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Volume Trading Strategy for Trend Trades

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Volume Trading Strategy
Volume Trading Strategy for Trend Trades, price vs volume analysis, best trading volume analysis

Volume Trading Strategy for Trend Trades: This video (and article) will teach the basic meta-patterns of volume and price, and how volume and price intersect and interact with each other. Incorporate this in your trading to boost your trading performance.

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Volume Trading Strategy for Trend Trades

Welcome my friend to this volume trading strategy video. I am going to share with you one of the basic meta-patterns of volume and price – price-volume trading strategy, how volume and price intersect and interact with each other. So here are the basic patterns, very simple. And what we’re going to do, first of all, is identify the general level of volume, that’s kind of an average level of volume here on this market. Let’s see, we can put it in right about here I guess – we’re just trying to capture, you know, where the normal volume goes the vast majority of the time and then catch some of these breakouts that are exceptions. And you could also do this with a moving average.

By the way, a lot of people like to put a moving average on their volume histogram and that’s okay. The only reason that I actually prefer to do it this way is that I think it is a little more accurate in the sense that you can give it a little wiggle room and you can eyeball it to capture that. The moving average is convenient because it automatically plots for you, but it’s also incorporating and it’s lagging actually. Either way, it is fine if you have a preference, no problem. Anyway, here is the basic pattern. So as price moves up, as we get an impulse move up, we want to ask ourselves, is that a strong move up or a weak move up? And then we want to also ask ourselves on the retrace, is that a strong move down or a weak move down?

Trading volume analysis

If we’re going to go along, what we want is a strong move up and a weak move down. We don’t want there to be a lot of buying coming in followed by a lot of selling right away. That’s what creates the patterns – V-tops, V-bottoms. So, in other words, we want the buying power to stay strong. What we get then on the price histogram here is, sure enough, as price is going up, it breaks out of this volume range and then as we get our retrace, it goes back into the volume range and stays down there. That is how we measure, specifically, the “how to” in determining whether there is strength up and if the retrace is on selling strength or on selling weakness. If it’s on selling weakness, then there’s not a lot of short selling from institutions and big players.

There might be some retail shorting. That’s fine. That’s not going to affect the market turning around and going down very much and that might just be a lot of profit taking, and that’s fine too. So, that’s the kind of pattern we want to see if we want to buy a retrace in a trend and then we say, okay, still interested in staying on the long side of this. So as the market moves up, puts in another impulse, move up, what happens? We get above that range, and then an impulse move up on volume, now we’ve got a strong move up. So everything’s still good, but that’s not enough. Now, if we’re going to add to our position or maybe we didn’t get in on the first retrace or we only identified this later, then we’re going to ask ourselves the exact same question.

Best volume indicator for day trading

Now look, the price goes down quite a bit, right? So if you’re just looking at price, that’s a pretty steep retrace. The retracement there, percentage-wise, is a lot. But then we go look at volume and there wasn’t a lot of selling volume. So selling volume went back into kind of just the average range, which means pretty much nothing. That’s just kind of the status quo, not strong up, not strong down, just kinda hanging around. Therefore, that’s why it’s important to not only look at the price pattern but also with the volume pattern to see how strong or weak that selling is because the selling could look dramatic.

Next move goes up, and what happens to volume? Goes up on strength now. That’s the strongest volume that we get, right? It goes above these two highs on volume and makes the highest high, but it’s also at a place that we’re now kind of in an extended trend. And you know, the slogan, probably the trend is your friend until the end. What that really means is that we should only trade trends early in a new trend. So the trend is your friend until the end. It’s really a timing slogan; it means the longer the trend continues, the less likely it is to continue, and it can be challenging to know when that trend will end.

Volume breakout strategy

So we get a one, two, three, four, five, pattern. All right. I’m not talking about Elliot ways. I’m just talking about these impulse moves in retraces. So, in my training methodology, I prefer it only trade the first retraces and trend and that again is just to follow that rule. Now, it could go further than this, but the odds get diminished and I want to trade with the odds. I don’t want to trade outside of the odd. I’d rather take my money and look elsewhere for a high probability trade meaning early in a new trend. Now, the problem, too, is late in an old trend, you can also get a big impulse move on volume and it can be an exhaustion pattern.

