Welcome to the TradeGuider FX / Currency Futures Mentorship Course Sponsored by Infinity Futures (CME Group Educational Partner)

Transcription

1 Welcome to the TradeGuider FX / Currency Futures Mentorship Course Sponsored by Infinity Futures (CME Group Educational Partner) Class Starts at 3:00pm Chicago (CST)

2 Your Presenters Tom Williams Retired Syndicate Trader and Inventor of VSA Gavin Holmes Professional Trader, Author & CEO TradeGuider Systems

3 Special Guest Speaker Stevens Haen Currency Futures Expert & Broker Infinity Futures Chicago

4 Mentorship Class Format The Mentorship course has two theory sessions on two consecutive Saturdays lasting approximately two hours followed by two live market sessions. We will take a 10 minute break during sessions and it is possible we will over run as we have lots of information. Audience participation is highly encouraged. No question is a silly question, if you do not understand, ask us. If we cannot get your question answered in the session please it to DARRENH@TRADEGUIDER.COM

5 Mentorship Class Points to Cover Chart basics - ticks, pips, bars, volume. Market basics Currency Futures, Spot FOREX, Currency pairs. Arbitraging of the futures and spot what it means. Basics of trend channel drawing Wyckoff VSA method. Why volume is so important. Volume in FOREX - the misconceptions. Find out how governments and international banks manipulate the currency \ Exchange Traded FOREX markets on a regular basis and how to spot it as it happens.

6 Mentorship Class Points to Cover Learn about trigger numbers at support and resistance levels to catch high probability, low risk trades. Understand the playing field - what it means and where the zones are, to better target your entry and exit positions. Learn how to measure average daily ranges for each currency pair, to manage your risk reward ratios, for maximum return. Learn the correct use of trailing stops, chandelier and multi bracket entries and exits. Learn how to analyze both the spot FOREX chart (using tick volume) in comparison with the same currency futures pair (volume from the CME Group) to see how both are arbitraged and how the currency futures move in relation, to give you a trading edge.

7 Mentorship Class Points to Cover Learn when not to take a trade in the Exchange Traded FOREX markets - prior to a manipulative event. Understand why the US dollar became a strong currency in despite all the news to the contrary. Learn why the Euro became a strong currency on January 13 th 2012, despite the media reports End of the Euro. Gain an understanding of the relationship between gold, oil, the euro and the dollar. Learn how to read the key vsa principles that identify serious trend reversals. How to identify high probability VSA trade set ups using the VSA sequential chart patterns.

8 Theory Sessions Mentorship Sessions Times All times are CHICAGO CST Saturday March 3 rd commencing at 3.00pm CST Chicago Saturday March 10 th commencing at 3.00pm CST Live Market Sessions Monday March 11 th commencing 7.00pm to 9.30pm CST Chicago Extra bonus session featuring Tom Williams Friday March 16 th 7.00am to 10.00am CST Chicago

9 Patience Timing Confidence Study Self Discipline Mastering VSA What Qualities Makes a Good Trader and Investor Do what the VSA Experts Do Desire / Will to win Focus Understanding the game with an open mind

10 BELIEF!! Educated Has trading plan that works. Good risk management. Concentration. Independent in thought. What Qualities Makes a Good Trader and Investor Be contrarian / believe the charts. Coping with fear. Following the system that you are comfortable with. If you are wrong CLOSE THE TRADE!!!

11 The Spot FOREX / Currency Futures Market The Largest financial market in the world. Approxiately 4 Trillion Dollars each day traded around the world in the spot FX market.

12 What is being traded in the FX markets? MONEY, MONEY,MONEY

13 What am I buying and selling You are not buying anything physical, so this can be confusing to many new traders coming into this market. Think of buying a currency as buying a share in a particular country, like buying stocks of a particular company. The price of the currency is a direct reflection of what the market thinks about the current and future health of, lets say, the Eurozone. (Europe) When you buy, say, the Euro, you are basically buying a "share" in the Eurozone economy. You are betting that the Eurozone economy is doing well, and will even get better as time passes. Once you sell those "shares" back to the market, you will end up with a profit or a loss. In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country's economy, compared to other countries' economies.

