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Page 1

“7-Day FX Master
Trader Program”
an introduction to
trading for a living

Written by:
iFund Traders, LLC

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025 Rev. 10/16//10
Page 2

Disclaimer
Copyright© 2010 by iFundtraders LLC

Published by iFundtraders LLC

All rights covered

Reproduction or translation of any part of this work beyond that permitted by section 107 or 108 of the 1976 United States
Copyright Act without the permission of the copyright owner is unlawful. Requests for permission or further information
should be addressed to the Permissions Department at iFund Traders, LLC.

Neither iFund Traders, LLC or it’s instructors are advising anyone to trade or use any system illustrated in this course.
These are educational examples of science of system testing and development that iFund Traders, LLC want to share with
you. None of the information illustrated in these examples is to be construed as offers to buy or sell commodities, stocks,
FX, or any other financial instrument. None of the information presented purports to be a complete statement of all
material facts related to trading.

Also, simulated performance results have certain inherent limitations; the results do not represent actual trading. Since
many of the trades in this series have not been executed, the results may have under or over compensated for the impact,
if any, of certain market factors, such as lack of liquidity. No representation is being made that the systems, methods or
ideas shown in this course will produce the results that are described or illustrated.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It
is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other
professional services. If legal advice or other expert assistance is required, the services of a competent professional
person should be sought.

From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of
Publishers.

Active trading is an activity that possesses a high level of risk and may not be suitable for everyone.

ISBN 1-59280-253-2

Printed in the United States of America.


Page 3

“iFund Traders”
An Introduction to
iFund Traders, LLC
CHAPTER 1
Page 4

Our Website
Page 5

FOREX
Background & Introduction
CHAPTER 2

“Every single transaction is both a buy and a sell, and is therefore neutral. The
opening transaction or tick, for any time frame is the most important for iFund
Traders” – Oliver L. Velez
History of FOREX
FOREX - the foreign exchange market, currency market, FX market or
Forex is the market where one currency is traded for another. The need
to exchange currencies is the primary reason why the Forex market is the
largest, most liquid financial market in the world.

In the foreign exchange market there is little or no 'inside information'.


Exchange rate fluctuations are usually caused by actual monetary flows
as well as anticipations on global macroeconomic conditions. Significant
news is released publicly so, at least in theory, everyone in the world
receives the same news at the same time.

Unlike stocks and futures exchanges, the Forex is indeed an interbank,


over-the-counter (OTC) market which means there is no single universal
exchange for a specific currency pair. The foreign exchange market
operates 24 hours per day, Sunday through Friday between individuals
with Forex brokers, brokers with banks, and mostly banks with banks.
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX – Global Market Schedule

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX Terminology

Major Currency Acronyms


USD = United States Dollar
EUR = Euro Dollar
GBP = Great Britain Pound
JPY = Japanese Yen
CAD = Canadian Dollar
CHF = Confederatio Helvetica (Latin for Swiss Confederation) Franc
NZD = New Zealand Dollar
AUD = Australian Dollar

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX Terminology

What Does Currency Pair Mean?

The quotation and pricing structure of the currencies traded in the Forex


market: the value of a currency is determined by its comparison to
another currency. The first currency of a currency pair is called the
"base currency", and the second currency is called the "quote
currency". The currency pair shows how much of the quote currency is
needed to purchase one unit of the base currency.

EUR/USD

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX Terminology
What Does Base Currency Mean?
The first currency quoted in a currency pair on Forex. It is also typically
considered the domestic currency or accounting currency. For accounting
purposes, a firm may use the base currency to represent all profits and
losses. 

 It is sometimes referred to as the "primary currency".

EUR/USD

Base Currency

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX Terminology
What Does Quote Currency Mean?
The second currency quoted in a currency pair in Forex. In a direct
quote, the quote currency is the foreign currency. In an indirect quote,
the quote currency is the domestic currency.

Also known as the "secondary currency" or "counter currency".

EUR/USD

Quote Currency

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX Terminology
Since the “Quote / Counter Currency’ is the part of the currency pair that
fluctuates higher or lower, it determines the strength or weakness of both
currencies in a currency pair. As one currency goes up, the other must go down.
When a currency pair goes from a low price to a higher price, the Base Currency
is said to have strengthened or gotten stronger. The converse is true for the
Counter Currency. That is, it has weakened or gotten weaker as the Base
Currency has gotten stronger.
Since Exchange Rates represent what a fixed amount of currency is equal to in
terms of another currency, we have seen there is just one price for the Currency
Pair. The movement of that price determines whether a currency is getting
stronger or weaker.
If the EUR/USD exchange rate goes from 1.2000 to 1.2024, we have concluded
that the EUR got stronger, the USD weaker.

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX Terminology
EUR/USD
(Base / Quote)

Strong Weak

Weak Strong

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX Terminology

What is a “PIP”?
Pip stands for "percentage in point" and is the smallest
increment of trade in FX. In the FX market, prices are quoted to
the fifth decimal point.

For example, if a bar of soap in the drugstore was priced at


$1.20, in the FX market the same bar of soap would be quoted at
1.20000. The change in that fourth decimal point is called 1 pip.
The 5th and final decimal place measures a fraction of a pip.

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX Terminology

What is a “PIP”?
EUR/USD EUR/JPY
5 decimal places 3 decimal places

1.314 2 0 108.7 4 0

Pip Pip

Fraction of a Pip Fraction of a Pip

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX Terminology
What is a “PIP”?
In Forex, currency prices are typically quoted to the fifth decimal.
For example, if the EUR/USD pair moves from 1.34100 to 1.34150
it has moved by 5 pips. If the EUR/USD increases by 1 full cent in
value (from 1.34100 to 1.35100), it has increased by 100 pips.

If the EUR/USD pair moves from:


1.34120 to 1.34187

How many pips has price moved?

6.7 Pips

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Understanding a Currency Chart
GBP/USD

What is a “PIP”?

1.55609 (Short entry)


_
1.54624
.00985
98.5 Pips

(Take profit)

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
FOREX Terminology
What is a value of a “PIP”?
Currency is traded in lots. One standard lot of U.S. dollars is
$100,000. The pip value is how much a change of one pip is worth
for one lot. For the U.S. dollar, the pip value is 1/100 of 1 percent
of $100,000, or $10. Each currency has its own pip value,
depending on its pip and the size of the standard lot of currency.

If the EUR/USD moves from:


1.32450 to 1.33530
Price has moved how many Pips?
108 Pips
108 pips x $10/per pip = $1,080 per lot

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Understanding a Currency Chart

Average Daily Ranges of Pips


Day of Week EUR/USD GBP/USD USD/CHF USD/JPY

Monday 138 131 97 63

Tuesday 160 162 123 84

Wednesday 140 142 107 86

Thursday 158 143 118 80

Friday 152 141 115 81

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Understanding a Currency Chart

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 21

Candles Light The Way The


Market’s
Four Major Ticks
CHAPTER 3

“Every single transaction is both a buy and a sell, and is therefore neutral. The
opening transaction or tick, for any time frame is the most important for iFund
Traders” – Oliver L. Velez
Page 22

The ‘Opening’ is Everything


Page 23

The ELEPHANT BAR


High High

Low Low

Bulls Win Bears Win


Every individual bar represents a battle that was fought by two groups, the bulls and
bears, the buyers and sellers. When the close is well above the open, the bulls win,
producing the color green. When the close is well below the open, the bears win,
producing the color red. How much each side wins is determined by how much green or
red they produce. In other words, the wider the distance between the open and close, the
greater the win. When the bar is big, relative to the recent bars on the chart, it is called an
“elephant” bar.
Page 24

The ELEPHANT BAR


It should not be difficult, it should be obvious -
CAN YOU SPOPT THE ELEPHANT?

5 7 8
2
1 4 6
3
Page 25

The ELEPHANT BAR


It should not be difficult, it should be obvious -
CAN YOU SPOT THE ELEPHANT?

5 7 8
2
1 4 6
3
Page 26

Elephant Bars
Igniting or Exhausting
EXHAUSTING

IGNITING

IGNITING

Elephant Bars (aka WRB’s wide range bars) that start a new move or EXHAUSTING
trigger a new entry in the continuation of a trend tend to be igniting
in nature and follow through is expected. When these same bars
appear after a move has already been underway they represent the
final push, the last hoorah, and often lead to a pause and or change
the momentum to the opposite direction
Page 27

The ELEPHANT BAR


High High
Open

Open
Low Low

Bulls Win Bears Win

If an elephant bar closes not too far off its extreme with a strong amount of color (green or
red), there is an 82% chance that the next bar will produce the same color. iFund Traders
Tip: Traders using my momentum style would look to dive into the bar following a strong
“win” bar, but not at the open, as is shown above. More than the open is needed in order
to commit to the trade. The next bar has to confirm the strength of the original “win” bar
by first producing a small amount of the same color. See next page.
Page 28

The ELEPHANT BAR


Buy Stop 1
High High

Low Low
Stop 1 Short

Bulls Win Bears Win

iFund Traders employing my momentum style of trading would look to buy once the bar
following a strong “win” bar shows a small amount of the same color. The stop would
initially be placed at the low (for green) or high (for red) of the “win” bar. iFund
Traders Tip: My momentum style has the best odds when the “win” bar is the first real
sizable bar in 8 bars or more and the bar preceding the win bar is either the opposite color
or a very small bar of the same color.
Page 29

