the official magazine of technical analysis

Transcription

THE OFFICIAL MAGAZINE OF TECHNICAL ANALYSIS
TRADERSWORLD
www.tradersworld.com | May/June/July 2014
How to Trade Like W.D. Gann
Signals for Traders
Are We in A Bubble?
Using Float Volume
Analysis for Better
Stock Traders
A Scalper's Dream Come True:
Combining Volume Techniques to
Identify Where to Take Profits
Favorite Candlestick Patterns
Interview with Jacob Singer
Detect Intraday
Volume Cycles for
the E-mini S&P 500
Futures using a
Genetic Algorithm
The Search for the
Ancient System
Seeking the Orgins
of Prognostic
Astronomy
How to Take Consistent
Profits Out of the Market
Every Day Includes
Sample Trading Plan
Momentum
Trading Advances
over Trend Trading
The Tradition of Financial
Astrology: The Secret
Behind Movement is
in the Stars
Reasons and Excuses
Giving Traders Back
Their Power
The VSA Setup
Trading the 401k Portfolio
VantagePoint 8.0
New Andrews Pitchfork Indicator
Candle Charting Basics
Make Moving Averages Work for You
Issue #57
My
It's about Time
Gilbert's Beta Test
Bear Market - Bull Market - Who Cares!
The Money is in Trading Oscillations
Profiting in a "Rigged Market"
The Sonata Silent Trading Computer
www.tradersworld.com May/June/July 2014
1
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2
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5
Contents
How to Make Moving Averages Work for You
by Clif Droke 77
A Scalper's Dream Come True: Combining Volume
May, June, July 2014 Issue #57
How to Trade Like W.D. Gann
by Timothy Walker 08
Signals for Traders
by George Krum 13
Are We in A Bubble?
By Daniel T. Ferrera 19
Using Float Volume Analysis for Better Stock
Traders
by Jan Arps 25
The Search for the Ancient System Seeking the
Orgins of Prognostic Astronomy
by William Bradstreet Stewart 34
Momentum Trading Advances over Trend Trading
by Thomas Barmann 40
Reasons and Excuses: Giving Traders
Back their Power
by Adrienne Toghraie 53
Trading the 401k Portfolio
by Steve Selengut 58
The VSA Setup
by John Matteson 61
VantagePoint 8.0 Software Review
by Darrell Jobman 64
Using the New Andrews Pitchfork Indicator
by Ron Jaenisch 67
Candle Charting Basics Spotting the Early Reversal Signals
by Steve Nison 72
Techniques to Identify Where to Take Prfots
by Gail Mercer 82
It’s about Time
by Rick Versteeg 86
ATA
by Al McWhirr 90
Detect Intraday Volume Cycles for the E-mini S&P
500 Futures using a Genetic Algorithm
by Lars von Thienen 94
Interview with Jacob Singer 98
How to Take Consistent Profits Out of the Market
Every Day Includes Sample Trading Plan
by Steve Wheeler 103
The Tradition of Financial Astrology: The Secret
Behind Market Movement is in the Stars
by Barry Rosen 113
My Favorite Candlestock Patterns
by Robert E. Ross 115
Gilbert’s Beta Test is Coming with
Hi-Tech Studies Now
by Gilbert Steele 122
The Money is in Trading The Oscillations
by Dr. David Hackbart 124
Profiting in a “Rigged Market”
by Jared Wesley 130
by Larry Jacobs 134
Amazon Kindle Books 135
6
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HOW TO TRADE LIKE
W. D. GANN
An Exploration of the Mechanical
Trading Lesson on U. S. Steel
BY TIMOTHY WALKER
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This course presents a detailed analysis of the entire
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7
HOW TO TRADE LIKE
W.D. GANN
By Timothy Walker
Ask the average trader what the name
W.D. Gann suggests and you’d probably get an
answer like ‘Square of Nine’ or ‘Astrology’, or a
comment about forecasting. While there is no
doubt that such things formed an important
part of Gann’s work, there is much more to
his story than that.
Gann’s career in Wall Street spanned over
50 years, from 1902 to 1955. He was an active
trader during that entire period, which saw
two World Wars and the Great Depression. He
began his career trading for his own account,
and then, after some years set up an advisory
service. He published annual forecasts on the
stock and commodity markets and consulted
with clients on the management of their
trading accounts.
In 1923 he published the first of 6 books
and also began to teach his methods to
private students. Over the rest of his life he
wrote many courses, covering both stocks
and commodities. The first thing he taught his
students was not how to forecast, but how to
trade.
The basic theme of trading as Gann wrote
about it was to buy when the market was
going up and sell when it was falling. He
was not a buy and hold strategist. His own
research indicated that market movements
are governed by cycles, which enabled a
trader to determine in advance when these
changes in direction should occur. This would
enable him or her to change from a long to
a short position or vice versa as close to the
turns as possible.
However, it took a lot of study and work to
master his forecasting systems, and so for some
years he devoted his energies to designing a
mechanical system which he could teach to
traders with little or no previous experience.
In 1930 he published this mechanical system
for the first time, calling it the Method for
Trading the Overnight Chart.
The rules of the trading system itself were
fairly straightforward, covering 4 pages and
consisting of 9 rules and an explanation of
how to draw a swing chart. But he then went
on to illustrate the system by applying it to
US Steel, at the time the largest stock on the
board. He covered over 300 trades spanning
a period of more than 16 years.
At that time, it was not practicable to
sell a course accompanied by daily charts
covering such a long period, and so all the
explanation had to be given in the text. This
makes for pretty dry reading, to put it mildly.
But it occurred to me that he must have had
a reason for going over so many trades, and
so I decided to search for the price data to
construct the charts.
This was easier said than done. The archivist
at the NYSE replied that they didn’t have
data back that far. The US Steel Corporation
itself, which is still listed, had data from 1950
onwards, which they happily shared. But this
wasn’t a help, because Gann’s lesson covered
the period from 1915 to 1931. Eventually the
only solution was to go to the library and look
8
up old newspapers and copy the data out one
day at a time.
This was a time-consuming process, but
what a gold mine of information this research
revealed! Reading the text along with a
chart started to reveal things about how
Gann himself must have interpreted charts
and therefore traded. Consider the following
example. First the text:
‘May 3rd advanced to 60¾, the third top
around same level, where we should either sell
out and go short with stop at 63¾ or leave
stop at 57½ [under the last swing bottom].
We sold on stop at 57½.
‘Decline followed, broke three bottoms
made April 24, 27 and 30. We sell 200 shares
more at 54¼. Decline continued to 48¼ where
there were three bottoms, March 26, 31 and
April 1st. Rule says, buy the fourth time with
one point stop. We covered 300 shares short
at 48½ and bought 200 at 48½ with stop at
46¾, which was one point under bottom of
March 26th and April 1st.’
After several pages of this I start to go
cross-eyed!
What he says is straightforward enough.
The market had been going up for some time
and made a triple top – either go short or wait
for the last swing bottom to be broken. When
it broke more support, add to the trade. Then,
when it found support at the level of old lows,
cover shorts and go long again.
But there was more to this trade than
meets the eye, which only the price chart
could reveal. See Chart 1.
The Buy and Sell arrows are located pretty
accurately for the prices where the trades are
indicated. If you look carefully at the bar for
10 May, you can see that the market made a
very wide range that day. It opened at 53½
Chart 1
9
(prices in those days were quoted in 1/8 of
a dollar) and then collapsed to 48¼, finally
rallying to close at 50¾.
This example reveals a lot about Gann’s
thinking as a trader. When the market is falling
heavily and everyone is panicking, he is telling
us to look for a buying opportunity. As soon
as the market enters a zone of support he is
ready to cover shorts and go long. He acts 2
ticks off the intra-day low. I’m not sure how
many of his beginner students would have felt
comfortable trading this way!
Having an opportunity to see the actual
chart, shows us that there was more to
Gann’s consideration in this trade than the
simple rule of seeking support off the most
recent bottoms. The chart includes two key
50% support levels which Gann does not
mention in the text, but he would clearly
have expected his students to be aware of,
one from the current campaign and the other
from the all-time high. He makes extensive
use of 50% levels in the lesson, as he stated
that you could make a fortune in the markets
using just that one rule alone.
This example also reveals that he was
teaching his students to follow the market
during the trading session. This is something
that he would change his mind on later in
his career, but there are numerous examples
of him acting intra-day in this lesson. Gann
himself was an expert tape reader and traded
on the floor of the Chicago Board of Trade, so
these insights help us understand some of the
techniques he would have used.
There are many little gems like this one
scattered throughout the lesson, and I found
so many of them that I decided to write the
lesson up as a book and include charts of every
trade. This way anyone could follow the rules
Chart 2
10
and strategy that Gann presented and gain a
deeper insight into his thinking and trading
methodology.
As an example of how his method would
apply today, let us consider a chart of the
e-mini S&P 500 futures contract. See Chart 2
Gann wrote his lesson for stocks trading
around 50-200, so we have to make some
assumptions to adjust for a stock index
trading at 1800. You would have to test
these to work out the optimum numbers, but
for this exercise, I am going to place stops
5 points above swing tops or below swing
bottoms. Gann’s pyramiding rule was to add
half the position size every so many points. I
will use 50 points here. We will take an initial
trade size of 2 contracts, based on Gann’s
risk management rules of only risking 10% of
one’s capital on any one trade, which would
require a capital of $50,000.
We will assume that we have been trading
the S&P for some time and simply pick up
the trades from the beginning of 2014. As
the New Year dawned, we would be long at
around 1788 from 18 December. This trade
was stopped out around 1812 on 13 January.
Profit 24 points x 2 contracts = 48 points. As
the system requires us to reverse positions
we will be short 2 contracts at 1812 with the
new stop placed above the 31 December high.
The market continued sideways for several
days more. Gann was careful in such situations
not to bring stops too close, so he would have
left them above the 31 December high. An
additional contract was sold at 1762 on 29
January.
On 3 February a special rule was triggered.
Gann didn’t even mention this rule at the
beginning of his lesson and it is only in the
trade examples that it becomes apparent. We
would exit all short contracts at 1736 (total
profit 178 points) and go long 2 contracts at
that price.
Although the market went a fraction lower
on 5 February, Gann’s rule for stops would
have kept the long trade intact, and we are
placed to take the full benefit of the strong
rally that followed. An extra contract is bought
at 1786 and another again at 1836. All 4
contracts were stopped out at 1860 on 12
March. Total profit 346 points.
Total profit on 3 trades is 572 points or
$28,600. Thus the return on our $50,000
capital over the first 3 months of the year,
without deductions for commissions, was
57%. But don’t forget that we are only trading
with 10% of our capital in this example, so the
returns on the actual “at risk” investment are
much higher. If we consider that our initial
investment was approximately $5,000, and
we generated a $28,000 return, we actually
produced 570% on our initial investment in
only 3 months! Not bad for a relatively simple
mechanical system…
Currently we would be short 2 contracts at
1860. Again being careful not to move stops
too close in a see-sawing market, the initial
stop above the 7 March high would now be
moved down above the two swing tops on the
13th and 21st.
This, of course, is a paper-trading example
only, but it serves to illustrate that the rules
Gann wrote almost 90 years ago can still
be applied profitably by a trader in the 21st
Century.
[How to Trade Like WD Gann is published
by the Sacred Science Institute,
www.sacredscience.com/Walker/
HowToTradeLikeWDGann.htm]
11
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12
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key questions: Is a stock, index or currency
pair a buy, sell or hold? Is it in an upswing
or a downswing? Is it in an uptrend or a
downtrend? Is this trend about to end? How
can I manage risk?
How do the OT Signals technical analysis
tools answer these questions?
First consider the BSH (Buy, Sell, Hold)
indicator which comes in two varieties: BSH Line
and BSH Bars. Our trading algorithm examines
every trading bar in three different time frames:
intraday, daily and weekly. Then it assigns a
buy, sell, or hold rating for each timeframe. Buy
bars are painted green, sell bars are red, and
hold bars are blue/white. (Chart 1)
For both line and step charts, the BSH Bars
indicator displays the buy, sell, and hold ratings
below the chart in bar format. A buy rating is
assigned a value of 1, a sell rating is given -1,
and hold rating is 0. (Light green bars in the
middle panel on chart 1.)
The BSH Line Indicator displays the same
information but on a cumulative basis. For
Chart 1
13
instance, the line will advance by three points
to reflect three buy bars in a row. A hold bar will
cause the line to remain flat. For each sell bar,
the line will decline by one point. (Jagged grey
line on top of price bars on chart 1.)
At a glance, you can see our BSH ratings’
excellent past performance. We are confident
our ratings will continue producing profitable
results in the future. (See Chart 1)
Next, we filter out certain sell and hold
signals to identify upswings, and certain buy or
hold signals to identify downswings. See chart
2 below. The beginning and end of an upswing,
downswing or wave is indicated by either the
Swing Indicator (purple jagged line on top of
the price bars) or by the Swing Signals indicator
(the black bars displayed below price).
If you’re familiar with Elliott wave theory and
enjoy counting waves, the Swing Indicator serves
as an unbiased reference tool for identifying the
beginning and ending of waves/swings. It also
helps determine whether the waves/swings are
motive or corrective. (The “swing” in OT Signals
is essentially the same as a “wave.” I’ll call them
“swings” in this article.)
The length of a swing is measured by the
Swing Time Indicator, which not only shows
you how long the current swing has been in
place, but also displays the average swing
time for the particular instrument. This helps
you immediately determine whether the swing
has the potential to continue or has already
overstayed its welcome. (See Chart 2)
The Swing Bars Indicator displays similar
information to the Swing Time Indicator but in
a slightly different format. It shows whether the
current swing is exceeding the average swing
by 2, 3 or more than 4 times. (The numbers 2,
3 and 4 are derived from a concept similar to
statistical standard deviation measures.)
Moving averages are a popular traditional
method for following trends. OT Signals provides
two additional tools for evaluating trends: Hurst
Channels and a new tool, Hashi, named after
chopsticks in Japanese.
We’ve discussed Hurst Channels at length
in previous articles. Briefly, Hurst Channels are
indicated by red (short term) or green (long
term) channel lines. (See chart 3, red lines.)
These provide a powerful visual aid for defining
the trend and determining the trading range
with high accuracy and confidence.
Chart 2
14
A properly drawn channel should include
all but one or two extreme data points. Swing
traders should look for buy/sell opportunities
when price reaches the upper or lower channel.
Longer-term trend traders should look for
changes in the channel’s trend.
Hashi is a dual purpose indicator (the two
short lines at the right end of price). At a glance,
it shows whether short-term and long-term
trends are moving up, down, or sideways, and
whether these trends are moving in the same or
opposite directions. Hashi can also be used as a
tool providing stop loss levels and trade entry/
exit points. (See Chart 3)
OT Signals includes three proprietary
indicators that can’t be found elsewhere and are
now accessible to anyone on the internet. These
indicators calculate and update different aspects
of market breadth every day after the close.
(We’ve addressed market breadth extensively in
the TradersWorld #56, and you can read more
in the Indicators section of OT Signals.)
Market breadth indicators are best viewed
superimposed on a chart with one of the major
averages (DJIA, NDX, SPX, OEX or IWM).
Chart 3 displays the SPY with our proprietary
overbought/oversold oscillator. It also illustrates
perfectly the cyclical nature of markets. Due to
the inherent contrarian nature of the overbought/
oversold oscillator, it often acts as an early
warning signal for impending trend reversals.
Another market breadth indicator included
in OT Signals is our unique Weekly Liquidity
Indicator which measures the liquidity flowing
in and out of the market on a weekly basis. A
third proprietary market breadth indicator in
the package is the % Bulls index. As the name
implies, it shows whether bullish or bearish
sentiment prevails at any particular moment.
In summary, OT Signals offers a variety of
unique tools designed to answer key trading
questions. Along with the indicators discussed
here, the package includes the Bull and Bear
Trend indicator, Pivot Line, the Stop/Loss, the
Trailing Stop/Loss and other valuable trading
tools. Our Stop/Loss indicators, in particular,
are very helpful for managing risk.
Unfortunately, we cannot cover all the app’s
valuable functions in this space, but visit
otsignals.com to learn more. By the time
you read this article even more indicators will
have been included.
Chart 3
15
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18
Are We In a
Bubble?
By Daniel T. Ferrera
Investors and speculators appear intent
on completing the same bubble pattern that
has attended the last three previous financial
bubbles in our equity markets. These include
1982 to 1987, 1995 to 2000, 2002 to 2007
and most probably the current market 2009
to present.
History repeats because human emotions
and behavior to similar external stimulus
remain consistent over the course of time.
A human being’s desire for more money or
the fear of losing it doesn’t fundamentally
change, so why wouldn’t business cycles and
price patterns reflect this underlying truth? Is
it possible that there could be such a thing as
a rational bubble?
Think of a feeding frenzy occurring in the
ocean where both the number of fish rapidly
grows in quantity while the attitude becomes
increasingly
more
aggressive
towards
acquiring whatever morsels remain available.
What happens to the frenzy when the party is
over?
Parabolic stock market advances feature a
similar behavior with increasingly immediate
impulses to buy every little dip or minor
correction characterizing the psychology
behind log-periodic bubbles, which was
described by Didier Sornette in Why Markets
Crash. What happens when investors and
speculators no longer feel inclined to buy
every little dip? The bottom begins to fall out
and the dips either get bigger or the market
crashes in a free fall fashion.
It works somewhat akin to an auction
market where the auctioneer gets the price
to rise rapidly via bids without a single sales
transaction. Once the bid momentum begins
to slow, the auctioneer starts to accept
smaller and smaller biding increments to
push the price as high as possible. This also
occurs in financial markets, except the bids
can go up and down. A crash occurs when
there are an overwhelming amount of sellers
and no buyers. Prices free fall in this type of
auction until the collapse becomes attractive
to purchasing bidders once again.
There is an expression that “a picture is
worth a thousand words.” What information
can an astute observer obtain from reviewing
the prior parabolic bubbles? For starters, notice
that all three of these parabolic advances
lasted almost exactly 5-years and 2-weeks
before falling apart.
The first example ran from the low of
August 13th, 1982 to the August 24th, 1987
top. The second example ran from March 9th,
1995 to March 23rd, 2000. The final example
runs October 2nd, 2002 to October 10th, 2007.
While there is no guarantee that this
specific time correlation will apply to current
circumstances, it does provide a simple means
of comparative measurement useful for
present data. Measuring 5-years and 2-weeks
from the March 6th, 2009 extreme market low
would forecast a parabolic bubble culmination
near the Spring Equinox of March 21st, 2014.
19
20
In order to make a future forecast, one must visually inspect the available data for recurring
price patterns, number intervals, cycles and so on. Looking at the market from this type of
perspective also reveals a strong seven-year interval. The market has pronounced lows in
1988, 1995, 2002 and 2009.
Additionally, the market also has noticeable tops in late 1993, 2000 and 2007. Thus as
a simple arithmetic exercise, one could estimate that from a historical perspective it seems
probable that there should be a top in the year 2014 and a low near 2016, if this sequence
continues.
While there are historical examples where speculative stock market peaks have crashed
and collapsed in relative short order, it is more typical for a market peak to be an unwinding
21
process as opposed to an event. This can be seen presently via diverging indexes.
For example, the Dow Utilities peaked on April 30, 2014; the Nikkei peaked on December
30, 2013; the Dow Industrials peaked on December 31, 2013; the Dow Euro Stoxx 50 Index
peaked on January 15, 2014; the German DAX peaked on January 17, the London FTSE peaked
on February 24, the Russell 2000 peaked on March 4; the NASDAQ 100 peaked on March 5;
the NYSE Composite peaked on March 6; the S&P 500 and Dow Transports peaked on March 7.
Considering that the current price advance from the March 2009 low is equal to the entire
bull market run of 1995 to 2000 (log scale), investors should understand that the present level
of risk has also reached new high levels as well. That is, of course, only true if readers believe
the simple logic that the risk of falling increases incrementally as prices escalate to new highs.
Surely, the higher prices go, they must be getting closer and closer to the final extreme price,
just as the inverse would be true for falling prices and a final low.
If the 7-year interval is anticipating a high for 2014 and a low for the year 2016, what other
evidence supports this scenario? For starters, the comparison of prior parabolic markets yielded
the 5-year 2-week measurement that suggests a top for March 21, 2014, which coincidently
also happens to be the 14-year anniversary of the tech bubble of March 2000.
Other evidence that supports the potential for a low in 2016 besides the 7-year cycle
includes the 42-year cycle running from 1932 low to the 1974 low and then from 1974 to
2016. In addition, since 1982, stock market lows have occurred at Fibonacci intervals (1, 2,
3, 5, 8, 13, 21, 34, 55….) giving the years: 1984, 1985, 1987, 1990, 1995, 2003, 2016 and
2037. Thus if these numerical patterns continue, then the year 2016 would be expected to
bring in a notable stock market low, which logically must be preceded by a stock market top.
Given the present time frame, that only leaves 2014 or 2015.
Statistically speaking, the year 2014 already gave a strong bear market signal this past
January when all the major indexes traded below their lowest levels of the month of December
2013. While not infallible, when this situation does occur, there are greater odds of ending the
22
year in negative territory.
Lucien Hooper, a Forbes columnist and Wall
Street analyst back in the 1970s, originated
this so called December Low Indicator. Hooper
claimed that when the Dow closes below its
December closing low in the first quarter, it is
frequently an excellent warning sign. He said:
““Pay attention to the December low. If that
low is violated during the first quarter of the
New Year, watch out below!”
In the year 2002, I revealed a cycle
summation waveform in my cycle analysis
course, Wheels Within Wheels, based upon
16 powerful stock market cycles that accurately
predicted the stock market melt down into
2009 and this current bounce back more than
seven years before it happened. Currently,
nine of the sixteen cycles are in a negative
phase and are all suggesting the potential
for another significant stock market decline
working towards a bottom in 2016, based
upon how these cycles act in total. If history is
any guide whatsoever, then a preponderance
of evidence suggests that we are presently in
a bubble.
Daniel T. Ferrera
(For information on Ferrera’s Books, Courses
& Yearly Forecasts see:
www.sacredscience.com/ferrera)
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24
Using Float Volume
Analysis for Better Stock
Trades
By Jan Arps, President, Jan Arps’ Traders’ Toolbox
Volume Float Analysis, first introduced
by Steve Woods to the technical analysis
community, is a method to combine volume,
time, and price to identify stocks ready to
make a major move.
The Woods Cumulative Volume Float
Indicators, more commonly referred to as
FloatAnalysis tools, help to give visual form to
the expression, “The smart money buys at the
bottom and sells at the top; the dumb money
buys at the top and sells at the bottom.” The
smart money traders are those who buy and
sell at exactly the right time; the dumb money
traders are those who buy and sell at exactly
the wrong time.
FloatAnalysis tools also give visual form to
the important technical terms “Accumulation”,
where the smart money is buying and the
dumb money is selling, “Distribution”, where
the smart money is selling and the dumb
money is buying, “Support” a price level
where there are more buyers than sellers and
prices stop declining, and “Resistance”, where
there are more sellers than buyers and prices
stop rising.
While most analyses of stock charts focus
on a stock’s price and the volume of shares
traded, float charts incorporate a stock’s float
number as well. The float, or floating supply,
is the number of shares actually available for
trading. A stock’s float represents its total
shares outstanding minus the ownership by
insiders. The easiest way to think of this is
to imagine a company that comes public and
issues a large number of shares. Of those
shares it sells some to the public and the
company insiders keep the rest. The shares
that are sold to the public and are actively
being traded are commonly referred to as
the floating supply of shares, or simply, “the
float”.
The Float Box
The principal indicator used in float analysis
is known as the “float turnover box” or simply
the “float box”. It is displayed on a price and
volume chart as a rectangle with two heavy
horizontal lines. he horizontal width of the
box represents the amount of time that it
has taken for the cumulative total number of
shares traded to equal the total number of
shares in the floating supply. This process is
referred to as a “float turnover”. The upper
and lower boundaries of the box reflect the
highest and lowest prices reached by the
stock during the time interval of the most
recent float turnover. The box represents the
shortest amount of time that a stock’s float
can completely change ownership and it gives
a way of hypothetically estimating the time it
25
takes for a complete turnover of ownership of
the stock to occur.
A stock’s current float box will always be
drawn on the far right of a price chart. It
gets re-plotted at the end of every trading
day. The cumulative volume count starts at
the right end of the chart with the volume of
the current bar. We then add the previous
day’s volume and that total is added to the
next previous day and so on backwards in
time until the cumulative total volume traded
is equal to the number of shares in the stock’s
floating supply. The next step is to look back
over that time interval and find the highest
high price and the lowest low price reached
during that time interval and draw a pair of
horizontal lines through those two price points
to complete the top and bottom of the float
box.
The float chart software that calculates the
float box on a stock chart offers the user the
ability to perform historic analysis to calculate
and plot a float box starting from any bar
in the past. When the box is moved back in
historical studies it illustrates the fact that a
float box is always found at all long-term tops
and all long-term bottoms.
For example, Chart 1 displays a weekly
float chart of Ralph Lauren Polo (RL), which at
the time the chart was created, in 2007, had
a floating supply of 58,300,000 shares. The
float box at the top of the chart was created by
adding volume cumulatively starting from the
bar of July 27th, 2007, backwards to the bar of
May 4th, 2007. The table below contains the
volume numbers for each week during this
time span and the cumulative totals that were
used to construct the float box.
