Price Action & Income presents... 3 Hidden Elements of Market Geometry By Senior Trader & Market Analyst, Richard Krugel. Thanks for downloading my eBook! My name is Richard Krugel, and I’m the Senior Trader and Market Analyst at Price Action & Income. Before we dive in, I want to give you a brief backstory about the concepts you’re going to see in this eBook. Firstly, I am a real trader that trades for a living. Like so many traders out there, I have had a very difficult path to becoming consistently profitable. After spending thousands of dollars on gimmicks and so called “expert advisers,” trying to make an honest living from trading, I was at wit’s end. So I started developing my own strategy. I combined a few powerful analytical techniques that compliment each other very well, and after a few years of rigorous back testing and experimenting, it resulted in a low-risk, high-yield strategy that has performed very well for me over the years. I’ve always wondered how much money, time, and effort I could have saved if I had my strategy sooner, however, which is why I genuinely market this strategy: to help fellow traders understand price action for what it is, and to trade it with discipline. -R ichard Krugel Introduction In this eBook, you’ll see that when I say “Hidden Elements,” I’m not referring to the individual analysis components. The components we will discuss are actually widely popular. However, it is the science of pulling the “predictable” elements together to create a winning strategy that’s hidden from almost everyone trading today. I call that science “Market Geometry,” which is just a fancy way of saying that you measure and forecast based on the predictable aspects of Price Action trading. **Remember: The majority of market moves are not patterns, but patterns do exist within the chaos if you know what to look for. If you focus on the predictable aspects of the market and ignore the chaos, you can approach trading in a scientific and highly profitable manner. Before You Get Started… Please remember that this eBook will only scratch the surface of what you’ll need to know to truly master market structure. Yes, it is extremely important to understand these elements first, but you’ll still need to work hard to develop your strategy and the rest of your knowledge around these components. If you want the shortcuts to really master this stuff, I have put my life’s work into a true curriculum that will give you every tool and resource you need to become a successful trader. So if you want to be fully immersed in these strategies, you can grab one of my training videos for just $14. Click here to get started. Now, on to the 3 Hidden Elements of Market Geometry… Element 1: Waves It’s not a new practice to use waves to analyze or forecast markets. However, understanding the real balance of these waves and how to apply the other elements to these waves is what will give you a significant advantage over other traders. When you understand how the waves work, where you are within a given cycle, and how to forecast multiple future price possibilities, you’ll be in a prime position to make winning trades - which is what this eBook is all about. Like most things in trading, it’s easier to learn by visualizing the concepts, so let’s take a look at two examples of the wave patterns you’ll want to recognize. Uptrend Pattern: Downtrend Pattern: The structure of a trending market is evident in both of these images. The basic market structure of an uptrend tells us that while price is moving up, it will make a series of Higher Highs (HH), and as the market briefly pulls back downwards, a series of Higher Lows (HL) before continuing the uptrend. Inversely, a downtrend will make a series of Lower Lows (LL), and as it briefly corrects upwards, a series of Higher Lows (HL) before resuming the trend downwards. R.N. Elliot defined market structure by labeling these trends and corrections with numbers and letters. He used numbers to label the trends (as well the main trend), i.e. 1–5, and the letters A–B–C to mark out corrections. My use of the Elliott Wave Principle is to define trends and identify corrections within the confines of market geometry. Let’s take a look at a detailed example: The image above depicts the nature of wave structure within a trend. If you look at the overall trend, it is clearly up, and I used labeling to define the evolution of the trend with numbers 1 – 5 in black. These are your primary wave counts. The primary wave counts subdivide into smaller waves as follows: ● Wave 1: 5 waves up (marked in grey). ● Wave 2: a – b – c (marked in red) and making a higher low and not going lower than the start of wave 1. ● Wave 3: Again 5 waves up, but this time the magnitude of wave 3 is much larger than wave 1. ● Wave 4: A repeat of wave 2’s structure, once again in an a – b – c format. ● Wave 5: Another 5 smaller waves up, typically preceding the high of wave 3. Trends tend to tell a story that can help us in our overall analysis. They are also repetitive in nature. To be able to “read” a trend we need a way to “measure” a trend, and identify our position within such a trend, in order to make better trading decisions. Wave 1: Typically the shortest of all the waves. We generally won’t know that it’s wave 1 until it’s followed by a corrective wave that does not break the starting point of wave 1. Wave 2: A Corrective Wave that tends to move in an overlapping fashion (corrective waves will be studied in detail later), and does not go lower than the origin of wave 1 before moving up again, creating a higher low in this example. Wave 3: Is what we call an Impulse Wave, as this wave’s magnitude is always larger than wave 1. The impulse wave also tends to have a steeper angle of ascent than wave 1. **If you look closely at the 5 wave structures, even the smaller sub structures, you will notice that wave 3 is always the longest. This is a very important characteristic to take note of. Wave 4: Another Corrective Wave, and this wave should never retrace lower than the high of wave 1. If wave 4 was to go lower than the high of wave 1, it will provide us with a sign that the previous wave structure was in fact not a trend, but probably some sort of correction instead! Wave 5: Will generally break the high of wave 3 in another 5 smaller waves, and is generally the same measured length as wave 1. It is during this wave that we need to be cautious of a possible change in trend direction. In a lot of cases, wave 5 won’t move in an impulsive manner and have a flatter angle of ascent compared to wave 3. Knowing where you are within a trend is one of the most