Again, that is more likely to happen late in an old trend than it is early in a new trend. It can also be a trend ending signal, especially after we’ve been going out for a while now. This one actually turned out kind of nice and neat and didn’t cause any problems because, at this point, the market puts in the low and high, and just kind of go sideways for a while. And, again, that’s indicated with volume. So, this whole time, the volume stays down in that range. In other words, there’s none of these impulse moves where the market goes up, none of them are accompanied by big volume. None of them break out of this volume range.

Intraday volume analysis

And that’s what would tell me that probably these are not going to be big moves and they’re not. And so this is a great meta-pattern and this is really the first volume pattern that I think everybody should learn. There are always some exceptions to the rules and it can get into that later, but you got to start with the rules and then you’ll learn the exceptions. So, this is something everybody should understand, know and memorize. It’s pretty simple.

It’s pretty logical and I think it’s within everyone’s grasp to get this – works on day trading, swing trading, stocks, commodities, and options. I would say it works somewhat on FOREX, although you have to be careful with FOREX because it uses tick volume and it’s also not a centralized exchange. Day trading, I would say, again, it does work, but day trading, it doesn’t work quite as well as with daily bars because the trading has a meta-pattern of volume built into it that you have to overcome and, trade outside of the meta-pattern.

Our Favorite Rubber Band Trade Strategy

I’ve got another video on youtube if you’re interested in that, but, this kind of basic pattern can still be seen in day trading. Still, be seen in forex trading, but ultimately I’m trading this on daily charts with stocks and futures, commodities, things like that works fantastic. Alright, well, if you thought the video was good, if it was helpful for you, then share good things with good people. Go ahead and click the share button below.

Also, share your comments. I’d love your comments if you have any questions or even request for videos in the future for topics. Put your comments down below. Your comments, I love them. I read every single one of them, by the way, and it keeps me motivated to continue to create more free tutorials for you. Finally, I have a trading strategy I’d love to share with you. And this one is a complete trade strategy. I mean including the entries, the exits, where to place your stops, everything and did I can’t do it in a 10-minute youtube video. So I created a little mini-course for you. That course is absolutely free. This is called my rubber band trade. Feel free to click on the link in the top right corner of this youtube video and you can get access to it there.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits, I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

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Japanese Candlestick Pattern That’s Rarely Taught – Video

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Candlestick Pattern
Rarely taught Japanese candlestick pattern that works in today's market, candlestick chart analysis

Japanese Candlestick Pattern That’s Rarely Taught: This video (and article) will teach you how to use a rather rarely taught candlestick pattern and its fundamentals that can tremendously boost the win/loss ratio of your trades.

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Japanese Candlestick Pattern That’s Rarely Taught

Welcome to this video about one of my favorite candlestick patterns. It is a Japanese candlestick pattern that doesn’t occur very often. I will reveal that right away. It’s rather rare, but as is typical, some of the things that don’t occur very often usually have the highest probability scenarios, so that kind of goes hand in hand. You might want to create a scan for this, pretty easy to create a scan for this and look for it, and if you’re a stock trader, for example, you will find setups like this long as you have a lot of different markets to scan for. The good news is it’s a very high probability trade and that’s why it’s one of my favorites, of course. So let’s look at this and it’s called the candlestick kicker. Now, it’s named kicker for a very good reason.

Let me first give you the rules for it. First of all, it is a two bar Japanese candlestick pattern and we’re going to start it out on the hard right edge of the screen here. So those are the two bars that were looking for. What are the rules? The rules are at bar number one of those two, it must be a bearish bar. And by bearish I simply mean that the close is below the open. So on mine, it shows red when the close is below the open and then shows green when the open is above the close. That’s number one and we want to see it after a bit of a down move. It doesn’t have to be a downtrend necessarily. But I want to at least see a half cycle down and it closes the last bar.

