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Written by:iFund Traders, LLC
“7-Day FX Master Trader Program”
an introduction totrading for a living
Rev. 10/16//10Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 2
Copyright© 2010 by iFundtraders LLC
Published by iFundtraders LLC
All rights covered
Reproduction or translation of any part of this work beyond that permitted by section 107 or 108 of the 1976 United States Copyright Act without the permission of the copyright owner is unlawful. Requests for permission or further information should be addressed to the Permissions Department at iFund Traders, LLC.
Neither iFund Traders, LLC or it’s instructors are advising anyone to trade or use any system illustrated in this course. These are educational examples of science of system testing and development that iFund Traders, LLC want to share with you. None of the information illustrated in these examples is to be construed as offers to buy or sell commodities, stocks, FX, or any other financial instrument. None of the information presented purports to be a complete statement of all material facts related to trading.
Also, simulated performance results have certain inherent limitations; the results do not represent actual trading. Since many of the trades in this series 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. No representation is being made that the systems, methods or ideas shown in this course will produce the results that are described or illustrated.
This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.
From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers.
Active trading is an activity that possesses a high level of risk and may not be suitable for everyone. ISBN 1-59280-253-2
Printed in the United States of America.
Disclaimer
Page 3
“iFund Traders”An Introduction to
iFund Traders, LLCCHAPTER 1
Page 4
Our Website
Page 5
“Every single transaction is both a buy and a sell, and is therefore neutral. The opening transaction or tick, for any time frame is the most important for iFund
Traders” – Oliver L. Velez
FOREXBackground & Introduction
CHAPTER 2
History of FOREXHistory of FOREX
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX - the foreign exchange market, currency market, FX market or Forex is the market where one currency is traded for another. The need to exchange currencies is the primary reason why the Forex market is the largest, most liquid financial market in the world.
In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.
Unlike stocks and futures exchanges, the Forex is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for a specific currency pair. The foreign exchange market operates 24 hours per day, Sunday through Friday between individuals with Forex brokers, brokers with banks, and mostly banks with banks.
FOREX – Global Market ScheduleFOREX – Global Market Schedule
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX TerminologyFOREX Terminology
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
USD = United States Dollar EUR = Euro DollarGBP = Great Britain Pound JPY = Japanese Yen CAD = Canadian Dollar CHF = Confederatio Helvetica (Latin for Swiss Confederation) Franc NZD = New Zealand Dollar AUD = Australian Dollar
Major Currency Acronyms
FOREX TerminologyFOREX Terminology
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
What Does Currency Pair Mean?
The quotation and pricing structure of the currencies traded in the Forex market: the value of a currency is determined by its comparison to another currency. The first currency of a currency pair is called the "base currency", and the second currency is called the "quote currency". The currency pair shows how much of the quote currency is needed to purchase one unit of the base currency.
EUR/USD
FOREX TerminologyFOREX Terminology
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
What Does Base Currency Mean?The first currency quoted in a currency pair on Forex. It is also typically considered the domestic currency or accounting currency. For accounting purposes, a firm may use the base currency to represent all profits and losses.
It is sometimes referred to as the "primary currency".
EUR/USD
Base Currency
FOREX TerminologyFOREX Terminology
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
What Does Quote Currency Mean?The second currency quoted in a currency pair in Forex. In a direct quote, the quote currency is the foreign currency. In an indirect quote, the quote currency is the domestic currency.
Also known as the "secondary currency" or "counter currency".
EUR/USD
Quote Currency
FOREX TerminologyFOREX Terminology
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Since the “Quote / Counter Currency’ is the part of the currency pair that fluctuates higher or lower, it determines the strength or weakness of both currencies in a currency pair. As one currency goes up, the other must go down.
When a currency pair goes from a low price to a higher price, the Base Currency is said to have strengthened or gotten stronger. The converse is true for the Counter Currency. That is, it has weakened or gotten weaker as the Base Currency has gotten stronger.
Since Exchange Rates represent what a fixed amount of currency is equal to in terms of another currency, we have seen there is just one price for the Currency Pair. The movement of that price determines whether a currency is getting stronger or weaker.
If the EUR/USD exchange rate goes from 1.2000 to 1.2024, we have concluded that the EUR got stronger, the USD weaker.
FOREX TerminologyFOREX Terminology
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
EUR/USD
Strong
Strong
(Base / Quote)
Weak
Weak
FOREX TerminologyFOREX Terminology
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Pip stands for "percentage in point" and is the smallest increment of trade in FX. In the FX market, prices are quoted to the fifth decimal point.
For example, if a bar of soap in the drugstore was priced at $1.20, in the FX market the same bar of soap would be quoted at 1.20000. The change in that fourth decimal point is called 1 pip. The 5th and final decimal place measures a fraction of a pip.
What is a “PIP”?
FOREX TerminologyFOREX Terminology
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
What is a “PIP”?
EUR/USD EUR/JPY
1.314 2 0 108.7 4 0
Pip Pip
Fraction of a Pip Fraction of a Pip
5 decimal places 3 decimal places
FOREX TerminologyFOREX Terminology
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
In Forex, currency prices are typically quoted to the fifth decimal. For example, if the EUR/USD pair moves from 1.34100 to 1.34150 it has moved by 5 pips. If the EUR/USD increases by 1 full cent in value (from 1.34100 to 1.35100), it has increased by 100 pips.
What is a “PIP”?
If the EUR/USD pair moves from:to1.34120 1.34187
How many pips has price moved?
6.7 Pips
Understanding a Currency ChartUnderstanding a Currency Chart
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
1.55609_
1.54624.00985
98.5 Pips
What is a “PIP”?
(Take profit)
(Short entry)
GBP/USD
FOREX TerminologyFOREX Terminology
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Currency is traded in lots. One standard lot of U.S. dollars is $100,000. The pip value is how much a change of one pip is worth for one lot. For the U.S. dollar, the pip value is 1/100 of 1 percent of $100,000, or $10. Each currency has its own pip value, depending on its pip and the size of the standard lot of currency.
What is a value of a “PIP”?
108 pips x $10/per pip = $1,080 per lot
If the EUR/USD moves from:
1.32450 to 1.33530
108 PipsPrice has moved how many Pips?
Understanding a Currency ChartUnderstanding a Currency Chart
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Average Daily Ranges of PipsDay of WeekDay of Week EUR/USDEUR/USD GBP/USDGBP/USD USD/CHFUSD/CHF USD/JPY
MondayMonday 138138 131131 9797 6363
TuesdayTuesday 160160 162162 123123 8484
WednesdayWednesday 140140 142142 107107 8686
ThursdayThursday 158158 143143 118118 8080
FridayFriday 152152 141141 115115 8181
Understanding a Currency ChartUnderstanding a Currency Chart
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 21
“Every single transaction is both a buy and a sell, and is therefore neutral. The opening transaction or tick, for any time frame is the most important for iFund
Traders” – Oliver L. Velez
Candles Light The Way The Market’s
Four Major TicksCHAPTER 3
Page 22
The ‘Opening’ is Everything
Page 23
The ELEPHANT BAR
Every individual bar represents a battle that was fought by two groups, the bulls and bears, the buyers and sellers. When the close is well above the open, the bulls win, producing the color green. When the close is well below the open, the bears win, producing the color red. How much each side wins is determined by how much green or red they produce. In other words, the wider the distance between the open and close, the greater the win. When the bar is big, relative to the recent bars on the chart, it is called an “elephant” bar.
Bears WinBears WinBulls WinBulls Win
HighHigh
LowLow
HighHigh
LowLow
Page 24
The ELEPHANT BAR
12
34
56
7 8
It should not be difficult, it should be obvious - CAN YOU SPOPT THE ELEPHANT?
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The ELEPHANT BAR
12
34
56
7 8
It should not be difficult, it should be obvious - CAN YOU SPOT THE ELEPHANT?
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Elephant BarsIgniting or Exhausting
IGNITING
IGNITING
EXHAUSTING
EXHAUSTINGElephant Bars (aka WRB’s wide range bars) that start a new move or trigger a new entry in the continuation of a trend tend to be igniting in nature and follow through is expected. When these same bars appear after a move has already been underway they represent the final push, the last hoorah, and often lead to a pause and or change the momentum to the opposite direction
Page 27
If an elephant bar closes not too far off its extreme with a strong amount of color (green or red), there is an 82% chance that the next bar will produce the same color. iFund Traders Tip: Traders using my momentum style would look to dive into the bar following a strong “win” bar, but not at the open, as is shown above. More than the open is needed in order to commit to the trade. The next bar has to confirm the strength of the original “win” bar by first producing a small amount of the same color. See next page.
Bears WinBears WinBulls WinBulls Win
HighHigh
LowLow
HighHigh
LowLow
OpenOpen
OpenOpen
The ELEPHANT BAR
Page 28
iFund Traders employing my momentum style of trading would look to buy once the bar following a strong “win” bar shows a small amount of the same color. The stop would initially be placed at the low (for green) or high (for red) of the “win” bar. iFund Traders Tip: My momentum style has the best odds when the “win” bar is the first real sizable bar in 8 bars or more and the bar preceding the win bar is either the opposite color or a very small bar of the same color.
Bears WinBears WinBulls WinBulls Win
HighHigh
LowLow
HighHigh
LowLow
Buy
Short
Stop 1
The ELEPHANT BAR
Stop 1
Page 29
Once the trader commits, and the current bar trading grows to regular size, an adjustment in the stop can be made. The adjusted stop is placed 1 penny under the current bar’s low if green and 1 penny above the current bar’s high if red. iFund Traders Tip: The purpose of the stop in this case is to protect the previous bar’s color. At this point, a movement back into the previous bar’s range would be negative, therefore the stop is adjusted to prevent this.
Bears WinBears WinBulls WinBulls Win
HighHigh
LowLow
HighHigh
LowLow
Buy
Short
Stop 2
Stop 2
The ELEPHANT BAR
Page 30
Absolute Control
Absolute control exists when a very solid colored bar is trading at its extreme. When a solid green bar is currently trading at its absolute high, bulls are in absolute control. When a solid red bar is currently trading at its absolute low. iFund Traders Tip: It’s the upper end of a green bar and the lower end of a red bar that truly determines the potency or lack thereof of the group currently producing the color.
