The Nature of Trends Strategies and Concepts for Successful Investing and Trading Ray Barros WILEY John Wiley & Sons Asia) Pte Li.Ey rte nr, Ter er pone ht made wer; ter many corebutns fo my Ieths Bock woa| have bee writen, TA big "thar you.” as always to my wie, Christine Kwan Barros, who has by me loyally a have eat ny cafe and stl by my side, despite he and ulation of our 37 year of marriage My hear than, om Rear aed Pranks aro fr Ur uniting less we in gh cdr wish Dad hd en alive or this book "The sce level of my grata Eeangs tomy teachers, bot det and Teter Stdlnayersbocks and seminars pul me on he odo success ling Hisiuencepermestesmy trading asdoesthe work Richard Wyo oneph Hart slo deserves spec mention fr hi as on he Whale Point {Court tnd Une Change Cat ‘Now tothe eve Tih ko to hankal he stusents who enrol nny we Sac Taking Cones In he proces teaching ther, ao Became ‘potent "An aly t the fourth: Kan Fleming, my tor. Without he flor Aha vwould havebeen mach lesser work. Thanks Roby, oral your asian‘he trade oy hs sot a theres fd would hve gen the Aigner for cray would hve Thy hve unwaro competng power, fete bene fhe pn aps de nthe sy o nergy eon Dut thes fact reui ta he a of nancial suceses to oes nt 00 Alert fom sehen paced my fie order Anes eedence sgt at Ii-s0% of teaders consistent lose money Pat ofthe prelem isthe computer Eompsting power nth sing and» care 1 bling n that stata ls how aval to alls providing the opportunity for beter isk gems cure Bese tha el traders stom the cach forthe pes tht undere market acto, toa search or “angles” that are profitable which havea “use by” date. The black ok that no one hae Ue nee Aero the dren Detrenthe wo, Nor has he eben tld why hat Ailerence important What is an “Anglo”? Fer Stidmayer called angles “behavioral parameters”—paterns thot will Ie mney ong nt too many rere ise them. The mae, Bein 3 Ample sell-apting sytem, renders argh elective (at ead a Ast your wating dlrs a oan as too many taders se then Tn the early days of Mare rfl here was bear] parameter called the Value Are” ral This le tate that fon eatin dota is» dy hat a rms hig wl, kw Ho ig, a8 dat fom a dete day tne ret ssp piss Plow the "Waive Ae tee wae an 8s probably that he marker would goto te opposite inary Well fora wl twas money for am. Dut then the word spread and. 1 omerber one day sein thn angle a pi the Australian 10 Jar bonds The ‘ly problem was, hs tine the net ode afer the market acepted below the Vatne zea wat at te oppose end! Yo, twas parca thin ath, Dut vom that day the t-te or this ange dropped for that nsrument "Aver ran forte lack of sete reo te ner tender Unit Je learns tht the et does bite he bev ha success easy After al Je can ce the chat pints fr hamactlcan he? I 0 ey Hee he gh ll Mpand tres he ows bay i Ad ers enough hype xt tere” to enone hi antary. Sore, he's her the storie aut the igh falar rate But at yo’ happen wo i strange tat the neve wouldn't dream of peering Aingery without Sint undergo eats of media ning, wile athe arse fhe brig that ale nec sucean in adi money and courage,tow ae oh rales of succes rns ect ha ben lly pure Ws had because te Tetey tote rane We onpe bene nop initout sthere solton? Thee an tat to hink in teems of principles My goal ln The Nature of Tons explain de principe, ading Concept tat Rave othe fr me ato rele thee prtpes othe clement a Uineretonary tending plan, Those ements ae +e the end ar where the mash is cated within the rene. Once ‘you deleie tat youhave your agy thats wheter or tise Youaretobe abuyer oracle With you stay decided, you ate rend ook fora low-risk ty ve clement comprise low-key: Zones for» resporsive tar (a buyer om ips in uptrend eke ‘ales in downed zones ae support ptr) esstance {Gowen aves tat contain he oreo ‘Seay char pater that provide canfirmation that zones holding. Ene puter chart pater Ut enlih the zone hashed and he trend resumed rita sy he cu a mata aso ie oF price ithenan te mney maga eklition hat sys theres value Inthe wade ‘once you ate ade it ie x on fade management—how to fet pray Ison, The Narre of Tris coma Weta or cane? Tm neta asks“ yout My ansrss a staightorwand an Wat the trond? And Wt Tote: Weal want aie ‘the material tmppings ‘xpenone at se moe ‘Toe We all want loved of Beng for the import psn in the Teta: My pent experience an that Sopped wanting Tone gay Tas ors Pepe Ung. Ue Pd that od teaming is x neverending heal wecan te. Enave never achive dept my best ny logy Wel ce. forrnch your won It then deste andl ofthe markets structure. beore fiscal wet a dscusnion ofthe Barer Swing and eto othe thee IWends—up, down and sideways. ‘Chapter? acisues the change intend pattems, Chapter 3 desk with the I of scceptane” an the funtion apart ie mes Chapter oaks ft dervaive indicator Chapter examines some of the important aspects of Aryan trade management Chapler examines the trent an ck Ahtrade tilt the concepls explained inthe book Fal the append Aplin hove te Barr Swing i constricted, a wel as Stayer method for calculating standard! deviaons—an approach que diferent rom tats tory "Chaper1 begin with pict rnd map tht oitines the contents of the chapter ‘Onc Hina, importnt pin: To faite your reading, some figures are ated that you dont have totum the page in he chat 0 which the i efering Taso a novel approach, Peet te wi you have fund ictal ovation Tekme any queries onthe construction ofthe Baro Sing Send your ures aonbaronailcom rvs ww tadingnsces comPTER Definition and Identification of Trends WW Se ys ue bck Simple one: that k be the vehce that wil enable you fo achieve your ane gas: Butt sma that | oar dou tha this otome wl achieve The renson? Ii atainent le attach n your hand at et mine Seles make ade trea this bok ae mana or your succes Dont st tend stay ond neste fhe Kea contained inn your pyc arog fret and more prac. net I promise you tat your adn wil sale ‘ew heights know tis becsuce mary Rave gore fre You andi te eas ae (ut hee werk forthe, why not or yo Mader leaming theory sys we lara best when we havea seme of where the texts leading The pcr oad map depict in Figure 11 sows 1. tn this chapter, we wil ok fit at my elf about the relationship Teen adn Soca andar ol he maria.thre wh tly one “Rate ofa trend, but also its time frame. wai _ (MY BELIEFS ABOUT THE RELATIONSHIP BETWEEN TRADING ‘SUCCESS AND THE NATURE OF THE MARKET "Neuro Linguist rogramming, the paychology of modeling vcs, ells us we sae suc by opt re saps + baits: sates and 1 maltrato. The key to undertanding my approach to tang. to understand each of ‘hese cmponents and the way they intact. We will examine each concep se we proceed thagh the book. For ow les tae impor at some af my talit—frt about ting sucen and he about mars My Beliefs about Trading Success ‘Trading sucess hs proven else for mort malt player. When latina snc Be eb te i ar ng gpa en ey ‘management was allamportant ately. pcg) as taken center sg Tee ‘the allowing formula sae, lve seen are eal ie a ‘an our tad ge Winning Feychology EMectve Money Management % Se) Caoge Soro ent sn Jn Ha end Byars) These trae pena et ston 10 jer Wie theresa dee ty i yar income ber fb pep Bat ea {Re fey. Ore common pce naing Copa fe modelo “rte he conte in wich anton oan of xe inperan tothe dncetonary tad Fr xanpl be DOs pater tg tl tem oe ne ee pny hang hebrew) Aer eco Rove a DOM may Sal change td oat ats oso On the“ter bar «BOM the ide competion has Me pb tive vals trader wl consider where the DOM certo ‘a, content everything, Whon he sees DO, he conse the ents! a then proces to draw certain conclsioe. The mechanical wade Ios ikalyto ask about the content n wich the DOM appear, +The dacrtonay trader may not ake a trade ast bere the plan cll foci How he fs aout the ade sass portant as ae oe ares of Alscetion sci as positon so, beta te atv importance a ‘rious variable. nother words bah height rain and het Sa ec tli 1+ Wheres the jective tarts he inpats oo oe than thie, the scotia racer may evel mach age aa), ‘The alvantage of he lscreonary trading appro that irr the Mui ‘ofthe market and we hersereexpet the conn dieretonr) tader What ‘beter ret rato than the compet chal ae Ths are my belies about success Now lets examine my els bt she rare of ashes [My Beliefs about the Mature of the Market Sir kaae Newetonsatural laws have ben overture by the theory tat gens ‘ny free mart, Complesty Theory where “crate teh replace’ “chute peat Whle deta examiaton of hissing theory ‘ute the bounds of hi txt we ned atleast o mention the ents et apy tothe market. ‘+ Thee onder bind the apparent randomness ofthe ark ‘+ This odors ractalinnatre—that we te he ame ples allie frames fo th wet othe + Wecan determine the probably of an acirence over 2 Ian sample ‘Sze but we are unable w determine he onl om an event-by cent ses Mar Douglas inte th eal paradox. On a tale-brode base, 2he markets uncertain ane unpeedctbleyet er age sare sie ‘srelectiey crn and predicale 1+ Complex pte area. This characteristic expla why mech ‘cal “anges hve sey dae hse tenes have importa implictins fr bath the mechanical athe dis ‘ear, or thedsceanay trade, they date the tating po fr thats, they define hs view athe trace ofthe market A ein needs flo the basic frets ofthe theory. An my mde as ut expe my not having hard of Chace Theory o Complexity Theory when oka the sructure adopt Wsaclasac ne an hasbeen ound nce Blok Markt Corgan ess 191), ‘The Tubbs Model Tle Medel shown in Fgue 12 pres th ners rad apo asat vy poses fon ot uprend t's Gown fom dove Sree Ang cess pe oy ters pong or mark, here cpr of accumu Figure 12 parc ths pein 1/8/C. Att we have» akon andthe Ge coiiation Mn» nw Ell mare maybe Te belt post atria oth mpi Theny at The markt sneer confirm the new al end “Onc he bl mart get under way, we can divide ovesiens no hee Iniberares up oves down moves an skeways ohana moves +The ap moves in moe ground than he down moves. In an uptrend, {he up moves ate alld snips,” whe he down moves are cal a orectin in igure 12, waves 24D, and are mpubie and waves 338 Band Gar corctve : + Sian tear meres down moves ae “impulsive” and up moves + Mover tat make no new ground nd merely ola around 2 central Price ae ald sideways Horna tens in adeways reds Highs Sedlows te abot eyInshore ca sy {ows barr by lower “The ct hat markt are aa ee and ler be ean (1 we observe iar pate al by surprises that case the market © experince trp ry dsequllbrium: and the higher time fame control the er oe follows: + atic turing pnts, when the ghar time me change its tre and + bythe net higher tine frame's natre—that the higher ie rae ‘rend wl affect the magnitude of the impale moves sn orectons {he lower te frame, Thie concept wil come carer when we ook at Thats the long and the short of Combine the vil rd map in Figure 1 veh the pont fat covered and you havea generk olin’ of al mart that al we a that all we new! for woes? Wel not quite Among oer xen, you ed a writen ading plan "A ncreonary pan ex certain lees ‘Trex Tenchangein trea aah erin the enh {1 Lemera ry,Zones, setups enty, and ial sop, {Tinie management roe aking rate rl tang tps ‘The first sp, then, n wing trading plano have some way of defining the trend of tne frame Tse Baro Sing define eds and ine ames ‘ow ta to that st. ‘A Mode! for Defining Trends and Changes in Trends: The Barros Swing | Bros Sving 3 sing chr Sing carts identity spor and este Point of centanmagntes Sots thse magne av dternined By {efor tan te pena Can Sng hat omc: ye er imine by prce=for nae, Arthar Merits Stred eres (ice percentage ing chrs Bato Swings ae une nth! they incorporate Bah ae Prien the formal, The frm nthe append rs Srngs me ety nay the nate os rebut los tine frame-tat they dene the tren of tie fame and tell me when change ie as acu doth ct ay eacirgwi en nc probably of smal Think ft way taal ‘ony say belt when going fora ourey means havea betcha a “turvving am acd Smal, when tag wth he ron am aig inthe ‘rection of est vente THs ans Tha retreats he ol mang mney "oo often, novice trader confuse geting lucky with Being wood trades they chy When hey lick no song tend And. he tat tend contin Teeve they are "ood trades when they ares fact sequin hab Ml val dstroy thei racing carers inthe 182-1609 NASDAQ uptrend, | Tad close ends who bough wlll I the market wert against ther, hey eld the pono some even ade other. Thy ft ha onside of The fist stp i adopting rak-avere approach Yo adi ide rea of ae re But ths ener than done, Mont technicians moving averages wentiy the end Bu Rave» problem with ts oa vy averages ea oes att Ue en scans end So, a he ory te ought ooking to buyin an pend he moving average overcome the shoncomings of moet ech analy end os, tena owing chars Inthe emainde ofthis chaper, we willie hw the Bares rine hlp sent moony the natre a end bt sos oe ram We Wil iok a 1+ ting Barros Swings io define the tend {ing Bree Swings dine changes in en art 1 theutmetmutono Bares Swings. SWINGS AND TREND DEFINITION Do! ater kien ome words go gets Tend and tine fre fad aso be fined together in our mira When ake. "What he ted of Instrument "my resposesineitaby. "Over hat ime eae?" The ol tat wel no consdr vente othe ie frame and ts on at'sook ist tho time ame. ‘Tho Say swing mts the week ten ‘The ey swing dente the mosh Wend ‘Tho von (ay ring tes the gare end ‘The [month (25-9 seg ents the eal en ‘The Mmonth swing enies the 2-year rend Andsoon Insight eae shal the js the othe hai denifyng the tend of Uhetime ame There ar thre pe fen‘Ao known as “horizontal tends” the high and ows of sdeays tes ae ‘out equal Figure L3 shows an uptrend, with X/4 being heat mpl le ‘A. Csand Dt form wh) Davin abot he sae highs ade The igre aso shows the winycharactertie of hostantl end 1+ Thee are lay deinen boundaries. Figure 13, A and 8 matk the tonnes +The market may move ahove A and below B But a ng. a hey erin Within certain Dour and rete to the tea of cengeton (he a ‘itn te imi of he sideways tend), Ue pater remains congeton Pater + Ihe markt retrace les han 76% wil probably continue aay from ve onginating Boundary. igure 1 istates thie principle the ‘igmating ounday of is A1/Disks than 786% ofA ensue E wil prety tor down and ea toward BT have drawn 4 dashed line £/F to represen he, Beyond the boundaries of ongertion (hat theme of he sideways ten, ‘wecan seme hal the mashes enue eircom move Clee he [Simran to dfn and quantify the conitons wader which wells ha the Aiectional move hae sured. al hse boundaries the sma estes gure shows the normal i of expen (ost ext), ‘One limit i 0% ofthe mpalse move X/A added 0 te gh of 8 an ap ‘move and subtracted fromthe law of Aina down me), Theresa alicson er We Te i x 0) 7 Nev that X/A must be a ent aan average impulse move (hat ist east equal {ithe impulse mean) fe, then we move X Back one low or mire ows unl N/A teat eas palse mea, ‘Ava under ment 1 found that many novice trader were selucant 10 ‘olclte the impulse wean, considering ita “dios” proces nate, many howe “eyeball” the average. Hen Lean ll youth for tatoo iw this proved tobe a dangerous pace, Team up witha caleulaton hat gies {vow th ame resalk Nowadays, Ise the larger of bth calculations ove Je» manta extension range Yau cans the second clulaon on YOu fhe conient hatte bounds of songs are seltely accurate hse ermal, aed ener alco i 200% of the bwndey ext. In theesample shown in Figure 15 above, let'say 4/86 100 ps, the pice at Ais sand st is Mh. Teeny percent of 4/8620 points. Hence, F wok be 930 30+ 2) and hee F wo be t 180200 ~ 2). Pecuse maths do expat Buran 1 calf reabe the Irons of songestin Pages an 17 ond he accempanying et se Note he bling pros.