ICT - Trading Plan Development 1.srt

Last modified by Drunk Monkey on 2021-06-11 13:56
1 00:00:04,620 --> 00:00:08,460 ICT: progress in the valley Trust Bank bridge, we have shots fired,
2 00:02:02,370 --> 00:02:15,150 folks. All right, we are going to cover the need for a trading plan. If you're new to trading, and you do not have a trading plan, it's hopefully my goal as an
3 00:02:15,150 --> 00:02:25,590 end result in this presentation to communicate the need for one, if you already started trading, and you've been having difficulties, and you don't have a
4 00:02:25,590 --> 00:02:35,550 trading plan, I could pretty much guarantee if you just put some work into formulating a very clear, concise trading plan, your results would be
5 00:02:35,550 --> 00:02:44,490 dramatically different. Because basically having no plan equals emotional driven results, okay, you're not going to have any understanding what to do going to be
6 00:02:44,490 --> 00:02:53,220 reacting more than you're anticipating. And that's the stark difference between a professional trader because they do have a detailed organized trading plan.
7 00:02:53,430 --> 00:03:04,590 It's well written, it's it's by their trading desk, it's memorized, it's reviewed continuously. And by having such they have an objective and result. And
8 00:03:04,620 --> 00:03:15,420 it really is the DNA of a successful trader. So having a trading plan is at the top of your list as far as being a consistently profitable trader. Or the
9 00:03:15,420 --> 00:03:24,870 majority of your time, what do you do as a trader? And where is it most spent in terms of time? Well, first, you got to understand that you have to manage your
10 00:03:24,870 --> 00:03:33,810 time wisely. Okay, no one's going to manage it for you. So it's important that you understand that the countless hours that you spend in analysis without
11 00:03:33,810 --> 00:03:40,890 having a clear objective or premise to it is our actually counterproductive, okay, you feel like you're doing the right thing by saving a lot of time staring
12 00:03:40,890 --> 00:03:49,410 at the chart. But unless you have an understanding of exactly what it is you're looking for, you're just wasting your time. You need to spend quality time with
13 00:03:49,410 --> 00:03:56,640 the macro economic analysis and higher time frame support resistance levels. I can't stress this enough because most new traders come into the marketplace and
14 00:03:56,640 --> 00:04:07,440 they spend too far time in five and 15 minute charts, and maybe even one minute charts, hoping to see some kind of mysterious neon sign saying buy me or sell
15 00:04:07,440 --> 00:04:18,840 me. Nothing significant occurs without first leaving telltale signs on a long term basis. That means if there's a significant price move, I guarantee you if
16 00:04:18,840 --> 00:04:26,820 you look at the higher timeframe charts, and I'm referring to the monthly, weekly daily for hour and new less than one hour chart, those timeframes, you're
17 00:04:26,820 --> 00:04:37,590 gonna have a clue as to what was the catalyst for that move prior to actually unfolding. Follow the interest rates. This is where the majority of your time
18 00:04:37,590 --> 00:04:45,750 can be spent. You need to get a feel for what interest rates are trying to do. Are they moving higher or are they moving lower? Keeping track of the overnight
19 00:04:45,750 --> 00:04:59,880 lending rate with the banks per country is absolutely significant information and insight you need as a consistent trader. Okay, what's the least important
20 00:04:59,880 --> 00:05:09,810 part? And trading? Well, don't focus on the money number one. And unfortunately, we all get into this business for a number of things, okay, but top of the list
21 00:05:09,810 --> 00:05:18,600 should be to make money. But while you're trading, your focus should not be on the money. Don't focus on the amount of money that you hope to make, there's no
22 00:05:18,600 --> 00:05:27,150 guarantee you're going to make it on every trade. So there's no real point and hoping you just trade the process, trade your plan. And the end result should if
23 00:05:27,150 --> 00:05:37,620 you have a well grounded, well formulated trading plan, money will deposit into your account. Do not worry about losses, okay, you're going to have losing
24 00:05:37,620 --> 00:05:45,420 trades. If you accept that going in, you won't be demoralized from an okay, every good trader, whether you're professional or not, they have losing streaks.
25 00:05:47,550 --> 00:05:56,490 Do not worry about Mr. trades, I'm going to tell you right now, I'm probably miss more winning trades every single week, than more than most of you realize,
26 00:05:56,820 --> 00:06:04,140 I don't take a whole lot of trades, I like to cherry pick, I like to take things that are really set up. And if you have that mindset going in much like
27 00:06:04,770 --> 00:06:14,550 expecting losses, it's very comforting to know that you're not feeling rushed. And that's a very important characteristic of a professional trader, we aren't
28 00:06:14,550 --> 00:06:21,780 rushed to get into the marketplace. You know, we react slowly when trying to make money. And we react fast and quickly when we're trying to preserve our
29 00:06:21,780 --> 00:06:30,240 money. That's a very significant paradigm shift that you're going to need if you don't already have that mindset going in. The least important process in trading
30 00:06:30,420 --> 00:06:39,000 is the entry signals. And I'll probably shock you right there. But it really is least in terms of significance. If you don't have a macro understanding of
31 00:06:39,000 --> 00:06:47,340 what's going on in the marketplace, and the higher timeframe, directional bias, chances are, you're probably going to be wrong more times. And you're right. So
32 00:06:47,940 --> 00:06:49,230 it's my
33 00:06:52,260 --> 00:07:01,890 goal to really try to drive you to looking at the weekly, the monthly, the daily in the four hour charts. And if you're going to go a little less than four hour,
34 00:07:01,890 --> 00:07:12,060 don't go below one hour, but spend most spend most of your time on the weekly and daily, those charts are going to be the most in significance, because that's
35 00:07:12,060 --> 00:07:23,580 what the banking levels are determined. Premise and sound basis is paramount. That means you have to have an understanding of what it is that you're doing.
36 00:07:24,120 --> 00:07:33,960 You're not just staring blindly at charts, because that's not going to get you anywhere, I guarantee you unless you have a specific pattern or a motive that
37 00:07:34,080 --> 00:07:42,930 you use to get into a particular trade. And you hunt that whether you're back testing or walking forward with it. Unless you have that understanding of what
38 00:07:42,930 --> 00:07:53,580 it is specifically that you're looking for. You're just basically spinning your wheels and it's my advice not to do that. Keep the focus on the plan and work
39 00:07:53,610 --> 00:07:56,010 the trading edge that your method exploits.
40 00:08:01,589 --> 00:08:10,289 Alright, the general overview. Ai trading plans are basically taking all the pieces of the puzzle that equate to successful trading and bringing those pieces
41 00:08:10,289 --> 00:08:23,039 together. Those pieces could be fundamental data technicals, inter market analysis. All these things go together in terms of building a trading plan.