26
Chart 1 – Ralph Lauren Polo
Ralph Lauren Polo (RL) Float Box Calculation
WeekNumber ofCumulativeFloat
Ending Shares
Total
Number
Traded
1)7/27/07 5,559,100
5,559,100 is < 58,300,000
2)7/20/07 2,669,200
8,228,300 is < 58,300,000
3)7/13/07 3,324,900 11,553,200 is < 58,300,000
4)7/06/07 2,022,400 13,575,600 is < 58,300,000
5)6/29/07 3,693,900
17,269,500 is < 58,300,000
6)6/22/07 6,548,800
23,818,300 is < 58,300,000
7)6/15/07 3,729,600
27,547,900 is < 58,300,000
8)6/08/07 5,088,600
32,636,500 is < 58,300,000
9)6/01/07 6,816,500
39,453,000 is < 58,300,000
10)5/25/07 3,981,200
43,434,300 is < 58,300,000
11)5/18/07 3,586,700
47,020,900 is < 58,300,000
12)5/11/07 3,714,500
50,735,400 is < 58,300,000
56,433,900 is < 58,300,000
13)5/04/07 5,698,500
14)5/11/07 4,358,800
60,792,700 is > 58,300,000
27
It is during the fourteenth week of the
backward count in which the cumulative total
equals the float number and by the end of
the week it is greater than 58,300,000. On a
weekly chart the float box is created from the
beginning date of July 27th, 2007 over to the
week ending May 4th, 2007. The upper and
lower lines of the box are then placed at the
highest and lowest prices during the 14-week
time frame.
The float box is an easy way to show
where the change of ownership occurred right
at the top as the smart money was selling
their shares to the dumb money. For stocks
that are making long-term bottoms after long
price declines the principle is the same. Right
at the bottom, the dumb money sells their
shares to the smart money. The smart money
accumulates the floating supply of shares
when they are of the greatest value (i.e. at
their lowest price). Consequently, once the
float has been accumulated, any new demand
drives the price of the shares higher.
An excellent example of this behavior is
on chart 2, Trina Solar Ltd. (TSL). By adding
cumulatively the number of shares traded
during the 13-day float box right at the bottom
we can see the area in which the number of
shares traded equals the number of shares in
the float.
Chart 2 – Trina Solar
The Float Channel Lines
The second part of float analysis consists of
creating two sets of channel lines: the 100%
28
float channel and the 50% float channel. These
are used to identify support and resistance
levels where a stock’s price changes direction.
The 100% float channel lines are created by
using the actual float number; the 50% float
channel lines use one half that number. Both
the 100% and 50% float channel lines are
created by plotting the prices represented by
the upper right hand corner and the lower
right hand corner of the float box on a dayto-day basis. The resulting channel lines
show the tracks the float box has made in
the past. The easiest way to understand how
the float channel lines are created is to think
of the float box as a railroad car that moves
forward each day by laying down new track.
The tracks then trail behind the float box as it
moves forward day after day.
For example, let’s look at Chart 3
Chart 3 - Ralph Lauren Polo (RL).
This chart shows the 100% float channel as
a pair of solid lines and the 50% float channel
as a pair of dotted lines. The gray float box is
in its most recent position, which is at the far
right of the chart.
Note that the current price bar at the far
right of the float box penetrates below the
float line of the float box. The reason for this
is that the top and bottom lines are used as
triggers to give alerts. If a stock’s price is
trading in between the two red lines then the
lines continue to be plotted at the highest and
lowest points of the backwards count. But
whenever the price penetrates through the
upper or lower line, the line is held at the
previous level so that the stock’s price is seen
piercing the line and an alert can be given
that a breakout above the box or a breakdown
29
below the box has occurred. Breakdown alerts
only occur when the lower channel line has
been rising. Breakout alerts only occur when
the upper channel line has been declining.
Chart 3 shows both the 50% and the
100% float channel lines as well as the 100%
float box which is at the far right of the chart.
Notice that whenever the 100% channel lines
overlap the 50% line, the solid line is given
preference and it covers the dotted line and
hides it from view. When a stock is trending
higher, the dotted lower 50% line is visible
and when a stock is trending lower, the
dotted upper 50% line is visible. The current
100% float box is always plotted on a float
chart. This is because it gives us an easy
way of looking at the current status of the
stock. It is especially valuable for analyzing
breakouts and breakdowns and the volume
characteristics within the float box.
Using Float Charts to Find Potential Entry
Points
Imagine the price of a stock going lower and
lower over several weeks. As the price drops
it will continually break below the lower line of
its float box. If you were convinced that the
company had a great future and the stock’s
decline was only temporary, then you would
want to see the stock’s price turn around and
head higher. But how would you determine
a good entry point to buy the stock? Float
charts can help you find potential entry points
because if the stock is going to turn around
and head higher it will have to stop going
through the lower line of its float box and it
will have to break out above the top of its
float box. This would potentially indicate that
the stock had been accumulated by the smart
30
money and was now headed higher. This is headed lower.
exactly what happened with Trina Solar (TSL)
But how would you determine a good entry
point to sell the stock? Float charts can help
See Chart 4.
you find potential sell points because if the
stock is going to head lower it will have to
Chart 4 Piercing the top line of the Float stop going through the upper line of its float
Box
box and it will have to break down below
the lower line of its float box. This would
After a long decline, Trina Solar’s price potentially indicate that the stock had gone
pierced the top line of its float box. This was through distribution to the Dumb Money crowd
a signal that the stock was no longer breaking and was now headed lower. This is exactly
below its float box but it was now breaking what happened with Ralph Lauren Polo (RL)
above it, signaling an attractive buy point.
in Chart 5. After a long rise, its price pierced
Now consider the case where the price of a the lower line of its float channel. This was a
stock is going higher and higher over several signal that the stock was no longer breaking
months. As the price rises, it continually above its float box but it was now breaking
breaks above the top line of its float box. If below it.
you were convinced that the company had a
bleak future and the stock’s high price was Chart 5- Ralph Lauren Polo Price
only temporary, then you would want to sell Breakdown at the Top
the stock when its price turned around and
31
The 50% Channel Line as a Level of
Support/Resistance
Now that we’ve seen that the 100% float
channel lines can help us locate areas of
support in a rising stock and areas of resistance
in a declining stock, let’s look at the 50% float
channel line. It is a very useful tool to help
locate levels of support and resistance. Study
Chart 6 and you will see a good example of
this. The price comes right down to the 50%
float channel line, finds support and bounces
higher.
Chart 6, Support at the 50% Float Channel
Line
How is it that the float channel lines can
locate the exact areas that a stock’s price
will reverse direction? The reason is that the
float boxes that are creating the lines often
expand like an accordion away from a day at
the back of the box which has a lot of volume.
On a stock that is rising, this is called a day of
strength in the background. On a stock that
is declining, this is called a day of weakness
in the background. These are days in which
the stock went higher or lower with a lot of
volume. This tells us that a lot of buyers or
sellers came in at that level in the past and will
likely do so again at that level in the future.
Since the 50% and the 100% lines are
created from float boxes that can extend back
to a day of strength or a day of weakness,
they often show up as the exact point where
the stock reverses direction.
If all we had to do to make money using
float charts was simply to wait for a stock
that is in a downtrend to break out above the
top line of its float box and then after a big
price rise to simply sell it when it broke below
the lower line, then float charts would be the
holy grail of all technical analysis indicators.
Unfortunately making money in the stock
market is not that easy.
Just because a stock breaks out above
its float box after a long decline doesn’t
necessarily mean that its price will continue
to move higher. We need another criterion to
judge the validity of a float box breakout.
The key is this: Valid Float Channel
breakouts are usually accompanied by
higher-than-average volume. In other
words, volume on the breakout should
be considerably higher than the average
volume seen during the development of
the float box. If breakouts occur on lower
volume than the average volume of the bars in
the float box, that breakout should be viewed
with a suspicious eye.
So, in summary,
Float Analysis integrates price, volume and
time information to identify potential buy and
sell points.
A float box defines the price and time
interval representing one turnover of the entire
number of tradable shares in a company.
Price breakouts of a float box on high
volume represent attractive buy and sell
levels.
100% and 50% float channel lines often
locate the exact areas that a stock’s price will
reverse direction.
For more information about float analysis
tools, contact info@janarps.com
32
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33
The Search for the Ancient System
Seeking the Origins
of Prognostic Astronomy
By William Bradstreet Stewart
Predictive financial astrology is one
of the most hotly pursued yet thoroughly
misunderstood subjects within the entire
spectrum of financial research and prognostic
science. The unfortunate failure of researchers
in this tradition is not due to any lack of effort
or competence, but due to the vastness of
the subject and the underlying complexity
of the topic. In fact, main stream science
and academic thought outright dismiss this
subject as the delusional theorizing of the
unenlightened, even though the pillars of
scientific tradition, Ptolemy, Copernicus,
Galileo, Tyco Brahe, Kepler and many more
ALL identified themselves as astrologers,
whose “scientific” and “astronomical” research
was merely an extension of their research into
the technicalities of their deeper astrological
and cosmological science.
Even the great Isaac Newton, long thought
to have been the father of the mechanistic
world view, has more recently been revealed
to have been a confirmed Alchemist! His
scientific discoveries were mere chips off the
workbench of his deeper esoteric research
into the true secrets of the universe, which
extend far beyond the purview of dogmatic
materialism and mechanistic science. These
revelations of the true esoteric orientation of
the great master of modern science have so
horrified the scientific community that efforts
have been made for 300 years to suppress this
knowledge, and even today most scientists
remain ignorant or refuse to accept the fact of
Newton’s true metaphysical orientation.
The superficial progression of materialistic
science since the 1700’s is responsible for
the unfortunate disassociation of the deeper
elements of the scientific system of the
ancients from the technical mechanisms used
to calculate their unified cosmology, thus
divorcing the mechanistic and mathematical
components of their system from their more
important correlation with an integrative
science of consciousness and cosmic order. In
their quest for scientific exactitude, modern
science has, for all intents and purposes,
thrown the baby out with the bathwater,
leaving the modern scientific tradition
stagnant and limited, having divorced the
mechanism from the living system, the how
from the why, the ghost of consciousness from
the machine of materialism, thereby creating
and perpetuating a fundamental dualism yet
to be surmounted.
However, with the advancement of 20th
century science into high energy physics and
quantum mechanics, this sclerotic materialism
has begun to crack, as the lines between
matter and energy, observer and observed,
continue to blur, calling into question the need
for a more holistic science with the ability
to transcend the matter/conscious dualism
in search of a new and more integrative
vision. And with this wider search for a more
unifying vision, the perceptive scholar is led
back to the more unifying sciences of the
Ancients, such as Astrology, Alchemy, and
Magic. This has revived the consideration that
perhaps these greatest minds in the history
34
of the human race were not half delusional
and mired in superstition, but were actually
initiated into something greater than the
reductionist materialism that has devolved
from a misinterpretation of their real and
deeper work.
For the ancient mind, there were not such
clear divisions between what have now become
the “specialized” fields of science, because the
system of the Ancients, better defined by the
Pythagorean term Cosmology (the “logic” of
the “Cosmos”), saw each division as a facet
of the jewel of a unified and ordered cosmos.
Pythagoras taught the Quadrivium: arithmetic,
music, geometry and astronomy, as the basis
of his system, which he received from his 22
year education as an Initiate in the Egyptian
Temple, the highest seat of learning for over
2000 years.
These four topics were not considered
to be isolated specializations studied
individually by researchers according to their
interst and orientation, but were instead
integrative perspectives of one unified
vision, interconnected through a doctrine
of correspondences. These were systems
of symbolic logic, whereby values from one
framework are directly correlated with values
across the others, creating a fluid system of
holographic information capable of producing
insights and technologies unimagined by
today’s limited science and the technology
derived therefrom.
This ancient tradition partially maintained
its historical form through the late 19th
century, when science was still identified as
“Natural Philosophy” and studied in a more
holistic manner, until the final blow was
struck with the Einsteinian revolution and
the development of modern academia, where
specialization became king, and this schism
became encrusted into the very foundations
of thought and knowledge, where it has
remained stuck to this day.
W. D. Gann was fortunate enough to have
been born during the last gasp of this dying
tradition, and gained his education studying
the final proponents of Natural Philosophy.
This perspective inspired him to seek a
unification of sciences so clearly expressed in
his 1909 Ticker Interview which gave credit to
this approach as the basis for his system of
forecasting and trading. As he developed over
the years, it became apparent that his research
delved not only into the natural sciences, but
included within that category the study of
scientific astrology. Seekers of Gann’s wisdom
have forever attempted to grasp the key that
he may have found in this exploration, but
very few have done so, thus far. So, for many
Gann and astrological researchers, the search
continues for a forecasting system with an
accuracy that rivals that of the astrologers of
lore.
Dr. Baumring, one of the foremost
interpreters of W. D. Gann’s Law of Vibration,
said of the purely astrological approach to
financial forecasting that it was so difficult
to accomplish, that even for one who fully
understood Gann’s Law of Vibration, mastering
the astrological mechanics behind the
movements in the markets would take another
5 years of dedicated research. He explained
that this was because the true system had
been lost, and the modern proponents of
astrology, even including those authors on
Gann’s famous Recommended Reading List,
understood only bits and pieces of the full
system, so that the task of pulling together
a complete science from fragmented sources
was all but impossible to accomplish by most
people. Very few of those who developed
these systems possessed a thorough grasp
or education in the advanced systems of the
ancients, so that what has come down to us
from posterity is a fragmented and incomplete
system producing only partial results.
35
This is clearly evidenced in the history of
works on financial astrology written over the
past century. There are many very good books
in this collection, like those of Luther Jensen,
Fred White, or George Bayer, which will
teach solid foundation principles and give an
excellent introduction to the subject. But when
it comes to producing consistently accurate
forecasts, all of these various systems are hit
and miss at best. Often a particular approach
will generate several excellent indications in
a series, only to see the next iteration of the
signal fail, usually just at the point where the
trader has found the confidence to invest in
his insight. This common experience serves
to erode a trader’s confidence in his system,
making it very difficult to produce results with
a long term statistical accuracy.
There are dozens of highly intelligent
astrological researchers who are able to
make some excellent calls, and particularly
when combined with principles of technical
analysis and risk management, are able to
produce decent returns from their version of
astro-trading. But few of them would admit
to having developed the full insight that
they are seeking, so their pursuit for yet
deeper knowledge continues. Many of these
are excellent astrologers when it comes to
reading the nativity of an individual or nation
and giving an astrological interpretation of
personalities, political cycles, wars, potential
upcoming events, probable outcomes to
situations, good and bad times to engage in
activities, and the like.
But there is a huge difference between
these more general interpretations and the
ability to accurately forecast market turns and
trends within days, over and over again, with
ongoing consistency. It is here that these
systems fail, because financial astrology
demands a much greater precision than other
fields of astrological forecasting. Predicting a
market pivot within weeks or months is of no
great use to any but very long term investors.
For short to intermediate term traders, if
financial astrology is to be of any real use, it
demands absolute black and white predictions
defining within a very small window where a
pivot will occur, whether it will be positive or
negative and whether the market will then
move up or down, and for how long. This is a
much more complex endeavor!
There has been a movement in modern
times to attempt to rediscover these lost
ancient systems in order to bring the accuracy
of this science to a new level of perfection. Groups like Project Hindsight have worked
now for two decades to recompile and
translate the Hellenistic system of Ancient
Greece, with their brilliant director Robert
Schmidt painstakingly attempting to derive
the essence of the original system so as to
be able to properly translate the full corpus
of this tradition. And after 20 years, we are
still waiting for him to complete his study and
publish his series. Or the Transcendental Meditation movement,
which has pushed Vedic scholarship to new
levels, and sought to decipher the ancient
Vedic system of Astrology, and has thus far
failed, only producing varied and conflicting
interpretations of that complex wisdom. And
the quest continues with many other dedicated
and well-meaning researchers, but yet with
few results in the general field, and almost no
results in the more specific field of financial
astrology, probably the most challenging
application of this discipline.
At the Sacred Science Institute, we have
ongoingly searched for new resources and
scholars in our attempt to unravel these ancient
systems of wisdom, even translating rare
works on the esoteric sciences from unknown
secret societies that were considered masters
of the arcane tradition. We have similarly
encouraged our authors and associates
to tackle this problem, and some of them
36
have produced useful insights and practical
applications within this field.
But until
recently, we have not seen anyone engage in
a complete survey and analysis of the breadth
of the historical systems with the detail and
scholarship required to isolate and determine
a solution which would provide the higher
level of accuracy in astrological forecasting
that serious traders have been seeking.
Our top author and most penetrating
scholar, Dr. Alexander Goulden, is the first
person we know of to have dedicated the full
effort, research and critical testing required
to penetrate this subject to the level needed
to uncover the missing mechanics of the
astrological system of the ancients.
Dr.
Goulden’s extensive research encompassed
more traditions and applications of planetary
causation than anyone we’ve seen analyze
the
subject
before,
including
Vedic,
Babylonian, Egyptian, Hellenistic, Tibetan,
Chinese, Arabic, Mayan, Native American,
Medieval, Renaissance, Western Sidereal,
Astrometeorology, Astronumerology, Esoteric
(Alice Bailey’s Rays material), the authors
from WD Gann’s reading list, astrological
magick and medicine, and even included the
study of unpublished library manuscripts and
private translations of ancient tablets. Now,
after many years of this exhaustive analysis
and testing, Dr. Goulden has finally released
the results of this study in his long awaited
course, Secrets of the Chronocrators,
revealing insights into the inner workings and
mechanics of this ancient technological system
as applied to financial market forecasting.
Through his research, Dr. Goulden
concluded that the current direction of modern
astrology has shifted from a more scientific
perspective to one that is more psychological,
often hated by purists for its vague platitudes
and lack of precision. If one goes back a few
hundred years, the greatest astrologers were
invariably mathematicians and astronomers.
One may think of Ptolemy, Al-Biruni, Bonatti,
Jean-Baptiste Morin, Placidus, Regiomontanus,
Kepler, Lucas Gauricus, Valentine Naibod,
etc. These men were prominent scientists,
the greatest thinkers of their day. They were
astrologers and advisers to Kings, Popes, and
various courts, and were called upon to give
precise, practical advice on births, marriages,
deaths, law suits, battles, enmities, and
other significant events or trends within the
native’s life. Their position at court (perhaps
even their lives) depended on their ability to
produce accurate, useful forecasts. The great
predictions of astrological lore were produced
by such men, and their methods differed
greatly from those in common use today.
Those who want to study astrology, for
any purpose, should only study with someone
who understands the old masters and, more
importantly, who can also make similar style
predictions himslef.
Dr. Goulden is such
a person, and there is no question that his
research has penetrated to a level beyond
any prior work on financial astrology. Those
with a serious interst in the deeper essence
of astrological forecasting will find the insight
and revelation in this work that they have
long been seeking, allowing them to forecast
not only turning points, but more importantly,
tradable trends in the market, with more
accuracy than they could ever achieve before.
Even the most advanced and well educated
astrologer will discover new insights and
techniques in Dr. Goulden’s work that they
have never seen or understood before.
William Bradstreet Stewart
Director, Sacred Science Institute
www.sacredscience.com
institute@sacredscience.com
800-756-6141 or 951-659-8181
37
THE MOST ADVANCED WORK ON FINANCIAL ASTROLOGY!
SECRETS OF THE CHRONOCRATORS
BY DR. ALEXANDER GOULDEN
A DISTILLATION OF THE ASTROLOGICAL SYSTEMS OF THE
ANCIENTS APPLIED TO MAREKT FORECASTING & TRADING
PROJECT KEY TURNING POINTS & TREND LENGTHS!
FOR A DETAILED WRITE-UP ON
GOULDEN’S
COURSE INCLUDING
FAQ & CUSTOMER FEEDBACK
WWW.SACREDSCIENCE.COM/GOULDEN/SECRETSOFTHECHRONOCRATORS.HTM
STATEMENT OF INTENT
ESSENTIAL TOPICS COVERED IN THIS COURSE
- THE INTENT OF THIS COURSE IS TO DEMONSTRATE THE
-
ASTROLOGICAL PRINCIPLES WHICH UNDERPIN THE
MOVEMENT OF FINANCIAL MARKETS.
IT OFFERS A CONTEMPORARY PRESENTATION OF THE
SUPERIOR ASTROLOGICAL TECHNIQUES DERIVED BY THE
MASTERS OF ANTIQUITY.
A CORE COMPONENT OF THIS ADVANCED SYSTEM IS THE
SCIENCE OF CHRONOCRATORS (TIME LORDS), WITHOUT
WHICH FORECASTING BECOMES INEFFECTIVE.
THOSE WITH A SERIOUS INTEREST IN HEAVYWEIGHT
ASTROLOGY & MARKET SCIENCE WILL GAIN IMPORTANT
INSIGHTS AVAILABLE FROM NO OTHER SOURCE!
THE COURSE INCLUDES UNIQUE REVISIONS OF AN ANCIENT
METHOD BY WHICH TO RECTIFY A NATIVITY.
IT EXPLAINS THE ASTROLOGICAL FACTORS WHICH
REGULATE THE TIMING OF PIVOTS & DIRECTION OF TREND.
IT ALSO REVEALS CERTAIN ASTROLOGICAL SECRETS WHICH
DETERMINE PRICE.
MOST IMPORTANTLY IT EXPLAINS HOW TO ISOLATE THE
ASTROLOGICAL SIGNALS WHICH ARE "LIVE" AT ANY GIVEN
POINT, AND WHICH WILL HAVE AN EFFECT UPON A MARKET.
FOR A DETAILED WRITEUP ON
GOULDEN’S
SEE:
§ The Septenary division of significators.
§ The relationship between the lunar cycle, the
moment of birth and the timing of major events.
§ The pre-natal Syzygy chart and how to use it.
§ The nature of the biquintile aspect.
§ The significance of the rotary interaction between
the Moon, the North Node and the lunar
counterparts by progression and direction.
§ Metaphysics of Part of Fortune & Arabic Parts.
§ An Arabic Part of great power and utility which is
little known and little used today.
§ Secrets concerning the rotary coordinates of price.
§ Ancient Chronocrator (Time Lords) systems,
revealing the inner and outer holograms of trend.
§ Chronocrators & astrological dynamics of trend.
§ The convergence of Chronocrators as a signal for
culmination of trend. Forecasting trend lengths!
§ Time keys and simplified directions.
§ The Science of Rectification - based on ancient
techniques, including a rectification of S&P500!
COURSE INCLUDING CONTENTS, SAMPLE TEXT
WWW.SACREDSCIENCE.COM/GOULDEN/BEHINDTHEVEIL.HTM
TECHNICAL ANALYSIS REVISED!
BEHIND THE VEIL
AN APPLIED TRADING COURSE USING
ADVANCED PRICE/TIME TECHNIQUES TO
PROJECT FUTURE TURNING POINTS...
BY DR. ALEXANDER GOULDEN
FORECASTING RECORDS
DR. GOULDEN PRODUCED 7 FORECASTS
IN 7 DIFFERENT MARKETS. HIS RESULTS
WERE IMPRESSIVE, 7 OUT OF 7,
YIELDING 3,161 POINTS IN 7 DAYS, WITH
7 TRADES, IN 7 DIFFERENT MARKETS!
&
FEEDBACK SEE:
Dr. Goulden’s advanced technical trading course Behind The Veil
presents powerful trading techniques based upon the deepest
scientific and metaphysical principles applied in a different way
than courses in the past. It unveils many mysterious and difficult
theories and applications similar in approach to those of W.D.
Gann and shows a trader how to use these principles to
successfully analyze and trade the any market on any time frame.
The techniques developed by Dr. Goulden will teach traders how to
identify future pivot points following which profitable market
moves ensue. All of the timing tools needed to forecast these pivot
points and the geometric tools used to identify price entry and exit
points, and to determine the nature of the ensuing trend are
demonstrated in the Course. Based upon a deep level of
metaphysical and cosmological insight, these techniques identify
PRICE LEVELS, TIME TURNING POINTS, AND TRENDS,
though proprietary HARMONIC, ASTRONOMICAL &
GEOMETRICAL techniques developed by a Cambridge scholar.
38
www.tradersworld.com Jan/Feb/Mar 2014
7
39
Momentum Trading Advances
over Trend Trading
By Thomas Barmann from NeverLossTrading
Summary: Momentum trading carries a fantastic opportunity for the private investor to
strive for profitability via constant income and frequent trading. Experience the entire trading
concept.
A) The Basis of Your Trading Decision
Even so, we will share a proven way of trading; it might not reach you:
“The majority of the private investors want to trade their style and sacrifice money rather than
applying a proven method for trading the financial markets”.
Trading is a professional business and you are competing with institutional investors. They are
prepared and set themselves up for success. In one way or the other, it is critical for you as a
private investor to replicate the pro-trader network:
Graphic-1: Pro-Trader Network
Graphic-1 shows: The trader, who executes the orders, does not stand alone; there is a
support- and control network for him/her to rely on.
Analysts: They prepare the base information, where money moves and in which assets to
participate in.
Back Office: The data miners are putting statistics together on trades that worked and did
not, producing a track record for the trader to study and improve in his/her score card.
40
Risk Manager: Gives clear guidelines, makes an agreement and monitors with the trader;
what to trade; when to trade; how to access and accept risk; position sizing; when to enter,
exit or protect trades.
Trader: Executes and monitors the orders, decides to reduce or add to a trade, applies
position sizing.