‘am Ona aati Can Mery "hore apne ed wan pans Man att Fig 1.6, and mark the boundaries of congestion antl F. At that point, Uhr is fle breakout tothe downed, tery extensing the 4/8 tang. (y “fake,” Tmean the market bee down ony etn Io congestion) I find convenient orbel Fas the naw B This eres me to beep the bounds ‘ingeton clear and sole “Thenentexaple Figure isto the mnnthypriceacton ofthe Dow anes Industral Average DIA) between 1982 an 1983 Le sce wha the chttl us. 1+ ALC, posible trading range frm 3 fs to ho and the Dow has @ fas reahout at when ow ses at, but ie met retus congestion is elabeled + ALE the Dow has anther fae beskout when Ci reached, bat the market set to congestion uw labeled an another ase reat Thee ow real The elineted by Awd Bh fo 107 1983 et review what we have learn 0 fT Barros Sng etn Hoa spcii tine fame, We have defined uptends,downtends sn rch We have als considere te carats of hrc es of being pet war consider i horizontal tend formation Bat belre we stakes restr Whew all ht content can be que overwhelming a taking pss o kent and be sideways markets ecaose at more quently than renting nets, Now that won be hay es we employed forte two types a trends were the eB hey ening market we can psy "gowith—tha i nan uptrend ay igh and/or every corey ain 3 dowrtrend al every new lw every correction However ns edeways end the os soatgy My lowe you money: moe importa youl do mach bt 8 Tamove arn theboundaresofcongeation (ly "ade" mean you “el fink "buy lows,” rater han "by new highs and “sinew lo”) en now to he ermation of horizon ake, of Horizontal Markets a markets general orm none of ee ways. rma pattem al ptern shown nFigate 18, Once he mathe fils fo make a new [Cand tus dove, pera congestion market is foringYouth i the greater the salts oyna amet ne bone ay or ‘erewe the prabiie lavorscongeion marke forming at ‘The Breach of Support or Resistance pattern ‘The Breach of Support or Resistance pte is shown in Figure 1. Here, C ‘sce (esis) by les than the 1 X/4/20% 08 AB range Thats he ‘hark beak above te boundaries ongeston But tay within the make ames Tesresa! Sper er Rane Paton tis IMPORTANT that the markt tums up at. not, we ca expect to evan change it tend patter. Indeed, a we wl ce, this potter 3 ‘ory rlible change in rend pater Sy ee 1 aoe spate fem Ih {tain ie frame a dation ia change en en progres nd ‘hota cengeto, rs IMPORTANT to dings between the wo beers our “Satay willbe diferent I congestion in prog, we would sl the new gh [tC inPigine 13, Te fied breakout ot auggesed a change intend i ony ‘the thee tims up at D that the potable revere ant om vo ‘change in end to tavoing congestion ‘What do we mesn by support and "stance? et ne quote fo the ery frst bok Tendo tecicltalyain Edwards and Mage’ Teil Anas Sk Trend, tn (Bot jon Mage, 1983) p21 1 super level i price level at which auicent demand foc 2 ‘Sock appears to alt down tred temporary a et and pony revere ie sat prices moving up again. A esc ane by Ne ‘ine than ie pie level at which ther is] sient mpl to op, and pox tam Bk up ted [A] supor eange ‘prensa concentton of ena sn rosance ange epee Sonoma of pa or meant "buyer" and by “spy” they meant le once prices acept below supe supest cements cep abe esi sone on a Pippen and resistance” unto of tem estat. 1 had the ett rp wating the ucretenay trader whan dealing th mation had made an wnumption, aumptions abet nds hae on ur experience, level fk the nformationvalibi nshort we make heb Jenn poem ances: However, the danger that we contin old aspen bec andor rsh evidenceothe conta. Avs dincrtony taser, der on my cota examination othe tran for inrmation my assumptions hoe heat pater the serie the "surprise apis pattern ive pattr Is shoen in Figure 1.10. AE , we expect the upd to instead, he market reaches tel at signing he poe sin Toei, For hs putter, inpctant ha the maha eas A Wretacen teat 8% 0 C/D before tans down (E. ‘Te Saran Pate Notice tot thave rable the completa pattern with 1/B1/C1. Viewed hs ight, we have a Normal cngeston formato. So ii is ial orm 3 ise taken the frm of 3 Normal pater why ct separate ego?{ecu wn nh re pe, ae ly mere ‘ety werd hen tenet betes ‘yet mares pe se Aeon than those we employ ‘uptrend an dowrtrens have lant ram experience hai he abence ot tence of change in tren ¢ math wl et congaton nthe sume dection {St enered. Consequenti nleae Ihave evidence change in tend, within itine polices eny in the diecton of the previous directional fengestion| ‘So far, in congestion, we have covert formation, nature, and strategy 49 ‘emp ieforeweturnt dheotheatypeo! tends uptrendsand downed [ets apply what we hve let sofa Tn igure 11th martet approached the ld high at ad tamed down at {C Thstle us at congestion probably about form. Ae ewe wold ‘beontheloskout ora uy stand B betwen the 7% reracerment eve 4/3 ‘ul themasimum ees The is hat accompanies igure 112 expan what ‘cure 4+ Tremaanum extension came nat 04524 {The 7a retrcement aren of te boundaries of congrstion was AB i iE SEES. OE ACLS Canine Format fers nn ne pari fo at Ait PEE In 132 tay AUS Coren arti "Sac ie oes seman fom Mot ae +The market dropped to the 8% retacument area and tue gp. At the time of woth Rad broken above the upige munimurn exon 1 fst stated trading fail to appreciate the nportance of ientiyng, ways markets and the eed for diferent adn satis for congo ets an for rending marth One sve imped my merry Tt Friday and Thad prety good week of day tang. Chy my wile, ted ive trading a mise that night Deca | oe ike "cr wt mo rand rath be kd i red: Bat hey, hubs set in and 1 ire could restom the weekend Wall the SEP ded o much tat ight fy oural sa hada point range But my equity set showed ara 3 pln! suceeded in bying every hgh sling every kon Te war ony tr my fist workshop wih Pte Stiimayer onthe Maske Pro thar the pei set to drop. So, and ay earth lemon we ets move onto tending market Directional Moves: Uptrends and Downtrends. Upon hae higher highs and higher ows: downtnands have lower laws ec Jower highs. The question arses: How mony higher highs foe an pte ac‘hm many owe laws dows per se ea igh {eran per snd wo lower lows redone on apr Te {ei on hs gan ihe ow, eat wei pone pend Netra down wanto svt et lowe vo re aero, tower hight fetal oman Tr gal pe ty sly depending on ects Fr oample he erat barber cngsing {eesome te ore ini oops eke gue 113 show the ws tbeks ot f ule Alsen thn Ate acrid -caogetionin 986 "Se Gags rd win pomain Yor ae aye [ALS wa have sho beakout, owed by the asics a 6 of he breakout level Attheretst ot vould have sedan ope probable In Figure 114 we havea weekly chat ofthe Dow in 200 breakout ter 35 wos of congestion. Toul rate the breakout only a 8 ptt uptend. We have one higher high, and higher low til fo frm. in atone fet ight wks of the Tweaiout ele ina. ane-eek eden move all, even afer he ne Week "pen conmence the gins have heen n kang witha move ped 233Ssweck congestion ‘What do rman a one wecksideways move? mean tht Basros Swing of one-week magrtide defines he sideways move, The swingin Figure 115 are of 2 eweck magetade. Ihave dil the congestion aftr te breakout with the abs 172 snl have daw sn te horizontal chanel The carts cumen date af wong and ive the ple RIRE135_ Dow Jom dar, Cah ety Sete: apc ros sarasota Ane tion suggests at east 2 1-week sing retacement to , if ttm nk Sangeston Fresh internation, si Dewomesavalable cone var, cree thview “The comparison ofthe Dove breakout in 1884 and 23s served to hte Joho meanby “a general panclpe mndbed by contest" Fora dersonsrylloras pated nme bo nee fe Matin npn ans a (ne pect cnet te dig stg pean downs nde sum toto Differing Strengths of Trends ‘Within uptrends and downtends, the dscns moves vary in thir imp strength ‘The Tubbs Sic (nroduced eater inthe chaper and repeated in Figure 16) sre this concept The Inpulue sratue abled 4/B an impulse move of subnoral stent. The impale move fom 2 sa move ok tor strength aly he move fom Sto Dione of ermal strength "lasting impulse moves helps ete our stay, a he iferent ‘ypeshave ther owe ansueline of atk +A submormal move rogirespatece 8 we apt “buy om retrace ‘ment approach + -A’rormal move wil accommodate both breakout poly + Anabove-normal move lest served by brskout trang ‘Tho ky question of cour x How can we Meni the strength of a move in onder Be able take advantage of To anewer this question, wel ue the wre’ Serr ews ss Wt Yrs sah al ate rege {ovuier any tar oding woot teats pasingsgonnancewiere (Steading witout an ncaa inva ot Twila te inrcig the onapt of wave tracts I nace he tus ea at inpulne ver ier toe eve oe e-waveats ad Ctech weve sous si ors cesta ‘Subnormal Moves (RO) I give these moves 9 Ranking 0, ap I consider tele profit potent be Tow unes you lear to Ment them early. To dasay the moves, Look the fallowing ‘The strength ofthe fi lower me-rame moves—whethe the impulse Imover ant average below verge, or tbo average In RU stactare th Imp of here tere in me you ae rain ell Sew ange + Another cl tat an RO i forming is when te Sst lower ine ame impale ne tums ae below average For example in a Say up-move Tie i-ay pe me sil be es me the Sry mp mos wl bese thon aap (A Seay impulse move uly comprises mae than fe lay impulse move) In igure 117 we have w Say inpulse move “imumercing Ose 10,2002 al ening on Dacember 2 212-Aterthe ame 17 aPC sy Saeed we pore Yom Mat At+ Another cues the strscre an lin ofthe st higher ine fae, that ‘is weaker than norma then ve expec the imple move nthe rade time tame ob a. The trader tne me theo that defines the ‘rund and therfore the strategy to be employed ‘A question that aos: What characteris can we expect fom an RO ten? lithe fst impulse move s below average, you will Rave theft characte ‘an RO pattern the seca tthe deep reracemant that ually follows By "dap retrace,” Tiana reracerent that exces 9% and pt 100% of he preceding impulse move inal, an RO sre compe of four waves Sic waves na sicwave pater wate-maybe shallow fetraceten oly Is tne not nconniyrtrace more than 6% of wave. Figures 1B and 119 St four and shave pte, mapecvey rover he prvi tnd wean enpc weve ofthe rw wet be Once wehave enim RO structure our next sep st vane oto “he ts of am RD scare Sepondon wher cea ey a he Bt foto of bull market spencer uli faces a he tid ith fatter, ts preseace prota erik ‘Normal impulse Moves (R1) Fal these moves normal because they represent sn 6s oftmpube moves ‘he normal has a prt character fhe imple sng on econ fhm congestion is mean dnt expect the etacement of tos. General, the mark wl only setrace ack ote breakout pint provdd ita he tie Inet the markt forms a wide range breakout to. "A widerange breakout bar has he wing characteris + has range and volume thats above oral {Iman ap bar. the ope fame 2 higher ais We Botton hed of the “ge and preferably nthe Bottom quater, nd the ov he op ‘hd ofthe range an pelea in eh top quate) «Ina down bar the open forme test Re tp thio the range an ‘rca inthe top quer and eco n the bom hi of the Farge (ae prefer in he boro quate, igure 12 sates the ore ehee thc openandelase areatone dtd of he range ane one-quarter ‘the ane. Teas at east 50% oft ange above he breakout point 1 Teo ao ence (out et ecesary) thatthe range and volume of the rahe dy wie Ut ofthe previous day, “+ Thebrmakout bar shouldnt ethereal of news fr nstance, moody conc teprts tall sale unemployment, etc). Thi listincton|foe fies between wide range breakout tha inews-driven anon that, Isimpurtan A newssevenbeakouthrins on rab reskoutsgal _eneely wil tod the Primary Zoe. or example, nse rake {ut wl retrace below the eimary Sl Zane A bres tht nt Mew ‘riven will normaiy retrace he Primary Zane bt lt reac gure 1.2 shows he normal move in. breakout ston. ‘The i is tho cast to wade. The retscements ae within most Waders ewig ona evi a be at arent subjected und tess nd pany thereracemant sage MB snot mater stot. tony the fit rst ower ane ame Te sangre move Tike 1 We il ce rracrents inthe second lower tne fae HB shows srl me Rloample pS epee: me 92°, cx oa) sae aes se wh pn Rom ht Aa From Jly 18,2081 Februay 2.2007, the S&P appre 19387. This is fe mo fr yw Ne iy wings axe SUMMARY In this chapter we ave covered hee topics 1. We toked fit at my bee structure about tang sce and the makes The key points mae were "Gace sa combination of winning psychology, fltve money ‘management anda writen rading pan A mechanical ade neds Styrene plan than hts by a crete re + ‘The markt are focal and complex (wn the mein of Com ‘ty Thy )by ature Fo ie wasted ca gi Stead invake lg Wethen teokan in-depth lock atthe structure and naar of tends Were lak st hw he Hates Sing tp sty te ate the trend ofa spect ie fame. Once you have ent the nature ifthe rend, you hae your strate. ou ae ow ble ently adae rita eras eae eee eee meets ‘ormal, normal of above normal. You te alo able fo speculate on the consequence of making thse ditions You als kw ow anton markets or, and hw label tem and you have tte Forteding ther ‘Onc you hae ken the caret rend the nex stop to beable oy when ‘hat wend changed. Tht th set of hen chapter Chapter we examined ways of senting the tend of «me frame. Marie wih tena detain becuse, by hlentiying the tend we place robbs of succes in our favor, or this reach, rcogricng the ted the most important pr of my asi It ge tat igh then sacs vl aul allow eaton er, Pee Shiner vd ok 1, Whats he cto? And 2 Wilton orchenge? ‘uamined the distion of tene—up, down, and sidetay (cr horizan- Jin Chapter. Moce importa, Pat chapter we noted he important ciple tha ends ae linked te 2 time frome’ Sythe fot queso above ul be eps: Wh th dof he Te ame? or carpi What's the month ea Inthe chapter, we wil tempt find ways to anetec the ced question conta change? ‘he pictorial oad map depicted in Figure 21 shows the main ten pterns Famne21 Peter Roa Mat Coc 2 25tren blow a por sng oe "Abeach he pie kw ‘len he ine frame's upten but doin dan commen lw 2 ‘iris er lows a oer hgh Pigure 2 atte the change intend fod ‘up fom upto down, The revere true fora change ner een down 0p. In Figure 22 the waves labeled with numbers (excep) frm pat of the uptrend; thse abled with eters and 6) orm prof the dowrrend Werden t ‘ave contmed change in end rom up to own) sl, whos we for ‘eres of ower ows an ome igh toh. ‘Des this mean tt we have to wat or a sarc pater before we change ur stategy? I were a tree lower, the the arse woud be at univ "Yes! Bu | dnt believe we have wal forthe sara structure ay oder to wade the change in trendy ths Becuse we have at curds cen high-prbablty pateens Ut enable fo antpte» change, Unive chested the ptr aie + Clare the frst higher tine frame ine ncn: Ths wl accu every tine theres change nen ‘sping pater: Oncor these wil be present in 92% of changes ten 1 Fonesstng patona: Thee tae place nthe fst lower tne fre bat fomeast change n tend i the wade’ ns rae, Wht de hs en, Souank? Les look tam example lee ar tading the 18-iny ontly) trend he pater wl appear in the fiat lower tine re, te 3ay (weep at hore oe cal Doin Al kes place nh dy ne fine, tes npn fo Fie ey rnd Tate tt Nght pater Te wg paternity forme ‘eo the aging patiern ow lk at ach ofthese pater in tu, IN THE FIRST HIGHER TIME-FRAME le fora change in renal A hog ine ret the sing Hf ihe ie fe mcs io fh trae ie fre ha che ota changein rend pattern ie present and whether no the ade’ me forme a Whole