Candlestick patterns explained with examples

This is the key. The last bar in that move down must be a bearish bar where it closes near the low and definitely closes below the open. So that’s rule number one. Now, bar number two must be a bullish bar and again basically means a green bar or the close is above the open. Now, that’s all good and great, but there’s more to it. And this is what really makes it the kicker. The thing is here, we’ve got to have a gap, right? And there’s your gap. Technically the gap will always actually go all the way down to here. If you want to use the most conservative rules, then you would say the bottom of this bar, the low of this bar must be above the high of that bar.

Now, that’s not one of the actual rules for a kicker, but if you want to be real conservative about it, you could do that because the bigger the gap, or I should say, the more prominent the gap, the more they get holds, the more power there is behind the kicker. So, the low of this bar, sometimes the wick would come down into the range of this wick. And that’s usually okay. What’s not okay is if it comes down to the clothes for sure. And most people don’t want it to come into the real body of the previous bar. So, the more you allow it to come down, the less conservative the trade is because the less impulse that move had up and that’s what we’re looking for. That’s the whole point of this pattern is that there is a big change in sentiment overnight.

Candlestick patterns for day trading

Now, I say overnight because this does tend to work best on daily bars, also weekly and monthly bars. But you won’t see it as much on intraday bars. And that’s because markets tend to gap overnight more than they do intraday. Here’s the logic behind the pattern. Something happened from one day to the next that dramatically shifted the sentiment of the market. The market participants went from being bearish to not only being bullish but being really bullish so that the thing that it gapped up and turned into a bullish bar. And so it’s usually news or it could be just rumor. But the point is that if it’s a daily bar and it closes above the open, then it’s usually not a rumor or gossip that just lasted for five minutes, a half hour or an hour, right?

It lasted the whole day. And so that means the market had enough time throughout the day to digest the news and say this is real, this is our sentiment. Whereas if it was just gossip or a rumor, then you might get a gap up, but then it comes back down after the market is up. That was not real. That was fake news, so to say. And let’s see what happened after that. So it goes up pretty nicely. And now, again, the last thing I want to say about this is that this is just a two-bar candlestick pattern, meaning that, and I’ll highlight here again for you, meaning that you can’t use this alone. So I think it’s fine to incorporate it into a screener of some sort, but you have to then interpret it in the context of the chart.

Candlestick pattern indicator

In other words, is it coming in at a trend? Let’s say it’s coming into the end of a long trend, up or long trend down. By the way, the bearish pattern would be just the opposite of this. You can get bearish kickers as well, so this is not when that’s really occurring in a trend, but you do want at least a half a cycle if it’s just in the middle of a sideways market, I wouldn’t give much credence at all because we, again, want them to be a bearish sentiment going into this. And then the sentiment to change dramatically. That’s really the whole point of it. Now, from this point, either use any other rules in your trading method in order to decide where to get out and all of that.

Our favorite Rubber Band Trade Strategy

So this would be one part of a trading methodology. Certainly not something that you trade in isolation. But it’s a nice little pattern. And I’ll tell you, there’s a logical reason why these happen and they’re pretty high probability. So I would definitely consider adding this to your trading methodology. If it looks good to you. Well, if you got value out of this video, then go ahead and click the thumbs up icon. Leave a comment below, I love your comments, feel free to share it with other people. It’s good to share good things with good people. So click the share button below and share it with others.

Also, I am giving away a complete trade strategy. So this one here today, it’s just part of a trading methodology. But I have another trade setup called the rubber band trade. And I’m actually giving that away for free. It takes more than a quick little 10-minute video like these youtube videos are. So it takes about 28 minutes or so and I give you the whole thing, where to get in, where to get out, where to place your stops in a free little lesson that I have for you. So go ahead and click on the icon in the top right-hand corner of the video and get my rubber band trade absolutely free.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Japanese Candlestick Pattern That’s Rarely Taught? Enter your answer in the COMMENTS section at the bottom of this page.

