I was doing a google search on Jam the trader trying to get opinions on JAM, and I wound up being directed here. I am already a member so was happy to try to read any reviews but Im so far not seeing any people who are happy with his free teachings here or whatever services he charges for as he has stated openly he has a paid for service as well. Was he banned? Can anyone tell me if they made money following his free posts here or his paid for service on his site? Very strange I dont see any continuation here. Even if he was banned can someone tell em their opinion of JAM or his website?
I am getting the rules down from Big Mike, I will give back free and don't expect anything from you or anyone. When I teach I learn and that is very valuable for me. With Big Mike's permission I will start teaching but do not want to cross any lines of self promotion.
All right guys, I am going to start teaching again. The first topic that I will start with is bar types. Please feel free to step in and join as well as add any bar types that you feel are relevant. After Bar types we will move on to
· Gann Pivot Analysis (helps with trend and chop determination)
· Chart Patterns
· Entry Techniques
· Stop loss techniques
· building a trading plan
· And whatever else may help
You will not need any special indicators for these lessons. You simply need time in front of the screen, a solid profitable trading plan that you can follow and the ability to humble yourself very quickly
One quick note, there are thousands of ways to enter the market and many many trading systems, which will all go through draw downs. It is up to you to stop chasing the holy grail and embrace a system, learn its strengths and weaknesses and trade. Moving from room to room or forum to forum looking for that "someone" who will make you a trader is a losing proposition. If you are not willing to step up and take responsibility for your actions then you should not be trading period. Remember at the end of the day it is you, for you, about you, and only you when it comes to trading. Nobody on the other side gives a rats a** whether you win or lose!
We will start with the bar types that I use most frequently first. Then add a couple more as time permits
I use mainly 3 types of bars
Tick Charts
Range Charts
Renko Charts
Tick Charts
Tick charts form a new price bar (or candlestick, line, etc.) every time a specific number of trades are completed. Popular numbers of ticks are 89 ticks, 144 ticks, and 233 ticks, which are all short term timeframes.
As tick based charts only form new bars when there have been enough trades, they adjust to the market, forming bars less often when the market is moving slowly. Some day traders believe that this gives tick charts an advantage over time charts, myself being one of them.
RangeBar Charts Range charts form a new price bar (or candlestick, line, etc.) every time the price has moved a specific distance vertically. Popular short term price ranges are 5 ticks, 8 ticks and 13 ticks, and popular long term price ranges are 21 ticks, and 34 ticks.
As price range based charts only make new bars when there has been enough price movement, they adjust to the market, making bars less often when the market is stuck in a small range (i.e. not moving). Some day traders believe that this gives range charts an advantage over time charts, myself being one of them. Price range charts appear different from other types of charts, because each bar (or candlestick, line, etc.) has the same range (high - low), and therefore has the same size when displayed on a chart.
RenkoBar Charts
Renko charts have a pre-determined "Brick Size" that is used to determine when new bricks are added to the chart. If prices move more than the Brick Size above the top (or below the bottom) of the last brick on the chart, a new brick is added in the next chart column. Hollow bricks are added if prices are rising. Solid bricks are added if prices arefalling. Only one type of brick can be added per time period, hollow or solid. Bricks are always with their corners touching and no more than one brick may occupy eachchart column.
It is important to note that prices may exceed the top (or bottom) of the current brick. Again, new bricks are only added when prices completely "fill" the brick. For example, for a 5-point chart, if prices rise from 49 to 54, the hollow brick that goes from 40 to 50 is added to the chart BUT the hollow brick that goes from 50 to 55 is not drawn. The Renko chart will give the impression that prices stopped at 50. It is also important to remember that Renko charts may not change for several time periods. Prices have to rise or fall "significantly" in order for bricks to be added.
Volume
Volume charts form a new price bar (or candlestick, line, etc.) every time a specific number of contracts have been traded. This is different from tick charts because a single trade can consist of several contracts. For example, a single trade for 10 contracts would be 1 tick on a tick chart, but would be 10 contracts on a volume chart.
Popular volume charts are 500 contracts and 1000 contracts, but any number of contracts might be suitable depending upon the market being traded. Volume charts also adjust to the market, and make price bars less often when the market is moving slowly, as there are less contracts being traded.
The next important topic will be on Gann Swing Analysis as I believe this is all you need to determine market structure.
Choppy Market
A choppy market is defined as a market without any clear direction. Choppy markets can present themselves after an extended bull or bear market has been in place. When identifying choppy
markets, a trader must first locate the highest high and lowest low over a number of sessions. These two swing points will give you your range. The next thing to look for is how well the market
trades within this given range. If the market puts up little fight when attempting to break through support or resistance, odds are the market is in a choppy period.
Change Your Mindset
Traders must change their mindsets in a choppy market. Many day traders in the late 90’s had grown accustomed to 25% gains intra-day. This of course changed as the market environment shifted
from boom to bust. Hence, traders should not get greedy and will have to adhere to the rule that ”small gains equals big profits”.
