welcome! outline for today's class:
DESCRIPTION
TRANSCRIPT
WELCOME!
OUTLINE FOR TODAY’S CLASS:
Simplified Trading Method
Chart Patterns
Reading Price Bars
Day-Trading off of Daily Bars
Invisible Indicators, Part 2
SIMPLIFIED METHOD 9
Use only 2 time frames: ST and LT
Short-Term Chart Display: Price Moving Averages: 15 EMA, 20 EMA, 40 SMA, 50 SMA, 100 SMA, 200 SMA S/R: Pivots, YH, YL, YC, Fibs, Significant H/L Indicators: Double Stochastic, CCI?
Long-Term Chart Display : NO PRICE! Double Stochastic CCI?
LOWER THE RISK: Trade the DOW e-mini (YM). ½ the cost of other markets. Trade only 1-2 contracts. Instead of risking $400/trade, now you’re risking $50-$100 per trade!
SIMPLIFIED METHOD 8
SIMPLIFIED METHOD 7
RULESSETUP ON ST:
Look for trades ONLY after get a new MA cross in direction of the cross.Trade setups:1. First Retrace after a Cross (or “X Marks the Spot”) INTERMEDIATE2. First Retrace in a Trend3. Second Retrace in a Trend
Wait for Cycle Indicator to get below 40 or above 70 and for it or the CCI to hook in direction of the trade.
CONFIRMATION ON LT:
Only take trade if Cycle Indicator AND/or CCI are angling in direction of the trade (regardless of level). CCI is faster, Cycle Indicator is more reliable.
EXTRA HINT: Best to use this on LTB trades too!
PROTECTIVE STOP:
One tick below/above Cycle Low/High
TRAILING STOP:
Hooking of LT Cycle Indicator against your Trade
TARGETS:
Next Support/Resistance Level. EXIT AT TARGETS to get reasonable Risk/Reward ratio rather than waiting for LT Cycle Indicator to turn against your trade.
SIMPLIFIED METHOD 6
SIMPLIFIED METHOD 5
SIMPLIFIED METHOD 4
SIMPLIFIED METHOD 3
SIMPLIFIED METHOD 2
Our intention is to buy off Support and Short off Resistance, and use the next S/R as first target.
S/R levels:1. Yesterday’s H/L/C2. Floor Trader Pivots; NEW: mid-line Pivots3. Fibonacci Retracement off Last Trend High AND
Last Trend Low4. Fibonacci Extensions5. Pitchfork6. Multi-day significant Swing Highs/Lows7. Previous Cycle/Swing High Low
SUPPORT RESISTANCE 1
SUPPORT RESISTANCE 0
PRICE PATTERNS 15
Second Chance First Retrace after a MA Cross Triangle Megaphone Inverted Cycle Head and Shoulders Double Top/Bottom Reversal pattern Trend Continuation (retrace or consolidation) Pinball ABC (complex vs. simple) Retrace NEW Double top/bottom CONTINUATION pattern NEW BB Fake and Break NEW
PATTERNS: 2nd Chance 14
PATTERNS: 2nd Chance 13
PATTERNS: 1st Retrace After Cross 12
PATTERNS: Triangles 11
PATTERNS: Megaphone 10
PATTERNS: Inverted Cycle 9
PATTERNS: Head & Shoulders 8
PATTERNS: Double Top 7
PATTERNS: Trend Continuation 6
PATTERNS: Trend Continuation 5
PATTERNS: Pinball 4
PATTERNS: Complex Retrace 3
PATTERNS: Double Top/Bottom Continuation 2
PATTERNS: Volatility Vacuum Fake/Break 1
EXERCISE: Trading only in Direction of 50
MA 0
• 1st RT after Cross
• 1st RT in Trend
• 2nd RT in Trend
• Triangle
• Compound RT
READING PRICE BARS 22
SINGLE BARS:
Relationship of High/Low/Open/Close on one bar
Where is the CLOSE in relation to the Open/High/Low, and mid-point (50% of range)?
MULTIPLE BARS: Question: Did this bar validate or invalidate previous bar’s action?
Relationship of High/Low/Open/Close on current bar compared to other bars
What is the RANGE of the High/Low compared to other bars
What is the relationship of the CLOSE to the previous bar’s mid-point?
What is the relationship of the CLOSE to the previous bars High/Low/Close
What is the relationship of the HIGH/LOW to the previous bar’s High/Low/Close
IN CONTEXT:
Bar formations are ONLY important in the context of the entire chart structure:
Trend
Momentum
Cycle
Support/Resistance
READING PRICE BARS 21
READING PRICE BARS 20
Does the 2nd Bar Validate or Invalidate the Bar Before it, or is it Neutral?
READING PRICE BARS 19
Does the 2nd Bar Validate or Invalidate the Bar Before it, or is it Neutral?
READING PRICE BARS 18
Does the 2nd Bar Validate or Invalidate the Bar Before it, or is it Neutral?
READING PRICE BARS 17
READING PRICE BARS 16
READING PRICE BARS 15
READING PRICE BARS 14
READING PRICE BARS 13
READING PRICE BARS 12
READING PRICE BARS 11
READING PRICE BARS 10
READING PRICE BARS 9
READING PRICE BARS 8
PRICE BARS expand/contract between Support/Resistance 7
READING PRICE SWINGS 6
Swings: The Rosetta Stone of Technical Analysis?
