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This guide was created by Maxx Mereghetti, and is offered FREE to all Forex traders.
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www.InvestingPeople.com
Table of contents
-1-
2.8. 95% of the losses end up in the hands of 5% of the rich ..............................................36
4.1. No trader has been trading all his or her life ................................................................46
-2-
4.9. My advice for those starting, and for those who have already started .......................61
5.6. Leverage............................................................................................................................74
6. The charts............................................................................................................. 91
-3-
6.17. Channels..........................................................................................................................119
-4-
-5-
6.43. Wedge..............................................................................................................................178
6.44. Rectangle.........................................................................................................................183
-6-
8.2. Candlesticks. What they are and how you draw them. ..............................................204
-7-
-8-
-9-
- 10 -
12.33. Metatrader..................................................................................................................330
- 11 -
The part everyone knows is the part which starts in 1997, when I started trading on
the Stock Exchange and in 2002, when I started trading with options.
But my story really starts on the night of the 23rd to the 24th of October 1975, when
Yes, for the first time, because since then I have been born again at least 6 times.
The first time I was born the same way as everyone else, from my mothers womb,
Ill spare you the other 6 times, but the thing to know is that I have always been a
shy person.
One of those people always appreciated for his kind heart, but so shy that he could
make even the most introverted person in the group feel uncomfortable.
Yes, because when you are shy, not only do you not strike up conversation with a
stranger, but you are quite capable of silencing even the leader of a high school
I know this seems incredible to those of you who met me in my dominant stage
animal persona, giving the audience shows and emotions together with amazing
- 12 -
Coming onto the stage, to the Rolling Stones music, in front of more than 500
people, like a rock star, and certainly not like the trader in a necktie you are used to
Usually people make themselves seem important by talking about their successes
When I went on stage for the first time, I was in front of 9 people.
I remember that during the coffee break I dissolved into tears with my friend
Andrea, because I believed I was not able communicate, my heart and my passion
to all the people there, together with the information they came for.
The people there were participating, smiling, enthusiastic and became an active
In other words, they were with me, accepting me as if they wanted to consume me
and I did nothing other than give them all of myself, my heart and my spirit, along
When I found myself in front of more than 500 people, who were all there for me, 5
presentations.
- 13 -
I always improvise and try to develop the presentation according to the make-up of
the audience.
In reality, all this comes from the fact that when Im on stage I give them my heart
Yes, because if you remember what you read up to this point, I was born shy!
When people think they are getting a lot from me, they do not know how much I am
Being accepted for what you are is the best satisfaction for a shy person, and every
Maybe this is the reason why I never became bigheaded in front of all those people,
People always gave their heart to me and I always gave them mine back in return...
With time I learned to accept myself fully and to give people back the gift they gave
to me: acceptance.
Im not writing these words for myself. It is beautiful to say all this things to the
Many people think Im really someone to put it briefly, I eat and drink, have fun
and get angry like everybody else in the world. I have my fears even if I have learnt
- 14 -
to give less importance to fear and more emphasis to important things so that I do
I have met more than 5000 people and I felt good with all of them isnt that
fantastic?
I want each of you to receive these few lines and to be able to read them, as if I had
In the following pages you will discover a part of the experience I have gained in
trading, but what you will not discover is the person I am and this is the reason I
When you read the book, I wouldnt want you to think that its the stuff of genius and
Im an average person.
So make good use of the information and understand that the result will always and
- 15 -
At this point, it is appropriate for me to thank all the people who made it possible for
Starting in chronological order, my first thanks go to my brother, with whom Ive had
a lot of fun from when we were kids, and who taught me patience, a virtue of which
To my mother and father, who have always lived a life devoted to sacrifice and
honesty, which is not a small thing, and always tried to instil those values in me.
To my childhood friends, those you never forget, with whom I discovered the world
step by step.
To Claudio, who for years freaked me out with his talks on philosophy, leaving a
To Lina, who dedicated an entire life to others and never got tired of passing on the
message of charity.
making me forget about the school uniform and the good guy hair cut.