Gann Swing Analysis is one of my favorite techniques to help determine market direction and when the market is not in a direction. While Gann Swing Analysis is not new, I believe the way that we use it for staying out of chop is. Lets get to the basics of Gann Swing Analysis and then we will look at our interpretation of chop using this tool.
We will start by defining Gann Swing Analysis and its forms
There are 4 types of basic
UpSwing
DownSwing
UpTrend
DownTrend
Upswing: From Down to Up.
The swing direction can only change to up if the market makes two consecutive highs.
Looking at the figure above, you can see that bar number 1's high is the first consecutive
high, and the bar number 2 is the second consecutive high. The placement of the lows is
not important.
Downswing: From Up to Down.
The downswing direction can change to down only if the market makes two
consecutive lower lows. Looking at the figure to the above, you can see that
bar number 1's low is the first consecutive low, and the bar number 2 is the
second consecutive low. The placement of the highs is not important.
UPTREND: Trend Change from Down to Up.
To change from a downtrend to an uptrend, the trend must have been down,
as indicted by the magenta line. A peak is formed by an upswing (1) followed
by a down swing. If this peak is passed on the upside, the trend changes from
down to up.
DOWNTREND: Trend Change from Up to Down.
To change from an uptrend to a downtrend, the trend must have been up,
as indicted by the solid line. A valley is formed (1) by a downswing
followed by an upswing. If this valley is passed on the downside the
trend changes from up to down.
Defining your Trend:
Defining your trend using pivot points is one of the easiest and
most effective ways of trend determination. With this method,
you do not have a need for any indicators. In the example below,
you will notice that we have higher high pivots and higher low
pivots denoting an uptrend.
In the example below, you will notice that we have lower high
pivots and lower low pivots denoting a downtrend.
Using Gann swing to determine trend and possible trend change is only one
way to use them. In fact, Gann Swing analysis can be very helpful in
determining chop.
Notice in the figure above, we have Gann swings going in and out of each
other denoting a sideways choppy market. As a trader we have two choices
here, stay out, or scalp. In my experience, scalping is a very difficult endeavor
and one that on this side of the computer, we are not well equipped to play.
I would prefer to go for the easy money and stay out of chop. Remember,
you do not have to catch every move, let the markets come to you.
In this next section, I am going to teach on the importance of news as a catalyst to drive market action. Importance of News
It's not enough to only know technical analysis when you trade. It's just as important to know what makes the market move.
Behind every major market move, there is a fundamental force behind it. This force is called the news!
To understand the importance of the news, imagine this scenario.
Let's say, on your nightly news, there is a report that the biggest software company that you have stock with just filed bankruptcy.
What's the first thing you would do? How would your perception of this company change? How do you think other people's perceptions of this company would change?
The obvious reaction would be that you would immediately sell off your shares. In fact, this is probably what just about everyone else who had any stake in that company would do.
The fact is that news affects the way we perceive and act on our trading decisions. It's no different when it comes to trading futures and currencies.
Why Trade the News
The simple answer to that question is "To make more money!"
But in all seriousness, as we learned in the previous section, news is a very important part to the market because it has the potential to make it move!
When news comes out, especially important news that everyone is watching, you can almost expect to see some major movement. Your goal as a trader is to get on the right side of the move, but the fact that you know the market will most likely move somewhere makes it an opportunity definitely worth looking at.
Dangers of trading the news
As with any trading strategy, there are always possible dangers that you should be aware of.
Here are some of those dangers:
Because the market is very volatile during important news events, spreads and fills can be wide and difficult to get. This increases trading costs and could hurt your bottom line.
You could also get "locked out" which means that your trade could be executed at the right time but may not show up in your trading station for a few minutes. Obviously this is bad for you because you won't be able to make any adjustments if the trade moves against you!
Imagine thinking you didn't get triggered, so you try to enter at market... then you realize that your original ordered got triggered! You'd be risking twice as much now!
Economic Indicators
It is an amazing process that happens each morning that major statistics are to be released in the US. A group of global reporters go into a dingy government building with orange plastic chairs, this room and time is referred to as “lockdown”. All communication with the outside world is now shut off, no cell phones, lap tops are checked to make sure no connection is available to the outside world. Clocks are set to match the atomic time. Why such tight secrecy? Because in the next few seconds these journalists will be the first to lay their eyes on the country's most sensitive economic data. Then 30 minutes before the rest of the world hears about the news, the reporters are briefed so they have time to be ready when the news is “officially released to the world”. 2 minutes before the news is released, the television reporters are told they can leave under escort to prepare for their live broadcast of the report. The remaining reporters and journalists in the room are told “Two minutes left”, then again “one minute left” they are allowed to open their telephone lines but not to transmit. With ten seconds to go, an official countdown begins, then the word everyone is waiting for “TRANSMIT” and all of the reporters simultaneously hit the enter keys on their computers to sent the information.