Bears in absolute controlBears in absolute controlBulls in absolute controlBulls in absolute control
HighHigh
LowLow
HighHigh
LowLow
Page 31
Full Control
Full control exists when a very solid colored bar is trading just a tad bit off its extreme. When a relatively solid green bar has pulled back off the high, but the bar is still dominantly green, bulls are in full control. When a relatively solid red has moved up off the low, but the bar is still dominantly red, bears are in full control. iFund Traders Tip: I repeat, it’s the upper end of a green bar and the lower end of a red bar that truly determines the potency or lack thereof of the group currently producing the color.
Bears in full controlBears in full controlBulls in full controlBulls in full control
HighHigh
LowLow
HighHigh
LowLow
Page 32
Good Control
Bears still in controlBears still in controlBulls still in controlBulls still in control
HighHigh
LowLow
HighHigh
LowLow
Good control exists when a solid colored bar has moved well off the extreme, but not enough to justify calling the bar wrecked or weak. When a green bar has pulled well off the high, but the bar is still mostly green, bulls are in good control. When a red has moved up well off the low, but the bar is still mostly red, bears are in good control. iFund Traders Tip: This is often what a bar will do after the trader has already committed to a play. These bars should not necessarily scare traders or make them doubt the power of the group producing the color…not at this point. This bar typically represents the squat before a dancer’s leap back to strength.
Page 33
Weak Control
Bears’ weakening controlBears’ weakening controlBulls’ weakening controlBulls’ weakening control
HighHigh
LowLow
HighHigh
LowLow
Weak control exists when a solid colored bar has lost about ½ of the color it once had. When a green bar has pulled deep off the high to eliminate about 50% of the green it once had, bulls might be in trouble. When a red bar has moved up deep off the low to eliminate about 50% of the red it once had, bears might be in trouble. iFund Traders Tip: This scenario does not guarantee that a full lost of control will materialize, but if the market is behind the counter –color move, the odds are good that the control is going to change.
Page 34
Lost Control
Bulls lose control to BearsBulls lose control to Bears Bears lose control to BullsBears lose control to Bulls
HighHigh
LowLow
HighHigh
LowLow
Last TradeLast Trade
Last TradeLast Trade
Lost control exists when a previously solid colored bar loses 2/3 or more of the color it once had, leaving the tail as the most dominant part of the bar. When a very solid green bar has pulled back so far off the high, leaving behind more tail than color, bulls have lost their power. When a very solid red bar has moved back up so far off the low, leaving behind more tail than color, bears have lost their power. iFund Traders Tip: This is the picture of change, the picture of the shift in power from one group to the other. I teach my traders to capitalize on change, making this a key action event.
Page 35
Totally Over!!
Bears in permanent controlBears in permanent control Bulls in permanent control Bulls in permanent control
100%
100%
Every individual bar represents a battle that was fought by two groups, the bulls and bears, the buyers and sellers. When the close is above the open, the bulls win, producing the color green. When the close is below the open, the bears win, producing the color red. How much each side wins is determined by how much green or red they produce. In other words, the wider the distance between the open and close, the greater the win, and when all that color is erased, the greater the odds of a change in control.
Page 36
Control Forever!!
Bears in control foreverBears in control forever Bulls in control foreverBulls in control forever
100%
100%
Every individual bar represents a battle that was fought by two groups, the bulls and bears, the buyers and sellers. When the close is above the open, the bulls win, producing the color green. When the close is below the open, the bears win, producing the color red. How much each side wins is determined by how much green or red they produce. In other words, the wider the distance between the open and close, the greater the win, and when all that color is erased, the greater the odds of a change in control. iFund Traders Tip: when all the color of a wide bar is erased and the opposite color is produced, you have usually found the high or the low for some time to come.
Page 37
Full Control
Every individual bar represents a battle that was fought by two groups, the bulls and bears, the buyers and sellers. When the close is above the open, the bulls win, producing the color green. When the close is below the open, the bears win, producing the color red. How much each side wins is determined by how much green or red they produce. In other words, the wider the distance between the open and close, the greater the win.
Bears in ControlBears in ControlBulls in ControlBulls in Control
HighHigh
LowLow
HighHigh
LowLow
Page 38
Good Control
Every individual bar represents a battle that was fought by two groups, the bulls and bears, the buyers and sellers. When the close is above the open, the bulls win, producing the color green. When the close is below the open, the bears win, producing the color red. How much each side wins is determined by how much green or red they produce. In other words, the wider the distance between the open and close, the greater the win.
Bears still in controlBears still in controlBulls still in controlBulls still in control
HighHigh
LowLow
HighHigh
LowLow
Page 39
Weak Control
Every individual bar represents a battle that was fought by two groups, the bulls and bears, the buyers and sellers. When the close is above the open, the bulls win, producing the color green. When the close is below the open, the bears win, producing the color red. How much each side wins is determined by how much green or red they produce. In other words, the wider the distance between the open and close, the greater the win.
Bears weakening controlBears weakening controlBulls weakening controlBulls weakening control
HighHigh
LowLow
HighHigh
LowLow
Page 40
Lost Control
Every individual bar represents a battle that was fought by two groups, the bulls and bears, the buyers and sellers. When the close is above the open, the bulls win, producing the color green. When the close is below the open, the bears win, producing the color red. How much each side wins is determined by how much green or red they produce. In other words, the wider the distance between the open and close, the greater the win. iFund Traders Tip: However, if more than 2/3 of any color is suddenly erased, the law of follow-through is greatly diminished.
Bears back in controlBears back in control Bulls back in controlBulls back in control
HighHigh
LowLow
HighHigh
LowLow
Page 41
Totally Over Forever!
Every individual bar represents a battle that was fought by two groups, the bulls and bears, the buyers and sellers. When the close is above the open, the bulls win, producing the color green. When the close is below the open, the bears win, producing the color red. How much each side wins is determined by how much green or red they produce. In other words, the wider the distance between the open and close, the greater the win.
Bears in control foreverBears in control forever Bulls in control foreverBulls in control forever
HighHigh
LowLow100%
100%
Page 42
“I’m not sure if Sir Isaac Newton ever played the market, but many of his discoveries and realizations lend themselves to proper market play.”
– Oliver L. Velez
“Velez Market Law 1”CHAPTER 4
Page 43
Velez Market Law #1The Law of Momentum
During MOVING market environments, FX and other tradable items tend to follow through or continue the most recently completed color-coded bar, 80% of the time, as long as most of the color has been maintained.
Sir Isaac Newton: “An object in motion tends to stay in motion.”
Different ways to communicate the law:
1) After a solid Green Bar, expect another one to follow 80%;
2) After a solid Red Bar, expect another one to follow 80%
3) The bigger the green or red bar, the higher the odds of follow through, meaning you’ll see continuance closer to 90% of the time.
4) A small amount of green or red does not give the iFund Traders enough to go on. More information is needed in that case.
Page 44
“There are only 13 bars the market can form. They represent the market’s alphabet, if you will. Learn these bars and what they mean and you’ll be set to
Trade for Life™.” – Oliver L. Velez
“The Market’s 13 Bars”
Page 45
The 10 Colored Candles
The first set of bars is won by the bulls in varying degrees, with the last bar being an actual loss. The most bullish is at the left, the least is at the right. The same goes for the bear wins. The most bearish starts at the left, the most questionable is at the far right.
Mos
t Bul
lish
2nd M
ost B
ullis
h
Leas
t Bul
lish
Neu
tral B
ull
Nor
mal
Bul
lish
Mos
t Bea
rish
2nd M
ost B
earis
h
Leas
t Bea
rish
Neu
tral B
ear
1 2 3 4 5
6 7 8 9 10
Nor
mal
Bea
rish
Page 46
The 3 Non-Color Candles
Bottoming tails (BTs) and Topping Tails (TTs) offer iFund Traders some incredible trading opportunities, which we will see shortly.
Tip: While technically no one wins, due to the open and close being even, the last group in control of the price is considered the winner. Bar 1, is completely a draw, Bar 2 is won by the bears and Bar 3 is won by the bulls.
Bottoming Tail (BT)
Topping Tail (TT)
Buy
ers d
omin
ate
this
ent
ire a
rea
Selle
rs d
omin
ate
this
ent
ire a
rea
All
gree
n w
as lo
st
All
red
was
lost
Dra
w
11 12 13
Page 47
“The following three time frames are used by iFund Traders to earn a living in the markets. These time frames are income generators, not wealth builders. They are used to making money on a daily basis”
The Four Trading Time Frames
CHAPTER 5
Page 48
Four Trading Time Frames
1) 5-minute Chart – This time frame is a key time frame for finding very tight stop entires with very large profit potential. The patterns we trade appear frequently enough in the 5-minute window to keep us active, yet infrequently enough to prevent us from over trading. This is a nice time frame to master.
2) 15-minute Chart – This time frame allows traders to capture some of the biggest moves without having to make split second decisions. Fifteen minutes is plenty of time to measure for stops, identify targets, and spot key support and resistance before having to commit to a trade. Since FX trades can last 24hrs a day, there are plenty of opportunities on this time frame.
3) 30-minute Chart – This time frame fits perfectly between the 15 and 60 minute time frames and shares the characteristics of both; it can be used to spot trends, key support and resistance and also has opportunity to find tradable patters that produce big moves.
4) 60-minute Chart – While in some markets this is considered to just be a primary trending time frame for day traders, the 24 hr nature of the FX market makes this another powerful trading time frame as well as helping to identify trends and key support and resistance points. Finding quality patterns on this time frame can lead to some moves that can last all day or days instead of just minutes and can result in some incredible profits.
Note: The 8-period, the 20-period moving average (20ma) and the 200-period moving average (200ma) are used on all three, the 5, 15, and 60 minute charts. Keep in mind that the 20ma and 21ma are interchangeable. It’s a personal choice.
Page 49
The 5-Minute Chart
Trading Tip: iFund Traders look to go long when the r20ma is above the 200ma. They look to go short with the d20ma is blow the
200ma
r20ma
Flat 200ma
When a FX pair is able to consistently outpace the average price of the last 20 bars, it is a powerful indication of institutions at work and iFund traders will look to capitalize by following along with this powerful trend
Page 50
The15-Minute Chart
d20 ma
Notice the price is declining with the d20ma, and at or near the point of contact will be trading opportunities for the iFund trader to capitalize on this powerful move.
Page 51
The30-Minute Chart
Notice the price is declining with the d20ma, and at or near the point of contact will be trading opportunities for the iFund trader to capitalize on this powerful move.
d20 ma
Bear Elephant causes breakdown – notice the move that follows
Page 52
The 60-minute Chart
Circles show well-defined sell opportunities for the iFund Trained Trader.
iFund Traders Tip: This time frame offers nice opportunities to capture entire trend using the 20ma.