The ELEPHANT BAR

Buy High
High
Stop 2

Stop 2
Low Low
Short

Bulls Win Bears Win

Once the trader commits, and the current bar trading grows to regular size, an adjustment
in the stop can be made. The adjusted stop is placed 1 penny under the current bar’s low if
green and 1 penny above the current bar’s high if red. iFund Traders Tip: The purpose
of the stop in this case is to protect the previous bar’s color. At this point, a movement
back into the previous bar’s range would be negative, therefore the stop is adjusted to
prevent this.
Page 30

Absolute Control
High High

Low Low

Bulls in absolute control Bears in absolute control

Absolute control exists when a very solid colored bar is trading at its extreme. When a
solid green bar is currently trading at its absolute high, bulls are in absolute control. When
a solid red bar is currently trading at its absolute low. iFund Traders Tip: It’s the upper
end of a green bar and the lower end of a red bar that truly determines the potency or lack
thereof of the group currently producing the color.
Page 31

Full Control
High High

Low Low

Bulls in full control Bears in full control

Full control exists when a very solid colored bar is trading just a tad bit off its extreme. When a
relatively solid green bar has pulled back off the high, but the bar is still dominantly green, bulls are in
full control. When a relatively solid red has moved up off the low, but the bar is still dominantly red,
bears are in full control. iFund Traders Tip: I repeat, it’s the upper end of a green bar and the lower
end of a red bar that truly determines the potency or lack thereof of the group currently producing the
color.
Page 32

Good Control
High High

Low Low

Bulls still in control Bears still in control


Good control exists when a solid colored bar has moved well off the extreme, but not enough to
justify calling the bar wrecked or weak. When a green bar has pulled well off the high, but the bar is
still mostly green, bulls are in good control. When a red has moved up well off the low, but the bar is
still mostly red, bears are in good control. iFund Traders Tip: This is often what a bar will do after
the trader has already committed to a play. These bars should not necessarily scare traders or make
them doubt the power of the group producing the color…not at this point. This bar typically
represents the squat before a dancer’s leap back to strength.
Page 33

Weak Control
High High

Low Low

Bulls’ weakening control Bears’ weakening control

Weak control exists when a solid colored bar has lost about ½ of the color it once had. When a green
bar has pulled deep off the high to eliminate about 50% of the green it once had, bulls might be in
trouble. When a red bar has moved up deep off the low to eliminate about 50% of the red it once
had, bears might be in trouble. iFund Traders Tip: This scenario does not guarantee that a full lost
of control will materialize, but if the market is behind the counter –color move, the odds are good
that the control is going to change.
Page 34

Lost Control
High High

Last Trade

Last Trade

Low Low

Bulls lose control to Bears Bears lose control to Bulls

Lost control exists when a previously solid colored bar loses 2/3 or more of the color it
once had, leaving the tail as the most dominant part of the bar. When a very solid green
bar has pulled back so far off the high, leaving behind more tail than color, bulls have lost
their power. When a very solid red bar has moved back up so far off the low, leaving
behind more tail than color, bears have lost their power. iFund Traders Tip: This is the
picture of change, the picture of the shift in power from one group to the other. I teach my
traders to capitalize on change, making this a key action event.
Page 35

Totally Over!!
100%

100%

Bears in permanent control Bulls in permanent control


Every individual bar represents a battle that was fought by two groups, the bulls and
bears, the buyers and sellers. When the close is above the open, the bulls win, producing
the color green. When the close is below the open, the bears win, producing the color red.
How much each side wins is determined by how much green or red they produce. In other
words, the wider the distance between the open and close, the greater the win, and when
all that color is erased, the greater the odds of a change in control.
Page 36

Control Forever!!
100%

100%

Bears in control forever Bulls in control forever

Every individual bar represents a battle that was fought by two groups, the bulls and
bears, the buyers and sellers. When the close is above the open, the bulls win, producing
the color green. When the close is below the open, the bears win, producing the color red.
How much each side wins is determined by how much green or red they produce. In other
words, the wider the distance between the open and close, the greater the win, and when
all that color is erased, the greater the odds of a change in control. iFund Traders Tip:
when all the color of a wide bar is erased and the opposite color is produced, you have
usually found the high or the low for some time to come.
Page 37

Full Control
High High

Low Low

Bulls in Control Bears in Control


Every individual bar represents a battle that was fought by two groups, the bulls and
bears, the buyers and sellers. When the close is above the open, the bulls win, producing
the color green. When the close is below the open, the bears win, producing the color red.
How much each side wins is determined by how much green or red they produce. In other
words, the wider the distance between the open and close, the greater the win.
Page 38

Good Control
High High

Low Low

Bulls still in control Bears still in control


Every individual bar represents a battle that was fought by two groups, the bulls and
bears, the buyers and sellers. When the close is above the open, the bulls win, producing
the color green. When the close is below the open, the bears win, producing the color red.
How much each side wins is determined by how much green or red they produce. In other
words, the wider the distance between the open and close, the greater the win.
Page 39

Weak Control
High High

Low Low

Bulls weakening control Bears weakening control


Every individual bar represents a battle that was fought by two groups, the bulls and
bears, the buyers and sellers. When the close is above the open, the bulls win, producing
the color green. When the close is below the open, the bears win, producing the color red.
How much each side wins is determined by how much green or red they produce. In other
words, the wider the distance between the open and close, the greater the win.
Page 40

Lost Control
High High

Low Low

Bears back in control Bulls back in control

Every individual bar represents a battle that was fought by two groups, the bulls and
bears, the buyers and sellers. When the close is above the open, the bulls win, producing
the color green. When the close is below the open, the bears win, producing the color red.
How much each side wins is determined by how much green or red they produce. In other
words, the wider the distance between the open and close, the greater the win. iFund
Traders Tip: However, if more than 2/3 of any color is suddenly erased, the law of
follow-through is greatly diminished.
Page 41

Totally Over Forever!


High 100%

100%
Low

Bears in control forever Bulls in control forever

Every individual bar represents a battle that was fought by two groups, the bulls and
bears, the buyers and sellers. When the close is above the open, the bulls win, producing
the color green. When the close is below the open, the bears win, producing the color red.
How much each side wins is determined by how much green or red they produce. In other
words, the wider the distance between the open and close, the greater the win.
Page 42

“Velez Market Law 1”


CHAPTER 4

“I’m not sure if Sir Isaac Newton ever played the market, but many of his
discoveries and realizations lend themselves to proper market play.”
– Oliver L. Velez
Page 43

Velez Market Law #1


The Law of Momentum
During MOVING market environments, FX and other tradable items tend to follow
through or continue the most recently completed color-coded bar, 80% of the time, as
long as most of the color has been maintained.

Sir Isaac Newton: “An object in motion tends to stay in motion.”

Different ways to communicate the law:

1) After a solid Green Bar, expect another one to follow 80%;

2) After a solid Red Bar, expect another one to follow 80%

3) The bigger the green or red bar, the higher the odds of follow
through, meaning you’ll see continuance closer to 90% of the time.

4) A small amount of green or red does not give the iFund Traders enough to go on.
More information is needed in that case.
Page 44

“The Market’s
13 Bars”

“There are only 13 bars the market can form. They represent the market’s
alphabet, if you will. Learn these bars and what they mean and you’ll be set to
Trade for Life™.” – Oliver L. Velez
Page 45

The 10 Colored Candles


1 2 3 4 5

2nd Most Bullish

Normal Bullish
Most Bullish

Least Bullish
Neutral Bull
6 7 8 9 10
2nd Most Bearish

Least Bearish
Neutral Bear
Normal Bearish
Most Bearish

The first set of bars is won by the bulls in varying degrees, with the last bar being an
actual loss. The most bullish is at the left, the least is at the right. The same goes for the
bear wins. The most bearish starts at the left, the most questionable is at the far right.
Page 46

The 3 Non-Color Candles


11 12 13

All green was lost

All red was lost


Draw

Tip: While technically no one wins, due to the open and close being even, the last group in
control of the price is considered the winner. Bar 1, is completely a draw, Bar 2 is won by the
bears and Bar 3 is won by the bulls.

Sellers dominate
Topping Tail (TT)
Buyers dominate

this entire area


this entire area

Bottoming Tail (BT)

Bottoming tails (BTs) and Topping Tails (TTs) offer iFund Traders some
incredible trading opportunities, which we will see shortly.
Page 47

The Four Trading


Time Frames
CHAPTER 5

“The following three time frames are used by iFund Traders to earn a
living in the markets. These time frames are income generators, not
wealth builders. They are used to making money on a daily basis”
Page 48

Four Trading Time Frames

1) 5-minute Chart – This time frame is a key time frame for finding very tight stop entires
with very large profit potential. The patterns we trade appear frequently enough in the 5-
minute window to keep us active, yet infrequently enough to prevent us from over trading.
This is a nice time frame to master.

2) 15-minute Chart – This time frame allows traders to capture some of the biggest moves
without having to make split second decisions. Fifteen minutes is plenty of time to measure
for stops, identify targets, and spot key support and resistance before having to commit to a
trade. Since FX trades can last 24hrs a day, there are plenty of opportunities on this time
frame.

3) 30-minute Chart – This time frame fits perfectly between the 15 and 60 minute time frames
and shares the characteristics of both; it can be used to spot trends, key support and
resistance and also has opportunity to find tradable patters that produce big moves.

4) 60-minute Chart – While in some markets this is considered to just be a primary trending
time frame for day traders, the 24 hr nature of the FX market makes this another powerful
trading time frame as well as helping to identify trends and key support and resistance
points. Finding quality patterns on this time frame can lead to some moves that can last all
day or days instead of just minutes and can result in some incredible profits.