Employment Situation
Market sensitivity - High
What is it: The most eagerly awaited news on the economy. Are jobs being created? AKA Non Farm Payrolls and Non Farm Employment Change
Release time: 8:30 a.m. (ET); Generally announced on the first Friday of each month and covers the month just concluded.
Source: Bureau or Labor statistics, Department of Labor.
Revisions: Can be major. Revisions can go back two months with each release.
Why is it important?
This is the big one! No single economic indicator can jolt the market as much as the jobs report. Why? To begin with, the employment news is very timely. Second the report is rich in detail about the job market and household earnings, information that can help forecast future economic activity. Third, we are talking about the American worker and their well being. Wages and salaries from employment make up the main source of household income. The more workers earn, the more they buy and propel the economy forward.
How is it computed?
Household survey
It's from the household survey that we derive the widely reported unemployment rate. Each month the government contacts 60,000 homes, a population that included farm as well as non-farm workers, self employed, domestic helpers, and U.S. residents who commute to jobs in Canada and Mexico.
Weekly Claims
Market sensitivity - High
What is it? Tracks new filings for unemployment insurance benefits.
Release time: 8:30 a.m. (ET) every Thursday; covers the week ending the previous Saturday.
Source: Employment and Training Administration , Department of Labor.
Revisions: Minor
Why is it important?
Experts have paid closer attention to this indicator even though it has been around since 1967. Improved monitoring by the labor department has made the series more accurate in gauging labor market conditions. The main appeal is its timeliness. Figures on new filings for unemployment benefits are released every week and are based on actual reports from state agencies around the country. As a result, analysts view this statistic as a good coincident indicator, meaning it accurately reflects what is presently going on in the economy. However, its greatest value is how first time claims for unemployment insurance can influence future economic activity. If a large number of people are losing their jobs every week and applying for unemployment compensation, this will eventually dampen consumer spirits, slash their spending, and cause business to pare back spending. For this reason, the weekly claims report for unemployment benefits is one of the components in the forward-looking index of leading economic indicators.
How is it computed?
Every state including the District of Columbia, offers jobless insurance programs that must conform set down by federal law. The states count all first time filers for a given week ending on Saturday and then transmit the data to the Labor Department in Washington, which releases the figures to the public the following Thursday. Information on “insured unemployment” –m that is, the total number of unemployed currently receiving benefits is published with a two-week lag.
ADP Non-Farm Employment Change
Market Sensitivity: High
What it is: A new and timely report that can serve as a preview of the government's monthly employment change.
Release Time: 8:15 a.m. (ET); published just two days before the Bureau of Labor Statistics puts out the Employment Situation report.
Source: Automatic Data Processing, Inc. (ADP) and Macroeconomic Advisers, LLC.
Revisions: Each release will contain minor revisions in payroll numbers for just the prior month.
Why is it important?
For space scientists, the ultimate goal is to find life elsewhere in the universe. For biblical archeologists, the supreme achievement may be to recover the Ark of the Covenant. For traders, the great aspiration is nothing less than to accurately predict monthly employment numbers by the bureau of Labor Statistics. Money managers have for years been scrambling to devise a statistical measure that accurately forecasts the governments jobs report. The endeavor has proven to be quite difficult. Well, now there is a measure that is proving to be a very good prelude to Fridays Payroll report.
How is it computed?
The manner in which the ADP National Employment Report is put together has intrigued the financial markets. ADP processes payrolls for more than 500,000 firms, spanning many different industries across the country. For its ADP National Report, however, the firm takes a sample payroll of about 350,000 private, non-farm companies that cover some 20 million workers. (In contrast, the BLS attempts to survey 400,000 establishments each month, representing roughly 50 million employees.) ADP then collects payroll information on those companies on a weekly basis, strips out all information that identifies these companies to maintain client confidentiality, and hands the data to Macroeconomic Advisers. Economists are focused specifically on the payroll data that includes the 12th of each month-the same week BLS carries out its survey. Experts from Macroeconomic Advisers crunch the numbers to correct for volatility and seasonal adjustments and then sort the job figures by key categories-total, good versus services, company size, and employment in manufacturing.
Bt tapping ADP’s wealth of payroll information and replicating some methods used by the government, the giant payroll firm and Macroeconomics Advisers believe they have come up with a jobs report that should closely correlate with the BLS’s “final” (net of revisions) figures for private, non-farm payrolls each month.
Personal Income and Spending
Market Sensitivity: High
What it is: Records the income Americans receive, how much they spend, and what they save.
Release Time: 8:30 a.m. (ET); data is made public four weeks after the end of the reported month.
Source: Bureau of Economic Analysis, Department of Commerce.
Revisions: After the initial release, data on income, spending, and savings undergoes revisions for the next several months as more complete information comes in.
Why is it important?