Page 53
“The following three time frames help iFund Traders establish a bias for the market.. Knowing how to determine what direction is more likely than the other
over the next few days, hours or 15 minutes is one of the true keys to accuracy as a trader” – Oliver L. Velez
The Three Analytical Time Frames
CHAPTER 6
Page 54
Three Analytical Time Frames1) Daily Chart – This time frame is key to determining upside and downside biases
based on the prevailing trend. Certain price patterns that form on the daily chart have a high probability of moving in a predetermined direction for days at a time and can lead to major multi-day moves. This proves very valuable to iFund Traders looking to take advantage of holding part of trade as a “core: position for the day or even the week when the trend is strong, and with well defined daily chart patterns, it will lead to it being a focus over several days.
2) Weekly Chart – This time is almost never used for trading, but it is unrivaled when it comes to finding major “reflection points,” areas of major significance which often lead to abrupt stoppages and sudden reversals during the day. The iFund Traders will use the weekly chart simply to reference these points and to gauge the major trend of the underlying FX pair.
3) 4 hr Chart – This time frame will be used primarily for trend analysis and support and resistance reference points. While iFund Traders do take trades on it from time to time, its use as a gauge of the currency pair’s power and it’s trend are priceless. With that being said, trades on the 4 hr chart can lead to the powerful multi-day moves. In a sense, for the professional trader earning a living via the markets, this time frame would be considered the “core” one, for longer term multi-day trades throughout the week.
Note: The 8, 20 and 200 MAs are typically used for the daily, weekly and 4 hr chart.
Page 55
“There are three moving averages iFund Traders monitor at all times." The moving averages form the basis for many of our biggest money making strategies.”
- Oliver L. Velez
The Three Trading Moving Averages
CHAPTER 7
Page 56
Three Major Moving Averages1) 8-period Moving Average (8ma) – This simple moving average is superior at
capturing and supporting the market’s most powerful moves. If price is moving with a fury (up or down), it is this moving average that the price will often react off of. We also use this moving average as the basis for one of our most effective trailing stop methods, which we will discuss shortly. iFund Traders have the 8ma on every chart they look at.
2) 20-period Moving Average (20ma) – This simple moving average is the number one staple for iFund Traders. No chart is ever looked at without the aid of the 20ma. In fact, I don’t regard a chart as being valid unless it is accompanied by the 20ma. It reveals the directional bias, acts like a magnet and tells the trader where significant areas of support and resistance are. Keep in mind that the purest would use a 21-period MA. We round to 20, knowing that moving averages are simply areas, not specific prices.
3) 200-period Moving Average (200ma) – This simple but major moving average is the granddaddy of them all. It’s almost magical how often price and the overall market obey this slow moving line. Many of iFund Traders’ most successful trades originate off the 200ma. It is always in view and is given the utmost respect.
Page 57
The Powerful 8MA & 20MA1) 8 & 20 Period Simple Moving Average – The 8ma & 20ma (or the 21ma) are so important to iFund
Traders that no chart is ever studied or viewed without them. That’s because their power and reliability are unrivaled. No chart is a chart unless it is accompanied by these all-important technical indicators. We use them on every time frame or chart we look at. Tip: The iFund Traders Trader can literally earn his entire living in the market with the 8ma & 20ma. Here are the most important things to know about the 8ma & 20ma and their proper use:
a) Trade with the 8ma & 20ma, not against them - Most of your trades should be in sync with the 20ma. If the 8 & 20ma are rising in a smooth fashion, your focus should almost always be long. Conversely, if the 8 & 20ma are declining in a smooth fashion, your
focus should almost always be to short. If the 20ma is flat (f20ma), your focus can be to liquidity trade with the “bid and offer” approach (buy below the 20ma; sell above the 20ma).
b) Use 8ma & 20ma as support & Resistance – If and when the 8 and/or 20ma is rising , it will serve as strong support. If the 8 and/or 20ma is declining, it will serve as strong overhead resistance. Look for buys at or near a r8ma or r20ma. Look for sells/shorts at or near a 8ma or 20ma.
c) Use 20ma as a median line – When a currency pair is consolidating in a sideways pattern, the 20ma will be flat and usually positioned right in the middle of the sideways trend. If and when this is the case, buying near the bottom in a range below the 20ma and offering/shorting near the top of a range above the 20ma is the game to play. Always be
watchful of which side the 20ma eventually halts the price on, for it is the potential start of the next trending move.
Page 58
Chart Courtesy of iFund Traders Pro™
The 15 Min Chart -20ma power
Price rising above a rising 8ma, above a rising 20ma – picture of power for the iFund trained trader. Long opportunities would be sought out on this and the other trading time frames.
r20ma
r8ma
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The 60 min Chart – 20 ma power
Price falling below a d8ma, below a d20ma – picture of power for the iFund trained trader. Short opportunities would be sought out on this and the other trading time frames.
d20ma
d8ma
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Chart Courtesy of iFund Traders Pro™
The 4 hr Chart – 20ma power
Price falling below a d8ma, below a d20ma – picture of power for the iFund trained trader. Short opportunities would be sought out on this and the other trading time frames.
Note – As mentioned earlier – when the 4 hr chart is trending, it can lead to multi-day moves without breaking trend, notice how the 20ma would have kept you short for days at a time
d20ma
d8ma
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The 20ma Halt!
When the 20ma becomes flat and wavy, price will tend to move equal distance above and below, almost ignoring the 20ma. Once the price is halted or caught by the 20ma, get ready for the next move – you have just found the start of a potential trend
20ma HALT
Bull elephant kicks off the new move following the halt
Page 62
The 20ma Halt
When the 20ma becomes flat and wavy, price will tend to move equal distance above and below, almost ignoring the 20ma. Once the price is halted or caught by the 20ma, get ready for the next move – you have just found the start of a potential trend
First Halt stops the expected move up after two BT’s
Second Halt sends the price crashing lower with a Bear Elephant bar
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The Mighty 200 MA2) 200 Period Simple Moving Average (200ma) – The 200ma is so universally watched, in
all time frames, that for all practical purposes, it has become a self-fulfilling prophesy. So rarely do FX pairs fail to obey (get halted by) the 200ma that we’ve given it the highest nick-name of all, Goliath. It’s power, force, and reliability are so great, that it truly is goliath-like. We use the 200ma on all time frames. Here are a few things that you must keep in mind regarding this mighty moving average:
a) Flatness is king: - While the 20ma is most powerful when it is rising and declining (trending), the 200ma is most powerful when it is flat (trend-less).
b) Use as support – Whenever price declines to a flat 200ma, it will almost always experience some form of rebound, particularly if the 20ma is far away.
c) Use as resistance – Whenever price rallies to a flat, overhead 200ma, it will almost always experience some form of retracement back down, particularly if the 20ma is far away.
Trading Tip: iFund Traders know that flat 200ma plays call for bigger positions
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The Flat Mighty 200ma
Charts Courtesy of iFund Traders Trader Pro®
The Flat 200ma would have been expected support (1), but once broken and retested (2), it now becomes strong resistance (3,4). Notice the nice measured moves once the 20ma becomes flat and wavy and the 200ma serves as the resistance.
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200ma support-resistance
Notice how the flat 200ma acts as very strong support, but once broken and retested it becomes equally strong resistance
Holding support in the upper third of the bull elephant bar
First break and retest of support
Confirmed resistance on next retest
Page 66
Flat Mighty 200ma
What key event happens right at the flat 200ma?
Notice the power of this 200ma play – not only does it stop the uptrend dead in its tracks, but sends it on a 100% retracement of the prior move
Page 67
“The number 1 has never and never will be a popular number for the market. It always seems to require something more than one, or once, or one time. In other words, the market likes confirmation. ‘One time’ never cuts it.” – Oliver L. Velez
“Velez Market Law 2” CHAPTER 8
Page 68
Velez Market Law #2The Law of “2”
The market never accomplishes anything with just one bar. It needs at least two bars to regard something as being real or significant. Follow-through by a second bar is crucial, otherwise the one bar event, no matter how apparently significant, is not yet real.
Different ways to communicate the law:
1) A one bar breakout is only significant if followed through by a second up bar;
2) A one bar breakdown is only significant if it’s followed through by a second down bar;
3) One bar events with no follow through tend to eventually produce strong moves in the opposite direction.
Page 69
Velez Market Law #2(1) Bull elephant kicks off the move (2) Bear elephant closes below the 20ma and then has the low of that bar broken confirming a break of the 20ma (3) Price moves back above a flat wavy 20ma and then has another Bear elephant bar close below the 20ma, BUT THERE IS NO FOLLOW THROUGH (4) This leads to a 20ma halt and a Bull elephant bar starts the next move higher(5) Notice the next “fake” break of the20ma, but our traders did not get shaken out due to Market Law #2
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Velez Market Law #2
1
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iFund Traders Quote: “All markets have statistical limits. The trader who thoroughly understands when markets are statistically at or near the outer
bounds of their norms will become a master, and possibly even rich!”- Oliver L. Velez
“Velez Market Law #3” CHAPTER 9
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Velez Market Law #3The 3, 5, 8 Bar Max
During NORMAL market environments, FX and other tradable items usually will not move in the same direction more than 5 to 8 bars in a row; however, price tends to
stay trapped in a 3 to 8 bar max cycle 80% of the time. 20% of the time, price moves can top and bottom outside of this zone. But 5 bars is truly the pivotal number.
Different ways to communicate the law:
1) After a 3 to 5 bar run (up or down) the market tends to sharply reverse, creating a nice trading opportunity. Every now and again, it can slip into the next 5 to 8 bar zone.
2) Neither the bulls nor the bears can consistently win more than 5 battles (bars) in a row. After a sharp 3 to 5 bar rally, the bears usuallyquickly regain control. After a sharp 3 to 5 bar decline, the bullsusually quickly regain control. These moves can move to the 5 to 8 bar zone at times.
3) Lastly, this law can be said this way: “After 3 to 5 green bars in a row, the iFund Trader should look to take advantage
of an upcoming series of red bars. After 3 to 5 red bars in arow, the iFund Trader should look to take advantage of anupcoming series of green bars.”