Note: The 8-period, the 20-period moving average (20ma) and the 200-period moving
average (200ma) are used on all three, the 5, 15, and 60 minute charts. Keep in mind that the
20ma and 21ma are interchangeable. It’s a personal choice.
Page 49

The 5-Minute Chart

Trading Tip: iFund Traders look to go long


when the r20ma is above the 200ma. They
look to go short with the d20ma is blow the
200ma

When a FX pair is able to consistently outpace the


average price of the last 20 bars, it is a powerful
indication of institutions at work and iFund traders will
look to capitalize by following along with this powerful
trend
r20ma

Flat 200ma
Page 50

The15-Minute Chart

d20 ma

Notice the price is declining with the


d20ma, and at or near the point of contact
will be trading opportunities for the
iFund trader to capitalize on this
powerful move.
Page 51

The30-Minute Chart

Bear Elephant causes breakdown –


notice the move that follows

d20 ma

Notice the price is declining with the


d20ma, and at or near the point of contact
will be trading opportunities for the
iFund trader to capitalize on this
powerful move.
Page 52

The 60-minute Chart

Circles show well-defined sell opportunities for the


iFund Trained Trader.

iFund Traders Tip: This time frame offers nice opportunities


to capture entire trend using the 20ma.
Page 53

The Three Analytical


Time Frames
CHAPTER 6

“The following three time frames help iFund Traders establish a bias for the
market.. Knowing how to determine what direction is more likely than the other
over the next few days, hours or 15 minutes is one of the true keys to accuracy as
a trader” – Oliver L. Velez
Page 54

Three Analytical Time Frames


1) Daily Chart – This time frame is key to determining upside and downside biases
based on the prevailing trend. Certain price patterns that form on the daily chart
have a high probability of moving in a predetermined direction for days at a time
and can lead to major multi-day moves. This proves very valuable to iFund Traders
looking to take advantage of holding part of trade as a “core: position for the day
or even the week when the trend is strong, and with well defined daily chart
patterns, it will lead to it being a focus over several days.
2) Weekly Chart – This time is almost never used for trading, but it is unrivaled when
it comes to finding major “reflection points,” areas of major significance which
often lead to abrupt stoppages and sudden reversals during the day. The iFund
Traders will use the weekly chart simply to reference these points and to gauge the
major trend of the underlying FX pair.
3) 4 hr Chart – This time frame will be used primarily for trend analysis and support
and resistance reference points. While iFund Traders do take trades on it from time
to time, its use as a gauge of the currency pair’s power and it’s trend are priceless.
With that being said, trades on the 4 hr chart can lead to the powerful multi-day
moves. In a sense, for the professional trader earning a living via the markets, this
time frame would be considered the “core” one, for longer term multi-day trades
throughout the week.

Note: The 8, 20 and 200 MAs are typically used for the daily, weekly and 4 hr chart.
Page 55

The Three Trading


Moving Averages
CHAPTER 7

“There are three moving averages iFund Traders monitor at all times." The moving
averages form the basis for many of our biggest money making strategies.”
- Oliver L. Velez
Page 56

Three Major Moving Averages


1) 8-period Moving Average (8ma) – This simple moving average is superior at
capturing and supporting the market’s most powerful moves. If price is moving
with a fury (up or down), it is this moving average that the price will often react off
of. We also use this moving average as the basis for one of our most effective
trailing stop methods, which we will discuss shortly. iFund Traders have the 8ma
on every chart they look at.

2) 20-period Moving Average (20ma) – This simple moving average is the number
one staple for iFund Traders. No chart is ever looked at without the aid of the
20ma. In fact, I don’t regard a chart as being valid unless it is accompanied by the
20ma. It reveals the directional bias, acts like a magnet and tells the trader where
significant areas of support and resistance are. Keep in mind that the purest would
use a 21-period MA. We round to 20, knowing that moving averages are simply
areas, not specific prices.

3) 200-period Moving Average (200ma) – This simple but major moving average is
the granddaddy of them all. It’s almost magical how often price and the overall
market obey this slow moving line. Many of iFund Traders’ most successful trades
originate off the 200ma. It is always in view and is given the utmost respect.
Page 57

The Powerful 8MA & 20MA


1) 8 & 20 Period Simple Moving Average – The 8ma & 20ma (or the 21ma) are so important to iFund
Traders that no chart is ever studied or viewed without them. That’s because their power and reliability
are unrivaled. No chart is a chart unless it is accompanied by these all-important technical indicators.
We use them on every time frame or chart we look at. Tip: The iFund Traders Trader can literally earn
his entire living in the market with the 8ma & 20ma. Here are the most important things to know about
the 8ma & 20ma and their proper use:

a) Trade with the 8ma & 20ma, not against them - Most of your trades should be in
sync with the 20ma. If the 8 & 20ma are rising in a smooth fashion, your focus should almost always
be long. Conversely, if the 8 & 20ma are declining in a smooth fashion, your
focus should almost always be to short. If the 20ma is flat (f20ma), your focus can be to
liquidity trade with the “bid and offer” approach (buy below the 20ma; sell above the 20ma).

b) Use 8ma & 20ma as support & Resistance – If and when the 8 and/or 20ma is rising , it
will serve as strong support. If the 8 and/or 20ma is declining, it will serve as strong overhead
resistance. Look for buys at or near a r8ma or r20ma. Look for sells/shorts at or near a 8ma or
20ma.

c) Use 20ma as a median line – When a currency pair is consolidating in a sideways pattern,
the 20ma will be flat and usually positioned right in the middle of the sideways trend. If and when
this is the case, buying near the bottom in a range below the 20ma and offering/shorting near the
top of a range above the 20ma is the game to play. Always be
watchful of which side the 20ma eventually halts the price on, for it is the potential start of the
next trending move.
Page 58

The 15 Min Chart -20ma power

Price rising above a rising 8ma, above a rising 20ma – picture of


r8ma
power for the iFund trained trader. Long opportunities would
be sought out on this and the other trading time frames.

r20ma

Chart Courtesy of iFund Traders Pro™


Page 59

The 60 min Chart – 20 ma power

d20ma

d8ma

Price falling below a d8ma, below a d20ma – picture of


power for the iFund trained trader. Short opportunities
would be sought out on this and the other trading time
frames.
Page 60

The 4 hr Chart – 20ma power

d20ma

d8ma

Price falling below a d8ma, below a d20ma – picture of


power for the iFund trained trader. Short opportunities
would be sought out on this and the other trading time
frames.

Note – As mentioned earlier – when the 4 hr chart is trending, it can


lead to multi-day moves without breaking trend, notice how the 20ma
would have kept you short for days at a time

Chart Courtesy of iFund Traders Pro™


Page 61

The 20ma Halt!


When the 20ma becomes flat and wavy, price will
tend to move equal distance above and below, almost Bull elephant kicks off the
ignoring the 20ma. Once the price is halted or caught new move following the halt
by the 20ma, get ready for the next move – you have
just found the start of a potential trend

20ma HALT
Page 62

The 20ma Halt

First Halt stops the expected


move up after two BT’s

Second Halt sends


the price crashing
lower with a Bear
Elephant bar

When the 20ma becomes flat and wavy, price will


tend to move equal distance above and below, almost
ignoring the 20ma. Once the price is halted or caught
by the 20ma, get ready for the next move – you have
just found the start of a potential trend
Page 63

The Mighty 200 MA


2) 200 Period Simple Moving Average (200ma) – The 200ma is so universally watched, in
all time frames, that for all practical purposes, it has become a self-fulfilling prophesy. So
rarely do FX pairs fail to obey (get halted by) the 200ma that we’ve given it the highest
nick-name of all, Goliath. It’s power, force, and reliability are so great, that it truly is
goliath-like. We use the 200ma on all time frames. Here are a few things that you must
keep in mind regarding this mighty moving average:

a) Flatness is king: - While the 20ma is most powerful when it is


rising and declining (trending), the 200ma is most powerful when it is
flat (trend-less).

b) Use as support – Whenever price declines to a flat 200ma, it will


almost always experience some form of rebound, particularly if the
20ma is far away.

c) Use as resistance – Whenever price rallies to a flat, overhead


200ma, it will almost always experience some form of retracement
back down, particularly if the 20ma is far away.

Trading Tip: iFund Traders know that flat 200ma plays call for bigger positions
Page 64

The Flat Mighty 200ma

The Flat 200ma would have been expected support (1), but once
broken and retested (2), it now becomes strong resistance (3,4).
Notice the nice measured moves once the 20ma becomes flat and
wavy and the 200ma serves as the resistance.

3 4
2
1

Charts Courtesy of iFund Traders Trader Pro®


Page 65

200ma support-resistance

Notice how the flat 200ma acts as very strong


support, but once broken and retested it
becomes equally strong resistance

First break and retest of support


Confirmed resistance on next retest

Holding support in the upper


third of the bull elephant bar
Page 66

Flat Mighty 200ma

What key event happens right at the flat 200ma?

Notice the power of this 200ma play – not only


does it stop the uptrend dead in its tracks, but
sends it on a 100% retracement of the prior move
Page 67

“Velez Market Law 2”


CHAPTER 8

“The number 1 has never and never will be a popular number for the market. It
always seems to require something more than one, or once, or one time. In other
words, the market likes confirmation. ‘One time’ never cuts it.” – Oliver L. Velez
Page 68

Velez Market Law #2


The Law of “2”
The market never accomplishes anything with just one bar. It needs at
least two bars to regard something as being real or significant.
Follow-through by a second bar is crucial, otherwise the one bar
event, no matter how apparently significant, is not yet real.