To Valentina, who spent 16 years of her life beside me and gave me trust and
unshakeable respect.
To Andrea Cesarano, friend and brother, who taught me how to sell under the
- 16 -
To Stefano De Carlo, who was the first person to arrive in the office and who has
shown heart and enthusiasm for himself and for everything around him over the last
3 years.
To Mirko Masoni, Stefano Gianti, Valerio Maggi, Salvatore Lo Voi and Gianluca
Landini, inveterate traders who have experienced in their life what it means to leave
Monica, Valentina, Fabio, Alessandro, Stefanny, Elisa, Francesca and Felipe who
dedicated time, passion and enthusiasm, both when working for us and during
Again thank you to Stefano De Carlo, Daniele Repossi, Alessandra Chirizzi, Andrea
Mereghetti and Alessandro Bonetti, who share the challenges of trading with me
To the woman I never thought would arrive in my life but who, in answer to a simple
request to Baby Jesus, just arrived like an angel, and gives me tenderness, love
and enjoyment every day of my life: Alessandra, for our friends Cina.
Thank you, thank you, thank you to over 5000 people who I have met in these 5
years of on and off stage training and who are still reading my words today, in this
book.
- 17 -
To them goes all my esteem and respect for the love they have shown me, and the
commitment they put into trying to change and to learn at any cost.
Not only through the exchange of information which is possible from a stage, but
also in front of a monitor in the trading room and on Investing Peoples new TV
channel
I am always available to you, I want to meet all of you to drink a glass of good wine
Im expecting you..
A big hug.
Maxx.
- 18 -
Welcome
the moment.
What you will learn in this e-book is how to recognise and interpret the main price
scenarios.
The price, of course, because only the price contains real information about where
By reading these pages, you will discover that the price always gives a readable
sign from which you can learn important things. You will learn that buying at a high
- 19 -
price is one of the most common errors to be avoided and you will find out that,
often, the techniques you read about in books are the result of experiments which
You will also find out how to follow the sharks, the ones who move the market, the
ones who are always on the right side, in this way it will be easier for you to earn
- 20 -
stock exchange?
Over the years I have talked to several brokers who have sight of their customers
accounts.
What people say in the trading rooms and at business dinners is that very few
accounts operate in the black and many of them are not destined to be profitable in
a trader.
- 21 -
It is often commission that makes a trading model inefficient, or over rigid automatic
systems, or the emotions of the trader who uses his discretion. However you look at
it, it seems there is always something that goes wrong, for the majority of
professionals, private individuals or for the often ill-prepared people camping in the
funds funds.
select other managers able to do this for him or her, in order to satisfy a clientele
who will then be willing, too, to entrust them with their own savings and capital.
The war of the managers, in this case, is divided into two sides: one side is looking
for the best performance and the other is looking for the best product package.
In this case, you should measure the quality of the product by its return over a
- 22 -
The product package is important in every case: just think about the amount of
money that has been raised from the introduction of capital-guaranteed products
In this case the products success does not come from the performance promised,
Some years later you would have discovered that nothing was guaranteed by those
products, as the risk assumption made during subscription was based on bonds
issued by certain banks that wrote the history of finance and today do not even
- 23 -
Managers who work for institutional investors, or directly for their own customers
are able to achieve positive performance in the long run, but without avoiding
trader working at the desk of one of the main managing banks, who decides to offer
his or her own consultancy to certified managing companies, or to open their own
One of the phrases that most impressed me and that best sums up and describes
it does not matter if you earn or lose, what matters is how you earn or lose
- 24 -
Traders embrace this profession for several reasons, but in first place is always the
Traders win above all because they risk their own capital, they enjoy the chance of
working anywhere in the world and they earn sums of money that most people
After a long time researching, they land on a suitable trading system and as far as
they are concerned, there cannot be another system that lets you earn as much as
Why do successful traders not believe that another trader can earn money with a
- 25 -
The dream of freedom, wealth and prestige that everybody would like for
through their own strengths and maybe only in their spare time.