As a private investor, you are on your own and somehow you need to build up this pro-tradernetwork at your home office.
How can you do that?
Point 1: Find or build your high probability trading system with defined trade entries and
exits.
Point 2: Define rules for acceptable risks and position sizing.
Point 3: Subscribe or build a trade alert service, for knowing which assets are on the move.
Point 4: Record your trades on a score card to check what worked, what did not and how you
complied with your own rules.
Constantly work on improving your trading.
Before we start building a trading system with you, let us ask a key question:
How often can you trade?
Possibility A: 3-times per Day or about 600 times per year.
Possibility B: 3-times per Week or about 150 times per year.
Possibility C: 3-times per Month or about 30 times per year.
If you can participate in 100 – 1000 trades per year, this article will give you an exciting
opportunity to better your trading. In case you can only produce around 30 trades per year,
we would rather focus you on making constant income from your positions and how to hedge
and leverage your investments; however, this is not part of this publication.
Why to use a Momentum Based Trading System?
In the following, we want to share with you, how to build a momentum based trading system
step-by-step; however, there is a little prelude:
41
“If trading was easy, nobody would ever go to work”. Hence, it will be an investment for you,
in time and effort to evaluate, validate, and put what is shared into action, considering that:
“The majority of the private investors want to trade their style and sacrifice money rather than
applying a proven method for trading the financial markets”.
With this repeated, let us dive into the world of Momentum Trading:
Definitions:
A momentum trade is oriented towards a short-term directional price-move; with or against
the prior direction; closing the trade when the set short-term price goal or stop level is
reached.
A trend trade has a longer-term perspective, setting its price goal further out; assuming that
the price-move in the chosen direction will continue for a longer time period.
Time Perspectives:
Momentum Trading: The average time in a trade is 1-5 bars with a pre-defined exit.
Trend Trading: The average time in a trade is 10 – 50 bars with a trailed exit.
Conclusion: You can realize 10-times more momentum trades than trend trades per time
period observed.
When we assume that a momentum trade has a $1 target, then every trend trade has to
produce $10 to put the two trading methods at par:
Alternative 1: Momentum Trades: 100 trades x $1 = $100
Alternative 2: Trend Trades: 10 trades x $10 = $100
Trend trading in general enjoys a very high popularity, assuming that a trend trade has the
same risk as a momentum trade, while it aims for a much higher target.
Table-1: Base Assumption to Favor Trend Trading over Momentum Trading
Method
Momentum Trading
Trend Trading
# Trades
100
10
Target
$ 1.00
$ 10.00
Win
70%
70%
Loss
30%
30%
Expectation 1
Risk
$ 1.00 $
40.00
$ 1.00 $
67.00
If the calculation of table-1 holds true, trend trading produces a 68% higher return than
42
momentum trading.
Let us check, validate or falsify this hypothesis:
Assuming that we find a trade setup, which produces a $10 move on a $1 risk, is not highly
probable, else every trader would be a billionaire. Studying the price move characteristics of
various asset classes and norming them on the basis of a $1 risk, we found the following:
Action A: 50% of the price moves retrace after the first price-increment-move.
Action B: 65% of the price moves retrace after the second price-increment-move.
Action C: 85% of the price moves retrace after the first price-increment-move.
Action D: The remaining sample continues its price move; however a 1:10 move is very
unlikely.
Comparing trend- and momentum trading, we use the following conditions:
Condition 1: Applying a high probability trading system with a 70% win rate (seven out of
10 trades).
Condition 2: Comparing trend- and momentum trading at the same asset and time frame.
Condition 3: The initial stop is at the high/low of the trade initiation candle, losing what we
aim for.
Condition 4: For trend trading, we trail our stop to entry, after the initial price move in the
desired direction (column with the word “Entry”) or even more brave: We trail the stop to
realize at minimum ½-momentum-move, which equals a $0.50 return (column: ½-Return)
Trend Trading Statistics with Trailing Stops
Trades
50% of the price moves retrace after the first price-increment move
65%
of the
price
moves
retrace for
after the
price-increment
move
and
use
this
result
thesecond
trading
system
comparison.
85% of the price moves retrace after the first price-increment move
Table-2:
Trend
with Trailed Stops and Reversals
Rest goes to target
(not Trading
likely)
Expected Result
3
2
1
1
7
Entry
$
$
2.00
$
2.00
$ 10.00
$ 14.00
1/2 Return
$
1.50
$
3.00
$
2.50
$ 10.00
$ 17.00
Surprise: Considering retracements, in the best case, we only produce an average return of
$17 from seven positive trades. Assuming a 30% loss rate from trade initiation, produces a
$3 negative impact and a total return of $14. When we compare the results of trend trading
to momentum trading, we see a relation of a $14:$40: An about three-time higher return of
momentum trading under the same conditions (Expectation 2).
43
Table-3: Comparison of Trend- and Momentum Trading Considering Retracements
Method
Momentum Trading
Trend Trading
# Trades
100
10
Target
$ 1.00
$ 10.00
Win
70%
70%
Loss
30%
30%
$
$
Risk
Expectation 1 Expectation 2 Advantage
1.00 $
40.00 $
40.00
286%
1.00 $
67.00 $
14.00
This is why Momentum Trading has an edge for the private investor:
Trade setups found, have a high probability to retrace after a first momentum move and thus,
trend trading has a lower expectancy than momentum trading.
Let us help you in building a momentum based trading system, with focus on frequent trading,
where the cross average positive trade outcome has a higher priority than the individual trade.
Building a Momentum Based Trading System
If you trade frequently, trade participation costs need to be considered:
Consideration 1: Commissions for entering and exiting a trade.
Consideration 2: Bid/Ask spreads for getting your orders filled.
In every trade, we have to cover those costs and calculate the minimum price move and
related probability for success to aim for:
Calculating Minimum Price Moves for Stocks
with a 1:1 Reward/Risk Ratio:
Assumption 1: You pay about 1-cent Commission/Share= 2-cents for a round trip.
Assumption 2: For getting filled, we usually sacrifice 1-cent at Entry and Exit = 2-cents
round trip.
Result = 4-cents of Trading Costs per Investment.
Conclusion 1: A $0.17 target then relates to a $0.13 Gain and a $0.21 Risk. For reaching
profitability, a trading system, which produces an above 62% rate of success, is needed.
Conclusion 2: When we increase the target to $0.25 and deduct the 4-cents, we attain a
$0.21 Gain and a $0.29 Risk. Hence, you need a trading system with a probability above 58%
to produce positive results.
44
Futures Trading Example with a 1:1 Reward/Risk Ratio:
Assumption 1: You pay $5 round trip commissions.
Assumptions 2: A 2-ticks slippage, depending on the underlying, relates to costs of: $20,
$25, $62.50.
Conclusion 1: For our example, we take $30 trading costs per investment including
commissions.
Conclusion 2: A $200 target then relates to a $170 gain and a $230 risk. For reaching
profitability, you need a trading system, which performs above 58%.
Conclusion 3: At a $100 target, a $70 gain and a $130 risk, requires you to use a trading
system, which performs above 65% for bringing you in the zone of profitability.
At this point of building your momentum based trading plan, you know how minimum expected
price moves and related probabilities for success work together and you can select:
Selection 1: Assets that fit your scope: Minimum price move per time unit traded.
Selection 2: Time periods, which allow you to trade with the odds in your favor, considering
the minimum probability of the trade setup needed to reach the zone of profitability, combined
within fulfilling the minimum price move per time unit observed.
Time frames or underlying instruments that move very little are not fitting for momentum
trading!
Example: CSCO moves about 11-cents per hour, which is below the minimum price move
expectation, even so the stock is highly liquid, exchanging a minimum of 3-million shares per
hour. On a daily time frame, the price of the CSCO share moves about $0.33/day and fulfills
the minimum requirements for a momentum trade, with a trading system performing above
56%.
In addition: Penny stocks are not a good choice for momentum trading.
Summary:
For momentum based trades, consider only:
Consideration 1: Assets with an extrapolated minimum price move per time unit observed.
45
Consideration 2: An established trading system, which produces high probability trade
setups, with an expected win ratio above 60%.
Action-1: Formulate specific rules for entering a trade; best on the chart:
As a momentum trader, you should never doubt in your trade entry:
Step 1: Define a trade entry price threshold.
Step 2: Act on its confirmation.
Step 3: Repeat your action with focus on winning in the average trade participation.
Graphic-2: Examples for Buy and Sell Rules from NeverLossTrading Top-Line
On graphic-2, you recognize examples of clearly spelled out trade entry rules: Buy>426.29
for example; only if this price threshold is surpassed a trade entry is validated and happens.
In addition: Calculate an average expected price move after a trade signal is validated, which
helps you to define your trade target and the relating reward to risk setup. Various methods
can be used. A very basic way of formulating the momentum based trade target is to take the
high-low-difference of the trade initiation candle.
To test the win/loss ratio of your trading system: Take a sample of 100 trades, with specifically
46
spelled out entry and exit parameters, count your winners and loser; if you achieve more than
60 winners you trading system is suitable for momentum trading.
Action-2: Find favorable trade setups through building or subscribing to a trade alert service.
As a momentum trader, you want to trade where the money moves; hence, do not stick to a
limited set of assets, expand your view and fish, where the fish are.
Many traders like to focus on one asset or asset class only:
Example 1: “I am trading the S&P Emini”; however, you might be missing out on major price
moves in Gold, Crude Oil, Wheat, Corn, Euro or Stocks.
Example 2: “I am only trading AAPL”; however, you might miss great opportunities in BIDU,
NFLX, F and many others, while the AAPL share is sitting idle, not giving you a trade signal.
This is where market scanners and price move seekers come into play. NeverLossTrading for
example, provides you with detailed overviews of assets on the move:
Offer 1: Day Trading Alerts: Stocks, Options, ETF’s, Futures, Forex.
Offer 2: Stock Trading Alerts: Stocks for Short-Term Trading, Swing Trading, Long-Term
Investments.
Offer 3: Long-Term Investor Alerts: Receive a 1-5 week perspective for, Stocks, Options,
Futures, Forex.
Action-3: Build a Momentum Trader Mindset
Feel, think and trade in probabilities
The individual trade does not matter:
Matter 1: Your trade setup triggers your entry and exit.
Matter 2: You decide the position sizing by a risk approximation.
Let us give you an example of a momentum based trading system, where you trade on price
breakouts and reversals from a specified price range:
Action 1: Trades are initiated when prices break out of the cyan zone and revert to the zone.
Action 2: The average trade gain is what matters.
47
Grapic-3: NeverLossTrading Price Range Breakout Example
Black arrows on the chart identify trade entries at specific conditions, when the price leaves
the cyan color price range. The dashed line sets the target for breakout- and reversal trades.
Stops are set at the high/low of the trade initiation candle, giving you the relation from risk
to reward. Next, we build an investment scheme for position sizing.
Action-4: Risk Handling
At every trade initiation, we act under ambiguity, estimating an uncertain outcome; however,
by knowing the strength of our signal, considering support/resistance points, we can combine
the approximated likelihood for success with the reward/risk ratio and decide for our position
size:
Action 1: ½-Postion or no trade at risky setups: higher risk than reward.
Action 2: 1-Lot at usually setups: Signal with risk/reward at par.
Action 3: 2-Lots at favorable setups: Lower risk than reward.
Action 4: 4-Lost at home run setups: Very little risk to accept
At this point, you might ask: Why to even take a 1/2-position trade when the risk is too high?
The ½-positon mentioned, relates to a setup, where the maximal risk shall be 1.2-times
the assumed reward and thus provides you at an above 60% probability for success with an
48
average positive expectation.
Let us give you an example how a position sizing model can look like:
Graphic-4: Example for Risk Appraisal and Position Sizing for Stocks and Options
NeverLossTrading Odds Ratio and Position Sizing
Risky Trades: 1/2-Lot or not Trade; Usual Setups: 1-Lot; Favorable Setups: 2-Lots; Home Run Setups: 4-Lots.
Stock Trade Evaluation
Stock Symbol
Trade Direction
NeverLossTrading Signal
1-SPU Measure
Entry Price
Stop Price
Target-1 (no hindrance)
Price Move to Target
Price Move to Stop
Risk/Unit
Reward/Unit
Reward/Risk
Stock Trade Evaluation Results
Odds Evaluation
SPU Evaluation
Odds Ratio
Potential Lot Size
Lot Equation
Account Size
Assumed Active Positions to Hold
Average Lot Size (calculated):
2-Lots of AMAT equates to:
Investment Amount:
Trade Reward at 250 Shares
Trade Risk at 250 Shares
Option Trade Evaluation
$
$
$
$
AMAT
up
Dark Green
0.72
39.99
39.39
40.62
$
$
0.63
0.60
1.5%
1.6%
1:1
Input
Select
Select
Input
Input
Input
Input
Stock Symbol
Put or Call Option
Time to Expiration (days)
Delta (enter positive values)
Price for the Option
Bid/Ask Spread
Calculated
Calculated
Calculated
Calculated
Calculated
Critical Price Point
Option Price at Target
Estimated Reward/Contract
Approximated Risk/Contract
Reward/Risk Ratio
Option Trade Evaluation Results
Option Price Evaluation
Time Evaluation
Odds Ratio
Potential Lot Size
Cleared Risk Managment
Check Your Stop Placement
2:1
2-Lots
$
$
$
$
$
50,000
10
5,000
250
9,998
157
150
Input
Input
Calculated
Shares
Calculated
1.6%
1.5%
Lot Equation
Dedicated Option Budget
Assumed Active Positions to Hold
Average Lot Size
1-Lot of AMAT equates to:
Investment Amount
Trade Reward at 20 Contracts
Trade Risk at 20 Contracts
AMAT
Call
$
$
$
$
Auto Selected from Stock Setup
Auto Selected from Stock Setup
39 Input
0.4 Input
0.50 Input
0.01 Input
39.39
0.74
48%
60%
0.8:1
Calculated
Calculated
Calculated
Calculated
Calculated
Acceptable
Enough Time
1.5:1
1-Lot
$
$
$
$
$
10,000
10
1,000
20
1,000
484
596
1.5
Input
Input
Calculated
Contracts
Calculated
48.4%
59.6%
The AMAT example shows that the trade setup more favorable for trading stocks: Proposing two lots, while
the option trading setup has a one lot proposal.
With a momentum based trading system, the markets always move enough to provide you
with an income opportunity, regardless if you want to:
Goal 1: Produce supplementary income.
Goal 2: Build a retirement budget.
Goal 3: Trade for a living.
Goal 4: Generate wealth.
Action-5: Have the instruments on hand to trade the markets to the up- and downside
For momentum based trading, you cannot only rely on trades to the upside. You need to find
yourself applicable trading strategies, which allow you to short stocks and other assets, even
in an IRA account.
Education and training in applying option strategies with or without holding the stock are
essential. To learn this practice a books is a start but usually not good enough to put you in
49
action. If you want to read about simple option strategies you can apply from the get-go,
check this book published by the author of this article at Amazon: My Stock Market Income.
Q&A Session
When things sound too good to be true, we are usually looking for a way to falsify the given
concept by changing the conditions:
Q: What, if you don’t find a new momentum trade?
A: If there is no trade, there is no trade. We only trade when we have a favorable setup with
the odds are in our favor. Never force a trade; however, with the amount of assets floating, it
is unlikely that we do not find an instrument to invest in after we closed a momentum trade.
Q: Did you check the system under a different condition, like: Four momentum trades versus
one trend trade instead of a 10:1 ratio?
A: Yes, we did and we can give you an example, where we were looking in particular for this
constellation; however, before we go there, one of the prime conditions of momentum trading
is: Do not stick to one asset or asset class. Assuming, in hundreds of considerable assets,
you cannot find one with a new trade setup, is close to impossible. Hence, you will have a
reinvestment opportunity that increases our participation rate to the 1:10 ratio, between trendand momentum trading. You will see in our MSFT example that the average momentum trade
lasted for 2 days in an observed period of 20 days, where only one trend trade substantiated
itself, which brings us back to the 1:10 ratio of trend- to momentum trading.
The MSFT example, which we evaluate, shows four momentum trades and one trend trade.
Taking the given price moves, we calculate the balance for just trading MSFT, while in reality,
the moment we had our money back, we do not wait for MSFT to throw us another signal.
In the MSFT trade constellation, you see:
Observation 1: Four momentum trades, with a calculated $0.60 gain each.
Observation 2: One trend trade, with a trailed stop at the red line, capturing a $1.75 gain. All
other attempts to initiate a trend trade failed and the trades got stopped at entry, producing
a zero loss, costing only commissions.
Observation 3: All trades were taken from the NLT HF Dark Green Signal, which indicates
a momentum- and volatility change of the stock in the observed time period of one month.
Trades were initiated from a daily chart, with an average expected move of the MSFT by $0.60
= 1-SPU (Speed Unit, a term used in NeverLossTrading).
50
Observation 4: All other trade signals besides the dark-green ones were disregarded in this
example.
Graphic-5: MSFT Momentum and Trend Trades
In our MSFT example, we will calculate the results on a cash-basis (no margin applied). The
capital involved in this example is $28,500, applying a 1-cent per-share commission.
On table-4, the Momentum section shows four momentum trades. In the table below (Trend),
we had four attempts to initiate a trend trade: Three got stopped and one trend trade concluded
and came to target, trailed by the red line on the chart (NLT Double Decker Line).
Table-4: MSFT Example for Momentum- and Trend Trading
Momentum Direction
Trade 1
Short
Trade2
Long
Trade 3
Short
Trade 4
Long
Entry
Shares Share Invest
$ 28.50
1000 $ 28,500.00
$ 28.90
1005 $29,044.50
$ 29.00
1022 $29,638.00
$ 27.20
1111 $30,219.20
Gain
$ 0.60
$ 0.60
$ 0.60
$ 0.60
Commission
$
20.00
$
20.10
$
20.44
$
22.22
Invest Capital Dev.
$ 29,080.00
102.0%
$ 29,659.90
104.1%
$ 30,239.46
106.1%
$ 30,817.24
108.1%
Trend
Trade 1
Trade2
Trade 3
Trade 4
Entry
Shares Share Invest
$ 28.50
1000 $ 28,500.00
$ 28.90
985 $28,466.50
$ 29.00
981 $28,449.00
$ 27.20
1109 $30,164.80
Gain
$ $ $ 1.75
$ -
Commission
$
20.00
$
19.70
$
19.62
$
22.18
Invest Capital Dev.
$ 28,480.00
99.9%
$ 28,460.30
99.9%
$ 30,190.68
105.9%
$ 30,168.50
105.9%
Direction
Short
Long
Short
Long
Momentum - Trend after four trades:
Considered Trading Period in Weeks:
Annual Expected Return difference
$
$
648.74
4
7,784.88
2.3%
27%
51
In the observed 4-weeks period, only trading the MSFT stock, momentum trading produced
a $648.74 higher return than trend trading. The average time in a momentum trade was
two days, which in reality would have given us the opportunity to re-invest immediately in
a different trading instrument, instead of sitting idle and waiting for MSFT to throw a new
signal; however, calculating the difference between momentum- and trend trading on an
annual basis, considering a 4:1 ratio: Momentum trading produces a 27% p.a. higher return
on capital than trend trading.
Do you like the edge of a momentum based trading system? Now, you have two choices:
Alternative 1: Build a trading system on your own.
Alternative 2: Come on board with NeverLossTrading, taking advantage of a ready to use
high probability trading system, you can apply to all asset classes and time frames.
Check out our offering at: http://NeverLossTrading.com
NeverLossTrading Mentorship Examples
Example 1: Are you interested in day trading, looking for a reliable algo- based trading
system where you stay in control of the ultimate decisions? Check: NLT HF-Day-Trading.
Example 2: Are you serious in online trading or investing and you want to scan and screen
the markets real time, using your own searches, watch lists and portfolio management? Then
check out NLT Top-Line.
Example 3: Are you looking for an introductory algorithmic trading system to spot and follow
institutional money moves for day trading and swing trading, applicable for all time frames
and asset classes: Stocks, Commodities, Currencies (FOREX), and Treasuries? In that case:
TradeColors.com is your choice.
Disclaimer:
The risk of trading securities, options, and futures can be substantial. Customers must consider all relevant risk factors, including their
own personal financial situation before trading. In our teaching of how to trade the markets, in our newsletters, webinars and our
involvement in the Investment Clubs, neither NOBEL Living, LLC, the parent company of NeverLossTrading®, nor any of the speakers,
staff or members act as stockbrokers, broker dealers, or registered investment advisers. We worked out trading concepts and share
them through education with our members and clients. Past performance cannot always be taken indicative for future results.
52
Reasons and
Excuses:
Giving Traders Back
their Power
By Adrienne Toghraie,
Trader’s Success Coach
If you are to reach or maintain the level
of trading success you desire, you will have
to find ways to meet your obligations, fulfill
your goals, and keep your word to yourself
and others regardless of what it takes. You
can’t do that, however, if you have a life-long
pattern of making excuses.
How often do you give yourself excuses
for not doing the things you say you want to
do? How often to do you give yourself passes
for failing to live up to your obligations, for
putting off deadlines, for delaying tackling the
things you dread, or for avoiding the things
you secretly fear?
Recently, I listened to one of my favorite
motivational speakers, Dr. Wayne Dyer,
psychologist and best-selling author, talking
about making excuses and how to avoid
them. It was a fascinating presentation. It
covered some important areas with powerful
strategies and it got me thinking about some
vital questions:
What is the difference between a reason
and an excuse?
How do you know when you are presenting
a reason that masks an excuse?
How can you stop making excuses to
yourself and to others?
How do you deal with skeptical responses
to legitimate reasons?
Legitimate reasons
Have you ever had the experience of giving a
legitimate reason for not doing something only
to be met with skepticism and condemnation?
Your flight was canceled and there were no
more flights until the next day or you were
in the Emergency Room passing a kidney
stone, or your mother lay dying. These are
all real reasons for not meeting an obligation
or fulfilling a promise. And yet, you may still
have the unnerving experience of having your
word questioned and your motives impugned.
What do you do? And how do you deal with
53
the anger and frustration that you feel?
Reasons are real. They are unimpeachable
and irrefutable. You cannot make up a tsunami
or appendicitis or the flu or a lightening strike
that destroys your computer. Still, there might
be a silver lining to the event because it did
indeed allow you to miss a meeting that you
dreaded or fulfill a promise you’re sorry you
made. So, down deep, you feel a sense of
relief, and that feeling of relief shines through,
making you look like you’re lying. But, the fact
that you’re actually relieved that you cannot
fulfill an obligation or promise does not mean
that you could have done so. The reason is
real. You’re off the hook.
The questioned reason
What then do you do when a legitimate
reason is met with a smirk, a wink, or outright
disbelief and you know that you are not
making an excuse? The short answer is to
do nothing at all. You do not need to justify
a legitimate reason. In fact, the more you
attempt to protest, the more disbelief the
other will have. So, unless you are holding
irrefutable evidence in your hand, shrug your
shoulders and move on.
What does this have to do with trading? A
great deal. First, the most important individual
you need to convince is the one who is looking
at your face in the mirror in the morning. You
are the only one who knows whether what
you say is a real reason or an excuse. If you
doubt yourself, you will be creating a sabotage
issue for your trading. It is essential that you
be filled with the sense of self-trust and selfbelief. If you lose that trust in the things you
say to yourself, you will not believe yourself
when you make agreements with yourself and
when you make promises to yourself.
Second, if you allow the skepticism in
others to affect you even when you know that
it isn’t justified, you will erode that self-trust
and you will begin to question yourself.
When it really is an excuse
So, if a reason is real and irrefutable, you
will know it. You will know that there was
nothing you could have done in that situation,
that your hands were tied, that you had no
hidden agenda.
Let’s return to the tsunami in Japan. I heard
on the news a story about a young American
teaching English in a Japanese village. He
was desperate to find out what happened to
his American girlfriend who was teaching in a
village far away and up the coast in the areas
most affected by the tsunami. Immediately
after the initial disaster, land and cell phone
coverage was gone, roads were washed away,
public transportation was not working, and
even if you could drive a car, there was no
gasoline to be found. This young man had all
of the most legitimate reasons for not finding
his girlfriend. He could not call her or reach her
by any means. That was a legitimate reason.
But, was it true?
Braving injury and even death, he walked
for twenty hours through the hell that had
taken place all the way to the village where his
girlfriend had lived. It was basically destroyed,
but he kept walking until he found people who
had escaped. They were able to tell him about
the place where many of the residents had
taken shelter. To his utter joy and relief, his
girlfriend was at that shelter.
The point of this true story is that the
reasons for not finding her were real. They
were not excuses. But they were not real
enough to prevent a determined individual
from revoking their legitimacy, and making
them into excuses.
54
All of the impossible things that have been
achieved by extraordinary individuals were
once viewed by others as having legitimate
reasons for not achieving them. However,
when the motivation to achieve the impossible
is overpowering, legitimate reasons become
excuses.
So, what are excuses? They are the fake
reasons we give others and ourselves for not
doing what we do not want to do for reasons
that we do not want to reveal to others and/or
to ourselves, (i.e. our hidden agendas) --those
real reasons for not wanting to do something:
Out of fear or dread
Out of disgust, revulsion, or loathing
Out of laziness
Out of a preference to do something else
with the same time, energy or resources.