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Also, I’m giving away one of my favorite Japanese Candlestick Pattern That’s Rarely Taught strategies that works in trading the markets. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with the first video.

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Trading ES Price Pattern Action Cycles, Part 4

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Trading ES Price Pattern
Trading ES Price Pattern Action Cycles, price pattern trading, most successful chart patterns

Trading ES Price Pattern Action Cycles, Part 4: This video (and article) on trading ES price pattern will teach you not only valuable insights to improve on futures trading, but also on stocks, futures, and more. This discussion about Trading ES Price Pattern Action Cycles will also help you in analyzing price actions, a very practical thing that is important for you to understand.

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Trading ES Price Pattern Action Cycles, Part 4

Welcome to this fourth in this series of Trading ES Price Pattern. Today, I’m going to use an example, Trading ES Price Pattern futures cycles, but this applies equally well to the forex market, day trading, swing trading, the stock market, futures, whatever you’re trading because it really has to do with the way that markets move through time. Now, in the past, we talked about other types of cycles such as seasonal cycles or calendar cycles, expansion and volatility cycles, and then we also talked about the chaos and the orderly cycle. Today, we’re going to look at price action, Trading ES Price Pattern, a very practical thing that is important for you to understand. So let’s take a look at what we’re talking about here. When it comes to cycles and price action, this is very important to understand. Now, we have a trend.

And so we’re looking at this upcycle or this uptrend here. Now, in an uptrend, we want markets to move up in price and in time. What that means is that we are using both time and price; in fact, W.D. Gann was famous for teaching this, the confluence of time and price. So when you’re in an upcycle, it’s not just about higher highs and higher lows. That has to do with price and so that’s fine. That’s half of the equation, but what people rarely talk about is the element of time in a higher high and higher low. So that’s what we’re going to talk about right now.

Price pattern trading

Here’s your half cycle from a low to a high, and then from a high to a low, that’s another half cycle, so your full cycle will be from the low to the low. Then it moves up from there and we started a new cycle. So that’s what I’m talking about these up/down cycles, markets moving up and down. Now, when we’re in an uptrend, we want to see two things. In other words, the practical application of this is to determine whether the market is going to continue or we all know the trend is your friend until the end. So if that trends not going to continue, you want a way to identify that. So, in an uptrend, the range of the price going up should be greater than the range of the price coming down in the down cycle.

And that just has to do with the price; when it comes down, it’s covering that much range, when it went up, it covered that much range in price. So, pretty intuitive, and this is what most people understand. So I want to talk about that too much, but now what I want to talk about is time. We also want to add the time element. In this half cycle, we want from the low to the high. There’s our time. We want that time to be greater from the time of the market goes from the high to the low, again, in an up cycle. So, again, that period of time, as it goes up, should be a longer period of time than when it comes down.

Price pattern in technical analysis

So it’s not just that it covers more price range. That’s half of it. Yes, that is half of it, but if you want the truth, the whole truth and nothing but the truth, you also have to look at how much time it spends coming down relative to how much time it spent going up. Now, this is called rate translations. If you want to get really into some specifics and technical analysis here, and I find unfortunately that this is not taught very often anymore, which is sad because it’s actually really helpful. So what rate translation means is if we look at this whole cycle, okay? Again, really it’s there that we put on our low or do we put it in there? Actually, the low comes in right about there and the highest up there.

So, there’s our full cycle. Now, if we were to look at this, the halfway point between the low and the low. So, in other words, from this low to that low, where is the halfway part? Is it at this blue line? No, that is to the right of the midpoint. So, again, I’m not going to measure this exactly, but you’ll get the idea. Let’s say I’m just going to eyeball it here that this is the middle note, which if we were to take this square and cut it in half, that is your midpoint right there. Now, if the high comes into the right of that midpoint, then it’s called rate translation. Essentially, that’s another way of measuring what I was just talking about, that the market has spent more time going up than it has been going down.