42 00:08:24,389 --> 00:08:36,029 impeccable risk control is the first component to any successful trading plan. Flawless equity management, which is closely tied to risk control is essential
43 00:08:36,029 --> 00:08:44,189 to every successful trading plan. You can have all the bells and whistles on your trade monitor, but it means nothing unless you control your money and the
44 00:08:44,189 --> 00:08:55,409 risks involved in all your trades. fundamentals at any measure can always assist a trader in trade plan development. inter market analysis is key to a well
45 00:08:55,409 --> 00:09:04,439 balanced trading plan. Understanding how all the asset classes tie together and hinge upon the movement of the interest rate markets that is crucial for your
46 00:09:04,439 --> 00:09:15,449 long term success and longevity in trading. Technical analysis, and a comprehensive approach to sound tools and concepts is the framework to
47 00:09:15,449 --> 00:09:26,009 exercising and train plan. If you don't have a concise list of specific tools that you use for specific times and reasons, you're going to be floating in and
48 00:09:26,009 --> 00:09:33,599 out with different oscillators, you're going to use different tools, understand what tools you're going to have and stick to those and understand what it is
49 00:09:33,599 --> 00:09:44,039 that those specific specific tools do. And try not to use them for any other reason except for those purposes only. executing a top down analysis with all
50 00:09:44,039 --> 00:09:51,959 the above components will deliver optimal results while controlling risk, which is the number one reason why we as traders last as long as we do in this
51 00:09:51,959 --> 00:09:58,679 business, we control risk so all the pieces together it begins and ends with the crop control of risk.
52 00:10:40,440 --> 00:10:48,630 The paradigm shift. Alright guys, you are not the only predator in the marketplace. I know sometimes when we get these trading plans and trading tools
53 00:10:48,630 --> 00:10:56,580 in essence the first time you've ever probably looked at organized structure of how to apply analysis to the marketplace, and you feel kind of like a big shot.
54 00:10:56,730 --> 00:11:07,470 And that's normal. That's kind of cool. But do not over estimate the importance of knowing there's other people out there that want your mind to whether you go
55 00:11:07,470 --> 00:11:17,400 in confident, or you develop confidence later on. Understand overconfidence is actually counterproductive. overconfidence is actually an invitation for ego,
56 00:11:17,400 --> 00:11:27,510 which also allows the input of emotions and that's not what you want your trading. Never assume your well designed trading plan won't hit a losing streak.
57 00:11:27,660 --> 00:11:36,420 I'm assuring you that it will. There's no one out there that is immune to it, you're going to have a losing streak, okay. always reflect on your wins as a
58 00:11:36,420 --> 00:11:46,710 victory and your losses as a learning opportunity. All learning opportunities that I've experienced in my trading have actually produced greater growth in my
59 00:11:46,710 --> 00:11:56,490 development as a trader. So losses are actually a beneficial thing. It will take preparation in advance to weather periods of inevitable drawdown, journal your
60 00:11:56,490 --> 00:12:04,890 results, both good and bad. It's important to go back to that journal because periods of drawdown and strings of losses, it will help remind you that these
61 00:12:04,890 --> 00:12:14,490 are temporary events and that you do eventually trade out of them. If you control risk and reduce your overall exposure as you continue to take losses. Do
62 00:12:14,490 --> 00:12:25,170 not overdrive your trading plan or attempt to trade outside its intended purpose. Do not turn a position trade and K into multiple different timeframe
63 00:12:25,170 --> 00:12:34,800 trades. Okay, if you if your analysis suggests it's a position trade, trade it like that, okay. Every great trader has one thing in common, and it's the
64 00:12:34,800 --> 00:12:44,220 respect and understanding that the risk will always outweigh the reward unless it is properly managed. It's not about the profits. It's controlling risk.
65 00:12:49,590 --> 00:13:02,820 Pack small play big 2% risk or less? Is it really enough? I probably get this question. emailed to me more than any other. Human you get into trading guys,
66 00:13:02,850 --> 00:13:12,540 you probably fantasize about going to places like this. And you think you need to risk new 2015 10% of your account to get there. And I can assure you I've
67 00:13:12,540 --> 00:13:22,650 been to places like this. And I've done it with 2% risk or many times with less than that. And it's amazing. If you just understand the power of compound
68 00:13:22,650 --> 00:13:30,870 interest, you don't need a whole lot of risk exposure to build this wealth. The question will always be in the developing traders mind, how can I make a fortune
69 00:13:30,870 --> 00:13:37,650 with so little risk and hopefully by the end of this presentation, you'll see that you don't really need a whole lot of risk. You just need time and
70 00:13:37,650 --> 00:13:48,480 consistency. proficient consistent traders focus on the reality that their trading will not be perfect. We are not going in with the mindset expecting our
71 00:13:48,480 --> 00:13:58,530 trades to be perfect, okay? We don't even need high accuracy. Okay. But you do need consistently following a trading plan. That's paramount. You have to
72 00:13:58,530 --> 00:14:12,600 continuously do that. You can make all the money you ever need risking 2% and many times even less than that portrayed. Wealth is built with time, not
73 00:14:12,600 --> 00:14:27,420 excessive risk exposure. Giving realistic goals in focus. Alright guys, you've seen all of the internet gurus and you probably thought I was one like that as
74 00:14:27,420 --> 00:14:38,820 well. That promised riches real quick. You're going to get you know 1000 pips every month. Guys, look, don't take the bait. Okay, that is meant for you to
75 00:14:38,820 --> 00:14:51,150 lose. Okay, do not buy into that mindset. Your goal is to steadily build your account with little drawdown as humanly possible. You trading is not hinged on
76 00:14:51,150 --> 00:15:02,250 the premise. You must hit home run profits, every trade, or even weekly. There's a lot of times I'll have a losing week. There's many times on Have a losing day
77 00:15:02,400 --> 00:15:13,620 and then come back from that and be able to recoup it. But I'm not always hitting Win Win Win, win win, and you're not going to either. Your career should
78 00:15:13,620 --> 00:15:28,770 be built on a low, yet sufficient baseline target based 1% return or pips per month or week. trading with risk controlled and profiting in net gain of 25 pips
79 00:15:28,770 --> 00:15:41,490 per week should be a new traders goal. After consistently harvesting 25 pips per week graduate to targeting 50 pips after 50 pips per week is achieved, aim for
80 00:15:41,490 --> 00:15:52,890 75 pips and eventually move beyond that as your experience and tolerance for risk increases. Alright, let's look at a case study here we're gonna look at a
81 00:15:53,820 --> 00:16:07,230 trading model that more or less targets and shoots a goal for 25 pips for the week. And we're looking at possibly making 6% return for the month, and we're
82 00:16:07,230 --> 00:16:18,900 risking 2% per trade, and 30 PIP stops are used, and the monthly goal only equates to 90 pips for the entire month. Now, if you look at these numbers,
83 00:16:18,930 --> 00:16:30,360 okay, this is a spreadsheet so there's going to be a little bit of a rounding issue, but 23 pips, okay, per week, roughly, we'll just call it 25 pips. That
84 00:16:30,360 --> 00:16:40,470 would equate to 6% return per month. If you start with 20 $500. In one year, your account goes to over $5,000, which is more than doubling. After two years,
85 00:16:40,470 --> 00:16:49,290 it goes to $10,122. Okay, so you see, essentially you're doubling your money every single year, you're only risking 2% and you're only looking for 25 pips
86 00:16:49,290 --> 00:17:01,110 per week. Now notice over here we have daily column, okay, this is more or less to stimulate the idea that if you trade on a daily basis and you scalp I don't
87 00:17:01,110 --> 00:17:10,350 really teach traders that go in and try to scalp scalp five pips. But just for the sake of argument, we're going to look at you know, every day if you scout
88 00:17:10,350 --> 00:17:17,430 five pips that would give you your 25 pips for the week. Obviously, if you trade in the best days of the week, which were Tuesday, Wednesday and Thursday,
89 00:17:17,760 --> 00:17:27,810 regardless what pair you trade, eight pips per day, three times a week would give you your goal for the week and obviously 11 should be round rough, round up
90 00:17:27,810 --> 00:17:40,740 like 12 twice a week would give you your weekly PIP haul. So you can see over time your money is growing steadily. And while it's not a whole lot of money,
91 00:17:41,460 --> 00:17:48,060 you got to look at what you're starting with and what you're really aiming for. Okay, and I think 25 pips per week if you're brand new trader is an absolutely
92 00:17:48,090 --> 00:17:49,530 wonderful goal to start with.