Port Conn Whole Pent Court (WDC) scone of ome fers sto ud again reakouts The others the Line Change Cae (LCC) Later in hie chaptee, eco beter cjninted with both of these fers Forte rent ist be hat the WC ana LCC increase the probity Bt change end i © 2:3 shows the Line Dection Change rule operation nthe 1 eck the S&P (anh) The Sek ne ltr doe the market a= a FA the marke tras at that pie he dey sig wl be deemed 9 ster whether or noone of techn en pate spree TiiitiiiiitKey ideas Before we loka he patter hemline wil consider some ky ideas For there to be a change in trend, there must first be a sustained uptrend or downtrend Inother words ore We havea change in tend rom upto dove, we must ist Nivea sere highs ig nd ge ls The restr the numer f Nghe ‘igh an higher low, and the longer the ne span te aptend encommpase, et te pity i Sangalo al Te 1 an opposing change in trend pattern follows a WPC, itis probable that the market is forming a sideways market either in ‘the trader's time frame or inthe first higher time frame ‘The same canbe a where the nil hange in tend fais to form a WRC. This usally ours where the change in end deemed 1 cccr ban the fis Iigher me fame has charged i ine distin, Less thse in action uN aS OME O0w Joe, ey ‘sae pcs asta pomaan for Mat ye pro 24 the 13-week price action ofthe Dow Jones nda Average (DJIA fawn eee righ of 188 om amsay 10300, The pie ston from October 8 198shows he following ‘+ On fauney 10,200, he math rece the hgh at A, HAD, aC fon {the mare etm to he A/Bcongation ange: The ordain are noe thehigh aC and the ow ‘+ On March 6,200 the market then breaks the low at Bat D, 0 thatthe boundaries of congestion ate nove C/D. 1+ Thenestimportnt event sat HE below C0 C remains he igh on AS F/G san ie wing tean be greed. + GaMarch 1200, the market taker ut Dat Hf and ears to congestion, ‘Nteacton high forms at The gh othe sideways art reas at C ‘eTin below © Hen the boundaries fenton are nw + There has een no WFC between Cand and hence no confirmed change + Gn September 7, 2001, the ont line tums dove a J Accordingly 1) Infact no WPC fre nth ditend 1+ On September 2220 the market changes fs te rm down up nde WPC des form, contemang the new 1 week uptend. Th pie aston agent tht tho I2‘month is forming deway tend. The oper ounary is 2 1908 (plus any asim etrsion), and the Lower unary 7,80 1 wil fin ft easier to apply the pattern if you focus ‘correct labeling four abs we use wo ety the rial sting points are XA, B,C. In an ce Xand Bate always wand A and Care cays high. na vee, find 8 are always highs and A and Caraway lowe X/A shouldbe ast lie mean In ths conon I dfins “impale” a move te diecton rend and the moana the average" In he caelation "mean imps? esi make no dstncton between sp and down mae igure 25 dete, or both uptrend and downed, the impulse wings we calculate the mpl meanWe cade waves We'd tic ms nt compe wen te ‘op Figure hatates he covet abeling or the rhe when wast ‘Once the markt aceps above 4/8 by is maximum extension B becomes X fd Ceccmes Ao ong th psu ne rome! at ero each I he prot. We continue inthis manner un the market breaches 8. Once the market scope prs beyond B by ar amount prea tha the maximum Aetension, ants WH fons blow 8 we sate a owntrnd im place. AS, Seadopt he labeling appre oa dourmand tats Xsalnaysa igh A ow Bagh, and 0 on “Away Beatin inl hatin 3 downtend, X and B are alvays highs an A nd Core aveystoms.X/Ashouks bet est ple mean ts wort opening imple nde at oes the decom of he end nd hat man ne aerage ‘Notethat ran uptrend, be X nly afer the ie tums and heads toward inline abe! ey ater elie tums apd on Tn sileways markt 4/8 usually marks the boundaries of congestion. Any yyes within A Bore’ inse waves" and aegnoed cane inten ptr ts lok at he example m gure 28 e A /\ .N Fguce 27 shoes the re abelingater the markstmovesabowe (in Fgure 28) bya main ester than he mama xtersion, Pm 28 acs na chron Tt Pat In Figure 28, al price action after within the Boundaries of 4/8 and is pared when deinghangein rend pate When the mat evens Tange ofthe sdemay arctan fetus to cngsrtion, 4/8 need to Be able Figure 29 rates ramber of mays hs eccas (TN sy way of esos we cover ths sbjctin depth in Chae 1) Recall ros Chapter the meaning of maximum extension: As soon a the mathe accepts beyond A by 20% of hoe by greater than 1 of X.2, ‘vhlcever the gest we esume the uptrnd wil contin, Tis sumption Isinvaliated the low is bescecar am 18g ptr to chge fom yt don te WIC i dt as ‘onecrtive dae hight rar thon he ret! pot B V ar 18d ge ter anger dwn op WRC defied as 9 nerve dae where oo ioc a hel! pd Se eee pene com caterer tem tien ; vache rm eet ei lp See ees ee Si ure 210 shows another rolabeling station \ Tein cone Cut \ A/\ Tel CCina meth or stying what ee neon ncn er oy tim to conirm anew tend. Hat research showed ta a aling of +3 would V Beitr io fps tata tcting be Ean oy { tan % Ta mania ener sent mez ean 0 ‘Time and price titers are used to Kdentity false breakouts etn nd price ers o achieve maximum exteson wile guarding against {ale brkoute Te tine iter are the Whole Point Count an the Line Change (Coan which are derived rom Joseph Hat's nese ied Trent Dyas {Gcon Tho ide presented ere rpreent my interpretations adaption St Hants concept an sould not be ken ae an accurate efletion of eae Thao alo changed thei its i ming way to isting Yr ron Hat formulation) ame 2 2c Seay 13 Maman ‘The Whole Point Count Ina ew downtend, 3 WPC is defined a the mamber of consecutive highs at (On day the market brat above thebreakout pinta A. Wepivethemarkat nt remain aoe bw B whan changing the rd fom up to dows wher 4 rang of 1, The important bourdares are now the high and low of day IE ‘hanging the ren frm own oop he numberof os that mas ea {he boundary is reach the eton of he new rend we ete ne‘ating a a the cami etal Hee on dy we pt ienriney marae tenets Sa erento ‘Normal pattern ‘About of changes in en ext hs patter. Fgure 212 shows Normal ‘rec change re po down. low echo ee alg ating of a ket rm he curative ‘Once the cumolatve al reaches 0 the ote eta we eve ve strctre 3 mim rating ’AN inside har receiv a ating of To identify an inde ar we we the ‘extremes of the drctonal move as boundaries. for example, in Figure 21h ‘ays? and 3 are sse bar lative to day Because day Ts boundaries fr the exremes ofthe directional upside breakout On day the high of ye ‘ened. To deny an tae Br, the founda are row the gh andthe lon of day Note The breach the maximum exension, the presence of WPC ane +3 LCC means we change ou seg st doen ean ove mediate nite & et trade. To take rade, we now met not ony the equ oe ‘entiation hut ako hase for low-risk ety aha sme, chop, Int stops andthe appropri ek/rewand all the sitet of ltr chapter In descending oder o inprtaee the thee change of red filers rank a slows + Whole Point Count The absence ofthe WIPC nega the probably ofa change tend nies we ave we of lower ows and loner igh in {change in ten rom up 9 down an the reverse fora change in ted fro down ou) + Line Change Coun You need to remember the hey ia dacs in thst des they ae solimportant Toul suggest hat you don proceed you are confident ye faves good working hr edge of these concep Characteristics of Lagging Change in Trond Patterns “There are tvee lagging pate In order of th euro sume, he Thee ro 7 1+ Norma pater 1 Spring fra change rm bear tnd to bull) and Ups (for chang om bear pastry ard oe a + Viop (or change from tear trend bull) and Voom (or «change fro blo Ber ptters 4a Fame 232 ternal oe a Pate a Ba Bee Te (Characteristics of the Normal pattern CCisbelow A. Ale the lower hgh tC the mathe can doone ofthe things The markt forms a congestion one and somewhere above Bf Hp ‘Weeds pin Dus tom toda une by Ad 8 Deewana he ord. etn foconpetsnco ht he ne toda ae A B fone below Bath te mse WPC: Inthe process, here wil be ICC and the mae il Sceptre Hoe By ret san he ‘oui extension, Te mae en gos on 10 fem 2 sero wee {tesa ower igh leading Wa owned. ‘one th WC and heart cept pesto B meas hee [Ri hang! set we change our stsigy fom nating long nitty sho, {pre ites (he LCC and maximum extern) el provide an ely waeing Fe Ehange in went and/or quay the quality the WPC. Figure 212 provides ‘htsample of Normal change in en faa bl bear en TErFigue212 there wos! he a wold of erence between a WPC that forms wut an LCC and maxim extern ard one hat farms with both {The leer swe strong momentum i the deci ofthe pole downed: ‘nhwtee the former oe ely than te ater to be alse reakowt. That Finca of frming owntend the marke fetus to cngestin.ame 23 ermal Crane Tr ate: Fo Baro Td ‘ther important elements na change in tnd patente the Primary Buy Zones (PZ in tl to ear er and he Pinay Sell Zones (SZ) ina Bear bull rend, n the bl to fer ten the appr xidary ofthe PBZ dood old nytt f the breakout. The PBZ the an ercompag the low athe one ‘hati caleulate by the flowing forma Higher undergo += BY. 3 the PBZ is oun by he ef oh “ew of BAB ‘Areracment following dowraide eskot should find esitance between the low andthe higher boundary Inthe beat to bull end the lower boundary’ of he PSZ shold Hod any et of the upside breakout. The PS the sme encnpasig the high ne he re That called by he oom Lune oundary P52: High —(A BY 5 the PBZ i hound yh aghof and he “highof B (A — BY 8" ‘breakout etacement sould nd support between the price high ow) and ‘he lower boundary higher boundary) othe zone ame 216 somal Change nT Pate Fam Buea re ‘Asan important aside, ks have anther ok at Figure 212 (reproduond hee su figure 219) Noe the potion of X1 and X Le sass: ‘+ Youhavotakon the trouble calle the impulse mean {Youd tht X17) snot impose mean $0, you move your tase of {sleltons from 11 X sere yo Br hat 71 a es pulse ‘eam AI now becomes A, 30 tha He imum extension fom XA it {rele tom XA. Dot be onfased bythe telbelng A and A [ibe the sane igh. changed th highs omens o relate AY scant + For esmple: AI 1000 and XI1/A1 Is 100 pols 110 pints were Impala, thon the maim entrar woul be (10+ 1000 =) 110, However weave sid 10) pins isnot impulse mean-So, we move he ‘alc io X/A1 and ind ts 60sec a eo pulse mean We aide 'o Al and identity the maximum extension ler a Beng, {Ado +40) 100. We now abel X/A1 19 X44 This diction i nprtant whan we conse the next patern the Spring/ Uptast Spring/Upthrust pattem We ind thi pater in aot 25% fhe changes end Is the mos rie tthe thre pater ac 0 able, acme ha athe ery lea, the marr wil ead ward Ba vermin eg. More impor, un tcl ta wl euro, ut sho tt he net il change Tkhough Richard Who ws diferent names to ey te change from tutes (on Uptrat nd the cange ram bert bul Sprig), heen Characters of bahar testeCharteris of he Spring/Ipthrut pater maven bey A by lass than the maxim extelon—20% of A/B ron A, And 10% of X74 trom A, whichever the grater ‘The maret thn venir engestion beyond the Promry Zone We knw thatthe PBZ I betmcen te my {nd low + (A 39/8" andthe PSZ between te high nd high-k B)/8 Imother words in an Ups he pattern complete when the athe eps ‘mow the price "high (A Bin aSpring the ptr = complete when te Imasket cept te the price “lw 9 (A 78 Tet'took at the Uptuatin Fgae 215, ame 238 nt Pata In Figure 215, C breaches A by let than the maximum extn evo (ines marke + and} represents the musi extension, Given fhe change in trend assumptions [make een ths pattern ccc, Ist tat SUSY fal to acept beyond the maximum enesion forthe pice ac to ual san UpinstorSpring shor Rach mason extn OR apne yond The mart then renters congpation and aces below the over boundary ‘ofthe Primary el Zone In Figure 218,1/e erent te ver body fe Primary So Zone that (A 8/8 ‘Once the markt aceps elo the lwer unary ofthe Pinay Sel Zan, wecan expat iat last fo Read t the Primary Buy Zoe In Figure 215) represents the upres boundary of the Primary Buy Zone However, nce the ‘market apts below the Primary Sal’Zane item a kel ttl on Change te wend sd accept pies ew 8 ame Sra tam ‘The important zones in is ptem ave the Primary Buy Zones in a bal 2 change andthe Prmary Sel Zone in eat bull cane. nthe bul end ober to complete the Ptr, the mat nods accept rd the ewer boda of the PSZ-tat the aoe calusted by the ral: High (88 the ter ene ull, to complete the pate, the market ness to acept rnd the upper boundary of the PSZ—tat the zone cleat by the ae (A By The Spring/Upthast completes dhe second of he te lgaing change in i patems Tne lat isthe" ormaton- and Vbottom patterns paltes ae ain figs markt Tost, the to events—the “WV hon andthe ine chang inthe st hgh tm rae only ave 315% ince four (Characteristics ofthe Vt and Vbtom paterns he VY oman says in ida ds at it on etna Jog nw. Thy sean eacepion the ale hat we sesame tend wil conte We market xpi bya the masini extension In thy "0 pate the thusimumestension exceed relly and then-—surpise—B is rend!"fats ave 9 unique aque of events We st tha sence fo ‘res 2170218. In Figure 217, fe ehh at the market ences 8 ard ‘he nally (ht rot pce) orm ‘Pinal Pgur 219, se anew dont commencing ee eee ‘hac are sme ane acca when the sequence of evens described above dest ike place ska the market doce passe beyond B and merely Jroseds to acct pices Beyone X. When Waxes, the "formation [ime "Norma change tend patrn- This means Hat once the market Scope price beyond we ame a change tend hs nce and we aller ‘Sor traingstaoyyt accent the ew ted ‘A Vom isthe micormage oa Vtop. gure 22 shows the pate [As Figure 218 shows, tere 10 Beat oage i ted he make moves up tw ether Ps of 4/3 orto the Primary Sl Zone st AA pat, Cocos A. the rew low becomes By and-—ihen the market tums afer Sdn esstance at either 50% of AB (ld) ra ABs) Primary Sell Zane that Sew ecm gh relate (Thee shown nite 2 bu ssh InPigue2 19) InFigure2 18 wesee the uptrend fain theo Primary Sell Zane (The “old A" igre? 1 label Ion gue 2175-4) wil pow ta to the signs tha Viop oF Vote wan ea oa change in tnd What igs esha s Vip Voom wow'renltin a change in en Tae ey murs ks plc ater ne 8 rms, We ow tat ne © wl rm ther atthe Aleve of theo A/B oa the okt AB Primary Zane. Onc he‘mart exces the ot Primary Zane wil om acongeton sone Been the ‘ew A and new Broth cgi tend wl ete In the contest of Pigure219, the ptr ll resume in de content of "gute 221 the dowrtend wll resume, To determine Wf congestion or esa th of he trend sorely, ned cramine the nd and spon Inthe ft and second higher i fame “The mptan zones inthis pater are the Primary Zanes ofthe old 4/8 and ‘he SOS zone fhe od AB range Summary of Lagging Chane in Trond Patterns ‘The hoe pts appear in of changes in trend. The retaining 8% of changes in rnd are dicered bys ine change nthe i hgher ne frame nother words Softee, he change tec io NOT Ugg by any pate. 2 ach pte hus its own unigue characteris that the trader MUST lear tn integrate. These harris ude te may he pater form, snd the patent” sone, 5 Inpring or Upetmt pats, ve sume a change ten when the smarker returns though A and aces pst he Boundary the Pray Zane 4 InVops or Vbotoms, we assume a change in rend if the markt ols ‘ther the So reracement of the old A/B ce he Pimary Zane fhe od 5. Ir Nonmal patems, we dom asim a change i tnd until we have _stceptance Of prices ej B and we have Gn order mportanse oe tonmation of aPC and 1 the formation ofa"43 LCC": and/or 1 themarkt aceptng prices beyond the maximum extension. “The remaining econ inthis chapter cove “spec” change in ee patens ‘Usual hes spec patos ulimatly forma Normal pate Hostever, by ‘denying the Specal pater, we