Does anybody ever asked themselves whether a commitment at the highest level is
My identity as a trader is very strong and I would never be able to justify not being
I have had periods of low profitability, or no profitability at all, even after having
Im not afraid of being compared with others, or of admitting this important truth.
- 26 -
What I do not accept is giving up a job like this, that defines me as person.
I believe that often even the best trading methods, and I have discovered and
I think this is normal, I do not believe that is good business to sell ice to Eskimos,
and in the same way to do options calendar spreads in the middle of the storm of
the financial crisis, or to buy call and put, in a range market, cannot be anything
- 27 -
Technical analysis is a very good discipline for describing and justifying the past,
but definitely not for earning money operating on the market in the present.
Directional traders often support this. What also helps me here, are the completely
informal conversations I have had with traders who live from trading on the stock
market or on the Forex and who have spoken to me about how their strategy, is
based on studying the price but also takes into consideration previous key levels,
- 28 -
and only works because of the care taken to enter into the position at the right
When I talk about risk management in my courses, the audience only pays attention
because of the word risk, and all the rest is just boring as people want to hear
about profits, and definitely not about how to manage their own operational plan:
In this book you will learn that technical analysis is the result of the amount of
money operators put into the game and not the opposite.
A resistance does not only form because the price reacts psychologically to a
A level of support results if money flows in the market but the fact that those
broken support.
What should I do when I read about the presence of a support on a chart? Do I buy
it, thinking that it works as support, or do I sell it, thinking that there will be a
breakout?
Is this not the same thing as deciding to buy or to sell at any time?
- 29 -
2.2. Oscillators
People say that oscillators do react late in relation to the price, that they give a more
immediate and filtered reading of the price and that they therefore reduce the
information it gives.
Of course, a line drawn with a mathematical formula can not, at any time back up
A very interesting observation came from a pleasant chat with a directional trader
recently...
When stock exchange traders were floor members they certainly did not have
computers and could not calculate the MACD or stochastic value at any moment of
the day.
Traders knew the prices of the previous stock exchange session and they could
mark with a pencil, in a notebook, the prices of the trading day that were shown on
institutions that definitely did not trade on the stock exchange to lose their money.
allows analysts and private traders to go crazy using indicators and "magic
- 30 -
formulae", which have nothing to do with the price, other than as the basis for a
calculating model that tries to explain what the price already says.
The more you move away from the pure price, the more you go towards something
In any case, I want you to remember that what we buy and sell is always a price,
- 31 -
In the era of the iPod, palm and laptops, which are forever getting smaller, we have
In trading, the robot that imitates human abilities without emotions is one of the
A lot of talk amongst traders new on the scene, who already want a trouble free life.
A major split has emerged between those who consider the trading system as the
only way to success, and those who consider it as the surest way to a guaranteed
- 32 -
When the moment comes that you are consistently earning more money than you
budgeted when you started trading, you will know for sure that you have earned the
results with commitment and you will certainly not believe that you have found the
Holy Grail but of have simply learnt a profession after having committed yourself to
Many people think that trading is a war to be fought against the market.
The market satisfies the demand and supply of those who place orders to buy or
If the price rises, your order has contributed to that movement, just as it has when
In any case we will not be those people, and we have to accept this fact.
- 33 -
In any case, if a character exists who "manipulates the market, (usually called a
adopts and what moves he/she makes, so that we can be on the right side of the
market.
I have never found the phone number of someone who could keep me updated
about the intentions of the strong hands, but what I have identified is the track
This particular detail warrants consideration in this e-book, which does not intend to
explain direction as the result of a technical observation, but simply as the result of
To know where the money masses are directed gives us the chance to be on the
side of those who earn simply because they have enough capital available to
Useless to say that, being able to change the rules of the game is a winning hand in
any activity.