14 Currencies are traded in pairs majors are: EUR / USD - Eurozone & United States Euro Dollar USD / JPY - United States & Japan Dollar Yen GBP / USD - United Kingdom and United States Pound Dollar USD / CHF - United States and Switzerland Dollar Swissy USD / CAD - United States and Canada Dollar Loonie AUD / USD - Australia and United States Aussie Dollar NZD / USD - New Zealand and United States Kiwi Dollar

15 Spot FOREX / Currency Futures Unlike other financial markets like the New York Stock Exchange and CME Group, the spot FX market has neither a physical location nor a central exchange. The currency futures market DOES have a centralized exchange, with it s home is in Chicago, The CME Group. The spot forex market is considered an Over-the-Counter (OTC), or "Interbank", market due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period. The spot forex market is spread all over the globe with no central location. The forex OTC market is by far the biggest and most popular financial market in the world, traded globally by a large number of individuals and organizations. In the OTC market, participants determine who they want to trade with depending on trading conditions, attractiveness of prices, and reputation of the trading counterpart. The following chart below shows the ten most actively traded currencies. The dollar is the most traded currency, taking up 84.9% of all transactions. The euro's share is second at 39.1%, while that of the yen is third at 19.0%. As you can see, most of the major currencies are hogging the top spots on this list!

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17 The US Dollar is the key The USD is one half of every major currency pair, and the majors comprise 75% of all trades, then you must to pay attention to the U.S. dollar. Despite all the negative news about this currency, it got STRONGER not WEAKER in 2011, despite the US downgrading by S & P!! According to the International Monetary Fund (IMF), the U.S. dollar comprises almost 62% of the world's official foreign exchange reserves! Because almost every investor, business, and central bank own it, they pay attention to the U.S. dollar.

18 The US Dollar is the key There are also other significant reasons why the U.S. dollar plays a central role in the forex market: The United States economy is the LARGEST economy in the world. The U.S. dollar is the reserve currency of the world. The United States has the largest and most liquid financial markets in the world. The United States has a super stable political system. The United States is the world's major military superpower. The U.S. dollar is the medium of exchange for many cross-border transactions. For example, oil is priced in U.S. dollars. So if a country wants to buy oil from Saudi Arabia, it can only be bought with U.S. dollars.

19 The US Dollar is the key

20 Volume and Liquidity One important thing to note about the forex market is that while commercial and financial transactions are part of trading volume, most currency trading is based on speculation. Most trading volume comes from traders that buy and sell based on intraday price movements. The trading volume brought about by speculators is estimated to be more than 90%! The scale of the forex speculative market means that liquidity - the amount of buying and selling volume happening at any given time - is extremely high, which is great when you can read and interpret volume. This makes it very easy for anyone to buy and sell currencies. From the perspective of an investor, liquidity is very important because it determines how easily price can change over a given time period. A liquid market environment like forex enables huge trading volumes to happen and when we see ultra high volume in the spot market you can guarantee the futures will follow as we will see, giving the trader who trades the futures a clear edge as the spot moves just before the future.

21 Definition of 'Arbitrage Arbitraging The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time. The spot FX market and the Currency Futures move in harmony because of arbitrage traders, so ultra high volume seen in the spot market will be seen in the futures market very quickly or almost at the same time. Here is one recent example:

22 The EURO USD 13 th January 2012

23 13 th January 2012 Smart Money Buy Euro

24 The EUR/USD Spot FX Contract 13 th January 2012

25 The Daily Chart EUR/USD Spot FX Contract 13 th January 2012

26 Spot FOREX Vs Currency Futures Please welcome Stevens Haen

27 Volume Spread Analysis Basics Explained

28 Herd Behavior in the Markets The Herd is the group of traders acting as a group would under certain circumstances. This group are usually uninformed, noncontrarian, and will believe what they read, what the TV says and what their brokers tell them. This group will easily get locked into the market just as the market turns against them, they become reluctant to sell because they would show an immediate loss so they hope and prey that they were right and they can exit their positions with no losses.

