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No claim is made by Trading Concepts, Inc. that the trading strategies shown here will result inprofits and will not result in losses. Trading may not be suitable for all recipients of thisTraining Program. All comments, trading strategies, techniques, concepts and methods shownwithin our Course are not and should not be construed as an offer to buy or sell stocks, ETFs,futures, foreign currencies, and/or options – they are opinions based on market observationand years of experience. Therefore, the thoughts expressed are not guaranteed to produceprofits in any way. All opinions are subject to change without notice. Each trader/investor isresponsible for his/her own actions, if any. Your purchase of the Trading Concepts EMINISUCCESS FORMULA™ Start-Up Edition constitutes your agreement to this disclaimer andexempts Trading Concepts, Inc. from any liability or litigation.

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10. Trend vs. Counter-Trend Trading11. Volatility12. Fibonacci Retracements13. Moving Averages14. Trading Strategies

• Trend Determination• Trade Set-Ups• Initial Trend Entry• Trade Management

15. Key Times of Day16. Summary

• 5 Step Process for Trading Mastery

1. What are Futures and Commodities?2. What are E-Mini Futures?3. Technical vs. Fundamental Analysis4. Charting

• Price Charts5. Identifying Market Condition

• The UPTREND Process• The DOWNTREND Process

6. Retests & Failures7. SUPPORT & RESISTANCE8. Types of Traders9. Trading Styles


What AreFutures and Commodities?


The terms “Futures” and “Commodities” is similar to the way “Equities” and “Stocks” are used when

traders and investors talk about the Stock Market.


To be more specific…

Futures are contracts of Commoditiesthat are traded at a Futures Exchange like

the Chicago Mercantile Exchange (the CME) orthe Intercontinental Exchange (the ICE).

Commodities are the actual physical goods like corn, soybeans, wheat, gold, silver, crude oil, etc.


Futures contracts have expanded beyond just Commodities; now there are Futures contracts on financial markets like the S&P 500, DOW, T-Notes,

Foreign Currencies and others.


The most popular and liquidFutures and Commodities products

can be broken down into 6 major groups…


1) Equity Index Futures (E-Mini Futures)

2) Agricultural Commodity Futures

3) Energy Futures

4) Foreign Currency (FX) Futures

5) Interest Rate Futures

6) Metals Futures


Equity Index Futures include key benchmarks such as the S&P 500, Dow Jones Industrial Average, NASDAQ-100, and the Russell 2000 Index.


Agricultural Commodity Futures include the staples of everyday life: the Grains (Corn, Soybeans, and

Wheat), Oilseeds, and Sugar.


Energy Futures include Crude Oil, Natural Gas, Gasoline, and Heating Oil. These Energy Futures

contracts are benchmarks that set the pricefor these resources worldwide.


Foreign Currency (FX) Futures offer transparent and equal access to foreign currencies. The CME is the

largest regulated FX marketplace in the world.


Interest Rate Futures include short-, medium-, and long-term interest rate derivative products on the

most widely followed U.S. interest rate benchmarks.


Metals Futures include full-size and smaller size contracts on Gold, Silver, and Copper.


What Are E-Mini Futures?


E-Mini Futures track the most popular broad-based stock index benchmarks in the financial world. Launched between

1997 and 2005, E-Mini Futures are among the fastest growing products in the industry.

The four most popular E-Mini Futures are…

E-Mini S&P 500 Futures contract (ES)

E-Mini NASDAQ-100 Futures contract (NQ)

E-Mini Dow (YM)

Russell 2000 Index Mini Futures (TF)


All E-Mini Futures contracts are tradedcompletely electronically via electronic order management

software on a PC or through a registered commodityfutures broker over the telephone.


E-Mini Futures are appealing because of their

excellent liquidity and

around-the-clock availability.

At one-fifth the size of their standard counterparts, these contracts have found an audience among professional and

individual investors alike.


E-Mini Futures are contracts to buy or sellthe value of a specific stock index at a specific price

on a specific date in the future.

Businesses and individual traders trade E-Mini Futures for different reasons, but primarily to try to profit from or

protect themselves from changes in the price of the underlying indexes.


Financial professionals, such as pension and mutual fund managers, typically use E-Mini Futures for managing risk and

hedging portfolios against adverse price moves.

Others, such as day traders or position traders, trade theE-Mini Futures to speculate on the price fluctuations

of the stock market.


E-Mini Futures closely follow the price movement of their respective indexes, typically referred to as

the “underlying” or “cash” indexes.


What is the E-Mini S&P 500?

The E-Mini S&P 500 Futures contract is traded via the Chicago Mercantile Exchange (CME) and was created to

track the Standard & Poor’s 500 Index, the key benchmark for large-capitalization U.S. stocks.

E-Mini S&P 500 Futures are the world’s most actively traded stock index futures contracts, with over 1.6 million contracts traded on

average per day.


E-Mini S&P 500 Futures (ES)Minimum Price Fluctuation (Tick Size):

0.25 index points = $12.50 (1.00 index point = $50) per contract


What is the E-Mini NASDAQ-100?

The E-Mini NASDAQ-100 Futures contract is traded via the Chicago Mercantile Exchange (CME) and was created to

track the NASDAQ-100 Index, a key benchmark of technology, telecom, and biotechnology issues.

E-Mini NASDAQ-100 Futures offer diversification potential with underlying index holdings that span major industry groups –

including computer hardware and software, telecommunications, biotechnology, and more – with over 259,000 contracts traded on

average per day.© Trading Concepts, Inc. 25

E-Mini NASDAQ-100 Futures (NQ)Minimum Price Fluctuation (Tick Size):



What is the E-Mini Dow?

The E-Mini Dow Futures contract is traded via the Chicago Mercantile Exchange (CME) and was created to track

the Dow Jones Industrial Average Index,a price-weighted index of 30 blue-chip U.S. companies.

E-Mini Dow Futures represent nine economic sectors – including financial service, technology, retail, entertainment and consumer goods – with over 138,000 contracts traded on average per day.