93 00:17:53,640 --> 00:18:02,310 Okay, look at another case studies is 50 pips per week, okay, and we're gonna be targeting 10% per month, so it was the same account 20 $500 now this time we're
94 00:18:02,310 --> 00:18:15,090 going to exercise the risk exposure of one and a half, one and a half percent 30 pips per stop, and the monthly goal in terms of pips is 200 pips and the weekly
95 00:18:15,090 --> 00:18:24,690 goal is 50 pips per week, and if you trade every day scalping 10 pips for today, equates to 50 pips. And three times Tuesday, Wednesday and Thursday looking for
96 00:18:24,690 --> 00:18:40,290 17 pips per day or two times for the week at 25 pips per trade. The first year your account would move to $7,846 and then in second year, it would be at
97 00:18:40,290 --> 00:18:54,060 $24,624 not bad and you're not really hitting homeruns yet guys, are you it's only 50 pips. Okay, we've got a case study where we're looking for 75 pips per
98 00:18:54,060 --> 00:19:05,340 week. Now I can tell you, you can build a career on this, okay. 75 pips is absolutely astonishing if you use it the right way. 10% per month, risking only
99 00:19:05,340 --> 00:19:17,250 1% per trade using a 30 PIP stop loss, the goal 300 pips 75 pips per week, if you day trade every single day 15 pips would be your goal 25 if you're trading
100 00:19:17,250 --> 00:19:31,770 three times per week and 38 pips twice a week with equate to your goal, and in one year, your 20 $500 would essentially grow to 7846 and again, $24,624.
101 00:19:37,950 --> 00:19:51,630 Modular thinking, steady progress. Now small consistency can still surprise you. It takes an exponential mindset, little things over a period of time equals big
102 00:19:51,630 --> 00:20:02,250 results. Building your trading plan flexibility, you're not always going to see it on a timeline that you want You might have a weekly goal that may require
103 00:20:02,250 --> 00:20:12,990 shorter term day trades or scalps to achieve. Do not force yourself into hunting or believing you need to make your goals daily and or weekly. Your weekly goals
104 00:20:12,990 --> 00:20:24,210 might fall short a week or two, but still might be met in the course of the same month, it may just average out guys. Your monthly goal might average out over
105 00:20:24,210 --> 00:20:37,110 the quarter or over the entire year. Don't be so rigid and allow the market to pay you when and how it will. Your goals might fall short of your forecast and
106 00:20:37,110 --> 00:20:50,850 hopes. However, do not be disappointed if this occurs, you will still be heading in the right direction. And that's really what matters. Success without homeruns
107 00:20:50,880 --> 00:21:03,510 Is it possible? Well, let's look at this. This is kind of lofty I met. But this is what could happen 20% per month. And it's rather impressive analysis. That's
108 00:21:03,510 --> 00:21:12,930 another debt you many fantasize about. We're going to be risking 2% per trade maximum. And now we have an understanding what we knew using our trading plan
109 00:21:12,930 --> 00:21:22,440 and we have some consistency. We understand how to use a lower timeframe so we can use now 20 pips stop losses. The monthly goal is 200 pips still in terms of
110 00:21:22,470 --> 00:21:32,190 many expectations of traders, that's very, very modest, weekly PIP goal 50 pips, and if you break that down, it could be done over a course of everyday 10 pips,
111 00:21:32,520 --> 00:21:46,800 three times a week is 17 pips and 25 times two per week 20 $500 in one year grows to $22,290. And in two years, it grows to 198,000. And in 34 months, it
112 00:21:46,800 --> 00:21:51,210 grows to what everyone fantasizes about in trading the $1 million mark,
113 00:21:58,110 --> 00:22:06,330 keep something, pay yourself, you have to learn to be methodical about taking first profit guys, no one's going to pay you, your broker is not going to take
114 00:22:06,330 --> 00:22:13,710 first profit for you, they're not gonna scout some of your position and make sure you get some profit out of a winning trade. It's your responsibility. So
115 00:22:13,710 --> 00:22:25,050 before taking any trade, it's crucial for you to know at what level you will take first profit and then start to reduce or remove risk altogether. Limiting
116 00:22:25,050 --> 00:22:35,070 risk after taking half of your original position off will remove emotional and psychological pressures you may feel while the position is open. If you take
117 00:22:35,070 --> 00:22:44,610 first profit, that will absolutely remove all of the rush for you to be able to close the trade because how many times you've been in a trade, even a demo
118 00:22:44,610 --> 00:22:51,060 account if you guys are new, and you see a profit, and you just want to close it out because you just want to see it in your account as registering as a profit.
119 00:22:51,240 --> 00:22:58,620 Okay, when when you take some off and you split your position in half, take some of it off and move your stop to break even or reduce it to half of what your
120 00:22:58,710 --> 00:23:09,630 original profit was. That's a wonderful position to be in because now no matter what you either make half of your first positions profit potential when it's
121 00:23:09,630 --> 00:23:20,280 first profit, or you stop at an event and you collect your first you first profit and that was it. Taking first profit at a predetermined level will assist
122 00:23:20,280 --> 00:23:28,410 in building confidence and removes the sting of the trade losing should it reverse on you and stop you out of breakeven. How many times you had a winning
123 00:23:28,410 --> 00:23:37,020 trade and then go against you and become a losing trade? Okay, I know that's like, I'm not immune to that I experienced that. The greatest thing you can do
124 00:23:37,020 --> 00:23:48,780 is learn to take profits take first profit and scale. Continuing our theme success without homeruns Now let's take a look at an example. Let's assume for a
125 00:23:48,780 --> 00:24:02,010 moment we are a trader that now uses two positions. Okay, to enter on a trade. In other words, we take a maximum of 2% risk and we split it in half. The first
126 00:24:02,010 --> 00:24:13,290 portion of our trade we take first profit at 30 pips, we're going to be risking 20 pips, so we're already risking 1.5 to one reward the risk. Okay, so we're
127 00:24:13,290 --> 00:24:22,590 making a little bit more than what we're risking for the initial first profit. And if we just did that alone in the second portion of our trade, we moved to
128 00:24:22,590 --> 00:24:33,180 break even and it stops out every single time we trade for the entire year, our account would still double okay. Risking 1% it would equate to 6% so that's
129 00:24:33,180 --> 00:24:45,990 still good. But now let's look what happens if we allow the second portion of our trade to run. What happens if the second portion captures the average daily
130 00:24:45,990 --> 00:24:57,900 range? Now the average daily range for this sake of argument we're just going to use as 100 pips. Now that would equate to if you just did this once per week,
131 00:24:57,960 --> 00:25:06,570 okay, now don't look at the daily three Once for a week or twice a week numbers, we'll block that out here. But the weekly number that 100 that's going to more
132 00:25:06,570 --> 00:25:18,720 or less equate to one solid trade for the week where you nail down one average daily range or collect 100 pips. In other words in terms of intraday trade. That
133 00:25:18,720 --> 00:25:38,880 would equate to 20%. Now think 20% plus 6%, what are you making? We'll get that in a moment. But if we able to do this, our money 1% risk grows exponentially.