29 The Herd Lose Money

30 The Smart Money - Predators

31 Smart Money makes money You will be joining the Smart Money soon!!

32 The Smart Money The Four States of Professional Activity 1.Trades are made which are large enough to actually change the direction (trend) of the market. These may be over several days or even longer creating a phase for the next move, this also applies to intra-day trading and is very obvious. 2.Periods occur when the professional money is not actively trading (low volume). This is just as important as when they are actively trading. You have to ask yourself Why are they not active? Low activity on a bar closing higher than the previous bar indicates potential weakness. Low activity on a down bar with strength in the background indicates potential strength.

33 The Four States of Professional Activity 3. The accumulation and distribution of the underlying instrument. If professionals are buying (accumulating), remember they will also be selling just enough to bring any small rally back down for more buying, but at the end of the day will have bought more than they sold. When market conditions appear right professional selling stops and a bull move takes place. If they are selling (distributing), they also have to buy to support prices on any reaction for even more selling on the next wave up. 4. We are not really concerned with what is going on, because the end result of all this activity, either true or false, has been condensed down into a view, which we can see within the PRICE SPREAD AND VOLUME. A view also taken by the market makers, specialists and professional traders who can see both sides of the market and because they are trading their own accounts will show you a true picture of the real supply and demand.

34 The Wyckoff Phases Of Market Behavior

35 What causes price to move on a chart? The past price does not cause the future price to move. The price movement is caused by the activity, either buying or selling, of Smart Money. This CANNOT be seen by analyzing past price alone, it is vital to look at more than one timeframe on any chart, and to look very closely at VOLUME as we will now see.

36 How Can Volume Spread Analysis Identify The Moves of Smart Money? Volume = Activity We are interested in volume because it tells us the consensus of opinion amongst the Smart Money The Spread and Close in Relation to the background Confirm

37 Volume Spread or Range of Bar and Closing Price

38 How To Identify Smart Money Buying and Selling Volume The Gasoline That Drives The Financial Markets The Key To The Truth Two very important points to always remember when analyzing your charts 1. Volume is ACTIVITY. As an estimate, about 85 to 90 percent of the volume seen on the charts will be from large funds (George Soro s), Institutional banks (Goldman Sachs) and Professional Trading Syndicates or Pools who are nameless, however Tom Williams worked for one as we have heard. 2. Ultra High Volume and Ultra Low Volume seen IN THE RIGHT PLACE in context with The Background are signals from the Smart Money of their true intentions, and these opportunities often arrive on earnings reports and news events.

39 The Laws Governing The Markets There Are Four Universal Laws that Govern all Market Behavior and your ability as a human being to create wealth 1.The Law of Supply and Demand 2.The Law of Cause and Effect 3.The Law of Effort Vs Result 4. The Law of Attraction (Belief in your ability as a human being to MAKE MONEY and keep it!)

40 Why Is Ultra High Volume VERY, VERY important when you see it and what does it look like? Because it will often mark a top or a bottom on a price chart and give you an early warning that a trade is setting up against The Herd

41 Houston s Yao Ming would be ULTRA HIGH VOLUME on a chart!! He is currently the tallest player in the NBA, at 2.29 m (7 ft 6 in).