E-Mini Dow Futures (YM)Minimum Price Fluctuation (Tick Size):

1 index point = $5.00 per contract


What Is the Russell 2000 Index Mini?

The Russell 2000 Index Mini Futures contract is traded via the Intercontinental Exchange (ICE) and was created to track

the Russell 2000 Index, one of the major benchmarks for small-capitalization U.S. stocks.

Russell 2000 Index Mini Futures represents the most widely accepted measure of small-capitalization stocks trading in the U.S., with over

117,000 contracts traded on average per day.


Russell 2000 Index Mini Futures (TF)Minimum Price Fluctuation (Tick Size):



Chicago Mercantile Exchange (CME)

E-Mini S&P 500, E-Mini NASDAQ-100, and E-Mini Dow trading hours…

CME E-Mini Futures contracts begin trading each week on Sundays at 5:00pm CT (Central Time) and continue until close of business on Friday at 3:15pm CT. Each day the market closes for a 15 minute break at 3:15pm, re-opens at 3:30pm, and continues trading until 4:30pm with a daily maintenance break until 5:00pm when the market re-opens.

Normal trading hours are Monday through Friday 8:30am to 3:15pm CT.


Intercontinental Exchange (ICE)

Russell 2000 Mini Index Futures trading hours…

ICE Mini Index Futures contracts begin trading each week on Sundays at 8:00pm ET (Eastern Time) and continue until close of business on Friday at 6:00pm ET. Each day the market closes for a two hour break at 6:00pm ET. Market settlement time each day is at 4:15pm ET.

Normal trading hours are Monday through Friday 9:30am to 4:15pm ET.


Contract Months

E-Mini Futures trade in quarterly time frames, with March, June, September, and December expirations.

Trading can occur up to 8:30am on the 3rd Friday of the contract month. Traders start switching over to the next contract on the 2nd Thursday of the expiration month. However, volume does not typically pick up on the next contract month until Monday during the week of expiration.


Why Trade E-Mini Futures?

E-Mini Futures are among the fastest growing productsfor a number of reasons…


The E-Mini Futures markets are highly liquid and active markets:

Market participants include institutional traders, investors, and individual traders so there is large open interest and volume (substantial liquidity).

ENTER and EXIT trades easily.

Tight bid/offer spreads, which reduce trading transaction costs.

The E-Mini Futures markets are volatile markets with a wide enough daily trading range to offset transaction costs.


The E-Mini Futures markets are traded via electronic access:

One central marketplace (CME and/or ICE) that offers market integrity and fully integrated clearing that matches and settles all trades and guarantees the creditworthiness of every transaction that takes place.

Trades electronically virtually 24 hours a day so you literally can trade from the comfort of your own home.

An easy and cost-effective way to access the financial markets.

Millisecond response time for speed and ease of execution so you will receive immediate fills.


The E-Mini Futures markets provide the use of leverage:

Use of leverage provides the individual “smaller” trader with more flexibility.

Brokers offer day trading margin requirements as low as $500 per contract.

Trading the E-Mini Futures also offers:

The equivalent of broad market exposure to a variety of major stock indexes at one-fifth the size of their standard counterparts.

The ability to employ a variety of trading strategies, such as hedging and spreading.


Why TradeE-Mini Futures over Stocks/ETFs?

If you are new to trading E-Mini Futures,you will find it helpful to understand the differences

between trading E-Mini Futures and trading Stocks/ETFs.


Trading E-Mini Futures is a more efficient use of capital:

Significantly lower margin requirements… You only need to put up a fraction of the amount of margin trading E-Mini Futures.

No SEC minimum equity requirement of $25,000 to day trade.

No T+3 (stocks/ETFs)… Your futures trading account is credited or debited based on that day’s profits or losses.

No payment of margin interest… You will have to pay margin interest on money borrowed to purchase Stocks/ETFs.

No inventory required for a SHORT position… it is just as easy to go SHORT as it is to go LONG trading E-Mini Futures.

No payment of SHORT position interest… You will have to pay interest to SHORT Stocks/ETFs.


There are tax advantages to trading E-Mini Futures:

Futures: The 60/40 rule

60% profits are taxed as long-term capital gains.

40% profits are taxed as ordinary income.

Stocks/ETFs:

Profits are taxed as ordinary income (up to 35%).


If you BUY an E-Mini Futures contract, you hope to gain from future price increases when you offset your trade by selling

the contract.

Correspondingly, if you initially SELL (i.e. Sell SHORT) an E-Mini Futures contract, you hope to gain if the price of the

contract declines.


Short Selling (also known as “shorting” or “going short”) is the practice of selling, for example, an E-mini Futures contract at

a perceived over-valued price with the intention of “covering”, or repurchasing at a lower price. The net decline

in price results in a profitable transaction.

The rapid price changes associated with stock indexes andE-Mini Futures create continuous trading opportunities.


Technical Analysisvs.

Fundamental Analysis


Technical Analysis is the forecasting of future financial price movements based on an examination of past price

movements on a chart.



Technical Analysis helps traders anticipate what is "likely" to happen to prices over time.

The most commonly used tools to determine future price movement are moving averages,

MACD, advance/decline data, volume, and even

chart patterns.


Technical analysts (chartists)are not concerned with balance

sheets, income statements, intrinsic value, or emerging product lines.

This type of fundamental information is assumed to be already factored into price.


Fundamental analysts, on the other hand, do look at economic factors, known as fundamentals, such as a company’s balance sheet, income

statements, new product lines, etc. to determine the value of a

companies stock.

Fundamental analysis can be used in conjunction with Technical analysis but most often is used to make long term

investment decisions.


I use a handful of technical tools to identify market trends and (intraday) SUPPORT and RESISTANCE.

Let’s dive right in and take a look.


Charting


Price Charts reflect the psychological component(fear and greed) of the market. They provide you,

the trader, with information about the psychology ofthe market and how you should trade it.