134 00:25:42,510 --> 00:25:54,510 Now taking both of those examples together, and assuming ideal scenarios at the end, or both are profitable, that would equate to about 26% return your 20 $500
135 00:25:54,510 --> 00:26:06,780 would grow to $40,000 in one year. And 640,000 in two years. Notice that you're really not even risking more than 320 average, per Pip.
136 00:26:47,400 --> 00:26:54,570 Alright guys, interest rates. That is the market's driving force. Okay, if you've never learned about interest rates, you're gonna learn a little bit of
137 00:26:54,570 --> 00:27:04,290 that in this presentation. But what makes the markets go around, whether it be stocks, commodities, forex, it's all interest rates, need to get to know the
138 00:27:04,290 --> 00:27:15,330 interest rate market, okay, because that will be the key to you unlocking the mind. The entire global markets are interconnected, and they spin on the
139 00:27:15,330 --> 00:27:25,530 gyrations in the interest rate market. Each country we trade currencies with has their own interest rates, and thus these rates influence the demand or
140 00:27:25,530 --> 00:27:39,270 disenchantment with its own currency. The market will always seek yield, and the higher the yield, the bigger the demand on average. There are several types of
141 00:27:39,270 --> 00:27:50,430 interest rates that traders can track and utilize to determine a trade idea. Understanding how they trade and the yields will make long term trends easier to
142 00:27:50,430 --> 00:28:06,060 determine. Interest Rate spreads and differentials. I guess you need to track the country's overnight lending rates. Okay, that's an it's one of the core
143 00:28:06,060 --> 00:28:17,550 principles to having long term trend analysis. And if you just Google any country and look for historical data, you can get that keep a spreadsheet. And
144 00:28:17,820 --> 00:28:28,140 you can do a whole lot with that information. It's not my goal to do that here. You can find sources on the internet to actually do these for you. But the
145 00:28:28,140 --> 00:28:37,740 currency markets date more or less trend on long term basis based on interest rates. And understanding which country has higher interest rates and which have
146 00:28:37,740 --> 00:28:47,040 lower rates can be a differential play or carry trade. And not only can you trade profit by directional bias into trading, but it also could be paid
147 00:28:47,040 --> 00:28:58,020 interest on top of that. If the country sees lower interest rates, this will weaken the base currency. At the current On the contrary, if the rates are
148 00:28:58,020 --> 00:29:12,900 increasing, this will prop up the country's currency. million dollar futures insights. Yes, seasonal tendencies. Now, some of you folks have already been
149 00:29:12,900 --> 00:29:24,900 introduced to this graph. This is the British Pound seasonal tendency. This is a chart that I've had held dear to me for many years since 1995. I got this from
150 00:29:24,930 --> 00:29:39,600 Larry Williams course. And it was among other seasonal tendencies, but because I've grown to trade the British Pound more than any other pair. This season
151 00:29:39,600 --> 00:29:49,620 Tennessee chart is kind of like it gives you like a macro roadmap of what should transpire. Now, one of the most impressive concepts you can learn is the nature
152 00:29:49,620 --> 00:29:59,490 of seasonal tendencies in the marketplace. The commodity market is one such market that has a very cyclical seasonal tendencies that have an uncanny ability
153 00:29:59,490 --> 00:30:09,690 to forecast Major price swings. Now I have used seasonal tendencies for nearly 20 years, and they still amaze me. One such seasonal tendency is the British
154 00:30:09,690 --> 00:30:23,370 pound to make a major low in February to March, June, September, October in December, and major highs in April to May. This is also seen in stocks as well.
155 00:30:30,360 --> 00:30:39,480 Look at the comparison of the British pound. And since we've already learned that the interest rate market is what more or less pushes the markets all
156 00:30:39,480 --> 00:30:50,460 around. We're gonna look at the US Treasuries. Yes, it does have a seasonal tendency. Now, I want to draw your attention to the fact that usually in April
157 00:30:50,460 --> 00:31:01,140 and May, if you look at the British Pound chart on the left, you can see that there's a red line and a blue line. Okay. And what that is, is is measuring the
158 00:31:01,140 --> 00:31:12,210 Bush years and the bearish years together to get a composite index. And the blue line is the 25 year historical data. And the red line is a 15 year historical
159 00:31:12,210 --> 00:31:27,900 data. So you can see over overall, basically the seasonal tendencies pretty solid, it usually makes a rally of some kind late February, early March, and
160 00:31:27,900 --> 00:31:40,290 trades up into the April May time period where it makes a significant Hein and trades down into the June timeframe. Well, if the bonds are inverse, okay, now
161 00:31:40,290 --> 00:31:51,330 onwards, is currencies go down the bond market or the futures market will go up. And while the bonds go up, the yield is inverted. So the yield would be going
162 00:31:51,330 --> 00:32:02,520 down while the bond goes up. And for instance, let's look at the April May time period on the bond. And you can see that it has seasonal tendency to rally that
163 00:32:02,520 --> 00:32:13,140 would indicate that interest rates would be going down. Okay. Now, if interest rates are going down, that would drive what currencies lower, there won't be any
164 00:32:13,140 --> 00:32:23,070 demand. So what would they be doing, it'll be a flight to quality, that will rally the dollar. Okay. And that would be essentially a risk off scenario. Now
165 00:32:23,070 --> 00:32:35,790 look at January and February. Okay, in the bond market, we see the bonds are sliding down into that April May time period. That means that interest rates
166 00:32:35,820 --> 00:32:45,420 would be increasing. Now, if interest rates are increasing, that's going to have demand for foreign currency. And it'll be a risk on scenario, the dollar index
167 00:32:45,630 --> 00:32:58,320 will be falling at that time period. Okay, look at January February time period. And you can see where in the 15 year basis, it was making lows and even in a 25
168 00:32:58,320 --> 00:33:07,920 year basis, it was making lows where it did rally up in essentially around the march time period, it got in sync in May, it's low and then it'll trade up into
169 00:33:07,920 --> 00:33:16,980 that spring time period making a high so study these charts and you can see there there's a huge advantage of having insight like this, because it can put
170 00:33:16,980 --> 00:33:31,710 you on on track to finding a long term trend and this waiting for interest rates to get in sync with this co2 and commercial trends. tracking the Smart Money
171 00:33:33,360 --> 00:33:42,660 Okay, guys, you've probably seen this a few times in my other tutorials, but mainly you want to be looking at higher timeframe charts and you want to spend
172 00:33:42,660 --> 00:33:50,730 some time analyzing the net positions of the large commercial traders. You want to be looking at the trend where their net positions are moving, are they
173 00:33:50,730 --> 00:34:03,450 continuously moving higher, lower, higher, lower overall bearish or bullish and lower is already swinging, bullish above the baseline zero line okay during
174 00:34:03,480 --> 00:34:11,520 uptrend or are they doing that during a downtrend? Okay. And what we're doing we're looking at the higher time frame weekly chart and determine if the price
175 00:34:11,520 --> 00:34:21,270 is going higher. And if it is, you won't be waiting for the commercials to be net long or extremely lightening up on their net short positions because that
176 00:34:21,270 --> 00:34:32,400 would equate to a bullish scenario. The trend on the weekly chart and the swings from net long to net short are very easy to spot and determine the long to
177 00:34:32,400 --> 00:34:42,090 intermediate term trends or direction. Looking for trades in this trend or directional bias will further increase your odds of capturing trades with large
178 00:34:42,090 --> 00:34:57,990 institutional sponsorship behind the moves. trading the news All right, I basically look at trading the news or news releases as volatility injections.