Out of unwillingness to concede to the
demands of someone else (perhaps out of a
knee-jerk rebellion against authority, or out of
a reaction to being pushed)
Out of a lack of physical or mental wellbeing (that you don’t want to acknowledge)
Out of feelings of inadequacy to accomplish
the task—ie, fear of failure or embarrassment.
So, the first test of an excuse is that if you
do not want to do something for one of these
real reasons listed above but you give another
reason in its stead, then it is an excuse.
Wayne Dyer gave a long list of some of
the classic excuses for not achieving one’s
espoused goals, dreams and wishes. They
included such excuses as I’m too old, it will
be too difficult, it will cost too much money
and I don’t have the resources, I’m not smart
enough or capable enough, etc. Most of these
excuses delineate the potential obstacles.
To all of these objections, Dyer proposed
that one should use the following two
strategies:
1. Ask yourself if the reason (you give) is
real? Dyer believes that testing the validity
of the reason will give you a sense of reality
and control. For example, if you say that
you cannot increase your business because
you don’t have the capital necessary to do
so, ask yourself if this answer is real? Test
your answer with your experience. Have you
never had the experience of needing capital
for something only to have that exact amount
suddenly come into your life?
Throughout the day, use powerful
affirmations that negate the excuse. For
example, if your excuse is that you are too
old, a powerful affirmation could be: I am
exactly the right age to do whatever I want to
achieve in life. I have all of the life experience
and resources I need to do what I want to do.
Give yourself permission to be honest with
yourself. If you do NOT want to do something,
give yourself permission to consciously express
that need to yourself. “I do NOT want to do
this!” By being open with yourself about your
real feelings, you will then find it possible to
be honest with others about your real feelings
and intentions. The result of this strategy is to
empower you in a way that you have not been
empowered in the past.
Excuses sometimes comes from a sense
of powerlessness…that you do not have the
power, authority or ability to express your
feelings and/or needs in an environment
where they have any influence. Children who
come from authoritative homes where they
are unable to express their feelings and needs
often feel this sense of powerlessness. The
result is that they become passive and resort
to making excuses rather than expressing
their real feelings and intentions.
Once you begin to openly express your real
feelings about things, you will find yourself
saying things like:
I really don’t want to do that.
55
I have no genuine interest in doing that.
I actually would much rather do something
else with my time, money, energy.
The thought of doing that makes me
uncomfortable, scared out of my mind, afraid
that I’ll embarrass myself.
I don’t feel up to the task. I need more
time to prepare.
I just don’t feel well enough at this point.
You get the picture! This level of honesty
with yourself and with others will give you a
dramatic increase in your sense of personal
power. You can soften the blow by saying that
you appreciate the offer and must decline.
My second strategy for empowering traders
to deal with real reasons rather than excuses
is to use the science of modeling. Neurolinguistic programming has given us one of
the most powerful tools to overcome the habit
of using excuses through the use of modeling
on others.
When faced with a task that you would
normally excuse yourself from doing with one
of your standard excuses, ask yourself instead
how (and then use the name of the individual
you are using as a model) would handle the
situation. I personally know several individuals
who persevere through all obstacles,
regardless of their personal circumstances.
They never, ever use excuses and they push
themselves unmercifully. Personally, I cannot
afford to abuse my health the way they do
and I know my medical limitations, but these
models are, nevertheless, a great inspiration
for me. When faced with an obstacle to
achieving an obligation, I ask myself what
they would do, and I can actually envision
their determination and creativity in solving
the problem. Before I know it, I’m well on my
way to getting the impossible done.
The third strategy for avoiding excuses
is to create the passion and motivation
that makes excuses irrelevant. The young
American teacher in Japan did not resort to
excuses because his level of motivation was
extreme. Nothing short of being shot or swept
away into the ocean was going to prevent
him from finding the young woman he loved.
When your motivation is high enough, you will
know it.
The question, then, is for you to ask
yourself some honest questions: what do I
really want? How passionate am I about my
trading? How badly do I want to succeed? If
you find that the answers to these questions
are tepid, that you honestly cannot find the
passion and motivation in your responses,
you will find yourself making excuses!
Conclusion
It is vital for a trader to be able to trust the
things that he says to himself in order to be
a great trader. For that reason, he needs to
be clear about the distinction between when
he is giving legitimate reasons and when he
is making excuses, between when a reason
is real or when he knows that it is a cover
for the real reason…the one he does not want
to reveal. To prevent himself from resorting
to excuses, a trader has some powerful
strategies he can use, including asking himself
how real his reasons are, using affirmations to
neutralize excuses, giving himself permission
to be honest about how he feels and what
he really wants, using modeling to find a
template for action, and finding and building
the passion and motivation that will make
excuses unnecessary in the first place!
56
Trading on Target
Free Newsletter
Adrienne Toghraie, Trader’s Success Coach
Visit Trading On Target
to receive a free newsletter
on Displine for Traders
Adrienne Toghraie, Trader’s Success Coach, writes
articles that are dedicated to those of you who have mere
minutes a day to absorb helpful ideas and creative solutions
to nagging problems about discipline in trading.
www.tradersworld.com
WWW.TRADERSWORLD.COMMay/June/July
Apr/May/Jun 2014
2014
57
51
Trading The 401k Portfolio
By Steve Selengut
Why bother to trade ETFs or Mutual Funds
(MFs)? Is it even possible to do so in a timely
manner? Can I obtain an actively “traded/
managed” portfolio for my own 401k Plan?
The basic commonality of these questions
is that they are rarely, if ever, asked. 401ks,
you’ve been told, are: safer than the stock
market, managed/created by professionals,
lower cost, retirement programs.
Safer than the Stock Market
But are they really “safer than the stock
market”? Of course not; they are the stock
market. Even Target Retirement funds are
mainly equity portfolios, and not in the lower
risk, dividend paying, profitable companies
known as Investment Grade Value Stocks.
Most 401k investment menus encourage
speculation
by
providing
varieties
of
capitalization, sector, commodity, and growth
varietals with little emphasis on internal
selection quality, diversification, or income
generation. A variety of speculations does not
create a “safely diversified” portfolio. More
speculation = more risk.
There is little control on how much of a
portfolio is invested in one fund or ETF...
safety is in the inexperienced hands of plan
participants, and most just don’t have the
time to do their homework.
So from a trading perspective, both ETFs
and MFs should be traded, to take advantage
of market volatility in either direction.
Managed/Created by Professionals
Both ETFs and MFs are created by
professionals;
ETFs are put together by
professionals but never managed, either
inside the 401k shell or out. All forms of ETFs
contain at least three levels of speculation, as
addressed in this article.
MFs have full time managers, but their
decision-making capabilities are restricted by
company investment committees. They may
not have the kind of discretion you would like
them to have when it comes to “buy”, “sell”,
“hold” decision-making.
Investment committees may have an
agenda that managers are forced to comply
with, as evidenced by performance around
the time of the dot-com-bubble... when the S
& P 500 rode the backs of a dozen or so “hot
NASDAQ ponies”.
What do you think will happen when this
bubbly stock market has the audacity to
go down for a few months in a row? What
can happen to 401k balances in the 30 days
between “selection change” or “contribution
switch” elections?
Unfortunately, participants are on their
own.... advisors are quick to say “buy”, but
gun-shy when it comes to sell decisions,
particularly those that involve profit taking.
And once the nest egg is lying cracked on
the ground, how will you know when to restart
your contribution engines? When the going
gets tough, or when the market goes greedy,
MF managers must do the opposite of what an
independent, investor/trader would be doing.
When the mob screams SELL (typically
58
in long-falling markets), ETF and MF prices
tumble. When the same folk get greedy (at
market all time highs), ETF prices soar while
MF managers must continue to buy at ever
higher prices.
Studies show irrefutably that MF managers
rarely “beat” their market benchmarks.
They can’t “outperform” over a market cycle
because unit holders invariably sell low and
buy high. But:
MFs and ETFs are provided by the same
or similar entities. The “raison d’être” for the
latter is the abject failure of the former. So
why do 401k professionals populate 401k
plans with MFs at all, and why do vendors still
offer both products?
In spite of their lower cost to participants,
how can index ETFs possibly perform better
than their MF brethren during market bubbles
and crashes?
Further misguiding the process, is the
tendency for managers and plan participants
to buy the most popular and pricy entities and
to move away from sectors and companies
that have fallen from favor... thus increasing
the scope, depth, and duration of the ensuing
market trauma.
Sure, ETFs and MFs are created by
professionals, but both become mob directed
as the market cycle moves further and further,
in either direction, for an extended period of
time.
So, from a trading perspective, since
portfolio management is often in the
inexperienced hands of plan participants, both
ETFs and MFs should be traded within preset buy and sell guidelines, so that market
volatility in either direction can be taken
advantage of.
Retirement Programs
401k
programs
are
not
retirement income, or pension programs.
Social Security is a pension program;
congress and many labor unions (notably
public employees) still have pension plans.
Many corporate entities provide a pension
benefit to their employees, or continue to
make payments to retirees.
The distinction is simple, and explained
pretty well in this article. 401k product vendors
want to “roll the 401k” into some other form
of product at retirement --- only then to start
thinking about income, and how to create it in
a low interest rate environment.
Retirement plans pay guaranteed income,
based on the participant’s recent pay level,
likely adjusted for employer Social Security
contributions, and possibly with COLAs;
employees have no responsibility for the
investment process.
401k Plans provide a variety of investment
products, predominately equity based, tax
incentives, and employer contributions;
employees are totally responsible for the
investment decisions... except in plans which
require company stock ownership.
Retirement plan investment portfolios are
managed to produce the promised income;
401k plans make no promises and do not seem
to make much of an effort to offer income
focused investment products. The income
produced by the highest yielding (highest
risk) mutual funds is generally lower than that
which can be obtained from lower income tier
Closed End Funds (CEFs).
So from a trading perspective, since portfolio
management is often in the inexperienced
hands of plan participants, both ETFs and MFs
should be traded within pre-set buy and sell
guidelines, so that market volatility in either
direction can be taken advantage of.
retirement,
59
Low Cost
Cost is absolutely lower in ETFs than in
Mutual Funds, but I’m convinced that it is only
misguided regulatory myopia that makes this
an issue... particularly in a trading environment
. If I buy a fund, an ETF, a common stock,
bond, or a sports car and make a net gain
on the sale of 10%, Scarlett, I just don’t care
about how much anyone else may have made
along the way.
No 401k plan participant sees the
commissions, fees, & charges that work their
way into the NAV of the products they choose
for their programs. If the product price rises,
they can take the profit. If they don’t trade
their securities, it’s on them.
So from a trading perspective, since portfolio
management is often in the inexperienced
hands of plan participants, both ETFs and MFs
should be traded within pre-set buy and sell
guidelines, so that market volatility in either
direction can be taken advantage of.
Why bother to trade ETFs or Mutual
Funds?
Because it’s your money and the ultimate
managers of 401k plan investment products
are people who are likely to know very little
about investing. Keep in mind, that at the
extremes of the market cycle, your 401k
product holdings become virtually unmanaged
entities... where will they be (in market value)
when you need them most?
The real difficulty could well be getting
the job you want done, when you want it
done. Equity markets can lose significant
percentages of their market value very
quickly, as evidenced by the MCIM “Three
Major Meltdowns” exhibit below:
Three Major Meltdowns
The majority of individual investors who
are not traders, overwhelmingly prefer to
be passive with their personal investment
programs, IRAs, Education Accounts, Trust
Accounts, etc... lulled to sleep in a hammock
of Mutual Funds and ETFs, not unlike the mix
that is force-fed to 401k participants.
The answers to these two questions should
make it clear to you that trading is an essential
feature of the retirement planning/investing
process.
What happens to my investment program
when the stock market goes down significantly?
Where does the retirement income come
from when I need to start spending it?
Can I obtain an actively “traded/managed”,
income focused, portfolio my 401k Plan?
Yes, you can.
You can have a series of individually
managed; age and risk tolerance sensitive;
retirement-income-growth
focused;
Investment Grade Value Stock and payingthrough-the-financial-crisis income CEFs only
portfolios.
Such portfolios generate higher levels of
income than either ETFs or MFs (regardless
of the asset allocation), and every individual
security is actively traded within stated buy
and sell price parameters. When equity prices
are frothy, cash positions are high from profit
taking and limited buying prospects; when
prices fall, cash is reinvested slowly as buying
opportunities reappear.
Income grows monthly because of “cost
based asset allocation” and portfolios are onefor-one transferable to privately managed
IRAs whenever the participant chooses to
retire or to change employers.
So yes, you can find a trading based 401k
program that you don’t have to worry about...
but “big brother” requires that you get your
own professional 401k adviser/provider to find
it for you. He or she can start by contacting
me... but expect some resistance.
Steve Selengut sanserve@aol.com
60
The VSA Setup
By John Matteson
www.mtpredictor.us
There are many traders who like to play
breakouts on high volume. While there is
definitely money to be made here, we know
that only about 4 out of 10 of these potential
high volume breakouts are successful. The
fact is that many professionals like to trade
against these breakouts. These breaks tend
to generate a lot of retail buying (in the case
of a break out) or selling (in the case of a
break down) which generates the liquidity
that allows the professionals to fade these
breaks. Professionals, in essence, give the
retail trader enough rope to hang themselves.
What if, instead of playing a high volume
breakout, you could identify, ahead of time,
whether the volume being created was by
professional buying or selling? This knowledge
then would allow you to fade the retail breakout
and trade in the direction of the professionals.
Would this be a valuable tool to have in your
trading arsenal? Let me introduce you to the
high volume VSA setup.
What is the VSA?
The Volume Spike Analyzer, or VSA, is
a proprietary indicator in the MTPredictor
software. It gives the trader a “heads up”
when there is unusual volume activity during
a particular time period by turning the volume
bar red. We will only pay attention to these
red high volume bars when the market is at
a level that is of interest (e.g. major support/
resistance, trend termination pattern, etc.)
Anatomy of a false breakout
When the market has broken a prior level
of support or resistance that is typically
identified by a retail trader on high volume,
it is assumed to be breaking out. The high
volume that is generated, in this case, is
Chart #1
61
assumed to be confirmation of the breakout.
Let’s look at an example of a potential upside
breakout on high volume. Chart 1 pictures
a typical breakout scenario on high volume.
See Chart 1
Once the break has happened, the
professionals like to allow the market to move
a short distance beyond the prior support
or resistance, to draw more retail players.
Then, they strike. They begin fading (selling
into a breakout or buying into a breakdown)
which heavily increases the volume during
this period. This high volume is seen by the
retail trader as confirmation of the break and
more retail traders pile in. The professionals
begin to overwhelm the retail buyers and trap
them in the break. The price then begins to
move against the retail trader and accelerates
when they are forced out of, what they now
recognize as, a false breakout or breakdown.
Since the selling is coming from professionals,
the move tends to be a large one.
Anatomy of a VSA setup
Let’s take the same scenario of the retail
breakout trade and compare how we would
analyze the situation using the VSA in
conjunction with a larger degree resistance
level. In chart 2, we have the same break of a
prior swing high resistance level. The volume
increases, which attracts more breakout
buyers. Notice that this market has broken
out right into the MTPredictor Decision Point
resistance level generated from the larger
time frame. This level is designed to identify
the level at which professionals will likely step
in and begin selling into the retail buyers.
Notice the red VSA bar. This is telling us that
there is unusual volume activity happening
during this time period. This is the “heads
up” that we are looking for. It is telling us,
in advance, that all the volume being created
may not be buying volume but instead, selling
volume.
Next, we need some confirmation that,
in fact, sellers are now overcoming buyers
in the DP resistance level. What we need to
see is what we call a red sellers candle. This
is a proprietary indicator in the MTPredictor
software as well. It indicates that sellers are,
Chart #2
62
in fact, overcoming buyers in the resistance
area and this selling is more than likely to be
professionals selling. See Chart 2
Setting up the VSA trade
Once we have our breakout into major
support or resistance (as defined by our
DP levels) on high volume where our VSA
indicates that the high volume being created
is potentially by professionals trading in the
opposite direction of the breakout, we wait for
a confirmation candle. If the candle confirms
the direction that the professionals are trading
in, then we are ready to take action by setting
up a low risk, high reward trade.
Chart 3 shows the trade setup with the
entry, protective stop, initial target and correct
position size for this account based on a risk
of 2% on $20,000 of risk capital. See Chart 3
I recommend risking a maximum of 2%
(you should start with less) on any one trade.
The reward side of the equation should be
at least twice your initial risk. Remember, if
professionals are truly fading the breakout,
then the resulting move should be a significant
one.
Summing things up
Many traders are taught to trade breakouts
on high volume. Professional traders, however,
like to fade these breakouts. The VSA trade
setup allows the trader to identify whether
the volume being generated on a breakout
is truly in the direction of the breakout or
instead, professionals fading the breakout
once price comes into a larger degree support
or resistance level.
Next, the trader should wait for a
confirmation candle to form indicating that
sellers are in fact overcoming buyers in the
resistance area, in the case of an upside
break, or a confirmation candle indicating that
buyers are now overcoming sellers, in the
case of a downside break.
Once all the pieces of the puzzle come
together, it is time to enter a low risk, high
reward trade setup and ride the wave of
professionals who are fading the break.
For more information on the VSA trade setup
and others, go to http://www.mtpredictor.us
Chart #3
63
VantagePoint 8.8
Software Review
By Darrell Jobman
If there is one piece of trading advice that
traders and investors are more likely to hear
than any other, it is, “Trade with the trend.”
For those who do follow that advice, perhaps
the most popular way they try to identify the
trend is with trend following indicators such
as moving averages.
But what is visible to everyone is usually
not sufficient to produce consistent winning
trades. This is especially true given the fastpaced nature of today’s globally intertwined
markets.
To give traders an edge, VantagePoint
provides early clues about shifts in price
“With information this accurate, recouping the
cost of the software should be quick and easy.”
VantagePoint
Intermarket
Analysis
Software 8.8 takes trading with the trend
to a whole new level. VantagePoint goes
far beyond most typical analytical software
packages, which look only at past prices
on each individual market to create various
technical indicators averages like moving
averages that lag current market action.
Instead, VantagePoint uses a highly
sophisticated, patented neural network process
to detect how global markets influence each
other and then uses this intermarket analysis
to produce unique predictive indicators that
make short-term, highly accurate trend
forecasts, thereby transforming typical lagging
indicators into leading indicators.
Getting an edge
Of course, successful trading requires more
than just spotting and trading with a trend.
It is often easy to see the price trend on
a chart and even where moving average
crossovers might trigger some trading action.
momentum and trend changes that a trader
can use to spot when and where to get into
a position at the beginning of a trend or get
out as a trending move shows early signs of
weakening. To be sure, there is still work for
the VantagePoint trader to do, and trading
skills such as sound money management
still need to be applied. VantagePoint does
not produce buy or sell signals. It is not an
automated trading system.
VantagePoint is a solid, time-tested tool
that analyzes and capitalizes on intermarket
relationships between dozens and even
hundreds of global markets using the pattern
recognition capabilities of artificial neural
networks. VantagePoint first identifies the
markets with the most influence on a target
market. Then VantagePoint sifts through the
data to find the best combinations of moving
averages for short-term, medium-term and
long-term crossover and momentum studies
as well as other predictive indicators to provide
forecasts of prices several days ahead for that
64
target market.
Global view
Louis Mendelsohn, a trading software pioneer
who developed the first strategy back-testing
software for personal computers in the early
1980s, realized the significance of increasingly
global markets on each other. He was the
first to quantify those relationships with his
revolutionary intermarket analyst approach
first introduced in the late 1980s followed by
the first version of VantagePoint in 1991.
Mendelsohn’s trading software company,
Market Technologies, dating back to 1979 and
the dawn of personal computers, has continued
to update and increase VantagePoint’s
predictive accuracy over the years by refining
its application of neural networks to global
intermarket data, taking the data through
numerous iterations based on Mendelsohn’s
patented technologies, retraining the networks
and expanding the number of global markets
covered, as is the case with this 8.8 version.
VantagePoint covers hundreds of markets
and thousands of symbols – 12 sectors
of U.S. stocks plus numerous stocks in
Canada, Australia, India and the UK; most
commodities/futures markets; all major
foreign exchange pairs and cross-currencies,
and numerous exchange-traded funds, both
U.S. and international.
End-of-day data for all of these markets
is downloaded into VantagePoint quickly and
easily and ready for your analysis. The IBM
chart (sidebar) illustrates one way to use
VantagePoint’s indicators to help spot potential
price turns early in their formation. The key to
any software’s value, of course, is whether its
indicators work.
Reliable, consistent
Based on VantagePoint’s proprietary Neural
Index, which analyzes how today’s actual
three-day moving average compares with
a predicted three-day moving average to
forecast whether the typical price will be up
or down in two days – 1 if higher, 0 if lower
– VantagePoint has consistently posted
accuracy rates of 80% or more in numerous
tests over many years and different market
conditions. Having a reliable track record like
this can give traders the confidence to rely on
the software’s predictions and take the trades
without hesitation.
The purpose of this accuracy analysis
was to pick a different time frame than what
Market
Technologies
tested
to
demonstrate
whether or not the accuracy is consistent over
multiple time
frames and multiple years. Accuracy and
statistics were computed and verified by a
seasoned trader and PhD in Mathematics. The
time frame and markets were chosen by the
independent researcher. A mixture of stocks,
futures and forex markets were selected to
test accuracy across all areas. The results
were impressive.
Another interesting VantagePoint indicator
65
predicts the next day’s high and next day’s
low, giving the trader has a clue today what
the trading range will be tomorrow so he or
she can get positioned accordingly by using
breakouts from this range to identify precise
entry/exit points to go along with the shortterm forecasts provided by other predictive
indicators built into the software.
VantagePoint also provides day-ahead
predicted indicators such as stochastics,
Relative Strength Index and MACD which are
forward-looking not lagging.
With so many markets and so many unique
leading indicators and so many potential
trading opportunities, it might seem like an
impossible task to select a market to trade.
VantagePoint helps solve this problem with
its IntelliScan feature, which can use criteria
from more than 70 filters to identify the
best possible trades. And if you want to do
more research, all of the data is available in
historical tables that can be exported into
Excel for further analysis.
VantagePoint is a complete analytical
and charting program but with some special
features where the computer has done the work
for you. You may not know what is happening
with VantagePoint behind the scenes, but you
will be able to appreciate the results as they
give you confidence about when and where to
make trades. With information this accurate,
recouping the cost of the software should be
quick and easy. For more information:
www.tradertech.com
Darrell Jobman has been writing about and
trading the financial markets for more than
45 years and has become an acknowledged
authority on derivative markets, technical
analysis and various trading techniques. He
served with the 82nd Airborne Division and as
an infantry platoon leader with the Manchus
in the 25th Infantry Division, including nine
months in Vietnam in 1967-68, earning the
Silver Star and Bronze Star.
TradersWorld Magazine
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66
Using the New
Andrews Pitchfork
Indicator
By Ron Jaenisch
Traders have a dilemma. The professionals
tell them risk management is the key. Their
gut tells them it’s all about finding the right
entry signal and systems. When they reach
the pot of gold at the end of the rainbow, they
find that it is filled with great entry signals
with systems that provide excellent risk
management.
Andrews is well known for the use of
median and parallel lines in trading. These
are used by many traders to determine the
trend and about how far prices are likely to
go. What is now known as the pitchfork,
utilizes three pivot points with the general
concept that prices are likely to reach the
67
median line. In Figure 1 the pivots are labeled
as A B C. The midpoint between B and C is
found and a median line is drawn from pivot
A. Parallel lines are drawn thereafter, giving
the appearance of a pitchfork.
In order to determine future price reversal
points, Andrews would use other geometric
indicators, he learned at the meetings of the
Gravity Research Foundation. An example
of one, was the March 7 th high in the Dow
on a 15 minute chart. It was posted on Cnn
minutes after prices hit the line. It may be
seen at: http://ireport.cnn.com/docs/DOC1101813.
The low in Gold was posted on Cnn also
http://ireport.cnn.com/docs/DOC-1071882,
using the Babson methods.
Roger Babson, at the Gravity Research
Foundation meetings, taught Professor
Andrews how determine the approximate
location of pivots, as prices travel in a trend.
Alan Andrews taught that Babson’s technique
utilized Newton’s third law of motion to make
this determination.
Professor Alan Andrews was well known
for advising his clients, and teaching a course
through his weekly course letters, which would
arrive on Monday morning. In the 1960’s and
early 1970’s, in each newsletter there was an
orders indicated section which the client was to
read verbatim to his broker. The objective was
to turn a $5,000 account into over $50,000
in less than a year. Records, which are now
part of the 800 page limited edition Expanded
Andrews Course, show that in the 1960’s and
early 1970’s he was able to accomplish this
regularly.
Along with the weekly course newsletter
68
came charts and explanations of various
concepts related to trading. Some covered
how to estimate how far prices will go in the
future. This was using Newton’s first law of
motion. This concept was different from the
standard median line concept and Roger
Babson’s Action Reaction Concept.
In the writings of Professor Andrews was
a concept that has been historically tested
and turned into an easy to use indicator. Now
it is referred to as the (NAPI) New Andrews
Pitchfork Indicator. The benefit of this indicator
is that it is not optimized. It is well known that
optimizing indicators for use with historical
data results in a perfect historical fit.
The new Andrews Pitchfork Indicator
(NAPI) has considerable value when it comes
to knowing when to enter a swing point and
estimating the minimum percentage of the
swing. It may also be used in conjunction with
the median line to forecast how far the move
will go in respect to the most recent median
line of the Andrews Pitchfork. The calculation
is based upon Newton’s Laws of motion.