Page 73
The 3 to 5 Bar Buy Rule
In each of the scenarios above, the iFund Trader would be looking for a tradable rebound to the upside, once the high of a prior bar has been taken out. How much of a rebound would depend on the answers to several key questions such as: a) is the 3-5 bar dip occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs present; c) how far away is the nearest area of resistance; d) where is the dip in relation to the 20ma; and e) is the current decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 74
The 3 to 5 Bar Buy Rule
In each of the scenarios above, the iFund Trader would be looking for a tradable rebound to the upside, once the high of a prior bar has been taken out. How much of a rebound would depend on the answers to several key questions such as: a) is the 3-5 bar dip occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs present; c) how far away is the nearest area of resistance; d) where is the dip in relation to the 20ma; and e) is the current decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 75
The 3 to 5 Bar Buy Rule
In each of the scenarios above, the iFund Trader would be looking for a tradable rebound to the upside, once the high of a prior bar has been taken out. How much of a rebound would depend on the answers to several key questions such as: a) is the 3-5 bar dip occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs present; c) how far away is the nearest area of resistance; d) where is the dip in relation to the 20ma; and e) is the current decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 76
The 3 to 5 Bar Buy Rule
In each of the scenarios above, the iFund Trader would be looking for a tradable rebound to the upside, once the high of a prior bar has been taken out. How much of a rebound would depend on the answers to several key questions such as: a) is the 3-5 bar dip occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs present; c) how far away is the nearest area of resistance; d) where is the dip in relation to the 20ma; and e) is the current decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in the many trading concepts taught in the future chapters and through out our 5-day live trading labs
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The Picture of Strength
Circles show well-defined buy opportunities for the iFund Trained Trader.
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The 3 to 5 Bar Sell Rule
In each of the scenarios above, the iFund Trader would be looking for a tradable decline to the downside, once the low of a prior bar has been taken out. How much of a decline would depend on the answers to several key questions such as: a) is the 3-5 bar rally occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs present; c) how far away is the nearest area of resistance; d) where is the rally in relation to the 20ma; and e) is the current decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 79
The 3 to 5 Bar Sell Rule
In each of the scenarios above, the iFund Trader would be looking for a tradable decline to the downside, once the low of a prior bar has been taken out. How much of a decline would depend on the answers to several key questions such as: a) is the 3-5 bar rally occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs present; c) how far away is the nearest area of resistance; d) where is the rally in relation to the 20ma; and e) is the current decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 80
The 3 to 5 Bar Sell Rule
In each of the scenarios above, the iFund Trader would be looking for a tradable decline to the downside, once the low of a prior bar has been taken out. How much of a decline would depend on the answers to several key questions such as: a) is the 3-5 bar rally occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs present; c) how far away is the nearest area of resistance; d) where is the rally in relation to the 20ma; and e) is the current decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 81
The 3 to 5 Bar Sell Rule
In each of the scenarios above, the iFund Trader would be looking for a tradable decline to the downside, once the low of a prior bar has been taken out. How much of a decline would depend on the answers to several key questions such as: a) is the 3-5 bar rally occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs present; c) how far away is the nearest area of resistance; d) where is the rally in relation to the 20ma; and e) is the current decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in the many trading concepts taught in the future chapters and through out our 5-day live trading labs
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The Picture of Power
Circles show well-defined short opportunities for the iFund Trained Trader.
iFund Traders Tip: This time frame offers nice opportunities to capture entire trend using the 20ma.
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Quote: “Market failures tend to cause major problems for most ordinary traders, but they can serve as major money making opportunities for well trained iFund
Traders! In other words, we are always prepared to profit from the market’s failed attempt to do something highly expected.”
- Oliver L. Velez
“Velez Market Law #4” CHAPTER 10
Page 84
The Failed New Low/High Law“If price fails to make a new pivot low, after it has already made 3 or more lower pivot lows, it will make a new high relative to the previous pivot. Conversely, if price fails to make a new pivot high, after it has already made a series of higher pivot highs (3 or more), it will make a new low relative to the previous pivot.”
Different ways to communicate the law:1) The first failed attempt to make a new low in a well established downtrend is the first sign that the balance of power has shifted from the sellers back to the buyers. The tend has likely changed and the first low in the new trend has been identified.
2) The first failed attempt to make a new high in a well established uptrend is the first sign that the balance of power has shifted from the buyers back to the sellers. The trend has likely changed and the first high in the new trend has been identified.
3) The first failed attempt to make a new high or low in a well established trend is the first sign that the back of the existing trend has been broken and the opposing side is ready to regain control.
Velez Market Law #4
Velez Market Law 4Velez Market Law 4
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
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Velez Market Law 4Velez Market Law 4
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
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Can you name the events on the chart ?
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The Fibonacci Sequence
major market moves
Page 88
The Fibonacci Swing
Your pairs become playable once they begin to swing in 3, 5 and 8-bar cycles. If your pairs are not providing at least three bars of the same color, then they should be left alone. 1 to 2 bar cycles are “no-follow-through” markets that generate a lot of whipsaws and losing trades. Tip: The first time your pair produces a 3-bar rally or decline of the same color, it should demand your attention.
Page 89
“The idea is to get out fast when a trade goes against you.”- Jesse Livermore
“iFund Traders”The Three Major
Trailing Stop Methods CHAPTER 11
Page 90
iFund Traders Trailing Stop Method 1
iFund Traders Bar-by-Bar Stop Method
Once the iFund Trader has entered his long, and placed his initial stop, it’s a boom or bust scenario, meaning that either the trader will hit his anticipated target or get out at his initial stop. Once there is a two bar lift (this includes the entry bar if it ends higher than the buy price), the trader would launch into “training stop” mode. During this mode, the trader would maintain a mental stop 1 pip below the prior bar’s low at all times. As each new bar begins, the trailing stop is moved up, always staying only one bar behind the bar currently trading. The same would apply in reverse, as evidenced by Figure 2.
Bar-by-Bar Trailing Stop
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The numbers show each stop adjustment made at the close of the bar
Bar-by-Bar Trailing Stop
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The numbers show each stop adjustment made at the close of the bar
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iFund Traders Trailing Stop Method 2
In the above Figure 1, the iFund Trader would simply buy at point 1, and sell into the initial rise, anticipating a pullback before the secondary leg. At buy point 2, the iFund Traders Trader could try to hold on to the trade as long as it remained above the r8ma. Essentially, at that point, the 8ma would become the iFund Traders trailing stop. Everything would be handled in reverse for Figure 2.
2) iFund Traders 8ma Momentum Stop Method – This is by far the most dynamic trailing stop method we deploy, but requires nerves of steel to put into practice. It represents one of my personal favorites because of its superior ability to keep the trader in a trade during the sweetest (strongest) part of the move. Bar-by-bar noise is illuminated, allowing the trader to focus on what counts, the force of the trend. What must be kept in mind is that when things are not in a trending mode, this stop method will result in frequent “whip-saws.” But, with proper timing, it (like its bigger brother, the 20ma trailing stop method) is unrivaled when it comes to “milking” the best part of a trend’s move. Note: We allow iFund Traders to use this stop method right from the initial stages of their trading.
Buy (1)Buy (2)
a
8ma
Figure 1
Short (1)Short (2)
8ma
Figure 2
a
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The 8ma Bull Run
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The 8ma Bull Run
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The Picture of Strength
Circles show well-defined buy opportunities for the iFund Trained Trader.
Notice the 8ma contains this entire move, and never has a two bar break, so the trail is never broken – this kind of power and trail is referred to as the “8-TRAIN” and it takes traders for a ride into the land of major profitability
THE 8-TRAIN
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The 8ma Bear Run
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8ma Bear Run
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iFund Traders Trailing Stop Method 3
In the above Figure 1, the iFund Traders would simply buy at point 1, and sell into the initial rise, anticipating a pullback before the secondary leg. At buy point 2, the iFund Traders could try to hold on to the trade as long as it remained above the r20ma. Essentially, at that point, the 20ma would become the iFund Traders trailing stop. Everything would be handled in reverse for Figure 2. The method applied to 5 and 15 minute charts works extremely well.
3) iFund Traders 20ma Trailing Stop Method – This is by far the most basic trailing stop method we deploy, and the easiest to put into practice. In many ways, it is the most superior method of all as it forces the trader to focus on the trend, instead of the bar-by-bar noise, which can be quite confusing at times. However, its superior nature only works in trending markets and it loses all of its luster when markets are not trending. But, with proper timing, it is unrivaled when it comes to “milking” a move for all it’s worth. Note: We allow iFund Traders to use this method after they have graduated to level 4.
Buy (1)Buy (2)
a
20ma
Figure 1
Short (1)Short (2)
20ma
Figure 2
a
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The 20ma Trailing Stop
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The 20ma Trailing Stop
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iFund Traders Quote: “You can beat a horse race, but you can’t beat the races.”- Unknown
“iFund Traders with”The Market’s Three Trends
CHAPTER 12
Page 103
The Market’s Three Trends
1) Uptrend
2) Downtrend
3) Sideways Trend
1) The Up Trend – The up trend, by far the most popular of all, is usually defined by a series of higher highs and higher lows. Our definition is a bit more involved. In addition to higher highs and lows, we want an up trend to posses a smooth rising 20ma above a 200ma.
Tip: In Up Trends, iFund Traders buy dips toward the 20ma, and buy breakouts at or near the 20ma .
2) The Down Trend – The down trend, by far the most feared of all, is usually defined by a series of lower highs and lower lows. Our definition is a bit more involved. In addition to lower highs and lows, we want a down trend to posses a smooth declining 20ma below a 200ma.
3) The Sideways Trend – The sideways trend, by far the most frustrating, is usually defined by a series of relatively equal highs and lows. This stage can be wide, usually when it forms after an advance, or it can tight and narrow, usually when it is just a pause or after a sharp decline.
Tip: In Sideways Trends, iFund Traders buy/bid dips and short/offer rallies, or wait for the “halt” play and look for the new trend to emerge
Tip: In Down Trends, iFund Traders short rallies toward the 20ma, and short breakouts at or near the 20ma.
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The Market’s Three Up Trends
1) Reg. Up trend
1) The Regular Up Trend – This uptrend, defined as rising price above a smooth rising 20ma, is a iFund Traders bread and butter trend. This trend will be played more than an other.
Tip: In Regular up trends, iFund Traders buy dips toward the 20ma, buy breakouts at or near the 20ma.
