Fundamentals
Of FOREX &
Futures
Trading
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2006, All Rights Reserved
Steve Wheeler
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Agenda April 29, 2006
Trailing Stop @ 6.28
GRA - Entry on 6/15/04
• Futures/ FOREX
– Risk Management
Buy Stop @ 5.03
Gain 24.85% in 15 Days!
$1,156.25
$1,156.25 Profit!
Profit!
GRA- Setup Long: 6-14-04
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– Developing a Trading Plan
– Test Your Plan and Yourself
– Psychology
– Potential Instruments to Trade
– Technical Analysis
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The Elements of Success
Controlling Your
Emotions
Your Trading Business
BROKER
3
RULES:
High Probability
Stock Trades
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RISK:
Money
Management
BROKER
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Why Trade The Futures/FOREX??
•Narrows the Scope
•Leverage 25 : 1 or greater
•Slippage is minimal
•Ease of going long or short
•Lets you specialize
•Not subject to day trading rule
•Tax advantages
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Do Self-Development
• The fastest way to get rich, and to stay rich is to
develop yourself.
• Learn from those who are already masters in their
field
– Find a mentor
• The more you learn, the more you earn.
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Steps In the Learning Process…
• Find People and patterns that Are Successful
• Find Out What They Consider Most Important to Their
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Success
Assess your own belief system
Test those beliefs on actual market data
Find Out What They Consider to be the Most Important
Elements of Their Success
Get Set up with Broker(s)
Get Set up with proper tools
Make sure you have a tested system
Now TEST YOURSELF by simulating trading!
Start Trading With only ONE contract (lot)
Add more contracts (lots) gradually as your capital builds
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Risk Management
• Never risk more than x % of your equity in a trade
• “It’s all about money management”
• Essentially this means that you cut losers quickly
and let your winners run.
– Sounds easy, right?
• Test this by setting up a system that goes for at
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least 2 points profit for every point risked
Example: A system that trades the Russell 2000
with and initial stop of .6 points (6 ticks) and goes
for a 2 point profit target, so you have a reward/risk
ratio of 2.0 / .6 = 3.33 to 1
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Four Outcomes of An Investment or Trade
• Large Gain
• Large Loss
• Small Gain
• Small Loss
• You Only Need to
Eliminate The Large
Losers and you will have
made a major stride
toward consistent profits
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Entry
Price
762.00
RISK
761.10
Initial
Stop
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Universal Money Management Rules
• Never Risk More Than
X% in any One Trade
– YOU define X% (0.52%is Typical)
• Why is this important?
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How many contacts/lots should I Buy or Sell?
• Risk = Entry – Initial Stop
1266.50 – 1265.50 =
50.00/contract
Entry
Price
• Position Sizing is Crucial
– Risk should not exceed 1%
to 2% of your equity on any
trade
• Account Equity = $20,000
– Max Risk = $20,000 x 1% =
$200
– Max contracts = Max Risk
Amount / Risk per Contract
– Max contracts =
$200.00/$50.00 = 4
contracts
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1,266.50
RISK
1,265.50
Initial
Stop
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Risk Management - Keeping It Under Control
Example 1
Russell 2000
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Equity = 10,000
Risk% = 2% = $200
Russell (ER2) = $100/pt
Price = 550
Technical Stop @ 548.50
Profit Target @ 554
1.5 point stop x $100 = $150
per contract risk
• Max. Contracts = 1 to not
exceed $200 maximum risk
level
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Example 2
S &P E-mini
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Equity = 50,000
Risk% = 2% = $1000
S&P (ES) = $50/pt
Price = 1100
Technical Stop @ 1104
Profit Target @ 1089
Maximum contracts = 5
4 point stop x $50 = $200 per
contract risk
• Maximum contracts = 5 to
not exceed $1000 maximum
risk level
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Tools You Will Need
• Computer(s) with power backup, data backup and
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surge protection, anti virus
– Redundancy is Always a Good Idea
Back Test Software
Charting
Front End Software
Broker
Yourself!
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Trading Environment
• What Does My Trading Environment Need to Look
•
•
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Like?
– Office Environment
Based on my system or method, what Equipment
do I need?
– Multiple Monitors, Computers?