- 34 -
The figures of power who hold important political and financial roles have access to
unobtainable information and are even able to create such information, not just
To know that the market can be manipulated and that this ability is in the hands of
the few, makes us conscious of the real risk, that of the impossibility of predicting
the price.
If anytime you enter the market, you are conscious of the fact that you can lose In
spite of your trading system, you can think of making this fascinating job part of your
future.
- 35 -
Lets say that if the strong hands are able to move the market with some efficiency,
This reduces the chances of us being elected to the 5% of profitable traders even
more.
The simplest thing to do, I think, is to follow the moves of those who definitely have
That is why simply watching the price and reading the tracks left by the big
The trader is the little fish that swims under the shark.
The shark moves and looks for its prey to eat, and by remaining under the sharks
belly the meal is guaranteed, and if nothing else, we also avoid becoming the
sharks dinner.
- 36 -
I went through phases when opening a calendar spread was a free meal in 80% of
the cases. I remember when this happened between 2005 and 2006.
I bought butterflies without an afterthought in the first part of 2007, when the market
went down without a hitch and I was earning from volatility, time or from direction,
but it was not difficult to bring money in, taking well judged risks.
I saw the break-even points of my options strategies fly from one side to the other
- 37 -
I then decided to operate buying monsters and gianty swaps, as we called them, to
earn from volatility without taking a risk on direction even when the market went on
I operated with options on the Vix, to earn rapidly during market crashes, with an
underlying that was maybe even more volatile than the market itself, simply
I have been able to create, with the help of expert scalpers, an unshakeable
Besides all this, I had to face difficult, non-profitable or even loss periods.
But above all, why did I go on changing strategy if I had a strategy that worked?
In any case, you cannot think that the strategy you use is the only one for your
entire life.
Your ability as an experienced trader will allow you to understand the conditions in
The application method of a strategy can last for 6 months, a year or maybe 2
Then this method will end up in the drawer to make room for a new method, waiting
for one you used for the previous 2 years to come back into fashion.
- 38 -
And when your method ends up in the drawer, what do you do?
The true method is the one of knowing how to recognise the method that works in a
defined, longer or shorter phase of the market, and to know that if you do not know
I expose myself to risk when Im conscious of having the chance of earning a profit
- 39 -
If the method you have spent so long looking for and that has worked for a period is
your emotions?
Wake up!
The market could simply have changed and the moment has come for you to adapt.
When the system is not performing anymore, the only responsibility you have is to
notice it before having lost your entire capital and having given it away to whoever
- 40 -
You start losing your trust in the method, and then you start doubting the market
moment, and in the end you lose trust in yourself as a trader and as a person.
When you reach this stage, the first instinctive reaction is one of discomfort, then
the feeling grows and starts taking on the look of frustration, and then sadness
At this point, if you want to get out of the corner and not go k.o. you decide to quit,
looking for an alternative that justifies the fact that trading does not suit you, or
,simply that trading is a tool with which it is impossible to earn and in doing so you
feed the legend that with trading people do not earn money.
I decided that I would definitely stop trading when in only 6 months I managed to
that time those were modest dreams: I lost the same amount of money in around 3
months.
- 41 -
The feelings I felt were so strong for me, that a wave of pure ammonia in a closed
elevator would have been nothing in comparison, even if the wave went on for 1
hour.
To rebuild the neuronal journey that allowed me to accept the loss and to start
It was like after the first free fall parachute jump , the emergency landing near a tree
made me completely forget the idea of carrying on jumping, and years later a
Well, at that time I was already conscious that I wanted to trade again and I was
already earning money with it, which made it seem easier for me to do another
parachute jump.
- 42 -
Joe Ross has surely seen more than I have on the markets.
His fame and his mature age make him one of the best known traders in the world.
The other day I was surfing on Facebook, I was looking for some well-known name
in the trading world, and you know what? Joe Ross is on Facebook.
What do I do?
The next day I receive his confirmation: I am a friend of Joe Ross on Facebook!
