlier
- Count increases: 1 → 2 → … → 9
- At 9, the trend is overheated → reversal or pullback likely.
Phase 2: The Countdown (1–13 Countdown)
If the trend is strong enough to continue beyond Setup 9, the system enters Countdown phase.
Countdown Rules:
- For a Buy Countdown, the candle must close lower than the low two candles earlier.
For a Sell Countdown, the candle must close higher than the high two candles earlier. - The count goes from 1 → 13 (not necessarily consecutive).
Significance:
- A completed 13 is one of the strongest trend reversal signals in technical analysis.
- A TD13 often precedes major turning points in Forex, stocks, and crypto.
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TD Sequential Buy Signal Summary
- Buy Setup reaches 9
- OR Countdown completes 13
- Ideal when price hits support or shows bullish divergence
TD Sequential Sell Signal Summary
- Sell Setup reaches 9
- OR Countdown completes 13
- Ideal when price hits resistance or shows bearish divergence
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How to Use TD Sequential in Trading (Practical Methods)
Below are the 4 most effective methods traders actually use.
1. Trading the Setup 9 Reversal
Sell Setup Example:
- Market rallies strongly
- 9th candle closes higher than the close 4 candles earlier
- Setup 9 prints → Overbought
How to trade:
- Enter sell on next candle after Setup 9
- Place stop-loss above the swing high
- Take profit at the nearest support or 1 ATR
Buy Setup Example:
- Market falls for 9-count sequence
- Setup 9 prints → Oversold
How to trade:
- Enter buy after 9th candle closes
- Place stop-loss below swing low
- Exit at resistance or after +1 ATR
Why this works:
TD Setup 9 identifies short-term exhaustion, similar to RSI overbought/oversold, but more precise.
2. Trading the Countdown 13 Reversal
This is the core power of TD Sequential.
When TD13 prints:
- Trend has pushed to exhaustion
- A major reversal is likely
- Top or bottom may be forming
Example:
If EUR/USD rallies 50 candles straight and hits TD13 → Expect correction or reversal.
How to trade:
- Enter opposite direction at candle close
- Place stop-loss beyond extreme high/low
Targets:
- 2× ATR
- Recent support/resistance
- Fibonacci 38/61%
Warning: TD13 = big turning point, but price can continue briefly before reversing (blow-off tops or selling climaxes).
3. Use TD Sequential for Trend Safety (Avoid Bad Entries)
This is a powerful but underrated use.
If you see:
- Setup 8 or 9
- Or Countdown 10–13 forming
Then avoid entering in the same direction.
Example:
If GBP/USD shows Setup 9 sell → Do NOT buy, even if trend seems bullish.
You are entering near the top → danger zone.
This drastically improves entry precision.
4. Combine TD Sequential with Support/Resistance or Divergence
The most profitable trades occur when TD signals align with:
- Divergence (MACD/RSI)
- Support/resistance
- Supply/demand zones
- Trendlines
Example:
- Price touches support
- Bullish divergence on RSI
- Setup 9 Buy prints
This is a high-probability bottom.
Example Scenario (Forex: USD/JPY)
Imagine USD/JPY rallies heavily for 20–30 candles:
- Setup 9 Sell prints → Short-term exhaustion signal
- Traders expect small pullback
Then price continues rising: - Countdown 13 Sell completes
This is a major reversal warning.
Traders may:
- Enter sell at TD13
- Stop-loss above highest wick
- First take-profit: 2× ATR
- Second take-profit: 50% Fibonacci retracement
This often catches huge reversals, especially on H4 or Daily charts.
Pros and Cons of TD Sequential
Pros
- Predicts trend exhaustion before the crowd sees it
Most indicators lag.
TD Sequential can warn before the reversal begins.
- Excellent for catching tops and bottoms
Particularly valuable in:
- Crypto bull runs
- Forex extended trends
- Stock market bubbles
- Works on all markets & timeframes
But most reliable on:
- H1
- H4
- Daily
- Helps avoid late trend entries
Setup 9 and Countdown 13 zones warn you when a trend is too mature to enter.
- Complements other indicators perfectly
MACD divergence + TD13 = extremely powerful reversal signal.
Cons
- Very sensitive in choppy markets
TD Sequential works best in clear directional movement.
In sideways markets, it creates many false 9 counts.
- TD13 does not guarantee immediate reversal
Price can extend beyond TD13 before reversing (e.g., blow-off tops).
- Requires practice to interpret
Beginners may miscount candles or misidentify setups.
- Not a standalone system
It needs:
- Support/resistance
- Trend context
- Volume or momentum indicators
When TD Sequential Works Best
- Strong trending markets
- Crypto markets
- Forex pairs after news events
- Stocks after earnings or volatility spikes
- Reversal trading strategies
When It Is Less Effective
- Sideways (range-bound) markets
- Low-volume markets
- One-candle spikes or news candles