Market Emotion
The market have certain emotions that when recognized can keep you out of trades when it is not the right time. But it can also make you some nice pips if you can spot the mood. Especially if there is a mood chance taking place from grumpiness to friendliness. If you get home from work and found your wife not in a good mood you surely are looking for trouble when she is not approached properly. A box of chocolates does not work always. But to see the mood change you will know by experience when she can be approached again. That is how well you must know the currency pair you are trading system. You got to know its moods. That can bring you lots of pips and save you a lot of
pain. This conclude the session about money management. Rethink the contents until you fully grasp what is conveyed here. It is much more important than what meets the eye.
D. The Multi level trading system
I want you to look at the next two pages and put the 8 charts in timeframe order from a 1minute, 5min, 15min, 1hour, 4hour, daily, weekly and monthly.
The only one that might be recognized is the 1min chart due to its lots of gaps. The rest can be any timeframe. Now look at the next two pages and see which belongs to which
charts.
What was the purpose of this exercise. To show you that the looks of the charts are the same no matter what timeframe you are looking at. That to me tells a story. The way (actions) people buy and sell on a big auction or a small auction is the
same. Whether they are buying the EurUsd on a monthly timeframe or on a 15min timeframe the chart shows the same patterns indicating the same actions. For a person that are trading with a $5million account in the EurUsd on a monthly or weekly timeframe experience the same emotions and make the same decisions as someone on a
$500 account. Those accounts represents what they are prepared to risk for the ability to make some profit. Both are within an accepted tolerance. If you have a sound strategy
that can take advantage of this concept of human behavior you can make money in any of
those timeframes. That is what the Multi Level Trading System is going to teach you.There is a certain rhythm in the actions people apply when they trade. This
Market Rhythm as I call it can be traced to various vehicles such as stock trading, oil prices, corn prices, commodity prices etc. The human behavior are the same. Look at the
following charts to see the same type of charts as the above.
They represent Oil, Gold, Copper and Soya. You can study other charts to see if you see the same type of actions.
We are going to exploit this whole human behavior in the MLTS(Multi Level Trading System). You remember our discussion about the Tsunami. Lets look into that human behavior to see if we can recognize some rhythm. If we can see when are they getting rid of their cookie and when are they accumulating cookies we can prepare a
plan..
The above shows exactly how the whole process works on a stock market. We will discus this concept later on a Forex market as it is slightly different because we can trade short as well. Towards the top of the cycle the going is good and the media reports even better. Even after a drop is underway the reporting is a correction and not a drop. When the reporting change to negative confirming the drop the cookie has already been handed over to someone else. The distribution phase is completed. Then starts the preparing for the accumulation phase by the same players waiting for those that they sold the cookie, to get rid of the cookie because the pain of a dropping market makes the pain unbearable. At this accumulation period the reporting is even worse making those that have decided to treat this cookie as a long term investment ( as suggested by some fund
managers) to fear even more and sell. During the drop there are temporary recovery (pullback) phases created. On a bull
run those pullbacks are called profit taking. What are the pullbacks on a bear run called. “loss taking?????”. Just my opinion. There are some risk traders that make money during
pullbacks. What are the possibility of the following scenario.
What would you do if the price is at 100 and there are very large orders at 70. If those orders presents the truth then I will have to buy above 70 as the price might turn around at that point. The chances of being filled below 70 are then very slim. Be careful for those big orders far away
from the price in a running market up or down.
An order can be withdrawn at any time. What if
those big orders were part of a fake to create a
false up move so that they can get rid of the
cookies they still want to get rid off.
What if the sell orders and the large orders were placed by the same people. Who will benefit from this action. You answer that. During the last stages of the pullback move the large order is removed. When you see that you will know the right direction of the market. This can make you rich especially if you can see orders way down. You and me as small traders will not see the real depth of orders unless we are prepared to pay some big money and fast electronic systems. But it is possible. But then you might be a
mafia yourself. (LOL) It will surely put you on another path if you would be able to see the whole depth of orders.
Volume play an important role. Large and or low volumes must be at the right places to be interpreted as telling a future story. What I have found is that the mafia wants to leave and enter the scene unnoticed or as quite as possible. That makes it difficult to spot there moves. But if you know what to look for you will see their actions. Lets look at a few examples showing this. What to look for.
