The indicators are used at Alert Levels. If a trade Setup is seen at times other than at Alert Levels, generally it is best to stand aside. This combination of indicators at Alert Levels gives very high probability trades. The indicators help establish some Alert Levels, so we must examine them first. I have also discussed Fib Levels are Alert Levels. The examples used in this book are for Intraday trading on Bonds, the Euro and the ES that I taken. I recommend using periodicities other than time such as volume, range or tick data. One could trade all volume, all tick or all time charts, but I find using time and volume is most effective. The indicators are interpreted the same way, regardless of the type of market data. I especially like time charts as Mark gives the Fib Alert Levels on a 3, a 15, and a 45 minute chart on most instruments. They are probably used by the majority of traders.
The principle again is all indicators at Alert Levels should point up and be green for longs and point down and be red for shorts therefore easy to learn.
The indicators used here are very close to price action in the immediate moment.
This is extremely important, as they tell what the market is doing without any lag delay in analysis.
For swing or position traders who hold their trades for days or more, the periodicities would be longer but one would still need to have multiple periodicities to determine trend, entries and exits.
There are many signal methods in use and many are successful. Mark Braun’s CCI method is outstanding. I watch them on his charts in his Chat Room and listen to his comments. The indicators I use seem to be a little easier and clearer, as well as being extremely successful. They give me the final answer on when to enter, how to stay with, and when to exit! I implore you not to add anything to this system till you master these indicators and are making money!
An important factor to consider is that the Indicators I use are put together also to be easily read and analyzed. If one has traded other systems, there is an inclination to try to improve this system. One wants to take some other good Indicators and add them to these. This system works, no others are needed. As a matter of fact, adding others can be distracting. It slows the analysis time and may cause a lot of late entries and loses.
One must gather and have pertinent information regarding price for a given period. The first tool I build on is Candlesticks. They have been used by the Japanese for centuries. I have several books by different authors on technical
45 indicators. The most important, and probably the oldest, is a moving average system. The third is the use of Blau Oscillator Indicators which are extremely accurate. No matter what triggering method is used, I think any would benefit from Mark’s Fib Levels.
I also use the Gann Swing Chartist to help analyze momentum moves. I use a simple Volume Colored Indicator to underscore momentum and to substantiate there is enough volume for follow through. I watch the $VOLD on the ES which confirms if the market is dominantly buying or selling.
I must say at this time don’t trade spikes or sudden movements. These
indicators work, but they must be in a synergistic movement or they will fail. One tool alone will not give profitable results! If you don’t have time to thoroughly analyze all the indicators, don’t trade. Traders see a big spike with a solid
confirmation chart and try to jump on board fearing they are missing some profit.
Once their trade is filled however the trade reverses just as quickly and a loss is taken. I repeat; if you don’t have time to scrutinize all the tools on all
periodicities, don’t trade!
The key to this manual is to master each section letting each one build on the prior to gain complete control of this system. In the same vein, we must master one tool at a time, then put them all together. We will explore the basics of each of the six tools in the order needed. We will put them all together in a synergistic method for actual use!
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Candlesticks
For any given periodicity of time, volume, etc, certain information is gathered.
This is the foundation for all indicators. Most traders are interested in the Open of the period selected, the High, the Low, the Midpoint and the Closing price. There are different ways of displaying this information. The most common is a simple line bar with flags. The low and the high are seen vertically. A flag to the left is the open. A flag to the right is the close. The midpoint is marked with an “x” or other symbol. Mark uses the line bar for his Fib, work which is important for him.
Another display method is the Candlestick. Both have their place in trading. I prefer the candles for my work.
Below, on the left is a simple and probably the most commonly used line bar. It is an open-high-low-midpoint-close bar contrasted on the right with a Candlestick.
The same information is gathered for either presentation. The details of reading and interpreting the Candlestick will be examined completely.
LINE BAR
CANDLESTICK
The Candlesticks have been used by the Japanese traders for centuries. Steve Nisson claims to have brought the concept to America, or at least brought it to America’s forefront. He has been a Candlestick teacher for years. He trades for major corporations and hedge funds. He, and many others, uses Candlesticks only to trade. What I will present is just the way I understand and use them.
Each Candlestick in essence represents a battle between the Bulls, who try to take the market higher. The Bears, try to take the market lower. They are first read as a single bar, then as a group, and then the groups are interacted allowing an analysis to make trading decisions. Below is a chart showing a group of Candlesticks.
47 There are several books about Candlestick Charts. Candlestick professionals have names for different types of bars, and names for groups of bars that give Setups.
They are numerous and challenging to learn. I prefer to use other tools, and just analyze a trade with the basic Candlestick philosophy as an aid.
The Candlestick Bar is printed for each interval used on a chart. This could be Minutes, Days, Volume, or Ticks and so forth. An evaluation is only made when the bar closes. The open and the close form a body. The high and the low, which are usually above and below the body, are formed by just lines and are called
wicks, or shadows. If the Open and the Close are the high and the low, there would be no wicks. If the bar closes above the open, it is colored green, and verifies an immediate up momentum. If the bar closes below the open, it is colored red, and verifies an immediate down momentum.
48 If there is no body on a Candlestick Bar, or a very small body, this means the open and close were the same, or nearly the same. This means a standoff; neither the Bears nor the Bulls could win. In Japanese it is called a DOJI which is the name I will use. If the open and the close are the same, and at the midpoint, it is called a Balance Bar. It is seen on the bottom left, in the next chart sampling.
If a DOJI occurs at the end of several bars of the same direction, it could be a reversal signal, especially if it has a long wick.
BALANCE BAR DOJIs
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