Different ways to communicate the law:

1) A one bar breakout is only significant if followed through by a


second up bar;

2) A one bar breakdown is only significant if it’s followed through by


a second down bar;

3) One bar events with no follow through tend to eventually produce


strong moves in the opposite direction.
Page 69

Velez Market Law #2


(1) Bull elephant kicks off the move
(2) Bear elephant closes below the 20ma and then has the low of that bar broken
confirming a break of the 20ma
(3) Price moves back above a flat wavy 20ma and then has another Bear elephant bar
close below the 20ma, BUT THERE IS NO FOLLOW THROUGH
(4) This leads to a 20ma halt and a Bull elephant bar starts the next move higher
(5) Notice the next “fake” break of the20ma, but our traders did not get shaken out
due to Market Law #2

5
2
3 4

1
Page 70

Velez Market Law #2

3
1
Page 71

“Velez Market Law #3”


CHAPTER 9

iFund Traders Quote: “All markets have statistical limits. The trader who
thoroughly understands when markets are statistically at or near the outer
bounds of their norms will become a master, and possibly even rich!”
- Oliver L. Velez
Page 72

Velez Market Law #3


The 3, 5, 8 Bar Max
During NORMAL market environments, FX and other tradable items usually will not
move in the same direction more than 5 to 8 bars in a row; however, price tends to
stay trapped in a 3 to 8 bar max cycle 80% of the time. 20% of the time, price moves
can top and bottom outside of this zone. But 5 bars is truly the pivotal number.

Different ways to communicate the law:

1) After a 3 to 5 bar run (up or down) the market


tends to sharply reverse, creating a nice trading opportunity. Every now and
again, it can slip into the next 5 to 8 bar zone.

2) Neither the bulls nor the bears can consistently win more than 5 battles
(bars) in a row. After a sharp 3 to 5 bar rally, the bears usually
quickly regain control. After a sharp 3 to 5 bar decline, the bulls
usually quickly regain control. These moves can move to the 5 to 8 bar
zone at times.

3) Lastly, this law can be said this way: “After 3 to 5 green


bars in a row, the iFund Trader should look to take advantage
of an upcoming series of red bars. After 3 to 5 red bars in a
row, the iFund Trader should look to take advantage of an
upcoming series of green bars.”
Page 73

The 3 to 5 Bar Buy Rule

In each of the scenarios above, the iFund Trader would be looking for a tradable rebound to the upside, once the high of a
prior bar has been taken out. How much of a rebound would depend on the answers to several key questions such as: a) is
the 3-5 bar dip occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs
present; c) how far away is the nearest area of resistance; d) where is the dip in relation to the 20ma; and e) is the current
decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in
the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 74

The 3 to 5 Bar Buy Rule

In each of the scenarios above, the iFund Trader would be looking for a tradable rebound to the upside, once the high of a
prior bar has been taken out. How much of a rebound would depend on the answers to several key questions such as: a) is
the 3-5 bar dip occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs
present; c) how far away is the nearest area of resistance; d) where is the dip in relation to the 20ma; and e) is the current
decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in
the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 75

The 3 to 5 Bar Buy Rule

In each of the scenarios above, the iFund Trader would be looking for a tradable rebound to the upside, once the high of a
prior bar has been taken out. How much of a rebound would depend on the answers to several key questions such as: a) is
the 3-5 bar dip occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs
present; c) how far away is the nearest area of resistance; d) where is the dip in relation to the 20ma; and e) is the current
decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in
the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 76

The 3 to 5 Bar Buy Rule

In each of the scenarios above, the iFund Trader would be looking for a tradable rebound to the upside, once the high of a
prior bar has been taken out. How much of a rebound would depend on the answers to several key questions such as: a) is
the 3-5 bar dip occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs
present; c) how far away is the nearest area of resistance; d) where is the dip in relation to the 20ma; and e) is the current
decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in
the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 77

The Picture of Strength

Circles show well-defined buy opportunities


for the iFund Trained Trader.
Page 78

The 3 to 5 Bar Sell Rule

In each of the scenarios above, the iFund Trader would be looking for a tradable decline to the downside, once the low of
a prior bar has been taken out. How much of a decline would depend on the answers to several key questions such as: a) is
the 3-5 bar rally occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs
present; c) how far away is the nearest area of resistance; d) where is the rally in relation to the 20ma; and e) is the current
decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in
the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 79

The 3 to 5 Bar Sell Rule

In each of the scenarios above, the iFund Trader would be looking for a tradable decline to the downside, once the low of
a prior bar has been taken out. How much of a decline would depend on the answers to several key questions such as: a) is
the 3-5 bar rally occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs
present; c) how far away is the nearest area of resistance; d) where is the rally in relation to the 20ma; and e) is the current
decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in
the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 80

The 3 to 5 Bar Sell Rule

In each of the scenarios above, the iFund Trader would be looking for a tradable decline to the downside, once the low of
a prior bar has been taken out. How much of a decline would depend on the answers to several key questions such as: a) is
the 3-5 bar rally occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs
present; c) how far away is the nearest area of resistance; d) where is the rally in relation to the 20ma; and e) is the current
decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in
the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 81

The 3 to 5 Bar Sell Rule

In each of the scenarios above, the iFund Trader would be looking for a tradable decline to the downside, once the low of
a prior bar has been taken out. How much of a decline would depend on the answers to several key questions such as: a) is
the 3-5 bar rally occurring in an up trend, down trend or sideways trend; b) are any of the most powerful reversal signs
present; c) how far away is the nearest area of resistance; d) where is the rally in relation to the 20ma; and e) is the current
decline potentially bottoming at or around one of the key reversal times? The answers to all these questions are covered in
the many trading concepts taught in the future chapters and through out our 5-day live trading labs
Page 82

The Picture of Power

Circles show well-defined short opportunities for the


iFund Trained Trader.

iFund Traders Tip: This time frame offers nice opportunities


to capture entire trend using the 20ma.
Page 83

“Velez Market Law #4”


CHAPTER 10

Quote: “Market failures tend to cause major problems for most ordinary traders,
but they can serve as major money making opportunities for well trained iFund
Traders! In other words, we are always prepared to profit from the market’s failed
attempt to do something highly expected.”
- Oliver L. Velez
Page 84

Velez Market Law #4


The Failed New Low/High Law
“If price fails to make a new pivot low, after it has already made 3 or more
lower pivot lows, it will make a new high relative to the previous pivot.
Conversely, if price fails to make a new pivot high, after it has already made
a series of higher pivot highs (3 or more), it will make a new low relative to
the previous pivot.”
Different ways to communicate the law:
1) The first failed attempt to make a new low in a well established downtrend
is the first sign that the balance of power has shifted from the sellers back to
the buyers. The tend has likely changed and the first low in the new trend has
been identified.

2) The first failed attempt to make a new high in a well established uptrend
is the first sign that the balance of power has shifted from the buyers back to
the sellers. The trend has likely changed and the first high in the new trend
has been identified.

3) The first failed attempt to make a new high or low in a well established
trend is the first sign that the back of the existing trend has been broken and
the opposing side is ready to regain control.
Velez Market Law 4
Click to add subtitle

1
2
3

5
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Velez Market Law 4
Can you name the events on the chart ?
4

5
3

2
1
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 87

The Fibonacci Sequence

major market moves


Page 88

The Fibonacci Swing

Your pairs become playable once they begin to swing in 3, 5 and 8-bar cycles. If your pairs
are not providing at least three bars of the same color, then they should be left alone. 1 to 2
bar cycles are “no-follow-through” markets that generate a lot of whipsaws and losing
trades. Tip: The first time your pair produces a 3-bar rally or decline of the same color, it
should demand your attention.
Page 89

“iFund Traders”
The Three Major
Trailing Stop Methods
CHAPTER 11

“The idea is to get out fast when a trade goes against you.”
- Jesse Livermore
Page 90

iFund Traders Trailing


Stop Method 1
iFund Traders Bar-by-Bar Stop Method

Once the iFund Trader has entered his long, and placed his initial stop, it’s a boom or bust scenario, meaning that
either the trader will hit his anticipated target or get out at his initial stop. Once there is a two bar lift (this includes
the entry bar if it ends higher than the buy price), the trader would launch into “training stop” mode. During this
mode, the trader would maintain a mental stop 1 pip below the prior bar’s low at all times. As each new bar begins,
the trailing stop is moved up, always staying only one bar behind the bar currently trading. The same would apply
in reverse, as evidenced by Figure 2.
Bar-by-Bar Trailing Stop

The numbers show each stop


adjustment made at the close of the
bar

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Bar-by-Bar Trailing Stop

The numbers show each stop


adjustment made at the close of the
bar

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 93

iFund Traders
Trailing Stop Method 2
2) iFund Traders 8ma Momentum Stop Method – This is by far the most dynamic trailing stop method we deploy, but requires
nerves of steel to put into practice. It represents one of my personal favorites because of its superior ability to keep the trader in a
trade during the sweetest (strongest) part of the move. Bar-by-bar noise is illuminated, allowing the trader to focus on what counts,
the force of the trend. What must be kept in mind is that when things are not in a trending mode, this stop method will result in
frequent “whip-saws.” But, with proper timing, it (like its bigger brother, the 20ma trailing stop method) is unrivaled when it
comes to “milking” the best part of a trend’s move. Note: We allow iFund Traders to use this stop method right from the initial
stages of their trading.

