Manual.pdf

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A Manual for

Day Trading

By

Don Huntsman

U.S. Government Required Disclaimer - Commodity Futures Trading Commission. Futures and options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This document is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. The past performance of any trading system or methodology is not necessarily indicative of future results.

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Table of Contents Continued

Mark Braun’s Fibonacci Levels Chart Page 120 The Fibonacci Trader Software Settings Page 125

Huntsman Template from Fibonacci Trader Page 126

Establishing Your Own Settings Page 158

Template Use Page 162

Monitor Arrangement Page 165

Chart Analysis Procedure Page 168

Using Extended Periodicities Page 172

Trade Entries Page 179

PUP/Kiss Page 182

Swing Trade - ST Page 183

The First Reversal Trade Page 192

Failed Swing Page 195

Pause Continuation Trade – PCT Page 197

Retest Trade - RET Page 203

Countertrend Trade - CTT Page 211 Breakout Trade - BO Page 218 Minor Alert Level Trades Page 223

Price Action S/R Alert Levels Page 229 Higher Low Buy vs. Lower High Sell Page 238

Overriding Convergence - Divergence Page 247

When Not to Enter Page 253

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Table of Contents Continued

Sideways Days Page 263

Congestion Page 269

Trade Exits Page 272

Over Riding the Frontrunner Exit Page 294

Trade Management Page 295

Pay as You Go Page 297

Management of the Record Day Page 299

Trading the News Page 306

A “C” News event Page 310

Quick Reversal News Trade Page 312 An “A” News Trade Page 316

Overriding indicators using new information Page 319 The Euro Currency Futures Page 321

Check List Page 324

Trade Review Spreadsheet Page 331

The Final Hurdle Page 337

Manual Conclusion Page 341

Appendix

Trade Examples Page 344

Indicator Concept Examples Page 345

Alert Level & Retest Reversal Page 356

Fib Alert Level Breakout Page 359 Minor Alert Level Reversals Page 363

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Table of Contents Continued

Higher Swing Low Buy Page 365 Lower Swing High Sell Page 367

ES Counter Trend Trade Page 369

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Thank You!

I want to thank Mark Braun for his mentoring and for his work. He makes me infinitely more successful. His help through the years developing this manual and my trading skills is greatly appreciated.

I want to thank Don Brummett aka, Cajun, for his relentless questions for method clarification and development. He also pushed for the use of color coded

Histograms on the Blau Indicators. I also want to thank him for continual proofing of the examples used in the manual. This manual is the better for his efforts.

I want to thank Joe Graber also, for his proofing of the manual. His demand for clarity in grammar, and thought content, has been so beneficial to make the manual more readable and understandable.

I want to thank George Zalis, aka, Reink, for his numerous questions and pushing me to trade currency futures! His pushing for an ultra short Frontrunner chart has also been valuable.

Finally, and most importantly, I want to thank my beautiful wife Nina, for her encouragement, and sacrifice of our time together. Her care for me during times of difficult health problems can never be repaid. Without her this manual might not have been finished.

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7 I have invested in stocks and mutual funds for 45 years. I have been trading for about 15 years and early on just successful enough to keep me going. I day traded part time for several years. I have been trading full time for a living since 2007 as other businesses and interests kept me occupied before.

I have taken so many classes and been in so many Chat Rooms, I couldn’t begin to number them. The same for the books I have read, they are too numerous to list. What I will present is what I have found to be the most important and successful. I have not developed anything new. I have just put together and refined the tools in a way I have found that work together well.

I want to emphasize this is a methodology for trading any market or

instrument! The examples are gathered from the instruments I have traded for the last five years. That is not to suggest this is a method for those

instruments only. I have used at times a 13 period moving average. At other times a 15 period moving average. They are very close and interchangeable. Thus some of the charts show one and other charts show the other. The same applies to charts, sometimes an example is a 15 minute chart and others are a 13 minute. All are valid, the concept is the same! I currently use a 13 EMA.

I would also like to caution the reader that most of the examples do not show Mark Braun’s Fib work. But, they were in agreement! Yes, the method will work without Mark’s work but it is more successful when used with his Fib work!

I discuss in this manual that it is important to have more than one market ready to trade as markets often slump for a short while or can change their character totally. Thus one could open an alternate instrument to trade instantaneously. Also when these methods are developed, it only takes a few minutes to even select a new instrument, set it up and to begin trading. This could be done for testing or exploring a totally different market!

The book started with my note taking and statistic gathering. I started writing for my own trading analysis and development. I learn better when I write things out doing a detailed analysis. It then progressed to a manual and I am continually refining it. Now I guess it is a book. I have friends and family who keep asking questions in general regarding trading. Like most people they expect a simple answer to a seemingly simple question when actually it is quite complicated. I started to write things out to show the complexity and the manual began. Thus, it is written really for my family, and friends. Most have never traded before so it is written to take a beginner to the level of making a living day trading.

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8 I chose to share with Mark’s Chat Room members because Mark has been such a great mentor for me and I must add a friend. I hope this helps and doesn’t distract from his great work.

Then fellow traders started asking questions. That forced me to dig deeper, expand more, to explain the concepts with more clarity and to show more examples. I now have a Skype sub room under Mark Braun’s Market Geometry room. In this group there have been additional questions and discussions, making me develop this manual to an even greater extent.

I also promised God if he would help me to become a successful trader I would share the knowledge.

I have worked with Mark Braun for years. He is the master of Fibonacci

methodology and I think his work is like a crystal ball. I will discuss Fibonacci theory, but will not explore Mark’s development of Fibonacci levels. That study should come directly from him. He uses different signals and triggers than I do with his Fib work which are outstanding. The ones I will present I find easier for me and some others to read and use. As Mark says “Any methodology has to speak to you”! My methods are successful alone but I would hate to trade them without Mark’s work, as he greatly increases my success. His work keeps me out of some trades that shouldn’t be taken and gets me out at the ideal level most often,

increasing my bottom line profits.

The method I will present is as good as any and better than most. It is tested and proven. As stated earlier the basic strategies have been used by many, many successful traders. I have discussed trading philosophy, psychology, concepts, tools and their use thoroughly with much discussion and many examples.

I am not a Guru or a master of trading. I know many traders and many in Mark’s Chat Room who have forgotten more than I know. I will continue to study and to try and learn as one must do in any profession. I am just an average trader who took many, many loses, and finally said enough is enough. I then started keeping the statistics to see what works and what doesn’t for me. My spread sheet also was developed over a period of time to help review all my trades.