Price Charts are the most direct and easily accessible method of seeing overall supply and demand in the markets.


The most commonly used Price Charts are those which reflect Price Action through Time, Trades, and Range.


Time-Based Bar Charts and Candlestick Charts are a reflection of the OPEN, HIGH, LOW, and CLOSE of Price over

a given interval of Time (ex. 3 Min. Chart).

HIGH

LOW

Upper

Shadow

Lower

Shadow

OPEN

CLOSE

REAL BODY

HIGH

LOW

Lower

Shadow

Upper

Shadow

OPEN

CLOSE

REAL BODY


3 Minute Chart

Time based charts reflect the range of price movement over a given period of time.


Tick Charts are based on a certain number of trades per bar. Each bar or candlestick represents a specified number of transactions. These transactions include all orders, large

orders as well as small orders.

Tick Charts reflect Price over a given number of transactions or trades (ex. 1597 Tick Chart).


1597 Tick Chart

The number of bars that print on a Tick Chart during trading hours is a reflection of the volatility of the market.

For example, a 1597-Tick Chart represents 1597 trades per bar and another bar will print after every 1597 transactions (trades) that occur.


Range Bar Charts take only price action into consideration. Each Range Bar (whether it be a vertical bar or candlestick)

represents a specified movement of price.

Range Bar Charts reflect Price over a given amount of volatility (ex. 4 Tick Range Chart).


For example, during normal trading hours(8:30am CT to 3:15pm CT) on a 3 minute chart you will find 135 bars / candles representing the market’s price action.

On a Range Bar Chart, there can be any number of bars / candles that print during normal trading hours as during

times of higher volatility, more bars will print; conversely, during times of lower volatility, fewer bars will print.


4 Tick Range Chart

The number of bars that print on a Range Bar Chart during trading hours is also a reflection of the volatility of the market.


IdentifyingMarket Condition



There are 3 primary waves or TRENDS in the market(or three ways the market can move):

1) UPTREND, 2) DOWNTREND, or 3) SIDEWAYS TRADING RANGE

Identifying which wave or TREND a market is inis vital to successful trading!

One naturally assumes that the more a trader knows about the various technical indicators, the higher the probability is

that this trader will earn income.

Some traders use charts filled with indicators, squiggles, lines, fans, ellipses, and so forth – to the point where the

actual price action barely can be discerned!

This is backwards!


ALL commercially available technical indicators are derived from price and volume alone.

Therefore, technical indicators are “lagging;” this means that any signal generated from an indicator will come after the signal generated by price and volume alone, if you know

how to read it.


My charts are relatively simple,and they are not overcrowded with what I consider

to be useless information.


Simplicity vs. Complexity

Do you really need technical indicators to see what is going on in this chart?

Analysis Paralysis!

Do you really need technical indicators to see what is going on in this chart?

Analysis Paralysis!


At its core, identifying market condition is really just understanding price movement.

My METHOD works in ANY TIME FRAME,and the concepts that I teach really are at the core of

what I use in the market to help build an EDGE for my trade entries and exits.


The following principles form the cornerstone ofany and every sound trading methodology or system

that exists today.

There is really only ONE major market cycle (movement)in existence; the market can do nothing else but comply

with this one basic market cycle.


The market either trends UP, DOWN, or CONSOLIDATES before a continuation or reversal. This is the core price

structure and rhythm of how the MARKETS moveand trade at all times.

There is no other movement or motionpossible in the markets.


Trends are based upon…

UPSIDE penetration of market HIGHs, and

DOWNSIDE penetration of market LOWs.


New HIGHs and New LOWs arebeing formed continuously in the markets...


We must try to identify theseimportant levels to help us map out

what the market is probably going to do next.


Identifying critical lows in an UPTREND and critical highs in a DOWNTREND will enable you to know with high probability that the market is probably

going to change directions and reverse.© Trading Concepts, Inc. 72

The UPTREND Process

Once an UPTREND is established, if a New High (NH) is penetrated to the upside… you will assume thathigher (New) Highs and higher Active Lows (ALs)

will continue to the upside until proven otherwise.

If the Most Recent Active Low (MRAL) is penetrated to the downside, then the UPTREND may be potentially changing

and/or has reversed.


An Active Low (AL)…

is the lowest reaction point down off of a New High (NH) at/near the 34 EMA in an UPTREND before reversing back up to match and/or penetrate up through the previous New High (NH), and

must be the low of a minimum of 3 candlesticks trading down off of a New High (NH).


The UPTREND Process

A series of higher New Highs (NH) and higher Active Lows (AL)

AL(Active Low)

MRAL(Most Recent Active Low)

(New High)

NH

NH

ALAL

NHNH

NH


The DOWNTREND Process

Once a DOWNTREND is established, if a New Low (NL) is penetrated to the downside… you will assume that

lower (New) Lows (NLs) and lower Active Highs (AHs)will continue to the downside until proven otherwise.

If the Most Recent Active High (MRAH) is penetrated to the upside, then the DOWNTREND may be potentially changing

and/or has reversed.


An Active High (AH)…

is the highest reaction point up off of a New Low (NL) at/near the 34 EMA in a DOWNTREND before reversing back down to match and/or penetrate down through the previous New Low (NL), and

must be the high of a minimum of 3 candlesticks trading up off of a New Low (NL).


The DOWNTREND Process

A series of lower New Lows (NL) and lower Active Highs (AH)

NL

NL(New Low)

(Active High)

AH

AH

(Most Recent Active High)

MRAH

AH

NL

NL

NL


Retests & Failures


The market first must retest aNew High (NH) or New Low (NL)

before it can ‘fail’ off that price level –if it’s going to fail at all.


Retests are simply when the market tests (retests) a previous New High (NH) or New Low (NL).

Retests indicate that the market is at least trying to settle down.

MRAL

NH

Retest

MRAL

NH

Retest

Failures can only occur after a retest when a market is unable to take out a previous New High (NH) or New Low (NL) with any significance.


