Determining Who’s In Control
Velez Market Law #1
The Law of Motion
During MOVING market environments, stocks and other
tradable items tend to follow through or continue the most
recently completed color-coded bar, 80% of the time.
Sir Isaac Newton: “An object in motion tends to stay in motion.”
Different ways to communicate the law:
1) After a Green Bar, expect another green to follow at least 80%;
2) After a Red Bar, expect another red bar to follow at least 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.
Winning Bars
High
High
Open
Close
Open
Low
Bulls Win
Close
Low
Bears Win
What color bar is next?
The 55% Entry/Stop Rule
High
High
55%
55%
Low
Low
Bulls stay winners as
long as they maintain
most of the green
Bears stay winners as
long as they maintain
most of the red
The Open After Strength
High
High
Open
55%
55%
Open
Low
The open is always
neutral. You don’t buy
until you get some green.
Low
The open is always
neutral. You don’t short
until you get some red.
Enter on Green with a 55% Stop
High
Buy
High
55%
55%
Stop 1
Stop 1
Low
Once a bit of green
materializes, the trader
can confidently buy with
a stop at the 55% mark
of the prior bar’s green.
Low
Short
Once a bit of red
materializes, the trader
can confidently short with
a stop at the 55% mark of
the prior bar’s red.
Use a 100% Stop Adjustment
High
Buy
High
Stop 2
55%
Stop 1
55%
Stop 1
Stop 2
Low
Short
Low
Once there is enough
green in the current bar,
protect it with a raised
stop to the low of the
current bar.
Once there is enough red
in the current bar, protect
it with a raised stop to the
high of the current bar.
Move to a new 55% Stop
High
Stop 3
55%
Stop 1
Buy
High
Stop 2
Stop 2
Low
55%
Stop 1
Short
Stop 3
Low
If the green of the current
bar grows substantially,
protect a little less than half
of it with a new 55% stop.
If the red of the current
bar grows substantially,
protect a little less than
half of it with a 55% stop.
The 10 Colored Candles
Least Bullish
5
Neutral Bull
Normal Bullish
4
8
9
Neutral Bear
2nd Most Bearish
7
Normal Bearish
Most Bullish
Most Bearish
6
3
10
Least Bearish
2
2nd Most Bullish
1
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.
Page 17
The 3 Non-Color Candles
12
13
All red was lost
Draw
All green was lost
11
Sellers dominate
this entire area
Bottoming Tail (BT)
Buyers dominate
this entire area
Tip: While technically no one wins, due to the open and close being even, the last group in
control of the stock 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.
Topping Tail (TT)
Bottoming tails (BTs) and Topping Tails (TTs) offer VCM Traders some
incredible trading opportunities, which we will see shortly.
Page 18
Absolute Control
High
High
55%
55%
Low
Bulls in absolute control
Low
Bears in absolute 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Full Control
High
High
55%
55%
Low
Bulls in full control
Low
Bears in 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Good Control
High
High
55%
55%
Low
Bulls still in control
Low
Bears still in 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Weak Control
High
High
55%
55%
Low
Bulls’ weakening control
Low
Bears’ weakening 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Lost Control @ 55%
High
High
55%
55%
Low
Bulls lose control to Bears
Low
Bears lose control to Bulls
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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Lost Control @ 55%
High
High
55%
55%
Low
Bulls lose control to Bears
Low
Bears lose control to Bulls
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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Totally Over @ 100%!!
100%
ALL COLOR HAS BEEN ERASED
100%
Bears in permanent control Bulls in permanent 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Lost Control Forever!!
100%
100%
Bears in control forever
Bulls in control 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Full Control
High
High
55%
55%
Low
Bulls in Control
Low
Bears in 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Good Control
High
High
55%
55%
Low
Bulls still in control
Low
Bears still in 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Weak Control
High
High
55%
55%
Low
Bulls weakening control
Low
Bears weakening 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Lost Control @ 55%
High
High
55%
55%
Low
Bears back in control
Low
Bulls back in 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Lost Control @ 55%
High
High
55%
55%
Low
Bears back in control
Low
Bulls back in 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
There is No Difference
55%
55%
55%
55%
55%
55%
Totally Over @ 100%!