I find day trading to be very challenging, but exciting and rewarding. I hope the reader will too. There is an additional benefit from trading that you may not hear about often. It is that challenging and using the brain allows one to live longer and healthier. Trading allows one to be able to afford living longer. Moreover, trading allows one to work from their home anywhere in the world. You like to ski, live in the Rockies. You like culture live in any metropolitan area you want. The trader

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9 needs no employees or an inventory to manage and sell. One can work as little or as much as one wants!

Like any profession one must be constantly learning. Hopefully, this manual will give the tools to learn to triumph over the markets for any reader. Then, hopefully one can make a living day trading.

This book will give a complete trading methodology. There are no fancy software additions, etc. Thus there will be no additional sales presentations, or attempts to sell you anything else. There will only be attempts to clarify this information if any is needed.

Some may say this manual is too long. I had shorter versions but, I had so many questions, I wanted to add material for clarification. I have found the additional material to be helpful to most. Each chapter presents a new concept or trading situation. The tools are all the same, thus, there is a lot of repetition for each concept. In a way, that may not be bad, as repetition is the cradle of learning. If the reader finds these methods to their liking, I would invite joining Mark

Braun’s Chat Room which gives access to my room. In the room all questions and difficulties can be discussed and these methods can be brought to fruition.

Please understand, a manual is not only a book of facts and guidelines for an endeavor, the word also signifies hard work or labor taking a great deal of time. Accordingly, understand this endeavor is going to require a lot of time and hard work till you can make a living day trading!

I hope the reader will master these methods and have a long successful trading career.

Trading Philosophy

Trading professionally for a career is a wonderful way to make a living. But it is also one of the most difficult ways to make a living. Statistics show more than 90%

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10 of all people who try trading fail. It takes years to learn any other profession but most who try trading for a living fail to realize trading is a business requiring capital, equipment, education and time. Consider physicians have probably 9 years before they can start practicing, a dentist 6 to 8 years, a teacher 4, etc. Trading requires as much time and effort as well to become successful. It is hoped this manual and its methods will save years of time.

Moreover trading involves reading of charts and split second analysis thus it has more mind games than any other career. There is no absolute, we are trading probabilities. A dentist finds a cavity and knows it has to be treated. The result is most always successful. A good trader gathers information, makes an analysis and even with the highest probability understands it still may fail. Trading is like baseball. You can’t hit a home run every time at bat. This is opposite of the

military where one hurries then waits. As Mark Braun says, this is a job of waiting, waiting, waiting, and then suddenly HURRY! This taxes the patience of most and leads one to take chances, overtrade and fail. Occasionally, hours can pass before a trade could be taken. Although rare sometimes one can sit a whole day and not take a trade. So the first job of any newbie is to develop patience.

Trading can return substantial profits, but can also result in substantial losses, and quickly, if one is not well trained and disciplined. Trading is not a get rich quick scheme; it is a business where one can earn a very good living. The methods I will be teaching and which I use in my daily trading are well founded. They have been gleaned from over 15 years of study and learning. There are many successful methods to trade, what I will be teaching is as good as any and better than most. Fundamental and Technical are the two basic ways of trading! Fundamental is based on a single stock company. It is usually a buy and hold method. It is based on corporate studies. These include earning reports, inventory, reorganizations and acquisitions, stock splits, etc. Regardless, any stock is in a state of flux with

continual ups and downs. To trade these movements, I use technical studies

There are two styles of trading using Technical’s. One is Predictive. Common schools would include Elliot Wave, Gann tools, Market Profile, and Fibonacci Levels. I have traded all of the above extensively. They can all work well when handled properly, but have found Fibonacci Levels to be the best. The second style is Reactive. That means watch data information bars, and patterns thereof, to analyze that information. I have used many, many indicators throughout the years. Some work poorly, some are good, and I have found a few to be outstanding. A few are extremely accurate. The tools I teach are based close to true price action,

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11 so they are extremely accurate and work the same on any instrument. We will use the best of both styles.

Moreover, one would consider my method to be Momentum Trading. I trade one instrument only. I try to catch the start of a move, jump on board and exit when the move stalls and weakens! Then I watch for momentum resumption or reversal. The Technical’s tell me when, where, and why to trade.

I actually have combined six concepts in my trading. They are the Candlesticks, Moving Averages, Blau Oscillators, Fibonacci Support - Resistance levels, Floor Traders Trades, as well as a volume watching system including the $VOLD. All will be explained thoroughly. I use Mark Braun’s Fib work as he is the best. I try to name the trades based on the actual mechanics. I have not given, as some do, catchy exotic names. Some teachers use names like Boogie Bounce, which tells one nothing, and they require a lot of memorization. I use names like Higher Low Buy. They are descriptive and tell exactly what one is looking for. Many mentors simply give a new name to an established trade used for years.

I have chosen the bond, the Euro and the S&P 500 Emini as my trading

instruments. The S&P 500 is a stock index instrument. I feel they are safer than stocks and many commodities. The bond is a debt instrument. They are used by countries, states, municipalities, and corporations as a way of borrowing money. Other debt instruments are notes and bills. They are rated with AAA being the highest, which is the safest. When one buys a bond, the issuer agrees to pay the money back in a certain time frame with periodic interest payments. When a purchaser buys a bond a return of principal with interest is guaranteed. In the scheme of money matters this is not a great return, but it is safe. Debt instruments are frequently called a "Safe Haven". When the stock market and other investments are poor, people buy Bonds for a guarantee on their money. This is often called “The flight to safety”. The Bond is used by Professionals as a hedging instrument, more than for speculation. The Pros are those who may spend millions per trade. I just want to ride their coat tails. It is imperative to have good volume for follow through. I like to see at least 200,000 contracts traded daily on the Bond. On computer data feed using eSignal the contract symbol is ZB. It is a deliverable contract. That means if you enter a long position by buying, if you are not out by First Notice on the new month’s contract, they can deliver the contract and demand payment. I exit all trades daily so having a contract delivered is nil. The Euro

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12 The S&P500 is one of the largest of the stock index futures and is traded by the Chicago Mercantile Exchange. A stock index future contract is a compilation of a group of stocks. They add the purchase price of all 500 and divide by 500 giving the cost of each contract. To make trading more affordable for the public they have issued a contract worth a fraction of the full S&P contract called an Emini. It is traded mostly electronically. We can purchase on the internet an Emini in

milliseconds, and we now have the same edge as a professional. There is the Dow, the NASDAQ, the Standard and Poor 500, etc. Many investors prefer to invest in them rather than buying an individual stock. This reduces risk on ones investment as a single stock is more volatile thus more risky as it is subject more to news, rumors, etc. The change in one stock in an index group does not affect the overall move of the index.

