One concept that every trader must master is that of knowing which elements of analysis are telling him the truth at any given time. The overriding factors of trading are those of common sense and trading what you see. However, there may be a time to use technical indicators, knowledge of cyclicals, perhaps even your own theories to help you in trading what you see. There is also a time to virtually discard all of these and trade only what you see without regard to confirmation. You might call that “intuitive” trading. At other times, confirmation can be achieved from the fundamentals in the market place. It is best to have confirmation of some sort before trading.

Although an individual trader, without the benefit and support of a research staff, can hardly afford to delve deeply into the underlying fundamentals, almost any individual trader can easily ascertain from the news and various reports and advisories some of the basic fundamentals needed for confirmation.

In this way a technical trader differs from a fundamentals trader, who may spend hours and days researching the fundamentals of a market in which he wishes to trade. Technical traders can satisfactorily use the research of others to know which futures, stocks or currencies to watch, and can outperform fundamentals traders by correctly timing his trades through both chart and technical analysis.

In a demand driven market, only an appreciation of the fact that prices are rising should suffice. All the technical and fundamental analysis in the world goes out the window in such a market. Only trading what you see on a chart makes any sense.

A demand driven bubble in stocks, which resulted in a corresponding bubble in the stock indexes such as seen in the latter part of the twentieth century, defies every type of analysis other than an admission that if you see prices rising, you should be long, albeit with protective stops to make sure you lock in profits.

The demand driven bubble situation in the U.S. stock markets left many analysts shaking their heads in confusion. Avoiding confusion is one reason why we maintain that you should trade what you see. For safety sake and a feeling of reassurance in non-bubble markets, what you see usually should be backed up and confirmed by some other method of analysis. There are situations in which there is no time for confirmation. Choosing that “other” area is an individual choice based upon experience and success. You learn to use what works for you.

Avoiding confusion is why you should never marry a market, a certain way of trading, or a particular method of analysis. The most successful traders we’ve seen learn to trade from a toolbox of analytical methods. They learn to use the appropriate tool for a particular market condition.

To avoid confusion, you must not marry a philosophy. When asking yourself or asked by others which way you think a market will go, you should be able to answer, “I don’t know, but by following the market’s own action and my own analysis, then more often than not, I will be positioned appropriately – even if that position is one of standing aside.”

As a trader, you must learn to dance with the market. You, also, must learn that if a market you are trading decides to do the “Cha-cha,” you do it too. But before you can dance with the market you have to learn how. You have to get to know and understand the basic forces that drive prices (Hint: Fear and Greed). You have to develop pattern recognition skills, and it can be helpful to include indicators that tell you things about the market you cannot readily see. The indicators are there to enhance your analysis, not to be your analysis. Indicators are no substitute for your own perception based upon what you see and know.

What is it that was driving the stock markets throughout the latter part of the decade of the 1990's? It was demand! People were pouring money into mutual funds at a fantastic rate. Those funds could not just sit on that money, they had to invest it where the people want it placed – in the U.S. stock market. Anyone paying attention to their constantly rising price charts could have seen that.

A Turnkey Business?

There are far too many traders who enter this profession looking for a turnkey business. 

An accountant can buy an existing practice. So can a doctor and, to some extent, an attorney. An engineer can usually buy into an existing firm. Entrepreneurial-minded individuals can buy a franchise. If you have enough money, you can get a high-profile, big-name franchise. A good one comes with training for you and for your hired help. It comes fully equipped with everything you’re supposed to need to run the business. Your advertising is laid out for you. You have an employee manual and an operations manual. You are shown how to set up your books, and trained in how to do it all on a computer using the software provided by the franchiser. Unless you are at the level of a functional idiot, you can pretty well be certain that you are going to succeed.

However, trading is far from being a turnkey business. You simply cannot go out and buy a mechanical trading system that is going to guarantee you any viable degree of success. Oh, we know they are advertised that way – so are some franchises in other areas of business. But there are fakes and frauds the world over. Caveat emptor!!