2) The Power Uptrend – This uptrend, defined as a rising price above a rising 20ma which is also above the 200ma, is a step above the regular uptrend. An overhead 200ma represents clouds in the sky, somewhat. When the 200ma is below all the action, it’s typically clearer sailing
3) The Super Uptrend – The uptrend, defined as a rising price above a rising 8ma, which is also above a rising 20ma, is the most powerful one in existence. It’s emergence signifies pure unadulterated buying power that one can trust absolutely. It does not get better than this!
Tip: In Super up trends, buying anywhere and anytime during the trend works amazing well.
Tip: In Power up trends, dips are no concern and can be used to accumulate larger positions.
2) Power Uptrend
3) Super Uptrend
20ma
20ma
8ma
20ma
200ma
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The Market’s Three Down Trends
1) Reg. Downtrend
1) The Regular Down Trend – This downtrend, defined as a declining price below a smooth declining 20ma, is a iFund Traders bread and butter short trend. This trend will be played on the short side more than an other.
Tip: In Regular downtrends, iFund Traders short rallies toward the 20ma, and short breakdowns at or near the 20ma .
2) The Power Downtrend – This downtrend, defined as a declining price below a declining 20ma which is also below the 200ma, is a step above the regular downtrend. A 200ma below the price represents a floor of support. When the 200ma is above all the action, the price is typically freer to fall.
3) The Super Downtrend – The downtrend, defined as a declining price below a declining 8ma, which is also below a declining 20ma, is the most powerful one in existence. It’s emergence signifies pure unadulterated selling power that one can trust absolutely. It does not get better than this for bears!
Tip: In Super downtrends, shorting anywhere and anytime during the trend works amazing well.
Tip: In Power downtrends, rallies are no concern and can be used to build larger short positions.
2) Power Downtrend
20ma
20ma
8ma
20ma
200ma
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iFund Traders Super Uptrend
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Super Down Trend
Page 108
Chart Courtesy of Realtick®
15-Minute Up Trend
Look at the power of this uptrend that develops after the 20ma halt. The 8 and 20 ma’s begin to rise and remain parallel to each other as they take the price higher and higher
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60 Minute Down Trend
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Sideways Trend
The 20ma says it all. The flat wavy 20 leads to price making relatively equal highs and lows above and below the 20ma. These “measured moves” become support and resistance points for traders to look for trading opportunities - do you see any?
Page 111
“Do not have an interest in too many stocks at one time. It is much easier to watch a few than many.”- Jesse Livermore
“Section III”The Trading Patterns
CHAPTER 13
Page 112
iFund Traders Buy Setup (VBS)
BULLISH TRENDBULLISH TREND• Rising price above a rising 20 Ma (a 20 Ma above a 200 Ma is ideal, but not required)
FULL SETUPFULL SETUP• Three or more consecutive Lower Highs (LHs), and Lower Lows(LLs) or,• Three or more Red Bars (RBs). Tip: Two LHs or RBs will often work in very strong trends.
ADD-ONSADD-ONS• Bottoming sign: BT, GBR, NRB,NB• Location: Price support, Moving average support; specialty support items• Time: reversal times are not required, but should be noted
BUY ACTIONBUY ACTION• Buy one pip above the prior bar’s high. Note: If the prior bar’s high is too far away, drop to the next lower
time frame and use the prior bar’s high in that time frame as your alternative entry price. Example: If the prior 15-minute high is too far away, drop to the 5-minute chart and buy above the prior 5-minute high.
• Place stop 1 pip below the entry bar’s low. If too close use prior bar’s low.
TRADE MANAGEMENTTRADE MANAGEMENT• Set minimum target at the 50% Retracement level. The secondary target is at or near the prior pivot high and
third is above the pivot high. Note: an overhead MA can also be a target.• After a 2 bar advance, place a trailing stop 1 pip under each prior bar’s low until a) objective is met; b) a
topping tail forms; c) a wide range up bar forms; or d) a RBR dips below (takes away) the prior bar.
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iFund Traders Buy Tactics1) iFund Traders Buy set-up – This is the main buy set-up we use at iFund Traders, and it will represent anywhere from 65% - 80% of your longs. It is comprised of only a few basic criteria and can be used in all time frames. To make it as an iFund Trader, this tactic must be mastered.
1) iFund Traders Note: – The location and time of occurrences of this main stay trading pattern are the major keys. The iFund Trader wants to essentially focus on the VBSs that occur at or near multiple support levels and key reversal times. The ones accompanied by Narrow Range Bars (NBRs) are my personal favorite. We’ll talk about these as we move forward.
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The iFund Buy Set – Up - VBS
LongEntry
Stop
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The iFund Buy Set – Up - VBS
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The iFund Buy Set – Up - VBS
Bull Power Trend with a textbook VBS
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iFund Traders Sell Set-up (VSS)
BEARISH TRENDBEARISH TREND• Declining price under a declining 20 Ma (a 20 Ma below the 200 Ma is ideal, but not required)
FULL SETUPFULL SETUP• Three or more consecutive Higher Lows (HLs), and Higher Highs (HHs) or,• Three or more Green Bars (GBs). Tip: Two HLs or GBs will often work in very strong trends.
ADD-ONSADD-ONS• Topping sign: TT, RBR, NRB,NB; • Location: Price resistance, Moving average resistance; Specialty resistance items• Time: reversal times are not required but should be noted
SELL/SHORT ACTIONSELL/SHORT ACTION• Short 1 pip below the prior bar’s low. Note: If the prior bar’s low is too far away, drop to the next lower time
frame and use the prior bar’s low in that time frame as your alternative entry price. Example: If the prior 15-minute low is too far away, drop to the 5-minute chart and short below the prior 5-minute low.
• Place stop 1 pip above the entry bar’s high. If too close use prior bar’s high.
TRADE MANAGEMENTTRADE MANAGEMENT• Set minimum target at the 50% Retracement level. The secondary target is at or near the prior pivot low and
the third is somewhere below the pivot low.• After a 2 bar decline, place a trailing stop 1 pip above each prior bar’s high until a) objective is met; b) a
bottoming tail forms; c) a wide range down bar forms; or d) a penetrating GBR.
Page 118
iFund Traders Sell/Short Tactic
1) iFund Traders Sell Set-up – This is the main sell set-up we use at iFund Traders and it will represent anywhere from 65% to 80% of your shorts. It is comprised of only a few basic criteria and can be used in all time frames. To make it as a iFund Traders Trader, this tactic must be mastered.
Alert
d20ma
Stop
d20ma
Ultimate Target Area
Pattern Set-up Short Action
Trading Note: The location and time of occurrence of this main stay trading pattern are the major keys. The iFund Traders Trader wants to essentially focus on the Sell Set-ups that occur at or near multiple support levels and key reversal times. The ones accompanied by NRBs are my personal favorite. We’ll talk about these as we move forward.
ShortT1
T2
T3
200ma 200ma
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iFund Traders Sell Set-up (VSS)
Stop
ShortEntry
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iFund Traders Sell Set-up (VSS)
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iFund Traders Sell Set-up (VSS)
Bear Elephant forms during breakdown, the iFund trader knows the potential follow through from an event like this and seeks out short opportunities with each VSS
Page 122
iFund Traders Quote: “I learned very early on that brokers are always wrong; analysts are always wrong; and clients are always wrong. But the tape is never
wrong.”- Jesse Livermore
“The Gift”CHAPTER 14
The “GIFT” BuyThe “GIFT” Buy
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
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The “GIFT” BuyThe “GIFT” Buy
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The “GIFT” BuyThe “GIFT” Buy
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The “GIFT” BuyThe “GIFT” Buy
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The “GIFT” BuyThe “GIFT” Buy
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The “GIFT” SellThe “GIFT” Sell
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The “GIFT” SellThe “GIFT” Sell
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The “GIFT” SellThe “GIFT” Sell
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The “GIFT” SellThe “GIFT” Sell
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iFund Traders Quote: “I learned very early on that brokers are always wrong; analysts are always wrong; and clients are always wrong. But the tape is never
wrong.”- Jesse Livermore
“iFund Traders Reversal Signs”
Bottoming Signals & Topping Signals CHAPTER 15
Page 133
Bottoming Tail (BT) & Topping Tail (TT)
3-5 Bar Decline w/ BT
BT makes up more than 2/3 of the bar’s range
TT makes up more than 2/3 of the bar’s range
3-5 Bar Rally w/ TT
1) Bottoming Tail (BT) – This bottoming sign is one of the most compelling in existence. Whenever a BT forms after a steady 3 to 5 bar decline, a bottom is almost eminent. iFund Traders would look to buy once the tail represents 66% or more of the bar’s range and/or the very next time a previous bar’s high is violated.
2) Topping Tail (TT) – This topping sign is one of the most compelling in existence from the sell side. Whenever a TT forms after a steady 3 to 5 bar rally, a top is almost eminent. iFund Traders would look to short once the tail represents 66% of the bar’s range and/or the very next time a previous bar’s low is violated.
20ma
20ma
Page 134
Bottoming Tail (BT) & Topping Tail (TT)
3-5 Bar Decline w/ BT
3-5 Bar Rally w/ TT
Entry Point
Entry
20ma
20ma
1) Bottoming Tail (BT) – This bottoming sign is one of the most compelling in existence. Whenever a BT forms after a steady 3 to 5 bar decline, a bottom is almost eminent. iFund Traders would look to buy once the tail represents 66% or more of the bar’s range and/or the very next time a previous bar’s high is violated.
2) Topping Tail (TT) – This topping sign is one of the most compelling in existence from the sell side. Whenever a TT forms after a steady 3 to 5 bar rally, a top is almost eminent. iFund Traders would look to short once the tail represents 66% of the bar’s range and/or the very next time a previous bar’s low is violated.
Stop
Alternate Stop
Stop
Alternate Stop
Page 135
VBS with BT
Buy
Stop
Alternate Stop
Page 136
VBS with BT
Buy
Stop
BOPBuy
Stop
Page 137
The Power of the BT
1
2
a. What event was marked by the number 1?
b. Where would your entry and stop have been?
c. What event was marked by the number 2?
d. Where would your entry and stop have been?
Page 138
VSS with TT
BDP With Elephant bar
Stop
Alternate Stop
Short
Page 139
The power of the TT
1
a. What event was marked by the number 1?
b. Where would your entry and stop have been?
c. What price was the bar-by-bar exit?
d. What price was the 8ma trail exit?
e. Is this a counter-trend play?
This is a very powerful event by itself, but even better when it occurs at a location item, do you see one?