The average number of contracts traded daily in the S&P Emini is well over 2 million. Thus there is great range, momentum, volatility, giving good follow through on most trades. On eSignal the contract symbol is ES. On occasion the volatility is so great trading it can be dangerous. Having these instruments to choose from allows one to be in a good instrument for trading most always. One should go to CME and read about the Bond, the Euro and the S&P 500 Emini contracts for a more comprehensive study.

One must understand any Market, be it stocks, financials, commodities, etc, is a living entity. They change conditions continually, sometimes in a few seconds. They are influenced by the world wide economy, politics, natural disasters, etc. At times the Market volume is low in one Market and high in another. Sometimes the volatility is huge, at other times it is trivial. Thus, these instruments are going up and down all day every day. Day traders try to trade these moves, making a profit buying and selling, often several times a day.

At times one Market is so slow it is untradeable. At other times the volatility is so high it is dangerous to trade. One must be flexible and adapt. So a trader may change markets on occasion to find one that is most tradable. Some change

markets daily using intraday time frames. I prefer to chose an instrument and stay with it daily. One must be adaptable and able to change as needed.

The ES and the ZB are often in price opposition. Some actually use that as a confirmation signal for trading direction. If bonds are up then the S&P should be down. That is fairly accurate but not infallible. I use other tools to determine trading direction. I find this to be more precise. More importantly when bonds are low in volume the S& P may be high. When volume is very low there is little follow through making trading difficult. When the stock index futures are

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13 extremely volatile and challenging to trade the bond may be very tradable. The Euro is a currency future. It is traded highly throughout the world, so it is most always tradable. Choosing between these instruments most always gives one a tradable market.

The Bonds, the Euro and the stock index futures are instruments managed by the CME Group located in Chicago, IL. All trades of these instruments throughout the world and similar instruments are handled there including their options. The

individual investor uses a broker to facilitate the buying and selling of these and other instruments through the CME. There are many brokers found worldwide. The broker I use is Mirus Futures with Zenfire, and a trading platform called Ninja Trader.

One should have a daily premarket program. Remember trading is a business built around the financial world. It is how the professionals invest, hedge and use their money. It is how the governments try to improve, control inflation and

maintain the economy. The financial world tells them whether to sell more treasury securities, or unfortunately buy their own. Moreover, trading is influenced by political events from around the world. Make no mistake, a demonstration in the states, or an uprising in another country will definitely affect our trading each and every day! The market is also influenced by weather and natural disasters. These events drive trading, and influence every trading decision we take. There are sources who do major extensive research and present it to us daily. It is our job to get those reports, read and use them in our daily trading. Having and using this information elevates trading above gambling.

The first task of the day is to simply check the major news sources. This could be, listening to the radio, watching the TV or checking your internet home news page. A headline like the one below, says to be very careful as this will have a dramatic effect on the markets. Consider that with a major catastrophy, there is going to be a huge need for medical supplies, food needs, construction materials, possible energy increase demand. On the other hand factories may be shut down halting

production. The markets are going to be impacted. For the day however this says to be extra cautious. We will trade what the tools, to be taught in this manual, tell us. We will watch the price action, the patterns formed, constantly analyzing the ebb and flow. This is the bottom line for all trading decisions!

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14 Next we explore more specific market sources. One of the best of these dedicated news sources is http://online.barrons.com/public/page/barrons_econoday.html

Barron’s Econoday. Barron’s has been one of America’s leading financial

magazine and news services since 1921. It is published by Dow Jones & Company. It is considered one of the most important sources of financial information for corporations, institutional investors, professional, and individual investors. I highly recommend the magazine in hard copy or online. However a subscription is not necessary to get its economic calendar, news alerts and announcements.

We should read the Economic Calendar every morning as part of the premarket work. It lists a daily market focus, International focus, Simply Economics, and gives Market Reflections also. The Market Reflection discusses the previous day’s trading and tries to put some sense into what happened. These sections are very helpful in analyzing the market activity. It helps us predict what the market may do. Econoday has the daily schedule of important speakers, News Announcements and notices of any auctions, etc. in all markets. These often influence the trading day. I read Econoday and other sources, before market opening every morning. Below is an actual Barron’s Econoday Economic Calendar page that will open when you click on the link above. I have highlighted the different items’ with different colored boxes and have marked a couple of speaker events in red arrows. I have checked with purple arrows a few of the Treasury events. I have marked with green arrows some of the financial News Announcements. I have not marked all as the page would be so cluttered. Econoday marks important financial news events with stars and dots of various sizes and colors for emphasis of their

importance. I have shown a couple in an orange ellipse. You can see for the week, the different announcements of treasury auctions and other treasury events. There

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15 are many most every day. Some of course are more important and have more

market effect than others. I will discuss how I rate these events, and how to use them in trading.

If you click on any event a pop up window explains the general concept of the event, and the possible effect on the market. It will give a definition, explore the highlights, and give a Consensus of expected outcome. This helps a News Trader to determine whether to trade a news event, and whether to go long or short. Most importantly explain fully why investors care! This includes a discussion of what the event is all about, what different numbers would mean, and how it affects the economy, and the everyday person.

I will show the details to help the new trader, as I feel this is so important. In earlier manual versions of this document, I just mentioned these sources but I found many students didn’t realize the importance and rarely followed through with a premarket plan. This is understandable as most people begin trading and believe it must be simple. They are looking for a straight forward tool that says buy here, or sell there, not even realizing one can make money even in a falling market. I am asked frequently by lay people how do you know when to buy? They are expecting a one sentence answer. I now answer I do premarket study to set the tone for the day. I am continually analyzing six studies on each of about ten charts and when all the pieces align I make a decision. Then they understand trading is not so simple. Believe me doing a premarket study will help to put money in your

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16 Below is a popup page that came up, when I left clicked on the announcement event Jobless Claims, marked with a black arrow above. This happens for any item. I have highlighted the sections of the popup with red boxes. The page gives a discourse on Jobless Claims. A similar page is given for each event seen above. Knowing this information helps to make the trader a better informed citizen. If one clicks on Why Investors Care, marked with a black arrow below, there will be additional information for the reader. This is most helpful. Needless to say with experience, one learns a lot of this information and will need to spend less and less time studying daily.

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17 You can also find the results of any News Announcement immediately, by left clicking on the event in the daily calendar. This is a screen capture taken a few seconds after the Retail Sales announcement. The results are in the Actual column on the far right in the red ellipse.