Consumers rule the economy, plain and simple. without their active participation, business activity would quickly come to a standstill. Consumer expenditures are the main driving force of sales, imports, factory output, business and investments, and job growth in the U.S. But to be able to spend, people need a reliable stream of income. As long as personal incomes rise at a healthy clip, so will spending. If income turns sluggish, consumers will curb their shopping.
Other News Events
While these are not the only news events to watch for they are some of the more important ones. You need to have a news source and watch for any news events that are high impact for the market you are trading. Personally, I use Forex Factory as my news provider and any events in red are the ones to watch out for. Here is a link to Forex Factory. Forex Factory
Source material is from "The Secrets of Economic Indicators" by Bernard Baumohl
I highly recommend this book as a part of your trading collection.
One of the best ever evolving operations I've had an opportunity to be a part of Marc. He has a full service website that teaches discpline trading. Those guys make money. You should check it out when you get a chance. I would grab all the free advice here you can soak up. Much like myself he really likes what he is doing and enjoys sharing it with others....be thankful. Banned, that's pretty funny.
I appreciate the Kudo's, but please redo your message. I do not want the promotion, just here to teach and get better myself. Please feel free to post and share some of your analysis, I have seen it and you have a lot to offer.
In this next lesson we will spend some time going over chart pattern basics and will follow that up with Higher Time Frame analysis then Entry Techniques. We will look at some very easy to read chart patterns and keep the more complex ones out for now. It is my firm belief that one major reason that most traders fail, other than no plan, is a plan that is to complex to trade real time and real money with. It looks great when back testing, but you can not trade it real time because there are to many moving parts.
You need to understand market structure and what to look for on your higher time frame charts BEFORE taking any entries on your trading chart. Too many traders pick a set of rules start trading with no regard to what the higher time frame is doing and wonder why they get chewed up.
In my trading today, I look at many markets and choose what I am trading by my higher time frames. I dont care about what I miss on the smaller time frame I care about what I make. I refuse to fall in love with one market and could care less what market it is, as long as it bears a few good traits.
In their classic book Technical Analysis of Stock Trends, Edwards and Magee defined support as "buying (actual or potential) sufficient in volume to halt a downward in prices for an appreciable period," and resistance as "selling (actual or potential) sufficient in volume to satisfy all bids and hence stop prices from going higher for a time."
Support Zones represent a concentration of demand
Resistance Zones represent a concentration of supply
What Is Support?
Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets
cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent
the price from falling below support.
Where Is Support Established?
Previous bottoms and consolidation areas below our current price provide our support zones, the higher the time frame the more relevant the support zone becomes. Technical analysis is not an
exact science and it is sometimes difficult to set exact support levels. In addition, price movements can be volatile and dip below support briefly.
What Is Resistance?
Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. The logic dictates that as the price advances towards resistance, sellers
become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from
rising above resistance.
Where Is Resistance Established?
Previous tops and consolidation areas above the current price provide resistance zones. In addition, price movements can be volatile and rise above resistance briefly.
Support and resistance areas are not guaranteed places that the market will stop and reverse, but instead are areas that you should take note of when trading. There are several pieces of information that these areas can hold for us as we approach them. Let's say we are at a double bottom and buyers are more enthusiastic then sellers at this area, they will continually increase their bids until their orders have been filled. On the other hand, if sellers are more in control, you might get a slow down at the area or a temporary rally that fails as sellers continue to liquidate, reverse, or take new short positions and drive the market through that double bottom.
JAM i'm happy you r back! ..................................................excellent thread, filled with the patience in learning the language of the markets!!!
As we get into the next area of teaching and discussion, I thought it necessary to be very clear that I have evolved in my trading from when this post was started! I DO NOT trade the same way and have considered revising my initial posts. What I feel is best however, is to leave all original posts in place and continue going forward. This allows one to see a timeline and progression line my trading and my journey towards the light
THE FIBONACCI SUMMATION SERIES
It is a well publicized fact that the Fibonacci summation series appears throughout our lives. It is in flowers, trees, plants, microorganisms, natural science, the ocean, the human body, and many other things around us that we take for granted on a daily basis. The Fibonacci summation series is as follows 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610 and so forth, to keep going just add the last number and the previous number to get the next number in the summation series. The series itself is asymptotic by nature and therefore moves toward a constant ratio slower as the number gets higher but can never quite reach the constant ratio no matter how far we go. If you divide a number in the series by its preceding number you will find that the answer always oscillates around an irrational number 1.61803398875 alternating higher and lower each time. In trading we round this number off to 1.618. The ratio 1.618 in geometry is known as phi. Entire books have been written about this subject.
You will also hear the ratio 1.618 called the “Divine Proportion” or “The Golden Mean”. I would encourage you to Google the subject or go to your local book store and read further if you are so inclined. For our purposes in trading, we are concerned with the ratio’s surrounding the summation series and not the summation series itself.