Figure 2

a
Buy (1)
Buy (2)

Short (2)
8ma Short (1)
a
8ma
Figure 1

In the above Figure 1, the iFund Trader would simply buy at point 1, and sell into the initial rise, anticipating a
pullback before the secondary leg. At buy point 2, the iFund Traders Trader could try to hold on to the trade as
long as it remained above the r8ma. Essentially, at that point, the 8ma would become the iFund Traders trailing
stop. Everything would be handled in reverse for Figure 2.
Page 94

The 8ma Bull Run


Page 95

The 8ma Bull Run


Page 96

The Picture of Strength

Circles show well-defined buy opportunities


for the iFund Trained Trader.

THE 8-TRAIN
Notice the 8ma contains this entire move, and never has a
two bar break, so the trail is never broken – this kind of
power and trail is referred to as the “8-TRAIN” and it
takes traders for a ride into the land of major profitability
Page 97

The 8ma Bear Run


Page 98

8ma Bear Run


Page 99

iFund Traders
Trailing Stop Method 3
3) iFund Traders 20ma Trailing Stop Method – This is by far the most basic trailing stop method we deploy, and
the easiest to put into practice. In many ways, it is the most superior method of all as it forces the trader to focus on
the trend, instead of the bar-by-bar noise, which can be quite confusing at times. However, its superior nature only
works in trending markets and it loses all of its luster when markets are not trending. But, with proper timing, it is
unrivaled when it comes to “milking” a move for all it’s worth. Note: We allow iFund Traders to use this method
after they have graduated to level 4.

Figure 2

a
Buy (1)
Buy (2)

Short (2)
20ma Short (1)
a
20ma
Figure 1

In the above Figure 1, the iFund Traders would simply buy at point 1, and sell into the initial rise, anticipating a
pullback before the secondary leg. At buy point 2, the iFund Traders could try to hold on to the trade as long as
it remained above the r20ma. Essentially, at that point, the 20ma would become the iFund Traders trailing stop.
Everything would be handled in reverse for Figure 2. The method applied to 5 and 15 minute charts works
extremely well.
Page 100

The 20ma Trailing Stop


Page 101

The 20ma Trailing Stop


Page 102

“iFund Traders with”


The Market’s
Three Trends
CHAPTER 12

iFund Traders Quote: “You can beat a horse race, but you can’t beat the races.”
- Unknown
Page 103

The Market’s Three Trends


1) The Up Trend – The up trend, by far the most popular of all, is usually defined by a series of
higher highs and higher lows. Our definition is a bit more involved. In addition to higher highs
and lows, we want an up trend to posses a smooth rising 20ma above a 200ma.

Tip: In Up Trends, iFund Traders buy


1)    Uptrend dips toward the 20ma, and buy
breakouts at or near the 20ma .

2) The Down Trend – The down trend, by far the most feared of all, is usually defined by a
series of lower highs and lower lows. Our definition is a bit more involved. In addition to
lower highs and lows, we want a down trend to posses a smooth declining 20ma below a
200ma.
Tip: In Down Trends, iFund Traders
2)    Downtrend short rallies toward the 20ma, and
short breakouts at or near the 20ma.

3) The Sideways Trend – The sideways trend, by far the most frustrating, is usually defined by
a series of relatively equal highs and lows. This stage can be wide, usually when it forms after
an advance, or it can tight and narrow, usually when it is just a pause or after a sharp decline.
Tip: In Sideways Trends, iFund Traders
3) Sideways Trend buy/bid dips and short/offer rallies, or
wait for the “halt” play and look for the
new trend to emerge
Page 104

The Market’s Three Up Trends

1) The Regular Up Trend – This uptrend, defined as rising price above a smooth rising 20ma,
is a iFund Traders bread and butter trend. This trend will be played more than an other.

Tip: In Regular up trends, iFund Traders


1)    Reg. Up trend buy dips toward the 20ma, buy breakouts
at or near the 20ma.
20ma

2) The Power Uptrend – This uptrend, defined as a rising price above a rising 20ma which is also
above the 200ma, is a step above the regular uptrend. An overhead 200ma represents clouds in the
sky, somewhat. When the 200ma is below all the action, it’s typically clearer sailing

2)    Power Uptrend


20ma Tip: In Power up trends, dips are no
concern and can be used to
accumulate larger positions.
200ma
3) The Super Uptrend – The uptrend, defined as a rising price above a rising 8ma, which is
also above a rising 20ma, is the most powerful one in existence. It’s emergence signifies pure
unadulterated buying power that one can trust absolutely. It does not get better than this!
3)    Super Uptrend 8ma Tip: In Super up trends,
buying anywhere and anytime
during the trend works
20ma amazing well.
Page 105

The Market’s Three Down Trends


1) The Regular Down Trend – This downtrend, defined as a declining price below a smooth
declining 20ma, is a iFund Traders bread and butter short trend. This trend will be played on
the short side more than an other.
20ma Tip: In Regular downtrends, iFund Traders
1)    Reg. Downtrend short rallies toward the 20ma, and short
breakdowns at or near the 20ma .

2) The Power Downtrend – This downtrend, defined as a declining price below a declining
20ma which is also below the 200ma, is a step above the regular downtrend. A 200ma below
the price represents a floor of support. When the 200ma is above all the action, the price is
typically freer to fall.
200ma
2)    Power Downtrend 20ma
Tip: In Power downtrends, rallies
are no concern and can be used to
build larger short positions.
3) The Super Downtrend – The downtrend, defined as a declining price below a declining 8ma,
which is also below a declining 20ma, is the most powerful one in existence. It’s emergence
signifies pure unadulterated selling power that one can trust absolutely. It does not get better
than this for bears!
20ma
Tip: In Super downtrends,
shorting anywhere and
8ma anytime during the trend
works amazing well.
Page 106

iFund Traders
Super Uptrend
Page 107

Super Down Trend


Page 108

15-Minute Up Trend

Look at the power of this uptrend that


develops after the 20ma halt. The 8 and
20 ma’s begin to rise and remain parallel
to each other as they take the price
higher and higher

Chart Courtesy of Realtick®


Page 109

60 Minute Down Trend


Page 110

Sideways Trend
The 20ma says it all. The flat wavy 20 leads to price making relatively equal highs
and lows above and below the 20ma. These “measured moves” become support and
resistance points for traders to look for trading opportunities - do you see any?
Page 111

“Section III”
The Trading Patterns
CHAPTER 13

“Do not have an interest in too many stocks at one time. It is much easier to watch
a few than many.”
- Jesse Livermore
Page 112

iFund Traders Buy Setup (VBS)

BULLISH TREND
• Rising price above a rising 20 Ma (a 20 Ma above a 200 Ma is ideal, but not required)

FULL SETUP
• Three or more consecutive Lower Highs (LHs), and Lower Lows(LLs) or,
• Three or more Red Bars (RBs). Tip: Two LHs or RBs will often work in very strong trends.

ADD-ONS
• Bottoming sign: BT, GBR, NRB,NB
• Location: Price support, Moving average support; specialty support items
• Time: reversal times are not required, but should be noted

BUY ACTION
• Buy one pip above the prior bar’s high. Note: If the prior bar’s high is too far away, drop to the next lower
time frame and use the prior bar’s high in that time frame as your alternative entry price. Example: If the prior
15-minute high is too far away, drop to the 5-minute chart and buy above the prior 5-minute high.
• Place stop 1 pip below the entry bar’s low. If too close use prior bar’s low.

TRADE MANAGEMENT
• Set minimum target at the 50% Retracement level. The secondary target is at or near the prior pivot high and
third is above the pivot high. Note: an overhead MA can also be a target.
• After a 2 bar advance, place a trailing stop 1 pip under each prior bar’s low until a) objective is met; b) a
topping tail forms; c) a wide range up bar forms; or d) a RBR dips below (takes away) the prior bar.
Page 113

iFund Traders Buy Tactics


1) iFund Traders Buy set-up – This is the main buy set-up we use at iFund Traders, and
it will represent anywhere from 65% - 80% of your longs. It is comprised of only a few
basic criteria and can be used in all time frames. To make it as an iFund Trader, this
tactic must be mastered.

1) iFund Traders Note: – The location and time of occurrences of this main stay trading pattern
are the major keys. The iFund Trader wants to essentially focus on the VBSs that occur at or near
multiple support levels and key reversal times. The ones accompanied by Narrow Range Bars
(NBRs) are my personal favorite. We’ll talk about these as we move forward.
Page 114

The iFund Buy Set – Up - VBS

Long
Entry

Stop
Page 115

The iFund Buy Set – Up - VBS


Page 116

The iFund Buy Set – Up - VBS

Bull Power Trend with a textbook VBS


Page 117

iFund Traders Sell Set-up (VSS)

BEARISH TREND
• Declining price under a declining 20 Ma (a 20 Ma below the 200 Ma is ideal, but not required)

FULL SETUP
• Three or more consecutive Higher Lows (HLs), and Higher Highs (HHs) or,
• Three or more Green Bars (GBs). Tip: Two HLs or GBs will often work in very strong trends.