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18 It is very important to have ratings on each of the news events. Knowing the strength of the announcements is vital to trading. Briefing.com has a paid

subscription to gain these ratings, their Consensus, and their explanations. Here is a list that I have gleaned from years of use of the old version of

Briefing.com, other sources and my own statistics. I believe this to be invaluable for news trading! It can make you a boatload of money! I would suggest you make a copy and refer to it daily if you want to trade the news. Remember, the A is the most volatile and is more risky. The B announcements can be quite volatile but with experience can be very profitable. With all the others one can just use the regular indicator tools. Often, I have overlooked these events, and just traded normally and have been quite successful.

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Announcement

Rating

Auto and truck sales C-

Bank of Canada B+

Beige Book D

BOE Bank of England Policy B+

Business Inventories C

Case-Shiller Index D

Chicago PMI B

Conference Board Consumer Confidence D-

Consumer Confidence B-

Consumer Price Index B+

Consumer Sentiment - U. of MI B

Construction Spending D

Crude Index C

Durable Goods Orders B

ECB European Central Bank Policy B+ EIA- Natural Gas (Energy Info. Admin) D

EIA Petroleum Status C-

Empire State MFG Survey C-

Employment Cost Index B+

Employment Situation A

The Employment Report ADP A

Existing Home Sales C

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Factory Orders D+

Fed’s Beige Book D

FHFA House Price Index D

Gross Domestic Products -GDP B

Housing Market Index C-

Housing Starts and Building Permits B-

Housing Price Index D

ICSC –Goldman Store Sales D

Industrial Production B-

Initial Jobless Claims C+

Institute for Sup. Management MFG A-

ISM Non MFG Index B

International Trade C+

Leading Indicators C-

MBA Mortgage Index D

Michigan U. Consumer Sentiment Index B-

M2 money supply F

New Home Sales C+

Non Farm Payrolls A

Non Farm Productivity D+

Pending Home Sales D

Personal Income, Spend and Consumption C+ Philadelphia Fed Survey Index B

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Productivity and Costs D+

Red Book D

Retail Sales A-

Trade Balance C+

Treasury Budget D

Treasury International Capital C-

Wholesale Inventories D-

Wholesale Trade D-

Weekly Jobless Claims C

My personal rating on Treasury Auctions is “A” thru “D”. An “A” rating would mean to expect a marked trading reaction always. The “B” rating would mean a probable reaction and could be dramatic. A “C” rating would give a small change if the auction is average but anything out of the ordinary could give a dramatic spike to the market. A “D” rating would be to expect little if any change in market action. We pay attention to those lower ratings because the market could respond dramatically if anything unexpected would occur. One must always be prepared as the Treasury announcements affect all markets. In general we simply follow the indicators.

Auctions 30 Year Bond A

10 Year Note A

7 & 5Year Note B 1 & 3 Year Note C Monthly /weekly Bills D

Announcements D

Settlements D

Mark Braun's Daily update email should be read every morning as part of

premarket study. His calls and forecasts are always spot o and are extremely helpful. Mark gives an analysis of the day’s expectations of most markets, including chart examples. He maintains a Chat Room posting intraday analysis

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22 live continuously for many instruments including currency, commodities, bonds, and stock index futures. I key my work off of Mark’s Fibonacci work. My methodology is very successful when used alone. I am much more profitable however, when trading with his Fibonacci Support, Resistance and target levels. I would hate to trade without Mark’s work. Many people use Fib Levels, but, he is the master, the absolute best. Moreover, he runs the work quickly and accurately using multiple time frames giving a summary posting. I feel using his work frees my time. I can then concentrate more on my trading tools.

Fibonacci Philosophy

Leonardo Fibonacci was a mathematician who lived about 1200 AD. He explored a different way of using numbers. By definition he starts with two

numbers, 0 and 1. Instead of using the usual progression of numbers adding one to the previous number: 1+1 =2, 2+1=3, and 3+1=4 etc. He adds the two previous numbers to give the next in a series. So 0+1= 1, 1+1 is two, 2+1=3, 3+2 =5, 5+3=8, etc. His sequential numbers would be; 0, 1, 2, 3, 5, 8, 13, 21 and so forth. This is a proportion of 1.618. It seems psychologically people respond to those numbers, or the proportion! It is known in art as the Golden Mean or Golden

Section. It is found repeatedly in nature. It is used in poetry, music and other walks of life. Think about the poem; Twinkle, twinkle, little star. The syllables are based on the rhythm of the Fibonacci numbers the same as in music. Strangely, it seems to affect the behavior of mankind as well. It is an extensive study and some feel it couldn’t possibly effect trading. Some call it magic. Let me say, you will think Mark’s work is magical. You will see Mark predict levels of support, resistance and targets hours ahead of time, day after day, after day. These levels are called Alert Levels. They are critical points that emphasize action. Suffice it to say, these numbers and proportions appear in trading. They are seen in price levels, as well as in time. Here are some general examples of Fibonacci numbers found in the world.

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25 Mark gives many classes on Fibonacci work and shares his knowledge daily in his Chat Room. You can check his website for classes, manuals and the Chat Room. Here is the link for those interested. http://www.mjbraun.net/

Every morning one should also check several days of previous data for range and volume. To get this information, one can use crosshairs as a pointer and right click on a daily candle stick data bar. A pop up will be seen to give the data information.

Other news sources would be: The Wall Street Journal. , Barron’s, Bloomberg -

www.bloomberg.com, http://www.smartmoney.com, as well as the following

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www.forexfactory.com .It gives news releases of all kinds pertaining to the markets live throughout the day.

In general, I use multiple contracts, taking small profits at a first target for less risk. This will yield a sizable profit for a very good living. This is the method used for years by some of the most successful floor/pit traders.

I set a minimal goal on each trade and for the day, so that I know I can make a good living without having to overtrade and take risky trades. (The psychology of

trading is as important as the mechanics if not more so. I will discuss this more. ) I

make my goal almost every day, often 2, 3, and 4 times over.

My personal goal on the Bond is only 4 ticks a day. But I usually get more than one daily goal. A tick in bonds is $31.25 that is 125.00 per day. If one trades 200 days a year, using five contracts would be about $135,000.00 per year. There are 360 days a year, less 104 Saturdays and Sundays, less 10 Federal Holidays, less 5 days sick leave, less 21 days vacation that leaves 220 trading days. If you want to

stay in a lower tax bracket, take more vacations. Knowing this I don’t have to be

nervous and anxious, thus overtrading and probably losing. It is generally possible to earn more than 4 ticks per day, and one could certainly add more contracts to get a higher bottom line. The simple math is that two goals a day is doable giving a probable profit of over $200,000.00 a year. This is not guaranteed but certainly possible!