When you are a trader, no one gives you an employee manual. No one offers you an operations manual. There is no school to which traders can go to be trained specifically in this business. (We are hoping to correct that somewhat with our books, webinars, and tutoring sessions.)

No one will sit down with you to show you which markets to trade and in which time frame to trade them. Trading is something that cannot be packaged. There are too many aspects of trading that derive from the individual personality and mind set of the trader him/herself. Trading is not the only occupation that is that way. Anything truly creative cannot be packaged as a business.

The Art of Trading

People talk about trading as though it were scientific. With varying degrees of success (failure??), they try to apply mathematics and scientific theories to markets, and consequently to the trading of them. But if you allow trading to define itself, it is quickly seen that it is an art form and not a science. Trading is more nearly compared with art and music than it is with science. Great traders are individuals, and almost always creative ones at that. Could anyone package and franchise the ingredients that created a Salvador Dali, or a Picasso?  Would it have been possible to package and franchise the make-up of an Arthur Rubenstein, Elvis Presley, or Whitney Houston? Trading is an art based on an artist’s perception of what is happening in the markets. If it weren’t, there would be many more traders.

Notice the head and shoulders pattern on the preceding chart. If prices followed some sort of law, or if chart analysis were a science, why didn’t that result in the market moving down instead of up? If something is scientifically provable, then it ought to be able to be reproduced repeatedly with the same results. If markets and trading were scientific, you ought to be able to obtain the same results every time you see a particular market pattern. But it just isn’t so! If it were, you could enter the trading profession and memorize all the major price patterns made by markets. You would then know exactly what to do in every case. You would have learned a job, and the pay for trading would be like most other paying jobs – low.

A similar observation can be made about theories. A theory is a theory until it becomes a fact. A fact is a fact because it is a result that can be proved repeatedly. A fact becomes fact when the result of something is always the same. If you jump out of an airplane, you’re going to fall – fact. If you slide down a forty foot razor blade...well you know! So why have we never seen an Elliott Wave fact? Because seemingly, no two people can agree on which wave they are in until after the fact!!

Many artists train and study with and under great artists, but to become successful on their own, they have to develop their own style based on their own perception of the world around them.

Musicians study under musicians having greater knowledge, experience, and maturity than themselves. But before they, too, can become proficient or achieve a level of greatness, they have to interpret music from their own perception of what they see and hear.

Not every trader is destined to be a great one. You should be the last one to ever consider yourself to be a great trader. Your success in trading will be derived from becoming proficient in the discipline of perceiving markets for what they really are and how they really work.

Classical Trading Patterns

We would have to guess that one of the first attempts at a scientific approach to the markets was that of pattern recognition. Pattern recognition has come full circle. It went out of vogue many years ago and now is back via the route of computer generated pattern recognition. The old-timers did a lot of their trading from these patterns, and maybe some still do: heads and shoulders, ascending and descending triangles, flags, pennants, coils etc. Do they work? Yes and no! You see, it is all a matter of perception. There were rules about how to trade these patterns. We can tell you this, they will work for you if you know when they are telling you the truth, and when to discard them as worthless.

Remember the heads and shoulders pattern we showed you on the previous page? The fact of real demand removed any semblance of reality for the heads and shoulders pattern – heads and shoulders tops are supposed to go down!

Nevertheless, an understanding of what is behind classic chart patterns will help to make you a better trader.

Classic Price Patterns

Assume prices trade within a relatively narrow Trading Range (between points “A” and “B” on the chart).

Recognizing the sideways price movement, the ‘longs’ might buy additional contracts if the price advances above the recent Trading Range. They may even enter orders to buy at “B,” to add to their position if they should get some confirmation the trend is higher. But by the same token, recognizing prices might decline below the recent Trading Range and move lower, they might also enter sell orders below the market at “A” to limit their loss.

The ‘shorts’ have exactly the opposite reaction to prices. If the price advances above the recent Trading Range, many of them might enter orders to buy above point “B” to limit losses. But they, too, may add to their position if the price should decline below point “A” with orders to sell short at some point below point “A.”