ADD-ONS
• Topping sign: TT, RBR, NRB,NB;
• Location: Price resistance, Moving average resistance; Specialty resistance items
• Time: reversal times are not required but should be noted

SELL/SHORT ACTION
• Short 1 pip below the prior bar’s low. Note: If the prior bar’s low is too far away, drop to the next lower time
frame and use the prior bar’s low in that time frame as your alternative entry price. Example: If the prior 15-
minute low is too far away, drop to the 5-minute chart and short below the prior 5-minute low.
• Place stop 1 pip above the entry bar’s high. If too close use prior bar’s high.

TRADE MANAGEMENT
• Set minimum target at the 50% Retracement level. The secondary target is at or near the prior pivot low and
the third is somewhere below the pivot low.
• After a 2 bar decline, place a trailing stop 1 pip above each prior bar’s high until a) objective is met; b) a
bottoming tail forms; c) a wide range down bar forms; or d) a penetrating GBR.
Page 118

iFund Traders
Sell/Short Tactic
1) iFund Traders Sell Set-up – This is the main sell set-up we use at iFund Traders and it will represent anywhere
from 65% to 80% of your shorts. It is comprised of only a few basic criteria and can be used in all time frames. To
make it as a iFund Traders Trader, this tactic must be mastered.

200ma 200ma
d20ma d20ma

Stop

Alert Short
T1

T2

Ultimate Target Area T3

Pattern Set-up Short Action

Trading Note: The location and time of occurrence of this main stay trading pattern are the major keys. The iFund
Traders Trader wants to essentially focus on the Sell Set-ups that occur at or near multiple support levels and key
reversal times. The ones accompanied by NRBs are my personal favorite. We’ll talk about these as we move forward.
Page 119

iFund Traders
Sell Set-up (VSS)

Stop

Short
Entry
Page 120

iFund Traders
Sell Set-up (VSS)
Page 121

iFund Traders
Sell Set-up (VSS)

Bear Elephant forms during breakdown, the iFund trader


knows the potential follow through from an event like this and
seeks out short opportunities with each VSS
Page 122

“The Gift”
CHAPTER 14

iFund Traders Quote: “I learned very early on that brokers are always wrong;
analysts are always wrong; and clients are always wrong. But the tape is never
wrong.”
- Jesse Livermore
The “GIFT” Buy
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Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The “GIFT” Buy
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Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The “GIFT” Buy
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Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The “GIFT” Buy
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Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The “GIFT” Buy
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Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The “GIFT” Sell
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Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The “GIFT” Sell
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Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The “GIFT” Sell
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Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The “GIFT” Sell
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Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 132

“iFund Traders
Reversal Signs”
Bottoming Signals & Topping Signals
CHAPTER 15

iFund Traders Quote: “I learned very early on that brokers are always wrong;
analysts are always wrong; and clients are always wrong. But the tape is never
wrong.”
- Jesse Livermore
Page 133

Bottoming Tail (BT) & Topping Tail (TT)

1) Bottoming Tail (BT) – This bottoming sign is one of the most compelling in existence.
Whenever a BT forms after a steady 3 to 5 bar decline, a bottom is almost eminent. iFund
Traders would look to buy once the tail represents 66% or more of the bar’s range and/or the
very next time a previous bar’s high is violated.
TT makes up
more than 2/3 of
20ma
the bar’s range

3-5 Bar Decline w/ BT

3-5 Bar Rally w/ TT


20ma
BT makes up
more than 2/3 of
the bar’s range

2) Topping Tail (TT) – This topping sign is one of the most compelling in existence from the
sell side. Whenever a TT forms after a steady 3 to 5 bar rally, a top is almost eminent. iFund
Traders would look to short once the tail represents 66% of the bar’s range and/or the very
next time a previous bar’s low is violated.
Page 134

Bottoming Tail (BT) & Topping Tail (TT)

1) Bottoming Tail (BT) – This bottoming sign is one of the most compelling in existence.
Whenever a BT forms after a steady 3 to 5 bar decline, a bottom is almost eminent. iFund Traders would look to buy
once the tail represents 66% or more of the bar’s range and/or the very next time a previous bar’s high is violated.

Alternate Stop

20ma
Stop

3-5 Bar Decline w/ BT


Entry

Entry Point

3-5 Bar Rally w/ TT


Stop

20ma
Alternate
Stop

2) Topping Tail (TT) – This topping sign is one of the most compelling in existence from the sell side. Whenever a
TT forms after a steady 3 to 5 bar rally, a top is almost eminent. iFund Traders would look to short once the tail
represents 66% of the bar’s range and/or the very next time a previous bar’s low is violated.
Page 135

VBS with BT

Buy

Stop

Alternate Stop
Page 136

VBS with BT

Buy
BOP
Stop

Buy

Stop
Page 137

The Power of the BT


a. What event was marked by the number 1?

b. Where would your entry and stop have been?

c. What event was marked by the number 2?

d. Where would your entry and stop have been?

1
Page 138

VSS with TT

Alternate Stop

BDP With Stop


Elephant bar Short
Page 139

The power of the TT


This is a very powerful
1 event by itself, but even
better when it occurs at a
location item, do you see
one?

a. What event was marked by the number 1?


b. Where would your entry and stop have been?
c. What price was the bar-by-bar exit?
d. What price was the 8ma trail exit?
e. Is this a counter-trend play?
Page 140

Green Bar Reversal (GBR)


& Red Bar Reversal (RBR)
1) Green Bar Reversal (GBR) – This bottoming sign is one of the most obvious in existence, as
the change in power from the bears back to the bulls has already fully occurred. Tip: Whenever
a GBR forms after a steady 3 to 5 bar decline, the odds of a bottom are greatly increased. iFund
Traders would look to buy once the green bar’s high is violated. Stops are placed just below
the entry bar’s low, or the green bar’s low.

20ma

RBR
3-5 Bar Decline w/ GRB

GBR 3-5 Bar Rally w/ RBR

20ma

2) Red Bar Reversal (RBR) – This topping sign is one of the most obvious in existence from the sell side. Tip:
Whenever a RBR forms after a steady 3 to 5 bar rally, the odds of a top are greatly increased. iFund Traders would
look to short once the red bar ‘s low is violated. Stops are placed above the entry bar’s high, or the red bar’s high.
Page 141

Green Bar Reversal (GBR)


& Red Bar Reversal (RBR)
1) Green Bar Reversal (GBR) – This bottoming sign is one of the most obvious in existence, as
the change in power from the bears back to the bulls has already fully occurred. Tip: Whenever
a GBR forms after a steady 3 to 5 bar decline, the odds of a bottom are greatly increased. iFund
Traders would look to buy once the green bar’s high is violated. Stops are placed just below
the entry bar’s low, or the green bar’s low.

Alternate Stop if
entry bar is to tight

3-5 Bar Decline w/ GRB Stop


Entry

Entry
Stop
3-5 Bar Rally w/ RBR
Alternate Stop if
entry bar is to tight

2) Red Bar Reversal (RBR) – This topping sign is one of the most obvious in existence from the sell side. Tip:
Whenever a RBR forms after a steady 3 to 5 bar rally, the odds of a top are greatly increased. iFund Traders would
look to short once the red bar ‘s low is violated. Stops are placed above the entry bar’s high, or the red bar’s high.
Page 142

VBS w/ GBR

Nice power trend – price rising above


the rising 8ma above the rising 20ma;
the iFund trader looks for buy set-ups
at or near the rising ma’s

Buy
Stop

Notice how this VBS is the first test of


the r20ma since the sideways trend was
broken to the upside, this is the start of
the new trend and should yield multiple
buy opportunities
Page 143

VSS w/ RBR

Stop
Short

Igniting bar leads to a text


book “Gift” sell set up after a
3 bar rally followed by a RBR
at the d20ma
Page 144

Narrow Body (NB)


1) Narrow Body Bottom (NBB) – This bar, as a bottoming sign is not quite a potent as its former brother, but it’s
significant enough to take notice when it does form. The narrow nature of the colored part of the bar (either green or
red) signifies that a change or shift in the balance of power is nearly complete. Tip: Whenever a NB forms after a
steady 3 to 5 bar decline, the odds of an explosive rally are greatly increased. iFund Traders would look to buy the very
next time a previous bar’s high is violated. Stops are always placed just below the entry bar’s low.
20ma
RBR & NB

3-5 Bar Decline w/ GRB & NB


Entry

Entry

3-5 Bar Rally w/ RBR & NB


GBR & NB
20ma
2) Narrow Body Top (NBT) – This bar, as a topping sign is not quite as potent as its former brother, but it’s significant
enough to take notice when it does form. The narrow nature of the colored part of the bar (either green or red) signifies
that a change or shift in the balance of power is nearly complete. Tip: Whenever a NBT forms after a steady 3 to 5 bar
rally, the odds of an explosive decline are greatly increased. iFund Traders would look to short the very next time a
previous bar’s low is violated. Stops are always placed just above the entry bar’s high.
Page 145

Narrow Range Bar (NRB)


1) Narrow Range Bottoming Bar (NRB) – This bottoming sign is one of my personal favorites. Firstly, the narrow
range nature of the bar makes for the lowest risk possible with this trade. The NRB makes for very tight stops.
Secondly, the market’s biggest moves tend to ignite from its smallest bars. Remember this. Tip: Whenever a NRB
forms after a steady 3 to 5 bar decline, the odds of an explosive rally are greatly increased. iFund Traders would look to
buy the very next time a previous bar’s high is violated. Stops are always placed just below the entry bar’s low.