Fibonacci Retracements
Retracements are defined as a move in the opposite direction of the trend in the time frame that you are analyzing, recapturing a portion of the move. Retracements are the most commonly used Fibonacci tool in trading and therefore hold the most weigh out of all of our Fibonacci Tools. Floor traders use the 50% ratio and almost all
publications about trading mention it somewhere. For this reason it would be prudent for us to pay close attention when prices approach one of these ratios, either as a place to reverse the markets or at least slow them down temporarily. Ratios involved and most important ratios •38.2%
•50%
•61.8%
•78.6%
In the example above left, our market moves up to form a pivot at the top to which we would apply our retracement tool and plot our ratios. In the example on the right our market is moving down and finally slows and forms a pivot at the bottom. At this point we would plot our ratios. Each charting platform has a different place for this, in NinjaTrader you can get this by hitting your F8 key, then clicking on the bottom pivot and pulling it to the top of the pivot and clicking again which sets it in place.
In the above chart , prices start moving up from point A and finally form a pivot at point B. We simply pull our Fibs from point A to point B and plot our standard ratio’s 38.2, 50, 61.8%. Notice that our prices stop and turn right on the 50% ratio. At this turning point we would then go to our smaller time frame and look for trade setups
and entries.
Retracements can be great patterns to not only take note of, but for defining a set of trading rules and trading them. We already know that retracements are the most popular Fibonacci study that is looked at by traders around the word. In this section we will define a set of rules, a basic money management plan using 2 contracts, as well as look at some confirmation techniques and apply these rules to trading. While Fib retracements can be very profitable, I would recommend using multiple tools for confirmation and not just a fib retracement by itself. Lets define some very basic rules for entry, exit, and some simple money management rules.
• We will use three time frames for analysis
a. 20 Range bar chart for support and resistance HTR = Higher Time Frame
b. 10 Range bar chart for area and direction MTR = Medium Time Frame
c. 5 Range bar chart for entry ETR = Entry Time Frame
• We will look at our 20 Range bar chart first to determine overall direction, and, if we have any longer term support or resistance in front of our trade. Once this is
analyzed, we will take notes and move to the 10R for analysis.
• Determine you direction on your 10R chart and look for fib retracements, once you have a
set up, move to your smaller timeframe chart and look for entries.
• Move to the 5 Range and look for entries
As you can see here in our 20 Range chart we have an area of resistance that in the overnight session stopped at a 61.8% retracement up, which now became resistance for the market as we start our trading session. The two areas to start thinking about shorts are at 2 and 3 labeled on the chart. Things to take note of as we get started in the morning.
• Triple top at the 61.8% retracement that cant even get all the way back to the first top labeled 1, 2 and 3 accordingly. This type of topping action denotes weakness
and lack of momentum. No momentum indicators are needed to tell you what the price action is telling you at this point.
• Lower low pivot at label 4 gives us another clue that our next leg up may have a lower top
than the previous top.
So we can say with confidence that our area shows a high potential for a reversal to the down side. At this point we go to our medium time frame and analyze with a little more of a detailed view.
After we have determined that our HTF chart is giving us reversal signals to watch for, we can then go to our MTF chart and analyze. In the chart above you will notice that we have a defined triple top from 2 through 3. This MTF offers us a little better detail than our HTF and gives better clues as we analyze and look for our high probability trades. So, what do we need after determining that our HTF and our MTF are at areas to turn the markets? Confirmation! I like using breaks of trend lines along with my fib retracements for confirmation that we are heading in our direction after an area is hit. In my opinion this is the best way to catch trades from strong areas because many times the markets can gain steam and move very fast without any major pullback once the rest of the world sees it and starts jumping in the trade. Just one word of caution here, you should never just jump in trades without a complete and proven trading plan that you can follow and that you trust because you have done all of your necessary homework.
Notice in the above chart, at the right edge, our trend line has been broken. At this point we will go to our entry chart and look for our entry signal.
At the right edge, you will notice that we retraced 61.8% of the move down after breaking a trend line and pulling back to it as well. If you go back and compare the our MTF chart on the previous page with this entry chart, you will see where we broke out and how the two charts correlate. Lets define some entry rules.
• HTF has been analyzed and at areas for a trade
• MTF has been analyzed and gave us a signal to look at our ETF (entry time frame)
• We now look for a pullback and reversal bar on our ETF denoted by our three arrows
So, where should we put our “initial” stop loss? There are several schools of thought on this
• Stop should go behind the previous pivot
• Stop should go behind the entry bar
• Fixed stop loss by number of pips/ticks
• Fixed money stop
• Use an indicator to dictate your stop (in my opinion this is the worst of all and holds little merit unless you are a system writer with an always in system, as indicators
are easy to automated.
There are complete studies on this subject alone, and we will not have the time to give you a full understanding and appreciation for the strengths and weaknesses of each listed. The stops that I use and we will use in this book here forward are entry bar stops. While entry bar stops can cause a few more whipsaws, once you get your entries perfected they will provide the best overall reward to risk ratios.
