Always look at Mark’s charts before looking at the Fibonacci Trader software charts. This should be done before each trading decision! We key all the indicators off of Mark’s Fib work and other price action Alert Levels. The Fib Levels help establish basic trade type. Are we looking for a bounce, where are the targets, are there Retests? How close is the next support – resistance level, determining the basic risk reward for a trade?
Next we look at the Fibonacci Trader software charts. All charts should be read from top to bottom. Sub Chart 1 is where the decision making is started. The Blau indicators and the Volume Colored chart are for confirmation of strength of the Setup! We would look at the long term Trend Charts to establish the primary momentum. We would check the EMAs for angle and separation. Is there Price Action Support – resistance? Is there a Sideways day possible? How strong is the momentum? Is there Convergence – Divergence? Are there standing aside signals?
169 We then check the intermediate Trend Charts for a Setup, going through the same sequence as for the longer periodicities. I verify the basic Setup of the price trend with the 3EMA system then I look for verification on the Sub Charts with the Blau indicators. One would again check the EMAs for trade direction strength. Are the Histograms with the trend or is there Convergence – Divergence? Now, volume becomes more important. Is there enough for trading? Is there buying or selling? Is there evidence for a Setup? Are there any indicators saying stand aside?
If all the indicators say a trade is feasible, we focus on the Trading Chart. We repeat the same analysis procedure. We pay even more attention to the volume now. That is a strong filter for confirming an entry. If any indicator is not in alignment, stand aside! There are plenty of good trades daily to make a living.
There is no need to take a questionable trade.
We look at the Frontrunner for final confirmation. The items to be checked on the Frontrunner for confirming the strength of the entry are; color agreement, steep angled EMAs, Histograms and Signal Lines. One must also check for Convergence or Divergence. If any of these are against the trade, it is best to step aside.
Remember a momentum reversal starts with the short term chart, so the longer term Setup could actually be reversing but may not be clearly seen yet. Even if momentum is just stalling on the Frontrunner, we would still want to wait for an entry.
Finally I look back to the Trading Chart for a trigger, which is Price Action
Confirmation. The PAC is based on the Signal Bar’s close, not it’s high or the low.
They are often very close so it really is not critical.
As a reminder, one must select a trading period that allows one to go through the steps.
Below is a screenshot of an immediate Trend, a Trading, and a Frontrunner chart with a time stamp of 10:59 MST marked on all three charts with a purple vertical line. They show how they would look when read together to find a common Swing High. Below is a screenshot of an immediate Trend, a Trading, and a Frontrunner chart with a time stamp of 10:59 MST marked on all three charts with a purple vertical line. They show how they would look when read together to find a common Swing High.
170 Once one sees a Setup with Mark’s work one merely looks for color and direction on all the Fibonacci Software charts to be in unison. This is how the Setup, signal, and Trigger are all in unison.
I hope these charts show how to take a trade with the system I use. Compared to many systems, it is relatively simple. In the heat of the moment when trading, things can be overlooked of course. This is why one needs plenty of screen time to become a proficient trader.
Analyzing trades this way is really not complicated, but having the patience to wait for the indicators to be in alignment at Alert Levels, is the hard part. Some focus only on the Trading Chart, and forget to check the Trend Charts for the Setup.
Many get excited when there is a sudden spike movement on the Trading Chart with large candles. They initiate a trade, forgetting to check Mark’s Alert Levels, and the Trend Charts for the basic set up. So often the spike is short lived, and then it quickly reverses resulting in a loss. This happens often when a trader is trying to do other things when trading. To prevent this one could minimize all but the
intermediate charts. When they give a Setup, one could then look to the shorter periodicities for signals and entries. One will have fewer trades, but the bottom line will be better.
Another way to prevent overtrading and taking poor signals is to use a check list before entering any trades. I will discuss the check list completely later.
171 In the charts below, there are 2 white vertical lines on each chart. The chart on the left is a 3 minute chart and the second on the right is a 1000 volume chart. The two vertical lines represent the same amount of time on each chart. The second chart has the lines closer together because only 1000 contracts traded in 27 minutes. The three minute chart however, gives a new bar every 3 minutes, regardless of the number of contracts traded. This might eliminate some confusion.
In summary;
First, check Mark’s charts for Fib Levels. This will help determine the trade type.
It will also help determine the risk reward basis for any trade.
Check the longer term charts to establish basic momentum.
Check the intermediate Trend Charts to confirm momentum Setups.
Verify signals on the Trading Chart.
Confirm with the Frontrunner.
Finally, watch for the PAC.
More detail will be given on the basic trades I take in the next chapter on Entries.
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