The above is a MONTHLY chart of the Dow Jones Industrial Index. Just work through the chart and identify the areas as we have discuss it up to now. We can clearly see how they over months get rid of their cookie and over months buy cookies again at cheap prices. At times at takes years to do so. The question now arise do I have to sit on the sideline for years without getting involve in the market until a big move starts. IF YOU ARE USING A MONTHLEY CHART as your decision mechanism the answer is YES.
The Multi Purpose System got its name from the fact that it allows you to get involve in the market on different timeframes like monthly, weekly, daily, 4hour, 1hour, 15min, 5min and as low down as a 1min. There are 3 multi level timeframes that you choose to work from namely a Primary, Secondary and Tertiary. With the primary level you determine the overall market direction and rhythm(We will discuss the rhythm later). Then on the Secondary level you look for and mark accumulation and or distribution areas like
patterns(triangles, flags, double bottoms etc). Then on the Tertiary you do your entries and determine your stoploss and profit targets. That helps you to spot the overall market condition on a higher timeframe, then identify areas of possible market moves on a one step lower timeframe and then finally make the entry on another one step lower timeframe that will help you get involve in the market with
smaller candle sizes making stoplosses smaller and more frequent trades possible and still be able to trade in the direction of the Secondary timeframe while keeping the overall Primary timeframe direction and rhythm in mind.
I have used the DJI index just to show it works on any market on any timeframe
on any vehicle whether it be stocks, forex, futures etc.
This is a monthly chart Of the EurUsd showing the major trendlines. Look how the price continues in the breakout direction after it broke out in Jan1997 and Dec2002 . With the credit crunch in 2008 the market dropped suddenly below the trendline in Oct2008, then made a double bottom and moved up to the trendline, test it, finding resistance against the trendline and bounced off it. We will see if the down move will continue. All I want you to see and understand with this chart is it looks just like a normal 4hour chart with up and down trends. You can now test a weekly, daily, 4h, 1h etc charts and will find the same trendlines with the same patterns like triangles, flags, channels, double bottoms, head and shoulder etc. Now come the nice part.
Should you find a nice pattern like a triangle on a 15min chart you have to make a Multi Level survey . The level you spot the pattern in for a possible move is the Secondary Level timeframe. Then you move one level up for the Primary Level to determine the possible direction of the move as well as the possible projected distance which are anticipated using a Fibonacci 1.61(161%) up to a 1.20(200%) extension. Then you go to one level lower which are the Tertiary Level and you determine your entry point and stoploss as well as your profit target using Fib(Fibonacci) extensions of 1.61 and 1.20 Lets work through an example.
Secondary level
By spotting a nice triangle on the EurUsd 15min chart that now becomes the Secondary level. Now move at least one level up. I prefer to skip the 30min. I don’t use the 30 min at all. When I see a 15min pattern my higher timeframe Primary level is the 1 hour. Lets look at the 1hour. Primary Level
By using the high and low within the triangle we now determine the possible extend of the move by using Fib 1.61 to 1.20 extension levels and marked that as our possible Projected move. That is where we anticipate the price to move to. Secondary level
Now we move back to our 15min Secondary level to set our max. stoploss and determine our profit target. The ratio will always be a 1:1 situation. By moving to the next lower timeframe(in this case the 5min) the Tertiary level we will determine if we can hop on board with a smaller stoploss with still the same profit target as with the Secondary level. That will improve our Risk to Reward ratio a lot if that can be
achieved.
The main thing to remember here is the stoploss. That is determined by the closest high to the possible breakout. Then that is used to determine the profit target as well. The
reason I set the 1.61 level as well is because sometimes you will find the projected move will be much further down then the profit target. If that is the case you do want to give
your position a chance to proceed to the projected move level and when the price goes below the 1.61 level you can set your position to breakeven and then use a manual trail to
follow the price to the projected move level or you can take some profit at the 1.61 level and give the remainder a chance to go to the projected move level. The choice is yours. Lets move to the Tertiary level to see if we can get on board with a better stoploss then the one we determined in the Secondary level chart.
Tertiary level the entry level
Now we have moved to the Tertiary to wait for the entry point to be reached and to pull the trigger but the most important part here is to see if we can get a better stoploss scoring a few pips that will make our Risk:Reward better.