A third group is not in the market, but they are watching it for a signal either to go long or short. This group may have orders to buy above point “B,” because presumably the price trend would begin to indicate an upward bias if point “B” were penetrated. They may also enter orders to sell below point “A” for converse reasons.

Assume the market advances to point “C.” If the Trading Range between points “A” and “B” has been relatively narrow and the time period of the lateral movement relatively long, the accumulated buy orders above the market could be quite numerous. Also, as the market breaks above point “B,” the result is a stream of market orders to buy. As this flurry of buyers becomes satisfied and profit-taking from previous long positions causes the market to dip from the high point of “C” to point “D,” another distinct attitude begins working in the market.

Part of the first group that went long between points “A” and “B” did not buy additional contracts as the market rallied to point “C.” Now they may be willing to add to their position ‘on a dip.’ Consequently, buy orders trickle in from these traders as prices drift down.

The second group of traders with short positions established in the original Trading Range have now seen prices advance to point C, then decline to move back closer to the price at which they originally sold short. If they did not cover their short positions with a buy order above point “B,” they may be more than willing to cover on any further dip to minimize the loss.

Those not yet in the market will place price orders just below the market with the idea of ‘getting in on a dip.’

The net effect of the rally from “A” to “C” is a psychological change in all three groups. The result is a different tone to the market, where some support could be expected from all three groups on dips. (Support on a chart is defined as the place where buying brings sufficient demand to halt a decline in prices.)  As this support is strengthened by an increase in market orders and a raising of buy orders, the market once again advances toward point “C.” Then, as the market gathers momentum and rallies above point “C” toward point “E,” the psychology again changes subtly.

The first group of long traders may now have enough profit to pyramid additional contracts with their profits. In any case, as the market advances, their enthusiasm grows and they set their sights on higher price objectives. Psychologically, they have the market advantage.

The original group who sold short between “A” and “B” and who have not yet covered are all carrying increasing losses. Their general attitude is negative because they are losing money and confidence. Their hopes fade as their losses mount. Some of this group begin liquidating their short positions either with stops or market orders. Some reverse their position and go long.

The group which has still not entered the market – either because their orders to buy the market were never reached or because they had hesitated to see whether the market was actually moving higher – begins to "buy at the market".

Remember that even if a number of traders have not entered the market because of hesitation, their attitude is still bullish. And perhaps they are even kicking themselves for not getting in earlier. As for those who sold out previously-established long positions at a profit only to see the market move still higher, their attitude still favors the long side. They may also be among those who are looking to buy on any further dip.

So, with each dip the market should find the support of: 1) traders with long positions who are adding to their positions; 2) traders who are short the market and want to buy back their shorts if the market will only “back down some;” and 3) new traders without a position in the market who want to get aboard what they consider a full-fledged bull market.

This rationale results in price action that features one prominent high after another, and each prominent reactionary low is higher than the previous low. In a broad sense, it should appear as an upward series of waves of successively higher highs and higher lows.

But at some point the psychology again subtly shifts. The first group with long positions and fat profits is no longer willing to add to its positions. In fact, they are looking for a place to “take profits.” The second group of battered traders with short positions has really been worn down to a nub of die-hard shorts who absolutely refuse to cover their short positions. They are no longer a supporting element, eagerly waiting to buy the market on dips.

The third group of those who never quite get aboard the up-move become unwilling to buy because they feel the greatest part of the upside move has been missed. They consider the risk on the downside too great when compared to the now-limited upside potential. In fact, they may be looking for a place to “short the market and ride it back down.”

When the market demonstrates a noticeable lack of support on a dip that “carries too far to be bullish,” this is the first signal of a reversal in psychology. The decline from point “I” to point “J” is the classic example of such a dip. This decline signals a new tone to the market.

The support on dips becomes resistance on rallies, and a more two-sided market action develops. (Resistance is the opposite of support. Resistance on a chart is the price level where selling pressure is expected to stop advances and possibly turn prices lower.)