can anpate charge sn tend BEFORE {he marie scept pre beyond 8 The at ofthese specal pattems ae the forcing fates FORECASTING PATTERNS Forctng plier cccurin thet ower ime frame bu warn us ofa change in| teedin the baderstime rome, They ar waning beac othe derive that ht statgy has aller Pigare 221 ltt the i, sig a foreasing pater ale he Diagonal Terminal Tangle InFigue 221: 4+ Tho By sing ar bee... 1 TheSayewingrate lala Xu beh 4 1M da en i som he aw of te igo ‘emia eme22 apr Terneal Tage + Thave drawn horizontals at A and o mark the Boas ofthe eday competion, Not hat. this example, the end ofthe forecasting pater at ¢ the same Wo tne edo the Seay downed (4) Rath than wat to go sort at B the Bhagat Terminal warns us ht the high pcb wade are ne on he ng pid rather tha he sore. Figure 221 shows a "deep C" This 6 not a necensry characteristic of 3 geal Terminal ters examine the realtime example in Figure 222. The fe shows the Je-nrh and amon singin the USD/DEM. In rms of guy, the ame 222 sone 12.4» Doon Tame roe ‘Stirs pas nah aren Mom Mat ahort fas ben vied by he FUR/UND, Wt chat Int "tic that th 12 nth lagna Terminal warmed of change inte inthe ‘wim wing atthe Apel 18. The market ten exe T2-menth Normal chang endanger rom down top The 30-month ie ‘hang to ange te 12-month end The IZmonh etacemen rom te second / wat a halow one. Bat oe the DiagenlTe, we old prey hve inp he mower he sSrond' asthe dat o's tPmonfh congestion zone or thereupon of he Soenosh dowrie. The Diagonal Tesina slowed uso ancpte a ange ‘nie ed a pston ous forthe lo he cond Forecatng ate Sr occ ae reerle eng seth fom wale ary bert The ee ma espe of necting ates 1 eriaontaby an ieee Morizontal Patterns The two Ierizontalpalterns are dhe Horizontal Terminal and the Horizont Complex Terminal. e's ook ist sf the Hore Teri Horizontal Terminal The precursor to a Horizontal Terminal a congestion markt. Ina sense, Horizontal Terminals ae complex congestion markets This mens that in 8 Horezntal Tenia we fave bourdanes of congestion. Unies we can daw the orton ron nes, we dont have a Poa paterh, Figure 225 an ‘empl ofa Hosen ermal ‘A Monel Terminal has the foto characters + A/B math the boundaries of congestion, { Thelinebelow A and € represen the maximum exes Hot Creteaces 4/8 betwen 10% and Wi of AB E moves elo A an, tut E remains above the maximum exterion, {Generally Dis sow 8 Where Ds above til sally abe by more than the annum ene ii, D mat aluobe ae TR B/C ‘he sential pols once at: 1. Band D.and A and Care almost at the same pie eel 2 Chance 4/8 between 100% and 90% 4/8 Lo’ conver ater ene example in Figure 224 Sur pc ed wih ene Hr hat At ‘We are examining the Haysving ofthe GBP /CHP. Notice that hire ine sample deviates rom the ide ina arb ways + Cinjut within the 784% requirement 2 De marily baoaay hove he main extension ints witht ‘Soret — = +The boundaries of congestion are markt by A/D and not A/B, as sual the cave ‘Te cxample thatrats the principle that history never repeats ial exactly dont expect pttrs ofl the eal ined they aly desing oy ny patter, ent and lok for he core ements Inte can os Hoist “Terminal the core clement are + Acongestin market where C make dp retacement of A/8ESsbeyont both and Can 1+ theft atempe by the market break oto congestion ‘Al other distinguishing featares ae tl to help ws identify the pater as ome {Lets sow tum tothe Complex Herz Terminal Complex Horizontal Terminal ‘The Complex Horzantl Terminals vation of th Horizontal Terminal, The stlerence between the two les in the rezacement ofA by nthe Compas Honzona retraces 4/8 by les han NP Homer lmest ete ADR at east 78%) Deca of ths shallower eacement Ema elie 4+ move beyond A, but above Cor 1 move beyond and Inallother respects hares the same core clement ofthe Horizontal Terminal ‘Therefore ts distinguishing estan ae fllows 1 retaces 8 byes than 9% an a eas 78.6% of 4/8, {+ Emoves itr Beyna 4 bt mt Corby both ad & + I any event Eis bajond the exe of the puter by lee than the + Theeisno Wa E + Gmreraly Dis below B. Where D isabove wil sully not beby more than 20% 14/8 Disaluoat eat Met B/C Me have an idealized ptr in Figure 225 of « Horizontal Complex Tein ‘nering of change in rend fen down Wo up. Femme 28 conte Heer Taming We have ow competed he horizontal pattems Let's rst he Tangle 1 should not be conf with a tangle change in rnd pater. fn the Diagonal Terminal ina Jowntend the apex ssp down, wile na ‘pend ts loping ‘Theres time symunery between 4/8 and C/D. Tie symmetey occurs ‘iEntc suing a Bande Dern tinea er cp Ae akon 30 alg yn C/O. mal be bate {ass thre ny ering oings en Aad Dale wig warm «They ag oft pate come 1 Onettomn tsp nove Scan ago ping Ded Ye 28 an sand veo the pee Mr 27 a sine ‘npc in de -mehan Sbmnh ing USD/DEM eae fhe Dag Ti sn Ub BEM ert kr Mn 236 Sago Ternqr rahe ned wh Soman fo Mabe aa Notice that gute 227 the swing dese or time symnety with ote as hat sf time ymety Non-sy metic sin Pete "and do’ ievaldate he pater Miwedenthavetime symmetry between) Pande wedonhaves Diagonal ‘erminal-On the ster Ran we may have Te Dives to 3 Top Bato, bat le tht tory ate in the shaper Expanding Terminal ‘The Espn Trina asthe following characteristics The ptr irre, bt hen it does cer ire nn tad at © Unless your trade management i carey constr. You ed up th ‘losing td becearn you willappetr to have Spring Uptirat + Thebreakoat st gest a confimatim of the tangent the the market comes down o rudely avaen by breaching CAS le sng Inet ng at es gant te Thee renew extemes at CD, and E with incessng momentum at BcD and + Ins downtrend C forme a ove blow A, al forme low Bolan ard € Dons ahh above Bn an upton C fre aig above A ad E Forma high above A and C.D formes love blo 8. ame 228- erdrg Tomine Boom ‘Summary of Forecasting Patterns “+ Forecasting pte occur inthe it lowe tne frame and wan of 2 hangs intend there ine ame 4+ Therearetwotypeso!forccsting pater th horizontal formations the oriootl Terminal andthe Complex Horizontal Terminal and the hye termination frmations the agonal Terminal andthe Fspaning Tomi ‘Mut completes the forecasting pte The net pater 40 consider the Thana TRIANGLE CHANGE IN TREND PATTERNS The ciference between Triangles andthe Diagonal Terminal is inthe direction fl theagex Inthe Trang, the apex posto the side Ue Dag Teal, It psn n dhe ietion a th en In aio, Tangs indent change tron nthe trader's ie fame, "Think Triangle compression patent resemble cited springs When ‘hesprings fly explode, you ead up with eae diretional move, (Characteristics of Triangles eg Thi she doa a Ike ll ens dows always happen. Hower, ‘heal emer mst be pesent Ema rence Dy than 785%vA \ Ao (ame 228 range argent Noe There ae ive points: 48,60, theta pine, fen rabies nove points the tangle hcl then Eile ig 29nd ou wot wicae + ALCO wit be sen in he tine fame in which the change in rend ‘ecunE yallfen Be i the eto sean lower tite rar ‘+ Forexampl if te tangle appenr inthe day, Un ill appear in tthe the day othe ay +E sbdivides intact tena. cd wl apps inthe sto second lower tine funn gency wilt nthe cond ower ine rae + Es ally» sal ange day, DOM a day where the opens eos fe about the sane pice oes neta day (he tart poe equvsent ‘fs DOM) short F represents day wee there eat al alan omerbetween the ber onsen «+ ter Ewe may expecta explsive move that weit n two /theeday , Woe ahing A ORM ined nena ren {1 Thevalues thay obtained allow mt define fie condo 1. norma ding, which for me means that there 35050 cance that he imple move wilco (mean +1 Sanda deviation ‘naan 05 standard deviation) 2 Amderatly subormal reading which fr me means that is ‘nly that the impulse mone wil terminate nth eto look for opportanties toad tomy postonseniatlowes ime ame ‘racers (manana dovition). 8. Amoderately abpemal reading which for me means ther it some Probab thatthe impale move will shor be comin (0 an frat (ean #2 standard deviations). With this reading Ter 10 tighten my tring stops, and clacton to ad to new post 4. Acgcaneysstmormal rsding whch fF me mone tha is excels Hat te impe ove ll emia hi time frame (mean —1'5 slandard deviation) I aggresive Wok for opportanitis to ald tomy pons i the same tie 5. A'Sgreantly sborral reading eich for me means that iis ‘xc ly ht tho mpulse move willsheetly be coming a8 fend @nean3standard devin). With is ending im ong for ‘opportunities quate my potions take sample edings inthe trade’ tie frame, iat higher ime fame and ist lowe me faethe eadngs at for bh ne and pend foe th cris and impulse swing So tatsny"guickand diy way” ofcaeuting the static tine and price windows Figure 5.2 shows » snapshot of the sample collection, The charting package ‘hot Tse has tol that caates the pre and ne ferences beeen 0 ‘ng points. 1” stands fr “Tmpule,"and "C” stands or "Corectos igre. shows the Ec spreads withthe sample dat nd he ala ‘son om which derive the men and wanda deviation date "The ine and price windows area "wie ne" that sone fn whch the ster tol il nest. An example of thins gven in Fare 3 whic shows MIDAS (ce tlow) esting within a tne an pice window forthe AUD/USD Spend ving on 2i0smunte char. By "24Daunute chars" mean charts Uwhete ech br or candle opens 3 24D-minte “open” “igh” “lw ta “close” The perio sy 8 40st carts equivalent 6 peed Sing daly har i eprsens my Bist ower ie fre,[MIDAS isan anchored moving avenge deve by Peal Levine, For full ‘lsrption of Levine's work go to, wor rdingnutescomn ce. There {ea micro cifrenes bebe Lovins work tnd ny own. Levinecsees toring averaged onthe mid anchor my MIDAS rom ether the igh ‘what's special about an anchored moving average? In what wy doce it dike fom a sample moving average? One derence Resin the way the ‘moving averages calculated nan anchored moving average, the period of he Calcltion conta increases For ample, on day one the database forthe Snchored mowing average eon day oy dhe database en day te, he Als a soe For ple moving averages he peri f the date SS presets for example fora hay moving average the lt day dey ‘eis deleted an dhe data of day 22 added othe dale, ‘Another erence the fac tht the tartan point of he anchored moving verge alliportant the starting oat of oer moving averages when he Storage hicks in For example in 20-day spe moving verge the average ks on the 20h day of data, hte MIDAS rom the vingentemeof the st higher ene ame ad ep ‘sting MIDAS ines to ech sing lw When acorn Poin lo or he ‘Suetintoe MIDAS ine Todetentine\/aMIDASHne active youneed oko - sawing extreme 2 NEDA pees tne ving eee and thw cri dernier rr AT) be active, MIDAS must he within 3 standard devise ening extreme, fexampl let's say god makes kw at 30 ad tha at te the Te, JAS a 120. The stance deviation ofthe ATR is 5 MIDAS i nt sctive 35-15, Thelow lem than 3tandard deviations ay —the asim stance Kevan active MIDAS 08 and he low at Note: Unite ther suport or resistance ze, I ene Hk to sce» MIDAS Hie penetrated, However sich pentation should be win 3 ATR standard Nevo a the extreme. As longs the extremes within 3 tnd deviations, omider MIDAS tab acts ‘Now, what abou if MIDAS ist ouch? I MIDAS active ifthe extreme is Within Standard deviations but fast wuch MIDAS? I theswing extreme fas Vi touck MIDAS corer tht MIDAS has provided support forrest) Tn ht cae 1 would nee to ee the other os orn conic Bele fond I ving camer hese Thave one lstroqlrerion fran active MIDAS: thas tobe with 3 standard evi fhe net ssi! pce endo "fo summa thee conto ae needed for MIDAS tobe conde to provide support or rsstanc ‘The penetration of MIDAS by a price extreme must be no more tan 3 andar devine of 4-peral verge tac range [MIDAS must be within 3 standard deviations period average te ‘ange of the cnet sseeal pe window. Figure $5 shows the AUD/USD 240-mite chart afer the S-petid swing lw formes on April 24, 27. The pera cometve and Say stat ne fice windows are awn bythe sl etal Two arowe sow the probable MIDAS supports, Remember the mite MIDAS news to be wits 3 standard levine af US pert averagetr ang ofthe bar, and within andar ‘deviations ofthe set slctsbal price window‘sure pes wh rman on Mat Amt MIDAS very importantin my armoey of too for dining high probity zone, Indeed, ony the sata ine and price windows are more impor However isnot the oly to lyon alo use another ol set hat cl the Pnnaccl Retracement und Proje FFibonace! Ratios ‘There are many excellent inductor books om the Fbnvec atin some of wich are avai ee of charge + ww tonaclbok om) 1 wo inset comer //hanacintracement asp 1 sraweminganow com inact shall rote dealing with she imeectory materi ther, in his son, will tlie the otis that Te wl the wing points an! hme aes rom ‘whch they are calculated oak tothe ae provide a pric window tha ness within the statistical ‘ime ane price window. To doth draw a distinction between Yetaceen te prjetons the ferences ein the ig gaits of etree, rem ‘wich we wil calculate the Hbonacl ation nthe cose of retacerent we ae ‘measuring the seg pnts of the rade’ ie frame the ae of Poets, ‘woare measuring the ving points in thea ower ire ans. Five Ratios To define which reracements are mist hey tobe met Lasis the current strctre of the mpalne wave For exceptionally sang waves, ees race Inert ofatest 25% and no more than SPs For moderately rong ipale moves, expect rscement of tween 2% and 382%, Wher he inpse ave uormal expec reracoments between 67a When the lmpulse waves fom normal, would expect setracementl at ant 6% and probly 7% more. The Rr ineaaced in Chapte ante asteation of his en. “The idea expres aoe art be taken ae uielins ony xcs Weare looking at single wave strates. A more accurate approach would be look at Conn! working impulse move in rato oe whole imple tract of the trader's tine fume For example, Ta ad the Ty tend near to determine whether the core retacemnt il fe shallow, noma deep would ped to consider the relationship of te cutent pals swing abd the ‘Ath Jrcture, would be appropriate te examine the Fb Rats St In ‘etracements using the swing points X and 0 (i-period swing extremes on & iba chart) Yo wil ce thatthe eel ret snag within he tat lume and pice window chose the 25% t 30% retracement ves Because the preceding 18y linpulse move was very strong Pure shows atthe iy Swing Was ‘trang tat he Seay nt pode any singe the move fo the March 8 Tow tothe Apa 9high Ths appeats to be an 2 or 1-day pulse move {he fing fam core in my assent woul expec is retacemit 9 Be ‘omore tan 25” 0% of he pce I-ay pulse wave 1) Ain Faure)sare: apnea na porate Aye AUID/USD 24 mnt cha et ta Ye Piet ation ‘we wl prjeting the rato om st wer ie ae sig [ulna th depth the etacement defines he peered prof vel {hat van heen ofthe impulse move I the eraement + oemal between and 6), Toor Letb evs + alormal hs than 342%) expat he 1.0, 1518 to 2518 ees an 1 Showernamal expect the0sinand 10 Oxcasnaly, we lsc 3.618 eet pct the suc oferta the I Pigue 59, we se that wave -2 raced wave ~Iby 79%, Nol, wewould fxpet «projection a io ore han 00 Howener, the cow asough he 1.00 Tevet ano far presi ance, base hat evel sot within he tata price window: f would expect another ust down. The 158i ested in the al pice window aI el expt hat to provide support safc tec bed wt oon at Aaa Another st of bona rats that use Lary Psat Harn Ras (soo ie 510) Again sneer inthe st ler ae amews m2 ere enesingeingee ame 18 Hamer Raton ‘sure Gps bed uh prin Yom at Ane calli feneentrcrrecretegeetee tere eee eee nena eee eee fe etme ens ec oc. = 4+ ibanace projections from the first lower