Page 140
Green Bar Reversal (GBR) & Red Bar Reversal (RBR)
3-5 Bar Decline w/ GRB
3-5 Bar Rally w/ RBRGBR
RBR
20ma
20ma
1) Green Bar Reversal (GBR) – This bottoming sign is one of the most obvious in existence, as the change in power from the bears back to the bulls has already fully occurred. Tip: Whenever a GBR forms after a steady 3 to 5 bar decline, the odds of a bottom are greatly increased. iFund Traders would look to buy once the green bar’s high is violated. Stops are placed just below the entry bar’s low, or the green bar’s low.
2) Red Bar Reversal (RBR) – This topping sign is one of the most obvious in existence from the sell side. Tip: Whenever a RBR forms after a steady 3 to 5 bar rally, the odds of a top are greatly increased. iFund Traders would look to short once the red bar ‘s low is violated. Stops are placed above the entry bar’s high, or the red bar’s high.
Page 141
3-5 Bar Decline w/ GRB
3-5 Bar Rally w/ RBR
Entry
Entry
1) Green Bar Reversal (GBR) – This bottoming sign is one of the most obvious in existence, as the change in power from the bears back to the bulls has already fully occurred. Tip: Whenever a GBR forms after a steady 3 to 5 bar decline, the odds of a bottom are greatly increased. iFund Traders would look to buy once the green bar’s high is violated. Stops are placed just below the entry bar’s low, or the green bar’s low.
2) Red Bar Reversal (RBR) – This topping sign is one of the most obvious in existence from the sell side. Tip: Whenever a RBR forms after a steady 3 to 5 bar rally, the odds of a top are greatly increased. iFund Traders would look to short once the red bar ‘s low is violated. Stops are placed above the entry bar’s high, or the red bar’s high.
Stop
Stop
Green Bar Reversal (GBR) & Red Bar Reversal (RBR)
Alternate Stop if entry bar is to tight
Alternate Stop if entry bar is to tight
Page 142
VBS w/ GBR
Notice how this VBS is the first test of the r20ma since the sideways trend was broken to the upside, this is the start of the new trend and should yield multiple buy opportunities
Nice power trend – price rising above the rising 8ma above the rising 20ma; the iFund trader looks for buy set-ups at or near the rising ma’s
Stop
Buy
Page 143
VSS w/ RBR
Short
Stop
Igniting bar leads to a text book “Gift” sell set up after a 3 bar rally followed by a RBR at the d20ma
Page 144
Narrow Body (NB)
3-5 Bar Decline w/ GRB & NB
3-5 Bar Rally w/ RBR & NB
Entry
Entry
1) Narrow Body Bottom (NBB) – This bar, as a bottoming sign is not quite a potent as its former brother, but it’s significant enough to take notice when it does form. The narrow nature of the colored part of the bar (either green or red) signifies that a change or shift in the balance of power is nearly complete. Tip: Whenever a NB forms after a steady 3 to 5 bar decline, the odds of an explosive rally are greatly increased. iFund Traders would look to buy the very next time a previous bar’s high is violated. Stops are always placed just below the entry bar’s low.
GBR & NB
RBR & NB
2) Narrow Body Top (NBT) – This bar, as a topping sign is not quite as potent as its former brother, but it’s significant enough to take notice when it does form. The narrow nature of the colored part of the bar (either green or red) signifies that a change or shift in the balance of power is nearly complete. Tip: Whenever a NBT forms after a steady 3 to 5 bar rally, the odds of an explosive decline are greatly increased. iFund Traders would look to short the very next time a previous bar’s low is violated. Stops are always placed just above the entry bar’s high.
20ma
20ma
Page 145
Narrow Range Bar (NRB)
3-5 Bar Decline w/ GRB & NRB
3-5 Bar Rally w/ RBR & NRB
1) Narrow Range Bottoming Bar (NRB) – This bottoming sign is one of my personal favorites. Firstly, the narrow range nature of the bar makes for the lowest risk possible with this trade. The NRB makes for very tight stops. Secondly, the market’s biggest moves tend to ignite from its smallest bars. Remember this. Tip: Whenever a NRB forms after a steady 3 to 5 bar decline, the odds of an explosive rally are greatly increased. iFund Traders would look to buy the very next time a previous bar’s high is violated. Stops are always placed just below the entry bar’s low.
2) Narrow Range Topping Bar (NRB) – This topping sign is one of my personal favorite. Firstly, the narrow range nature of the bar makes for the lowest risk possible with this trade. The NRB makes for very tight stops. Secondly, the market’s biggest moves tend to ignite from its smallest bars. Remember this. Tip: Whenever a NRB forms after a steady 3 to 5 bar rally, the odds of a violent decline are greatly increased. iFund Traders would look to short the very next time a previous bar’s low is violated. Stops are always placed just above the entry bar’s high.
GBR & NRB
RBR & NRB
Note: The NRB can be any color and still be powerful
20ma
20ma
Page 146
3-5 Bar Decline w/ GRB & NRB
3-5 Bar Rally w/ RBR & NRB
Entry
Entry
1) Narrow Range Bottoming Bar (NRB) – This bottoming sign is one of my personal favorites. Firstly, the narrow range nature of the bar makes for the lowest risk possible with this trade. The NRB makes for very tight stops. Secondly, the market’s biggest moves tend to ignite from its smallest bars. Remember this. Tip: Whenever a NRB forms after a steady 3 to 5 bar decline, the odds of an explosive rally are greatly increased. iFund Traders would look to buy the very next time a previous bar’s high is violated. Stops are always placed just below the entry bar’s low.
2) Narrow Range Topping Bar (NRB) – This topping sign is one of my personal favorite. Firstly, the narrow range nature of the bar makes for the lowest risk possible with this trade. The NRB makes for very tight stops. Secondly, the market’s biggest moves tend to ignite from its smallest bars. Remember this. Tip: Whenever a NRB forms after a steady 3 to 5 bar rally, the odds of a violent decline are greatly increased. iFund Traders would look to short the very next time a previous bar’s low is violated. Stops are always placed just above the entry bar’s high.
Note: The NRB can be any color and still be powerful
Narrow Range Bar (NRB)
Page 147
iFund Traders Quote: “If you think education is expensive, try ignorance.”- Unknown
“Velez Market Law #5 NRB
CHAPTER 16
Page 148
Velez Market Law #5Market Law # 5:
The markets biggest moves ignite from its smallest (tiniest) bars.
Different ways to communicate the law:
1) Explosive moves almost always originate from narrow range bars.
2) The market is a breathing mechanism. It inhales (contracts) and exhales (expands). When it inhales (contracts) deeply, a major exhale (expansion) will be the result. Narrow range bars (NRBs) are the sign of a deep inhale. A major exhale usually is the result.
3) A cluster of small bars signifies the calm before the storm, the sleep before the awakening.
4) The iFund Traders Trader will look to commit more to trades that involve NRBs. The combination of lower risk and bigger potentialreward warrants it.
Page 149
VBS with a NRB
It has been said that a picture is worth a thousand words, just look at the result of this VBS from a NRB – enough said
Page 150
VSS with a NRB
What’s this? What should you be thinking?
VSS with a NRB
Page 151
7 BUY Reversal Signs
Plus any of the iFund Traders Bottoming Signs:
Page 152
7 SELL Reversal Signs
Plus any of the iFund Traders Topping Signs:
Page 153
7 BUY Reversal Signs
r20ma
BT – Bottoming Tail
Page 154
7 BUY Reversal Signs
r20ma
BT – Bottoming Tail
Page 155
7 BUY Reversal Signs
r20ma
GBR – Green Bar Reversal
Page 156
7 BUY Reversal Signs
r20ma
NBB – Narrow Body Bar
Page 157
7 BUY Reversal Signs
r20ma
NBB – Narrow Body Bar
Page 158
7 BUY Reversal Signs
r20ma
NRB – Narrow Range Bar
Page 159
7 BUY Reversal Signs
r20ma
NRB – Narrow Range Bar
Page 160
7 SELL Reversal Signs
d20ma
TT – Topping Tail
Page 161
7 SELL Reversal Signs
d20ma
TT – Topping Tail
Page 162
7 SELL Reversal Signs
d20ma
RBR – Red Bar Reversal
Page 163
7 SELL Reversal Signs
d20ma
NBB – Narrow Body Bar
Page 164
7 SELL Reversal Signs
d20ma
NBB – Narrow Body Bar
Page 165
7 SELL Reversal Signs
d20ma
NRB – Narrow Range Bar
Page 166
7 SELL Reversal Signs
d20ma
NRB – Narrow Range Bar
Page 167
“Section IV”The Location Items
CHAPTER 17
Page 168
iFund Traders Quote: “There is nothing more important than your emotional balance.” - Jesse Livermore
“iFund Traders”Support &
Resistance Points
Page 169
Price Support Types
iFund Traders Buy Rule #1: Any of the four iFund Traders Bottoming Signs that occur at or near these support points have very high odds of success. Limit all your buys to some area of price support.
1) Prior High Support – This form of support occurs when a current low (dip) revisits or retests a prior high/peak. Often, this support point coincides with the 50% retracement level.
Low Retests Prior High
Prior High
2) Prior Low Support – This form of support occurs when a current low (dip) revisits or retests a prior low. In essence, this is a 100% retracement of the prior rally.
Low Retests Prior Low(s)
36
38
40
24
22
37
24
Page 170
MA Support Types
iFund Traders Buy Rule #2: Any of the four iFund Traders Bottoming Signs that occurs at or near these MA support points have very high odds of success. Limit your buys to some form of MA support.
3) Trending Moving Average Support – This form of support occurs when an up trend pulls back to or near the rising 20ma or 8ma and stabilizes (forms one of the four bottoming signs). Often, this support point becomes stronger after the first successful rebound off the r20ma.
4) Flat Moving Average Support – This form of support usually occurs when there is a flat 200ma beneath the price. It is not often that when a pair is falling back to a flat 200ma it fails to at least stall for a period of time. The first move to a flat 200ma will usually result in some form of rebound, if only temporarily.
Flat 200ma Support
20ma
20ma Retests
Flattish 200ma
Page 171
Retracement Support Types
5) 55% Retracement Support – This form of support occurs when an up trend gives back about ½ of its recent gain, then stabilizes (forms one of the four bottoming signs). Tip: The 55% Retracement Level often coincides with Prior High Price Support. When it does, the 50% Support Level is even more solid.
