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Divergence Trading Workshop
Day One
presented by
Thomas Wood | MicroQuantSM
Real Life Fibonacci Trading & Dynamic Targeting with MQ Trend
Risk Disclaimer
Trading or investing carries a high level of risk, and is not suitable for all persons. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. This content is subject to change at any time without notice, and is provided for the sole purpose of education and assistance in making independent investment decisions. ValueCharts.com has taken reasonable measures to ensure the accuracy of the information contained herein; however, ValueCharts.com does not guarantee its accuracy and is not liable for any loss or damage which may result directly or indirectly from such content or from an inability to access such information or any delay in or failure of the transmission or the receipt of any instruction or notification in connection therewith. Any past performance results are shown for illustration and example only, are hypothetical and as such have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Past performance is not necessarily indicative of future results.
CFTC Rule 4.41 (Hypothetical Disclaimer)
U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures, stocks or options on the same. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED WITHIN THIS SITE, SUPPORT AND TEXTS. OUR COURSE(S), PRODUCTS AND SERVICES SHOULD BE USED AS LEARNING AIDS ONLY AND SHOULD NOT BE USED TO INVEST REAL MONEY. IF YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS SHOULD BE YOUR OWN.
About Me… Dave Aquino
• 1995 Graduate of Vanderbilt
University
• Full Broker at Age 23 with Merrill Lynch
• 12 Year Senior Advisor Vanguard Asset Management Service
• 39 months in Stocks & Options Live Trading Room
Fibonacci Trading & Dynamic Targeting (MQ Trend)
• Fibonacci Fundamentals
• Fibonacci – Real-World Application
• MQ Trend “Dots” : Setup & Settings
Fibonacci Trading & Dynamic Targeting (MQ Trend)
• Powerful Combo - Fibs & MQ Trend Dots
• Real-World Trade Setups you can Trade
– Intra-Day Reversals on range-bound Days
– 2-3 day Swing Trades
– Big Fish Move Setup
• Let’s look at LIVE examples
- Fibonacci Trading -
Fibonacci Fundamentals
Fibonacci Trading
Fibonacci Fundamentals
• Fibonacci analysis is based on a series of numbers developed by Italian mathematician Leonardo Fibonacci in the 12th century.
• 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89 …..
Fibonacci Trading
Fibonacci Fundamentals
• These Fibonacci numbers and how they related to each other repeatedly show up in naturally occurring patterns.
• St. Thomas Aquinas, conceived of the
relationship as a perceived relationship of
proportions and our idea of beauty
Fibonacci Trading
Pyramid of Giza
Fibonacci Trading
Golden Section of a Rectangle
Fibonacci Trading
Translated into Proportions & “Beauty”
Fibonacci Trading
Logarithmic Spiral in Mollusk Shell
Fibonacci Trading
* Practical * Use in Trading
• Fibonacci Numbers are favorite numbers to use for Moving Averages & Time/Tick Frames
• 5, 8, 21, 34, 55 (50), 89 (90), 144
Fibonacci Trading
* Practical * Use in Trading
• We use their “fractional” forms for Fibonacci Retracement and Extension levels. 23.6% 38.2% 50.0% 61.8% 78.6% (76.4%) 127% 162%
Fibonacci Trading
* Practical * Use in Trading
-- There are two primary ways that I use Fibonacci analysis in my trading:
• One is to identify or confirm support or resistance levels
• and the other is to help identify price targets
- Fibonacci Trading -
Real-World Application
Fibonacci Trading
Real-World Application
• Reversals
Point of Inflection
Fibonacci Trading
Real-World Application
• Reversals
Point of Inflection
Fibonacci Trading
Real-World Application
• Reversals
Point of Inflection
(GO LIVE) – how to find them / draw them
Fibonacci Trading
Real-World Application
• Reversals
– Single Tops/Bottoms
– Double Tops/Bottoms (Divergences)
– Triple T/B : H&S, Inverse H&S
Fibonacci Trading
Double Top
Bearish Divergence
Fibonacci Trading
Triple Top
Head & Shoulders
Fibonacci Trading
Double Bottom
Bullish Divergence
Fibonacci Trading
Triple Bottom
Inverse
Head & Shoulders
Fibonacci Trading
Real-World Application
• Reversals
• Imagine you are driving a Southbound car,
– 20 MPH
– 55 MPH
– 85 MPH
Fibonacci Trading
Real-World Application
• Reversals
• Imagine you are driving a Southbound car,
– 20 MPH (single)
– 55 MPH (double)
– 85 MPH (triple)
Fibonacci Trading
TradeStation settings
Fibonacci Trading
* Practical * Use in Trading
• We use their “fractional” forms for Fibonacci Retracement and Extension levels.