time-frame swings; and sete etc oe nth mina an Mat Abt (Once s zone determine, I wat for the mathe! ener i It does, Hook Forether of Wo pe of tps: negative development orWhat is negative devel ‘market continuing inthe ection inated bya rust pate at pater that hs proven dependable nthe pal cs the oppo Most pater are of a genre that inclves a rea of support of resisane, witha fare bythe matet contin nde drcton othe beach, For expe tale head snd shouer patter inlet lows Beyond the ci tat we bya resumption of the ted The ational hind the setup resides in he fat hat markets are fractal. The robust pattern fos hese the it higher me ame cares The "aire ‘ecu hen hea higher ame rosa trend. The Spring or Uphst Isanother ample ts gone Wheres sprig of Uptake the fm ot ‘Sntinton pater, [eal ea 3. Outid Figue 55 tsanexample ofa 13-Ousie” nyse development setup. The sng you ce the Bey he monthly tren Theft Nghe ime fe, he TSaweek the quately ed) nam uptrend in Figure 5.15 this the cher ‘sring in that i stl st the 0978 gh tat was fred on January 82007. The "8-day me tama down apc then upon Janay’ 3,207 380785, saree Suga se wh poms Nom Mat Ant Normally we wold expet hat upon beck of suppor the maker would ontinw heading th Inte os Fighe 1 chow the market returned the ‘Sours rags ted ws pemazion om Mat ra (On March 6,207, the markt mikes ase lw a 0767, taking othe previous low at 17095 Figure S18) Atte sume time, Use owe to Ue 7677 fms the 1seek line dove, completing scores move Fame Aw0U905P none ste fraiche wt paras fom Mast Ay“ongeton formed between 07978 a 708 This preach astro ny ‘TbOutde negative developmen ate ‘Anche formal neatve developments the bg ba with ole through Inthscase.the math st oema sen reconal ar Normal we would ‘expt no moe than ne pase day before the market eames he diet move Instead, the diction move marks the end ofthe correction an The egnnng ofthe resumption ofthe higher nee rend. gue 816 woes ‘example thi setup the bi-br day occu on Janus 1,208 Depa ggcaianyonnyst mong sre ere ed wh peso Yom Mat at Negative development one typeof setup anothers contraction. Contraction In thecontraction cup, therein decree inthe ange asthe make proces ‘the zone aly, on the day tot the market reaches the sane wl form 2 ‘Sllrange net barat abe rere te open an secur at aout {he ame place and where the ange fe below nora (hat = ethan meen, T standard deviation af he pero average tc range, oF ATR) Figure 317 sam example ot conrcton sep. “Te contacton setup ca la ak the orm of neal has, The ranges may loenormal ce mnterately above normal tte open sd cles cs Oe shother within OS ofa standard devin cf a 4S pod ATR) ‘The Setup can als tke the form of Ue silat range of he pst for ays (usualy called NR) or the swale rng fhe ast sre dy asl led [Nor you cam have anise day tha os he sales range of he st four oe seven dae (arly called IDNR and IONIC, respecte) Fac vel of contraction increases the probly thatthe sone wl hold and wn explste move willow nthe dito ofthe traders mene era. The arrow in Figute 817 pont uta bar Note that te open and lose wera the same price ‘Conrartion sttps can alo be spot with indclos. Robust indians found in most charg packages ae ‘Te Klint ann coupla at Betinger band Gann. Let the Kelner toa standard devitionof 15 withen B-day moving average. Tae he Bolinger trand to standard deviauon of 20 witha day moving verge [Nowmally he Bolinger bands wl be ode the Kee chenels bat in perc of ow vot the Randel be within the Relive channels This isa warning of age mov to come, ‘+ Theta lity ae, Thie the nti between to ieen lengths ‘of historcal volt fr oxampie the ratio between ay and 100K) hao vlaity The 03 anes used 86th Bench, Whe he ‘market dropstilow 05, nar-tr olay signaling ha lage mone+ agra atelier ae eee ae Ta a Figure 5.18 provides examples of each of thee indicator Inthe top pane weave the Kelior and Bolger bards. Tho Bolinger band have just ped Into the Keltner chants sugaesting a ange move i about 9 occur. The secon pne the hor! wtaity rat. The instore ell above 0 Uae 0 Sinking o volatity here The fel pane the bandwith The mere hone tothe historical lows sgesting we ae close oa large move RES ALOUD Oy ‘sure apr ioe an rom Maa Ate ‘Once we havea setup in plac, Lok or an etry ad the placement af the Ina stop. Ler now tart bj. ‘Thiggers and intial Stops Triggers ‘he triggers for negative development setups are setpspeciic | Took for 3 resumption ofthe nex higher ne frames tend. Fr ences of spor of resistance hak fran cepa beyond the primary aes ofthe prev “Sng. For the “barn aw thru” lok for abrach f he pice ‘hats 1% of the bg-ars ange above oF below i extremes. “The trigger for sort stupa bar tat shows conviction in the ston a the higher tne ame end Figure'19 peovdes enampes of the various Wiggers. At A, we have & conttton trigger at 8, we have "negative development reach suppor trigger and ate ave 3 ibar no llow Bough” Wigget separate exit stapes ine: +l ee monitoring ac 1 stinequen tnd moors Inia rade monitoring can be quansative or qualtative int approach The ‘uiniise ayoch representa rcs yond wh Lam nt prepared acept Fer. The stop plement is determin bythe suctre ofthe math an‘he pote os eta by my ney mangement ues, Unless ny pea Jom tn my mney manager actu woult bypass the Woe sve thee types il sop low places in ede of pretrece they beyond he maximum extern: $) beyond 10% of the cent wing: and 1 ithe ontry har shows trang conviction, beyond the extremes ofthe entry barby 10% of teeange ‘The stop placement has o balance the amount of dlls os wth probability that he mart wl tee sop and then posed nu favor Pace =p Inn the maximum extension ersten the renee py ta he ep Wb etd only ms wrong about he rade The eer two sop provides Imense protection however even they are he pbb remain that Tyas ight abot the trae But smply mae merc in my tg Une. gure 5.20 chows the tee types of tp oatons ‘+ A =o maximum extension 2 Zbelow icant ring and Cow 10% ow min oo entry bars ange: Thats the quanstatv proton sald the stop repens the mann olla ws thot Lam prepare tobe for he rade Sere’ Grohice wc we perma tom Maat Anat at bk etry esate romen Reoareneer caer ‘Uss1080 This sot of dol wn/ Ise rat woul be pose ested the loang poston on sop ae Me puto rae, sk mel thee penton 1. What does the marist have ook ihe tomorow or mt es 22 What does the make have to look tke tomorrow fr me ot thi 8. What ete time tp for this soap? The anawers to uration 1 and 2 ae «function of context and experience Generally on negative declopment setup 1k see the mart has med immediatly in my tw; hat | ant t ue the markt ove BY Mh 15 ‘andar eviaon fom entry thin tre Wading dsp perods (hare te tty day peri dy pio “To understand why took for his, we nex 0 eran wht ours it a negalive devlopncl event, When a market trecher previo support or fesitance what general occurs ia Masturg ut all stops Ofte. te market Abo fshcr out the "weak hands” ln itn new poston ae netted by thon eho aleve tht onl he bt stat ln ous an sy wh the market retums othe prevous congestion. ee have pense rom two ets of partipant the fit preare comes from those who have [St Insted no potions More kl than nt he stops on the feck pst Wille ted soon sthernahe coves thera Zanes, The ther presse Stone fom thos who have jst en stopped ot (he "weak Rand) ty ‘The esa ofthese pressures is sully a uick move in ny drcton immed star entry Pure 52 sows the wal pattern fe sega der lope ‘Shp. Theenty bar woul ave ben thebrclosing above the Primary Buy Zone Immesiny folowing the any Bar the mathe moved up for 5x coneetive have decribed » genetic price ation tt alls 2 negaive developement sctup Ill has oir mie by Uh pater specific an etre For ‘ample te pre action described us he foreign exchange caren, butt ‘Stately diferent sory when comes to soybeans In at intra, afer 2 nopativedavelopment setup, he mare fen mands fo some te elre ‘tut the move However, Gace tare to tove, anos with get dea of ‘ingen! AW have jst covered what 1k ko flowing & negative development setup Les now taro contction setupsFoe contraction setups, we have fess definite gues If he setups based ols sch a the NRG, NI, othe Historical Vol {CHV then like sea move with conviction wih te ofive Say entry. ‘Onthe other han have no ped pater ten epitome ‘ops or ary tin conracon sep andthe marke seacton oppor and testance, The next ualtatve question Yak mye i Wat dvs th ere hace Todd ome te he ae Tn negative development tp, I pafer mo ose a strong move against ‘my entry nl the impale ove hs moved in ty favor bya eat meat 03 ‘andarddeviaton. Should ace a countrenzyinove before the market hae ‘moved tis distance, then I kly to wade my expo oF cl MY sie Postion. Tae ratonao simple ene since In expscting a song pase ‘ove io commence any srg contea nave prio ow kan = normal imple ‘move throws my anal to dou. Tn acentraction pon for markt acto at support on estan eve 1et'mlong {would be looking kr rastance eves to ie aya if am short would be Lakin for rapport evel to ve way sther word 0 deeming fale this canexe my most portant nico ithe manne in ei he ‘mathe! approche nel ett apport and estan. “he final question Thave oan: Wha! my i sp? gave devepment sepa mast each 18. ATR etn ereegerscee ey omen ar omen nomen op eel heer of he der’ terme eng Aga, beter pdr ty wee ett qulcaton by prs eatonaee? [ce behavior an patera ‘nogunt trade management x governed bythe Rule of 3. Lat me sy rom the oust thatthe func of the Rule ot 3 to wablize my gly curves {dosnt car mprove my overall prostabty Ine nang ein Qparhets the Rule 3 wil Rave the cect of dampening my profits How Aver, Ii! the advange of sails my ety fave far moe esporant Than the torts! probabty of snerenang my po. A futher advantage {the Rale of 3 that i enables me Yo pysama ly fm rg ending The Rao has four principe 1. Tea ia maltiples of the contacts. 2 But the nt poi ay soon os he realized prof covers the stp f the two remaining positns For ample, you ae lng gk! at USS and Soups step st USESN Hence, four potential eect contra = USS hen the maet moves to USS04 lqusaton at ht pie would sre you woul lone onthe Wade even he marke now stopped Jou ion the peaiingpostocs, 4. Tait the second contact at loa objective. This acon contact 1 ave lle the “coe pet contract" I se this contact 1 55 mY ‘ikyremard—that tT asure my stp lone age te contacts potent profe toaster raked ‘When comes to determining the log objsive forthe core prof contract draw a dition beach Setups aa zones the teers {ume ame ana setups and zones in he fit ower ie ame Tor the waders ne fume, the loge abjeive isthe poste pi smary zone, For example, have boight ron the Primary Buy Zane, would ent te cre profit contac atthe Primary Sel Zane "othe fist lower te ame, the logical objective tie the sop lowe For example Tt gl at USS an ad stp oso ce carats at USS298, my isk o the hee contacts would be USIz In {Bis cae ey cove profi contract would have log objective of USBL2 + USS200 (my enty pie. 4 The thd cont hat one of my tenis alle the “be sky con tract” The contacts designed to capture beskout moves hat fa fo rezace belore moving exponertily Goer the muke fae 2 theFray Zones anda tho tes, we can expect the maths to stop Uso at heakeven. However i the ocak when the market ds ‘ove exponentially that more than makeup for thove when the thd ort stopped out Trailing Stops. use form of wang tps that are bse om the rte ol the marke, rather han on seme mathematal csterion. tn aden, thee isa ifeence tn the op frmalation, depend on wheter mn wing te I ay o Slay Second Contract Eighteen day zone My stops on all open postions rein a skeen until the market accepts ahove/below the 7% 3.9%) Ones cur, Teng my sop onthe sad “onract beyond the opposing 38.30% level The snp oh hid conta ean ft beakeven For ecample, have bought the math! a the Pinary Boy Zane ‘When the market accepts tho 2% retacerent level I tring my aps on he sect eth 829% lhe ethan ico Pret ont, move ays to breakeven onthe thd contre Five-day zone My stops remain unchanged us take my proton he coe prot contest ‘Once hat cccurs I mwe my sop othe th contract to eaheven Third Contract Fees eee rie th ot ae ne er re ea ein, eet lott foe om tm aoe Sees et ne cigar arenes ogee aa deems ge mramn ena ote a etree nd ty ns fgtersans acter foe Seaman “Aa ay tet re a ed ime rue etree Th ey ere ie he matt ror 82 ‘Noe lala slay eters hen the market has accepted shove ie maximum eereon ofthe prior [day extreme. Pure 822 Intratesths sen moved the third coteact stop to break when the Iaet moved the Prntary Sel Zone bese 03392 and 04778 Whe (homaet nce part 0.90, the ow a0 227 preset the cleared law "Onee the market acct ave the mani extension af 00167 tn 587 then the ST ow eo ave bee ast eae Iw Ay, stron phones win parmesan fiat rat. A rate ta on bus th me +2: When the fisher ie frame imple move hos traveled greater than ean +1 ny taling top gee 10 Tejon the wc ln les extreme of the fim lower Se [At grr ten mm 2 tha an 43 When the fmpae move of the it higher tine ame hae raved rater tan mea #2 Love mY tring sop tothe st cleared exten st owe te rae. Ui gtr ton mean When the me move he Ht higher ie frame has traveled greater Un tea move my ting op 1 the ‘etn at dared eseae of he acon ewe ee ae‘Th ve ae lew ny Th ae operating pipe allow he tara om nes Outs por ine hage whe optinng Your exit re hcg oie don suMMARY |n this chapter we have considered the elements of low-risk entry and trade Effective Money Management and sranagement They sister the ma when pobre Winning Psychology {eae an to mana the positon fora ang asthe problisescontin oe favorable, Whon the protabiestum again! the poeon, weseck tei, at ‘esto protec the potion so sto masimieproftabliy and sunita prot or low-risk etry, we look fr zone, setups, ager, and ntl stops, For tuade management employed the Ral of Inthe nent chap T wil show hw draw togeter the vaio strand order to take advantage o wick, high potablty opportunites. fective Money Managerent ane Wining Peycology havea place in every teding bok and Wis no expo. Indeed these aps ought Be he ‘ject of thir own bok. Why shoul hsb he ae? Tn the ates formal: ‘Winning Payehology» Efetive Money Management Plan With An Ege Winning Pajchlogy represents sof the equation and Eifstve Money Management 3%. S0 is tempting to think tat we ca sco iho & Winning Plan With An Ege Inecet erature {have red gurus who eee that random eney and ext vel make money a lng swe have Winning Psjcology anc tectve Money Management In my ew, nothing could be fare ren the ath, ‘ 107[A plan without an Edge tat executed with proper money management will ‘ll us to rnvve he gue itl hoger ce pertaps «et ange Bu aney tranagement aloe wil ht tra plan without an Ege imo a winner Note ‘hat he forma contain a muliplation ign between each of Ue cement 5 {hata zero fray ofthe cleents wll ne hat theta 20 What eth"? es» Wine Pantha, ver age sample ie, gee usa etm af apt greater han I To every 1 of Fik Te cg i cnlcated (Average Win « Winkate)— Uverage Loss Losate) = =1 Wer: +The Average $Winis the tal number of dll won divided by the tot numberof wining ade umber of tae. 1 Thedverage’ Lis the otal number dla nv by the ing tras, +The Lowa isthe total numberof las des died by the total rumber of tad. Successful traders know that feusing an ning the Wink or postion tnads to more than 8 is an excrete ef ¥o tone ain fons that inka the arth on rare occasions For mere moral, Ike you and IS Winkate of 4% Wo 5c what we can expt fo