Failure

3 Types of Failures

Marginal New Highs & New Lows: When the market takes out a New High or New Low marginally (slightly).

Matching Highs & Lows: When the market matches the previous New High or New Low to the exact price.

Failure to Reach a New High or New Low: When the market actually fails to trade to the previous New High or New Low.

A Bullish Failure is when the market is unable to take out a previous New High (NH).

MRAL

NL

AH

NH

AL

NH

Retest FAILURE (Bullish Failure)


A Bearish Failure is when the market is unable to take out a previous New Low (NL).

AH

NL

NL

Retest FAILURE (Bearish Failure)

NH

MRAH

AL


If a market takes too long to come off these levels (i.e. test of a high or low),

Be cautious & aware market could break through that high or low

(& tighten up your stops if currently in a trade)…

The market could possibly be basing and getting ready for a relatively large move through the New

High (NH) or New Low (NL) that it's testing.


An UPTREND Reversing into a DOWNTREND

In order for a market to potentially change TREND from UP to DOWN, it must penetrate down through the

Most Recent Active Low (MRAL).

Once the MRAL is penetrated to the DOWNSIDE,look for a potential change in TREND from UP to DOWN.

This is the first indication trend may be changing.


DOWNSIDE penetration of the Most Recent Active Low (MRAL)

An UPTREND Reversing into a DOWNTREND

MRAL

AL

NH

NH

AL

(Highest High)

HH

AH

NL

NL

AH

NL

AH


The longer an UPTREND continues with higher New Highs (NHs) and higher Active Lows (ALs), the more likely it is to

start moving sideways into a TRADING RANGEor potentially change and REVERSE.

A market can only move so far so fast withoutsome sort of rest or reversal.


A DOWNTREND Reversing into an UPTREND

In order for a market to potentially change TREND from DOWN to UP, it must penetrate up through the

Most Recent Active High (MRAH).

Once the MRAH is penetrated to the UPSIDE,look for a potential change in TREND from DOWN to UP.

This is the first indication that trend is changing.


UPSIDE penetration of the Most Recent Active High (MRAH)

A DOWNTREND Reversing into an UPTREND

NL

AH

MRAH

AH

NL

LL(Lowest Low)

AL

NH

NH

AL


The longer a DOWNTREND continues with lower New Lows (NLs) and lower Active Highs (AHs), the more likely it is to start

moving sideways into a TRADING RANGEor potentially change and REVERSE.

Now that we have discussed how to identify market condition, let’s touch on one more Extremely important

concept regarding SUPPORT and RESISTANCE.


SUPPORT & RESISTANCE

SUPPORT & RESISTANCE levels are very important concepts to understand; they are powerful occurrences that happen in

ALL markets and ALL time frames.© Trading Concepts, Inc. 91

Using SUPPORT and RESISTANCE will help ensure that you will trade on the same side as the professional market makers and market specialists, thereby increasing the

probability of any trade you decide to place.

Since all professional traders use SUPPORT and RESISTANCE levels in their trading, these levels prove to be very reliable

and predictable.


SUPPORT is a price level (or general area) where thebuying overwhelms the selling of a market and

provides good BUYING opportunities.© Trading Concepts, Inc. 93

RESISTANCE is a price level (or general area) where the selling overwhelms the buying of a market and

provides good SELLING opportunities.


Here’s the extremely important points I want you to know regarding SUPPORT and RESISTANCE…

The longer the SIDEWAYS trading range, the stronger SUPPORT and RESISTANCE will become, and the bigger the breakout will be when the market does start to move outside of the trading range.

RESISTANCE becomes SUPPORT when broken to the UPSIDE.

SUPPORT becomes RESISTANCE when broken to the DOWNSIDE.


In an UPTREND, when RESISTANCE is broken to the upside, it will act as SUPPORT (a potential BUY zone).


In a DOWNTREND, when SUPPORT is broken to the downside,it will act as RESISTANCE (a potential SELL zone).

HIGH

LOW

AH1

NL1

AH2

NL2

AH3

NL3

AH4

NL4

AH5

NL5


OK, up to this point we’ve discussedMarket Condition, Trend Determination, and

SUPPORT & RESISTANCE levels.

Now, let’s look at the different Types of Traders and Trading Styles… then we’ll show you some simple

tools and techniques for entering the market.



TheFour Most Common

Types of Traders


These 4 Categories of Traders are all based on the typical length of time that they’re in a trade. It boils down to which

time frame (discussed shortly) that you will use for your trading decisions.


Scalpers are typically in and out of the markets several times during the day – as many as 30 to 40+ times during the day, only looking for very small moves, and never keeping a trade overnight. Scalpers typically use small tick charts or 1 -2 minute charts to make their trading decisions. You have to be a full-time trader to be able to trade like this.

Day Traders are typically in and out of the markets 1 to 5+ times a day, never keeping a trade overnight. Day Traders typically use 3 minute, 5 minute, 15 minute, and/or 30 minute charts to make their trading decisions. You should be able to devote a minimum of 1-2 hours during the 9:30am ET to 4:00pm ET trading session to become a Day Trader.

Scalper…

Day Trader…


Swing Traders are not in and out during the trading day, but rather they keep trades overnight. These types of trades can last anywhere from 2 days to a few weeks or longer, depending on what the market does. Swing Traders typically use Longer-Term Intra-Day charts or Daily charts to make their trading decisions.

Position Traders will hold a position for the long term (from months to years). Position Traders are not concerned with short-term fluctuations because they believe that their long-term investment horizons will smooth these out. Many Position Traders will take a look at weekly or monthly charts to get a sense of where the market is in a given trend. Position Trading is the polar opposite of Day Trading because the goal is to profit from the move in the primary trend rather than the short-term fluctuations that occur day to day.

Swing Trader…

Position Trader…


Time Frames Used for Trading

There are different time frames used by different traders depending on the type of trader they are.


Weekly Charts are used by longer-term Position Traders to capture major trends in the markets. Each bar encompasses five (5) trading days.