On the ES my goal is 8 ticks per day. At $12.50 per tick that is $100.00 per contract. Trading multiple contracts and averaging 3 winning trades per day can give a substantial living as well.

The Euro can give comparable or even better results.

An ultraconservative way to trade, especially for the beginner with a small account, is to only have a goal of 2 ticks per trade on the Bonds and 3 or 4 ticks on the S&P Emini or the Euro. With a good methodology and I believe my

methodology is, that goal is almost assured. On a strong trending day when price moves all day in one direction, a lot of money is left on the table. Trending days only happen a few days a month. Most days are momentum days where the market moves for a short period in a direction, reverses, then reverses again. This gives several swings up and down throughout the day. These days have possible losses, if in for a long period. Since a few ticks can be had easily the net can often be more profitable on these types of days. The remaining days are extremely choppy and for most traders losses are almost certain, whereas the ultraconservative trader has a stronger chance of success. So on a full month of trading averaging trending,

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27 momentum and choppy days the ultraconservative trader can be rewarded

substantially.

When one can trade multiple contracts taking off some at lower targets, using a Runner to catch the longer trends, trading is safer and more profitable. That is when one can make a living trading.

When trading more than two contracts, one should take off a larger proportion at the first target. If one is trading 3 contracts, take off 2 at first target. If trading 4, take off 3 at first target. This allows one to be trading on market money. The

remainder called the Runner has less chance of a loss or at least a smaller loss than if one is taking half off at first target. The important thing is to not lose money. One must be aware the market can only move up or down. When a market is

seemingly Sideways, there are still small up and down movements! Furthermore, it moves in cycles, up and down. Knowing how to find these cycles gives us our trading opportunities. This will be discussed extensively throughout the manual. People decide to try trading and expect to find a single indicator, a HOLY GRAIL, two lines crossing for example that will be totally successful. It will make a profit every time. There just isn’t any single indicator that will do this.

I do firmly believe, however this system can be the gate to the HOLY GRAIL. The HOLY GRAIL is the trader who has mastered a system and developed the self -discipline to be a trader. I believe that combining Mark Braun’s Fibonacci work with my methodology is a sure way to success!

The daily market plan will be discussed extensively. Essentially, we want to establish the market direction and take trades with the immediate momentum. We will use multiple charts called periodicities, to establish trading direction. These include time and volume as well. The trend is established by the professionals, large banks, hedge fund managers, etc. The longer term time charts and higher volume charts establish the trend and trade direction. This is a Setup. We don’t try to always take the extreme high and the low of each cycle. We just try to get the part when the indicators confirm. The shorter term time charts, lower volume and Tick Charts give the Signals to join the trend and enter a trade. They also help with trade management. To enter a trade we use a Trigger which is Price Action

Confirmation. That means the price must move in trade direction beyond the Signal Bar. When all the indictors on all charts are in agreement we call this a Grand Slam, a GS! When a GS is established, one could initiate a trade. There are Mini Slams, which we will discuss.

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28 One really should not trade unless he or she has the account size to trade at least two contracts, ideally 3, or multiples thereof.

It should be emphasized that there is no way to predict the future, in trading or in life. But interestingly, every time a person enters a trade, they are trying to predict the price of the instrument in the future. We establish what the market is doing now. Then, we use tools to make an analysis of what the price will probably be in the future of the instrument being traded. I will present several tools and their use. This will help to make the predictions, of what the probable outcome will be. There are no absolutes, but with the tools in this manual, and with Mark Braun’s Fibonacci work, we will be successful the vast majority of the time. If one is gambling one may use tools, like counting cards, to help predict the outcome of a bet, but one is still playing the odds. In good trading we use tools but they are based on more complex factors that include the economy, imports, exports,

manufacturing, weather, international political events and other worldwide events as well as mathematical probabilities which greatly enhance our outcome. Thus I think it can be safely stated, good traders are not gambling.

We will trade with the trend and countertrend. Many traders will not take Countertrend Trades. I trade them frequently, almost every day. The method will be explored thoroughly.

We will trade News Announcements. Most traders will not trade them, but we will take them routinely with much success.

We will trade, both Long and Short trades. Long is when you buy a contract and you sell it at a later date. Some people trade only Long. The concept is simple just like buying a boat, a car, a baseball card. I buy and if price goes up, I sell and keep the difference. If price goes down and I sell, I lose money. Short is when one sells a contract and you cover (buy) at a later date. Shorting is a little harder to

understand. Simply put, you just borrow a contract from the broker and you have to pay it back. If you can buy it at a lower price, you can pay it back “cover” with a cheaper one so you keep the difference and make money. If you “cover” at a lower price you make money. If I have to pay more for the borrowed contract to return to the broker I lose money.

Some people, psychologically, don’t like to short as they feel it is wishing a company will fail. They want it to go down in value. They feel badly for the company, the economy and the country. This is not true. We are not wishing anyone to fail. Any stock, financial instrument, stock index future, commodity goes up and down all the time. The pendulum swings so to speak. As a matter of

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29 fact when the price on any instrument goes down, it may only rest, building up strength to go even higher. It is our job to recognize and trade those swings. That allows us to make money, whether the market is going up or down. Remember trading is a business.

There must also be a post market plan. This is the time to evaluate all trades. A novice trader takes a trade, and if successful, jumps up and down, screams, and brags. If they lose they get mad, swear, throw things and berate themselves. A professional trader merely asks “Why did the trade become successful, or why was the trade not successful?” Following this procedure will greatly improve success. When one trades using my methodology there should only be a few trades to review at the end of the day. One can review the day in a short time. This will tell why a trade was successful or failed. It could find missed trades as well. A good idea is to use Snagit and copy all trades made. Then, one can review each trade more easily. I will also give a check list. If used, it will give a quick means of reviewing each entry. I found my trading improved dramatically when I started reviewing my trades post trading. If one trades well, a lucrative living can be made in a few hours each morning. That leaves ample time to review trades as well as to study the news, etc. In today’s Globex electronic trading world good trades may be had all day long. They seem to be fewer and slower later in the day, but often give steady gains.

I will give a detailed check list to aid in selection of each and every trade. It will list most every detail needed to make any trading decision. Most failures are the result of failing to gather all the information needed. It is complex but with practice, its use will become routine.