The Downturn

Now the picture has changed. As prices begin to advance from point “J” to point “K,” traders with previously-established long positions take profits by selling out. Most of the hard-nosed traders with short positions have covered their shorts, so they add no significant new buying impetus to the market. In fact, having witnessed the recent long(er) decline, they may be adding to their short positions.

If the rally back toward the highs fails to establish new highs, this failure is quickly noticed by professional traders as a signal the bull market has run its course. This is even more true if the rally carries only up to the approximate level of the rally top at point “G.”

As profit-taking and new short-selling forces the market to decline from point “K,” the next critical point is the reactionary low point at “J.” A major bear signal is flashed if the market penetrates this prominent low (support) following an abortive attempt to establish new highs in prices. In the vernacular of chartists, a head-and-shoulders reversal pattern has been completed. But rather than simply explaining away price patterns with names, it is important to understand how the psychology of the market action at different points causes the market to respond as it does. It also explains why certain points are quite significant.

In a bear market, the attitudes of the traders would be reversed. Each decline would find the bears more confident and prosperous and the bulls more depressed and threadbare. With the psychology diametrically opposite, the pattern completely reverses itself to form a series of lower highs and lower lows.

But at some point, the bears become unwilling to add to their previously-established short positions. Those who were already long the market and had refused to sell higher would eventually be reduced to a hard core of traders who had their jaws set and refused to sell out. Traders not in the market who were perhaps unsuccessfully attempting to short the market at higher levels will begin to find the long side of the market more attractive. The first rally that “carries too high to be bearish” signals another possible trend reversal.

With this basic understanding of market psychology through three phases of a market, a trader is better equipped to appreciate the significance of all chart price patterns.

No one expects to establish short positions at the high or long positions at the low, but development of a feel for market psychology is the beginning of the quest for trades that even hindsight could not improve upon.

When you analyze charts, approach them with the idea that they reflect human ideas about prices that are the result and the struggle between supply and demand forces. Your attitude and ability to judge market psychology will determine your success at chart analysis. Unexpected occurrences can change price trends abruptly, and without warning. Also, some of the chart formations may be hard to visualize, you’ll sometimes need a good imagination as well.

MEMORIZE THESE THREE PHASE SCENARIOS – EVERY TRADER SHOULD BE ABLE TO RECITE IT FROM MEMORY!!

This concludes our free trading lesson series by Joe Ross.  We thank you for investing in yourself by broadening your trading knowledge.  

The correspondence sent by trading educators is intended to help teach you how to trade, improve your trading skills, or both. As you continue to receive our weekly emails, there may be sections which are difficult to understand upon first reading. Our material and concepts are meant to be studied, and studied multiple times. Many traders may not be able to grasp these with just a cursory reading of the text. Feel free to email us with questions and check our blog.

Chart Scan Newsletter is delivered to your inbox every Friday.  Happy studying!

Joe Ross wants you to succeed!  Check out our many products that Trading Educators has to offer.  Our most popular resource that our students take advantage is Private Mentoring.  Accelerate your trading knowledge and work one-on-one with the trader of your choice.   Click here for more information and book your session today!

Thoughts on managing money.

We often hear from students who greatly desire to trade managed money. At the opposite end of the spectrum, we also hear from students who want money managed for them. In either case, the experience can be gut-wrenching.

In both scenarios, this lesson should be a warning and caution to you. What I am going to share with you is based upon my own experiences. This lesson could be entitled “Confessions of a Trader.”

The psychological basis for successful trading is indeed a delicate subject. We have never heard of anyone who has been able to pinpoint exactly what it is that gives one trader success while another trader fails. Although some claim to have done this, coming up with an attribute profile of the “average” winner, no one we know of has identified a set of common denominators among professional winning traders. Besides, which of us is “average?” Is it you?

Winning in the markets seems to involve a fine balance of traits that differ among winning traders. To make the identification of winning traders even more complicated, there seems to be a distinction between those traders who can successfully trade their own money, and those traders who can successfully trade the money of others. I have met both.