Most successful chart patterns

But there’s an official term for it. Now, if the market made its high over to the left of the midpoint, let’s say it went there and then it spent all this time coming down, that’s called left translation. It came into the left of the midpoint between the low and the low and then that would be called left translation. That’s not as strong of a signal for it to continue going up because, again, talking about practical trading and addressed theory here, that’s what we’re dealing with. We’re dealing with the issue of I’m going to take a trade, I’m looking to go along. But I got to trade it the hards right edge of the screen. So, do I have a high probability of this thing continuing to go in an uptrend after I get in? This is one way that can help determine that.

So the dynamic behind it, by the way, it’s not just charting or geometry or theory, there is actual practicality behind this, and what it means is that you’re getting a very strong impulse move when this happens. So it goes up very fast in a short period of time. And the way that affects the market participants psychologically is they feel like ‘I’ve missed out on this move’ and we had a big impulse move, and I got left behind. So that’s part of the mass psychology that’s going on that discourages people from coming in and buying after that event. Another very practical aspect of this is those big moves that have been in a very short period of time are often caused by news events, sometimes that’s now fake news. But, the point is that the market is reacting emotionally and a very quick a knee-jerk reaction.

Price action chart patterns

It may then end up very well, say ‘that deal is done’. That news is over with the money was made on that news or later on, it could be just minutes later they say that wasn’t really news, that was just a piece of gossip or rumor or because the markets respond to news so quickly they might then you evaluate it. They usually just read the headline and they’ll say that’s exciting. And then after the news comes out and they’ve taken their trade, their initial trade at least. then they read all the qualifiers of that news and they’re like well the headline sounded good. But now that I read all the details, I guess it’s not as good as I thought after all.

So these are the kinds of dynamics that happen. This is the reality behind the price pattern. And then when people think these things, of course, they’re less likely to follow through. So that’s what the price pattern means in practical terms. There’s a tool – now you can do this with just eyeballing it and getting to understand price patterns and kind of get these ingrained in your brain cells through repetition and that’s totally cool. I actually prefer to use tools that are objective mathematically so that I don’t have to depend on my discretionary evaluation. Now, we have a tool that’s mathematically based, then you have an objective evaluation. But, you also have a mathematical one that you can create rules with so that you will then you can build a rule-based system which I think is very important.

Price action trading strategies

So I’ve got a cycle indicator that I use. It actually catches every single cycle, high end low with amazing precision. It’s very accurate in identifying the final high and low so you don’t get stopped out so often after entry. And this is not an indicator that I sell. In fact, it’s not even a proprietary indicator, quite frankly. It’s an indicator that is already on your charting platforms, in fact, it’s one of the most common indicators that is on charting platforms. But it wasn’t designed as a cycle indicator and to time the market. So, I modify it. They just go into the parameters with the inputs, we modify it and we turned it into a cycle indicator.

So if you’re interested in that, it takes about an hour for me to help you get it set up in your chart and then to give you a tutorial on how to trade it because frankly, it’s very counter-intuitive how to trade it and a lot of people would look at it and say this doesn’t work until I show you the patterns you trade, the triggers and so forth. And then, in fact, I just had a gentleman wrote me the other day. He was already a professional trader.  He said ‘thank you so much for this, it’s already improved my trading even though I was making money’. This is absolutely free, no charge whatsoever. Just join me on the Webinar depending on when you watch this video.

Rubber Band Trade Strategy

The Free Webinar may or may not still be available since things last here on youtube for years. But, just send me an email, barry@topdogtrading.com if you’re interested and we’ll send you an invitation to this. I love doing these videos for you. Please go ahead and leave a comment below on this Trading ES Price Pattern video. Give us a thumbs up, share the video below if you would. Really appreciate that. And it’s good to share good things, right? Share good things with good people. And I’d love to help you in any way that I can. Another thing that I have for free right now is I’m giving away one of my trading courses. This is an actual course with videos and there are five videos in it, it’s just a mini-course.