6) 33% Retracement Support – This form of support occurs when an up trend mildly gives back only 1/3 of its recent gain, then stabilizes (forms one of the four bottoming signs). Tip: The 33% Retracement Level, while more minor than its 50% brother, it signifies that there is very high demand.
$36
$40
$38
50% Support Level
iFund Traders Buy Rule #3: Any of the four iFund Traders Bottoming Signs that occurs at or near these Retracement areas have very high odds of success. Limit your buys to one of them.
$36
$40
$38
33% Support Level
33%
50%
My Personal Favorite
Page 172
Price Resistance Types
iFund Traders Short Rule #1: Any of the four iFund Traders Topping Signs that occurs at or near these resistance points have very high odds of success. Limit your shorts to some form of Price Resistance.
1) Trending Price Resistance – This form of resistance occurs when a current high (rally) revisits or retests a prior low/dip. Often, this resistance point coincides with the 50% retracement level.
High Retests Prior Low
Prior Low
2) Prior High Resistance – This form of support occurs when a current high (rally) revisits or retests a prior high. In essence, this is a 100% retracement of the prior decline.
High Retests Prior High(s)
Page 173
MA Resistance Types3) Trending Moving Average Resistance – This form of resistance occurs when a down trend rallies back to or near the declining 20ma or 8ma and stabilizes (forms one of the four topping signs). Often, this resistance point becomes stronger after the first successful decline off the d20ma.
4) Flat Moving Average Resistance – This form of resistance usually occurs when there is a flat 200ma above the price. A rally to a flat 200ma will rarely fail to experience some form of resistance. The first move to a flat 200ma will usually result in some form of price lapse, if only temporarily.
Flat 200ma Resistance
20ma
20ma Retests
Flattish 200ma
iFund Traders Short Rule #2: Any of the four iFund Traders Topping Signs that occurs at or near these MA resistance points have very high odds of success. Limit your shorts to these MA areas.
Page 174
% Resistance Types5) 55% Retracement Resistance – This form of resistance occurs when a down trend rallies back about ½ up its recent decline, then stabilizes (forms one of the four topping signs). Tip: The 55% Retracement Level often coincides with Prior Low Price Resistance. When it does, the 55% Resistance Level is even more solid.
6) 33% Retracement Resistance – This form of resistance occurs when a down trend rallies back to its down trend line and stabilizes. The down trend line often coincides with 20ma resistance, and like many other forms of resistance, it can coincide with other forms of resistance, like Prior Low, Moving Average and the 50% level.
$36
$40
$38
50% Resistance Level
$36
$40
$38
33% Resistance Level
iFund Traders Buy Rule #3: Any of the four iFund Traders Topping Signs that occur at or near these Retracement areas have very high odds of success. Limit your shorts to one of them.
50%
33%
Support & Resistance Support & Resistance
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Support & Resistance Support & Resistance
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Support & Resistance Support & Resistance
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Support & Resistance Support & Resistance
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 179
iFund Traders Quote: “There is nothing more important than your emotional balance.” - Jesse Livermore
“iFund Traders”Specialty Support &
Resistance Points
Specialty S&R TypesSpecialty S&R Types
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Fulcrum Points
Specialty S&R TypesSpecialty S&R Types
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Fulcrum Point examples
EUR/USD EUR/JPY1.41000 135.0001.40800 134.8001.40500 134.5001.40200 134.2001.40000 134.000
Specialty S&R TypesSpecialty S&R Types
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Specialty S&R TypesSpecialty S&R Types
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Pivot Points
We often hear market analysts or experienced traders talking about a market price nearing a certain support or resistance level, each of which is important because it represents a point at which a major price movement is expected to occur.
But how do these analysts and professional traders come up with these so-called levels?
One of the most common methods is using pivot points, and we are going to take a look at how to calculate and interpret these technical tools.
Specialty S&R TypesSpecialty S&R Types
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
How to calculate Pivot PointsThere are several different methods for calculating pivot points, the most common of which is the five-point system. This system uses the previous day's high, low and close, along with two support levels and two resistance levels (totaling five price points) to derive a pivot point. The equations are as follows:
R2 = P + (H - L) = P + (R1 - S1)R1 = (P x 2) - LP = (H + L + C) / 3S1 = (P x 2) - HS2 = P - (H - L) = P - (R1 - S1)
"S" represents the support levels "R" the resistance levels "P" the pivot point. High, low and close are represented by the "H", "L" and "C" respectively.
Specialty S&R TypesSpecialty S&R Types
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Specialty S&R TypesSpecialty S&R Types
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Where to find your Pivot Points?
There are many free online resources available that calculate pivot points
Page 187
iFund Traders Quote: “I am one of the few speculators who has never cared in which direction a stock is going. I simply go with the line of least resistance.”
- Jesse Livermore
“Section V”Micro Reversal Times
CHAPTER 18
Market Reversal TimesMarket Reversal Times
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
1) 2:30am ET Reversal Time – This time is when traders really begin to see their first “real” action of the day. The European market has just opened 30 minutes prior and volume is starting to flood the market. This is also around the time when major news announcements take place for the Euro Zone. iFund Traders should look for some type of reversal or stall from a trend that may have been in place from the Asian session.
2) 3:30 – 4:30am ET Reversal Time– This marks another major reversal time, as it denotes the opening of the London Market. The reason for the importance is that 34% of the daily FX volume comes from the UK. With both European markers open and major UK news announcements happening at 4:30am EST, it makes this time of day VERY interesting. The iFund Traders Trader would look for major stoppages of up and down trends to occur around this time.
3) 8:30am ET Reversal Time – This time marks the kick-off for the US session. At this point in the day, all major markets (US, Euro, and UK) are open for business. A good majority of the US news announcements take place during this time. Especially the Non-Farm Payroll numbers on the first Friday of every Month. Based on the news and the Euro markets breaking for lunch, this time is known for reversing trends from the Euro sessions and starting new ones which can last for the remaining of the day.
Market Reversal TimesMarket Reversal Times
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
4) 10:30 -11:30am ET Reversal Time – This time is know for its volatility. Trends set earlier in the day by both markets can find themselves well overbought or oversold during this time of day. As the market stretches to set new highs or new lows, Institutional traders in Europe are looking to close up shop for the day and complete any last transactions required of them before they leave. In doing so, this dries up much of the volume in the market and once strong trends begin to “fade” or reverse course. This time also marks when the US sessions prepares to break for lunch, which also adds to the reversal of previous trends. iFund Traders should look for market reaction from the news announcements at the 10:00 hour to see if price is slowing or accelerating into the close of London.
5) 3:00pm ET Reversal Time – This time denotes when the bond market closes. There are days during which bonds are the major support for all markets. When bonds are supporting a risk friendly environment and the market loses its friend at 3:00, a change in direction can be ignited. Conversely, there are days during which bonds are a major support for safety. When bonds, which were proving to have a risk averse outlook on the day, closes at 3:00, a turn for more risk tolerance can material.
6) 8:00pm ET Reversal Time – This time marks the time when both the Australian and Asian Markets are open. Major news announcements during this time can and often sets the tone for the market to trend in for the rest of the session. Most days the Asian session remains in the range set by the Major markets earlier in the day. However, the Japanese are know for surprise announcements which can jumpstart the market well into the start of the Euro session.
Page 190
The News CHAPTER 19
The News The News
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Forex trading does require a trader to be aware of pending news announcements to avoid being caught of guard by sudden and unexpected volatility. Although technical analysis is the key to winning trades, knowing what and when the global news announcements are happening in the foreign exchange market will help traders protect their profits and avoid sudden and unexpected losses.
Important news events are readily available on many internet websites. One such website is forexfactory.com which has a global schedule of news events and even ranks them as far as expected potential impact on the FX market
The NewsThe News
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Is Trading the News a sound strategy?
The News The News
We do not trade news releases !!!• Traders should be flat 15 Minutes before release• Look for trades beginning 15 Minutes after the news release
We wait for the news to price itself into the market at someone else’s expense, and then trade the reaction by reading the chart and trading the patterns that emerge. Do not get caught up in the “what” or “why” when it comes to the news, just know the “when”, and then just trade the chart.
Page 194
iFund Traders Quote: “There are times when your trading money should be inactive. In the market, time is not money – time is time – and money is money.”
- Jesse Livermore
“Section VII”The Sideways
Break Strategies CHAPTER 20
Page 195
Two Main Breakout Facts
Fact 1:Breakouts are amongst some of the most powerful, profitable plays in existence
Fact 2:72% of all Breakouts Fail
Page 196
Breakout Question 1
Question 1:So how can breakouts be so powerful and profitable if most don’t work?
Answer:The 28% that do work do so in a major way. Big Profits!
Page 197
Breakout Question 2
Question 2:So how can one distinguish between those breakouts that are likely to fail, versus those which will likely soar?
Answer:By the end of this educational session, you’ll know which breakouts to buy and which to by-pass.
Page 198
The Traditional Breakout
iFund Traders Tip:You need a minimum of three relatively equal
highs and lows to have a true consolidating base.
Page 199
Stop Here
The Traditional Breakout
Page 200
Stopped Out Here
What’s the culprit? What went wrong?
The Traditional Breakout
Page 201
The iFund Traders Breakout
Page 202
The iFund Traders Breakout
Page 203
iFund Traders Breakout Play (BOP)PATTERN SETUP1. The sideways base can occur in an established uptrend or after a downtrend2. The base should be narrow and thin, not wide and whippy3. The bars in the base should be small and narrow, no wide range4. The 8ma and/or the 20ma should ideally be rising during the base’s formation
BUY ACTION1. Buy the bar that breaks above the last 2/3s of the base2. Place a stop one pip below the breakout bar (the entry bar’s low).3. Project the length of the base upward for target, if there is no prior reference point.
IMPORTANT POINTS1. The best breakouts occur at or near the point of contact with the rising 20ma/8ma2. A iFund Traders buy Set-up at the bottom of a base can be an early buy opportunity
for the watchful trader, if the VBS is occurring at or the rising moving average.3. We play BOPs more on 5 and 15 minute charts when scalping4. A Pause (Base) VS a Top – When a Base Is a Top and not a Pause:
a. Pauses (bases) are narrow; Tops are wide and whippyb. Pauses (bases) have small bars; Tops have big wide range barsd. Pauses “usually” don’t cross the 20ma by much; Tops cross below it.
Page 204
iFund Traders Breakout Play (BOP)
iFund Traders Breakout Play – This buy tactic will be the iFund Traders second most frequently traded event. On many days, it will be the only pattern traded, as FX pairs tend to spend the majority of their intra-day time drifting sideways in bases.