Two of the most successful money managers I know personally began by trading managed money. They began trading other people's money for lack of sufficient money of their own with which to trade. Later in their careers, when they did have sufficient money with which to trade their own account, they found that they failed miserably. They were not able to trade their own money with any degree of success. More than that, when they traded their own money simultaneously with trading managed money, they failed at both.

Upon further investigation, and after speaking with a number of traders who have tried both, I discovered that there are many traders who are successful at trading managed money, but who can't trade their way out of their hat when trying to trade their own money. Invariably, upon further probing, some admitted that they were much more daring and courageous with other people's money than they were when the money was their own.

Also in this group of those who trade better for others than themselves, I have been able to identify traders who said they were much more careful and conservative with the money of others than they were with money of their own.

Within this group of traders, all of them students of ours who can successfully trade managed money, some are successful because they are more daring with other people’s money, and some are successful because they are more careful with money not their own.

Next, we come to those traders who successfully manage their own money and who have attempted to manage money for others, but failed.

I have heard from quite a few traders who attempted to manage money for others. In this group I include those who have failed miserably. I have spoken with a number of students who have had the experience of losing at least half of the money under their management prior to returning the balance to those who invested with them. Amazingly, the answers are the same as with the group who successfully manage money. Managed money seems to be a “monkey” on their backs. They find that they trade too carefully, too conservatively, when the money is not their own. Worse than that, when things go wrong with a trade, they do not act as rationally and with the same cool determination as they do with their own money. When they trade their own account, they do not think of it as money. When they trade someone else's account, all they can think of is that it is money. And, because it is not their own, they try their hardest to not lose it. Unfortunately, experience shows that what they fear the most happens – they do lose the money.

I have spoken with students who successfully manage their own money because they are more careful with their own than with the money of others. They, too, have failed with managed money, and have resigned themselves to trading only their own accounts.

Among these students and acquaintances, I have identified at least four categories of traders who attempt to manage money. I’m sure there are other categories, but these are the ones I've found:

1. Those who successfully manage money for others, but cannot manage their own account with any great degree of success, because they are too careful with their own money while they are more daring with the money of others.
2. Those who successfully manage money for others, but cannot manage their own account with any great degree of success, because they are too daring with their own money while they are more careful with the money of others.
3. Those who successfully manage their own money, but fail with managed money because they are too careful when managing money for others.
4. Those who successfully manage their own money, but fail with managed money because they are too daring when managing money for others.

Among these students, I found none who successfully traded both managed accounts and their own accounts. The size of the population for this study was too small to come up with any meaningful statistics, but there are some warnings and cautions that can be concluded:

To those of you who want to have your money managed, be aware that the individual success of any trader trading his/her own money is no guarantee that that person can successfully manage the money of others. Be sure to place your managed money with a trader who has proven to be a successful manager of other people’s money.

To those of you who want to manage money for others, be aware that successfully trading your own account is no guarantee that you will be able to successfully trade the account of others.

Be very careful, because in both of these situations the result can be great personal pain. Failure in either of these situations is painful for all concerned! In fact, the pain can be so great as to prematurely end the trading hopes of either party. The pain may be both physical and mental, and can cause you to abort your trading career. I feel it is my duty to caution you about getting involved with managed money, whether you try to manage the money of others, or whether you want someone else to manage yours. The costs can be horrendous.

Interestingly, most of my students come to me relating that the reason they want to learn how to trade is so they can become independent and not have to work at a regular job. The responsibility of trading managed money can really wear you down. You may have to go for years without a vacation. You find yourself working late into the night, and working a significant portion of the weekends. All work and no play is not a good thing for your trading career. Managing other people’s trades, using their money, is one of the most grueling jobs you can ever undertake.

If you currently are or have been contemplating this side of trading, I hope you’ve taken my thoughts to heart, and received some insight about managing trading money.

This concludes our trading lesson for today. We thank you for investing in yourself by broadening your trading knowledge. Be on the lookout for tomorrow's lesson!