High
100%
Bears in control forever
100%
Low
Bulls in control 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. VCM
Trading Tip: However, if more than half of any color is suddenly erased, the law of
follow-through is greatly diminished. We use the 55% Retracement mark as the turning
point. Remember this, as it is the basis for may VCM Trading Tactics.
Single Bar Sell Triggers
Single Bar Buy Triggers
Stop
55%
Sell Short
Buy Long
55%
Stop
Stop
100%
Buy Long or
Add
Sell Short or
Add
100%
Stop
Dual Bar Sell Triggers
Dual Bar Buy Triggers
Stop
55%
55%
Buy Long
Sell Short
Stop
Stop
100%
Buy Long
100%
Sell Short
Stop
Three Major Moving Average
Locations
1) 8-period Moving Average (8ma)
Best when Trending
2) 20-period Moving Average (20ma)
Best when Trending
3) 200-period Moving Average (200ma)
Best when Flat
VCM Buy Locations
VCM Sell Locations
Declining 8ma or 20ma
Buy near here
Short near here
Rising 8ma or 20ma
Flat 200ma Below
Flat 200ma Above
Short near here
Buy near here
Single Bar 55% Triggers
Declining 8ma or 20ma
55%
Rising 8ma or 20ma
Flat 200ma
55%
Flat 200ma
55%
Stop
55%
Single Bar 55% Triggers
55%
Buy
Declining 8ma or 20ma
Stop
Stop
Rising 8ma or 20ma
Flat 200ma
55%
55%
Flat 200ma
Stop
Buy
Stop
Short
55%
Short
Single Bar 100% Triggers
100%
Buy
Declining 8ma or 20ma
Stop
Stop
Rising 8ma or 20ma
Flat 200ma
100%
Short
Flat 200ma
Stop
Buy
100%
Stop
100%
Short
Dual Bar 55% Triggers
Buy
55%
Declining 8ma or 20ma
Stop
Stop
Rising 8ma or 20ma
Short
55%
Flat 200ma
Flat 200ma
55%
Stop
Buy
Stop
55%
Short
Dual Bar 100% Triggers
100%
Buy
Declining 8ma or 20ma
Stop
Stop
Rising 8ma or 20ma
Short
100%
Flat 200ma
Flat 200ma
100%
Stop
Buy
Stop
100%
Short
Buy 1
Buy 2
Buy 1
Buy 2
8 Red bars
Note: 3 Red bars and 4 lower highs.
VCM Buy Set-up (VBS)
VCM Trade Opps
Prior High Resistance (PHR)
20ma
5-Red Bars
200ma
Prior Day’s Close (PDC)
Circles show VCM Trading Opportunities
Charts Courtesy of VCM Trader Pro®
40.11
8
NH
Velez Law # 3: If a stock fails to make
a significant new low, after a series of
lower lows, it WILL make a new high!
Taking the 8 Train
Charts Courtesy of VCM Trader Pro®
Taking the 8 Train
8 Train Full of Apples
Charts Courtesy of VCM Trader Pro®
Name the Entries
Charts Courtesy of VCM Trader Pro®
VCM Mini Quiz
1) Location Item?
2) Entry?
3) Are you still in?
4) Where is your current stop?
1) Location Item?
2) Entry?
3) Are you still in?
4) Where is your current stop?
200ma Resistance
200ma
13
20ma
20ma halts price
13
5
Chart Courtesy of VCM Trader Pro™
8ma
What Location Item are your playing off of?
Which Entry Tactic did you use, 55% or 100%?
Are you still in this trade?
One VCM Trading Strategy
The VCM Buy Methods:
1) Buy 55% and 100% retracements of former red bars
at or near the rising 8ma
2) Buy 55% and 100% retracements of former red
bars at or neat the rising 20ma.
3) Buy 55% and 100% retracements of former red
bars at or near the flat 200ma.
The Sell/Short Methods:
Everything mentioned above applied in reverse.
APPLY IN ANY TIME FRAME