Pattern Set-upBuy Action
Tip Top
Alert
Volume Decline
Higher lows
Buya
Buy
b
Trading Note: Bases that are tight and narrow with rising lows and a rising 8ma and/or 20ma produce the highest odds of exploding to the upside, once they clear the over head resistance. Keep in mind that these “pauses” are not negative, despite the apparent loss of momentum. They simply serve as pit stops on the way to higher ground. In essence, they give the trend the ability to rest and rejuvenate before another big advance begins. The iFund Traders Breakout Play is a staple amongst our traders.
iFund Traders TipThe second move, after a normal dip, will often be the biggest one.
Patter Set-Up Buy Action
Page 205
Breakout Play (BOP)
Igniting Bull elephant bar (do you see it?) leads to consolidation in the upper 1/3 of the move - look to buy the break out at or near the point of contact with the rising ma’s
Buy here
Page 206
Breakout Play (BOP)
a. Name the events marked by the blue arrows
b. Where would your entry and stop have been?
c. What is the trend?
d. Where did the consolidation occur?
Page 207
Breakout Play (BOP)
BT “shake out”
Igniting Bull elephant bar
Page 208
Breakout Play (BOP)
When break outs do not immediately blast off, they will often retest the highs of the consolidation prior to the breakout, look for opportunities to buy or add on this event
Page 209
Breakdown Play (BDP) PATTERN SETUP1. The sideways base can form in an established downtrend or after a after an uptrend2. The base should be narrow and thin, not wide and whippy3. The 20ma and/or 8ma should still be declining.
Note: in the downtrend, this is very important, more so than in an uptrend.
SELL/SHORT ACTION1. Short the bar that breaks below the last 2/3s of the base.2. Place stop one pip above the breakdown bar or above the entire base. This is your choice.3. Project the length of the base downward for target, if there is no prior reference point.
IMPORTANT POINTS1. The best breakdowns often occur at or near the point of contact with the d20ma2. A n iFund Traders Sell Set-up at the top of a base can be an early short opportunity for the
watchful trader, if the base is wide enough.3. We play BDPs more on 5 and 15-minute charts when scalping4. A Pause (Base) VS a Bottom:
a. Pauses (bases) are narrow; Bottoms are wide, whippy and longb. Pauses “usually” don’t cross the 20ma by much; Bottoms cross below the 20ma, and eventually become one with the flat 20ma (f20ma)c. Pauses don’t tend to form too far below the 200ma, while Bottoms do.d. Bottoms often bring the 20ma and the 8ma together to form one MA; Pauses don’t.
Page 210
iFund Traders Breakdown Play (BDP)
Trading Note: Bases that are tight and narrow with declining highs and a declining 20ma, produce the highest odds of collapsing to the downside, once they clear of the support. Keep in mind that these “pauses” are not bullish, despite the apparent loss of momentum. They simply serve as pit stops on the way to lower ground. In essence, they give the trend the ability to rest and rejuvenate before another big collapse begins. The iFund Traders Breakdown Play is a staple amongst our traders.
iFund Traders Breakdown Play – This short tactic will be the iFund Traders second most frequently traded event. On many days, it will be the only pattern traded, as FX pairs tend to spend the majority of their intra-day time drifting sideways in bases.
Patter Set-Up Short Action
Page 211
Breakdown Play (BDP)
Long period of consolidation
Igniting Bear Elephant
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Breakdown Play (BDP)
VSS with a RBR
VSS with a NRB
Long period of consolidation
Igniting Bear Elephant
Once the long period of consolidation is broken to the downside with the igniting elephant bar, the power down trend emerges and iFund traders look for short opportunities at or near the dmas
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Breakdown Play (BDP)
Consolidation in the lower one third of a nice WRB, look for the break down at or near the point of contact with the dmas
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“Section VIII”One Bar Strategies
CHAPTER 21
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Bull 180º Play (+180)PATTERN SETUP1. The current bar must represent a very bearish period. This is to say that most of
the bar’s range should be red.2. The open must be in the top part of bar’s range.3. The close must be in the bottom part of the bar’s range.4. The further this bar is away from the 20ma, the better.5. Also works well if it is the VBS trigger at or near the 20ma
IMPORTANT POINTS1. Works accurately on all FX pairs2. Works best as a multi-bar trading tactic and can often result in healthy gains.3. Properly used this tactic can enjoy an incredible accuracy rate. 4. When you’ve found a Bull 180, know that you have just grabbed the absolute
low for a very long period time, relative to the time period.
BUY ACTION1. Buy one pip above the high of the red bar if and when it’s violated. 2. Place a protective stop one pip below the entry bar’s low.
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Bull 180º Play (+180)
1 23
a. What event was marked by the number 1?
b. Where would your entry and stop have been?
c. What ?
d. What price was the 8ma trail exit?
e. Is this a counter-trend play?
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Bull 180 Play
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Bull 180º Play (+180)
Tip: Strong tails and 180’s often see a retest and form a higher low before making the big move
BULL 180
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Bear 180º Play (-180)
PATTERN SETUP1. The current bar must represent a very bullish period. This is to say that most of
the bar’s range should be green.2. The open must be in the bottom part of bar’s range.3. The close must be in the top part of the bar’s range.4. The further this bar is away from the 20ma, the better.5. Also works well if it is the VSS trigger at or near the 20ma
IMPORTANT POINTS1. Works accurately on all FX pairs2. Works best as a multi-bar trading tactic and can often result in healthy gains.3. Properly used this tactic can enjoy an incredible accuracy rate. 4. When you’ve found a Bear 180, know that you have just grabbed the absolute
top for a very long period time, relative to the time period.
SHORT ACTION1. Short one pip below the low of the green bar if and when it’s violated. 2. Place a protective stop one pip above the entry bar’s high.
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Bear 180º Play (-180)
Is this a break of the 20ma? Do you see an opportunity here and if so , what it is?
VBS with GBR,NBB
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Bear 180º Play (-180)
This Bear 180 is showing the “no follow through” concept –when something that should happen (bull elephant break-out bar leading to a move higher) does not, (no follow through) and the opposite signal appears, (the bear 180) get ready for a big move in the opposite direction of the original signal
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Bear 180º Play (-180)
BT
BT
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Red Bar Ignored (RBI) PATTERN SETUP1. Bar 1 must be a bullish green bar. This is the bar that dictates the direction of the
trade.2. Bar 2 must be a red bar. The best red bars stay (trade) within the top 1/3 of Bar 1,
without trading above Bar 1’s high, but this is not required.
IMPORTANT POINTS1. This tactic works amazingly on all times frames, and can be seen often on 5 and 15
minute time frames2. Works accurately on all FX pairs3. This tactic has an amazing accuracy rate.4. This buy tactic helps traders jump on board strong trends already in motion.
BUY ACTION1. Immediately buy when Bar 3 (or 4) trades one pip above the highs of Bar 2 (red bar).
Note: This signifies that the very brief negativity of the red bar was nothing more than a breather for the pair. When red bars are ignored, explosive moves tend to follow.
2. Place your stop one pup below the low of your entry bar. Note: This makes this tactic very low risk, especially when the red bar is of the narrow range variety.
3. Use a trailing stop strategy untila. Your objective has been metb. The low of a reversal bar has been violated, or
c. Your incremental sell approach has led to you running out of lots to sell.
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Red Bar Ignored (RBI)
Powerful surge with 2 bull elephant bars, then a textbook RBI forms in the upper 1/3 of the prior solid green bar, this is an incredible risk/reward opportunity to add to a winning position, or get it if the initial move was missed
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Red Bar Ignored (RBI)
Very powerful trends will offer multiple opportunities to maximize a winning position, and RBI’s offer some of the best risk/reward possible, look to add each time these appear in a power trend move.
Notice how both of these RBI’s stayed in the upper 1/3 of the prior solid green bars making this a very high odds play
RBI
RBI
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Red Bar Ignored (RBI)
1 2
3
a. What kind of trend is in progress?
b. What is the event marked at #1?
c. Name the event and location, along with entry and stop price at #2?
d. Name the event and location, along with entry and stop price at #3?
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Red Bar Ignored (RBI)
This is it, the moment you have waited for, the opportunity you have been dreaming about, do you see it?
Are you ready?
What should be getting ready to do any moment?
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Red Bar Ignored (RBI)
CHA-CHING!
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Green Bar Ignored (GBI) PATTERN SETUP1. Bar 1 must be a bearish red bar. This is the bar that dictates the direction of the trade.2. Bar 2 must be a green bar. The best green bars stay (trade) within the bottom 1/3 of
Bar 1, without trading below Bar 1’s low, but this is not required.
IMPORTANT POINTS1. This tactic works amazingly on all times frames, and can be seen often on the 5 and
15 minute time frames 2. Works accurately on all FX pairs3. This tactic has an amazing accuracy rate.4. This short tactic helps traders jump on board strong trends already in motion.
SHORT ACTION1. Immediately short when Bar 3 (or 4) trades one pip below the lows of Bar 2 (green
bar). Note: This signifies that the very brief bullishness of the green bar was nothing more than a breather for the weak pair. When green bars are ignored, explosive moves to the downside tend to follow.
2. Place your stop one pip above the high of your entry bar. Note: This makes this tactic very low risk, especially when the green bar is of the narrow range variety.
3. Use a trailing stop strategy untila. Your objective has been metb. The high of a reversal bar has been violated, or
c. Your incremental cover approach has led to you running out of lots to cover.
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Green Bar Ignored (GBI)
Entry
Stop
Page 231
Green Bar Ignored (GBI)
The flat wavy 20ma indicates the sideways trend and the price is making measured moves above and below the 20ma. Once the sideways range is broken , a powerful move to the downside begins, and the GBI sets the stage for some fat juicy profits
Page 232
Green Bar Ignored (GBI)
Power down trend under way, and the GBI appears giving the iFund trader a chance to add to the existing short, or get short once the low of the “little green bar of hope” is broken
VSS on a “peek-a-boo” break of the d20ma
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Green Bar Ignored (GBI)
Yes, this is a real chart
Yes, this really happens
Yes, you will see this again and again
But will you know what to do?
Will you be ready?
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Green Bar Ignored (GBI)
The GBI will produce some of the best risk/reward opportunities, and is one of the most powerful events that delivers consistent profits to the iFund trained trader
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iFund Traders Live Chat Room
Page 236
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CHAPTER 22
Page 237
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