W.D. Gann: Use 2 day swings instead of 3 day swings.
SWING HIGH: 2 Higher Highs, followed by 2 Lower Highs
SWING LOW: 2 Lower Lows, followed by 2 Higher Lows
My definition of Swings is different from Gann
Consider Equal Highs/Lows, inside bars and outside bars.
TREND: Higher Swing Highs, Higher Swing Lows; Lower Swing Lows, Lower Swing Highs. Swings are good places for Trailing Stops
SUPPORT/RESISTANCE: Previous Swing High/Low
SWINGS WITHIN CYCLES. Trade a Swing Reversal at Cycle Tops/Bottoms. Trade Swing Continuations in direction of Cycle.
READING PRICE SWINGS 5
READING PRICE SWINGS 4
READING PRICE SWINGS 3
READING PRICE SWINGS 2
READING PRICE SWINGS 1
READING PRICE SWINGS 0
DAY TRADING OFF DAILY BARS 15
Look for good setups on the Daily Chart for an entry on an intra-day chart.
Can be used to hold positions overnight if that fits your risk profile (there is substantial risk to holding highly leveraged markets overnight in that you can lose more than you have in your account). This carries great risk, but this is where the superior reward is found.
Fantastic Risk/Reward. This is an excellent stand-alone trading approach – a alternative that fits between Day Trading and Swing Trading.
Each market will only give 1-2 trades per month. Therefore watch several markets to find more trading opportunities.
Can be used to trade Futures, Stocks, ETFs, etc.
DAY TRADING OFF DAILY BARS 14
DAY TRADING OFF DAILY BARS 13
DAY TRADING OFF DAILY BARS 12
DAY TRADING OFF DAILY BARS 11
DAY TRADING OFF DAILY BARS 10
With a Risk/Reward Profile like this, it looks easy! But like everything, there are challenges:
1. It may take several intra-day triggers to find the final Top/Bottom
2. You will often be using a Reversal Trade Setup on the intra-day charts for an entry in the direction of the Daily Chart
3. You need to trade larger size. 4 contracts is the absolute minimum and more is much better
4. You need to be able to hold your winning trade through some VERY LARGE retraces against your position until you get a clear exit signal on the Daily/Weekly Charts (never past your original protective stop)
5. The market can gap away from your setup.
6. Since your entry is on the intra-day charts, you must still be an expert at trading intra-day setups.
INVISIBLE INDICATORS 1:Time and Sales 9
2 WINDOWS:
1. >= 10 contracts
2. <= 2 contracts
Look for one to be mostlyRed and the other to be mostly green. Tells youWHO is buying/selling atthe moment.
INVISIBLE INDICATORS 2:Gann Box Revisited 8
Tradestation Fib Times Use “Fibonacci Time Extension Lines,” NOT “Fibonacci Cycles”:
-50-33-19-11033.36077.7100166.6200300
Esignal Fib Times Use “Time Fibs” drawing tool:
.5
.67
.81
.891.01.3331.61.7772.02.6663.04.0
INVISIBLE INDICATORS 2:Gann Box Revisited 7
INVISIBLE INDICATORS 2:Gann Box Revisited 6
INVISIBLE INDICATORS 3:Fair Value 5
Symbols (for eminis):
Tradestation: $ESINX, $NQIQX
Esignal: $EPREM
Web Sites:
www.indexarb.com
www.programtrading.com
Get your Arbitrage Program Trading Premium Values from one of these web sites and then chart them. Draw lines and create alerts on the lines so you know when program trading is kicking in.
FAIR VALUE 4
“Fair Value” is monitoring when the futures market is over/under-valued relative to the cash market. When these 2 markets develop too much of a SPREAD between them and there is too much of a PREMIUM required to buy one over the other, then an “arbitrage” opportunity exists to trade each back to the “FAIR VALUE.”
Buy/Sell Programs kick in when this occurs. They make up > 50% of volume!
Buy Programs occur when the futures market is over-valued relative to the cash market. They sell the index futures and buy the stocks in the index (as well as ETFs and options).
Sell Programs occur when the futures market is under-valued relative to the cash market. They buy the futures and sell the stocks in the index (as well as ETFs and options).
For Futures Traders, this provides an opportunity to find short-term Tops and Bottoms.
As always, it is dangerous to trade against the trend. If the market is making a Higher High, and you are alerted that the Buy Threshold Level has
been reached, wait for a divergence to go Short.
FAIR VALUE 3
Sell Programs No Programs
Buy Programs
IndexSell
Active (SA)
SellThreshold (ST)
Fair Value
(Premium) (FV)
BuyThreshol
d (BT)
BuyActive (BA)
S&P500 (TM)
4.46 5.37 6.58 7.79 8.69
NASDAQ100 (SM) 11.02 12.82 15.22 17.23 18.72
Dow JonesInd. Avg. (SM)
16.55 24.41 34.91 45.41 53.27
FAIR VALUE: 2
Best when have Higher Low, Lower High, or Equal High/Low
FAIR VALUE: 1 If have a Kamikaze, then at least wait for divergence
Barry Burns 0
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COMPLETE THE EVALUATION FORM
For all correspondence:
(805) 491-3541
NEW INDICATORS: •Pivots (with mid-points) •Swing High/Low indicator