As you can see we could use a lower stoploss level that resulted in 16pip risk and a 22pip reward where the original one was a 23pip risk with a 23pip reward. When price reach the 1.61 Fib level then partial profit may be taken or all set to breakeven etc. to give the position a chance to run if it wants to. Our main objective with the Tertiary level is to obtain a better stoploss level that will enhance our risk to reward ratio. If there is no lower stoploss level then use the original one as set in the Secondary level. Lets look at another example.
Secondary level
We spot a potential trade on the 5min chart. It can break both directions so we
will have to do our analysis on both directions.
Primary Level
One level up to the 15min to determine the Projected move.
Secondary level
Back to the secondary level to determine the profit targets and max. stoplosses for both directions.
As you can see we make provision for a break in any direction. Tertiary level the entry level
We got a 1pip better entry and the profit target was reached. The projected move was also reached so the +9pips could be stretched.
Above is a schematic presentation of the events as per Level.
READ MORE - Market Emotion
The market have certain emotions that when recognized can keep you out of trades when it is not the right time. But it can also make you some nice pips if you can spot the mood. Especially if there is a mood chance taking place from grumpiness to friendliness. If you get home from work and found your wife not in a good mood you surely are looking for trouble when she is not approached properly. A box of chocolates does not work always. But to see the mood change you will know by experience when she can be approached again. That is how well you must know the currency pair you are trading system. You got to know its moods. That can bring you lots of pips and save you a lot of
pain. This conclude the session about money management. Rethink the contents until you fully grasp what is conveyed here. It is much more important than what meets the eye.
D. The Multi level trading system
I want you to look at the next two pages and put the 8 charts in timeframe order from a 1minute, 5min, 15min, 1hour, 4hour, daily, weekly and monthly.
charts.
same. Whether they are buying the EurUsd on a monthly timeframe or on a 15min timeframe the chart shows the same patterns indicating the same actions. For a person that are trading with a $5million account in the EurUsd on a monthly or weekly timeframe experience the same emotions and make the same decisions as someone on a
$500 account. Those accounts represents what they are prepared to risk for the ability to make some profit. Both are within an accepted tolerance. If you have a sound strategy
that can take advantage of this concept of human behavior you can make money in any of
those timeframes. That is what the Multi Level Trading System is going to teach you.There is a certain rhythm in the actions people apply when they trade. This
Market Rhythm as I call it can be traced to various vehicles such as stock trading, oil prices, corn prices, commodity prices etc. The human behavior are the same. Look at the
following charts to see the same type of charts as the above.
We are going to exploit this whole human behavior in the MLTS(Multi Level Trading System). You remember our discussion about the Tsunami. Lets look into that human behavior to see if we can recognize some rhythm. If we can see when are they getting rid of their cookie and when are they accumulating cookies we can prepare a
plan..
The above shows exactly how the whole process works on a stock market. We will discus this concept later on a Forex market as it is slightly different because we can trade short as well. Towards the top of the cycle the going is good and the media reports even better. Even after a drop is underway the reporting is a correction and not a drop. When the reporting change to negative confirming the drop the cookie has already been handed over to someone else. The distribution phase is completed. Then starts the preparing for the accumulation phase by the same players waiting for those that they sold the cookie, to get rid of the cookie because the pain of a dropping market makes the pain unbearable. At this accumulation period the reporting is even worse making those that have decided to treat this cookie as a long term investment ( as suggested by some fund
managers) to fear even more and sell. During the drop there are temporary recovery (pullback) phases created. On a bull
run those pullbacks are called profit taking. What are the pullbacks on a bear run called. “loss taking?????”. Just my opinion. There are some risk traders that make money during
pullbacks. What are the possibility of the following scenario.
What would you do if the price is at 100 and there are very large orders at 70. If those orders presents the truth then I will have to buy above 70 as the price might turn around at that point. The chances of being filled below 70 are then very slim. Be careful for those big orders far away
from the price in a running market up or down.
An order can be withdrawn at any time. What if
those big orders were part of a fake to create a
false up move so that they can get rid of the
cookies they still want to get rid off.
What if the sell orders and the large orders were placed by the same people. Who will benefit from this action. You answer that. During the last stages of the pullback move the large order is removed. When you see that you will know the right direction of the market. This can make you rich especially if you can see orders way down. You and me as small traders will not see the real depth of orders unless we are prepared to pay some big money and fast electronic systems. But it is possible. But then you might be a
mafia yourself. (LOL) It will surely put you on another path if you would be able to see the whole depth of orders.