achieve. The difeence tw the losing newbie and the experienced sucessful profesional the Aiference betwen te sterage dolar win an he average dole low For mont profesional ds direc canbe as ich as 3:1 and #1, Enis Way, We on "hat gives you the Expectancy Retum whch incon ofa Winning Pan, Shatin te fence Money Manageme? Tris Balance the eppoxing aims of masimizing profiablty ono capital aed preventing the ke run The rah rin mews aingo tah ney Bt tne can no longer bein the game Most news al appreciate the importance (Fak of muy yet te appreiaton ie paramount to Sur succn U We have Ussing once and we nk nly USI per rad, hen ee re det: Ing our capital. On the ter hand iw wet to nk he wise USSIDO IND each te we nd then sooner or we il sate ran Objective of Money Management To get a lea de of the Balancing ct in money management you ned oak hse questions: ‘+ What athe mir art hat should isk pr tn? P leraeadt oom oy seep epee gorse ny capa 1+ Hove thou race my ope postors when experienc drown inmycoplal? “To annwer these questions, we need to lok a umber of variables These ane spit ovo main gros: + One group is subjective and inlades an assesment of whether ou sk rots corervnive crappy + Theother group is objective ae includes factors sich 2s the vai of the market the ek sive ofthe intrument our average dll win a Wintour average dello ons, and ou Loss Fined Fractional Trading Curent, wo money management hore arn vogue One Fie Fraction wading aide that hasbeen around since tme mimemoral. Trades sk 2 centage of ther capital on cach tae This meane that if we bapin with PSs and we ster sles of our next ade has 8 expt base of ‘Usios.nn Iroue mex trade again loss 2% our newt trade has apa bse a ssa There are two disadvantages this proach 1 rwesutfera sso losies we wil equi greater percentages ‘neath sucesre nde to recoup ou apa 2. fweenjoys sen of profitable trades, wl gi king mone anc more dollars asthe wing steak continue Figure 61 shows what happens when we use xed Fecion] money ent ‘agement afer sere loses etd nos clumi After 5% Tos need to double our existing capital jst o breakeven. The prot column shows what happens under Fae Faction money man. geen ater stg pros. Alters sere of wings, we sles (Tc tat stead of tring tour eign sake, we find we face a aw nistFixed Ratio ‘The oer metho i alld Fined Ratio, te rancid of Ryan foes. this sppmach we maintain af attire by cnecntract Heal thao the deha. Previous Regazed Equity + (Number of Contacts Delt) Next Level, Let's look tan example ten frm one’ ook Trading Ge je Wey fe Sona 199) page + eke uss5.00 {Starting capt and fst rue level US810000 1 Staring number of contacts 1. USHIObN + (1+ US¥S/0) ~ USS15 000 incense to contract AY USEI5E00 aise 3c 2 SSIS + ( < USSD = USE O00 ALUSE5,000 10 raise dcontacs: 5) Uss2snib0 1 « USS = USSA0M00 To reduce the number of contacts, he suggests the option of exig the postion ats faster rate ha he rate of crease The formal for the ate Secrsae (CL (CL PL x09) = Next evel of decrease PL > Previous Level X% = Variable percentage ‘Let's astme that wehad 2 PL of USS. and made pro of USSIO.NND 0 ‘hat cue CL = USSI01/00. Ler arte sume our dla USSS.00 and we ‘decree a wie the rte of nea Theat of decrease forourCL. eo be ‘UssiEN,p00(USS100, 000 US80,00 » 50%) = L985, 000 Jones says that there are dsadvantages to this faster ate of decrease and agree Like Fike Faction trading the faster you detase your ability ‘erecoup the lanes decease proportonaly. Buta the ded, entins, he percentage ont tough faster tate of decree il Iecre nigricety sale than the percentage teough (raing Gane, “Howe hy ne al at ath et een hs ea ge USE» dn ment oes gf Uy reel {5 ye hil snr aca tf US 28 trad ter “Phe robin wheat rainy Shut deanna, hemes ht a ota aes eet mart ar en as cote Hare coadrng he vy of the nunc voz fe frm hat we an opty oe gett My Approach To undemtand how I came oth formuls, we nes ogo back oa eight sunny Autry atthe Roel Race Coure where was nace to he nesting Wolof profesor Mansksppng Inthe coum my ecson, eam sro the works of Don Sot the yen of Australian punting ns bck, Wags Rit Scott aay that if selec had 3 chance of winning, then hat [prota remains he same merpctivof th capital you have for panting afer Ae resus of your le bet Wat Scot sat about panting apples to trading tha a USS 00 ascnt and 1 masa the probably of Suste forthe nes trade toe 6, then ay Frise should be theme, ether arnatnyat ade was a wi Inother Wo Tstated with USS]0000 and 4 pot ealle for 1 cones, hon, whether a asl of preioas tade my acount stood 8 USS 0D ot [USsiot 00 T sul sl 0 contact. ‘Thatisthe stating pont Bute may havea problem if we contin ith that log if my acount drops t USS or ncreses fo USS28000 my postion she would remain a 10 canes. Clay this does et balance optiniing tia wth minnng tak of an “To overcome this dsadvanaye T decided that I would combine some of the ens of Fae Fractional trading with ome ofthe ess of Ped ato trang st. decide hat would set thee an alu decided not tad gains to my ting un reached tt treshold. Te alculston for ht esd has changed Over the years Cute, Tam employing an Kea derived re T (Chane Bend Teal Als He signs that we con determine the ausiam deawown by the fr 3 The Standard Deviation of Monthly Loses Inconjunction with thor, se he foe fr estinating he maxima porsble consecutive le or ny pero Tha om is Ms ashe 3) here M =the average consecutive st date‘by cermin the two formulas, Heese the pasion see each me my cpl ice 18 "Tet around the prblem associated with Ped Ral theory we erase ‘or derse ofthe etry poe rather tan just dolla luc. My cleans ow inclode the resus percentage increases, for the ie tae and she the percentage eur pr rat er example, le’ ay T buy 10 cone ita of Eine 1300 ardent at 1520. My percentage pl for the ade sol be (41520 — 15001071500 = 155 (Ona per contact basis. my percentage profit forthe rade would (1520 15001500 13% ‘The next step ny Elective Money Management method ces fom Peter ‘Steinayer. In is Market Profle coutes,Stecmayer suggested That pstion sng aha ary depending ponte cy ofsacs singe ‘+ Above normal opprtaniy [double my ronal ie {Normal opprturity Tapp perma size {low mammal opportunty, ble normal sie. ‘The fourth tps the Expectancy Retr, which was intrued catir inthe chp average [alle] Win WinRate ~ (Average %| Dela] Loss LosRate) = Long-term Success “The formula mst produce a nambergreter than one, overage sam ple ale, fra under tobe suse | found something coe to be tae & trader har mach more control over ents an exits tha he doce ove hi Winkat pute 62 shows some ofthe sate | Lap. My financial year ran fom ‘Sepltnber I Augaat HL hav shown he dla vasa han percentage increas because mont readers wlll beter othe dll vals. [Note the diference between the annual § Prot and’ Lass the Prot exces the $ Lose by about LT annul Expectancy Ratio ak Tappens tobe L8This the oer eno ny hata boundaries: the upper fut June sparculry inert waste month mae mos rey It steed the wort orl real cae Td ut cote ae steal ice as chaos van oter ment. | draw your atntiont theses figures Psst the only factors in tad ‘hat ace totaly eithin ui conto ate cur ens and nits Yous ag, [ead Series atic the Inert wet by th Panton othe Ps" The autor that ost Waders ene in a rae rd ext ly he mart poses them wroag Helle more practiveapoch woud be sok he art toproveatrade righ ital nt e sas you soles theta medal though hat dictum sted my sve a Wading, Hence. whenever enter trae, T know the conditions under wach {wl connie tl» poston and the mam time that am prepa ol for he condtns to appear One that time expres Ten thet. How long ms prepared oven enter hd setup spe concept Laminin Caper ‘Money Management Approach Summary at's together the various trac cf my mney management net a. Using the formas know tht te anim sraedown sho nen 24s (Lllow tora mana drawdown of 1) ads conseatne oss ‘of 0 (Callow for 18%). Babed on ny sly ik prof and these oma +My tp ora normal se poston i. of pial {Talo fora maximum por rsk ot 1° 1 Taeepr tt four crmeatve loses ar ral beyond that take break sromirading + My'thrshol is 15% 20 dot a pois ony capital base uni have snes my previ capa nd my lpn ae Alecease of eney prices a ania tle ae1+ Hastie ane tract ora ena nese he dere berren rit ard es Final Considerations There are two) more mtr to consider before I move cm to Winning Py hology. So far, T have considered my subj risk profil, al my pe tonal tading prof, including my Wirkate and average dolar win Til fave to conser musket deta inching voit, Belore I detrmine my ptr size in any gen trade. The formula 1 oe to deine their bse fentrct sie I complicated, but a mstoable approximation i the Ture ppc i Capital a RAK/USS Wal of ATR of Instrument For example the int ha a ATR 10 pint the number of contracts woul enter ona capital be of USSLO0A0 woud be 2% «100050 (1 « USES) = 2.000500 = 4 Wit this caleaaton. 1 then assess the made sbjectiely and determine hate the ade warans an eens of deerene of se Wi es atthe Sia ofthe top and the “Ture nize acordingy.Lamive the final sce by ‘nets tchaent king condone op ond Tare Tetslook atan example (On Strc 6, ought the ADUS, I my capital bee was USH00000, Fd have akon» pi sine of 29260 ADUS Her re my calculations mes sou oy ce gms nih prmaton ton Nett ‘Thefial question wehaveto sds s whether there are any objective apts to ep determine the percentage of capital tk? “Tec ruleragond alc thumb. ter sppreach fer 30 winning tes, ‘eo cate the Moni Adverse EacasonJohn Smee reduced ths ‘lenin estan dere Exes on Whey fe Sone 157). “Th ie sample: Workout fo ening fades Row much the market ge agains you bute mover in your ieton Then se harman © work ‘Stora your ok ava potent of apt for sno ade, Hore arte stops Take +My narmal sie sop sUS82.000 (2% 100000 {My tsk was 0 pent per Oks with nty around 7757 and sop at (177 This me cou the 4 2900 poston se +The ADUS vlatty wae about 0 points pr day. Ths the Tare positon see wae 2000/70) 203 contact 1+ Chow had to consider whether I would test this trade a: one tht warrant anormal or above normal psn se. 1. ork out the maxim dolla vale ofthe pols he marke moves fet yous Let's sy inane wining tad the market fast moved 3 ean aint outs USI 3 = USSD 2 Tiyour se capital USS2D000 on 3 one contract bass, his means 2 res my rationale Thephuseswerethehighprobubity thatthe 1-day tend would onto ‘helkaly target roan 040 thismesnt Fae extn al is ann (0880010 0820, andthe Negative Development sco ‘The minuses vere ta the core prot aio swe «mere, keto sa higher rate bcase sual scout pre trade 380 By a ch 12555 Based or thse actors Taha taken tanta. ‘ove of USSI5/20000 = 0.7% er contact Dots for a rade “Then workout the maar and standard deviation [Tse men 1 stuntan! deviations oy benchmark tno words tnorkont-ona preetagetei ow mac dhe market wl move gaint Ine and sill end up ny favor{Whar using this appro in Your wading, make sure you remember thatthe aleultins neon se cotract as and le er Na yo “re ing mall contact For example le’ say that your nea ‘witha standard devotion of 025. Ons ane-ontact bake you mo Be aking 15% per on 7, Thetnal testo loka ours proleand come up with percentage Tee fora normal wade There you hive it a short summary of my money management ides, Lets now frm Yo the succes ator hat 66 ofthe equation Winning Psychology Paychology males up ofthe aces quo, Wining Psychology encom passa henge t ses rom behavorl nance ote guationo ce {hal sroucoefl trader, fom the management of our aulomabc entra ‘eeponss (what sometimes referred to se our “rat brain”) Yo the dion Iain pros, and fom nderanding and overcoming mental obstces to the acqution of tring sill Tn this chats. |sal provide an overview of what I conser the enh Wells withthe plenphcal conte and then proce tothe decison making proc From thee wel famine some tte o help us ork tough ut Philosophical Context In any endenvor such a trading, the plotphial context it cus. One of the great infarc 9 my he he onthe works of Am Rab 4 novel _Philowpher who as nt bee given therein she deserves ‘Rind wrote hat man’s operating context "abjetive reali” and in dealing vith tha ebjectve reality we need sean Recent research, sich athe wor ‘of Antonio Damasio, has shown that within the decisionmaking proces reason ‘rithoutemetin inot ony esos ttt even dee. In short the ‘ecorch sows that eb deconemabing press eres bh anal rd ‘motional input Tender hee dacovero to exer of Ra's de Rand sls taught that oe ofthe vies reed fr rater ea honesty Sin dined a the esa o creo fae ely any shape or form. The ay word here is "sonst" We may miitrpet rity and ts mely ‘nabg mistake What we cnaot det dlberaty fake A grea example ofthis distortion ca be sae by the behavior af someone 1 oon wal He a began trading a abot he same me but he deat with ses by not opening his brokerage stements, His rational he wil evel hake "theless so the satmens re al 3 temsporay situation The winning ea rm ou ones a stan We el ide rm ou mae rd our prods, ical ourdation of bonny, weed detain hil One “othe shila robust decision making pres Decision-Making Process Loft Brain, Right Brain ial thinking ithe province ofthe ef sie of he bran. The best advice can ein ths are is to adap an de of Rand's: ck yur proms To nse hat ho thus my decon mahi proces involves an stale tee pombe Merde any given station’, down, or sideways. (share a example a my roves trim thin chapter "Te other seo the decisionmaking proces ithe cetve sd, the sight yin in hs pros lv tang den o Dube fr from my expen Heres an eanpie Trade the Bay te fame My Sint higher timeframe is 12 months: my secur 3 wees Since stare with «top-down appre let’ fist ook tthe {Bement swing, Thee it ace anything jump at Generally Tm seeking a answer to the questo: Wa dee ont ie fe hae Soy su! he che oman he 18d ed? Fare 64 hone he 2c ‘nUD/USD, ‘Souce Gapcs sed nh permanente Maer Aah“The pint woul note a hat tare slideway en forming. | ‘monthly lose with beara conticon Del oul teh taming ‘he sklewaye ted has formed two cree coes wth Bars cometion ‘would be centration deways td does orm the targets he Pay Buy Zone a 0588 to 4775 ‘Om the oer han the mark less nero above USA, then we ge 3 strong fection exteme bere the open or lose whiter is lowe andthe Tn essence Iam brainstorming the chats ad noting bulsh bearish, and Tepes the proces for the L-ech aed ay ie frames, Le posible ‘erecating pater forming om he Say ing hen It Sven the Sy Sting fora daser examen Wie is proces icmp, havent of charts med tions st ead oe arte by the et rain ana THs takes the or fsck movers the questions suchas 1. Wha she 18a ad ly 1 coin 0 ehage? To answer thse question ned to conde he tee and eernce Suppor resistance points ofthe 2-month an week ie ames. The ase {othe quesion prvies me wth astray I elem whether Teed Ie seeking to tode and iso whether ahold be «buyer ot seller ‘Armed with his stategy Tov Tok fo fw rk et 2 Arta ce do a suport for gs ree oss? Once Uae itcated the sons of support or restanc, than i ot if he mart tornenr the tones Ian Tove fo he met question Doth Negute Dssyent or Contrainte, sek answers (ethene esol questo. 