42 TWO RULES NEVER TO FORGET Rule number 1 When WEAKNESS (shorting opportunities) appears on a chart, it will appear on an UP BAR, that is a price bar that has closed higher than the bar behind it, and will be on unusually high volume (TradeGuider calls this Ultra High) or unusually low volume (TradeGuider calls this Ultra Low)

43 Signs of Weakness Up bars, narrow or wide spread, close high, middle or low. Volume can be high or low. Narrow spread indicates supply. This supply caps any attempt to move up. Ultra high volume up bars (the classic trap of Smart Money!!) Professionals have no interest in the upside Low volume. Professionals are selling into the public buying Higher volume. High + volume shows supply public buying smart money selling. Low volume shows no interest from Smart Money so prices will not go higher. Philip Friston will explain the definition of weakness

44 BEWARE OF ULTRA HIGH VOLUME UP BARS THEY ARE USUALLY WEAK BARS DRIVEN BY NEWS

45 Oh dear, doesn t Mr Bernanke look depressed, maybe he went long Euro!! NOTE THE DATE

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47 Before taking a short position Have you seen a rollover and is the market in early stages of downtrend or still in an uptrend? Is the market falling with no professional support? Is the low of each bar lower than the previous bar? (you may allow 1 up bar for every 2 down bars for a downtrend) Are you into fresh high ground when distribution starts? Is there a trading range to the left? Is there lots of GOOD NEWS about this particular market? Is the market in an overbought area of the trend channel? Is there End Of A Rising Market / Buying Climax in the background? Are you entering on a down bar remember weakness appears on up bars?

48 TWO RULES NEVER TO FORGET Rule number 2 When STRENGTH (opportunities to go long) appears on a chart, it will appear on a DOWN BAR, that is a price bar that has closed lower than the bar behind it, and will be on unusually high volume (TradeGuider calls this Ultra High) or unusually low volume (TradeGuider calls this Ultra Low)

49 Signs of Strength Down bars, narrow spread, close middle or low. Volume can be high or low. Narrow spread indicates no professional selling. This buying prevents any attempt to move down. Ultra high volume down bars (the classic trap of Smart Money!!) Professionals have no interest in the downside low volume. Professionals are buying into the public selling Higher volume. High + volume shows demand public selling smart money buying. Low volume shows no interest to the downside from Smart Money so prices will not go lower.

50 BEWARE OF ULTRA HIGH VOLUME DOWN BARS THEY ARE USUALLY STRONG BARS DRIVEN BY NEWS

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52 Before taking a Long position Is the market in early stages of uptrend or still in an downtrend? Is the market rising with no professional support? Is the high of each bar higher than the previous bar? (you may allow 1 down bar for every 2 up bars for an uptrend) Are you into fresh low ground when accumulation starts? Is there a trading range to the left? Is there lots of BAD NEWS about this particular instrument? Is the market in an oversold area of the trend channel? Is there a Buying Climax in the background? Are you entering on a up bar remember strength appears on down bars?

53 Summary Each of us are unique. We have different account sizes, loss tolerance levels, experience levels, different ways of viewing things (two people can look at the same mountain from the same place and see entirely different perspectives), and different levels of self discipline. These strategies are a guide but must be adapted to your style of trading and personality. Only YOU can do that for yourself. VSA principles apply to all markets where there is volume available and in all timeframes. We will be looking at stocks but we could easily have looked at the same patterns in Futures, Commodities, Spot FOREX, etc. KISS Keep It Simple Stupid. Nothing here is rocket science. VSA is very logical and is based on principles that have been around for decades. Take a holistic approach to your chart analysis. Definition of Holistic - Emphasizing the importance of the whole and the interdependence of its parts.

54 Points To Remember Strength will appear on down bars. Weakness will appear on up bars. The background analysis of the chart is vital. Has the strength or weakness appeared at the top or bottom of a channel? Is this a major trend reversal or a retracement? Is the news good or bad?? Is demand overcoming supply? Is supply overcoming demand?

55 Points To Remember - Continued All patterns seen in the past will be there at the right edge of your chart, but they will come in different intensities. VSA is a discretionary methodology that still requires discipline and money management. VSA is much more effective when used with support and resistance and with Elliot Wave analysis. (Used by Wyckoff). You must use more than one timeframe to see the bigger picture. If you listen to news, have a very contrarian view of the contents when taking a position. The chart never lies, rely on your charting skills.

56 END OF SESSION Q AND A