An emphasis and discussion must be made regarding focus. On the surface it might seem inconsequential, but let me tell you it is critical to successful trading! I use seven chart periodicities. There are four Sub Charts with multiple indicators on each with long and short considerations. There are nuances that must be analyzed as well. Although each chart is basically the same and analyzed the same it still requires maximum concentration to be sure some minor detail is not overlooked. When I am trading, I am not reading the news, sending or reading emails, or surfing the internet. I am looking from Mark’s charts to each of the Fibonacci Trader charts, using a check list continuously. I am looking for Setups and for reasons not to trade. I am trading and like a surgeon, I am concentrating. I would like to make a point regarding trading during the so called “Dead Zone” or the extended lunch time. Traders think because it is a slow time, they can pay their utility bills online, etc. I think this is hypo focusing. Unfortunately, when they

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30 look back at the indicators, they see some action and they jump in a trade. In haste, they have overlooked something or the trade has been running and they are late in entry a few ticks, with resulting loosing trades!

If one is hyper focused, one is apt to only see the EMAs, etc. Thus, a trader will overlook another tool like Mark’s Fib work, which is more static not changing for long periods at times. There may be long periods when seemingly nothing is happening. But in just a few seconds, a trade sets up, signals and an entry is given. It can also be the reverse of what the market might have been suggesting for quite a while.

To prevent hyper focusing, one should take deep breaths, expanding the rib cage up and out Sideways while inhaling. On exhaling contract the stomach, and bringing the rib cage down and inwards with sideways movement. This is to get maximum body movement as well as oxygen. This helps the heart as well as concentration and burns a few calories. Another tool is to sit in front of your

monitors and force your focus on the outer edges. This does something to the brain as well as stretching and relaxing the eye muscles. Therefore one is more relaxed but still focused. One can also message one’s ears vigorously for 30 seconds each, and also breathe deep, rapidly through the nose for 30 seconds or so. These also build energy! I like to use Mark’s Chat Room as a tool to prevent hyper focusing. This is different than reading the news or sending emails as the information is based on our trading. So I make some comments, if only to say Good Morning to Mark and fellow traders, or when Mark discusses his charts to say thanks. Not only does Mark deserve acknowledgement, but it takes the edge off of hyper focusing. In summary, when one is trading, one must be focusing on the charts every second, but should be in a state of “Calm Focus”!

This is a way to review all trades taken to evaluate one’s strengths and weaknesses. The question is will a new trader accept trading is very difficult. It is extremely challenging and almost certainly the most difficult way to make a living. The beginning trader must accept trading is probably more art than science. Will the new trader be willing to do the hours of work it takes to become successful! Most won’t and most are destined to fail.

I hope the readers of this manual will understand how important a post market plan is. It is tedious and time consuming but the work pays substantial dividends. The Spreadsheet is like homework in school. Those, who do not do homework, are lucky to pass. There are exceptions. If one does not have time to trade all day and the time to do the homework, it would be best to trade only

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31 mornings. Then use the afternoon for homework. It simply must be done. Many say a trader’s success is definitely proportional to the statistics gathered. I believe it. Below is my spreadsheet master.

It may appear confusing, but when the manual is completed it will seem quite simple. Filling it is easy, but it is time consuming. I will break it down in sections, so it will be easier to read. I will also explain each item in detail, then one will understand the effect on one’s trading.

Downloadable Master for this sheet is:

HERE for Excel 2007 HERE for earlier versions of Excel

I must emphasize that trading is a business! One needs to be trained to be successful. Hopefully this manual will be a thorough platform to help anyone to become a profitable trader. It will take a great deal of study, homework, and screen time to be successful. The screen time is like an internship for a physician. Also, one must have the proper equipment to trade properly. A dentist couldn’t think about treating a patient without an office, a special chair, x-ray equipment, a lab, tools, and assistants, etc. We need the proper hardware too. Many think

because they have a laptop and the internet, they are set to trade. That is just not so. I can tell you many who do not have the proper hardware have software problems. They may blame the software, but the problem may be their hardware. However, the cost to set up a trading business is minimal compared to most businesses.

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32 The beauty of trading for a living also is that one only needs a home office, thus no commute. One doesn’t need a staff, so there is no payroll, taxes, and hiring

problems, etc. There is no inventory, advertising, etc that complicates most businesses.

One further bit of philosophy is to really, really devote your time to a system till you know it well. Many try a system, but don’t really master it. When they fail, they blame the system. Many, many mentors have rooms with successful traders, but a newbie comes in, tries it for a while, fails, then says the system doesn’t work. If the mentor’s system was not successful, why are there successful people with that mentor? Any system including this one, takes a great deal of screen time to really be able to trade successfully.

Along with this thought is that many will try to change the system. They will add other tools from their past. Be careful doing this. Moreover, some will try to use additional systems, and then get “paralysis by analysis”. If one is trying to look at too much data, one will often overlook an indicator or two, and get a losing trade. The trader then blames the system. When one becomes a master with one system, then it might be OK to compare another or test another but be careful! Trying to use three systems together will almost guarantee failing.

Philosophy Summary

The reader must understand learning to trade is extremely difficult. When one has mastered any endeavor it is easy. You have heard the cliché “When you know how it’s easy!” If trading were easy, everyone would be doing it. It is not a science where one can say if the market does “X” then buy. Or, if it does “Y”, then sell. One must take several factors, analyze them for probability, and then make the trade decision. In addition to being challenging, this leads to various psyche problems, often with failure for the individual trader.

We must have the proper hardware and we must be well trained. This requires an individual to commit to devoting extensive time and effort. Unfortunately most will not commit to the work needed to become successful. And they will try to get by without the proper hardware. They will want to find some Guru who offers a weekend class to master trading with a chain store off the shelf computer. Or, they will respond to one of those ads saying “This simple secret will make you millions in the stock market”. What I present here is not quick, simple, or cheap, but it is proven.

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33 Conquering the market can be done, but it takes time and work. It is a career, a means to earn a living, and like any profession it will take time and effort to master.

This chapter has attempted to discuss the central elements on beginning to trade. From this we will explore the hardware, the psychology, the concepts of trading, then the indicators, the tools with their use. We will put together the use of the tools to cover the mechanics of trading. This hopefully will save years of effort to become a winner!

I have started with the premarket plan. Good information including links, have been given. All the trading tools will be explained with numerous examples. The tools for the post market plan will be given in a more thorough manner.

I have used this methodology for years. There have only been refinements with no changes or additional tools. It is tested and proven. It is challenging to master but can be done. This manual is quite long and may seem overwhelming but when taken one step at a time conquering day trading can be done!

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34

Trading Psychology

It has been statistically proven that 90% of all traders fail. There are many methodologies that work, and many successful traders make a fantastic living! So why do so many people fail? I believe it is the psychology; the makeup of the individual trader that leads to self destruction and failure!