44 Wha ety to oT a et inte the rade andere will le yi ste? Where lI mcr rot cnt? Pat ‘steno? Dost ior sage thi rae th air? et {ny rt rhe tht cnt? ogee oe the reo the gore rt contr? He og dxf ether the tid 5. Other questions askincude 1 he he de ay wh ae ee {orem te de? Wa te masini in a peered or te ar once 13 ATR rm etry? Wh neo 0s mei 0 The answers o these guestons provide a oudiap that guides my Wading ter entry Figure 65s the check that |e Yo provide a mesure of oe ‘hiya blish or the mara, ten te ol tings shou Support tat +3 uhere 3 most bush and 3 most bearish IRE RS vr Cechs ‘When geo the oto of checklist the conuson does not eles nays hen {edo the analy, checking my premises My a i secure ‘tude doc that eft reat to he best my aby. The proces allows me toy thatthe rade katy be profitable,” ad hen beable o define the ‘pac action hat ought fo follow, AFTER eter. ave dosed to tke aod, there sa final stp my analy pons tasks question, Hew do labo! aking hs ae?” Ue sno conic tnd in comfortable with tae, only press tps there. Bat nen {Tscomfort then probe forthe nuns of that comer The causes cou side ‘hin the charts remoctesrsetne find the reason aren vets my eat the me, What eimprant rf sony wheter he asco nal that he uneorectus mind has sen some sdb te contencompany tin normaton systems One dy ut befor the lanch beak hgh se Aah A end ee ih moo sme tate No sone i tint Heide tha 1c ueny. My fed sid wast 2 "at oma ro” eto ananassae uty fer ery bt he a rnc Whee mart ess a 2 pd te "Of core, a scons sl, te market went up. My fend ake ne Had dupes the ong poston and hw 1a nam tt the mara hed oo fig in Pt gad mcf ti rae ‘Abo 30 minutes ater, the musket To ad ito inary the move ons so og ot my end fre wort ppg on he say farevee in tee Saye "hot igh went ovr my cars but ould ot dent wht was that had Induce me toe the on Mh rigorous proce of amination requires at mach honey as we can Imus that me can sings between ton and “hn wing Bt Meso layman tna irs eon fAvother rightbran tol that | se 2 vara of Scenario Panning ce Amaro Thinking wht ra rte planing tal a sme orpanations use tomakefexblange ps ‘Scenario Planning Seana Manningtree inal ting once we how Ih the market has done, we ctte story fo sere thse and ft frase Insmaro paming we eiscvcly“utrepace” We ad the Tate has happened sn we Rave te avantge of aking over out shoulder 10 dine the tenehnarhs hat defined the experience. Beaune the market Anca, we need multiple pespectvs each on with it Own internal aie weve ave te steps in my Scenario Planning that Ihave adapted rom Peer Acer Te art Lange: Pamir Futuro Uncrta He 1 Keny the assumptions for defining thee asp. dwn, rseways, 2 dent te benchmarks or ech othe toe tends 8. Cromeabet story round each ofthe tc end lading ane ‘ton of he Hechnahs ht woul suggest the sana are deviating from the sore mot suggesting tha this the only wy oncorporste igh and eft rain flys This jst happens tobe te way tha hand it ayo ou om. al of hese proce we nerd tobe aware the ies enti thence “ beaviora Grance This ot the pce fran r-pth explanation of the lence. Tere ae many god books on He maj main ne oso’ Din by RL Peterson, What ke wo do hereto review theses at most filet my stents “Anchoring ‘Wiss when 2 trader decides to enter anl/ar exit at a price rather than jst tering or eting scoring wo the dictates ofthe prvaing markt coos. Yow would thik mene ke my wie, Chis, whe has seen the worst and Irot of my ads, might no beter ui this inodent proved atari ‘Many yen aftr my trading sowed consistent proaty, Chriy tld me she wart ty ner hand at trading We agro 3 capa hse of AS28000 find T greed tet dhe would be these devshavaaker A fe day inter, ot inna Hoard Blt nomen she buy the Hong Kong PCCW shares fot thrn So RSD per share He expected the run would taken week en dy “Chey bought the shares et HKSQU and day oF ro ltr PCCW went xs" Woe 20% pan none day Di my bay eal hee psion? OF eos fot She thought this would be the ronda of al trades and would make Nera milonste inane ade. ter iting FIKS2S, PCCW sted sie and it fall retard oer ei evel At this oi La “Are you going 82" “Surat sa rent HAS.” She had now Anchored at KS) ‘Wht ce gt ke" Tah rien es BASED “The nent ay, the market gape own, 0 si “re you omg est” Wht gr 1 HSI.” (She had now Anchored at KS, [PCCW slipped HKSS and al he while Chris ancora at pice higher than the stock eer tain in tear market lies ‘Chisy exhib the las symptoms Anchoring is tte target exit nd then at her ely, To avon this ine ned Se a Ou Based on ‘Ssterment of market onions ater than some st Pee.‘The ext mont common bas have encountered is ose Aversion, ‘nthe section on Money Managemen Iss! tat the hey 49 sce wae for ou dollars ob a charset Yo or dear win oro Wall Sree pot "lt yur wes nat your les” Ba we ae har ine toa pan ard ‘meat iraders fe pat a hey raze Lone Thee of Lowe Aversion can Be {atnstophicto oa tor ie. The pram ete incetainy fhe rte, Wecanottall whathe fur willing When the markt egos agit ne tend totative thatthe market will everse an makeup th eso ed soveties es jst hat Nick Leeson namo avant oH ily leat thar al he hac odo was oat aoeng positon snd al ould be well Tlowever, here ae ire tht the aka dsm see og enon, A imo things happen 1. Fea pervades ur thoughts and etn otha the pln of eating he less swampy fear of further ew Al thi pnt, we impultly ‘the poston usually jst Beto the market dws rues move Sur ave 2. wearetradinga leveraged mart, we run of out money andare unable tomeetamargincall (Nick Lason every Jost 0 much ta! Barings prod Itt with 20 yeas in baking was se for just 21) ‘The best way to oversome Loss Aversion tn plan your tras. You nee to ncn what hs To happen to stayin a rae: whst his a happen fo setae fan above al place a stop lass order at the price beyond which You ae Prepared to bea any melon Gambler's Fallacy ‘Thetis the Gambler's Fllay. In thse wel ht just because we have sere of enseutive nas or wins we ate duc cur ack o change ‘we make this decison witht reference o market conditions. The Marge Money Management Approach sabe o Uses. There ile tol is forsach an approach and ts past wl a on, ‘The way 1 ved Bin ot ach ade independent and ass So far we have ben dealing with many the cine side ofthe problem. ‘uti the nent econ ht tev contin the Wades salto the aren ‘of managing and integrating our emotions daring mes of oes Managing Stress : Not ll sess dsemposrering: Mihaly Catazentihly in his book, Fs (Ries &€ Can, 202) found eat sams lvl of stent scons to optim se eens What ie ogre tet ‘Wen {become overeat by sts, [rake unplanned, seat fhe pants wads Asa onl my ext coins are ot predeined aa they are more ‘hn ikl orn st ones hat ae cae my money management deli ‘Av ret have taken certain steps to ensure Ut my ste level ei Imanageabe on ros cases ist, we need to catch the ght of fght motion before it overwheims ar econ, ee red st of tos that dampen the enetonal vera Il allow us to accept de prevaling conditions Ths helps us operate orally ten “The fist egurement i one of sltawarenes, We need lobe aware of ur lig body repens that sal that tess evel have reached poi where febast decisionmaking dul In my cae, Pca I ade on an iad Is that | am mon prone toss atch when ener rade. ind felely easy toe relaxed when ot watching the price ation dering marke Fors “Some short-term one hat se: “+A biofdhace machine tht wars me when my ses Kees are ence: Tipe up, wat away fom my back tree of computes and perform seme setching cerdses for necoris or so This sll Rye break does wonders. allows me to compe myself and to memtally prepare mse to walk ito my trading rom ant reanavaethe Ma. ‘+1 ako use longer-term al that eal progressive meditation and have found tisentremely festive Mos of you are pray amie with meiaton bane have been cstenivly dacumented, a have the varios rato meditation techie In progressive medtaton you bogin with» tail echague sd ad to ‘that NLP cals anchoring, The mean that we add «physical gesture to the ‘madatvefechrique as We el curve sipping ino the mete tet eps ifwe une music to acompany or praca sesone Aft a ine, we wll find hal the wea the anchor andthe mi wll utomatically st se he ‘madiative sn ‘Once wo achieve ths, Westar reduce he ime takes to proce the alpha tae asso with meditation. In my cise, the acest procs doce ‘Produce tate an deep as normal mediate, But thas etal lowed se Sp ily into alpha state an ake contol of what Janice Dolley “ibn Prowsive maton tught me how to remain unl and centered turngte ty bly ea me trang More tha any ber ol Tet teaches me that AWARENESS is everything‘othe san to work th el world? The waste question Lane imysl when tent und recent erage i a expriment tse whether Inyo would work ashore station We parpte inthe Dnils ‘hadi PX Furs Mio Dollar Trading Competition that began a ue 287 its important that you understand tha trading 3 Sompetion ivory ferent than ring for bngerm prot ue longterm conabeeny, Fort fran, ran the ste andy stent, Anna Wang exe tI etermine’ {hotrod and poston ie Anna ened the 2me eyed ei taegin The day belore the las day of trading, we were running in rs place th TAO see Figure 66 Million Dollar Trading Competition - Updated as of July 27th ‘erTaseay daa paenasonaees com Millon Dollar Trading Competition MEE Out ower Targa “Tho ast day ofthe competition produced a small range day which dk ot lt any lagen pots Toke fo aday-tade that mig st could ot ‘anything te help or postion, We ended the competion wih 75.29% een (caplal"ecFiguse 62 The miner wa able veto sce the at dy ‘intresting thing hat we Scleved the 7% result thu usm snail eponure f 15%. The broerin charge ofthe competion tld my partner: "No mater rh nied wth» higher pescentage onthe date of uly 3st, You "he s200 CASH Par Coons TE WEEK OF a sae ges od th pn om Dan Tod, ta Ray se the tnd for everyone fellow James Kaine in ane (o'Anna Wangon Aug 4 247). ‘Stl important oelze that we were hick, To understand why, we to provides litle bachground: Thad chosen he ADUS athe ntrment tae for thecompetiion Ths isbeause Ht volstiity std ou cpl ban ant ceed the prenpect tong dietonal move i he te one of te competion ‘Our captal bse wa rg rough to provide aut ptm agua isk of ut in ado to ticking to ou internal exposure Limit we faced anther iaivantageinthe competion When taingapainstsmalerbees weeded togenacte gener prt bring about these tun a investment Teche ‘onions showed te ADUS was preparing fora tong rn. Te was basing ‘round 18400 an Theives thatthe ADU old beak ut ether apo down ‘he markets would go fora run. The ype target wan ONS eb A pet pro and the dove target was 289, but 00 pi prot or recs ‘wang into ee, [favored the psi‘Wy were we chy? 1. he ADUS actully did wha the probable ait woul do, On tradebytade basi, the act thatthe probabil aver trade does ot ean thatthe trade wll make mney onl om long tem large Simple size boss hat prbabiles provide the edge: Hence singe ‘en rrr overs tort perio, have ile prog vals 2. The ADUS, having broken up, provided great etm by moving etna Ite ct have to rove om OAD) to OBO ara ‘True id eevee ek favored the nove but again hii not mean would happen ‘The competition showed that the ton this Bok, especially the tok se to remain swe fre aed foci, pce raul nly foe but also fot Syne who applies An this beings me oan approach se to protect aint ‘eponton the al bain” we ting ‘On cogative level thi calle for Acaplance of he outome of trade By ‘Acceptance msn fhe ait to be aware am emtion wat “baying ino ecantent some may cll he “mines” Torevampl, magne yo have jst ered tae and the very next bara lig range bar agin you pesiton. You might Begin to think My Gon ere 1 go again Can do anything ght What wil my lesa Take yee long ae?” Maybe Lsbold move ny lop? No Ica thatthe lst te ‘cot ne my bank Bat wht about the othr dy when 1 got opp at only to Rave st go my Way? THE fs oo ae Imagine you have ist entered ade andthe very et hare a big ange bar gion your pion nstend of pane you tik “The marks approaching my sop. {el uncomfortable with the ‘pe ach and an ive wth the dcomdo. In the fist scenario, the odor may thin he has accep he outcome bt in athe art the emia evel Inthe send scearo the trae has ‘cepted the utcome tal eee “Thi idea of Acceptance applies not only to loses butt profi as wall The tear wo fly “asepe” an stcome elzs tha on snide bas {postive outcme om ne ade doesnot transaid prot "Ati core, Accoplance mca that ade relics hating is asd on probsbiis and as ich evry trade unig Inter words hepa doos nt jaa the fare, certain pera tule ae emenia 1+ Awarepess—the abit step outside ueven and cbaerve The moe fective we ca do is, he eases to reach Aceptanee Hanes the aby to peeve realty in pte of ur ter 1 Courage—the wilt bar the ui abouthy aur awarenene snd terest seals the wilngness odo whatever necemary to achieve our Inthe words of Chie-Ning Chu author of Ti Fas, lack rt ven though mnt people think thy are tying. to sce they ae imply going tteugh te motes The lt thing inthe world ‘hey want soe of the faior endml and actully ete where We cannot sce in ur jouney to Acceptance unless we acquire these tutes To the extent tat we ave the the exe ko which we wl ‘prince uilment, (Umatly to sacrod, as trades, we alto nes to adopt two apparent onradctory belt +The mares ocean and unpredictable an the markt i elabvey xstainand predicable + Thereaction of ts epparent conf ound in the ine frames at we oi he els Aho trade trade level hat Mark Dough welF now wading coach, ‘all he micro ve we shold ove Hal th she uncertain and cna the market cn and probably wil do anything, we should pts ou capita Invewcting our wating plan in othr words, we mast aways Rave sent satey. ‘At the level ofa age sample size o the macro leew shoul hod the second tell, that markets ae predictable and tothe eet tl ou tang plan har an Ee, the market wil be predicable nd cera ashore we cept hat with trading eae dling with probit snk Tes pertive that we old these ets ot nly at anil eve tno at ever evel four ing—especlly the etinal eve "As a wading coach Ihave sortie and again ip service Accepiance to the hea of probably; but when it comer to achlly Wading Waders Traave a each and every rade mist be a wimer Thy have a ned for cera low dee can we expan the popula of services advertising iain? Mthoads were not deawing an adequate espns they woul! Sapper‘AsMark Doug points ut probability Nnking eds to hot of ther states sd it 1, Because we ko that we wil ace in the Jong ra, and brs ‘we know we wl protec ourselen ne mater what he markt des ne esi the sate os tt andthe state of brng "caer" In 2g fecisc cone ard cae eps us when weare experiencing, the neville prolonged dvdr, {3 Weran do the Betse athe micro level we know that he market rd. We wil ct lle eapharia son and ead ws Wo ede trades Each ae rl only bea na seis of robbie: 44. Weve view rut nts ot a sete of peaure opi but merely as data providing us with opportunites, This not oa tracing ‘hold be niin not omy sho it be an, bu for mon tars IUMUST be However, the fun comes rom the consent exscuton he ‘sept oe tage of vt an nt om Mey ae ‘The main enemy to Acceptance is Fear, The universal Fars are the Far of tng ebundoned eel the Fete ning coi Te ric fora moment, el se how the Fear of teing abandoned ais from ur cidhood ‘As young chien, we te totally dependent or parents, Very auicly we core to rele thatthe ever abun esl unable o Ere for Oa Selves: Most usa to cnn this Fear awe gow int adulthood, Asa sul ‘ve stomatal deal with by atoning to canta dur enronment the People conn and evens that suround us. "Pa terdency to control ay or may ct be appropri in lhe area oie tout as arategy orang the mart te at Mont ate incapable of Inluencing te market even forthe shores ements conta ‘Mark Douglas stout Fea that are an outgrow of he vo univers Fears andimay bemore familar