In the chart above and for every example going forward we will only enter after a pullback and a bar
close in our direction and all initial stops will be 2 pips/ticks behind our entry bar.
• We enter on the close of the bar with three arrows above it with 2 contracts
• Initial Stop is set 2 ticks above the entry bar
• We will use an area to take profits on the first contract and trail the second by pivots.
We will grab our milk money or take profits on ½ our positions when hitting an area that could hold the market. In this case it is a double bottom. After profits are taken, we will trail the second half behind pivots. At this point you should not take a complete loss on the trade, if the market moves back up with strength, keep your stop smaller than original. A good place to move the stop is a bar close above your entry piece. If the bar hits your entry price but does not close at or above then you
would simple stay in.
In the chart above at the right edge you will notice that we get a pullback above our entry price, but the bar turns back around and closes below the actual entry so we will stay in the trade to avoid exiting prematurely. After this bar closes back down and continues in our direction, we will then move our stop two ticks behind the new pivot. At this point we would expect the bottom to finally break and head to the down side. We will not always get such a deep pullback and in that case we still trail
our stop behind any future pivots.
Our trade takes back off in our direction as expected, but never guaranteed. Considering that we have already taken our money contract out, with this contract we can shoot for the home run, trail all the way down, and extract as much as it will give us. So the logical question here is why this setup is such a high probability? Well for starters, we have traders at other timeframes taking trades based on the HTF, the MTF and the ETM independently using the same analysis that we just used. These traders will all have a different set of rules for entry, exit and money management, but we all have one thing in common, pure technical analysis. Perhaps this can be best explained by using pure crowd behavior. If you have ever taken any Psychology classes than this should make even more sense, if not, then just take my word for it, when multiple traders come together, with the same analysis techniques that the majority use, then we are going to have movement in market that reflects
this analysis. Is this 100% guaranteed? No, but you don’t need anywhere near 100% winning trades to make money, in face one could very well argue with proper money management techniques, your win to loss ratio could be well under half and you can still make a very good living trading.
In the above chart you will notice that we have another leg down and new pivot. At this point we will move our stop down and behind the new pivot by 1 to 2 ticks.
And we finally get our exit signal. Lets sum up the trade
• First exit +10 ticks
• Second exit +48 ticks
• For a net total of 29 ticks on the trade (10+48)/2
As you can see trading pullbacks can be quite profitable. However, you must first understand that no trading system or style is ever going to be 100% correct all of the
time. Remember, we are dealing with human emotions and not absolutes, people do change their minds and therefore you should always have your protective stops in
place. And remember, always take some profits so you can get paid for your work. Don’t every let the market come back and take you out one you are in a decent profit position.
The Head and Shoulders Pattern is one of the most highly noted patterns traders look at. Because this pattern is so recognized it stands to reason that it will have an impact of some king when it forms. Remember, markets tend to follow crowd behavior. Head and Shoulders Patterns form at market tops and bottoms, but can also form during trends that are already in place. The Head and Shoulders Pattern has a reputation for being one of the most reliable patterns.
What makes a head and shoulders pattern unique is the psychology that takes place in traders in order for this pattern to form correctly. You start out with a strong market in a direction with an initial top that forms, followed by a retracement and then another push higher then the previous top. At this point the only information you have is that we are in an up market with higher higher and higher low pivots (see Gann Pivot Analysis). However, when the next leg up begins it is usually on less volume and as it continues, fails to take out the previous top forming our first bear rally and right shoulder.
The violation of the neckline as shown in the chart below, is in itself a signal that the market has reversed. This is a good area to look for an entry.
Reversal head and shoulders patterns that form at the bottom will be reversed from the top patterns giving you the appearance of someone standing on their head.
Triangles are one of the most common price patterns that you will see on your chart. They are not as reliable in general as a head and shoulders pattern but if you have proper trade management they can make for good trades. Triangles can be classified as reversal or consolidation patterns and start out with a wide range that tightens up until the final break out usually from 2/3 to 3/4 of the way through. You will have a trend line on top and one on the bottom, each of which needs to touch at least 2 points in order to be valid. The more times the lines are hit, the more significant the break. When prices go beyond 3/4 of the way through be aware that you may instead be heading into a sideways consolidation pattern.
There are two types of triangles;
Symmetrical Triangle
Right Angle Triangle
In the Example below you can see the formation of a Symmetrical Triangle. You will normally see volume decrease as the pattern shrinks to the right until a breakout occurs to which volume should increase significantly. If volume does not rise, you may be looking at a failed break out or a consolidation period beyond the triangle that is still very much intact. It is very difficult to know with the symmetrical triangle which way the pattern is going to break until it actually does, for this reason the trader should not assume and instead wait until the breakout and then look for a low risk setup to enter the trade. Remember that this is a battle of buyers and sellers that needs to play out and both are very even handed in a triangle pattern. In the beginning both buyers and sellers are very much out of control as prices swing in larger ranges. As price contracts forming the triangle the buyers and sellers are gaining composure and waiting for the other to make a move. When the hand is tipped, you can plan your trade.