20ma RBR & NRB

3-5 Bar Decline w/ GRB & NRB

GBR & NRB 3-5 Bar Rally w/ RBR & NRB


20ma

Note: The NRB can be any color and still be powerful

2) Narrow Range Topping Bar (NRB) – This topping sign is one of my personal favorite. Firstly, the narrow range
nature of the bar makes for the lowest risk possible with this trade. The NRB makes for very tight stops. Secondly,
the market’s biggest moves tend to ignite from its smallest bars. Remember this. Tip: Whenever a NRB forms
after a steady 3 to 5 bar rally, the odds of a violent decline are greatly increased. iFund Traders would look to short
the very next time a previous bar’s low is violated. Stops are always placed just above the entry bar’s high.
Page 146

Narrow Range Bar (NRB)


1) Narrow Range Bottoming Bar (NRB) – This bottoming sign is one of my personal favorites.
Firstly, the narrow range nature of the bar makes for the lowest risk possible with this trade. The
NRB makes for very tight stops. Secondly, the market’s biggest moves tend to ignite from its
smallest bars. Remember this. Tip: Whenever a NRB forms after a steady 3 to 5 bar decline, the
odds of an explosive rally are greatly increased. iFund Traders would look to buy the very next
time a previous bar’s high is violated. Stops are always placed just below the entry bar’s low.

3-5 Bar Decline w/ GRB & NRB


Entry

Entry
3-5 Bar Rally w/ RBR & NRB

Note: The NRB can be any color and still be powerful

2) Narrow Range Topping Bar (NRB) – This topping sign is one of my personal favorite. Firstly, the narrow range
nature of the bar makes for the lowest risk possible with this trade. The NRB makes for very tight stops. Secondly, the
market’s biggest moves tend to ignite from its smallest bars. Remember this. Tip: Whenever a NRB forms after a
steady 3 to 5 bar rally, the odds of a violent decline are greatly increased. iFund Traders would look to short the very
next time a previous bar’s low is violated. Stops are always placed just above the entry bar’s high.
Page 147

“Velez Market Law #5


NRB
CHAPTER 16

iFund Traders Quote: “If you think education is expensive, try ignorance.”
- Unknown
Page 148

Velez Market Law #5


Market Law # 5:
The markets biggest moves ignite from its smallest (tiniest) bars.

Different ways to communicate the law:

1) Explosive moves almost always originate from narrow range bars.

2) The market is a breathing mechanism. It inhales (contracts) and


exhales (expands). When it inhales (contracts) deeply, a major exhale
(expansion) will be the result. Narrow range bars (NRBs) are the sign
of a deep inhale. A major exhale usually is the result.

3) A cluster of small bars signifies the calm before the storm, the
sleep before the awakening.

4) The iFund Traders Trader will look to commit more to trades that
involve NRBs. The combination of lower risk and bigger potential
reward warrants it.
Page 149

VBS with a NRB

It has been said that a picture is worth a


thousand words, just look at the result of
this VBS from a NRB – enough said
Page 150

VSS with a NRB

What’s this?
What should you be thinking?

VSS with a NRB


Page 151

7 BUY Reversal Signs

Plus any of the iFund Traders Bottoming Signs:


Page 152

7 SELL Reversal Signs

Plus any of the iFund Traders Topping Signs:


Page 153

7 BUY Reversal Signs

BT – Bottoming
Tail

r20ma
Page 154

7 BUY Reversal Signs

BT – Bottoming
Tail

r20ma
Page 155

7 BUY Reversal Signs

GBR – Green Bar Reversal

r20ma
Page 156

7 BUY Reversal Signs

NBB – Narrow Body Bar

r20ma
Page 157

7 BUY Reversal Signs

NBB – Narrow Body Bar

r20ma
Page 158

7 BUY Reversal Signs

NRB – Narrow Range Bar

r20ma
Page 159

7 BUY Reversal Signs

NRB – Narrow Range Bar

r20ma
Page 160

7 SELL Reversal Signs

d20ma

TT – Topping Tail
Page 161

7 SELL Reversal Signs

d20ma

TT – Topping Tail
Page 162

7 SELL Reversal Signs

d20ma

RBR – Red Bar Reversal


Page 163

7 SELL Reversal Signs

d20ma

NBB – Narrow Body Bar


Page 164

7 SELL Reversal Signs

d20ma

NBB – Narrow Body Bar


Page 165

7 SELL Reversal Signs

d20ma

NRB – Narrow Range Bar


Page 166

7 SELL Reversal Signs

d20ma

NRB – Narrow Range Bar


Page 167

“Section IV”
The Location Items
CHAPTER 17
Page 168

“iFund Traders”
Support &
Resistance Points

iFund Traders Quote: “There is nothing more important than your emotional
balance.” - Jesse Livermore
Page 169

Price Support Types


1) Prior High Support – This form of support occurs when a current low (dip) revisits or retests a
prior high/peak. Often, this support point coincides with the 50% retracement level.

Prior High 40

38

37 Low Retests Prior High


36

2) Prior Low Support – This form of support occurs when a current low (dip) revisits or retests a
prior low. In essence, this is a 100% retracement of the prior rally.
24 24

22

Low Retests Prior Low(s)

iFund Traders Buy Rule #1: Any of the four iFund Traders Bottoming Signs that
occur at or near these support points have very high odds of success. Limit all your
buys to some area of price support.
Page 170

MA Support Types
3) Trending Moving Average Support – This form of support occurs when an up trend pulls back
to or near the rising 20ma or 8ma and stabilizes (forms one of the four bottoming signs). Often, this
support point becomes stronger after the first successful rebound off the r20ma.

20ma

20ma Retests
4) Flat Moving Average Support – This form of support usually occurs when there is a flat
200ma beneath the price. It is not often that when a pair is falling back to a flat 200ma it fails to at
least stall for a period of time. The first move to a flat 200ma will usually result in some form of
rebound, if only temporarily.

Flattish 200ma

Flat 200ma Support


iFund Traders Buy Rule #2: Any of the four iFund Traders Bottoming Signs that
occurs at or near these MA support points have very high odds of success. Limit your
buys to some form of MA support.
Page 171

Retracement Support Types


5) 55% Retracement Support – This form of support occurs when an up trend gives back about ½ of its
recent gain, then stabilizes (forms one of the four bottoming signs). Tip: The 55% Retracement Level often
coincides with Prior High Price Support. When it does, the 50% Support Level is even more solid.
$40

$38

$36
50% Support Level

6) 33% Retracement Support – This form of support occurs when an up trend mildly gives back
only 1/3 of its recent gain, then stabilizes (forms one of the four bottoming signs). Tip: The 33%
Retracement Level, while more minor than its 50% brother, it signifies that there is very high
demand.
$40

My Personal Favorite 33%


$38
50%
$36
33% Support Level

iFund Traders Buy Rule #3: Any of the four iFund Traders Bottoming Signs that occurs at or near these
Retracement areas have very high odds of success. Limit your buys to one of them.
Page 172

Price Resistance Types


1) Trending Price Resistance – This form of resistance occurs when a current high (rally) revisits
or retests a prior low/dip. Often, this resistance point coincides with the 50% retracement level.

High Retests Prior Low

Prior Low

2) Prior High Resistance – This form of support occurs when a current high (rally) revisits or
retests a prior high. In essence, this is a 100% retracement of the prior decline.

High Retests Prior High(s)

iFund Traders Short Rule #1: Any of the four iFund Traders Topping Signs
that occurs at or near these resistance points have very high odds of success.
Limit your shorts to some form of Price Resistance.
Page 173

MA Resistance Types
3) Trending Moving Average Resistance – This form of resistance occurs when a down trend
rallies back to or near the declining 20ma or 8ma and stabilizes (forms one of the four topping
signs). Often, this resistance point becomes stronger after the first successful decline off the
d20ma.
20ma Retests

20ma

4) Flat Moving Average Resistance – This form of resistance usually occurs when there is a flat
200ma above the price. A rally to a flat 200ma will rarely fail to experience some form of
resistance. The first move to a flat 200ma will usually result in some form of price lapse, if only
temporarily.
Flat 200ma Resistance

Flattish 200ma

iFund Traders Short Rule #2: Any of the four iFund Traders Topping Signs that
occurs at or near these MA resistance points have very high odds of success. Limit your
shorts to these MA areas.
Page 174

% Resistance Types
5) 55% Retracement Resistance – This form of resistance occurs when a down trend rallies back
about ½ up its recent decline, then stabilizes (forms one of the four topping signs). Tip: The 55%
Retracement Level often coincides with Prior Low Price Resistance. When it does, the 55%
Resistance Level is even more solid.

$40 50% Resistance Level

$38

$36
6) 33% Retracement Resistance – This form of resistance occurs when a down trend rallies back
to its down trend line and stabilizes. The down trend line often coincides with 20ma resistance, and
like many other forms of resistance, it can coincide with other forms of resistance, like Prior Low,
Moving Average and the 50% level.

$40 33% Resistance Level


50%
$38 33%

$36

iFund Traders Buy Rule #3: Any of the four iFund Traders Topping Signs that occur
at or near these Retracement areas have very high odds of success. Limit your shorts to
one of them.
Support & Resistance

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Support & Resistance

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Support & Resistance

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Support & Resistance

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 179

“iFund Traders”
Specialty Support &
Resistance Points

iFund Traders Quote: “There is nothing more important than your emotional
balance.” - Jesse Livermore
Specialty S&R Types
Fulcrum Points

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Specialty S&R Types
Fulcrum Point examples

EUR/USD EUR/JPY
1.41000 135.000
1.40800 134.800
1.40500 134.500
1.40200 134.200
1.40000 134.000

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Specialty S&R Types

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Specialty S&R Types
Pivot Points
We often hear market analysts or experienced traders talking about a market
price nearing a certain support or resistance level, each of which is important
because it represents a point at which a major price movement is expected to
occur.