179 00:34:58,380 --> 00:35:08,850 Okay. Don't fear news, but I certainly respect it. There are certain reports and events that I more or less will step outside of and more trade. But one of the
180 00:35:08,850 --> 00:35:17,760 most difficult ways to trade the markets is to try to trade the news releases themselves. The internet is littered with so called robots or programs designed
181 00:35:17,760 --> 00:35:26,370 to quickly give you trading profits on a knee jerk reactions to the news. To me, this is pure and simple gambling.
182 00:35:27,960 --> 00:35:37,560 We can never know for sure what the numbers will be in the reports and the guests is just ridiculous. However, we can wait for the release and watch the
183 00:35:37,560 --> 00:35:49,080 reaction in many times a signal will form shortly after the release. Many times counter direction to the intended news hawks use news releases for injections
184 00:35:49,080 --> 00:35:54,240 and volatility and fuel trade ideas based on price action.
185 00:35:59,640 --> 00:36:13,800 Key market moving indicators key economic releases, okay, we're gonna be looking at the US market, the UK market and the German market. Okay, we're gonna start
186 00:36:13,800 --> 00:36:27,480 with the UK, the British Pound daily rate decision, retail sales, consumer prices, claimant count, GDP and industrial production. Those are reports that I
187 00:36:27,480 --> 00:36:38,880 have on my calendar times when they're gonna come out. And I will absolutely be aware of these and I will be more or less looking for trades to either be
188 00:36:38,880 --> 00:36:47,910 propelled in the direction that I've been prior to that report or I'll be looking for a signal to generate shortly after one of these reports are
189 00:36:47,910 --> 00:36:48,450 released.
190 00:36:56,460 --> 00:37:07,350 by the US dollar we're gonna get the North America market Federal Reserve rates, retail sales, consumer and producer prices, non farm payroll I avoid that I do
191 00:37:07,350 --> 00:37:17,100 not touch it. Gross Domestic Product GDP trade balance consumer confidence reports and service and manufacturing ICM. You want to note these as well
192 00:37:17,100 --> 00:37:21,750 because all of your crosses with the dollar will be impacted by this as well.
193 00:37:31,050 --> 00:37:41,460 Get the German market get the euros okay rate decision German IFO German unemployment, German consumer prices, German GDP and manufacturing and services
194 00:37:41,460 --> 00:37:49,710 sector PMI. You want to have these on your calendar when time they're gonna be released. And be aware of these because these absolutely will move the market
195 00:37:49,740 --> 00:38:06,990 considerably. I plan for news impact. You have to have an awareness of your economic calendar folks. Now, there are a few resources that you can use to
196 00:38:06,990 --> 00:38:21,330 determine when high impact news will release and hit the market. Number one, obviously baby pips coms calendar, forex factory comm calendar. And you actually
197 00:38:21,330 --> 00:38:31,980 Google econo day calendars. You can find some at Bloomberg, and a few other resources, but they have a very good format. I like that they're very user
198 00:38:31,980 --> 00:38:42,690 friendly. Now for more information on this topic, and if you have any more interest on interest rates, I would recommend that Chris Lori's inside the banks
199 00:38:42,690 --> 00:38:56,790 webinar. I purchased this A number of years ago. And I was very impressed with his presentation on the banking level in terms of interest rates and how they
200 00:38:56,790 --> 00:39:11,130 move and propel the marketplace. So if this isn't, if this isn't, more or less, get to the understand that you're looking for. I would counsel you to do a
201 00:39:11,130 --> 00:39:18,180 little investment on your career. And it's not much money at all, but it absolutely is a wonderful resource. He does a really good job in that webinar.
202 00:39:19,140 --> 00:39:31,620 You can reach Chris Laurie at Chris laurie.com. And you can get his webinar from his website. He's actually the only one that I recommend any folks buy material
203 00:39:31,620 --> 00:39:42,570 from I have everything but is Aussie yen course, and I just don't trade yen crosses, otherwise, I probably would have bought that as well. He does a really
204 00:39:42,570 --> 00:39:51,360 good job of teaching. He's very, very interested in your success. And that separates him as far as my concern from all the other folks out there and so
205 00:39:51,750 --> 00:39:53,400 yeah, kudos to him.
206 00:40:33,150 --> 00:40:41,190 Alright guys, 30 year treasuries and tea notes. Okay, now some of my best concepts are found in my early days as a futures trader and the bond market is a
207 00:40:41,190 --> 00:40:49,710 big market. And it provides so much insight and leading information. Now, I don't trade bonds anymore, but I absolutely monitor the futures on a daily
208 00:40:49,710 --> 00:40:57,480 basis. This market can tell you everything you need to know in any market asset class, if you understand it, the scope of the bond market is not the objective
209 00:40:57,480 --> 00:41:10,080 here. But we will use it to discover some rather impressive techniques to ferret out some blockbuster trades. 10 year Treasury notes, okay, much like the 30 year
210 00:41:10,080 --> 00:41:21,690 treasury bond, I used these early on in my career as a futures trader. And there's a little caveat to understand the bond market, whenever you see the
211 00:41:21,690 --> 00:41:33,690 price chart on the futures when they rally up, they will have an inverse relationship. In other words, as the price data goes higher, the yield will
212 00:41:33,690 --> 00:41:43,950 actually be going down. So you have to have that in your mind. Now, since I trade the cable and the fiber exclusively, you know, I trade tracking the German
213 00:41:43,950 --> 00:41:58,140 10 year bond as well. The five year Treasury note much like the 10 year and 30 year and when price runs up on the contract price on the futures market, the
214 00:41:58,170 --> 00:42:06,480 yield will be basically decreasing are dropping. And obviously, if the chart would be dropping on the futures, that would mean the yield would be increasing
215 00:42:06,480 --> 00:42:19,440 as well. And much like the 10 year I also track the five year German bond as well. And two year Treasury note much like the five year and 10 year I track
216 00:42:19,500 --> 00:42:30,090 that on a German basis as well. And by having any understanding of all three of those, we can find some pretty neat things we're going to learn about here
217 00:42:30,090 --> 00:42:44,100 shortly. Obviously goes without saying the US Dollar index i like daily FX comm if you go to the net Dania charting now do not go to net dania.com Okay, it's
218 00:42:44,100 --> 00:42:56,310 very important. Go to daily FX calm and use the net Dania charting, it's free. Okay, um, just open up a US Dollar Index chart. And it'll give you your what I