Daily Charts are used by Swing Traders to capture intermediate-term swings in an ongoing trend while side stepping the brief countertrend (CT) moves. Each bar encompasses one full trading day.

Longer-term Intra-day and Hourly Intra-Day Charts (i.e. 60 Minutes) are used by Swing Traders and to capture shorter-term swing trades that traders may hold overnight.

Shorter-term Intra-day Minute Charts (i.e. 30, 15, 5, 3, & 1 Minute) are used by Day Traders for daily cash flow. Most Day Traders will use a 30 or 15 Minute Chart to help eliminate “noise” and gain a clearer perspective of the shorter-term trend. Day Traders will typically base their trade entries and exits off of a 5 or 3 Minute Chart. Scalp Traders will typically use a 1 Minute Chart for really quick “scalp” trades. These shorter time frames are typically used for trades that are not held overnight.


YOU ultimately must figure out what time framesbest suite YOU as a person and as a trader, in terms of your

personality, temperament, and time commitments.

For example,

Some traders prefer to Day Trade for Daily Cash Flow and have no desire to hold positions overnight, and

Some traders simply want to Position Trade and/or Swing Trade with the goal of looking to supplement their incomes safely, conservatively, and consistently… or grow their retirement accounts.


I want you to think about everything that we’ve discussed up to this point and place yourself in the category of the

Type of Trader that makes the most sense to you.


Your energy level doesn’t necessarily play a huge role in your overall trading success, but I do think it would be wise to try to match your

trading style with your energy level.

For example…

Many Scalpers and Day Traders tend to have a higher energy level.

Swing Traders tend to be more even keel and are definitely right between higher energy and lower energy.

Scalpers, Day Traders, Swing Traders, and Position Traders are definitely mixed between all energy levels. Most people who think of themselves as Position Traders are those that simply don’t have the time to put a lot of time into their trading.


Here are some questions you need to answer to help you determine what Type of Trader best suits your personality, temperament, and

time commitments:

Can you sleep at night with a position on? Do you typically feel stressed watching the markets during the trading day? When the market closes each day, do you feel happy or exhausted? How much time each day, week, or month do you want to put into your

trading? Do you work full time? Are you able to put as much time into your trading as you would like, or is

your work schedule combined with your family life making it impossible to devote as much time to your trading as you would like?

Are you retired looking to spend 2 to 4 hours a day on your trading? Are you looking consistently to compound your accounts (i.e. IRAs,

Discretionary)?

Breakout Tradingvs.

Retracement (Pullback) Trading


Breakout Trading can be defined in two ways:

1) BUY the market as the market is making higher highs, or SELL the market as the market is making lower lows, and

2) BUYING the Breakout of a Trading Range by placing a BUY STOP order above the HIGH of the Trading Range, or SELLING the Breakdown of a Trading Range by placing a SELL STOP order below the LOW of a Trading Range.


UPSIDE Breakout of a Trading Range

Place a BUY STOP order above the HIGH… if and when the market breaks above the HIGH, you’ll be there to take advantage of the move.


DOWNSIDE Breakout of a Trading Range

Place a Sell STOP order below the LOW… if and when the market breaks below the LOW, you’ll be there to take advantage of the move.


Retracement (Pullback) Trading is when you look for an established TREND to develop and simply wait for a Retracement (Pullback) before getting into the market in that TREND direction.

If the TREND is UP, you wait for the market to pull down off of a New High into a logical place of SUPPORT before entering LONG.

If the TREND is DOWN, you wait for the market to pull up off of a New Low into a logical place of RESISTANCE before entering SHORT.


UPTREND Retracement (Pullback) Trading

Wait for the market to pull DOWN off of a New High (NH)into a logical place of SUPPORT before BUYING the market.


Wait for the market to pull UP off of a New Low (NL)into a logical place of RESISTANCE before SELLING the market.

DOWNTREND Retracement (Pullback) Trading


Trend Tradingvs.

Counter-Trend (CT) Trading


Many beginner traders try to catch tops and bottoms in the market and don’t even try to trade the TRENDS. Many

novices believe that trying to catch a market top or bottom is where the real money is.

I disagree… catching just a little piece and/or a much larger piece of the TREND adds up and is easier to do

with a high probability of success.


I highly suggest about 80% of your trades should betrading with the TREND.

The remaining 20% or so of any trade you make can beCOUNTER TREND (CT) trades.


Focus more on TREND trades as opposed to trying to pick tops and bottoms (CT trades).

You will find your trading not only less stressful, butalso much more rewarding and profitable if you

simply stick to trading with the TREND.


Of the roughly 20% of COUNTER TREND (CT) trades you may make, 80% of those trades should be BUYS.

Why, because…

BOTTOMS are much easier to pick than tops.

Most traders have a bias towards buying the market rather than selling the market as a whole.

BOTTOMS are put in place much more quickly than tops (market tops take longer to form).


COUNTER-TREND (CT) tradingis more difficult than TREND trading…


Wait for a ‘Retest’ Of a Low before potentially looking to BUY LONG.


Wait for a ‘Retest’ Of a High before potentially looking to SELL SHORT.


Volatility


General Rules of Thumb

The market tends to be a lot less volatile in UPTRENDs.

The market tends to be more volatile in DOWNTRENDs and falls roughly three times more quickly than it rises.


Let’s discuss Volatility a bit further because we will revisit this subject later when we talk about protective stop placement.

The volatility of a market is reflected in the range printed during a specific period of time. The range of a Day’s trading is simply the HIGH minus the LOW (HIGH – LOW). Just as the range of a single 3 Minute bar is the HIGH minus the LOW (HIGH – LOW).

HIGH

LOW

1 Day Range

HIGH

LOW

3 Minute Range


The Average True Range (ATR) indicator measures the range (volatility) of a market for a given number of periods

(normally 14 periods).

Knowing the Average True Range gives us a range the market is likely to stay within.


