Market entry with action/reaction lines
by Ron Jaenisch
Action/Reaction lines are a charting technique developed in the early 1900s by Roger Babson, who
founded the Babson Business Institute in Massachusetts and believed Newton's laws of gravity affected
At the heart of the Action/Reaction Method is the age-old physical sciences law that every action has an
equal and opposite reaction. In its simplest form, the Action/Reaction Method shows a trader when and
where to add on positions if a market is in a strong trend.
This is accomplished by drawing peak-to-low Action/Reaction Lines on a price chart, a simple technique
that starts by finding two major and recent pivots: a high and a low. When you connect the peak and low,
you have what is called the center line (Figure 1).
Locate earlier pivot points and from each draw a line parallel to center line. These are the Action lines
On the opposite side of the center line, draw Reaction lines—one for each Action line and the same
distance as the Action line from the center line (Figure 3).