219 00:42:56,310 --> 00:43:09,450 like to see in terms of the US Dollar Index. I look at the cash basis also. And the chart to the right here. This is the futures chart of the United States
220 00:43:09,450 --> 00:43:21,270 Dollar Index. If you like these types of charts, and you want to subscribe to them, it's not very expensive, or things like $25 a month, but you can get that
221 00:43:21,270 --> 00:43:31,050 at price charts calm. You don't need to pay for futures charts, but I do prefer this format because I'm used to reading them since 1990s. I just grown
222 00:43:31,050 --> 00:43:40,680 accustomed to having them in my repertoire. Now I like to use SMT concepts to spot diverging highs and lows between the US dx and relative price points in the
223 00:43:40,680 --> 00:43:55,560 fiber and cable. And you knew that as my USD x SMT. And I look for the bond and USD x SMT as well. Major stock market indices, okay, the major stock market
224 00:43:55,560 --> 00:44:03,480 indices are one of my favorite tools to gauge the long term price swings. If we are failing at highs on the daily charts as we see here in the image to the
225 00:44:03,480 --> 00:44:13,290 right, this suggests a possible risk off scenario. Expect weaker stock prices and possibly foreign currencies. The US Dollar index will confirm this with a
226 00:44:13,290 --> 00:44:23,130 rally at support. At the same juncture. simply reverse for risk on scenarios. The markets as a whole are interconnected and it pays to monitor them and hunt
227 00:44:23,160 --> 00:44:35,610 for clues. The CRB Commodity Index. Okay, now I usually watch this on the cash basis. And you can get that from the price charts calm. I'm sure I could do a
228 00:44:35,610 --> 00:44:42,870 google you'll probably find that as well. But again, this really like this. This chart. I think it's real crisp, and we print them out. There's nothing like
229 00:44:42,870 --> 00:44:51,540 printing out charts and marking them up by hand. I'm like a Flintstone caveman. I like being able to carve up some notes and draw my charts. You know, I like
230 00:44:51,540 --> 00:44:59,070 sharing with you guys electronically. But you know, if it's going to be a matter of preference, I would love to have you printed charts every single day. That's
231 00:44:59,100 --> 00:45:10,650 this is my My opinion really, now I like the CRB index, because it usually has a inverse relationship to Dollar Index. And I like to confirm a swing higher in
232 00:45:10,650 --> 00:45:21,270 dollar with shorting fiber and or cable with a CRB decline. Now the CRB index tends to be a little bit early and can one possible long term shifts in the
233 00:45:21,270 --> 00:45:27,690 trend. It's a dynamite tool to use for major market analysis and pinning down long to intermediate term directional bias.
234 00:45:30,600 --> 00:45:39,150 Alright, well in gold now, like looking at these two markets, I don't trade them. But I'd like to use them as barometers more or less to see if there's risk
235 00:45:39,150 --> 00:45:49,890 on or risk off scenarios underway. And basically, you want to be looking at the same way that you foreign currencies and CRB all those markets should be moving
236 00:45:49,890 --> 00:45:51,060 in tandem with both.
237 00:45:58,200 --> 00:46:11,250 Okay, we're looking at the T note yields, okay, these are going to be the two year, five year and 10 year. And you can look at the legend up here to determine
238 00:46:11,490 --> 00:46:25,200 which is which as we go through. And what I'm highlighting here is when there is a divergence between these yields. Okay, these are t note yields. And this line
239 00:46:25,200 --> 00:46:35,790 is not the T note price, it's the actual t note yield. So the yield is actually invert is an inversion of the futures charts price of the Tina. Okay, so I kind
240 00:46:35,790 --> 00:46:48,510 of monitor both. But the yield when you monitor it like this, it will basically mirror what foreign currencies should be doing. In other words, as the yields
241 00:46:48,510 --> 00:46:59,460 were increasing here, that would have been bullish for foreign currency. And contrary as the yields drop, that would be bearish for foreign currencies, okay.
242 00:46:59,910 --> 00:47:10,710 You see these confirmations in your technicals on your charts. In other words, if there's a buy signal for foreign currencies and in your daily charts or
243 00:47:11,490 --> 00:47:22,770 respective timeframes that you trade, and there is a sell signal being confirmed in the US dollar, that is a confirmation that you probably got, you know, a good
244 00:47:22,800 --> 00:47:32,580 probability of a nice swing for your respective timeframe. Now, what we're referring to here is a daily basis, this is really going to give you a buy,
245 00:47:32,790 --> 00:47:45,630 program or sell program. Okay, this is the beginnings of a buy program. This is the termination of a buy program, and a beginning of a sell program. Now the
246 00:47:45,630 --> 00:47:55,170 main thing I want you to focus on is that there's typically a three or four month cycle, okay, it's like almost like a quarterly effect that takes place in
247 00:47:55,200 --> 00:48:04,380 the yields. And it's based basically on interest rates, and macroeconomics and things of that nature. But I'm not going to bore you with that here. But just
248 00:48:04,380 --> 00:48:13,860 basically, if you look at the charts, and on historical perspective, you'll see that that is, in fact, what happens on the average. Now we're going to do is
249 00:48:13,860 --> 00:48:28,770 we're going to talk about at the time of this recording, this is June 2012. And what I'm looking at is trying to go over why we saw the precipitous slide in the
250 00:48:28,800 --> 00:48:42,780 foreign currency market, namely the British pound and the Euro, USD pairs, cable and fiber. And we're gonna look at how that relates to these yields here. Okay.
251 00:48:42,780 --> 00:48:52,050 And what we're looking at, again, on this chart is the United States 10 year, United States five year and the United States, two year t notes. Okay. And
252 00:48:52,050 --> 00:49:02,430 again, these are D yields. And basically, what you're looking for is at specific times, seasonally, and quarterly, there will be a divergence that posts in these
253 00:49:02,430 --> 00:49:12,930 yields. And that looks like this. We have, it may be a little difficult to see I understand but the orange line here, which is the two year the high made back
254 00:49:12,930 --> 00:49:35,910 here is lower than the high made in March, April time period. Okay, we're actually in March 19. The high here on the 10 year was just about equal. And
255 00:49:36,540 --> 00:49:51,210 same thing here we have the five year just about equal. Okay, so we have a divergence between the two year five year and 10 year. Okay. That typically is a
256 00:49:51,210 --> 00:50:01,680 reason to start looking for other reasons to support a decline in yields, which would represent a decline in foreign currency, any rally The US Dollar Index.