Volume play an important role. Large and or low volumes must be at the right places to be interpreted as telling a future story. What I have found is that the mafia wants to leave and enter the scene unnoticed or as quite as possible. That makes it difficult to spot there moves. But if you know what to look for you will see their actions. Lets look at a few examples showing this. What to look for.
The above is a MONTHLY chart of the Dow Jones Industrial Index. Just work through the chart and identify the areas as we have discuss it up to now. We can clearly see how they over months get rid of their cookie and over months buy cookies again at cheap prices. At times at takes years to do so. The question now arise do I have to sit on the sideline for years without getting involve in the market until a big move starts. IF YOU ARE USING A MONTHLEY CHART as your decision mechanism the answer is YES.
The Multi Purpose System got its name from the fact that it allows you to get involve in the market on different timeframes like monthly, weekly, daily, 4hour, 1hour, 15min, 5min and as low down as a 1min. There are 3 multi level timeframes that you choose to work from namely a Primary, Secondary and Tertiary. With the primary level you determine the overall market direction and rhythm(We will discuss the rhythm later). Then on the Secondary level you look for and mark accumulation and or distribution areas like
patterns(triangles, flags, double bottoms etc). Then on the Tertiary you do your entries and determine your stoploss and profit targets. That helps you to spot the overall market condition on a higher timeframe, then identify areas of possible market moves on a one step lower timeframe and then finally make the entry on another one step lower timeframe that will help you get involve in the market with
smaller candle sizes making stoplosses smaller and more frequent trades possible and still be able to trade in the direction of the Secondary timeframe while keeping the overall Primary timeframe direction and rhythm in mind.
I have used the DJI index just to show it works on any market on any timeframe
This is a monthly chart Of the EurUsd showing the major trendlines. Look how the price continues in the breakout direction after it broke out in Jan1997 and Dec2002 . With the credit crunch in 2008 the market dropped suddenly below the trendline in Oct2008, then made a double bottom and moved up to the trendline, test it, finding resistance against the trendline and bounced off it. We will see if the down move will continue. All I want you to see and understand with this chart is it looks just like a normal 4hour chart with up and down trends. You can now test a weekly, daily, 4h, 1h etc charts and will find the same trendlines with the same patterns like triangles, flags, channels, double bottoms, head and shoulder etc. Now come the nice part.
Should you find a nice pattern like a triangle on a 15min chart you have to make a Multi Level survey . The level you spot the pattern in for a possible move is the Secondary Level timeframe. Then you move one level up for the Primary Level to determine the possible direction of the move as well as the possible projected distance which are anticipated using a Fibonacci 1.61(161%) up to a 1.20(200%) extension. Then you go to one level lower which are the Tertiary Level and you determine your entry point and stoploss as well as your profit target using Fib(Fibonacci) extensions of 1.61 and 1.20 Lets work through an example.
Secondary level
Now we move back to our 15min Secondary level to set our max. stoploss and determine our profit target. The ratio will always be a 1:1 situation. By moving to the next lower timeframe(in this case the 5min) the Tertiary level we will determine if we can hop on board with a smaller stoploss with still the same profit target as with the Secondary level. That will improve our Risk to Reward ratio a lot if that can be
achieved.
reason I set the 1.61 level as well is because sometimes you will find the projected move will be much further down then the profit target. If that is the case you do want to give
your position a chance to proceed to the projected move level and when the price goes below the 1.61 level you can set your position to breakeven and then use a manual trail to
follow the price to the projected move level or you can take some profit at the 1.61 level and give the remainder a chance to go to the projected move level. The choice is yours. Lets move to the Tertiary level to see if we can get on board with a better stoploss then the one we determined in the Secondary level chart.
Tertiary level the entry level
Now we have moved to the Tertiary to wait for the entry point to be reached and to pull the trigger but the most important part here is to see if we can get a better stoploss scoring a few pips that will make our Risk:Reward better.
Secondary level
We spot a potential trade on the 5min chart. It can break both directions so we
will have to do our analysis on both directions.
One level up to the 15min to determine the Projected move.
Back to the secondary level to determine the profit targets and max. stoplosses for both directions.
Above is a schematic presentation of the events as per Level.
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