On our preferred Day trading chart, the 3 Minute bar or candlestick chart, the ATR gives us a range the market is

likely to stay within allowing us to use the market volatility to identify stop level.

When using ATR, we will place our stops 2x(above/below price) the indicated ATR.


Fibonacci Retracements


Fibonacci Retracements are a very popular tool among technical traders and is based on the key numbers identified

by mathematician Leonardo Fibonacci in the thirteenth century.

However, Fibonacci's sequence of numbers is not as important as the mathematical relationships, expressed as

ratios, between the numbers in the series.


In technical analysis,Fibonacci Retracement is created by taking two extreme

points (usually a swing low and swing high) on a chart and dividing the vertical distance by the key Fibonacci ratios of

23.6%, 38.2%, 50%, 61.8% and 100%.


Once these levels are identified, horizontal lines are drawn and used to identify possible SUPPORT and RESISTANCE.

Let’s look at a couple of recent examples of Fibonacci retracements in the E-Mini S&P 500 Futures market…


Buyers in Control…Look for Buying opportunities!

38%50%

LL

MRAH

NH1

NH2

AL2

AL1


Sellers in Control…Look for Selling opportunities!

50%

38%

NL1

AH1

NH

NL2


Moving Averages


Moving Averages are another tool used by technical traders to identify support and resistance. Simply put, a moving average prints the average price of an instrument over a

given period of time.

The most common Moving Averages (“MAs”) used in day trading are the 8/21/34/50/89/100/200 MAs.

Let’s look at two frequently used MAs, the 34 and 50 period Exponential Moving Averages (EMAs).


Market is trading Above the MAs.Look for Buying Opportunities!

34 EMA

50 EMA

LL

AL1

NH1

NH2

AL2


Market is trading Below the MAs.Look for Selling Opportunities!

34 EMA

50 EMA


Now that we’ve discussed the two most frequently used tools (i.e. Fibonacci Retracements & MA’s)

for identifying SUPPORT & RESISTANCE, let’s put it all together, with a few examples…


UPTRENDs

After identifying an UP trending market condition you want to look for a buying opportunity on the

first retracement (pullback) back to a SUPPORT level.


Buyers are in control… Look to Buy on a retracement back to SUPPORT (i.e. Fibonacci Retracements and/or the EMAs).

HIGH

NH1

NH2

AL1

AL2

LOW

34 EMA50 EMA


Fibonacci Confluence will act as SUPPORT in a UPTREND…“Pulling” multiple Fibonacci Retracements from the LOW to NH1 and from the most recent AL (AL1) to NH1 identifies a “Fibonacci Confluence” Zone.

LOW

HIGH

AL1

NH1

AL2

34 EMA50 EMA


DOWNTRENDs

After identifying a DOWN trending market condition you want to look for a selling opportunity on the first

retracement (pullback) back to a RESISTANCE level.


Sellers are in control… Look to Sell on a retracement back to RESISTANCE (i.e. Fibonacci Retracements and/or the EMAs).

HIGH

LOW

NL1

AH1

NL2

AH2

34 EMA50 EMA


Fibonacci Confluence will act as RESISTANCE in a DOWNTREND…“Pulling” multiple Fibonacci Retracements from the HH to NL2 and from the most recent AH (AH1) to NL2 identifies a “Fibonacci Confluence” Zone.

34 EMA50 EMA


Trading Strategies


As we discussed earlier,a minimum of 80% of your trades should be

those trading with the TREND.


Concentrate more on TREND tradesas opposed to trying to pick tops and bottoms (CT trades).

Once again you’ll find trading not only less stressful,but also much more rewarding and profitable as a result of

simply sticking to trading with the TREND.


Now, let’s go through the entire process, A-Z, of identifying market condition, entries, stop placement, and profit

targets.

Let’s focus now on TREND trades only.


Specific Criteria for aDOWNTREND REVERSING into an UPTREND

In order for the market to change TREND from DOWN to UP, it must penetrate up through the Most Recent Active High

(MRAH) & the current candlestick (price bar) must have penetrated up through the 50 EMA by more than 75% of the

range of the current candlestick (price bar).


34 EMA50 EMA


Specific Criteria for anUPTREND REVERSING into a DOWNTREND

In order for the market to change TREND from UP to DOWN, it must penetrate down through the Most Recent Active Low

(MRAL) & the current candlestick (price bar) must have penetrated down through the 50 EMA by more than 75% of

the range of the current candlestick (price bar).


34 EMA50 EMA


Trade Set-Ups

LONG Trades (BUYs) will be executed at a logical SUPPORT level in an UPTREND and SHORT Trades

(SELLs) will be executed at a logical RESISTANCE level in a DOWNTREND.


LONG Trades (BUYs) will be executed at a logical SUPPORT level in an UPTREND.


SHORT Trades (SELLs) will be executed at a logical RESISTANCE level in a DOWNTREND.


Initial Trend Entry

Initial Trend Entries will occur on the first pullback to the 34/50 EMA after a change in TREND.


When looking to execute an Initial Trend Entry,you want “weight of evidence” or confirmation that the

market has traded back into SUPPORT or RESISTANCE offering a high probability of success.

This “weight of evidence” is quite often aFibonacci Retracement level coinciding with, or in

confluence with, the 34/50 EMAs on a pullbackimmediately following a change in TREND.


Initial Trend Entry – UPTREND

After identifying a new UPTREND… look for a BUYING opportunity on the first retracement (pullback) into logical SUPPORT.

LONG Aggressive Entry: automatic BUY at SUPPORT(i.e. the 34 EMA in confluence with a Fibonacci Retracement level)

LONG Conservative Entry: just above the HIGH of the low bar in a pullback at/near the 50 EMA SUPPORT


Initial Stop Loss (ISL) – UPTREND

The Initial Stop Loss (ISL) needs to be placed slightly BELOW whichever is lower:

either the Lower Moving Average (i.e. 50 EMA), OR

the Fibonacci Retracement level (38%, 50%, or 62% from the LL to the NH the market retraced DOWN from) that is at or just below the Lower Moving Average.