23.6%
38.2%
50.0% (HIGHEST Probability – #1 Target)
61.8% (Purest “Fib” Level - #2 Target)
78.6%
Fibonacci Trading
Real-World Application
• GO LIVE on TradeStation Charts
Fibonacci Trading
Think or Swim settings
(default is fine)
Fibonacci Trading
Real-World Application
• GO LIVE on TOS Charts
- Dynamic Targeting -
MQ Trend indicator & Settings
Dynamic Targeting
MQ Trend Indicator
• Originally developed Microquant as a “trend following” indicator
• Green is Bullish Trend
• Red is Bearish Trend
• Based on Chandelier algorithms
• Not Parabolic SAR
Dynamic Targeting
MQ Trend Indicator
• Provides a variable Support/Resistance Level
• Adapted (DOTS) use as a “Dynamic Target”
• When use with Fibonacci Levels, can provide a very high level of confidence in profit target.
• Maximize Profits, Reduce Risk
Fibonacci Trading
Default
setting
Fibonacci Trading
DOTS
Setting
drawn on
primary
chart
Fibonacci Trading
Fibonacci Specific / Trading Room Settings
Fibonacci Trading
MQ Trend
Dots
Support/
Resistance
Fibonacci Trading
MQ Trend
Dots
Dynamic
Targeting
- Real World Trading -
Combination of Fibonacci Levels & MQ Trend “Dots”
Dynamic Targeting
Combine Fibonacci Levels & MQ Trend DOTS
• Fibonacci Levels : Provide levels of Support & Resistance
• Use 50% Retracement Level as the #1 Target
• Use 61.8% Retracement as the #2 Target
Dynamic Targeting
Combine Fibonacci Levels & MQ Trend DOTS
• Overlay (MQ Trend DOTS) use as a “Dynamic Target” – imagine dots as a moving “bullseye” that will gradually settle on or nearn one the Fib Levels
• MQT DOTS provide a very high level of confidence that, that Fib level will the “Target” level – adjust profit taking to Maximize Profits
STEP 1 :
• Watch chart for a 12 – 20 Bar / directional move
– 3 minute : 30 – 45 minute move
– Hourly : 2 – 3 day move
– Daily : 3 week move
Combine Fibonacci Levels & MQ Trend DOTS
STEP 2 :
• Identify the START and END points of inflection
– This will reveal the Fibonacci Levels
Combine Fibonacci Levels & MQ Trend DOTS
STEP 3 :
• Locate the current MQ Trend DOT distance
• Is it near a Fib Level?
• Is it moving?
• Assume that the current price will move to that price at the end of its retracement (End Goal)
Combine Fibonacci Levels & MQ Trend DOTS
STEP 4 :
• Plan your EXIT / Profit taking Strategy
• If MQ Trend DOTS, far away – hold longer for more
profit and/or sell slower and let more contracts run
• If MQ Trend DOTS, near by – take profits sooner, move may not go very far, but leave on a “runner”, it may breakthrough!
Combine Fibonacci Levels & MQ Trend DOTS
Dynamic Targeting
Combine
Fib Levels
&
Dynamic
Targeting
- Real World Setups you can Trade -
Real World Setups
Morning Daily Range - IntraDay
• Chart : 2 or 3 minute Intra-Day chart
• Start Time : 9:30AM eastern
• Watch for first 60 minutes for “run”
• If possible, identify High / Low
Real World Setups
Morning Daily Range - IntraDay
• If possible, identify High / Low Prices
• Are they point’s of inflection? Still Trending?
• Single/Double/Triple
Real World Setups
Morning Daily Range - IntraDay
• If answers are yes,
• Follow the Steps 1 – 4 in the Fib/MQ Trend Combo instructions.
• Usually get 1, possibly 2 quality retracements
Real World Setups
Morning Daily Range - IntraDay
• GO LIVE
Real World Setups
2 Day Swing Trade
• Chart : 60 minute chart
• Morning Trading session, Afternoon session
• Look at a minimum 5 Day period
Real World Setups
2 Day Swing Trade
• Watch for Trending Run of 12 – 15 bars
• Look for “Starting” point of run
• Watch for “Reversal Pattern”
Real World Setups
2 Day Swing Trade
• Take the Trade according to the Steps 1 – 4 in the Fib/MQ Trend Combo instructions
• You can trade it with stocks or options (directional or debit spreads)
Real World Setups
2 Day Swing Trade
• GO LIVE
Real World Setups
Big Fish Setup
• Chart : Daily chart
• Watch the Indexes first for “Trending Run”
Real World Setups
Big Fish Setup
• Watch for Trending Run of 12 – 15 days
• Look for “Starting” point of run
• Watch for “Reversal Pattern”
Real World Setups
Big Fish Setup
• Identify a Big Fish Stock making the same pattern.
• Take the Trade according to the Steps 1 – 4 in the Fib/MQ Trend Combo instructions. Trade the Index or the Stock.
• You can trade Big Fish Move in stocks or options (debit spreads/swing trade timeframe)
Real World Setups
Big Fish Setup
• GO LIVE
Thank You for your Attendance
Dynamic Targeting
Combine
Fib Levels
&
Dynamic
Targeting
Real World Setups
Intra-Day Scalping
• ES
• SPY
• Individual Stocks
Recommended