When the last pivot is labeled a five by
the indicator, the result is prices typically go
past the green far parallel line of the Andrews
Pitchfork.
Figure #2 shows examples of moves that
were labeled a five and that price went beyond
the far parallel. Note that the moves were
over five percent measuring peak to low.
When the indicator only reaches a value
of three, a move of three percent or more is
69
anticipated.
In this case prices either make it past the
median line, (as seen in Figure #3) or get
very close to it before making a swing in the
opposite direction. In the original video to
this indicator on you tube it showed the days
where the value is one or two. These may be
useful in conjunction with other indicators In
order to test out the indicator and perform
optimization test runs it will be included in
future versions of software given to members
of the Advanced Andrews Course.
How can it be used in conjunction with the
Babson lines, is a question asked by many. In
a prior article, this author showed how future
reaction lines are found with the Babson
technique. The Babson reaction lines are used
to determine a target area in the future. NAPI
signals can show up during a trend as prices
pull back for a day or two. When the NAPI
gives a value that signals continuation of the
trend, the next Babson line is regarded as a
target area.
In addition prices are known to go past an
Andrews Line or a Babson Reaction Line and
pull back temporarily. It is during this pull back
that a NAPI trend continuation signal is used
by some traders to put on additional positions
or initial positions, when trading.
All of the posts on the Andewspitchfork.
com website focus upon the S&P Index.
Why? Because of liquidity. This brings up
the question… Does it work elsewhere? The
answer is Yes. It can be applied to stocks as
well as the S&P.
The indicator value is available on the web,
70
when the market opens and after the market
closes at the andrewspitchfork.com website.
This is presently free to the public. It should
be noted that the early and noon values may
change between market open and market
close. It is only the end of day (EOD) values
that are not subject to change.
Some suggest that the values can
themselves be used for a trading system.
There is a video that shows the indicator
values over a long period of time at https://
www.youtube.com/watch?v=TgJ3aD6Lt-I
If one is simply to enter a trade at a value
of 2 or greater (cumulative) and exit on a
close below (if long) the entry day or a day
with value of 1. The chart below shows what
would have occurred. This shows that further
historical tests are warranted.
About the author: Ron Jaenisch was a
student of Alan Andrews, who spent time
with him at seminars and the kitchen table
to learn the methods. The author operates
Andrewscourse.com and teaches the Advanced
Andrews Course through web based seminars,
a course manual and other group events.
He posts updates to the indicator on www.
Andrewspitchfork.com. He can be contacted
via email at ronj@san.rr.com
71
Candle Charting
Basics –
Spotting the
Early Reversal
Signals
by Steve Nison, CMT – President Candlecharts.com
Mr. Nison is the author of three books
including “Japanese Candlestick Charting
Techniques” and “Beyond Candlesticks.”
These “bibles of candlestick analysis” have
been translated into over 13 languages.
The article below is a sample of the free on
going education you get by becoming a student
at the FREE www.candlechartsacademy.com.
More details about this at the conclusion.
“A good
beginning is the
most important of
things.” (Japanese
proverb)
WHAT ARE CANDLESTICKS?
Japanese candlestick (also called “candle”)
chart analysis, so called because the lines
resemble candles, have been refined by
generations of use in the Far East. These
charts are used internationally by traders,
investors and premier financial institutions.
Candle charts:
Are easy to understand: Anyone, from the
first-time chartist to the seasoned professional
can easily harness the power of candle charts.
This is because, as will be shown later, the
same data required to draw a bar chart (high,
low, open and close) is used for a candle chart.
Provide earlier indications of market turns:
Candle charts can send out reversal signals in
a few sessions, rather than the weeks often
72
needed for a bar chart reversal signal. Thus,
market turns with candle charts will frequently
be in advance of traditional indicators. This
will help you to enter and exit the market with
better timing.
Furnish unique market insights: Candle
charts not only show the trend of the move, as
does a bar chart, but, unlike bar charts, candle
charts also show the force underpinning the
move.
Enhance Western charting analysis: Any
Western technical tool you now use can also
be used on a candle chart. Candle charts,
however, will give you timing and trading
benefits not available with bar charts. This
merging of Eastern and Western analysis
will give you a jump on those who use only
traditional Western charting techniques.
CONSTRUCTING THE CANDLESTICK
LINE
The broadest part of the candlestick line is
the real body. It represents the range between
the session’s open and close.
If the close is lower than the open the real
body is black. The real body is white if the
close is higher than the open. The real body is
white if the close is higher than the open.
Chart 1
The thin lines above and below the real
body are called the shadows. The peak of the
upper shadow is the high of the session and
the bottom of the lower shadow is the low of
the session.
The color and length of the real body reveals
whether the bulls or the bears are in charge.
Note that the candle lines use the same data
as a bar chart (the open, high, low and close).
Thus, all Western-charting techniques can be
integrated with candle chart analysis.
At Candlecharts.com, we have found the
candles are most potent when merged with
Western technical analysis. Accordingly, we
harness the best charting techniques of the
East and West to provide you with uniquely
effective trading tools. See Chart #1.
USING INDIVIDUAL CANDLE LINES
A critical and powerful advantage of candle
charts is that the size and color of the real
body can send out volumes of information.
For example:
a long white real body visually displays
the bulls are in charge a long black real body
signifies the bears are in control.
a small real body (white or black) indicates
a period in which the bulls and bears are in
Chart #2
73
a “tug of war” and warns the market’s trend
may be losing momentum.
While the real body is often considered the
most important segment of the candle, there
is also substantial information from the length
and position of the shadows. For instance, a
tall upper shadow shows the market rejected
higher prices while a long lower shadow
typifies a market that has tested and rejected
lower prices.
The slogan of our firm is “Helping
Clients Spot Market Turns Before the
Competition.” This is based on the powerful
fact that candle charts will often provide
reversal signals earlier, or not even available
with traditional bar charting techniques.
Even more valuably, candle charts are an
excellent method to help you preserve your
trading capital. This benefit alone is incredibly
important in today’s volatile environment.
Let’s look at an example of how a candle
chart can help you avoid a potentially losing
trade.
Exhibit 1 (below) is a bar chart. In the
circled area of Exhibit 1, the stock looks strong
since it is making consecutively higher closes.
Based on this aspect, it looks like a stock to
Exhibit #1
buy.
The candle chart, uses the same data as
Exhibit 1, (remember, a candle chart uses the
same data as a bar chart; open, high, low and
close.) Let’s now look at the circled area on
the candle chart in Exhibit 2 (below). Note the
different perspective we get with the candle
chart than with the bar chart. On the candle
chart, in the same circled area, there are a
series of small real bodies which the Japanese
nickname spinning tops. Small real bodies
hint that the prior trend (i.e. the rally) could
be losing its breath.
As such, while the bar chart makes it look
attractive to buy, the candle chart proves there
is indeed a reason for caution about going
long. The small real bodies illustrate the bulls
are losing force. Thus, by using the candle
chart, a trader or investor would likely not buy
in the circled area. The result -- avoiding a
losing trade.
This is but one example of how candles will
help you preserve capital.
When investing his own money, Warren
Buffet has two simple rules that he follows:
RULE
#1
Don’t lose money.
Exhibit #2
74
RULE
#2
Don’t forget Rule
#1.
Candles truly shine at helping you preserve
capital!
Let’s now look at a specific type of candle
line that has a very long lower shadow called a
hammer (shown in Exhibit 3 below). So called
because the Japanese will say the market is
trying to hammer out a base. The criteria for
the hammer are:
1. The real body is at the upper end of the
trading range.
2. The color of the real body can be black
or white.
3. A bullish long lower shadow that is at
least twice the height of the real body.
4. It should have no, or a very short, upper
shadow.
The hammer reflects the visual insights
obtained from a candle chart—specifically the
hammer’s extended lower shadow shows that
the market rejected lower price levels to close
at, or near, the highs of the session.
In the intra-day chart shown at Exhibit 4
(below), I show two hammers at the same
area (denoted by the arrow). These areas
Exhibit #3
took on extra significance since there were
two hammers at the same level and these
dual hammers confirmed a support level
shown by the dashed line. This illustrates how
easy and powerful it is to combine the insights
of candle charts (the hammers) with classic
western trading signals (the support line) to
signal the likelihood of a market turn.
Most of the candle signals are made with
candle patterns in which we have more than
one candle line. An example of a candle
pattern is a bullish engulfing pattern as shown
in Exhibit 5 (below). The market falls, and a
black candle forms. Next session a candle line
develops with a white real body that wraps
around the prior session’s black body. The
name for this pattern is based on the fact
the white candle “engulfs” the black candle.
As the white real body opens under the prior
black real body’s close, and closes above that
session’s open, it shows buying pressure has
overpowered selling pressure, i.e., the bulls
have taken charge! If the market is solid, the
lows of the bullish engulfing pattern should be
support.
Exhibit 6 illustrates a classic bullish
Exhibit #4
75
Exhibit #5
engulfing pattern in IBM in which the bullish
engulfing pattern confirmed a support area
set by a hammer.
A Japanese proverb says, “His potential
is that of the fully drawn bow- - - his timing
the release of the trigger.” The timing of the
“release of the trigger” depends on many
factors not addressed in this article. There
are also many important candle patterns and
trading tactics not discussed in this basic
introduction, such as the times when candle
signals should be ignored.
Exhibit #6
To continue your free education go to www.
candlechartsacademy.com to get:
Learn Steve Nison’s most important trading
rule:
1) The 4 Common (and Costly!) Mistakes
Almost Every Trader Makes
2) Improve your analysis skills with our Chart
Challenges
3) Test your knowledge with interactive
Bio: Steve Nison, the first to reveal the power quizzes
of candlesticks, has taught the top professional
traders from nearly every major investment 4) Receive informative market updates
firm from 19 countries. His work has been
highlighted in the financial media, including 5) Private webcasts where we analyze US and
the Wall Street Journal, Worth Magazine, and FX markets of your choice
Barron’s.
76
How to Make Moving
Averages Work for You
By Clif Droke
Technical analysis has never enjoyed
as much respect on Wall Street as it does
today. Once widely shunned and decried as
“witchcraft” by the Street, it’s now embraced
by even die-hard fundamental investors.
Virtually every hedge fund incorporates at
least some form of technical market analysis
in its trading strategy. Most computer-based
trading systems, moreover, involve a measure
of TA in their algorithms.
With the explosion of technical analysis
in the financial world, the emphasis today
is mainly on the complex aspects of the
discipline. Algorithm trading is a case in point:
teams of PhD mathematicians are employed
to program the most arcane mathematically
based indicators and price relationships into
the computers which run the programs.
Meanwhile individual traders and investors
use dozens, if not scores, of complex technical
indicators in their attempts at gaining an edge
in the market. Complexity, it seems, has
become the name of the game.
It’s my contention that retail traders would
do better to take the opposite tack of Wall
Street’s elite by embracing a simple approach.
Simplicity is underrated today, almost to the
point of being frowned on. Yet the simple
approach to technical analysis is the road
less traveled, which in the contrarian world of
financial markets means it’s much more likely
to lead to success.
One of the most basic approaches to
trading is to incorporate moving averages into
your trading or investing discipline. Moving
averages are widely used today, yet they
are paradoxically misunderstood by those
who use them.
Worse, moving averages
tend to be misused by all too many traders.
Using a basic program involving time-tested
moving averages in a disciplined fashion can
supercharge your trading performance. In
this article we’ll see just how a simple moving
average system can work for you.
The first thing you should know about
moving averages is that while they can be
extremely helpful and lead to profits in the
stock market, they are not the “holy grail” of
technical analysis. Moving averages are but
one of many tools which a trader should use
to evaluate the market. They are by nature
a lagging indicator, not a leading one, so the
use of moving averages should definitely be
supplemented with other indicators, both
fundamental and technical.
The benefit of using moving averages in
your trading program is that they tend to be
excellent reflections of market momentum.
They’re also quite underrated as support/
resistance indicators. When used in conjunction
with other technical indicators they can even
be used to identify critical market junctures,
thus increasing your odds of getting in and
out of the market at the best times.
In this article we’ll be looking at how
moving averages can be using for entry
and exit points in stock market trading. It’s
important to remember that moving averages
should never be used as standalone tools for
timing purposes; other technical indicators
77
should be employed to confirm optimal
trading points. When used in conjunction with
proven technical indicators, however, moving
averages can form the basis of a reliable
trading discipline.
Let’s start with arguably the most commonly
used moving averages, namely the 200-day
MA. The 200-day MA is often overlooked
by sophisticated technicians, many of whom
tend to sneer at this trend line as being
“plebian” and “over used.” Yet experience has
proven the 200-day MA to be an extremely
valuable tool for spotting market bottoms,
especially when used in conjunction with
price oscillators such as the slow stochastics
and MACD indicators. The usefulness of this
moving average is likely due to the fact that it
captures the most dominant of intermediateterm market trading cycles, namely the 40week cycle. The 40-week cycle influences the
price movement of a wide variety of stock and
commodity sectors.
Experience teaches that the 200-day MA
should be used primarily as a potential support
level following a market decline. When an
actively traded stock’s price has become overextended from the 200-day MA, thus becoming
vulnerable to a correction, it usually pays to
watch as the stock’s price begins falling and
comes closer in line with its 200-day MA. This
especially holds true if the stock in question
shows an historical tendency to bottom above
the rising 200-day MA in a bull market. When
the stock finally comes into contact with the
200-day MA, watch for signs of a selling climax
in terms of increased trading volume.
Also watch what happens in the 2-3 days
immediately after contact is made with the
200-day MA. If trading volume oscillates
wildly and price quickly reverses higher back
up to or above the 200-day MA there’s an
78
excellent chance that the decline will quickly
reverse and establish support above the 200day MA. If price closes 2-3 days or more back
above the 200-day MA after the decline, this
can be used to initiate a new speculative long
position in the stock.
In the following chart example, the Dow
Jones Industrial Average (DJIA) made contact
with its rising 200-day MA during the brief
pullback in late September/early October
2013. Note also the position of the daily
MACD indicator at the time that contact was
made. This is an excellent example of how
the 200-day moving average can be used as a
reversal indicator. See Dow Chart #1
Less widely used is the equally important
24-week (or 120-day) moving average. This
intermediate-term trend line has acted as a
pivotal support for the S&P 500 Index many
times in the past and has reversed several
recent declines in the index, as well as in
several actively traded NYSE and NASDAQ
stocks. The most recent example of the
120-day MA acting as a pivotal support and
reversal indicator was seen in succession June,
September and October 2013 and in February
2014. See the following chart example. See
SPX Chart #2
Longer-term moving averages like the
200-day MA and 120-day MA can be used
alone, but shorter time frames should be
used harmonically. Even more useful, for
instance, is the employment of the dynamic
30/60/90-day MA series.
This harmonic
triple moving average system is useful for
delineating the trend and external (price)
momentum of a stock, as well as for its ability
to check corrections (i.e. pullbacks) against
the main trend. It can be used to identify
“moving support” and “moving resistance” as
well as to underscore and identify a trending
79
intermediate-term trading opportunity.
The two key moving averages in this series
are the 60-day and 90-day MAs. Together
they comprise the sub-dominant interim and
dominant interim trend lines, respectively, for
most actively traded stocks. In an established
uptrend, the 60-day MA often acts as a critical
support for a stock’s price. In those instances
when the 60-day MA is violated, the 90-day
MA is most likely to act as the “support of last
resort.” If the 90-day MA is also violated then
there is a strong indication that bear market
conditions are prevalent.
Below is a daily graph of the NYSE Arca
Pharmaceutical Index (DRG).
Note how
well the 60-day MA has served to keep the
main interim uptrend for the drug stocks
intact. Each pullback in DRG was stopped
short before decisively violating the 60-day
MA. Note also that violations of the 30-day
MA almost invariably mean that a test of the
underlying 60-day MA is imminent. Should
the 60-day MA be violated at any time during
a pullback, traders should watch for support
above the 90-day MA. If this important trend
line is violated then it’s a good bet that the
intermediate-term trend has shifted. See DRG
Chart #3.
The 30-day MA can be used to confirm the
start of newly formed upward trends. Following
an extended decline when price turns back up,
the 30-day MA will at some point cross above
the 60-day and 90-day moving averages.
This serves as a confirmation of the breakout
and is often a precursor to further gains in the
stock’s price.
The 30/60/90-day MA series can also
be used as a resistance indicator, giving
you a further advantage over the use of
conventional trend lines. For example, after a
period in which price has risen steadily above
the 30/60/90-day MAs, then falls beneath all
three moving averages to confirm the start
of a bear market, price will often encounter
Chart #3 DRG
80
selling pressure each time it rallies back up to
the 60-day and/or 90-day MAs. This is more
likely to be true if the stock begins an extended
downward trend and the 30/60/90-day MAs
are all declining in reflection of the downward
momentum the market has developed.
When using multiple moving averages,
it’s important that the moving averages be
harmonically related to each other. Using
oddball moving average combos like the 13day and 45-day MAs, for instance, will only
skew your trading results since the moving
averages likely aren’t tracking the same family
of cycles. The moving average time frames
mentioned in this article (30/60/90/120) are
all part of the Kress cycle series which are
dominant in most actively traded stocks.
As we’ve discussed in this article, moving
averages enjoy many advantages over
classical trend lines when it comes to stock
trading. It offers an easy way to identify
market trends at a glance and is a good way to
isolate levels of support and resistance along
a market trend. Best of all, moving averages
afford traders with a disciplined and reliable
system for entering and exiting a trade in a
disciplined fashion in order to achieve greater
profits.
Traders
World
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Clif Droke is a recognized authority on moving
averages, internal momentum and Kress
Cycles, three valuable tools as applied to
the equity market. He is the editor of the
Momentum Strategies Report newsletter,
published three times a week since 1997. He
has also authored several books on trading and
technical analysis, including his most recent
one, “Kress Cycles.” For more information
visit www.clifdroke.com EVERY WEEK will bring you new
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home using your computer, tablet
or even smart phone.
81
A Scalper’s Dream Come
True: Combining Volume
Techniques to Identify Where
to Take Profits
By Gail Mercer
One of the biggest challenges for day
traders and scalpers is where to take profits.
Although I had researched volume profiles,
I felt that they were complicated and did
not offer any benefit to my existing trading
techniques on the live edge of the market.
Instead of complicating my methodology, I
simply continued to use a risk to reward of 1:2
or exited my position using volume divergence
or oversold/overbought indications. However,
this often led to missing potential trend runs.
Before I go into the details of maximizing
Chart #1
profits, let us review my basic entry setup. I
wait for price to approach the THD ATR stop
(indicated by the plus sign on the charts
below). As price approaches the THD ATR
stop, I look at the THD Directional Volume
Indicator to identify divergence, and I never
risk more than ten ticks on any one trade. In
fact, typically, I enter using only five to eight
ticks.
For example, Figure 1: Crude Light shows
that price had retraced to the THD ATR Stop
(plus sign). As price approached this area,
Chart #2
82
the THD Directional Volume indicator showed
there was a decrease in selling volume (Point
A). A long position, with three contracts, was
entered at 98.77 and by doubling the eight
ticks of risk, profit targets were identified at
seventeen ticks (Point B), thirty-four ticks
(Point C), and fifty-one ticks (Point D). Each
profit target was achieved, resulting in a risk
to reward of 1: 4.25. Overall, this was a good
trade. However as a business owner, I am
always looking for additional ways to decrease
expenses and to increase income.
Figure 1: Crude Light
Luckily, my programmer at PureLogikTrading,
mentioned a volume profiling indicator that
he designed which harnesses the incredible
volume capabilities of the NinjaTrader
platform, and enables the user to highlight
any price area for any time period. Could it
be that the LogikVolumeWand could improve
my risk to reward?
Chart #3
In Figure 2:
Crude Light with
LogikVolumeWand, I have highlighted the
same entry point through to the top that was
formed at 99.45. This is exactly as it would
look on the live edge of the market.
Figure 2: Crude Light with
LogikVolumeWand
At Point A, a top was formed in a high volume
area and the Directional Volume indicator
clearly showed divergence as the top was
formed at Point B. Now instead of scaling out,
I exited all three contracts at the close of the
bar. The result was a gain of fifty-eight ticks
per contract or one hundred fifty-eight ticks,
increasing the risk to reward ratio to 1: 7.25
-- a substantial increase in income that will
offset my expenses (losses).
The next question was whether the
LogikVolumeWand could identify trades that
were potential losers because my original risk
to reward (1:2) would not be achieved.
Chart #4
83
Figure 3: Gold Trade, shows one of my trades
on Gold using the same entry methodology.
The entry was at the THD ATR Stop (plus
sign). I entered the trade with the anticipation
of the price retesting the high at 1343. At
Point A, as price retraced to the ATR, sellers
were decreasing
(indicated by diverging
selling volume). I entered at the open of the
next bar, 1340.60. However, as price was
approaching the high, the LogikVolumeWand
showed a high volume area and Point B on
the Directional Volume indicator showed that
buyers were decreasing. I exited the trade
with a risk to reward of only 1:1, not an ideal
risk to reward ratio but it did prevent a losing
trade.
Figure 3: Gold Trade
This trade highlights the unique feature that
PureLogikTrading incorporated in their volume
profiling tool -- the ability to highlight any
area of a chart. While most volume profiling
Chart #5
tools will begin at the open of the market
and end at the close of the market, the
LogikVolumeWand can be moved or added to
any area of the chart. So throughout the day,
I can monitor an upswing, a downswing or a
congestion area.
For example, Figure 4: Nasdaq Opening
Session, is a three-minute chart for the Nasdaq
on March 21, 2014. I have highlighted the
pre-market session from 8:00 am to 9:30 am
ET. The gray dots above price indicated that
the market was in a congestion area (these
are part of the THD Trend ATR indicator). The
LogikVolumeWand showed that the bias was
to the downside (54.7% sellers versus 45.3%
buyers). The market opened, went up, but
immediately defined an area of high volume.
In other words, there was high volume but
price did not continue up. This market action
indicated that the market more than likely
would go down because the high volume area
was created by sellers entering on those highs.
The market then went down to 3657.25 where
it oscillated, building a high volume area on
the lows. This was the indication that it was
time to exit your position.
Figure 4: Nasdaq Opening Session
Do these techniques work equally well on the
Forex market? Yes. Figure 5: GBPUSD Chart
is a 15 minute chart. At Point A on price, a
congestion area developed. At Point A on the
Directional Volume indicator, it showed that
the buying market orders were decreasing (the
“-” mark on the Directional Volume indicator).
The LogikVolumeWand confirmed this because
a high volume area was formed with price not
increasing and not breaking the congestion
dots. A short position could have been entered
at 1.6515, with minimal risk (stop at 1.6520).
Price then began a downward movement and
made a low at 1.6475. A high volume area
84
then developed showing that price could not
continue down (Point B on the price chart).
The Directional Volume Indicator confirmed
that the market orders were now buying and
it was time to exit the trade (Point B). This
trade would have resulted in a profit of forty
ticks per contract, while only risking five ticks.
This results in a risk to reward of 1:8.
Figure 5: GBPUSD
The combination of these powerful volume
techniques are simple, visual techniques that
can easily be identified on any NinjaTrader
chart -- making it easy to incorporate
into any scalper’s current methodology.
All charting types are accommodated by
PureLogikTrading. For those that use tick or
range bar charts, PureLogikTrading includes
the LogikVolumeWand HD, which improves
volume profiling accuracy on tick, range, and
other non-standard charting types. All in all,
the LogikVolumeWand can be used to both
increase profits and to decrease expenses
(losses) by allowing traders to focus on a more
concentrated area of their chart in applying
volume. This allows traders to identify with
more accuracy when to allow a trend to run
and when it is appropriate to exit a trade early.
For more information on the THD indicators,
LogikVolumeWand, or to download a free
demo of the NinjaTrader platform, visit our
website at www.TradersHelpDesk.com.
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85
It’s about Time
By Rick Versteeg
Some years ago I decided it was about
time to focus my research more on TIME and
less on Elliott Wave. After years of research
and software development with regard to
Elliott Wave I was in need of more than price
pattern analysis. In spite of the fact that
Elliott Wave was and still is one of the most
powerful tools, it was difficult to determine
WHEN a pattern was going to happen or at
what point in time corrective patterns or bull
market patterns would most likely emerge.
Obviously, the challenge was to devise a model
that treats time dynamically. From there a
fascinating journey began in order to program
a time model that I already “invented” back
in 1987. This resulted in several indicators
that display future forces with regard to time,
short term as well as long term. It appeared
that “time patterns” exist with a fractal
nature, just like the Elliott Wave, smaller time
patterns within larger. These time patterns
indicate periods where small or large bull
market would be very likely to occur.
Introduction
As said, in the ‘80 ‘s of the previous century
I devised a concept to calculate time cycles
in the financial markets by calculating the
Figure 1: proprietary software matches bull time patterns. Same Time patterns found coincide with strong
bullmarkets. Future occurences of the time pattern are already calculated as shown.
86
force field of financial markets according to a
theoretical model based on Physics law. I left it
undeveloped, because firstly the Elliott Wave
and programming the waves came along and
secondly because computations of the model
were rather complex. A couple of years ago,
once better software and faster computers
were available, it became about time to
implement the model in proprietary software.
Next, a physics genius came along,
who was able to program
the model
according to my instructiones, taking
care
of
the
complex
calculations.