What broker do I need? Talk to other traders for
ideas…
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Charting
• Find something that speaks to you
• There are many good indicators
– Just find something that works for you that identifies your
preferred method of entry and exits
• Suggestion
– Take a look at a price chart with only price bars. With only
price bars, try to find what would have been the best entry
points, and then put on an indicator and see if it would
have identified these great entry points
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Charting Systems to Consider
• AIQ Systems
– www.aiqsystems.com
• E-signal
– www.esignal.com
• Qcharts
– www.qcharts.com
• QuoteTracker
– www.quotetracker.com
• Ensign
– www.ensign.com
• Sierra Charts
– www.sierrachart.com
• Aspen Graphics
– www.aspenres.com
• Trade Maven
– www.trademaven.com
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Front End Software
• Bracket Trader
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•
•
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– www.bracket-trader.com
Ninja Trader
– www.ninjatrader.com
Trade Maven
– www.trademaven.com
Others
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Back testing Systems
• AIQ
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•
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– www.aiqsystems.com
Trade Station
– www.tradestation.com
Genesis Trade Navigator
– www.genesisft.com
AMI Broker
– www.amibroker.com
MetaStock
– www.equis.com
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Written Business and Trading Plan
• What It Needs to Contain….
• Similar to other business plans – Blue Print!
– What do I need to do skill wise to trade?
– What IS MY TRADING PLAN? HAVE I TESTED IT?
– What equipment do I need?
– How many days a year do I trade?
– What kind of income do I need and how am I going to
accomplish my objectives?
– What are my expenses?
– Projected P & L
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What is a reasonable Goal?
• Gain experience by just trading the futures
and preserving your capital
• Learn how to execute orders
• Learn how to control your own behavior
• Patience!
• Begin to trade profitably!
Unfortunately, there is no substitute for
experience
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What is a reasonable Goal?
• Six S & P points a week consistently will
provide a nice income if you are trading
enough contracts.
– Example
5 contracts x 6 points x $50 = $1,500 per week =
$78,000/ yr.
10 contracts x 6 points x $50 = $3,000 per week =
$156,000/yr.
Don’t start out with too many contracts, no
matter how large your account is.
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The Building of a Belief System
• Seeing Is Believing
– You Can Start By Looking at Charts for Ideas
– Test Your Ideas by Methodically Going Through Charts and
keeping Statistics
– Use some type of computer system to back test strategy
and money management ideas
• Write Out Your Beliefs about Trading
• Trade In Simulated Mode to Test Your Beliefs
– A good trade simulator will give you a very good idea if
YOU can trade the strategy consistently profitable
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Planning is the Key to Success
• Pilots use a
Checklist
• 20-Year Pilots
use the Checklist
• Memorizing It is
NOT an Option
• If You Fail to
Plan, You Plan to
Fail
Predefined Procedures Make Planning Easy to Do
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Benefits of Having a Written Plan
• Written Plans Clarify Your
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Trading
– Predefine Risk
– Predefine Reward
You Will Be More Likely
To Follow The Plan
Forces You To Take
Responsibility
Creates Good Habits
Fosters Consistency
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Step 3: Develop a Profitable Trading Plan
• Assess Your Beliefs - Write them Down
• Test your beliefs with real data
• Write Out Your Plan
• Test yourself
• Execute Your Plan
Planning / Execution
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How To Develop Your Own System
• Determine How Actively You Want To Trade
– Every 5 Minutes
– Two Times A Day
– Weekly
– Monthly
• This Will Determine The Type of Chart You
Look At and the indicators that you need to
look at
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Elements of Your Trading Plan
EURO Futures - Setup on 02-10-2006
How do we plan this trade?
• How to Enter? When? Order type?
• How do we exit?
– With a loss?
– With a profit?
– With too much time?
• How many contacts do we buy?
• Are we all in or all out or do we
scale entries and/or exits?
• How do we manage the trade once
we are in? Moving stops.
• How do we ensure we follow the
plan each day in the trade?
– WRITE IT DOWN!
• What do we do when we exit the
trade?
• What will we learn the most
from….winners or losers?