But thats another story. What I want to tell you here is a phrase that a trader told
This trader did courses with me and then after 3 years of study finally started
He studied all sorts of books and collected all the information he could find on the
web.
I remember the hours spent coaching him, discussing all the details of option-
strategies and even the most useless and hidden curiosities of trading.
- 43 -
I sincerely thought that for him trading was a fascinating subject to study with an
academic approach.
Even if rare, his was not the first case I saw of a person who, after having attended
a course and traded virtually, did not start operating in real money after having
passed the critical limit of 6 months. By this time more or less everyone starts
trading, even the most risk averse, with the desire of challenging their own goals.
Well this person, who is now a friend of mine, comes into my office for a talk, after I
We meet and we discuss the latest trading news and what do I find out?
He started trading.
Absolutely not.
His first account was $100.000 and his profit in the first 3 months $30.000.
I have always told people to start trading virtually, with paper money, and then to
open a small account and then, goal by goal, to increase the managed amount.
In any case, starting is very important, once you feel ready, to get a feeling for the
market.
He did virtual trading for more than 2 years, he carefully consolidated his knowledge
- 44 -
His first quarter has been a very good one for a beginner, not only because he has
proved that he can manage risk emotionally, but also by because he has gone on
the market with a such a significant amount of money for his first options account.
I strongly recommend not opening such a big account, during the first few months of
Just thinking of the number of books about trading he suggested I read, in only one
evening, his study time has not been too long or too short.
I also told him I would read them but I do not think he believed me, as I did not write
This has been a period for him when he gained awareness of the risk and he
The job was so well done that when he started, he started with the confidence that
only a trader with at least 1 years experience on the markets could have had.
When you work with different people, you understand that what you can teach them
After a while, you will definitely learn far more from each of them.
- 45 -
So I cannot state that I have been trading all my life, as I believe nobody can.
There is always a beginning, and when you start you are exactly like anyone else
starting something: doubtful, confused, maybe a bit clumsy, and if you add some
By 2009, in the 12 years since I started trading, I had seen at least 3 important
crashes on the stock exchange: the one on the Japanese market, the 9/11 crash
and, finally, the one that involved the whole financial world and is still having an
- 46 -
The beginning is the first phase, the one that is for brave, passionate or simply
curious people, but the results fill the white pages of your own story only because
All the jobs in the world and all the professionals face some difficulties in their
The first difficulties are those that define the boundary between earning and losing
money.
If we think about this, these are the most important difficulties and those which will
The trader who quits is the one who is tired of frustrations and failures or the one
But there also are traders who operate for years and then, facing a long-lasting
period during which they lose or do not perform, prefer to quit because they have
trading world is the biggest reason for failure for those who have achieved some
results over a long or short period. But then fall out of love with trading when facing
- 47 -
a difficult test. The thing is, those people did not think they would still have to face
Difficulties have existed, do exist and will always exist even in the life of a super
trader who has faced the market for years and managed any amount of money.
We cannot know what we are not prepared for until the day when, unexpectedly, it
- 48 -
And Im not talking about being the first in sport or in a particular profession at world
level.
Im simply talking about achieving results above the average or at an unusual level.
Successful people feel the same emotions, otherwise they would not be people.
The difference lies in the fact that facing the same feelings, successful people do
Often people confuse enthusiasm for reaching a goal with a consciousness of the
result.
If Im conscious of the result and of the goal I want to reach, I will remain focused on
result, a gust of wind coming from a failure or from any kind of problem will be
follows.
- 49 -
There are no obstacles that can stop successful people, and maybe this is the only
When I do open an operation I ask myself what I will feel if this operation loses and I
When a person is risking, he or she experiences feelings of fear that link the risk
For this reason, if I risk being knocked down by a car I experience a temporary
shock which, after the event, leaves me completely immobilized or makes me feel
The fear remains and over time it will influence my future behaviour in relation to
similar situations, when it comes back to me or when I live through it again in the
future.