In the example below you will see the second type of triangle, the right angled triangle. This is a special form of triangle that, unlike the symmetrical triangle, can give the trader an idea which way prices may break. While prices can break either way, the pattern on the left is a bearish pattern and the one on the right bullish.
In Trader Vic's book "Principles of Professional Speculation" Vic teaches us one of his favorite reversal patterns. In an uptrend if prices penetrate the previous high, but fail to carry through and immediately drop below the previous high, the trend is apt to reverse. In a downtrend if prices penetrate the previous low, but fail to carry through and immediately rise above the previous low, the trend is apt to reverse.
A second pattern that I really like in Trader Vic's book " Principles of professional Speculation" Vic shares another great reversal pattern, the 1-2-3 Pattern.
This is a very reliable pattern and can be traded in 2 ways. First lets go through and describe the pattern then we will get into discussions about trading it.
Three successive pushes to a top or bottom with near Symmetry and Retracements often meet Fibonacci Ratios. When each successive leg is less then the previous leg it tells you that a possible reversal is pending. Volume is also another tool the technician can use to help determine the weight of the evidence.
When trading this pattern in a reversal fashion, I like to see more supporting evidence such as divergence forming on the MACD, RSI or our Q-Filter. Having areas of support or resistance is also something to watch for and when we get three pushes into support and resistance with divergence, this can lead to a very nice high probability reversal.
Notice in the chart above that each successive push is less then the previous push. This is telling you that the market participants are getting tired and your market is getting ready to attempt a reversal. Remember that at the right edge we never really know what the market is going to do, but with good analysis and supporting evidence, we can make higher probability decisions.
There are 3 ways to trade this pattern,
As a reversal off of an area when the third top is in place
Wait for a break below the trendline supporting the bottoms then your setup
Back in the direction of the original trend if the three pushes pattern is not at any areas and no divergence is present. In this case wait for the pullback to meet a fib ratio then look for your entry pattern back in the original market direction
Before we start getting into the basics of Trade Entry, I would like to list some of my references that I use.
1. Trade Chart Patterns like the Pros - Suri Duddella
This will be the best investment as a quick reference book for anybody trading chart patterns and will save you a lot
of time and money buying other books. While I do not trade the way these are outlined in the book, I do use this
book as a reference quite often, in fact it is falling apart and pages falling out I have used it so much, I need to buy a
new copy
2. Pring on Price Patterns - Martin Pring
When I started my trading career, Pring was the first author that I studied. In fact I bought
most of his courses and material at the time and do not regret any of it.
3. Encyclopedia of Chart Patterns - Thomas Bulkowski
Good reference
While I have many good books in my library, these are specifically for chart patterns and highly recommended. If you can only pick up one of these, I would recommend Suri's book first.
Hi Jam, glad to see you post some of your thoughts. I was wondering do you have an anchor or bread and butter trade setup, one that provides you a consistent positive result and you could talk about for hours ? Did you specialize in one particular setup ?
I could talk about all of this for hours as for one particular setup, yes I have a couple that I really like and use daily. Here is the problem however, if you don't know all of this other stuff, how will you know your market structure and know when "NOT" to take the setups?
Everything that I am sharing here is building a foundation of understanding and will be used in higher time frame analysis as we move into the area of trade entry.
For trade entry, I use chart patterns only and do not enter on any indicators at all. With chart patterns I can control my risk a little easier.
But what about if instead we specialize in one setup only. It seems logical to think "all of this other stuff" would become secondary, don't you think ? Why trying to swallow an elephant if you can eat a small tick
So, are you saying is that you should only know one setup such as moving average crossover, and this will work if you know it well enough? What you might be forgetting is the years behind the screen it takes to develop the skills to see patterns develop to choose the best spots where that moving average crossover (example only) might actually work.
One entry might be good, b ut how do you know what market structure is telling you? when is that entry not good?
BTW, I wouldnt swallow the elephant, but instead take it in small bites
If i were to teach someone how to trade, i would focus my efforts on two things: the importance of the process of becoming specialized in 'one thing' in regard to price action and the process of becoming a good thinker.
A good example of what i had in mind regarding specialization is in my opinion the guy who is called the Gap guy. Someone that trades the Futures markets could possibly focus on the 1 minute range and maybe add the initial balance into the mix and try to become an expert about price action around these levels. There could be the last half hour of trading which offers very good opportunities. In fact, when you focus your attention on one thing and do it with diligence then you eliminate many things which for all intent and purpose are secondary and more of a distraction than anything else. Let's consider another example which occurs frequently, price makes a high and low during the globex session (night session for someone who resides in the Eastern time zone like me). When price makes a repeated visit to these levels during the day session, how could you possibly try to profit from these significant levels ? Could you develop your bread and butter trade setup around these levels ? How should you proceed if you have no experience ? etc. That's the type of practical concerns i would try to address before making people read books or lose their time trying to talk about thousand of patterns they may encounter.