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The Fundamental Math of Trading
• From a mathematical standpoint, all you have to do
to make money is the following:
• (Number of winners x average win) > (number of
losers x average loss)
• It is important to understand this so that you know
that you do not even have to be profitable more
than 50% of the time to make money
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Testing Manually for Plausibility
• You Can Test intraday strategies manually by
looking at charts
– This will give you an idea of what will probably work before
spending time coding a back test
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How To Evaluate Trading Systems
• Number of
Winners/Losers
• Average Trade Size
• Reward/Risk Ratio
• Annual ROI
• Total Number of
Trades
• Max Draw Down
• Largest Winner,
Largest Loser
Without Testing You are Flying Blind
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Principles of Price Behavior
• Trend
ContinuationBOOM
• Initial Momentum
Precedes Further
Momentum
• Price Movement
is a Function of
Supply and
Demand
• Price Movement
Cycles from
Range
Expansion to
Range
Contraction
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Initial Momentum Precedes Further Momentum
• Dynamic
•
Materials BOOM
This Principle
is Powerful and
Gives You One
of The Best
LEADING
indicators You
can find
• You Will
•
Normally See a
Familiar
Volume Pattern
along with this
Price Pattern
Boom did 300 x
normal vol on
breakout
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Go Back to Price Behavioral Principles
• Go With The Major Trend
• Look for Sudden Bursts of Momentum
• Look for Volatility Expansion and Contraction
– These will make you money
• Look For Patterns that Occur with Probability
– Double Tops & Double Bottoms for Reversals
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Psychology - You Need To Rewire Your Brain
• None of These Parts Were Made To Trade.
• You must learn to think differently than the
masses, because at least 95% of them lose
money.
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Why does Success Evade Most Traders?
• In searching for trading success, most
people spend their time solving the
wrong problem
–Looking for the perfect setup, finding a
guru, chart patterns with 100% winners
• The Problem Most Often Lies In Our
Trading Behaviors
• There is much more to Trading
Successfully than just Having A
System
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Discipline
• To Master Trading, You will have
to learn how to master yourself
• The one thing that all successful
traders share is strict discipline
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Trading Discipline Leads to Profits
• Mistakes have much more effect than successes
– One mistake can easily wipe out 10 successes
– Conversely, One Good Trade replaces 10 losers
• Sadly, most Trading Mistakes could be avoided
– Discipline in Entries, Exits, Proper Sizing, Risk Control
can make almost any trader profitable
• Unfortunately, most people do not want to do
ANY work to make money
• Happily, with the help of computer automation
and the world wide web, less work is required
– However, Discipline in doing what IS required is still
the key to success… it’s just easier now!
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What is Trader Psychology?
• Correct Trader Psychology simply means
following your pre-determined Trading Plan
– NO MATTER WHAT HAPPENS!
• First, You Have to Have a Plan
• Second, You Have to Follow it
• Eliminate emotional trades, the majority of
which lose money (amateurs)
• You will find that the more automated and
simple your plan is, the Easier it will be to
follow.
It MUST Contain the 3 Elements of Successful
Trading
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Major Psychological Errors Made by Traders
• Trading too Large of size
• Trading too small of size
• Trading Without a
Mathematically Proven
System or a System of
any kind
• Trading the Wrong Time
Frame
• Not Having a Written
Plan
Lead to a Falling Equity Curve!
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Errors to Avoid
• Do Not Add To Your Size after a Losing Streak
• Do Not Increase Size after a Good Streak
– One or two bad trades with more size can wipe out weeks
of months of good trades with less size
– Each Trade should stand on its own, and not Every trade
should NOT reflect the previous one
• Sorry for the repetition, but all we are saying
is…Follow your Plan.
Stay Disciplined and Follow Your Plan
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Psychological Suggestions for Traders
• Put Losing Trades Out of Your Mind
• Put Winning Trades Out of Your Mind Even Faster
• Be objective, not subjective in your decision
•
•
•
making
Keep a Good Attitude, Even in the Face of Constant
2 Steps forward, 1 Step Back
Don’t change the plan in the middle of the trade
Do not put on too Big of a Trade…It will affect your
objectivity (FEAR)
– Can cause you to switch to shorter time frames
– Can cause you to become an investor (can’t take the loss)
Being Objective means Following a WRITTEN PLAN!
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Tracking Performance Improves Performance
• Profitability Every Quarter is another Goal
– Profit for Quarter 2 2004 (April, May, June)
– $7,409.65 starting with a $22,000 account
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A Trade Journal Helps to Reinforce Good Behaviors
• Professional Traders keep a
•
•
•
log of why they entered a
trade, exited, errors made,
etc.