he ae Faro es Fon oftang rey Resred mesg out Fear svn ney on he able ist gained a sight ito the efecto en some ears ago. At at tne, I wasting through fckon Puree The company provided 3 tang soem land Tenet aque chap there He came in fw mutes afer Ube US bond mart a 0 am, hs was men note looked very dated ech bth Heide had bee te shins seng bul marche Ne rarimmed eyes stared of in he distance he said 1 on know why Ij dict the postion eater anyone wold have seen the strength-why did't? versa hi again ‘That he eft of Fear—it dives out knowlege: t lade ko myopia: it mobilizes wand lead opr "The mirror image Fears Euphoria. he ing that we an dono wrong As ‘mc Fer, Euphoria wil limatel ea to taing fare Since aig ie fame of probable, we vill experince as ehen we ca do wrong Bat {hese ine wl comet an end Te trader caught in th euphor ance wl ak tecognie ti a taking one rik too many. he willeventaly get caught 2 ‘hey lors ck, the las wl ot be alastop nd cca rader Two oer factors impacon our emoton= 1+ Ourexpctations—rather than accept matt information in tp form, ‘re inpone oor exportation In turn tea expectations pect Gur eat oF Eaphone 1+ Our om psychosls— Each of us grows into adultood wih cu py ‘hast what the pychlogt Stephen Wain call "ances” Ths ‘many dines out espns o market ilormaton aren arp ‘resent information bu to pnt evens Inter words we arent trading [tbe NOW or ih PRESENT TENSE INFORMATION, Toacheve Acptaree, we need to manage Fearand Euphoria Le’ consider sexe cher ols tht Tha oud wa Ti my case the decisive tol was earning Sratees toe aware of acknowl ‘ge, ard manage the tin emetann of Feat and uphori:This ent tring, ‘vith sal pain and slow becoming comfortable wih ay techngs When int strted rang seco, used dcplne ae my ain Weapon, ut en stared fd maagenet st 991, Tou nant De Cae LLsnas helped me cree the wey of mamaging oct ining tn ender ‘Georg taht ne hata step tp appro waste best way forme Learning ‘omunage smal Fears [lowly art handle Fear and Eaphoran yang Thave developed a prouss based on the works of Stephen Wolnshy. Wh wrote Tn Cha and Brite and. Andreae, the thor Cae Taran‘Ray's Emotional Process ‘The goal ofthis pres tallow wo be ens an lovers with ur Feings ‘Ment tudor {have met det with pin rough denial and supprenion. Theis tindertandable bein at humane we move stay rm pai what nd tary is that throne adeeshareaosaegy a preven then om ill expedinctg that joys They dots Benue ey atempt fo ok an tothe flings a oy tel ining, iy Boome conse tnt honing ont ht hey ght ‘epersence realy experience th elings oy "As Tas ind this strange Filly, T have rized that traders do this Ins ey aestanges oly elg heemtons My press esha tote yout, and evenly bond yu, your eng The process Sine 1, Youfra lin youre side ae fly experienc the pin or plese Atsome point the mens wl pss ive the eration oeaton asap: Mr db you fl hp? 1 the it of our ty? oar i? Wht sap it? had fi? A buna? Say with the ation shape Thon allow the conscious mind Wo tak a srs of questions and then to ten rely ne, t the subomcoue. You ae skin to rash ‘apport you have neglected you eodons fora long pero ths wll ‘heajustons are designe to draw ct he subconscious. Wewan!o understand What tis about the event hat is eausing te feeling. Thor are fe assumptions made i is proces ‘The in hat or pve i ompored of pars, Al havior is the rent of same part seeking © positve ouome-ths i tue wher oF not the thavior fe appropriate fyundertaning the porpowe of each pat we cn ‘eptiate wil he part osu « more appropri behavior forthe eat The second sd belore we commnce the negotiations we fst mast have epontd cr of gol seth sur sabeneious. The carency of the fucose ou etingy fw have neglected our earns for Yas, we fee expext our subcomacios o trst mmeinsysothe procss wil ake the: would schedule w “gut eof 20 rues rice ares ni way When the ns aes, we al Ra ail epost of gol Below i an exerpt rom my oural wate the joumal by hand because am rotonly lnokingts keeps con bt slo wana ey the nett experince civring "The joual entry cope verbatim fr the econ T made on September By way of background I should mton tht [had not Ben ang wel in 19 in hes ee moth, Thad tec 2% even By Specie, {was ding borer ant a brought that down tan 8% drawdown’ peverthles 7 ime in gts ance oe» pnt But “oy ta Tat own sane Tine whch my nae process Joural entry September 19, 1906 Tat down for 18 mintes 14 my heat hammering forced ysl si wii ‘Ar 1 minutes {was aidan its ape wa 2 solid rck in my stomach andabon concer round y bear and tot CONSCIOUS Hi! Hew re you fing?” SSUBSCONSCIOUS: Very arf aunt rut nthe Why noo rade gin? Th om rads ae ay prong at at ry! yo thee do hace rae? CONSCIOUS. Whe nr you saying you ar ey gene nse you ae to Irate that ight? SSUBSCONSCIOUS: Ys tas ight ‘CONSCIOUS: fy et hae rae wold you uel at imprint fo yo, sop wold hen fr? SUIRSCONSCIOUS. Ys! No! No, lds he tai I 56 mc part of Me CONSCIOUS. Wat ns open oyu to fa af? SSUBSCONSCIOUS Int 1 ok fer—l at fel rene CONSCIOUS. Wht hs apne fi fe? SSURSCONSCIOUS. nt foe sin woe myo is ade coli stand oP. (CONSCIOUS: You at art inning ade? SSUBSCONSCIOUS: Lagi eng sly ae CONSCIOUS, Do you fry? 'SUBSCONSCIOUS. Yo, at lita sural in? Laughs gin Bu So ofl {CONSCIOUS hat in ape fren fl fe? SSUBSCONSCIOUS: a ot plang he sop een fhe markt gay ‘ey Would yo willing ha? on tow fo he emer hale “ting ses CONSCIOUS. Sue.few comments would be appropiate 1L_ Note that CONSCIOUS only asked questions Sometines mas brie ‘comments but overt tee, {CONSCIOUS fe stk Row SUBSCONSCIOUS fl and nly than i itprbe or cause The questo asked were “wha” quetons “why ‘The presse stopped when SUBCONSCIOUS identified what ad 10 happen orto el ate 5 Theoutzome was egotte stement place physica stops have rnodoubte that had ja ignored the fy would have sata ysl 5 Thaveben ding this proces fr tre tie CONSCIOUS ao “cet deposits” with SUBSCONSCIOUS 0, doubt tha he proces would have taken 0 ahora pena 7 Onceyouhavethe ntemalzed the proces develops heaf own ‘Se Time he joa entry, at 3 serie jal: Now Tse (Camtasia oer my trades a oak een for his proces, ‘ter tols Ihave fund useful ae Neuro Linguistic Programming (NLP) technics, breath and posture NLP is wie fr dealing wi undertaring, td working through pain Ie 2 madium tr tetnigus Leong o breathe, ‘te oratory canbe fe shore a en sn pe “To succed, a rader mist havea vison abut where hes heading ard mnt Invermalize that Winning Prycholgy et ona prot tart i Imndet is Accepanc ofthe radi otcorn This ear rnaping Fer srt Euphoni Todo this wenoed to ACCEPT, withevery fiber cour body the Blt thatatth mr level the market unceinand unpreditable sn the macro levels elavey certain and predicate Inthe nent chapel how how to draw together the various rar onder to ke advantage iow nck, high-proitabityopportunies or this the fun part ofthe Book The bases have boon coved we have ia entity the rnd ans change in rend ora spc te ae IWehave aloha look t sme secondary ols In ths hp, yarlying the tion of couple of rumen, we wil we the Bao Sing im aon att action curen othe ne of wen The folowing procesisdervtrom th thor fimerson you iigenty ppl he procedure, you ill exponentially increase your lenin carve Toe the parpores Of the examples, we wll sure tat ou tade’s ane Aue isthe lay. The meted consiss of + answeing the questions in sequence {aking anoe of hearers and {evening your decison weely and monthy ensure thatthe sss $ouave eat beomescned fate Staring with heft higher timeframe, ths asthe 2-month sing the Aust questions you ned ask ae 2 Whrere ti 2m sport ad estan eel? 5 teteine decto ily contina or change? [Now shit othe second lower ime ame this he Ine swing, and 1. Wha ther 2 What the line dccion? Note that tee sa ference between tine ‘ection and trend decion Ane dicrion is erly ing directo Snopes ove 5. the nner Tino ely octet change? 4. Whereae the sk sapprt and stances? 133‘tly speking the net ne rae the a: we are aking her to ade Inline with or rr a ade tha volves change a rend Ashe 8 ay ne or tend appeoacis the L2-monih and loeck support r resistance lve ‘we want ose te Hl to espect the ones orseetheri wl contin Re ibe econ ‘On most cctsions an 1-hy line change wil be signe by a Say change In tend So, we il xamine the Saying tesa it reacting othe ger ime ame supporto ressance areas, othe day ine endo 1 Dome hae changin tre pattem? 2. Docs comporon ith He pes imple sing inca coins oF hnge? ‘Once we have covered the 2 month, Lb-veck and Slay, we hve rete ‘acround foranalying the Ida 1 What te caret yond? 2. ete nod nny oH mare? At his sage, we anne thi question by tang the rea ont aa reference pit I the market Ths st snaled a ange intend with 4 Whale Pat Count (WPC) ‘nine Change Cour (LCC) ne nancy. [eth re ily conto hae? [sth grt esting rend oman change? ‘Aveany peta changes ro pater lng? {Wine oe ines pie he 18 te ask sti 205,08 la Whee he 18 ay sip! or san sos? Hohe ayn ahem Here we age ooking frac that wil tellus i the Seay imple move (Heday comet fe he sae 8 cay muse noe) incoming a ee 9. eth ay mention ating day contin o change in he ig ling titon?| 10, Aree sng ccc slume and range? (By emacs” Fea the hed standard deviton- This sagpest ha change in trend liminet a evidenad bya change nen pattern) ‘Aer we have gather the infrmation, ve armarze it and ue i create Panof action. This plan includes description pre ation halls us revise Lats Rave a lonk afew realtime examples, Well stat ith the Dow Jones Indust Averages DIA, AME Oow Joes ani Cah Moni "rex Gaps und an pace ria nat 1. What isthe line direction? Thelin dietonup,ais the tea ha commenced in 1982 Sofa the art has breached 2-month swing Low sme ths uptrend command. The ast Sing low occured i er 10 2. Where are the 12-month support and resistance levels? Support is fund atthe cng low a7. 18, To ently rsa we ned 0 dig ‘emanate come ap witha Foreant 3.18 the 12-month fine direction likely to continue or to change? ‘The L2-month hase an ptendsincektber 1,109) In es of persntage incense an ie spent ina mpule de the pte iin the hi standard weck. Foe he Iya Seay i sete active month Figure 6 shows the postin ofthe Lent ‘Twelve-Month Time Frame 1. What isthe line dlection? ‘Thelin ition sup Bat the 12-onth provides even mor information. gure? Tesh that gold ha formed pol congestion make essen Xap Tsay this becuse B has retraced moe than 78% of XA aking he angaston aenario a highprobbiity eve, Notice oo, hat wl harman abe ince formes in Febuary 1989, ‘Shas lowiyteonexponding Fr reasons allmake clear ina momen the price ‘ction on he I2-mont suggest move 495 S00 or the curen nth 2. What are the resistance levels? Resiance levels are the 4010497 a,8. Is the tine direction likely to continue orto change? Why do believe the 12-month chart indicating a structural target of 495 109530? | daw your atenton to dhe re acon in Réuary 1985, The markt bse ‘dow the previous aw a3 bat returned to congestion alin othe Primary Sell Zane of 305 0 53 In August 199) the market broke Bow te February 1985 fw a 288 an has since vetured o congestion, suggesting a move to te Primary Sl Zone of 6/8485 40330 (59- [529-25 /8). “The statistics for the ermal stings between C/B are alse intresting Fam 7.17 cls C3: Popss ot strc Cahn nes wn sora for Maite Uwe ignore the cui of eight ment the average move at 29 months andthe fist standard deviation +1 nlher words he average move kes [eeween 17 and monte This caret moe has taken 29 mothe ‘Aga fwe dsc the ue of spots, te average moves USSI73 0h stndard deviation of 9. Tie mane ho Seerage Move ls etesen 118 ad 2B. Thecarent ove US Both ime and price ae average so we are unable fo daw any conclusions bout entiation change ane om the 2a ig cane “ eer ppt iad pies Ra we a Or sere we cn de rl contae despite the small population. 1 What isthe 19-week trond? te up, we can expect the aren ren ob up, Westat He ‘fon thls 12mh ow in pi 00, is ether an Upto 2 Fae Upthrst inthe maling. A ‘ecu when the markt aces price above the anu extension, ang 2 continuation ofthe uptrend. The Uphest signal complete when the markt Accopts price blow the Print Stl Zane, leading a ast io move to te Primary Bay Zane of 0/4. Ashe levels are so mportant,werned (0 Tur othe Deemer 30 contract Figure’) “The December contact has a Failed Upthrst ccuting when the mar et accepts proces above 0, aod confrmaton ef the Uptieutaccep ples below 379, Hance we obtain the flowing information fom he + The -week tend up, 1 Thece doubt about ts continuation or change Perhaps the lower ie frames wil an. + There levels ar the maximum exterson zn of 401 to 25 fais December 208) andthe lower boundary ofthe Pinay Sell Zoe, 398 (ane December 280, 2, What isthe 19-week line direction? ‘The ction i up, but hi case this question os epoca than tho ee Sete Tigute 720 shows the ay and Say strates They aie stone oflnatge ‘On tho Tay, the markt has troken oa f congestion butts uncer Pct ae ing eject or aceped at the higher level Hw about the secondary tos? 1+ Tinie Vc Tein Sages momentum tothe up int Fig 721 stows the rnaine tact alter he current eacton high was made have placed a Une pica! on te lowe used for he toe be "Because of her, the pre ema ae a9; otherwise, wou Per ‘PERIOD RELATIONSHIPS Daily data Sed = period week 18-day = period monthly Weokty data {eek = period quately Monthly data 12:month = pero yeaty month = period 2 yearly month = period Seni(HOW TO MANUALLY CALCULATE THE MARKET PROFILE ‘scala by ft aking ve day average the dal eae. Aer ‘VALUE AREA ‘lelting the five day average. (mulipy ths vere) By 0.20 oe eee 8 ‘Stedimayer cleats the bales aliphly deren way to generate, sat Repeat thi proces calculate the olay unite faa ad cally the fst standard deviation tional wading dy. 1. Pita all the TAOs time, price. opportunities) 2 Tocaleulate the “bulge,” the st standac deviation 2 Mati te sun 070. {Sst the prt fom he line contining the apetest number ‘SCTPOs (Point of Contra). Now some te two Bes shove and ‘ekow the Pin of Control Sam the wo lines containing he estes mater rom the maining product, deduct the um. 1 Oftheremsning lines compar two line above a blow the Point ff Conrad wpe the press + Contin the proves nt of TPOx is rach {Total the rd sander deviation, nly theft number of TPOsby 070 and repeat the process un 70 is eched ‘aseomplees the clclaon forthe is standard deviation. | Toealelate the third standard destin, mali the teal amber of ‘TROsby 09sand peat the proces (CREATING BARS FOR VALUE CHARTS. Fora fall understanding ofthe dort underpinnings, ead Mak Helwe, sn Davi Stendah's Dyan Trig Instr ohn Wiey Sons, 202). The folowing is quoted om tat souree (27, 1 Chet fing ai ‘he fain ain ssp caluated by averaging the median pices feo the crrent bar and nt rent four har ie bate ttl The sedian price calculated ap llows (hightlow)/2. fer aeulting i. thi vale for ach price bare imply take the average five bar q tree ou ating sis 2. Cre aster : ‘The celative hgh can be aut by subtracting the Moting ass rom, thigh Simply pant the conversion proce forthe ope, igh low - and lose o cause the relative high relative lw and lative close 3. Al ret changing eoutity (Aer calculating the relative open, relative high relative law, relative floc) by the djmamie vous ut The dma voy aca me‘The providers tt blow have prot hat produce the Baer Swing ant het oleh se Market Anayst ow Matha: Analstcom Tek 61790187907 Fw ost 7 33190982 sw hispermumiber om /premium signin sp

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