ISL

LONG Aggressive Entry: automatic BUY at SUPPORT(34 EMA in confluence with 50% Fibonacci Retracement level LOW to HIGH)

Initial Trend Entry & Initial Stop Loss (ISL) – UPTREND

34 EMA50 EMA



ISL

Initial Trend Entry & Initial Stop Loss (ISL) – UPTREND

34 EMA50 EMA


LOW

HIGH

AL1

NH1

AL2

NH2

AL3

NH3Initial Trend Entry & Initial Stop Loss (ISL) – UPTREND

34 EMA50 EMA

ISLLONG Aggressive Entry: automatic BUY at SUPPORT(34/50 EMAs in confluence with 38% Fibonacci Retracement level LOW to NH1)


LOW

HIGH

AL1

NH1

AL2

NH2

AL3



ISL

34 EMA50 EMA


HIGH

AL1

NH1

AL2

NH2

AL3


34 EMA50 EMA

ISL

LONG Aggressive Entry: automatic BUY at SUPPORT(34 EMA in confluence with 50% Fibonacci Retracement level LOW to HIGH)


HIGH

AL1

AL2

NH2

AL3



ISL

34 EMA50 EMA


Profit Objectives (P.O.s) – UPTREND

Profit Objectives (P.O.s) for an Initial Trend Entry in an UPTREND will also be at logical attainable levels:

Profit Objective #1 (P.O.#1) is the HALF WAY (50%) point from where you bought LONG up to the New High (NH) the market retraced DOWN from.

Profit Objective #2 (P.O.#2) is slightly BELOW the New High (NH) the market retraced DOWN from.


P.O.#1


P.O.#2

34 EMA50 EMA


LOW

HIGH

AL1

NH1

AL2

NH2

AL3

NH3

P.O.#1


P.O.#2

34 EMA50 EMA


Trailing Stop (TS) - UPTREND

Continue to move a Trailing Stop (TS) UP 2.00 ATR BELOW the Highest High in an UPTREND as the market moves higher in your favor.


HIGH

AL1

AL2

NH2

NH3

P.O.#1

P.O.#2


34 EMA50 EMA


As we discussed earlier, TREND Entries will be at a logical SUPPORT level in an UPTREND & at a logical

RESISTANCE level in a DOWNTREND.


Initial Trend Entry – DOWNTREND

After identifying a new DOWNTREND… look for a SELLING opportunity on the first retracement (pullback) into logical RESISTANCE.

SHORT Aggressive Entry: automatic SELL at RESISTANCE(i.e. the 34 EMA in confluence with a Fibonacci Retracement level)

SHORT Conservative Entry: just below the LOW of the high bar in a pullback at/near the 50 EMA RESISTANCE


Initial Stop Loss (ISL) – DOWNTREND

The Initial Stop Loss (ISL) needs to be placed slightly ABOVE whichever is higher:

either the Upper Moving Average (i.e. 50 EMA), OR

the Fibonacci Retracement level (38%, 50%, or 62% from the HH to the NL the market retraced UP from) that is at or just above the Upper Moving Average.


34 EMA50 EMA

Initial Trend Entry & Initial Stop Loss (ISL) – DOWNTREND

SHORT Aggressive Entry: automatic SELL at RESISTANCE(34/50 EMAs in confluence with 50% Fibonacci Retracement level HIGH to NL1)

ISL




34 EMA50 EMA

ISL



SHORT Aggressive Entry: automatic SELL at RESISTANCE (34/50 EMAs in

confluence with 38% Fibonacci Retracement level NH1 (HH) to NL1)

ISL

34 EMA50 EMA



34 EMA50 EMA

ISL



ISL is placed ABOVE either the Upper Moving Average OR, the Fibonacci Retracement level (38%, 50%, or 62% from the HH to the NL the market retraced UP from) that is at or just above the Upper Moving Average.

34 EMA50 EMA


SHORT Aggressive Entry: automatic SELL at RESISTANCE (34/50 EMAs in

confluence with 38% Fibonacci Retracement level HIGH to NL2)

ISL



34 EMA50 EMA


ISL



Profit Objectives (POs) – DOWNTREND

Profit Objectives (POs) for an Initial Trend Entry in a DOWNTREND will also be at logical attainable levels:

Profit Objective #1 (P.O.#1) is the HALF WAY (50%) point from where you sold SHORT down to the New Low (NL) the market retraced UP from.

Profit Objective #2 (P.O.#2) is slightly ABOVE the New Low (NL) the market retraced UP from.


34 EMA50 EMA

Profit Objectives (P.O.s) – DOWNTREND

P.O.#1

P.O.#2



34 EMA50 EMA


P.O.#1

P.O.#2


Trailing Stop (TS) - DOWNTREND

Continue to move a Trailing Stop (TS) DOWN 2.00 ATR ABOVE the Lowest Low in a DOWNTREND as the market moves lower in your favor.



34 EMA50 EMA


P.O.#1

P.O.#2


Key Times of Day


Now that we have discussed Volatility and how we measure it, wouldn’t it be great to know when the market is likely to be more volatile or less volatile intraday? Here’s the good

news:

You Can!

You will be amazed at how predictable the market can be when you completely understand these key times.


The next series of slides will provide you with a roadmap for knowing how and when to trade the E-Minis intraday and

will also greatly help you to determine what the E-Minis are likely to do intraday, with incredible accuracy.


The E-Minis are perhaps the most predictable of markets, in terms of when and where the market

should make a reversal and/or resume the trend of the trading day.


The E-Minis (along with many stocks that closely follow the E-Minis) have a somewhat definable time pattern that

occurs at consistent intervals throughout the trading day.

Although this isn’t 100% accurate (nothing is though),

it’s powerful enough to help gauge what the market"should do" and "when" it should do it.


These patterns occur frequently and consistently enough to make it a very, very valuable trading tool to have at your

disposal during the trading day.