This Daily Routine reinforces
good behaviors, and
extinguishes bad behaviors
Logs should be reviewed
frequently, otherwise what
good are they
Keeping logs on a computer
is convenient & can provide
more details on the trade
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Followed the plan on this trade. Setup was right
& everything followed through.
Closed the trade too early. Should have followed
the plan for profit target but got out sooner.
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How Do I Make Myself Behave Successfully?
• I Must Only Take
System Trades
• I Must Buy the
Proper #
Contracts/Lots
• I Must Cut
Losses Short
• I Must Have a
WRITTEN PLAN
• I Must Learn from
My Mistakes
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Traders Action Plan
• After the Market Closes
–Analyze Markets for new setups
–Plan entries, exits, size the trade for
appropriate risk, write the trading plan
with all this information
–Also needs to manage current positions
–Enter orders for next day with your broker
• During Trading Day
–If full time trader, use the day to learn a
new system, skill, or do
research/recreation
–If part time, focus on your job
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Winners Get Out of Their Comfort Zone
• Do The Hard Work now to Make
Your Life Easier in The Future
• You can either develop your own
systems, or find someone to
code them for your
• Successful people say that “If I
can learn just one new thing,
then my efforts will be worth it.
• Do whatever it takes to move to
the next level.
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Maintain a Positive Attitude
• Your Thoughts Are a Choice That You Make
• Keep a Journal on Your Thoughts
• Think about the Tests You Have Done On Your
•
Strategy and How It Has Worked In The Past
Have Some Patience and Give Your Trades a
Chance to Mature
– If You Planted a Seed, You Would Not Dig Up The Seed to
see if it is growing
– Accept The Fact That We are Playing a Game of
Probabilities, not Certainties…..Sometimes you get the
elevator, and sometimes you get the shaft
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Trading Vehicle – S & P e-mini
• S & P e-mini
– Tick Value$12.50
– Minimum movement .25 point
– Point Value
$50
– Example
– $10,000 trading account x 2% = $200
– Assumption – Max. stop loss = 1 point ($50)
 Maximum contracts = 4
– Assumption – Max. stop loss = 2 point ($50)
 Maximum contracts = 2
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Trading Vehicle – Russell 2000
• Russell 2000
– Tick Value$10
– Minimum movement .1 point
– Point Value
$100
– Example
– $10,000 trading account x 2% = $200
– Assumption – Max. stop loss = 2 point ($100)
– Max. Contracts = 1
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Trading Vehicles – Euro Futures - EUR
• Euro
– Tick Value$12.50
– Minimum movement .0001 tick Equivalent to 1 pip in the
spot currency market
– Example
– $10,000 trading account x 2% = $200
– Assumption – Max. stop loss = 16 ticks
– Max. Contract(s) = 1 (16 x 12.50) = $200
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Trading Vehicle – British Pound Futures - GBP
• GBP
– Tick Value$6.25
– Minimum movement .0001 tick Equivalent to 1 pip in the
spot currency market
– Example
– $10,000 trading account x 2% = $200
– Assumption – Max. stop loss = 16 ticks
– Max. Contract(s) = 2 (2 x 16 x 6.25) = $200
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Future Orders w/ Bracket Order-1
Enter ES, select Future,
Select Month/Yr
Click ASK Price for Buy,
Bid Price for Sell to create order
Once Future order is created,
adjust price as needed
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Future Orders w/ Bracket Order-2
RIGHT-Click on
Order Line to get
Menu
LEFT-Click on
Attach, Bracket Orders
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Future Orders w/ Bracket Order-3
ENTRY ORDER
Profit Target
Stop Loss
Click “T” to Transmit
Order has entered the Market as a Limit order, w/
associated Bracket orders
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Benefits of Using a Front End
• Less Entry Errors
• Define your method and simulate trading it
• Keeps record of your trades
– Wins vs. Losses
– MAE and MFE
• Enforces discipline
•
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– Stop and profit target are placed automatically
Helps with psychology
– Teaches you to cut your losses and let your winners run
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Bracket Trader - Use with IB
• Download Bracket Trader at www.brackettrader.com
• In IB Trader Workstation
– Configure, API, Enable ActiveX
– Set Up Your Strategies
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Bracket Trader - Use with IB
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Ready For Next Entry
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Bracket Trader – While In Position
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Simulation of IB TWS Screen
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Bracket Trader – After Trade Closed
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Trade Log In Bracket Trader
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Learn to Read the Momentum of the Market
• Often, you will get a good read on the day by
looking at the first 15 minutes of activity, which in
many cases will be the best indicator of that days
momentum
• Use Momentum Indicators such as CCI or Keltner
Channel
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What To Do With The Information….