powerful tools for any trader, and understanding the geometry of market waves is critical to being able to do it. Element 2: Implementing Pitchforks The pitchfork (image below) is used to determine market direction and structure, almost as if we’re “mapping” the possible path of price in the future. This will, of course, helps us make winning trades. A pitchfork is typically drawn using 3 major pivots on a chart (marked A–B–C) and projected forward in time. The first pivot is the starting point of the pitchfork and is named the Median Line (ML). The second and third pivots are used to determine the final angle, or slope, which is always parallel to the ML. These are called the Upper Median Line (UML) and Lower Median Line (LML). The Median Line dissects pivots Band C in the middle (halfway between B and C). Most charting software has the Andrews Pitchfork as a standard drawing tool. By simply selecting the starting pivot first, then selecting two additional pivots after, the drawing tool will automatically draw itself at the right angle forward in time, making it very easy to use. We use the Wave element to know where we are within the trend so that we know which direction is a more profitable opportunity for us to trade. Now, by adding the Pitchfork to the appropriate pivot based on our wave forecast, we can identify potential price movement and can hone in on high-probability trade setups. Element 3: Fibonacci Some of the most widely used technical tools in trading are Fibonacci Ratios. These ratios were discovered by a thirteenth century mathematician named Leonardo Fibonacci. Traders commonly use these ratios to identify possible areas of support or resistance. There is a wealth of knowledge to be found about Fibonacci ratios by doing a quick internet search; however, all you need to know about them for our current purposes is the very basics. Fibonacci Retracements A Fibonacci retracement can be drawn when connecting two extreme points on a chart, usually a previous high to a most recent low in a downward trending market, or a previous low with a most recent high in an upward trending market. I also use them to measure specific characteristics that corrections and waves tend to display. The ratios we recommend using for trade decisions are as follows: ● 38.2% ● 50.0% ● 61.8% ● 78.6% Below these retracement ratios are displayed as vertical lines on a downward trending market. To draw a retracement in the example above, I selected two swing points: I used an important high from which price moved strongly down (Point A), and connected it to a most recent swing low (Point B) from which price moved up. If we are of the opinion that price will continue lower at some stage, without taking out the high at point A, we would expect our Fibonacci ratios to act as resistance. In this example, price respected the 50% level briefly, but touched the exact 61.8% ratio shortly after, and reversed strongly down. This is the power of Fibonacci Ratios and why so many traders use them! Fibonacci Extensions We will be using another Fibonacci trading tool, called Fibonacci Extensions, in our technical analysis. Fibonacci Extensions are a way of projecting these ratios forward in time to find possible areas of support or resistance in the future. Price tends to react to these extensions when they eventually reach them, and they make good targets to trade toward when entering a position. We will also use them to measure corrections and for identifying wave characteristics. The ratios we recommend using for trade decisions are as follows: ● 100.0% ● 127.2% ● 138.2% ● 161.8% ● 200.0% Below, these extension ratios are displayed as vertical lines on an upward trending market. In the example above, I selected three swing points to draw an extension. I used an important low, from which price moved up (Point A), and connected it to a most recent swing high (Point B). Price then made a higher low (Point C), and moved upward again, breaking the high of Point B. Before we draw our extensions, we need a higher low followed by the break of a previous high. If we are of the opinion that price will continue higher, we would expect our Fibonacci ratios to act us resistance. In this example price respected the 100%, 161.8%, and 200% levels. It should now be fairly evident that Fibonacci ratios are very important technical analysis tools that can help us measure market structure. You can see that by combining these elements together we have built an incredibly scientific and predictable approach to trading price action. Rather than looking for a special candlestick pattern (which is like trading based on flipping a coin!), we are trading within market structure by scientifically analyzing market components to tell us the 4 most important things any trader can know: 1. What is the trend doing? 2. Where are we within the trend cycle right now? 3. Where are viable entry points to enter during the next trend move? 4. Where are viable exit points to take my profit once it’s achieved? When you know those 4 pieces of information, you are leaps and bounds ahead of the average trader. By studying market geometry and applying your own strategy to what you’ve learned in this free eBook, I’m confident that you will see vast improvement. To your trading success, ___________________________________________________ Richard Krugel Senior Trader | Market Analyst Price Action & Income ___________________________________________________ Looking Ahead: More of My Methodology We’ve only scratched the surface of understanding market structure and how to trade within it. If you’d like to see my complete trading strategy – plus my own exact entry criteria for finding the highest profitability trades that most traders completely miss – I highly recommend my video training. It’s called the Propulsion Method, and it’s the next step in learning how to master market structure and take control of your trades. Click here to grab video #1 for just $14. In my Propulsion training, you’ll quickly discover: ● How to spot 100%, 300%, and even 800% ROI trades, including REAL examples of these exact types of trades – and how to manage those positions until you take profit ● How to apply a specific set of Market Geometry tools to find these entries – including the most overlooked tool in your trading platform ● How to see through the “noise” and identify natural market movement ● How it all ties together and how you can start applying it to your trades right away Click Here to Get Started © 2019 Price Action & Income | Contact: support@priceactionandincome.com 816 Ligonier St. Latrobe, Pennsylvania 15650 United States