But in it, I share with you some very practical thing that you can actually incorporate into your trading. This includes my rubber band trade. And this rubber band trade is a complete trade setup that I’ll teach you in. My intent is hopefully you can start making money without having to spend any money. And I love to get you making money first before you make any kind of investment. And I’m obviously doing it on paper or simulator trading before, but I give you all the rules absolutely free. Just click that little icon in the top right-hand corner of the video. If you’re not watching a youtube, then there’s a link below or an opt-in form on the side. Once you do that, I’ll send you a link to the course with my rubber band trade strategy.

GET MY FREE MARKET ENTRY TIMING INDICATOR

BTW, if you’re interested in the indicator that I use personally for very precise entries and exits, I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

What did you think of this tutorial on Trading ES Price Pattern Action Cycles, Part 4? Enter your answer in the COMMENTS section at the bottom of this page.

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Forex Market Cycles Trading Indicator Part 3

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Forex Market Cycles
Forex Market Cycles, best forex market cycle analysis, forex market indicator

Forex Market Cycles Trading Indicator Part 3: This video (and article) on forex market cycles trading will teach you not only valuable insights to improve on forex trading, but also on stocks, futures, and more. This discussion about forex market cycles will also present the fundamentals of trading, the five energies which run the market, which can help you in your trades.

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Forex Market Cycles Trading Indicator Part 3

Welcome to part three of our series on forex market cycles. This one, we’re titling FOREX market cycles trading, but it also applies to stocks, futures, pretty much any type of market. This is one of those cycles that is rarely talked about. In fact, I hardly hear anyone talk about this and yet it is one of the most important. So we have taught about calendar cycles and we have talked about high volatility, low volatility cycles. Well, this one is when I call my order chaos cycle theory. First of all, there’s one theory that the market is a random walk. In other words, chaotic, random, and you’ve probably heard of the book random walk down Wall Street if you haven’t even read it.

It’s a popular book, very well thought out, very well researched, and it is a good book and there’s a lot of truth to it. Basically, the author said that everything that can be known about the market is already known and, therefore, the markets are already perfectly efficient and if we can’t get an edge and trading or investing. So that’s one theory. Another theory is exactly the opposite and these people say the market is perfectly orderly, predictable and they’ll often use mathematical models, often geometrical models. And here you’re getting into schools of thoughts such as Gan, probably the most famous, and some followers and people have followed up with his work, maybe altered it a little bit. It’s basically saying we can predict the market five years out, 10 years out, 20 years out to the exact day, time and price.

Forex market cycle analysis

Two completely opposing points of view and some of them even have some history to back up some predictions that they’ve made out into the future, which were pretty accurate. Obviously, I’ve read both of these positions and each one seems very convincing. They showed a lot of examples and you can say, ‘that worked, that made sense.’ But then, when you’re done reading both sides of the research, you’re stumped because they are completely and utterly contradictory. So, as I was doing this, I realized, yes, they both have examples that support to their positions. So there might be an issue here where sometimes the market is a totally random walk and other times when it is very orderly and predictable. That’s why I came up with this idea that there is another type of cycle where the markets go through periods of being orderly and chaotic.

While they’re chaotic, they are unpredictable and you cannot establish a probability scenario. Therefore, you should not be trading them. On the other hand, the times we do want to trade is when the markets are very orderly and then we can provide a probability scenario. This is why overtrading is one of the cardinal sins because people can trade for a while and maybe you’ve had this experience where you’ve traded a methodology and it’s worked for a little while and then all of a sudden it seems like it stops working. One of the reasons for that may be that while you’re trading it, the market is in an orderly cycle and then it goes into a chaotic cycle, and your probability scenario goes away just because the market isn’t a random walk during that time and nobody’s taught you about these cycles.

Forex cycle analysis

So if you’re trading during both cycles, then you’re going to be overtrading because you shouldn’t trade during quarterly times. And this is the foundation of waiting. What I do is I wait for the alignment of what I call five energies in the market. Well, how do we determine now when we have an orderly cycle in the market? I don’t like to use the word predictable because that assigns too much certainty to what we’re doing. But probability, which is really all we need to exploit that probability over a large period of time, is what makes us money. So here’s how I determine an orderly cycle, I’m looking for the energies in the charts: the money, money flow, buying, selling, buying pressure or selling pressure volume, and the speed of the orders. So I break the energy of the market down into five subsets.