• Buy Support
• Sell Resistance
• Going into the open, the most significant
price points that you know are the previous
day’s High and Low
• As You Get further into the day, you Know
more and more, such as first hours high
and low.
• Unfortunately, the further you get into the
day, the closer you are to the end of the
day!
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Types of Days and How To Anticipate Them
• Consolidation Day
– This is a day where trading stays within a fairly
tight boundary and usually trades within a few
point of the open for most of the day.
• Trend Day
Range for the day is relatively large, and prices
usually trades from Low to High or High to Low
• Reversal Day
Price starts out going in one direction and then
changes direction during the day.
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How To Anticipate Trending Day
• Trend Day
–Opening Gap –Prior Day was Narrowest Range day in N
days
–Activity In First 15 minutes – What is the
range?
–Tick Values + 1,000 for Up day or -500
–Trin Values .5 or less for Up day
–Trin Values 2.0 or higher for a Down day
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How To Anticipate Consolidation Day
• Just had a trend Day!
–It is very uncommon to have a trend day
just after you have had a trend day.
–Price activity in first 15 minutes. Only a
fairly small amount of price movement
over the first 15 minutes.
–The longer you trade, the better feel you
will have for this.
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How To Anticipate Reversal Day
• You have had a series of days in a given
direction (down) for example.
• The market opens down again today, and
then goes to a known price area where the
market has shown support in the past.
• A sudden change in tick values, for example
from -800 to + 1,000.
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What To Monitor During the Day
• Charts
• Tick
• Trin
• Nasdaq, Dow, S & P
• Where you are in relationship To Key
Levels
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Why is it Important To Anticipate Type of Day?
• The trading methods you might employ will
be determined by type of day.
– Trend day
Let your winners run
– Consolidation day S & R Take smaller profits
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Ways to use tick information
• Symbol $tick = Net stocks up or down on NYSE
• The two ways to use the ticks are as follows:
– Fade extreme readings when in a trading range
environment.
– Enter on retracements in tick readings in a trending
environment.
• Summary of Tick Value Behavior
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Summary of Tick Behavior
•Environment
•Oversold/Overbought
•Up Trending
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Range in Tick Readings
0 to +1200
•Sideways Trading
-900 to +1200
•Down trending
-1000 to + 400
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What is a Good Reward Risk Ratio?
• For each dollar you are
•
risking you should be
able to capture 2 to 3
dollars in profits
– We use 2.5 or greater
Typically low risk entries
occur as Volatility (range)
decreases
– Big move from Base greatly
increases volatility and ATR
– During Pullback, Volatility
and ATR decrease
REWARD
RISK
• This condition precedes
the continuation of the
Trend
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What is a Good Reward Risk Ratio?
• For each dollar you are risking
you should be able to capture
2 to 3 dollars in profits
– We use 2.5 or greater
• Typically low risk entries occur
as Volatility (range) decreases
– Big move from Base greatly
–
REWARD
increases volatility and ATR
During Pullback, Volatility and
ATR decrease
• This condition precedes the
RISK
continuation of the Trend
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High Probability Setups
Exit
• Trade with the Trend
– Probability favors
continuance
• The Longer the Base the
Entry
Better the Move
• The bigger the First Move,
the Bigger the Second Move
• Price is a function of Supply
& Demand
– When S/D are unbalanced,
Price moves very fast
– Imbalances take much
longer to correct than to
create – this is what
underlies the TREND
PRICE
VOLUME
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What Are We Really Looking For?