Our goal was to calculate a completely new time
cycle, which is dynamic in nature and could
be calculated before it happens. Obviously,
fixed time cycles from shorter term business
cycles to the Kondratiev wave are of value,
but not for the purpose of timing the markets
because they tend to deviate strongly along
the way.
Already the first outcome was astonishing.
Remember that before hand, the time indicators
could be calculated for the next decennium!
Correlating the first outcome-2 time indicators
of the larger time trend- with the SPX over
the years 2000- 2012, it appeared that one
indicator forecasted volatility. When this
indicator reached high levels for a longer
period (f.e. 2001-2003 and 2008 and beyond),
volatility was at a much higher level. In other
words, crashes and very hectic markets
coincided with this indicator. Low levels in
the indicator coincided with low volatility.
The second time indicator seemed very
strongly related to bull and bear markets.
Even more, this indicator showed a bull
market time pattern, more or less the same
pattern as in Elliott Wave, 3 waves up and
2 waves down, whereafter a corrective
time pattern in the indicator follows.
As a result of this first draft and outcome we
decided to program the model, to scan for
the discovered patterns and test the results of
these patterns back in time on more then 100
years of Dow Jones data. See Figure 1
Figure 2: Bull market Time patterns calculated in advance as shown by the shaded areas. As you can see every
pattern has 3 waves up and 2 down. Patterns with equal waves down in the 2nd and 4th wave are the strongest
bull markets, like 1985-87 and 1994-1997.
87
The outcome was even betterfoes . Over
this time span there were 18 bull market time
patterns found in the indicator and all but
one forecasted a major bull market. Actually,
it included almost every major bull market.
See also below. Clearly, although markets
seem random, they reflect an orderly pattern.
Calculating time patterns
In physical science everything consists of
energy, visible or not, which known scientists
(Newton, Maxwell and Einstein) have
described
in physics laws and formulas.
Therefore it is possible to calculate the
forces in a theoretical model with regard to
alls sorts of aspects of how energy should
behave, like kinetic energy, resonance, sound
waves as well as electromagnetic waves.
The atom, its force field and what it keeps
together is what the model is based upon. As
we see it, the principle is relatively simple,
but how to implement it is complex as well as
calculations.
Results of the indicator and its practical
application
First of all, the time indicator is especially
applicable to market indices, since it measures
energy of the masses and therefore mass
psychology effects on the markets. As said
we tested the indicator and its patterns
for statistical significance. For this purpose
we required that a pattern in the time
indicator had a correlation of at least 60%70% with the base pattern. For example we
compared the time pattern for a strong bull
market period (1985-87) with every other
period in the Dow Jones from 1900, to see
if matching patterns coud be found and if
market performance would be comparable.
This resulted in the periods as shown in figure
2 by the shade area and pattern, in which
periods, because of the same bull time pattern,
also strong bull markets could be expected.
As summarized in this graph, in the last 100
years of the Dow Jones 85% of the strong bull
markets were accompanied by this pattern
with an average performance of around 35%,
from low to high within the pattern even 50%.
Relatively similar performance happened for
smaller bull time patterns, which coincide with
a couple of months with very strong trends in
the markets.
Just like Elliott Wave, the time pattern
has 3 waves up and 2 retraces in between.
Normally the 3rd wave is the most strong as
Figure 3: Statistics- for the bull market time pattern in force from 2014/2016- show an average performance of
21.68% and a hit ratio (win/loss) of 86% from waves 9 to 29, historically and statistically the most interesting
time to invest.
88
expected, also in time patterns. If the 2nd
wave in the time pattern has a deep retrace
and the 4th a much smaller, this is more like
an extended 5th where the last part of the
time pattern shows the best performance (see
2014-2016 below).
Summary research
The time indicators are calculated long
before it happens, all time patterns are
known before the fact. This can be calculated
at any point in time, so there is no fitting
after the fact. Therefore if we would have
calculated the results in 1980, we would have
had calculated the same bull time patterns
(and others) like the ones in 1982-84, ‘8587, 88-89,94-97, 2005-2007, 2009-2010.
This means of course that we already have
calculated bull time patterns for the future, for
which we give a sneak preview of the period
end 2014-2016 with its ups and downs. We
mention that this time pattern has a deep
retrace in wave 2 of time, so it is a little bit
different and normally less strong. You can
see statistics in figure 3 below. Because of
the statistical significance of these results,
like an average performance of 21% with a
86% probability. We have learned this is no
coincidence, but Time will tell.
Near term prospects for indices
Apart from bull market patterns also bear
markets can be succesfully indicated
shown by the results of the model.
Still an important correction, sharp or sideways,
is coming up which is accompanied with high
volatility. In around 65% of the occurrence of
a bear time pattern which is NOW in progress
and still has to reach its bottom, the markets
have experienced a strong decline of on
average 25%. Even more then 40% decline is
possible but this is an exception.
In figure 4 below we have displayed the
bear market periods with coinciding bear time
patterns, which has a strong match with the
time pattern that is in force now for the next
months.
Rick Versteeg
fundmanager, original founder, designer and
expert of ELWAVE
www.aquilaesignal.com
Figure 4 : bear market Time patterns and their performance in the shaded area..
89
ATA
by Al McWhirr www.eminiscalp.com
The quest to find the perfect, or at least a
profitable trading method, has been allusive
to the majority of traders for years. A perfect
method does not exist, but profitable ones do.
Whether the method is based on indicators
or price action, human involvement is usually
required.
In order to understand how to incorporate
a method in to your trading, you must first
understand market movement. The market
goes up, down and at times, flat. The goal of
a trader is to determine whether the price will
be moving up or down and when the volume
has subsided resulting in the market going
flat. I believe that many traders complicate
their trading by reading a lot more into market
flow. It is either up, down or flat. It does not
matter what drives the market in its direction.
What matters is our ability to take advantage
of these movements. Attempting to guess
what news may do to the market is fruitless.
There is usually something happening and
normally as a day trader, you are not part of
it. What is crucial is what takes place after
the move(s) that any news may create. Of
course, the market will move without news.
Traders entering the market anticipating
price moves to certain areas will create profit
opportunities.
Dealing with the emotional aspect of trading
is a major stumbling block. A trader may know
where to enter and exit, but to actually take
the trade is difficult. Not all trades will be
profitable , and if too many are not profitable
during a trading session, the emotions may
be the driving force behind any subsequent
trades. If all trades were profitable the only
emotion that would be of any consequence
would be that of jubilation. But, we know
that this is not the case. In my opinion, the
only way to overcome this emotional issue
is continuous work. Of course, a trader will
Chart A
90
need a method that assists in building trade
confidence, because confidence can be the
key to overcoming the emotional problem.
Without confidence, there certainly will not be
success.
Our Eminiscalp ATA method, for NinjaTrader
and Sierracharts, can help traders identify
entry areas and our Eminiscalp Intervals can
help with the targets. The uncomplicated
explanation of trading is that it is about entries
and targets. With the two aforementioned
methods,
we
have
this
covered.
I have heard from many traders that many of
the methods that display some type of dot,
arrow or some other type of marker result in
what they call “false signals”. I am really not
convinced that this is the case as many of these
methods are built on some type of algorithm
where the signals are displayed when certain
market conditions are met. Unless there is
some type of malfunction within the method,
any signal displayed is done so according to
the built in formula. I believe it is up to the
trader to be able to determine the correct
trade decision once a signal shows up.
There is no such thing as a “false signal”
in regard to the ATA. It would either be a
long, short or no trade. This all depends
upon where the target(s) are. A dot appears
because of certain market conditions. Once a
dot appears, the trader would enter the trade
as per the ATA rules, and ONLY if there is a
target that allows room for profit. If the trade
is entered and the trader is stopped, this is
not because of a “false signal”, it is because
the trade just did not work. This does happen
on occasion. A false signal would be when a
dot appears haphazardly, and not due to the
algorithm which the ATA is based on. This does
not happen. No ATA dot appears randomly.
To claim a false signal, a trader would have
to know the conditions that cause an ATA to
appear, which is not the case, as the trader
does not know this. There are no false signals
with the ATA.
Will all ATA entry signals be profitable?
Absolutely not, but with screen time and by
following the objective ATA rules, a trader
should, with practice, be able to determine
the targets. Knowing where to get in a trade
and where to exit a trade is key. The ATA will
assist with entry areas, screen time and work
will assist with the exits.
Chart B
91
CHART A
In the chart above, you will notice the ATA
trade entry area, as depicted by the black dot.
I have also included the EminiScalp Intervals
on this chart. The goal of the Intervals
is to show trade entry and target areas.
More information regarding the EminiScalp
Intervals can be found on our website. Using
the Intervals with the ATA can enhance the
trade experience.
CHART B
Chart B above, also shows the ATA trade
entry areas as well as potential target areas.
Along with the ATA comes the EminiScalp
Intervals. The Intervals are a predictive study
that has shown to be very effective over a
variety of markets. A more detailed description
of our EminiScalp Intervals can be found on
our website at www.eminiscalp.com. All but one
of the charts displayed in this article show
our Intervals. You will notice the EminiScalp
Intervals on Chart C along with the ATA area
trade dots. The Intervals display entry as well
as target areas. Chart D is the exact same
chart as Chart C, but without the Intervals
shown. Although the ATA illustrates the area
of entry, it is usually a very difficult task
for most traders to determine target areas.
Actually, it is difficult for many to determine
areas of entry as well. The ATA along with
our EminiScalp Intervals is certainly a fine
addition to a trader’s arsenal.
Once a dot appears, there is a specific
manner in which to take the trade, IF there
is a trade. Normally a trader has more than
enough time to evaluate the possible trade
once the dot does appear. This is all described
in the documentation, but I will give a brief
overview here. Firstly, once a dot appears,
it stays put, it does not move. The trader
then will determine a possible target area by
viewing the EminiScalp Intervals or reviewing
other criteria that we use. The trade is taken
on the very next bar or candlestick. There is a
specific point where the entry is made. If the
following bar does not show the entry, then
we wait for the next bar. We will usually go no
more than 4 bars from the bar with the dot. If
we are not able to enter by the 4th bar, we wait
Chart C
92
for another ATA dot to appear. The entries are
manual, as the ATA is not an auto trade. The
appearance of the dot alerts the trader that he
or she should be alert for a market entry. If
the conditions are not met for an entry, then
none is taken. This information is explained in
the ATA documentation.
If our readers navigate to the ATA section
of our website, you will notice a few screen
shots showing the ATA dots. Although some
dots are red and some are green, the color of
the dot is immaterial. What is important is
what happens with the bar or candlestick that
follows the bar or candlestick with the dot.
CHART C
In CHART C above, the reader will notice
two ATA signal dots. The trader would enter
the trade as per the ATA rules. Then what
happens? If the trader is able to determine
target areas, then he or she would have a
good idea of where they may want to exit
or add to the trade. But, this is where many
traders fall short, as determining target areas
is difficult for many.
CHART D
CHART D above is the exact same chart,
but with the EminiScalp Intervals added. Now,
the trader has a very good idea of where price
may want to go. The EminiScalp Intervals are
placed well before price reaches them. More
information about our EminiScalp Intervals
can be found on our website.
In conclusion, the goal of the ATA is alert you
when there is a potential trade sets up as well
as assist the trader in building the confidence
needed in order to take the entries. Screen time
is essential in becoming a successful trader, but
in order to achieve the desired success, a trader
has to understand price action and market
action. This can only be accomplished with
screen time along with a method that enables
one to build confidence.
For those traders who took the time to read
this TradersWorld article, we have a web page
with special pricing on all of our methods. Go
to www.eminiscalp.com/specials for significant
price reductions for the ATA, LTD, PLUS and our
very popular EminiScalp Pilot Auto Trade.
Chart D
93
Detect Intraday Volume Cycles for the
E-mini S&P 500 Futures using a Genetic
Algorithm
By Lars von Thienen
One of the ways of analyzing cycles in
financial data is to detect cycles in traded
volume. In particular, there are interesting
correlations between the fixed amount of
volume traded and price reversals in intraday
trading. The relevant static volume counts
during the day can be interpreted as follows.
If all the available traders on that day have
gone long (expressed as the fixed amount of
volume traded), the price must decrease by
at least a few index points in order to free up
volume for the subsequent long trades. If you
are able to detect these static volume figures
that can explain intraday price movements,
you have an edge for your trading strategy.
Thus, instead of time-based cycles, it
makes much sense to look for fixed amount
of volume cycles to spot market turns.
However, once you have detected the
active correlations between volume cycles
and price movements, this behavior will not
remain static. It is, therefore, quite difficult to
keep pace with the dominant volume cycles
as these cycles are dynamic. On a daily basis,
the volume cycles will adjust according to
the traders available as they represent the
available volume that needs to be traded in
either direction for the direction of the price
movement to change.
A genetic algorithm (GA) is a promising
way to detect volume cycles and to
incorporate the flow of traders on a daily
basis. It is a new alternative to using digital
signal processing for detecting possible
cycles. Akin to chromosomes in a genome, a
GA will check possible cycle length settings
for long, short, and exit signals. The genome
transforms based on an evolutionary process
that involves mutation, crossover, and
survival of the fittest. Similarly, based on a
random population of cycle genomes, the GA
will evolve to detect useful volume cycles at
different starting points and optimize these
cycles based on the rules of natural evolution.
Each genome is measured against a special
fitness function that simply checks the equity
curve if you would have traded these volume
cycles. The smoothest upward sloping equity
curve will have the highest fitness score and
the best rating for the cycles in the evolution
process.
This strategy requires a charting and
analysis platform that can chart the data,
apply cycle analysis, use GAs, and apply
alerts based on the strategies identified for
real-time trading. The WhenToTrade charting
software allows you to incorporate all these
requirements into your trading strategy.
The following example illustrates the
application of this strategy of trading volume
cycles in practice. The strategy was actually
applied before market hours and has been
recorded live. Thus, you can review the trade
result through the video link at the end of this
article.
This strategy uses an 8000 volume chart
94
for the S&P500 eMini futures; that is, a bar
will be plotted after the trading volume has
reached 8000. Thus, the x-axis indicates a
linear fixed amount of volume and not time.
Thus, the cycle length in these charts does
not represent a fixed time period, but a fixed
amount of volume.
In our example, we set our intraday trading
strategy on January 17 2014 at 7:00 am NY
time, one hour before the major US market
opens. We apply the GA to the data for the
prior two weeks in order to evolve the cycle
genomes. Picture 1 depicts the setup. Data
from January 2–15 is used for the GA process.
Data for the out-of-sample period, January
15–16, is used to verify the results.
Picture 1: Data Setup
We use the relative strength index (RSI)
to analyze the volume cycles on the price
chart. The RSI works as an oscillator and is
cyclical in nature; therefore, it can be used
to detect cycles. Once the RSI for the volume
bars crosses a special value, a signal will
be generated. Each trading signal has two
parameters—a length setting for the RSI and
an individual threshold value that represents
the cut-off value for the signal to be generated.
The combination of the crossover threshold
and the RSI length represents fixed active cycle
measures through the RSI indicator. We allow
individual combinations of these parameters
for long, short, and exit signals. Thus, we
assume that different cycles are active for
long and short signals. This enables us to
remain in sync with the real characteristics of
traders’ emotions, as short cycles are mostly
faster and sharper than long cycles.
The generic script to apply this signal is as
follows: CROSSOVER(RSI(close,LENGTH),TR
ESHOLD).
Next, we apply the GA to check which
parameters have been able to generate a
constant upward sloping equity curve for the
given period. The GA was run for just 3–5
minutes and the fittest genomes from the
population were identified (see Picture 2).
There is an important benefit of GA over
brute force optimization algorithms. A brute
force technique checks each parameter
combination for local optima. For our example,
this would imply the following search space.
The RSI length can take values between 5–35
and the crossover threshold can take 30
different values. Thus, each independent signal
can have 30*30=900 possible parameter
combinations. This results in a search space
of over 600 billion possible trading strategies
(900x900x900x900). A brute force algorithm
must check all combinations for the best
combination. In most cases, this is not
possible within a short period and, therefore,
not applicable in an intraday trading setup
where the results are required in the morning
before the market opens. On the other hand,
the GA can spot profitable combinations
within three minutes in this huge search space
based on the rules of natural evolution. The
process of natural evolution is more similar
to the behavior of cycles and the dynamic
component within the markets. Thus, the
95
characteristics of GA are similar to the way
cycles drive financial markets.
Picture 2 plots the trading system
characteristics for each genome identified
from the population. The genomes are sorted
by the fitness function that seeks constant
upward sloping equity curves based on the
given fitness criteria.
Picture 2: GA results after three minutes
The blue marked line indicates the current
top genome along with the corresponding
trading system results. The equity curve for
the selected genome is shown in the lower left
panel and the related parameter combinations
for the entry and exit cycles of the RSI are
shown in the right panel of the screen. The
GA was able to detect cycles within the RSI
oscillator of the volume chart that generated
a profitability of 76% or 86 e-mini futures
points from January 2-15. The equity curve is
a constant upward sloping line that indicates
constant profit per trade and low risk. Even
the out-of-sample equity curve for the last
two days (the area to the right of the red
line) exhibits the same behavior, which is
promising.
Based on these statistics, the GA seems to
be fit to be applied to real market conditions.
Thus, we applied this system to live market
conditions. The scripts generated in the right
panel of Picture 2 can now be incorporated
into any real-time alerting module. The WTT
platform includes an alert generator. Thus,
the scripts along with the parameters were
incorporated into the live alert engine and
activated a few minutes before the market
opens. In Picture 3, the line “ALERT START”
indicates when the alert was applied. From
that point in time, the system is monitoring the
volume chart according to the rules and realtime incoming signals. The alerts are shown in
a special alert window, are written into a file
for further processing, and are directly plotted
on the chart as red and green arrows in real
time as new bars are plotted.
Picture 3 depicts the results after the
trading setup was applied to the chart at
Picture 2: GA results after three minutes
96
market open. The arrows were plotted in real
time.
Picture 3: Real-time trading signals from
the detected parameter combinations
As seen in Picture 3, our detected cycle
parameter combinations for the entry and exit
signals generated eight trades during the day.
Of these eight trades, seven were profitable
and generated a total profit of over 11 e-mini
futures points for the trading day. The trades
shown in the chart have not been incorporated
ex-post. This behavior was recorded during the
day and you can watch the script in live mode
where the last two signals are generated in
the chart during the live recording. The video
link for this trading day is at the end of this
article.
This example was used in our learning
academy to illustrate how to use and set
up the GA. It demonstrates the power of
combining cycle analysis, volume charts, and
GAs. Thus, it highlights the power of what is
possible if you have the knowledge and tools
at hand to utilize the power of cycles and
GAs. The knowledge on how to apply these
tools in the real trading environment is often
more important than these tools alone. This
article shows how to apply a genetic engine to
prepare your trading systems for the trading
day. The real-time video, that shows (1) that
the GA was run before market open and (2) the
method of monitoring the signals generated
in real time, is available here for your review:
http://youtu.be/JXvJndqOvGc
Lars von Thienen
www.whentotrade.com
Picture 3: Real-time trading signals from the
detected parameter combinations
97
Interview with Jacob Singer
Larry: What is your background is your
background?
Jacob: I qualified as a Pharmacist in 1958
from Chelsea Polytechnic, London, England. In
1966, working as the manager of South African
Druggists Wholesalers in Pretoria, South
Africa, a friend told me to buy a share which
would be newly listed on the Johannesburg
Stock Market. I did what he told me, and
thanked him when I sold it with 100% profit.
Then I kicked myself, because had I held the
share, I would have made 1000% profit. That
started my interest in the Stock market so
that I would not make the same error twice,
(wishful thinking).
I started looking for a way to analyze the market
and discovered Point and Figure trading. In
those days there were no computers, so all
my charts were drawn by hand.
A year later, I discovered the book, The
Encyclopoedia of Stock Market Trading. That
book introduced me to The Elliott Wave
Principal and analyzing the market with the
technique of WD Gann. I then discovered
the book Elliott Wave Principle by Frost and
Prechter. I subscribed to Prechter’s newsletter
and I wrote and asked him many questions.
He always replied, scribbling on a newsletter,
next to charts to clarify his wave counts. I
learned a great deal from him.
In 1981, managing my own Pharmacy, I
purchased a Sharp MZ-80A computer and
taught myself computer programming.
Market history was downloaded via telephone,
(took close to an hour) and a program I wrote
analyzed a share with moving averages. I
would print out charts and analyze them with
Elliott Wave and Gann. In the same year, on a
visit to New York, I walked into a stockbrokers,
and asked him to buy me $1000 of shares in
the company Microsoft, a company owned by
a Bill Gates. He told me that he had never
heard of the company. I should have left the
money with him, with instructions to buy the
shares when it was listed. I am still kicking
myself.
In 1982 I discovered Technical Analysis of
Stocks and Commodities and bought the
program Technifilter Plus, which allowed me
to write my own formulae. Analyzing the
market was no longer such an effort.
In 1985 the program Metastock was released
by Computer Asset Management. It was a
Godsend, and introduced me to a large number
of indicators I had read about. Applying Elliott
Wave Analysis and analyzing charts via GANN
analysis, became easier. I started to profit
better than average on the stock market, so
much so that my stockbroker would phone me
and ask for advice.
In 1986, after selling my Pharmacies, I
joined the Stock Broking Company I traded
with as a market analyst. Six months later I
was head hunted by a Futures Company and
worked for them for three years as analyst,
lecturing clients throughout South Africa and
introducing them to Technical Analysis. It was
then that I met Franco du Toit.
98
Franco and I had one thing in common, we
were both Gann nuts. Many of the strategies
Franco and I developed, I still use today. I
must add that Franco died in his late 50’s.
His wife blames his early death on the fact
that Gann’s spirit was angry at Franco for
improving his techniques. I must add that
Franco made millions of Rand on the market
trading only with his Gann strategies.
I wrote an article for a local newspaper
analyzing the Gold price using Gann analysis.
In the article I compared the gold price
movement to the phases of the moon, as
suggested by Gann. Gann believed that the
gravity of the moon aligned with that of the
planets would affect the emotions in the human
body in the same way gravity controlled the
tides of the Ocean. Bodies are 90% liquid. The
day after the article appeared, the CEO of the
biggest Insurance Company in South Africa
walked into my office. He told me that he had
a brother who was influenced, mentally, by
the phases of the moon, and that my analysis
confirmed his belief that stock market trading
was influenced by emotion.
In December 1992, my wife and I emigrated
to Canada where I became an Investment
Advisor with a brokerage house.
Larry: How long have you been trading?
Jacob: As mentioned above, I have been
trading the market since 1966, but it is only
now, since I have retired, that I sit in front
of my computer every morning at 6:30 am
PT, seriously trading the market to achieve a
99
certain $ figure every day.
Larry: What is your view of the popular
trading techniques such as Gann, Elliott
Wave, Andrews, Wycoff, and Fibonacci
and do you use any of them and what do
you personally use?
Jacob: I have come to believe that all trading
strategies that in the past analyzed the market
effectively, are no longer as efficient as they
were. This is because of the introduction of
Banks and Hedge Funds into the playing field,
where a large part of their trading is done via
algorithms on computer. Computers are nonemotional. Yes, there are human traders, but
we have seen the odd bank trader lose billions
of dollars for his company. Those losses simply
stress the advantage of Computer Algorithm
Trading.
Today, even though I still look at and analyze
the Indexes with Elliott Wave and Gann
analysis, I use a program where I have created
computer strategies that give me buy and sell
signals. They have proved to be very effective
and profitable.
Larry: What is your view of the stock
market, metals, and the economy?
I believe that the stock market is in a major
Bull trend until the year 2017 or 2018 allowing
a year’s error. I believe this because of the
Kondratieff Wave which I discovered and
have been following since 1982. The K-Wave
100
predicted an economic crash in 1999. The
stock market crash occurred in March of
2000. The K-Wave also predicted a crash in
the economy in 2007. The stock market crash
occurred in July 2007.
Elliott Wave analysis, a strategy I have come to
accept purely as a signpost in the wilderness,
can change direction a little way down the
road but, it does assist me in determining
when a market bottom could occur. Market
tops tend to occur 6 months to a year later
than the economic crash projected by the
K-Wave, and major market bottoms two to
three years earlier. I put this down to the fact
that the stock market will always forecast and
precede the economy at market bottoms but
the delay in exiting the market at economic
tops is because the unsophisticated investor,
and trader, usually enters the market at the
top.
As to metals, Gold has become a world
currency play. When things look bad, money
runs to gold. One should never forget that in
today’s world, there is more gold out of the
ground than in the ground. Mining has become
expensive because of the increase in salaries
to miners so I tend to steer clear of investing
in mines, far preferring ETF’s. Silver is a
by-product of gold, but with less gold being
mined, silver is starting to gain value.
Copper has one use, electricity, and with
101
developing nations growing economically,
copper will always be in demand. Of course
then there are Lithium and the rare earth
metals, where their use in electronics and
batteries is slowly increasing as the world
moves away from oil as an energy source.
Larry: Why do you think that most traders
actually lose in the market?
Jacob: I have only three words for this, greed,
Greed and GREED. One must NEVER fall in
love with a company, and NEVER buy a share
on the advice of a third party, no matter how
close they are to you until you have analyzed
their recommendation thoroughly.
Larry: If you were starting out how would
you start the learning process of trading?