Now you can add more to this, but these five are important and I’ll show you why in a moment. But first, let me just give you the list. So step one in my trading method is trend, and I always trade by going right through this checklist. Start with step one. What’s the trend? A good place to start because I want to know which size of the market I should be in. Number two, trend is not enough. A lot of people think you just to trade with the trend. No, there are two types of trends, strong trends and week trends. Again, that is a huge vacuum in your knowledge of trading and you will lose money unless you learn how to determine whether the market has momentum behind it because momentum is strength, and if a trend is weak, it will fail.

Forex cycle indicator

The trend is your friend until the end and you will be getting in at the end, so you must always ask yourself a question. In fact, I’d encourage you to write this down and here’s the question, is this a strong trend or a weak trend? And Ask yourself that question every time before you take a trade. Step number three, cycle. So now that we have a trend and it’s strong, then we go to step three, but only if we have step one and two in place. Now, we say when do I want to get in? I want to buy the final cycle low so the market doesn’t make another low after I bought. By the way, that’s where my cycle indicator comes in, which I did get away for free.

I offer it through a live Webinar, at least at the time of this recording. I’m still offering that for free and it takes about an hour to explain it – not only how to get it set up in your charts, but how to trade it so we modify an indicator that’s already in your charts to turn it into a cycle indicator. So if you want that, just send me an email at barry@topdogtrading.com. Like I said, if it’s still available, we’ll let you know the date and time of the next webinar. It’s all for free. Now, step four then, we’ve got a trend that’s strong, we’ve got the time to get in and we just want to make sure that we’re buying at a support level or shorting at a resistance level, and that’s all on the short-term chart.

How market cycles work

Then number five, I look at the longer term timeframe and I want to make sure I’m trading in the direction of the strength, the momentum of that longer timeframe. Not trend, I don’t care what the trend on the longer timeframe is. So that’s one of the heresies of traditional technical analysis that I violate. It’s not the only one by the way. But if you’re making money with traditional technical analysis, God bless you. Most people aren’t, by the way, there’s a reason for that. It’s not that it’s no good, it’s just that the markets have changed since those rules were written. Now, markets move very differently because of technology – computerized trading, algo-trading, commoditization of retail, traders direct access, high-frequency trading, all of this stuff has dramatically changed the way markets move since the establishment of traditional technical analysis.

So you’ve gotta keep up with the times. Thus, trend on the longer timeframe no longer means anything. Used to work, but no more. So I wait for the alignment of these five energies. Now, here’s the key, as I measure these, we’re going to use indicators not because indicators are any kind of magic. They’re not magical, they’re just mathematical. But I use them because being mathematical gives me objective measurements so that I don’t have to be a discretionary trader. And indicators themselves don’t make us money, right? They do what they promised, well the answer’s in the question, they indicate. But they do give us an exact value so that the measurement of those energies is objective, rule-based and duplicable. So when I share this with people, they can do it as well. It’s not just that I’m good.

Cycle analysis trading

So here’s the bottom line on how this all then creates a probability scenario. At each point, I’m looking to possibly take a trade. I simply ask myself how many of those five energies are aligned and give each set up a score of one to five. Now, the higher the score, the higher the probability of success. So, I liken this to taking each trade to court, but here’s the key. These particular five energies were strategically chosen because they are independent and uncorrelated to each other. That’s why these five energies, as I said in passing earlier, you can use more. But these five are special because they are very uncorrelated to each other. That’s what makes it significant when they’re all bullish or bearish. That gives you a preponderance of the evidence and gives you a probability scenario.

So that’s when we then say, now we have an orderly cycle in the market. The market is moving in an orderly manner and we still have to use our stops. We still have to hedge our positions because anything can happen at any time. But that’s okay because we can survive those as long as we use good risk management and money management. But this is how I establish a probability scenario. I find cycles that are in a time of moving in an orderly way that gives me a probability scenario.

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