• You Need An Edge so You must find a way to
identify
– The trend for the timeframe in which you are trading
– A Method of Entry
 Pullbacks
 Breakouts
• What matters more than entries is that you know
your risk going into the trade, and you adhere to
that risk plan
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Charting
• Find something that speaks to you
• There are many good indicators
– Just find something that works for you that identifies your
preferred method of entry and exits
• Suggestion
– Take a look at a price chart with only price bars. With only
price bars, try to find what would have been the best entry
points, and then put on an indicator and see if it would
have identified these great entry points
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Charting Systems to Consider
• QuoteTracker
• E-signal
• Qcharts
• QuoteTracker
• Ensign
• Sierra Charts
• Aspen Graphics
• Trade Maven
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Daily Preparation
• Know When Major News Announcements are
•
•
•
taking place
You may be trading five minute bars, but you may
want to step back and look at daily charts or some
longer time frame to give you the bigger picture
Make sure you are rested and in top physical
condition
Make sure you are in top mental condition
– Proper Diet and Exercise
 Then best health insurance is free!
• If you are trading off of daily bars, do all of your
orders before the market opens
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Steps In Learning Process…
• Find People Who Are Successful Already
• Assess your own belief system
• Test those beliefs on market data
• Find Out What They are doing
• Find Out What They Consider to be the Most
•
•
•
•
•
•
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Important Elements of Their Success
Get Set up with Broker(s)
Get Set up with proper tools
Make sure you have a tested system
Now TEST YOURSELF by simulating trading!
Start Trading With only ONE contract
Add more contracts gradually
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Some Rules of Thumb -1
• The larger the opening gap, the greater the odds of
•
•
•
•
80
a trend day
The majority of the time, the opening play will be a
test of the previous days high or low.
If the previous day was a trend day, the odds favor
the market trading on both sides of the open by 2
to 3 points in the first 30 minutes
If the previous day was a trend day, today will very
likely be a consolidation day.
On consolidation days, go for smaller “scalp” type
of profits
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Stock Index Futures - Rules of Thumb # 2
• On Big Range Days, The Market Will Trade From
•
•
Low to High or from High to Low
The importance of knowing this is that generally
you will want to have a runner on the big range
days and your best exit will be at the close
Avoid Taking Counter Trend Trade late in the day
on big range days
– This is important, because of the above phenomena of
markets trading from high to low or low to high on big
range days. You can look at daily bars to see that this is
true.
• Try to Avoid Biases Going Into The Day
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Technical Analysis Examples
• Pattern breaking out of long bases on relatively
•
•
•
•
large volume
Extreme initial move (forward momentum)
– Relatively Large Daily Range
Smaller countermove
– Decreasing daily range
Volume – Large on the Up Move, Smaller on the
Countermove (shows the “Real Move”)
ENTRY: At the end of the countermove
– Resumption of the Momentum
Initial Price Momentum Precedes
Continued Momentum
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Indicators – What Are You Trying To Find
• What are we really looking for with indicators?
• Major Trend
• Minor Trend
• Change of Trend
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Look At Charts – Patterns and Setups
• When We Look At Charts, What is the one thing
that we can all agree on?
– Price
• Indicators
– Stochastics
– RSI (Relative Strength Index)
– MACD (Moving average convergence/divergence
– CCI (Commodity channel index)
– Keltner Channel
– Donchian Channels
– Moving Averages
– Trend Lines
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EURO 02-10-06 8:30am – 9:00 am 15 min chart 40 point move
Use of Trend Lines
MACD
Stochastics
RSI
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Russell 2000 02-10-06 - 3 min DB w/ MACD Diver.
5 Point Move Up After Double Bottom
MACD Divergence
86
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Looking at Multiple Time Frames - Russell 2000 Daily Chart 02-10-06
Use of Trend Lines
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Russell 2000 30 min chart 02-09-06/02-10-06
Stochastics
MACD
RSI
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Russell 2000 02-10-06 9:30 – 1:30 5 min chart
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British Pound 11-15-05 3 min Channel Breakout
First Pullback
Break Below Channel
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Use of CCI
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Channel Breakout
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Enter Short 1.1997
Channel Breakout
News Event at 8:30 a.m. EST
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Channel Breakout
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EuroFutures
Futures10-11-05
10-11-052:20 a.m.
Euro
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12 Hour Channel- Euro 10-13/10-14-2005
• 13 Minute Chart
Use of Trend Lines
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Euro Futures 6-10-05 10 min chart
Break Below Channel
Short on Pullback
• Euro Futures 6-10-05
• Break below the donchian channel
• Short on first pullback
• Review charts to determine the type of stops that
you will need to keep you in these trades without
creating undue risk
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Euro Futures 6-10-05 10 min chart
Adaptive Moving Ave
CCI Zero Line Reject
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Euro Futures 6-10-05 10 min chart - Keltner
Enter on Pullback
Close Below Keltner
Exit on Close above MA
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British Pound 6-13-05 30 Min Chart
Regression Channel
Trend?