The following 4 users say Thank You to trendisyourfriend for this post:
Great point! Specializing in a specific setup or group of setups is important and in the context that you have laid it out, yes it works this way.
For myself and my trading, I specialize in these price patterns and techniques that I am sharing and trade with them every day. I look at these levels, I study these patterns and trade based on them on a multiple timeframe basis! Everything that I am teaching here I trade with. Trend, feel free to add any trading methodology that you have and we can all learn
I have not had much time to post, but we are still active and I will try and get some multiple time frame analysis on here. We do not trade the way we did when I started the post in fact completely different!
Exactly. Are vendors who constantly change their approach just making new things to sell. I would rather see a solid performance record using same techniques over an extended period of time. Not that we don't need to be adaptable. But why "completely" different?
Sat in on a trial over a year ago. spent most of his time going over past trades... I liken to" the all the what if... approach". Had a few different approaches and would go back and forth. Used to have daily profit potentials posted on site then they were all erased... Now he has a new approach, just use your spidy sense here...
The following user says Thank You to ironman07 for this post:
There are several reasons this can happen, but again for me and my team, it was a culmination of years moving away from indicator based trading and toward priced based trading. As a trader and mentor, I am always growing both in my trading and even more important in by ability to teach! Teaching is not easy and unfortunately you can not help everyone. Some get it right away, others do not and take awhile longer and finally, some will just never get it and blame everyone else for their mistakes!
As a teacher and a trading room, we are not without our mistakes and growing pains, and we are not without the bumps and bruises of learning and growing in both areas along the way.
Four years in business with a good size room and loyal members, so I am pretty happy with our progress!
Im just relating what I heard in the room. I was in the room the whole time and like i said there was a canvas of "what if" applied. Very few real time trades and those were below break even....Maybe just a bad week for the method - not sure. It was lets take a look what happened this morning ect. The approach was a rehash of a commercial system I was already familiar with with a slightly different twist. Not for me but maybe a novice might find some interest with all the bells and whistles...
Speaking generically, because you (or your clients) slowly and increasingly come to the realization that what you were doing doesn't work. Just the most obvious, typical and common reason I can think of. I've been trading the same method for 5 years. You could not pay me enough to give it away, but if it didn't work, it would be worth, i'd say about $299/month
The following user says Thank You to monpere for this post:
Where do i sign up Monpere? HAHA In all seriousness what about all the newbies that signed up with this program years ago paying close to $4000. are they getting this new red and green button program for free/ Or a refund cause there is no support for original method.
Of course the only reason to stop what your doing is if it isnt working. At least he realized we are in tough times hence the new fee of only $1999..
Dont see any new signups from BMikes members
For the traders who have nothing better than to criticize another trader/business man trying to grow and progress with changes that come with an evolving market, you can go elsewhere to comment and maybe look in the mirror and ask yourself what can I do to become a "better" trader. Trading is a lifetime of learning. Constructive criticism would be the polite way to do things. I am a lifetime member of the room and I can say that I've become a much more disciplined and now profitable trader because of it. Going from an indicator based system to a price action based one only betters what he is doing because this is how the professionals/floor traders do business (no indies). Who wouldn't want to follow the money? It's not to say that you can't use them but do not have them as your primary method to take trades. Jam is always willing to listen to his members for possible ideas in how to make the classroom better. With my trading I do not follow every trade Jam takes and do not not have the exact same screen as he does, what he has done for me is allowed me to become a successful INDEPENDENT trader who was given the proper tools needed to get the job done. Jam is a gentleman who sincerely cares about his traders and do whatever it takes to help you become a profitable trader. Just my two cents.
The following user says Thank You to Steelerman for this post:
I think it's more fine tuning of a good sound methodology. Whatever can improve results on an already profitable system I think is the duty of the vendor. The upgrades are fantastic and complement what you have already been doing for years. I've been following JAM over the past few years and watched it all come together. Is it really a problem to be better as time passes, I think not. It's a very powerful system that you can optimize to your own style, whether it be intraday trading or swing trading. Advanced higher time analysis is just the icing on the cake. Some great customized indicators that have evolved from experienced trader knowledge have made this one a no brainer. Should check it out if you haven't seen what's going on lately. Sound money management, setups by the rules, established trading plans, etc. very nice.... Well done Jam!
I have nothing to show or I would post them. I am just getting started and was just looking for someone to provide more then just their opinion about Jam's trading program. I guess I will just have to sign up for his free trial. I guess I am just confused because I have been to many web sites that say they will teach you to trade and that you will make money using their system, but very few will show you any evidence that it works. I am not looking for a get rich quick system and I also know that it will take take a lot of study time and learning, I would just like to see results from someone who says they are using the system and making money.
i'm happy you r back! 