The correspondence sent by trading educators is intended to help teach you how to trade, improve your trading skills, or both. As you continue to receive our weekly emails, there may be sections which are difficult to understand upon first reading. Our material and concepts are meant to be studied, and studied multiple times. Many traders may not be able to grasp these with just a cursory reading of the text. Feel free to email us with questions and check our blog.

Check out our eBooks - Let Joe teach and explain trading.

Chart Scan Newsletter is delivered to your inbox every Friday.  Happy studying!

Many traders run into the following situation quite often. See if it has been happening to you:

You have been faithfully following your trading plan and the rules you've set for trading.  By following them you are now in a trade that doesn't look so good.  At the same time, by following your trading plan, you see that you've missed a beautiful move in a different market, one that could have made you a lot of money.

You are in a bad trade, and you've missed out on a great trade.  You become disgruntled.  You think to yourself that your trading plan must not be perfect.  You think there must be a better methodology that you should use that will prevent this from happening. You think to yourself, “Yes!  That's it! I'll change the way I do things.”  You create a new rule, or modify an old one, so that such a rule would have let you capture the trade you missed, and avoid the one you took.  Have you been making this mistake?

Here's another way it can happen:  You are in a trade, and your rules cause you to be stopped out with little or no profit.  Shortly after you exit the trade according to plan, prices take off and move to where, had you stayed in, you would have made substantial profits.  The move leaves you sitting there thinking you are stupid.  You reason that there must be something wrong with the way you do things. 

Your rules, your plan, or both, must not be right.  You change what you are doing, or make a new rule, so that the next time this happens you won't be left behind.

You have just abandoned all your previous hard work that enabled you to trade successfully.  You've ignored your education and learning.  You've disregarded the wisdom that will enable you to be consistently successful as a trader.  You've just started trading history, and you are supposed to be trading on the future movement of prices.  You are trading what happened, not what will happen.  By not being willing to be left behind, you are setting yourself up for being left out.

If you've been having thoughts, or have been acting as we've just described, you have a terrible problem with greed.  Why is it problem?  Because greed can never get enough.  You can't satisfy greed.  Greed wants more, and yet more.

Not every trade is your trade.  Not every trade has to work out for you.  You have to be satisfied with getting a reasonable share of trades that fit your description of a good trade.  Some of those trades will turn out to be great trades, others are good trades, and a certain percentage of your trades will end up bad.  There's no way around it.

Not every good trade will turn into a great trade.  When you enter a trade according to your rules and trading plan, you have no idea whether or not it will turn out to be a good trade, much less a great trade.  The reality of trading is that, try as you might, you cannot know the future.

Whenever we miss a big move and then try to find some pattern, indicator, rationale, or modification to make what we are doing so that the next time we will not miss the “big” move, it is a part of the hunt for something magic ¾ a continuation of our quest for “the holy grail of trading”.

What a terrible mistake to allow yourself to make.  Winning as a trader consists of making some small profits and some larger profits on a regular basis.  Obviously, there will be some losses.  Our goal is to keep losses small, but there are times when a loss will get away from us and turn out to be bigger than desired.

If adversity causes you to become disgruntled, then you really need to examine your thinking and your approach to trading.  Your trading plan must allow for disappointment and loss.

You've got to believe in what you are doing, and be able to trade from the knowledge that when you follow your rules and your plan, you will make money from your trading.

When you become disgruntled and begin to change your plan, your rules, or both, you are setting yourself up for almost certain failure, and the worst thing that can happen to a trader ¾ you will lose the courage of your convictions.  Without it, you cannot trade with any level of confidence.

This is why we encourage you to write out the reasons and rationale for every trade you make, even if you have to do it after you have completed the trade. You must develop a keen recognition of the trades that are your trades.  Write out your daily trading plan, including every trade you intend to make.  If you did not have time to plan every trade, be sure to review those you did make without pre-planning.  Then you can go back over your trading and be able to see why and when you are successful.