257 00:50:02,280 --> 00:50:14,820 Okay, so let's take a look at a few other examples. And we're looking at the foreign bond markets. Right now we're looking at the five year notes on the UK
258 00:50:14,970 --> 00:50:30,210 tenure, I'm sorry, UK five year note, the German five year note and against the United States five year Treasury note. Okay, and we're going to look at this
259 00:50:30,510 --> 00:50:41,640 same timeframe in here. Okay, going back to this chart real quick, just to reference again, we're looking in 2012, March, April time period. Okay, we're
260 00:50:41,640 --> 00:50:56,160 going to go and look at this area here. And what I want to draw your attention to is the fact that we had the US five year note higher, respectively,
261 00:50:58,020 --> 00:51:13,230 while the German five year note was lower, and the UK five year note was lower. Okay. And what I'm gonna do is I'm gonna take off to UK, as you can see, there
262 00:51:13,230 --> 00:51:27,720 is a clear divergence between the US and the German nettle sufficiently through the divergence. Okay, see the high here, too high on the red line, that's the
263 00:51:27,720 --> 00:51:42,720 German five year note. It's bearish. While at the same time, the US five year note was making a higher high in yield. Okay, and then you saw them slide
264 00:51:42,720 --> 00:52:04,110 together. That that is a yield SMT divergence. Okay, as I look at it, you can see a contrary signal here back in October of 2010, where the German five year
265 00:52:04,110 --> 00:52:17,160 note was failing to make lower lows in yield. At the same time, the US five year note was making a lower low. Okay, and then we saw both yields increase
266 00:52:17,160 --> 00:52:31,170 together. And here the high, you saw inability for the US to trade higher in yield while the German yield went higher. And you can see there was the shift in
267 00:52:31,170 --> 00:52:39,570 the major market sentiment. And that's really what this is measuring market sentiment, because you're, you're chasing the yield, okay? And the markets
268 00:52:39,570 --> 00:52:49,020 always going to seek yield. Okay, so if the yields are increasing, that's going to be bullish for major currencies. And it's going to be bearish for the dollar.
269 00:52:50,460 --> 00:53:03,750 And vice versa. And we see the same thing here and this April 2010. Okay, the US five year made higher highs, while the German five year note was unable to make
270 00:53:03,840 --> 00:53:14,580 equivalent new highs, and there was your shift and notice this is happening march april time period. And we just recently at the time of this recording also
271 00:53:14,580 --> 00:53:26,850 had another divergence which is a continuation of this longer term downtrend in yield. And again, here is a 10 year comparison, we're gonna compare the German
272 00:53:27,000 --> 00:53:42,210 which is the orange date, UK, green and the lighter Orange is the US 10 year Treasury note. You see the same thing happening here where the German was making
273 00:53:42,210 --> 00:53:55,560 higher highs while the US and UK 10 year notes were failing to make higher highs in their yield and the same thing is also that low was formed in the fall of
274 00:53:55,590 --> 00:54:11,340 2010. We saw the German tenure failed to make lower lows and yield while the US Treasury made on its 10 year basis made a lower yield and the UK failed to make
275 00:54:11,370 --> 00:54:22,140 a lower yield on seven and that was your sentiment shift to bullish and that would be looking for buy programs on major currencies and sell signals okay in
276 00:54:22,170 --> 00:54:30,480 the dollar, okay. In other words, the dollar would have been declining all during this period here. And at this point where we saw a major shift, okay in
277 00:54:30,480 --> 00:54:42,570 the yield diverged, the sentiment now was going to send the dollar bullish and then major currencies on the foreign would be declining. So that would be a risk
278 00:54:42,600 --> 00:54:57,720 off scenario here or sell program from forex. And this is a bi program, okay, where the the current foreign currency markets would be rallying and the US
279 00:54:57,720 --> 00:55:07,050 dollar at this time period would be declined. Okay, so it just basically think in terms of make it real easy for yourself, when the yields are going up, the
280 00:55:07,050 --> 00:55:14,160 foreign currency markets should be trailing in sympathy, okay? Because they're going to chase yield. And as the yields drop, foreign currencies are going to
281 00:55:14,160 --> 00:55:23,880 chase that down as well, there won't be any demand for that foreign currency, and they'll be a flight to safety in the form of going back to the dollar and
282 00:55:23,880 --> 00:55:28,110 buying bonds. Okay. So, again,
283 00:55:28,140 --> 00:55:37,410 there's an inverse relationship between the bond market itself and the yield as bonds would go up, the yields would drop and vice versa. Okay, so it that's
284 00:55:37,440 --> 00:55:50,040 basically the panoramic view of a risk on risk off scenario and determining buys and sell programs on the daily basis. And this is one really strong powerful way
285 00:55:50,040 --> 00:55:59,490 of keeping yourself in sync with the macro economic view. And you'll have to go through all this economic data is this is visual for you, you can see it
286 00:55:59,490 --> 00:56:09,330 happening is every three to four months, just look for a shift to occur. And when you start seeing these things occur on your on the yield, okay? That's when
287 00:56:09,330 --> 00:56:18,090 you want to be looking at your your price charts and looking for maybe some top formations, and some reversal scenarios. Okay. And same thing in here. So we're
288 00:56:18,090 --> 00:56:29,670 using seasonal tendencies, cyclical analysis, and the yield analysis where the market will always seek yield and if yields are dropping, that's going to be
289 00:56:29,670 --> 00:56:32,880 bearish for major currencies, and bullish for the US dollar.
290 00:57:16,920 --> 00:57:24,810 Key support and resistance, you got to know your key levels guys, if you don't have a firm grasp on support and resistance, all this is going to be a waste of
291 00:57:24,810 --> 00:57:33,000 time, because none of your signals are ever going to confirm entry or exit unless they get to one of these key levels. The cornerstone to your success in
292 00:57:33,000 --> 00:57:41,910 trading will be your patience in determining high timeframe key support resistance levels, and waiting for the setups to form at those same levels. Once
293 00:57:41,910 --> 00:57:50,550 you have directional bias based on the major market analysis, you identify key price levels from the 60 minute chart up to the monthly nothing less than a 60
294 00:57:50,550 --> 00:58:00,330 minute chart and ideally, the daily basis is optimal. Determine monthly weekly, previous day's session highs and lows as well as pivot levels and Asian range
295 00:58:00,330 --> 00:58:14,790 highs and lows. market sentiment, you got to avoid the herd mentality. if everybody's doing it, it's probably not a good thing in the futures market or
296 00:58:14,880 --> 00:58:24,720 Forex. It's usually probably petered out and so you want to be looking to trade against the majority. Now when decided to take action in the market, it is
297 00:58:24,720 --> 00:58:35,010 important to remain on the side of the market that is the minority. Looking for trades when the market is by all parents bullish when you want to short is
298 00:58:35,010 --> 00:58:45,420 ideal. And you might have already guessed it, when it looks bearish, do your buying. This might sound rather obvious and elementary but consider how little
299 00:58:45,420 --> 00:58:57,150 actually followed this mindset. Consider the intraday Judas swing for example. This is a sentiment played by all standards, and it's used to quantify an entry
300 00:58:57,210 --> 00:58:58,530 in the opposite direction.
301 00:59:04,320 --> 00:59:16,020 market structure hunt intermediate term price swings. If you find all of your trading occurring at long to intermediate term price swings, you're going to
302 00:59:16,020 --> 00:59:26,160 find that your trading is absolutely mind blowing. The ideal setups for trading low risk high probability swings is to limit your consideration to only trade
303 00:59:26,190 --> 00:59:35,730 the intermediate term highs for shorts and intermediate term lows for Long's. Taking short term scalps and or day trades in the same direction is advised.
304 00:59:36,390 --> 00:59:47,430 Your trading plan is not to capture every move in the market, just the easy low hanging fruit. Using daily four hour and hourly market structure and nesting
305 00:59:47,430 --> 01:00:02,430 fractals can be a wildly profitable price action approach. This is my core price action concepts open interest and premiums. open interest reflex Smart Money
306 01:00:02,430 --> 01:00:10,830 activity. Now the open interest is basically only going to be found in the futures market. And the open interest in for instance, is example here. Okay, in
307 01:00:10,830 --> 01:00:20,160 this example, we're looking at the Swiss franc. And what I've noted here is that price had ran up, it's been in an uptrend and we moved into a trading range.