It is important to note, all traders lose money! This means some traders lose most of the time; some lose part of the time. The winners are successful most of the time keeping their losers small.

I have read that the number one reason for failure is the same for any business – Undercapitalization! There is a lack of money for learning, for software, for hardware, and for the time needed to develop self discipline! I hear statements like “I can’t put up all those charts cause I don’t have enough monitors” The answer is, one shouldn’t be trading. There is a lack of capital. One must have enough capital to sustain temporary losses before becoming profitable. My method requires several monitors watching multiple charts on each. The off the shelf

computer at your local chain store is not good enough. I recommend Trading Computers.Com. Some say they are pricey. But I don’t believe out of line for their product. They simply do the job and are extremely dependable. They have

computers with the capability to watch up to 12 monitors. They state as many as 100 charts can be run on those monitors. I have run 30 or 40 charts on 6 monitors and never have a problem. If one is really knowledgeable about computers one could build a good computer. I am not. I know many who have built their own successfully. But, I have seen many who cannot match the performance and dependability of Trading Computers.com.

There are trading mistakes to be made just learning the use of the hardware, the computer software, the trading software, and trading mechanics. This is one of the main reasons I recommend paper or Simulated Trading. A few believe one should always trade with real money, then the trader is more focused, doesn’t take

chances, and more attention is given each trade. Thus, the learning curve is shortened. This takes a large account, and most traders don’t have that to start. I just feel it is wasteful. Some say a simple rule is to have enough trading capital to be able to take 10 losing trades in a row and still have enough money to continue to trade.

The number 2 reason for failure is the inability to actually take a trade. This is fear of losing. So how can we overcome that fear? Once again, I say it can be done by Paper Trading and keeping statistics until one is successful. Then, one has the

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35 confidence the odds are very favorable. This really shatters the fear of entry. Of course one has to have a good system. I truly believe you will find it here.

One should look forward to the entry with eagerness and excitement not with fear. Reaching that level of confidence is not easy, but it can be done.

My trading will be discussed in detail, but basically I look for Alerts, which are trading opportunities. I find the Trend; I then employ a Trading Chart which gives the signals to Stop or go. I confirm entries with a Frontrunner Chart. The tools I use must be the same on all charts. I call this the Grand Slam. If you have that you have a very, very, high probability trade! As one of my students, Elson Lacerda said “The Trend Chart is like a policeman standing at a traffic light, even when the Signal traffic light is working, he tells you to sometimes to stop on green or go on red”.

The number 3 reason for failure is not having realistic goals. I set a very small daily goal, so I know can make a comfortable living. Then, I can start the day knowing my goal is easily within reach. So, I am relaxed. Why do I keep it so low when I generally exceed it? So I am not taking chances to reach a high and

probably unrealistic goal. Forcing trades is a sure way to lose. Let me add that I often stay with a trade for lengthy periods garnering several daily goals on one trade. The secret to staying with a trade will be discussed later. Don’t try to force trades. Just follow the Trading Plan and we will suggest a good one.

When the Setups and the triggers are given, the trades must be taken.

Selectivity of the signals and triggers, invariably results in a loss as one generally picks the losers and lets the winners pass. At the very least, while time is taken to determine which trade is good, the momentum will have run its course and often reversed. The Setups I use are high probability, and when seen should always be taken. I can safely say, waiting before entering, is one of the biggest reasons for failure.

Not all trades are going to be successful regardless of the methodology. My personal average is high. But as a matter of fact if one had only a 40 to 50% success rate, then managed the trade wisely, one would be able to make a good living.

The number 4 reason for failure is not having a trigger. The trigger I use is price moving beyond the Signal Bar. It is called Price Action Confirmation- PAC. Entering a trade too soon before the trend direction is confirmed is probable

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36 The number 5 reason for failure is exiting a trade improperly. Surprising as it may seem most beginning traders take a small profit on winning trades, and let losers run. Obviously this results in continued losses and depletion of the trading account. With my method, there are clear-cut signals for exiting. One can be completely relaxed, even anticipating the exit.

The beginning trader takes a little profit to be safe, but lets the losers run. He or she won’t accept a loss, or feels so strongly about the basis for the entry, one feels it will surely turn around and become a winner. Deciding when to exit and when to stick with a trade must be done on every single trade. So every single trade is managed as soon as the trade is opened. One must accept immediately when a trade is unsuccessful. Exiting quickly with a loser and staying with a winner is one of the hardest aspects of trading.

An exit Stop that is too close to the entry price, is another reason for exiting a trade improperly. The trader thinks it is best to keep Stop close to the entry, so any loss would be only a couple of ticks. That doesn’t allow for market volatility. This takes one out before the trade can move successfully, thus consistently losing. If the reasons for entering are sound, the majority of the time the trade will be successful. Losses do happen, forget them, and get to the next trade.

The number 6 reason for failure is overtrading. This may be the biggest reason for failure. It used to be my biggest problem. It is a downward spiral that whirls one out of control, and results in major losses. Traders overtrade when they are not sure of their methodology, or lack the discipline to wait for a proper Setup. They take trades because they are in the Hope Mode. Consequently, they take chances and force trades.

Probably the biggest reason for overtrading is what I call “The get it back

syndrome”! I believe there are three reasons for falling into this syndrome. The

first is undercapitalization. This causes the trader to be so worried, panicked decisions are made. Traders who are undercapitalized have a very small trading budget. When they do take a loss, they feel they have to get it back quickly. They force trades, jumping in and out with the slightest momentum reversal. This results in many trades with more losses. When they do get a little profit they exit thinking they must be sure to get something on the trade, only to see it go for many more ticks of profit. Understanding the methodology, being sufficiently capitalized and realizing there will always be losing trades gives one the reassurance to just calmly wait for the next Setup, signal and trigger. The second reason for getting into this downward spiral is personal ego. The same philosophy prevails, the trader has to prove they are good traders, but they become nervous and again force trades.

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37 Don’t laugh but the third reason for this syndrome is spousal and peer

pressure, This may be the greatest of the three. We just can’t admit when we face our spouse, our family, our friends, our neighbors with the truth! We made a mistake and or admit we lost family money. They are always saying “Trading the stock market is just really gambling”. And you know what; overtrading is gambling! If you don’t have the perfect Setup, the perfect Signal, the perfect

Trigger, you are gambling. Admitting you have a gambling problem is the most important step to being able to break the behavior!