Here are some important steps to take before the market opens: 

• View major formations on the charts of those markets you intend to trade.  View potential congestion areas; get the big picture from the longer term charts. 
• Write down all potential entries as you see them on the chart.

You need to go through this exercise every day that you trade.  This takes discipline.  However, doing so will help you develop the kinds of habits that will mold you into a great trader.

If you are too busy to be disciplined, then you are too busy to trade.  If you don't discipline yourself, you will soon disappear from the trading scene. 

This concludes our trading lesson for today. We thank you for investing in yourself by broadening your trading knowledge. Be on the lookout for tomorrow's lesson!

The correspondence sent by trading educators is intended to help teach you how to trade, improve your trading skills, or both. As you continue to receive our weekly emails, there may be sections which are difficult to understand upon first reading. Our material and concepts are meant to be studied, and studied multiple times. Many traders may not be able to grasp these with just a cursory reading of the text. Feel free to email us with questions and check our blog.

Chart Scan Newsletter is delivered to your inbox each Friday.  Happy studying!

Joe Ross has written many books about trading, check them out!

Dear Traders,

The purpose of the Trader's Trick Entry (TTE) is to get us into a trade prior to entry by most other traders.

Trading is a business in which the more knowledgeable have the advantage over the less knowledgeable.

What we are trying to avoid here is the damage that can be done by a false breakout.

It is important that you study and fully understand both the Law of Charts (TLOC) and the Traders Trick Entry (TTE) as you begin your way to making consistent profits in your trading. 

Typically there will be many orders grouped just beyond the #2 point of a 1-2-3 formation, or the point of a Ross hook.

The market movers are very much aware of the grouping of orders at those points.

If they can make it happen, they will move prices to where they see the orders grouped together, and then a little past that point in order to liquidate as much of their own position as possible.

This action by the market movers is called “stop running”.

Unless the pressure from the outsiders (us) is sufficient to carry prices to a new level, the breakout will prove to be false.

The Traders Trick (TTE) is designed to join the  market movers as they move prices towards where they see order accumulations.

• Market movers will often create moves aimed at those points where they realize orders are grouped.
• It is that kind of engineering that makes the TTE possible.

For those who are able to move prices to be able to stop us from following their moves, they would have to stop the price action they are trying to create. You’ll soon see why.

Let’s begin our examination of the Traders Trick Entry (TTE).

The TTE and 1-2-3

The Following Provisions Applies

Profits and TTE

Additional Information

Trading The TTE Has Very Simple Rules:

Although we’ve shown you upward movement of prices, the same rules apply to downward movements of prices from 1-2-3 highs, Ross Hooks, and downward breakouts of Ledges and Consolidations.

Let’s look at this slide more closely.

Notice on the slide below that we did not take the first Trick. There was only 1 higher low after the #2 point. For the same reason we did not try the Trick after the Rh.

The slide below, the TTE after the second Rh has 4 bars of higher lows and therefore, we do not take the entry. Although a TTE seems possible for the last 1-2-3, we do not take TTEs from 1-2-3s in sideways markets.

At the last 1-2-3 high we a double low, which counts as 1 bar of correction. Finally, at the last Rh, we have a valid TT following the third bar to make a higher low.

EVERY TRADERS TRICK
CONTAINS ANOTHER TRICK

LET’S LOOK AT THAT NOW

Final Comments on the TTE

The Gann traders also increase the momentum generated by the market mover as he pushes prices towards the #2 and Rh points. They buy or sell 1/3rd, 1/2, and 2/3rds retracements of price movements.

The “Golden Ratio” traders also increase the momentum generated by the market mover as he pushes prices towards the #2 and Rh points. They buy or sell 50% retracements of price movements.

The TTE offers the possibility of using the momentum of others to cover costs and capture some profits, as well as a free trade to the trader willing to use it.

However, the probability for a trend to form is less following a 1-2-3 formation once the #2 point is violated, than it is for a trend to continue after the point of a Rh is violated.

The reason is that 1-2-3s are often followed by congestion.

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