- 50 -
When you lose or risk losing, you also experience a fear that will go with you in
You will live through this uncomfortable feeling again every time you risk losing
money and this quite heavy, unpleasant feeling could provoke a reaction of refusal
to trading, where every day and in every single operation you risk losing money.
- 51 -
If the trader trades, he or she will inevitably have right and wrong operations.
To admit ones faults is a sign of maturity and to understand that faults are part of
The most interesting observations we should make are about the emotions felt after
a losing operation.
The first losing operation is normal, the second is annoying, the third makes you
angry and after the fourth, you start losing confidence in the method or in yourself.
And it is at exactly this point that the desire comes to recover the losses, maybe
From the probability point of view, you put yourself in a situation which is more and
If the fifth consecutive loss also arrives, usually the extent of this last one is bigger
than the sum of the previous ones, because of the higher amount of money you
invested or the higher risk situation you exposed yourself to, in the hope of
- 52 -
The fifth loss exceeds the stress levels that the trader had fixed in advance and
furthermore it goes against the estimated acceptable risk ,because the trader was
At this point the trader goes into shock and stops for a few days before regaining
table.
- 53 -
I understand perfectly that closing every daily or weekly trading session in profit is
difficult.
For this reason, above all if the operativity is not intraday based but on a multiday
If the quarterly balance is negative you need to ask yourself some questions about
If the problem lies in the method, because it is unable to perform in that particular
These moments, when you lack results and you need a break, are the most difficult
to face because at this precise moment of wanting redemption and recovery, the
At this point ego and obstinacy come into the game and the trader would like to
Stopping could be seen as fear and the trader does not want this for him- or herself:
fear is unacceptable.
- 54 -
In reality a degree of humility never hurts and a break to reflect could be more
The backtest simulation, like a demo trading account, is a very good solution to
regain confidence and to keep on training or to test your own method during an
To simulate without money allows you to draw more reasonable conclusions about
the operativity, exactly when the results are not those you were expecting and the
- 55 -
But not the money you sweated for and worked for, the money you got without
The money that falls at your feet and you did not have to commit for.
The money that changes your life in a moment because fortune choose you.
If you wake up in the right mood and you go to have breakfast in a caf, would you
- 56 -
If it is luck and the feeling of it being "the right moment" which is driving your
It is through emotions that people choose, but you do not have to confuse emotions
with luck.
- 57 -
It really seems that with the financial crisis, the income from lotteries and gambling
has increased out of all proportion. If the probability of winning is very low and the
money usually ends up in the hands of the Government, why then do so many
people decide to gamble even if they know they will be throwing their money away?
This is the reason why the slogans I reported above are the true luck of the
marketing companies that look after the lotteries and the gambling industrys ad
If this phenomenon did not constantly increase, the Government probably would not
Money coming from gambling actually represents capital which the Government
cannot give up without having to create new taxes or new more restrictive
measures.
- 58 -
If, starting tomorrow, everybody would stop gambling and the Government then
decided to increase taxes to compensate for lost revenue, a civil war" would
- 59 -
If reading the above phrases did stimulate your mind so much that you feel
Buy a lottery ticket, so that you wont be one of those people who say you cannot
Traders would not be successful people if they believed they were lucky or if they
I understand that these simple observations could seem stupid, but the failure of a
These are the same phrases and slogans that attract gamblers and stimulate the
So be careful and try to understand if your approach is the one of a trader or rather
that of a gambler.
- 60 -
4.9. My advice for those starting, and for those who have
already started
Believe in yourself.
Look for an intelligent trading method, test it and start believing in the method itself.
Once you overcome those three steps, start trading and never, for any reason,
Only in this way will you belong to the group of people who have achieved success
with trading, without paying any attention to the people who told you to be careful or
- 61 -
Disclaimer
The present book is only intended to be educational.
performance.
Speculative trading activity carries enormous economic risks and anyone who does
it, does so at his or her own and exclusive risk, and so the Authors do not take any
- 359 -
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