Jacob: I would start by developing a simple
spreadsheet to analyze the fundamentals
of a company. I would then start reading
as many Technical Analysis magazines as
are available and spend money on a decent
analysis program. Unfortunately the latter is
expensive, but every cent spent is worth it.
Finally, I would join those ‘experts’ in a training
program to learn a technique in trading the
market. Once I have this behind me, I would
spend at least 6 months PAPER trading to
discover any emotional errors I could make.
Larry: Any final words for a trader to
become successful?
My World Today.
I was fired by the company I worked for as
an investment advisor in Vancouver, because
in the market crash of 2000 and 2007, I
moved all investor assets into interest bearing
investments and bonds. This meant that the
commissions I produced for the company
were next to nothing. The Company placed
itself first and clients second.
Today I look after and trade my own portfolio
and that of my family, working from home. A
number of my previous clients and often their
friends phone for advice. I do not charge
for advice given but ask them to put a dollar
in the tin cup of a lady begging on a street
corner. One person from Spain told me that
my advice helped him so much, he put $1000
in a tin cup, then had to call an ambulance,
because the lady fainted.
Because I live on the Pacific coast, for me
my day starts at 5am. Once the market has
closed at 1pm PT, I then sit down and write,
either for a Technical Analysis magazine under
the name Koos van der Merwe, or stories of
people and events in my life. I have written
two books, BRAKENSTROOM and The VASE
with the MANY COLOURED MARBLES, the
latter under the name Jacob Singer. Both are
available from any bookstore or from Amazon
as a soft cover or eBook. My website is www.
jacobashersinger.com
Jacob: My final words to become a successful
trader, is to never stop learning. Always to
keep an open mind and not become fixated
in any way. Finally never forget, CASH IS
ALWAYS KING.
102
How to Take Consistent Profits Out Of
the Market Every Day
Includes Sample Trading Plan
By Steve Wheeler
Founder and CEO of NaviTrader.com (www.navitrader.com)
Professional Trader and System Designer
www.navitrader.com
Introduction
Let me start by introducing myself. I am
a full time trader and trainer in the futures
markets. I run a real time trading room four
hours each trading day. I have traded for
over 20 years, and concentrate primarily on
the currency (FOREX), crude oil, gold, and
stock index futures markets, such as the S &
P E-mini.
I have developed a full suite of charts and
indicators known as the Trendicators™ and a
market analyzer known as the TradeFinder™.
What follows are the fundamental elements
you need to be consistently profitable in the
futures markets.
Making money in the market is a matter of
being on the right side of the market. Specific
to the futures markets, there are both up
and down moves each day that provide many
trading opportunities.
One approach to
the markets is to look for evidence of major
support and resistance levels based on chart
history. Many people ask me which time
frame that I look at for my trading, and by
best answer is that I look at all of them. A
good analogy would be that if you were going
to buy or short a stock, you would most likely
start by looking at a weekly or daily chart.
Why would you approach the futures markets
any differently?
To put the odds in your
favor, you must find things that occur over
and over and trade with this information.
I
have provided an example to the type of trade
setups we look for at NaviTrader.
How To Determine The Best Market
or Instrument to Trade and When
To Trade It
Probabilities favor the continuation of a
trend, therefore you want to trade or invest in
the direction of the major trend. For purposes
of intra day trading or even investing, a daily
chart is a very good place to start to analyze
the major trend. To put the odds even further
in your favor, I recommend that you analyze
whatever you want to trade to find out the
consistency of the trend. This can be done by
measuring the trend in various time frames
all the way from short term trends such as a
five minute chart all the way to daily or even
weekly charts. For an automated method of
analyzing markets for various time frames see
the Multi Trend Analyzer below:
See the Multi Trend Analyzer
Below:
This tool will automatically analyze any
market in whatever time frames you choose.
In this example we are analyzing various
trading instruments (futures contracts)
starting with the 5 minute trend , 15 minute
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trend, 60 minute trend, 240 minute trend, and the daily trend. Looking at one screen takes
the place of multiple charts, and it will analyze the specific markets much more objectively
than you will do without this tool.
As a first step we can choose markets with consistent up or down trending characteristics.
In the example above, you can see that the NQ, ES, an TF symbols have the most consistent
down trending characteristics.
Once you have selected the markets that have the most
consistent trending characteristics, you can then fine tune your entry by waiting for the specific
trade setup you are looking for on those markets with the trending characteristics you are
looking for.
We know that even within a trend, markets tend to move in a wave formation, so we can
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look for low risk entry points within a trend by waiting for “pullback” type entries within a
trend. The idea of waiting for a pullback allows for a logical stop to be place below the pullback
level in the case of long positions and above the pullback for short positions.
Find Trade Setups Within a Trend
For an example of a sell setup within a trend see the example below. We are looking for
a sell entry in a down trend. In the example below we look for the oscillator on the bottom
of the screen to move up to the upper red line and then a red closing bar on the chart for a
short entry.
The tool below is the TradeFinder™ and it is designed to find these types of trade opportunities
for you.
105
Preparation for trading profitably consists of market observation over a period of time so
that the trader can build confidence in knowing what usually happens in the market, and how
to profit from the recurring market behavior that repeats itself every day. To take advantage
of cycles in the markets, observe the typical move that a market moves after it moves up or
down out of a range contraction pattern.
The real objective is to build a knowledge of probabilities of market behavior so as to take
consistent profits out of specific trading instruments. The following are observations of market
behavior that will help to put the probabilities in your favor.
Price behavior can be summed up by knowing how to determine the overall patterns in
varying time frames. See the chart example below of a move up out of a Range contraction
patterns of about ten points on the S & P Futures market.
Example of a break higher after a break above range contraction:
One way to determine if you have this type of pattern developing is to look at the current
range relative to past range. The Navi_Relative_ATR indicator below will indicate a relatively
low value when you have a range contraction setup. See chart example below:
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You can take advantage of this pattern of low volatility that will predict an upcoming
period of higher volatility. If the market breaks down from a period of low volatility, you will
likely have a down trending market. Down trends consist of lower highs and lower lows. Up
trending markets consist of higher highs and higher lows. Markets move in a wave formation,
and when each wave is formed, a pivot is formed. These pivots form Lower highs and lower
lows in a down trend, and higher highs and higher lows in an uptrend.
See down trend example below:
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Velocity indicates the speed at which the market is moving. Trend indicates the overall
direction of movement.
If we have an extremely high velocity down moving market, then
the probabilities favor a continued down move. If we have an extremely high velocity up
moving market, then the probabilities favor a continued up move.
The examples below are trade setups or chart conditions that you can use to take your
trading to the next level. The examples below make use of the NaviTrader Trendicator©
charts. The Trendicator© charts will display a red price bar when the market is moving
down and a green price bar when the market has moved higher on that specific price bar.
Examples of Trend Determination
:
Above chart uses the Trendicator© Charts running in the NinjaTrader platform.
The above Trendicator chart shows you the current price direction for each price
bar. The short trade setup above includes the following elements:
1. Current momentum is down indicated by the red dots on the price chart.
2. Price has made upside retracement based on HiLo indicator (HiLo indicator moved
above 90)
3. Price is again moving down based on Red closing price bar color
4. Price target is lower velocity channel (blue line)
The long trade setup above includes the following elements:
1. Current momentum is up indicated by the green dots on the price chart.
2. Price has made downside retracement based on HiLo indicator (HiLo indicator
moved below 10)
3. Price is again moving up based on Green closing price bar color
4. Price target is upper velocity channel (blue line)
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Example 2:
Swing Trading Method:
Within a trend, the momentum will sometimes change or shift, for example we may have
had down momentum, and then the momentum shifts back to up momentum. This change
in momentum is what I refer to as a “momentum shift”. A momentum shift represents one of
the best trading opportunities, because it usually accompanies the beginning of a new trend.
Look for a shift in Momentum and trade in the direction of current momentum. If the most
recent momentum is down, then enter short trades. If most recent momentum is up, then
enter long trades. One of the best indicators of a trend change is when we get a momentum
shift.
In the example below, we previously had “up” momentum and then an extreme
momentum shift to the down side.
Use a momentum indicator such as the BigMo© indicator and stay short when Red Dots
appear on the screen, and remain in the short trade until Green Dots appear on the screen,
indicating that you now have a momentum shift in the opposite direction. The red dots
indicate extreme down momentum and green dots indicate extreme up momentum.
Above Red and Green dots are the NaviTrader BigMo© indicator
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Above Red and Green dots are the NaviTrader BigMo© indicator
Risk Management
A primary downfall of beginning traders lies in not knowing how to manage risk. The
use of stop losses (known as stops); is one important tool in trading futures. An even more
important tool is known as position sizing. Position sizing answers the question of how many
contracts should I trade in the futures markets, and how many shares should I buy or short
in the stock market.
We know that trading is all about how to react to your successes as well as trades that
don’t go your way. No discussion of trading would be complete without a discussion of risk
management. For futures trading, risk management is established with a combination of the
use of stop orders combined with position sizing.
You need to pair a proven strategy along
with risk management. Risk management is accomplished in general by never taking a “big”
loss on any one trade. I suggest that you start by making sure that on any one trade that
you do not risk any more than one percent of your trading account. You will need to calculate
before you enter a trade whether you would be risking more than one percent of your trading
account.
To calculate position size you need to know some basic information such as the following:
Account Size
Risk Percentage that you are assuming
Tick value of contract you are trading
Number of ticks of your initial stop loss order
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A Risk Management calculation example for the e-mini would be as follows:
Entry price = 1438.25
Initial Stop level =
1436.25 = 8 ticks on the S & P E-mini
8 ticks x tick value of $12.50 = $100 $100 x 1 contract = $100 risk on this trade.
Account Size = $10,000
In this example, you would be able to trade 1 contract $10,000 x 1% = $100 maximum
risk
Like any profession, you need to be prepared to take on the markets in a structured and
methodical manner. If you study the above principles, you will better understand overall
market behavior and you will be equipped to begin to consistently benefit from the great
opportunities that exist each day in the markets.
Platform:
As you develop your trading skills, I suggest that you use a professional trading platform
that will allow you to trade directly from the charts and will allow you to trade in simulation
mode as well as to execute trades in your futures account. It is important to develop your
skills as to how to use your trading platform while in simulation mode so as to minimize
trading errors after you are trading your actual trading account.
Below is an example of The NaviTrader Trendicator© charts and the Ninjatrader Chart
Trader platform:
Trading in simulation mode will help you to develop your confidence and an overall
111
methodology that fits your personality.
Fear:
Most traders will develop fear as they trade due to a history of losses. Like any fear, the
way to overcome it is to continue to do what you fear the most. An advantage of having a
trading platform that provides for simulation is that you will be able to trade in simulation mode
to build a plausible plan and to develop more confidence in your approach to trading. As you
trade in simulation mode, develop a set of notes that will act as the beginning of your trading
plan. Trade in simulation mode until you have mastered the use of the trading platform you
have chosen. As you trade in simulation mode, practice developing the discipline needed to
execute your trading plan. Through repetition, you will begin to develop into a polished and
profitable trader.
Sample Trading Plan Follows:
Trade 6E Contract between 3:30 AM Eastern and 6:30 AM Eastern
I will trade 3 contracts
For Long Trades, I will look for pullback patterns
I will review 60 Minute chart for long term Intraday Trend
I will trade consistently with Momentum on the 5 and 10 Minute charts
For Long Trades, I will wait for a pullback, defined as NaviTrend HiLo
Moving below 10 value
Buy 2 ticks above Green signal Bar
After In the Trade, I will use 5, 10 and 20 tick targets
Manage stop based on NaviBar Stop on 10 minute chart
For Short Trades, I will wait for a pullback, defined as NaviTrend HiLo
Moving above 90 value
Sell 2 ticks below Red signal Bar
After In the Trade, I will use 5, 10 and 20 tick targets
Manage stop based on NaviBar Stop on 10 minute chart
Please let us know if you need any help in developing your approach to profitable trading.
Send an e-mail to support@navitrader.com with any questions and visit our website at www.
navitrader.com
If you have any questions on the material in this publication, please send an e-mail to
support@navitrader.com www.navitrader.com
Contact Information:
Steve Wheeler
steve@navitrader.com
www.navitrader.com
800 987 6269
Skype navitrader.steve
112
The Tradition of Financial Astrology:
The Secret Behind Market Movement is
in the Stars
By Barry Rosen.
“Anyone can be a millionaire, but to become
a billionaire, you need an astrologer.”
J. P. Morgan, founder of the Morgan Bank
J.P. Morgan, died with a net worth of over 600
million and did not quite live up to his famous
proclamation. But in the 1920’s such a fortune
is still astounding by today’s standards. He
had a private astrologer, Evageline Adams,
who helped him tremendously. I have been
fortunate to purchase financial astrological
books from her library.
It is a little known fact that W. D. Gann
went to India and studied Indian Sidereal
Astrology. In his notebooks we find sketches of
astrological symbols on his charts; and in his
memoirs, he discusses his journey to India. In
fact, the famous Gann wheel was first used by
tea merchants in seventeenth century India.
Futures and stocks can be successfully traded
by understanding planetary aspects and
movements. This article will provide a brief
look into why financial astrology works.
“Financial astrology” has a rich history.
In the early part of the last century, famous
economic researcher, Lt. Commander David
Williams scored an 80 percent accuracy
rating in predicting the ups and downs of the
US economy in his magazine column. While
some scoff at investment astrology, Williams
and many others pioneered early scientific
research. Many others continued to unfold
hidden dimensions in the relationship between
gecosmic cycles and investor psychology and
business cycles .
Scientists for years have understood the
relationship between full moons and the effects
of emotional and psychological behavior on
mental patients. Given that the markets are
very emotional and psychological, it is no
surprise that the planetary cycles have an
effect on market behavior.
While it makes
sense to malign silly newspaper horoscopes,
there is much more to astrology and its
predictive power than most would think.
The essence of cycles is astrology: the 365day cycle of the earth going around the sun;
the 29-day cycle of the moon going around the
earth; and all the inter-connective cycles of all
the planets. The two year cycle is connected
with Mars journey through the zodiac. The
famous 12 year cycle and the Chinese calendar
is connected to Jupiter’s transits through the
zodiac. An the famous 89 day cycle and its
divisions discussed by D.W. Gann is connected
to the 89 day orbit of Mercury around the Sun.
Financial astrology is rather mathematical
as the angular relationships between major
planets create emotional and psychological
peaks and valleys. D. W. Gann was familiar
with key stress points at 90, 120, 144, 180
and 270 degrees and how markets peaked
and bottom as the planets moved to these
emotional nadirs and peaks creating peaks and
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valleys in investor optimism and pessimism.
For example, a 120 angle between Jupiter and
Venus, two inflationary and bullish planets will
often lead to a CRB high or stock market high
about 1 day before the exact moment of their
exact trine. An aspect from somber Saturn to
the moon or another major optimistic planet
like the sun can quickly deflate a market.
Throughout the course of my studies,
I have found that Ancient Indian astrology,
from the Vedic civilization going back almost
10,000 years, is the oldest and most accurate
form of astrology. Parashara, a great seer or
ancient scientist, intuited the laws of space and
time responsible for the evolution of human
consciousness and recorded his findings in a
book called the Brihat Hora Sastra.
The first major difference between Indian
and Western astrology lies in the calculation
of the longitude of the planets. Ancient Indian
astrologers observed that the equinoxes and
solstices moved backward by one degree
every 72 years, an astronomical phenomenon
now known as precession. Over time this has
resulted in a difference of slightly over 23
degrees between the tropical Zodiac, used by
Western astrologers, and the sidereal Zodiac,
used by Indian astrologers. In essence, the
two systems differ in their choice of a zero
point for Aries --the Western system uses
the position of the spring equinox, while the
Indian system uses a fixed star. Thus, when
the Sun is moving into Aries according to the
Western system, it is still at 6 degrees Pisces
in the Indian system.
CONCLUSION
to knowledge of economic laws, but ultimately
to knowledge of the self. Understanding one’s
Indian cycles and transits is as important for
trading successfully as a good timing system.
A combination of the two is astoundingly useful
and leads to an awe-inspiring appreciation of
the order of natural law. While no astrological
system should be used 100% to time market
entries and exits, a combination of astrological
and technical signals and a knowledge of
personal trading periods can certainly stack
the odds in one’s favor and lead to the
answer of one of man’s greatest metaphysical
questions--the relationship between his own
consciousness and the universe.
About the author:
Barry Rosen is a financial analyst and
has been studying Indian philosophy
(Vedic Science) for forty years and Indian
astrology for the past 28
years. He
began applying it to the financial markets
in 1987. His newsletter, Fortucast, began
in August 1987 by focusing on stocks
and is currently in its twentieth-sixth
year, having evolved into a daily and
hourly
advisory service covering over
20 commodities and 15 major ETF’s.
For more information contact FORTUCAST
MARKET TIMING at www.fortucast.com or
email support@fortucast.com or call 928284-5740, ext. 1.
Toll free in the US:
1-800-788-2796. Trials available. Also visit
his Facebook Site: Financial Astrology by
Barry Rosen. He has a home study course
also available.
Anyone attempting to uncover the
mysterious laws of nature that underlie the
commodity markets will be rewarded and
intrigued by the depths of Indian astrology.
The study of Indian astrology leads not only
114
My Favorite Candlestick Patterns
By Robert E. Ross
I prefer candlestick patterns that require more than one candlestick to flash a signal. With
more than one candlestick required, you are getting a confirmation of your theory. However,
I still require technical indicator confirmation such as MACD, RSI and Stochastic which are
probably the most popular. If you are using technical indicators that are not the most popular
or widely used, you might be early or late in the trade in my opinion. I firmly believe it is best
to use the most popular technical indicators and 3 indicators are adequate.
Candlestick Review:
Upper shadows or topping tails are the day’s high and lower shadows or bottoming tails are
the day’s low. Candlestick patterns do not always have shadows or tails. White candlesticks
are up days and black candlesticks are down days.
Bullish Engulfing (2 candlesticks)
In a downtrend, the first candlestick is black (down day) and the second is white (up
day). The first (black) candlestick should be a small range bar. The small range bar
signifies a trend change because the buyers and sellers are almost equal. We all learned
about supply and demand in economics. Stock price is demand (buyers) and stock
volume is supply (sellers). The sellers are deciding whether they want to take a lower
price so volume is beginning to dry up at that point. If sellers offer fewer shares at that
price (supply = volume), buyers will have to increase their bid to attract more supply into
the market if they want to own the shares. The second (white) candlestick must engulf
(swamp) the body of the first candlestick. The longer or larger the white candlestick is
better for the signal. If the second candlestick is white and engulfs the small range bar,
buyers are ready to take control of the stock and the price should start going up.
115
Bearish Engulfing (2 Candlesticks & opposite of Bullish Engulfing)
In an uptrend, the first candlestick is white (up day) and the second is black (down day).
The first (white) should be a small range bar. The small range signifies a possible trend change
because the buyers and sellers are almost equal in strength. The buyers are trying to decide
whether to take the price higher. The second candlestick (black) must engulf (swamp) the first
bar. If the second bar engulfs the first the price should start to fall.
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Bullish Harami (2 Candlesticks)
There can be other color combinations for both Bullish and Bearish Harami but these are
my favorites.
In a downtrend, it is a large candlestick (Black) followed by a smaller candlestick (white)
whose high and low are within the range of the larger body. It is signaling a possible trend
change from bearish to bullish.
Bearish Harami (2 Candlesticks)
In an uptrend, it is a large candlestick (white) followed by a smaller candlestick (black)
whose high and low are within the range of the larger body. It is signaling a possible trend
change from bullish to bearish.
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Piercing Pattern (Bullish – 2 candlesticks)
In a downtrend, a long black candlestick is followed by a white candlestick that closes at
least halfway into the black candlestick.
Dark Cloud Cover (Bearish – 2 candlesticks)
In an uptrend, a long white candlestick followed by a black candlestick that opens above
the white candlestick’s high or close and then closes preferably more than halfway into the
white candlestick.
118
Hammer (Bullish - 1 candlestick)
In a downtrend, a small range bar (white or black) with a long lower shadow and little or
no upper shadow. In my opinion, the closer it is to support, the better I like it.
Hanging Man (Bearish – 1 candlestick)
The Hammer and Hanging man are both the same type of candlestick pattern. Both are a
small range candlestick, either black or white, with little or no upper shadow and having a
very long lower shadow. In an uptrend it is a hanging man whereas in a downtrend it is a
hammer. In my opinion in an uptrend, the closer it is to resistance, the better I like it.
Small range bars (SRB’ S - 1 candlestick)
I prefer more than one candlestick pattern to flash a signal, however some small range
bars (SRB’s) can be potent. The small range bars (SRB’s) are indicated by the open price and
the close price being the same or almost the same. The open and close price being almost
the same are suggesting that the buyers and sellers are almost equal in power. Don’t expect
this to last very long, it may mean that a significant price movement may happen soon. Small
range bars (SRB’s) suggest that buyers are reluctant to take the price higher and sellers are
reluctant to take a lower price. Small range bars (SRB’s) signify a tug of war between buyers
and sellers. They represent indecision by buyers and sellers but this won’t last long. The
highs and lows are the tails of the small range bar and the high would be a topping tail and
the low would be a bottoming tail. I don’t consider the highs and lows in defining the small
range bar only the open and close prices.
Some examples of small range bars are:
119
Dragonfly Doji (bullish – 1 candlestick)
In a downtrend, a candlestick pattern with a long lower tail, in which the open and close
are at the session’s high
Gravestone Doji (bearish – 1 candlestick)
In an uptrend, a candlestick pattern with a long upper tail, in which the open and close are
at the session’s low
Spinning Tops (bullish or bearish and signifying a trend change – 1
candlestick)
This is a candlestick pattern with a small real body. The body can be white or black. It
can be in an uptrend or a downtrend and signifies a possible trend change. If it shows up in a
downtrend, it is signaling a possible trend change to an uptrend and vice versa. I prefer ones
that look like a spinning top, meaning they have both an upper tail and a lower tail.
I would like to make a few comments about two other candlestick patterns. The first is
three white or three advancing soldiers, which is considered a bullish signal. This pattern
is three white candlesticks with consecutively higher closes. The problem I have with this
pattern is simply this. If the next candlestick is a bearish candlestick meaning that the closing
price is below the third white candlestick, this is now a bearish kicker candlestick pattern
which is a very powerful pattern. The problem with three white soldiers is that you’re betting
that the next candlestick will be higher (white) but that may not be the case, and if it’s a
bearish candlestick (black), it’s going to be a stronger signal for a bearish pattern which is a
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bearish kicker.
The other candlestick pattern is three crows
which is a bearish pattern. This pattern is
three black candlesticks each one lower than
the previous. The problem is that if the next
candlestick is a white candlestick, the pattern
is now a bullish kicking pattern which is also
a very strong candlestick pattern. I don’t like
to bet that when I see three black crows or
three white soldiers that the next candlestick
will continue the trend and not be a kicking
candlestick. Therefore, I stay away from
these candlestick patterns.
Should these candlestick patterns
be confirmed?
Absolutely, they should be confirmed with
technical indicators, volume analysis, and
support and resistance levels. I never use
just candlestick patterns alone to trade. I
prefer to see them at or near extremes such
as a downtrend or uptrend. Trading can be
risky so I like confirmation. I never use one
indicator or pattern to make a decision. I like
to use relative strength index (RSI), stochastic
(STO) and moving average convergence
divergence (MACD) with candlestick patterns.
Additionally, besides technical indicators, if it
is a bullish candlestick pattern, I like to see
bullish candlestick patterns at or near support.
If it is a bearish candlestick pattern, I like
to see these patterns at or near resistance.
Also, I like to check volume. Volume should
be rising versus average daily volume in
bullish scenarios and falling versus average
daily volume in bearish scenarios. I prefer
to see rising daily lows for the stock in bullish
situations and falling daily lows for the stock
in bearish situations.
Robert E. Ross is CEO at Sweet
Dreams Trading Company (www.
sweetdreamstradingcompany.com), an
option trading source helping investors
demystify the complex nature of
option trading and understand option
strategies. He may be reached at sales@
sweetdreamstradingcompany.com
CLICK TO SUBSCRIBE
121
“Gilbert’s Beta Test is Coming, WITH
HI-TECH STUDIES NOW”
By Gilbert Steele
This article shows I have called the down side
of the market on two different stocks. And
in doing this I have bent over backwards to
have simplicity. A picture is worth 1000 words
and I have incorporated this knowledge. You’ll
see in both cases after looking it over I have
called the market to go down from five days
earlier. Example 5 is where I do most of my
explaining with pictures of understanding. I
am certain that the reader that puts his time in
this article should be blessed with knowledge.
When looking at stocks going up for months
and months to call a downside drop is a great
feat of engineering. And I have worked years
to put this together.
Example #1 MRO
You can see I have used my own personal
pages from my studies to give the reader the
best for his time spent. See Examples.
Examples #2 MRO
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Example 5 HAL
Example 3 HAL
Example 5 TXN
The red candlestick
on each chart says
it all. (Showing price
going down)
Red Square is
the location
of the price
action, showing
the location to
destination
The closing in
red show it was
Example 4 HAL
Note: Beta Test can tell a Commodity Trader, the
high and low ticks for the week coming and more.
Contact Gilbert at gsteele101@neo.rr.com to offer
Donations. I am going to make a POWER POINT
Documentary of the process. I will use the supplied
information for the weekly high and low tick. Open
a real trading account. Buy more Information from
MetaStock. (I use 10.1 end of day Data). I will write
my code to track the Buy and Sell in MetaStock. I
will do what I think is needed to be successful.