I can’t tell you how many times early in my trading career, I have made money in the first hour of trading, only to give it back and usually more during the rest of the day. Trading mid day is more difficult, mainly because there is little volume. Thus there is no follow through. Pushing trades during the lunch time without the proper Setup is pure and simple greed. If you lose a little of your profits then the “Get it Back Syndrome” kicks in and the downward spiral begins. Then one starts

gambling. This is the major reason I have a realistic goal.

The major way to stop overtrading with my methodology is to minimize all but the Trend Chart, and only watch the Trend Chart. Watch for the perfect Setup! There will be 3 or 4 of these a day, and occasionally up to 8 a day. If one is taking more than about 8 trades a day one is probably overtrading. When ALL the indicators are in line with good angles or getting close to it, restore the Trading Chart and look for the Signal.

Another reason for overtrading is taking signals randomly rather than at Alert Levels.

Some days it seems you just can’t win! If you are trading multiple contracts and have a day with 3 losers in a row, you should stop trading live for the day or at least till a later period. Most often this occurs when the Trend Charts indicators are in conflict. Some days, one must stand aside. If this is happening from 10:00 AM EST until 1:00 PM EST, then the losers may be due to “lunchtime doldrums”. So at least stop trading until the afternoon session when there is more volume and follow through. There are some days when the market is just range trading with low volume and is very choppy. They often occur the day after a strong trend day or sometimes on Friday afternoon particularly in the summer. If one has two losing days in a row then probably one should go back to Paper Trading until one is successful five days in a row. Let me assure you however, if one is taking trades as this manual prescribes, one may have losing trades but should not have a losing day.

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38 The number 7 reason for failure is a lack of knowledge of one’s own

weaknesses. As discussed earlier one must do a spreadsheet of every trade to determine why a trade was successful or why it failed. One will find there are patterns repeated over and over that allows one to be successful or to be in the 90% of all failing traders. A trader who is continually losing has his or her own faults. They must be discovered. The best way to find and to correct those habits is to do the spreadsheet daily of all trades winners and losers.

In Summary: To gain the proper mind set to be able to trade calmly, relaxed, and with the inner confidence to trade successfully, use the following.

Be properly capitalized. Have good hardware. Set realistic goals.

Set realistic Stops so that volatility doesn’t stop the momentum move. Develop a premarket plan.

Watch the Trend Chart only until you have a perfect set up. Trade Grand Slams at Alert Levels

Follow the exit strategies. Use a post market study period.

One should Perfect Paper Trade until you have consistently 20 or 30 successful days in a row.

Nothing can stop the man with the right mental attitude from achieving his goal; nothing on earth can help the man with the wrong mental attitude.

Thomas Jefferson

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39

The Trading Concept

A Trader must be continually monitoring the market to evaluate possible entries, exits, or when to step aside. This is not a profession for those with Attention Deficit Syndrome. In a trend, the market moves, pauses, moves, pauses in a general direction. These are called Cycles, or Swings. The cycles and swings determine the trend. This gives the opportunities to enter, exit and helps with management as well. When the market is Sideways it may be flat with little

movement or choppy with some short irregular up and down movement. The term “consolidation”, is used when price has been moving Sideways in a small range. When price is moving in a trend or direction and reverses slightly or levels, we have to consider whether the market is showing indecision or the momentum is halting briefly, some say resting, or a reversal is beginning. The first sign of leveling or turnaround we call a Pause.

If price is in an uptrend, then rests dropping down, it is called a Pullback. That is a downward momentum movement in an uptrend cycle. If the market is in a

downtrend and then turns up for a while, an upward momentum movement in a downtrend it is called a Rally. After the momentum rests, the cycle may resume or become a true reversal.

The Pause, Pullback or Rally may take place in 2 or 3 bars, or they may involve several bars. We have rules to determine if a reversal is occurring.

If the momentum rests, forming a Rally or a Pullback, one must then be looking for a Trend Continuation Trade or a Counter Trend Trade.

I start trading Bonds early and watch the volume build. I want to see a minimum of 1000 contracts in 3 minutes or less on the Bonds to trade. One can use an indicator called Volume Color to determine that volume. Often there will be 1000 contracts in less than a minute.

The ES is one of the highest volume instruments traded. When the Pit Market opens, there is most always substantial volume to trade. It is advisable to check the daily volume range every day to know when the market is slowing, and may be more difficult to trade. One must check for extreme volatility and range as extreme volatility can be dangerous to trade. Premarket opening trading can be done using a 24 hour Globex chart, but should be done with caution. For premarket trading I especially like to see a minimum of 8,000 contracts traded in a 3 minute period. The first few minutes after opening can be erratic, so some choose to wait till the

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40 market settles to begin trading. There are many who trade longer term. They

placing a market order at the open, then go off to another job. I think this flood of orders increases volatility, and then the market settles down, reflecting what is currently happening in the world. I am confident enough with the selected indicators to trade the opening.

One must select a personal time frame, volume, or tick amount one is comfortable with. These are called periodicities. Some people are in a trade for days at a time. Some trade for only a minute or two. Even when one has basic periodicities one is comfortable with, one may find a day when volatility is so high that price becomes erratic. One might then choose a longer period to smooth price. This may

necessitate larger Stops however. These choices are personal; experience and spread sheets help make these decisions of course.

On the evening news they give a business summary. For example “the Dow was down 2.60 today”. They don’t tell you price may have been above or below the opening 2 or 3 times, being up part of the day and down before the final closing. I hope to catch those intraday moves. I like to trade the first couple of hours when the market is moving the most. I leave when the market slows and becomes more unstable.

We will be trading using Alert Levels. Alert Levels are support, resistance or target levels. The market will move to a level, and possibly stalls or turns around. It is amazing how significant these levels are! The Alert Levels are based on price, and time using Mark’s Fibonacci work. I also use previously established highs and lows of price or other indicators and called swings. We have Swing Highs and Swing Lows. The Alert Levels alone do not predict what will happen, when the Alert Level is reached. They do predict where an event is most likely to occur. We will use tools to help predict what will happen at these Alert Levels. The results are extremely positive. No one can predict with 100 percent accuracy what will happen at these levels. One will be amazed though, how effective the Alert Levels can be! There is a dichotomy in trading. On the one hand we try to establish the trend and trade with the trend. There are clichés “The Trend is your Friend”, “Trade the Trend”, etc. So long term charts are selected to determine the trend direction. On the other hand a trend change starts on a single bar in the shortest periodicities. Knowing when the trend is changing is difficult as it takes time to develop. If one is in a trade a lot of money can be lost, if one is only trading long term charts. This is a major conflict, and can be challenging. If one wants to solve this problem that means trading the shortest periodicities possible. Then, there is so much volatility one could overtrade. I have selected periodicities for my psyche that keeps me