Let’s take a look at these time patterns…


Key Times of Day

MORNING Price Action: 10:15am ET to 10:45am ET

Expect a Counter-Trend (CT) move of some sort in the first 45 to 60 minutes of the day’s trend or bias, if there is one.


MORNING Price Action: 10:15am ET to 10:45am ET

10:15 10:45HIGH

LOW

LL

34 EMA50 EMA

Normal Retracement (UPTREND)(10:15am ET to 10:45 ET)

Reversal of First Hour TREND(10:15am ET to 10:45 ET)

34 EMA50 EMA


LUNCH Price Action: 11:45am ET to 1:00pm ET

This is perhaps the dullest and least volatile timeof the trading day.

A majority of the time, this period is when the market is the least volatile & makes the smallest swings during the day.


LUNCH Price Action: 11:45am ET to 1:00pm ET

Lunch “Dull” Price Action (Mid-Day Doldrums)

34 EMA50 EMA Mid-Day

Lunchtime “Doldrums”


POST LUNCH Move: 1:00pm ET to 2:00pm ET

Expect a resumption of the overall day’s trend (or upward or

downward bias of the day) if:

the overall trend is UP and the market is trading DOWN off the high of the day, or

the overall trend is DOWN and the market is trading UP off the low of the day.


POST LUNCH Price Action: 1:00pm ET to 2:00pm ET


Mid-Day Lunchtime “Doldrums”

34 EMA50 EMA

POST LUNCH Price ActionResumption of Trend



Mid-Day Lunchtime “Doldrums”

POST LUNCH Price Action: 1:00pm ET to 2:00pm ET

POST LUNCH Price ActionResumption of Trend

34 EMA50 EMA


AFTERNOON Move: 2:00pm ET (give or take 15 minutes)

Expect either:

a resumption of the day’s trend if there was no move from 1:00pm to just before 2:00pm, or

a Counter-Trend (CT) move of the day’s trend if the market is testing the high or low of the day.


AFTERNOON Price Action Move: 2:00 ET (+/- 15 minutes)

34 EMA50 EMA

AFTERNOON Price ActionLook for a Resumption of the day’s

TREND if the market is trading down off the HIGH of the day at 2:00pm ET.


AFTERNOON Price Action Move: 2:00 ET (+/- 15 minutes)

AFTERNOON Price ActionLook for a Counter-Trend move of the day’s TREND if the market is trading at the LOW of the day at 2:00pm ET.

2:00

34 EMA50 EMA


DELAYED AFTERNOON Move: 3:00pm ET (+/- 15 minutes)(the 2:00pm move will help dictate what may happen at 3:00pm)

Expect either:

a Counter-Trend (CT) move of the day’s trend if the market is testing the high or low of the day, OR

a resumption of the day’s trend if a counter-trend move occurs around 2:00pm and the market is trading down off of the high of the day in an UPTREND or up off the low of the day in a DOWNTREND.


DELAYED AFTERNOON Price Action Move: 3:00 ET (+/- 15 minutes)

If the market does not move off of the HIGH or LOW of the day in and around

2:00pm ET, then expect a counter-trend move to occur around 3:00pm ET.

CT Move at 3:00

DELAYED AFTERNOONPrice Action

34 EMA50 EMA


CT Move at 3:00

2:00 Resumption of Trend

CT Move at 3:00

DELAYED AFTERNOON Price Action Move: 3:00 ET (+/- 15 minutes)

DELAYED AFTERNOONPrice Action

If the market moves off of the HIGH or LOW of the day in and around 2:00pm ET,

then expect a resumption of the day’s TREND to occur around 3:00pm ET.

3:00

34 EMA50 EMA


The 2:00pm ET and 3:00pm ET times are real important to be aware of for the E-Mini futures day trading session because of the buying and selling pressure that usually comes in the

market around these times.

Also realize that the volatility in the market also increasesduring these afternoon times.


Key Times of Day SUMMARY

These are general guidelines where you normally would expect some type of move in price action depending on where the E-Minis are trading at that particular time.


3 General Statements concerning these Key Times of Day

1) Always know what time it is & know what to generally expect at these times.

2) These Key Times of Day are only a general rule of thumb of what to expect in the market.

3) There must be a trade set-up providing the technical reason to trade.


Once again, I want to stress that these Key Times of Day are great general time patterns for the E-mini futures markets,

along with stocks that mirror the E-mini futures.

Nothing is perfect, however knowing these key times will help give you an edge over other day traders that aren’t

aware of these times.


Alright, you’ve learned a whole lot by now so let’s quickly recap what we’ve covered here today…


10. Trend vs. Counter-Trend Trading11. Volatility12. Fibonacci Retracements13. Moving Averages14. Trading Strategies

• Trend Determination• Trade Set-Ups• Initial Trend Entry• Trade Management

15. Key Times of Day16. Summary

• 5 Step Process for Trading Mastery

1. What are Futures and Commodities?2. What are E-Mini Futures?3. Technical vs. Fundamental Analysis4. Charting

• Price Charts5. Identifying Market Condition

• The UPTREND Process• The DOWNTREND Process

6. Retests & Failures7. SUPPORT & RESISTANCE8. Types of Traders9. Trading Styles

Remember… Keep it Simple!

The 5 Step Process for Trading Mastery

1. Identify Market Condition

Is the market in an UPTREND, DOWNTREND, or SIDEWAYS Trading Range?

2. Identify a Trade Set-Up

Is the market trading at logical SUPPORT in an UPTREND or at logical RESISTANCE in a DOWNTREND?


3. Determine Trade Entry

Look for a “weight of evidence” or confirmation that the market has traded back into SUPPORT or RESISTANCE offering a high probability low-risk entry?

4. Determine Initial Stop Loss

Place Initial Stop Loss outside of the normal “ebb and flow” of the market… just below SUPPORT in an UPTREND or just above RESISTANCE in a DOWNTREND.

5. Determine Profit Objectives

Pay yourself as the market makes money available to you and take profits at high probability logical attainable levels.


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