Gsteele101@neo.rr.com
123
The Money is in Trading the Oscillations
By Dr. David Hackbart
guy correctly called this certain event in the
market. But does that mean we should listen
to them today? Where have they been since
2008? I am sure they have made 100s of
predictions since then – all of which were false
and forgotten. The so called market psychic
for sure won’t be reminding you that he is 1
for 44 in his predictions.
No one has a crystal ball. And the ability
to predict long term in today’s world is simply
Every year we get the big breaking news not possible. There are too many variables.
that some big Wall Street Wanna Be or Has Information is moving too fast and technology
Been has predicted a huge bear market, while is expanding at break neck speed. What once
was not even conceived is reality tomorrow.
others are screaming Bull market.
Please understand, this is all just NOISE, by 1 year ago, who knew Russia would invade
Ukraine? Who guessed the Benghazi embassy
people who want to get noticed.
would get attacked? (Certainly not our present
No one can look long term and predict anything administration.) Who would have correctly
in the market with a high degree of accuracy. predicted the breakdown of certain countries
Sure they all say things, like back in 2008 this like Greece? All these events moved the
market, and there is no way to predict their
Chart #1
124
occurrence years in advance.
Buy-and-hold Investing is out-ofdate, and may be dead.
Buy-and-hold doesn’t work anymore. The
volatility is too weighty. Buying into a mutual
fund and holding it for 10 years is no longer
going to deliver the same kind of expected
return that we saw over the course of the last
seven decades, simply because of the nature
of financial markets and how quickly things
can change.
because their brokers told them “You can’t time
the market, Just wait it out”. But their brokers
still made their commissions. I don’t see any
of them offering to pay their customers back
because they gave bad advice.
What is the better safe alternative? This article
is to help familiarize you with investment
strategies that can consistently prosper in up
or down markets. Let’s look at the charts.
With its IPO many
hopeful investors got on the train early and
watched their positions grow astronomically
for the first 2 months. The next 4 months they
have watched their positions come back to
almost even. What it will do from here long
term is anyone’s guess. See chart 1.
The investors of Twitter.
Lubos Pastor of the University Of Chicago
Booth School Of Business and his colleagues
have recently documented that buy and hold
may never have been a viable investment
strategy.
Wall Street Journal columnist Brett Arends
wrote in 2010: “For years, the investment
industry has tried to scare clients into staying
fully invested in the stock market at all
times, no matter how high stocks go…. It’s
hooey”…. They’re leaving their clients to get
slaughtered.
The above graphic is a daily chart of Twitter
from November to April 17th. If as an investor
you would have invested in Twitter on November
11th and held until April 14th you would have
made nothing.
However if you would have known how to play
the oscillations you could have made a fortune!
I wonder how many people stay fully invested
You could have bought almost any time between
Chart #2
125
December 1 and December 20th and sold at
with each trade. And your real risk would have
the first of January.
been less than $20 per contract.
Then gone short any
time between early January and April first
and bought back your position on April 14th
Trading 3 option contracts at the $1 price would
and made significant profits again.
require you to have $300 in your account,
but your investment would have produced
Predicting direction in the short term is much
$1,500.00 in profit. (Within a few hours) Your
easier to do and your risk is minimized to
risk should be no more than $60 for this trade.
almost nothing. Profit on the other hand can
(I recommend no more than 20% risk for your
be astronomical.
stop.)
See Chart #2 For Apple on April 17th 2014
Face it; It requires much more risk tolerance and
with 5 minute candles.
much more capital to trade long term. You must
have nerves of steel to watch your portfolio fall
As you can see at the open Apple was at
like a rock and hold on to hope that the market
519.00 and within 15 minutes it reached
will return to your position.
$521.00 per share. From it’s high of $521.00
it dropped $10 to $511.00 by noon and then
rose again to be at $518.00 by the close.
Again to buy at the open and hold through
the day you end up with no profits.
By learning to play the oscillations you could
have easily made $10 per share shorting the
stock in the morning and $7.00 per share by
Making Money In a Bull or Bear
on the chart above are technical indicators Market
going long in the afternoon. The blue circles
that would help you in your decisions to
buy or sell. Once you get properly trained
you can easily predict direction and making
money in either direction becomes second
nature.
Now take that a step further and you could
have traded the options on Apple cutting
your risk tremendously. Instead of spending
$500 per share, on this day you could have
bought the put option in the morning for less
than $1.00 and to purchase the call option
in the afternoon your cost would have been
around 50 cents. Trading the options would
have returned you over 500% on your money
The use of “bull” and “bear” to describe markets
comes from the way the animals attack their
opponents. A bull thrusts its horns up into the
air while a bear swipes its paws down. These
actions are metaphors for the movement of a
market. If the trend is up, it’s a bull market. If
the trend is down, it’s a bear market.
Bull markets are characterized by optimism,
investor confidence and expectations that
strong results will continue.
A Bear market is characterized by widespread
pessimism as the prices of securities are
falling. As investors anticipate losses in a bear
market - selling continues & pessimism grows.
126
Sure there are other animals, but
you don’t want to be on their farm.
discipline, focus and the ability to take
advantage of the fear and greed of other
investors.
How to Spot Bear and Bull Markets
Pigs are high-risk investors looking for the
one big score in a short period of time. Pigs
buy on hot tips and invest in companies
without doing their due diligence. They get
impatient, greedy, and emotional about their
investments. They end up getting slaughtered
by the bulls and the bears.
Chickens are afraid to lose anything. Their
fear overrides their need to make profits so
they turn only to money-market accounts in
their bank or stuffing a cookie jar.
The key to profiting in both market types is to
spot when the markets are starting to change
direction. To do this you must understand the
psychology of trading.
There are 2 main emotions that drive the
market, Fear & Greed.
To make money
consistently trading you need to understand
that you are not trading stocks or commodities
as much as you are trading people and their
reactions.
While it’s true that you should never invest in
something over which you lose sleep, you are also
guaranteed never to see any return if you avoid People are followers and thus as they see
the market completely and never take any risk, trends develop they jump on board. Trends
move up and trends move down. You need
Make sure you don’t get into the market to be able to spot the reversals and the
before you are ready. Be conservative corrections. Corrections occur because people
and never invest in anything you do not who are trading decide they want to take
understand. Before you jump in without the profits, when they do the market moves in the
right understanding; think about this – The opposite direction. If there is an overreaction
likelihood of you making money without to the correction you get an actual reversal.
proper training is less than 5%.
Both bear markets and bull markets represent
tremendous opportunities to make money,
and the key to success is to use strategies
and ideas that can generate profits under a
variety of conditions. This requires training
to recognize market direction, consistency,
There are many indicators you can utilize, the
key is to find those that make sense to you
and that you understand. When I trade I use
multiple indicators to help me make precision
entries. You can watch some of my trades
on my YouTube Channel (SafeDayTrading) to
127
see how I use them.
The key to making money in any
market is to precisely predict
direction.
falling, even plummeting - you’re missing out.
It’s time to change that. I highly suggest you
get training from an expert who is consistently
making money trading the market.
There are many ways to profit in both bear
and bull markets. The key to success is using
the indicators in conjunction with one another
to spot when both bull and bear markets are
beginning or ending.
The old idea that it’s un-American to short
stocks comes from Wall Street’s institutional
elite. They don’t want the public shorting stocks.
In fact, they don’t want the public even selling
stocks. Wall Street talking heads will try to
convince you that short selling is some complex
procedure that’s best left to the “professionals.”
Well, ignore all that chatter. Short selling isn’t
any different than going long. However, you
can typically make money 60% faster as the
market is moving down. That goes for Stocks,
options, commodities or futures. WHY? Because fear is a much stronger motivator
than greed.
Short selling in a bear market has nothing
to do with what’s good for the U.S. economy
or for America. It’s simply a matter of what’s
good for your net worth. I say that all the
time and I’m surprised how many people think
it’s wrong to short stocks, some people don’t
even know that it’s possible.
I expect 2014 will be a tough year for most
investors. But it should be enormously
profitable for traders who can adapt and learn
to correctly predict market direction in the
short term, whether that is bearish or bullish
there is money to be made and lots of it.
So if you’re not making money when prices are
Make Money In Any Market
Condition: Learn To Trade The
Oscillations.
How can you tell when to short, or
when to go long?
Well, the first thing I look at is the “big
picture.” That is, what is the overall market
doing? What is the trend? Are stocks,
commodities, and bonds, going up or down?
It may sound complicated, but identifying a
trend is easier than you might think. You don’t
have to be a scholar to read a chart, or figure
out if markets are moving up or down. Just
look at the data that’s out there and use your
instincts and common sense.
A good general rule is to only short things that
are already going down. And go long on those
things that are already moving up. Get on a
moving train. It’s called trading with momentum.
The most important thought for
any trader needs to be “What if I’m
wrong?”
Being right will take care of itself. You don’t
want to be afraid to be wrong you just need
to know what you are going to do if it occurs.
128
Where is your tolerance, where will you have
your stop, what will you do if you need to
correct the trade or hedge your position?
There is always risk. Without risk, there is
no reward. The trick is to mitigate your risk.
To that end, you should always have a plan
when you trade. Have an understanding
of how far the position can go in both
directions and why it might move up or down.
You should always have a stop -loss level in
mind, even if you don’t actually place a stoploss order on your trading platform. You also
should have profit targets in mind.
Don’t be greedy when you’re
trading.
Rarely do trades run all the way to the
Promised Land, so take your profits as
soon as you reach your chosen target, or
be moving your stop to protect profits.
The bottom line: Taking timely and targeted
positions can accumulate a lot of capital in
a relatively quick period of time - whereas
sitting the sidelines gets you nothing.
Exploring Your Options
A new trader might wonder how to make
money in this difficult market environment.
“Lots of smart people stumble into trading
but don’t know the most basic rules. I think
the worst mistake that a beginner makes
is wanting to make money from day one,
without any preparation...you have to spend
time educating yourself, and practicing your
self-discipline.
So what choice do I have?
Learn short term trading? The shorter the
trade the lower the risk! To minimize risk and
accentuate gain you need to be nimble and
precise. Trading the peaks and the valleys of
each day or week on whichever instrument you
choose to trade is your safe alternative. Buy
Today and wait for a year & you end up with
nothing; meanwhile the stock or commodity
went through multiple ups and downs in that
time period where literally billions could have
been made.
To be successful in the current market
environment, investors must be vigilant,
informed and ready to move on a moment’s
notice.
The market environment is constantly
changing. Understanding the fundamentals,
the technical analysis, the psychology of
trading, proven trading strategies and the
system of trading with momentum is the
safest and most profitable way to trade.
You can register to be my V.I.P. guest for a
LIVE 2 hour trading session at
www.TIEdemo.com
Make Yours a Profitable Day,
Dr David Hackbart
SafeDayTrading.org
A beginner should open a virtual account and
trade with paper money to learn how to trade
consistently. Money will come if you play it
right.
129
Profiting in a “Rigged Market”
By Jared Wesley
There has been a great deal of press
coverage recently about the markets being
potentially rigged, especially as it relates to
the influence that HFT’s or High Frequency
Trading machines have on the general equities
market. To the average investor, HFT’s
have been largely unknown until the recent
exposure on television, however in the trading
community HFT’s have been somewhat of a
hot topic for several years now. Many traders
believe these HFT firms have consistently
gotten away with activities that are generally
thought of as illegal; such as quote stuffing
and front running among others. However
they also have legitimate advantages that
are considerably in their favor, such as co-
location, faster data-feeds to obtain news that
has not yet been disseminated and of course
the ability to place, cancel and execute orders
faster than a human could.
As traders we’ve all seen (and felt) their
impact at one time or another. For example,
when a stock pops $5 in less than 1 minute
then comes all the way back down and trades
in a range for the remainder of the day. We’ve
also watched as a breakout is triggered by
a few pennies on big volume then shakes to
the downside only to come back up and move
higher. Most have witnessed pull back entries
retest the lows by pennies only to go higher
for the remainder of the day. Perhaps most
notably was the flash crash in May of 2010
130
and the subsequent “mini” crashes since then
(see chart above). Suffice it to say, if you’ve
been day trading for any length of time, you’ve
likely seen and felt the impacts of HFT on one
level or another.
Despite the media coverage, most of us
assume that HFT are unlikely to go away
or become regulated any time soon. As day
traders, where does this leave us? Is this the
end? Should we all just throw up the white
flag and concede to the fact that we are at a
disadvantage to these quants and acknowledge
that nothing will likely be done to make the
system fairer? Sadly, many traders have done
this, feeling frustrated and helpless against the
machines. Yet many other day traders have
been thriving during these times. So what is
the difference between these two groups of
traders?
Simply put, ADAPTATION. Many of us have
heard the saying, ‘the only thing constant in
life is change.’ This is also relevant in trading
and one trader’s frustration is another trader’s
gratification. So, how do we compete? The
key to trading success in this electronic age is
to better understand what you are up against
and make adjustments. The trader’s who’ve
failed and gave up, simply could not adapt.
They continually did the same thing over and
over and expected a different result. We’ve all
heard that definition before: insanity.
To compete with and profit against the
quants we need to be focused, disciplined
and nimble in our approach. This also means
refusing to play the victim or letting ‘them’
psychologically damage our beliefs. On a
131
technical level, one of the best ways to combat
HFT’s is to buy shakeouts, using wider stops
and only on certain types of trades (with the
intention of adding back).
For example, a standard breakout used to
be a fairly straight forward play. Buy above the
base, put your protective stop loss below the
base and ride it up to the target area. Although
these types of patterns still work, they have
become far more prone to being “shaken”
before they eventually go higher. If you take
a look at the XOM chart above, you will see
how it triggered above the base by a small
margin on huge volume, then violently shook
below the base (triggering many stop losses)
and then continued higher for the remainder
of the day. If you bought the top of the base
and put your stop below the base then you
just got taken out, only to watch it go higher
without you. Frustrating isn’t it?
It’s time to smarten up and understand that
this situation has become increasingly common
to the point that it is almost predictable. So we
must be more flexible in our approach. In the
chart below we will still buy above the base,
but this time we will do it with MUCH smaller
shares, in order to “allow” the stock to shake.
Then on the shake, we will drop to a 1 or 2
minute chart and buy the first higher high we
see and “get full” on our position using the
low of the pivot as our stop loss. You can use
the original base as a “cheap” target, or be
more patient and use the originally intended
target (not-shown, as it’s based on a higher
timeframe), thus providing a better average
cost and a higher reward to risk.
In the example given, you would first enter
XOM at $80.00 with small shares, perhaps 1/3rd
or a maximum ½ lot. (Note: how many shares
you actually buy is a product of your personal
risk level and comfort level.) This way, IF the
stock goes higher without ever shaking you
still have some skin in the game and can add
on a pullback later in the move. However, IF
XOM gets tricky (as it does in this example)
you have the opportunity to give it more room
so you can withstand the shake. Then, after
the stock shakes, you buy the pullback on the
first higher high. In this case that would be
the $79.75 area. If you initially used a 1/3rd
lot, then you would buy 1/3rd at $80.00 and
the other 2/3rds at $79.75 with an average
cost of $79.83 and a protective stop loss of
$79.60. You now have a better average cost,
a more secure entry because the stock has
already shaken (on volume) and the potential
to make more money if the stock moves to
your originally intended target. In this case
XOM peaked at around $80.82, which is
roughly $1 from the entry point. Assuming a
23 cent stop loss, a $1 move is about 4:1 on
the reward to risk, which is far better than
losing money and then watching the stock go
higher without you! Assuming you risked $500
on this trade, you turned a potential $500 loss
into a possible $2000 gain. That’s a pretty big
difference in your P/L, especially on only one
trade.
Certainly some shakeouts are more severe
than others and will occasionally require a reentry regardless of how much room you give
them. However, generally speaking the harder
they shake the more dramatic the bounce.
Keep in mind that shakeouts aren’t exclusive
to breakout plays. They happen on pull back
plays as well as various other strategies too.
However you will still use a similar approach.
Buy with a partial share size in order to be
flexible enough to allow the stock to shakeout
or potentially retest the low and of course add
back when the opportunity presents itself,
thus making your trading more secure and
more profitable.
132
Naturally nothing works 100% of the time,
as there will be occasions when a shake is
so severe that you will still stop out (this is
not condoning trading without stop losses).
On other occasions the stock will retest or
shake, and still fail to go higher later. This
could be due to many factors such as poor
market conditions, a higher timeframe with
resistance above, simply a poor stock choice
or a number of other possibilities. However
using this more flexible approach will allow you
to withstand most shakes, stop out less often
and by adding back give you a better reward
to risk as well. It’s truly a win, win situation.
Fewer stops and more targets! This is merely
one of many techniques that I personally use
as well as others at Pristine to help us profit
from the new faster paced electronic markets.
Remember, education is the foundation
of success. When you combine a quality
education with live market experience only
then can you begin to master and profit from
the markets. Don’t let the markets continue
to frustrate you, give Pristine a call. If you
would like to learn more about this technique
(and others) please visit www.pristine.com,
or call us at 800-340-6477. We offer FREE
online workshops several times a week, as
well as FREE trials to one of our live online
chat rooms. Join us and see how we trade
these set-ups in real time every day!
Written by Jared Wesley. Jared is a Senior
Pristine Certified Trainer who has been actively
trading the markets using the Pristine Method
for over 8 years and has been helping traders
to keep their approach simple. Less is more.
He avidly preaches emotional and educational
discipline as the cornerstones to success. He
specializes in early morning trading on short
1’, 2’ and 5’ timeframes with a high degree of
accuracy. You can contact him at: jaredw@
pristine.com.
CLICK TO SUBSCRIBE
133
by Larry Jacobs
Testimonials
Limited Time Sale:
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with very complex proprietary algorithms that need extensive
computing power. The Sonatas are both amazingly quiet
and fast and I am totally satisfied with them. I have had
no mechanical problems with them. I, after buying my first
Sonata Trading Computer, bought a “trading computer” from
another vendor, and to my constant regret it was unbearably
noisy, and mechanically a hard drive went out after less than
a year of use. I did not even bother to repair it – I just bought
a second Sonata, and then a third one a few months later. I
will not even bother to check out any other source for trading
computers after 3 years of experience now with Sonatas.
C Easter, Santa Barbara, CA
I just wanted to thank you for the wonderful computer I
purchased from Traders World. It is very quiet, which I really
need as I spend a lot of time beside it (I am trading all day
everyday). It is very reliable. We had a few strong storms
and the TV was affected in my house, but not the Sonata
computer. It is also very fast, which again I need for day
trading. The thing I like the most is the fact that I can use 4
monitors (or more) with it, so I can see as many charts as
I need at the same time. I have been trading now for more
than 3 years and I am very happy with the quality of the
computer. If I were to buy another one (which I don't think
it's going to be the case, since it's a very good computer)
I would definitely buy another Sonata. I would also like to
mention the fact that I am in Canada and the computer
arrived in perfect condition and pretty fast too.
I would also like to commend Larry Jacobs for his kindness,
availability, professionalism and patience with me. I am not
a computer pro, so he was very kind to walk me through the
steps when I set up my computer and also when I wanted to
view more than one chart. Everytime I needed something he
was there to help me figure it out.
Two thumbs up Tradersworld and thank you!
F. Iofcea, Canada
After spending weeks doing on again off again research on
the web, I finally decided on the Sonata Trading Computer.
I focused my research many on trading forums, eSignal,
Tradestation where I have accounts and other forums as
well. All references I found were positive with emphasis on
their competitive pricing. Larry is a pleasure to deal with and
well known in the trading community. He even threw in a CD
of the last Traders World Online Expo.
M. WRIGHT
134
Amazon Kindle Books
Gann Masters Course by Larry Jacobs $9.95
As you know, W.D. Gann was a legendary trader. Some say he amassed a
fortune in the the markets. He wrote several important books on trading as well
as a commodity trading course and a stock market trading course. He charged
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successful.
A Unique Approach to Forecasting by Ivan Sargent $32.95
This book is possibly one of most advanced books in technical analysis you
will read regarding price and time reversals. Knowing the Price and time of
a stocks reversal point is undeniably an important element for to successful
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which when accurately placed can deliver reversal points with amazing accuracy. Trend lines,
retracements lines, channels, fan lines, pivot points etc, all inspect a stock
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Patterns and Ellipses by Larry Jacobs $9.99
This book concerns itself with a highly technical subject, the subject of
technical analysis of the financial market. This book specifically deals with
ellipses and pattern formations used for trading the markets. It also covers
many other technical analysis tools that can be used effectively by the trader.
Gann’s Master Charts Unveiled by Larry Jacobs $9.99
We know that Gann used the Pythagorean Square because he was found
carrying it with him into the trading pit all the time. This square was hidden in
the palm of his hand. How did he use this square? Why did he not discuss the
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of Nine in all of his books and courses. Was this square his most valuable tool?
These and all the other squares Gann used will be discussed in detail in this
book with many illustns and examples to prove how they work.
Gann Trade Real Time by Larry Jacobs $9.99
When you opened this book you took the one step that will help you learn how
to be successful at the most desirable, but hardest profession in the world. That
profession is real time trading. This book is not going to give you an instant
secret to day trading. It is going to give you the basics so that you might start
the path to understanding how the markets work both short term and long
term. You need to know and fully understand the markets and develop successful trading
135
strategies to become successful at this endeavor.
Best Trading Strategies: Master Trading the Futures, Stocks,
ETFs, Forex and Option Markets [Book Edition With Audio/
Video] (Traders World Online Expo Books) [Kindle Edition]
$5.99
This is one of the most fascinating books that was ever written about
trading because it is written by over thirty expert traders. These traders
have many years of experience and they have learned how to turn
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best trading strategies they use and have the conviction and the discipline to act assertively
and pull the buy or sell trigger regardless of pressures they have against them. They have
presented these strategies at the Traders World Online Expo #14 in video presentations and
in this book.
What sets these traders apart from other traders? Many think that beating the markets has
something to do with discovering and using some secret formula. The traders in this book
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analysis principles and formulas in their best trading strategies.
Trading is one of the best ways to make a lot of money in the world if one does it right. One
needs to find successful trading strategies and implement them in their own trading method.
The purpose of this book is to present to you the best trading strategies of these traders so
that you might be able to select those that fit you best and then implement them into your
own trading.
I wish to express my appreciation to all the writers in this book who made the book possible.
They have spent many hours of their time and hard work in writing their section of the book
and the putting together their video presentation for the online expo.
Finding Your Trading Method (Traders World Online Expo
Books) [Kindle Edition]
Finding your trading method is the main problem you need to solve if
you want to become a successful trader. You may be asking yourself,
can I find my own trading method that will reflect my own personality
toward trading? For example, do you have the patience to sit in
front of a computer and trade all day? Do you prefer to swing trade
136
from 3-5 days or do you like to hold positions for weeks and even months? Every trader is
different. You need to find your own trading method.
Finding out your trading method is extremely important to produce a profitable benchmark
that can be replicated in your live account. Perhaps the best way to find a successful
trading method is to listen to many expert traders to understand what they have done
to be successful. The best way to do that is to listen to the Traders World Online Expos
presentations. This book duplicates what these experts have said in their presentations,
which explains what they have done to find their own trading method.
If you have a trading method that gives you a predictable profit, then that type of objectivity
contributes to your trading edge. The problem with most traders is that being inconsistent
will never allow them to have an edge. After you find your trading method that you feel
comfortable with, you must have the following:
An overall plan to:
1) Set your rule set and plan and then stick with it in all of your trading.
2) To give you a trading plan for every day.
The trade plan then should:
1) Have an exact entry price
2) Have a stop price
3) Have a way to add positions
4) Tell you where to take profits
5) Have a way to protect your profits
By reviewing all the methods given in this book by the expert traders, it will give, you the
preliminary steps that you need to find your footing in finding your own trading method.
Reading this book and by seeing the actual recorded presentations on the Traders World
Online Expo site can act as a reference tool for selecting your method of trading, investment
strategies and tactics.
It took many of these expert traders in this book 15 – 30 years to finally come up and find
the answers to find their trading method to make consistent profit. Finding your trading
method could be then much easier when you read this book and incorporate the techniques
that best fit your personality and style from these traders. This book will enable you to that
fastest way to do that.
So if you want help to find your own trading method to be successful in the markets then
buy and read this book.
137
Learn the Secrets of Successful Trading (Traders World Online
Expo Books) [Kindle Edition]
Learn specific trading strategies to improve your trading, learn trading
ideas and tactics to be more profitable, better optimize your trading
system, find the fatal flaws in your trading, understand and use
Elliott Wave to strengthen your trading, position using correct sizing
to trade more profitable, understand Mercury cycles in trading the
S&P, get consistently profitable trade setups, reduce risk and increase
profits using volume, detect and trade the hidden market cycles,
short term trading by taking the money and running, develop your
mind for trading, overcoming Fear in Trading, trade with the smart money following volume,
understand and use the Ultimate Oscillator, use high power trading with geometry, get
better entries, understand the three legs to trading, use technical analysis with NinjaTrader
7, use a breakout system with cycles for greater returns with less risk, use TurnSignal for
better entries and exits, trade with an edge, use options profitably, learn to trade online,
map supply and demand on charts, quantify and execute portfolio rotation for auto trading.
Written by Many Expert Traders
The book was written by a large group of 35 expert traders, with high qualifications, most
of who trade professionally and/or offer trading services and expensive courses to their
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139

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