Technical Resistance
CCI below Zero Line
100
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British Pound 6-14-05 60 Minute Chart - CCI
101
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British Pound Futures 01-25-06 15 min chart
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Russell 2000 02-06-06 1 p.m. 15 min.
Stochastics Low Buy above High of Lowest Down
Bar - Sell on Close Below Low of Highest Up Bar
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GBP 02-06-06 3 a.m. 15 Min
Longer Term Trend is Down – Below
Moving Average
Use of Trend Lines
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EURO Futures 02-06-06 15 min.
Longer Term Trend is Down – Below
Moving Average
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Risk Management – GBP (British Pound)
• GBP
– Tick Value$6.25
– Minimum movement .1 point
– Point Value
$100
– Example
– $10,000 trading account x 2% = $200
– Assumption – Max. stop loss = 1 point ($100)
– Max. Contracts = 2
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EUR 15 Min.02-03-06 Effect of News - See 8:30 a.m.
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Russell 2000 02-06-06 15 min 2:09 p.m.
Longer Term Charts are More Significant
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Russell 2000 02-06-06 - 5 min 2:10 p.m.
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Russell 2000 02-15-06 3 min MACD Divergence
Double Bottom
MACD Cross
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Russell 2000 1 min 04-27-06 First 15 Min
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Russell 2000 - 5 min 04-27-06 Entire Day
• Volatile
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Russell 2000 5 min chart – 04-27-06
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Dow Mini 5 min 4-27-06 Double Top w/ Divergence
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Challenge Yourself
• Simulate trading based on your plan
• Make it a goal to be able to trade 15 consecutive
•
•
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profitable days before using real money
Now start with one contract (lot) at a time, no
matter what your account size might be
After at least 15 consecutive days of profitable
trading with one contract (lot), consider adding
more contracts one at a time, as your account size
permits
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Wipe Out Accounts only on Paper
• Any Pilots Here?
• Have You ever Used a Flight Simulator?
– Why?
• If You are Going To Crash, Do it in A Simulator, not
with real money!!!!!!
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Benefits of Simulation
• Good simulator will..
– Show you the importance of managing risk
 You will see that you could have 7 trades with 5 losers and 2
winners, and still make money, if you cut your loser quickly
– Show you whether or not you can follow our own rules
– Keep a trading log
 This is almost impossible to do manually, although even with
the computer keeping a log, you may want to supplement with
your own notes on what you were thinking, etc.
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Benefits of Simulation
• Simulation Plays a Huge Part in Your Psychology
– Simulation Helps to Build a Profitable Belief System
 Cut Your Losers Quickly, Do You Want to be Right or do you
want to make money?
 Let your winner run
 See that when you follow your rules you make the most
money and when you invent trades that are not part of your
plan, most often they will fail
 Find Out the importance of having patience and waiting for
the very best trading opportunities to come along
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Thanks For Attending this Seminar
• NaviTrader
• www.navitrader.com
• NaviTrader Managed Services, L.L.C.
• www.managed-4x.com
• If you would like a copy of this presentation, send a
request to :
profits@navitrader.com
• 800-987-6269
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Upcoming Events
• Web cast seminars – Check our website for details:
• WealthExpo
– www.thewealthexpo.com
– www.worldforumexpo.com
Atlanta, Georgia
May 4th – 6th
• Extreme Options Seminar
– Renaissance International Plaza Hotel
 Tampa, Florida
 June 10th
 8:30 AM – 5 PM
 Speakers will be Steve Wheeler & Dale Wheatley
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Potential Brokers to Consider – Futures/FOREX
• Brokers to consider:
– Interactive Brokers www.interactivebrokers.com
– TerraNovaTrading www.terranovatrading.com
– OptionsXpress www.optionsxpress.com
– Efx Group www.efxgroup.com
– Global Futures www.globalfutures.com
– Man Financial www.manfinancial.com
– One World Capital Group www.1worldfcm.com
– Interbankfx.com www.interbankfx.com
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