308 01:00:20,490 --> 01:00:33,180 Okay? And if you look at the circle here, that is open interest, that cumulative line that goes along, and all of a sudden drops off precipitously drops the
309 01:00:33,180 --> 01:00:44,100 trade down. Okay, that is open interest declining while the market is in a range. What do you think that translates to? Well, this is a concept that I
310 01:00:44,100 --> 01:00:52,620 adopted from Larry Williams and it still served me well today. The open interest while in a market market consolidation or range can tip the hand of the smart
311 01:00:52,620 --> 01:01:03,180 money if you understand what to look for. If the open interest drops off 20% or more rapidly, this is attributed to commercial short covering, if open interest
312 01:01:03,180 --> 01:01:12,300 increases 20% or more rapidly in a consolidation, this is commercial short selling, commercial traders are the largest hedgers in the marketplace. And when
313 01:01:12,300 --> 01:01:20,790 you hedge, you're essentially shorting the market, you're selling something you already have. So if open interest declines, that means that they're lightening
314 01:01:20,790 --> 01:01:31,050 up aggressively on your shorts. Why would they do that, because they anticipate price going higher. When you have a premium in the futures contracts, that means
315 01:01:31,050 --> 01:01:41,760 the nearby contract is selling at a higher price than the next month out in the future. That is a premium. Okay, that means is that a high demand for that
316 01:01:41,760 --> 01:01:53,760 particular commodity or currency? If you see open interest dropping off in that scenario, this is a near perfect trade scenario you need to be buying. And as a
317 01:01:53,760 --> 01:02:04,650 result, this was a mega trade. This is in 2010. If you look at your charts around the Fourth of July in 2010, you can see how in the FX market, the pair
318 01:02:04,800 --> 01:02:16,710 for the swissy fell out of bed like a rock. This trade and futures market actually moved 2300 points. And it did less than half of two months. And open
319 01:02:16,710 --> 01:02:27,900 interest dropped while in the range at support at 118. And it was in an existing trend already. And that's absolutely mind boggling profit. And if you have that
320 01:02:27,900 --> 01:02:36,600 type of scenario unfold in the marketplace and you see a couple of these happen a year, you can really absolutely kill it catch some explosive price moves. So I
321 01:02:36,600 --> 01:02:44,550 would counsel you to look at open interest in the futures markets on the pairs that you trade. The Swiss franc is example here, but it's not limited to that
322 01:02:44,580 --> 01:02:58,440 it's you can use it in the dollar index you can use in the Canadian dollar, Australian dollar, British pound, Japanese yen, and even the euro. Higher
323 01:02:58,440 --> 01:03:05,700 timeframe directional bias, maintaining a focus on the weekly daily impossibly the four hour timeframes will keep your trading in the highest probable
324 01:03:05,700 --> 01:03:15,120 direction. Look for support or resistance on these levels determine where price is trying to reach to if price is trading lower on the daily look for an old low
325 01:03:15,150 --> 01:03:26,310 or high in the left side of your chart to determine if there's time and price available for trade. Given that direction. Reverse for looking for buy setups.
326 01:03:26,580 --> 01:03:31,740 The main point is to keep the higher timeframe in your trading. It really does pay off.
327 01:04:13,110 --> 01:04:22,800 general market risk on or risk off? You want to start with the interest rates. Are we seeing yields dropping or increasing? Is there weakness or strength in
328 01:04:22,800 --> 01:04:32,040 the stocks commodity and treasuries? is gold and or oil giving you any clues? Is the dollar index confirming recent highs or lows compared to the interest rates?
329 01:04:32,730 --> 01:04:43,110 Are there any market reports do that might change the current market tone. The more the other asset classes confirm or negate your trade idea, the better risk
330 01:04:43,110 --> 01:04:47,370 off dollar rallies risk on it slides. It's that simple.
331 01:04:52,380 --> 01:05:01,050 anticipatory stage of analysis. This is the stage of analysis where you will spend the majority of your time it is on the weekly and daily time. Since the
332 01:05:01,050 --> 01:05:08,850 trades are based on these higher timeframes, there might be a few days or so before a trade actually sets up. Don't worry, that's a good thing. You want to
333 01:05:08,850 --> 01:05:16,980 track the interest rates, you want to be paying attention to cod Commitment of Traders reports, major market indices, seasonal tendencies, key support
334 01:05:16,980 --> 01:05:30,090 resistance levels and inter market analysis with correlated assets. This stage of analysis is the foundation to your successful trading career. execution stage
335 01:05:30,090 --> 01:05:38,160 of analysis This is stage of analysis where you hunt setups based on the insights and conclusions you arrived at in the anticipatory stage of analysis.
336 01:05:38,820 --> 01:05:48,150 If risk is on, look for setups to buy currencies and confirm these setups, with higher moving are poised to rally stock indices, CRB oil, golden SMT concepts.
337 01:05:48,510 --> 01:05:58,500 If risk is off, look for setups to sell currencies and confirm these setups with lower moving or poised to decline, stock indices, the CRB index oil gold and SMT
338 01:05:58,500 --> 01:06:10,920 concepts. Management stage of analysis This is the stage that requires your concepts for trade management want open positions, the management of stop loss
339 01:06:10,920 --> 01:06:19,890 orders, limit orders, initial profit objectives and scaling later portions. Your trading plan must have clear concepts and techniques for the process that you
340 01:06:19,890 --> 01:06:30,420 will adhere to when managing open positions. This stage of analysis is crucial for consistently and having longevity in this career. You can find wonderful
341 01:06:30,420 --> 01:06:40,410 setups, enter it off more entry points and still mismanaged the trade and in this stage, you will find results bring with it loss and regret if you do not
342 01:06:40,470 --> 01:06:55,260 manage your analysis correctly. reactionary stage of analysis. This stage of analysis is seen where your trades are open and you suspect or clearly see
343 01:06:55,260 --> 01:07:03,810 reasons to collapse the trade and cut your losses or take what profits you have open. There must be clear parameters in your trading plan that will invoke an
344 01:07:03,810 --> 01:07:13,770 immediate trade termination and abort on your original trade idea. This might be a result of a report or news event global catastrophe and or you realize you're
345 01:07:13,770 --> 01:07:17,880 simply human and essentially wrong. Imagine that making the mistake
346 01:07:23,250 --> 01:07:32,430 the documentation stage of analysis. This stage of analysis is where you record in your journal what your trade idea was based on what tools you use them why
347 01:07:32,940 --> 01:07:41,280 screenshots and how you felt going into the trade while the position was open and what made you nervous. The results of the trade should be documented and
348 01:07:41,280 --> 01:07:49,350 reflection on the trade plan and was it adhered to from the beginning to end document any lessons learned from the trade and what you would have liked to
349 01:07:49,350 --> 01:07:57,900 have done differently? determine what leverage and or lot size your next trade will be using. Keep these records and refer to them when you experience a period
350 01:07:57,900 --> 01:08:03,300 of drawdown and or a string of losses. It will remind you that temporary losing streaks come and go