But how do these analysts and professional traders come up with these so-
called levels?

One of the most common methods is using pivot points, and we are going to
take a look at how to calculate and interpret these technical tools.

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Specialty S&R Types
How to calculate Pivot Points
There are several different methods for calculating pivot points, the most common of
which is the five-point system. This system uses the previous day's high, low and close,
along with two support levels and two resistance levels (totaling five price points) to
derive a pivot point. The equations are as follows:

R2 = P + (H - L) = P + (R1 - S1)
R1 = (P x 2) - L
P = (H + L + C) / 3
S1 = (P x 2) - H
S2 = P - (H - L) = P - (R1 - S1)
"S" represents the support levels
"R" the resistance levels
"P" the pivot point.
High, low and close are represented by the "H", "L" and "C" respectively.

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Specialty S&R Types

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Specialty S&R Types

Where to find your Pivot Points?

There are many free online resources


available that calculate pivot points

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 187

“Section V”
Micro Reversal Times
CHAPTER 18

iFund Traders Quote: “I am one of the few speculators who has never cared in
which direction a stock is going. I simply go with the line of least resistance.”
- Jesse Livermore
Market Reversal Times
1) 2:30am ET Reversal Time – This time is when traders really begin to see their
first “real” action of the day. The European market has just opened 30 minutes
prior and volume is starting to flood the market. This is also around the time
when major news announcements take place for the Euro Zone. iFund Traders
should look for some type of reversal or stall from a trend that may have been in
place from the Asian session.

2) 3:30 – 4:30am ET Reversal Time– This marks another major reversal time, as it
denotes the opening of the London Market. The reason for the importance is that
34% of the daily FX volume comes from the UK. With both European markers
open and major UK news announcements happening at 4:30am EST, it makes this
time of day VERY interesting. The iFund Traders Trader would look for major
stoppages of up and down trends to occur around this time.

3) 8:30am ET Reversal Time – This time marks the kick-off for the US session. At
this point in the day, all major markets (US, Euro, and UK) are open for business.
A good majority of the US news announcements take place during this time.
Especially the Non-Farm Payroll numbers on the first Friday of every Month.
Based on the news and the Euro markets breaking for lunch, this time is known
for reversing trends from the Euro sessions and starting new ones which can last
for the remaining of the day.
Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Market Reversal Times
4) 10:30 -11:30am ET Reversal Time – This time is know for its volatility. Trends set earlier in
the day by both markets can find themselves well overbought or oversold during this time of
day. As the market stretches to set new highs or new lows, Institutional traders in Europe are
looking to close up shop for the day and complete any last transactions required of them before
they leave. In doing so, this dries up much of the volume in the market and once strong trends
begin to “fade” or reverse course. This time also marks when the US sessions prepares to
break for lunch, which also adds to the reversal of previous trends. iFund Traders should look
for market reaction from the news announcements at the 10:00 hour to see if price is slowing
or accelerating into the close of London.

5) 3:00pm ET Reversal Time – This time denotes when the bond market closes. There are days
during which bonds are the major support for all markets. When bonds are supporting a risk
friendly environment and the market loses its friend at 3:00, a change in direction can be
ignited. Conversely, there are days during which bonds are a major support for safety. When
bonds, which were proving to have a risk averse outlook on the day, closes at 3:00, a turn for
more risk tolerance can material.

6) 8:00pm ET Reversal Time – This time marks the time when both the Australian and Asian
Markets are open. Major news announcements during this time can and often sets the tone for
the market to trend in for the rest of the session. Most days the Asian session remains in the
range set by the Major markets earlier in the day. However, the Japanese are know for surprise
announcements which can jumpstart the market well into the start of the Euro session.

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 190

The News
CHAPTER 19
The News
Forex trading does require a trader to be aware of pending news
announcements to avoid being caught of guard by sudden and
unexpected volatility. Although technical analysis is the key to winning
trades, knowing what and when the global news announcements are
happening in the foreign exchange market will help traders protect
their profits and avoid sudden and unexpected losses.

Important news events are readily available on many


internet websites. One such website is forexfactory.com
which has a global schedule of news events and even ranks
them as far as expected potential impact on the FX market

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The News

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
The News
Is Trading the News a sound strategy?

We do not trade news releases !!!


• Traders should be flat 15 Minutes before release
• Look for trades beginning 15 Minutes after the news release

We wait for the news to price itself into the market at someone else’s
expense, and then trade the reaction by reading the chart and
trading the patterns that emerge. Do not get caught up in the “what”
or “why” when it comes to the news, just know the “when”, and then
just trade the chart.

Copyright © 2010 * iFundTraders, LLC. * 2576 Broadway, #158, NY, NY, 10025
Page 194

“Section VII”
The Sideways
Break Strategies
CHAPTER 20

iFund Traders Quote: “There are times when your trading money should be
inactive. In the market, time is not money – time is time – and money is money.”
- Jesse Livermore
Page 195

Two Main Breakout Facts

Fact 1:
Breakouts are amongst some of
the most powerful, profitable
plays in existence

Fact 2:
72% of all Breakouts Fail
Page 196

Breakout Question 1

Question 1:
So how can breakouts be so
powerful and profitable if most don’t
work?

Answer:
The 28% that do work do so in a
major way. Big Profits!
Page 197

Breakout Question 2
Question 2:
So how can one distinguish between those
breakouts that are likely to fail, versus those
which will likely soar?

Answer:
By the end of this educational session, you’ll
know which breakouts to buy and which to by-
pass.
Page 198

The Traditional Breakout

iFund Traders Tip:


You need a minimum of three relatively equal
highs and lows to have a true consolidating base.
Page 199

The Traditional Breakout

Stop Here
Page 200

The Traditional Breakout

Stopped
Out Here

What’s the culprit? What went wrong?


Page 201

The iFund Traders Breakout


Page 202

The iFund Traders Breakout


Page 203

iFund Traders Breakout Play (BOP)


PATTERN SETUP
1. The sideways base can occur in an established uptrend or after a downtrend
2. The base should be narrow and thin, not wide and whippy
3. The bars in the base should be small and narrow, no wide range
4. The 8ma and/or the 20ma should ideally be rising during the base’s formation

BUY ACTION
1. Buy the bar that breaks above the last 2/3s of the base
2. Place a stop one pip below the breakout bar (the entry bar’s low).
3. Project the length of the base upward for target, if there is no prior reference point.

IMPORTANT POINTS
1. The best breakouts occur at or near the point of contact with the rising 20ma/8ma
2. A iFund Traders buy Set-up at the bottom of a base can be an early buy opportunity
for the watchful trader, if the VBS is occurring at or the rising moving average.
3. We play BOPs more on 5 and 15 minute charts when scalping
4. A Pause (Base) VS a Top – When a Base Is a Top and not a Pause:
a. Pauses (bases) are narrow; Tops are wide and whippy
b. Pauses (bases) have small bars; Tops have big wide range bars
d. Pauses “usually” don’t cross the 20ma by much; Tops cross below it.
Page 204

iFund Traders Breakout Play (BOP)

iFund Traders Breakout Play – This buy tactic will be the iFund Traders second most frequently
traded event. On many days, it will be the only pattern traded, as FX pairs tend to spend the
majority of their intra-day time drifting sideways in bases.
b
Tip Top
a
Buy
Alert Buy

Higher lows
iFund Traders Tip
The second move, after a normal
dip, will often be the biggest one.
Volume Decline
Patter Set-Up Buy Action

Pattern Set-up
Buy Action
Trading Note: Bases that are tight and narrow with rising lows and a rising 8ma and/or 20ma produce the
highest odds of exploding to the upside, once they clear the over head resistance. Keep in mind that these
“pauses” are not negative, despite the apparent loss of momentum. They simply serve as pit stops on the way
to higher ground. In essence, they give the trend the ability to rest and rejuvenate before another big advance
begins. The iFund Traders Breakout Play is a staple amongst our traders.
Page 205

Breakout Play (BOP)

Igniting Bull elephant bar (do you see it?)


leads to consolidation in the upper 1/3 of the
move - look to buy the break out at or near
the point of contact with the rising ma’s
Buy here
Page 206

Breakout Play (BOP)

a. Name the events marked by the blue arrows


b. Where would your entry and stop have been?
c. What is the trend?
d. Where did the consolidation occur?
Page 207

Breakout Play (BOP)

BT “shake
out”

Igniting Bull elephant bar


Page 208

Breakout Play (BOP)

When break outs do not immediately blast off,


they will often retest the highs of the
consolidation prior to the breakout, look for
opportunities to buy or add on this event
Page 209

Breakdown Play (BDP)


PATTERN SETUP
1. The sideways base can form in an established downtrend or after a after an uptrend
2. The base should be narrow and thin, not wide and whippy
3. The 20ma and/or 8ma should still be declining.
Note: in the downtrend, this is very important, more so than in an uptrend.

SELL/SHORT ACTION
1. Short the bar that breaks below the last 2/3s of the base.
2. Place stop one pip above the breakdown bar or above the entire base. This is your choice.
3. Project the length of the base downward for target, if there is no prior reference point.

IMPORTANT POINTS
1. The best breakdowns often occur at or near the point of contact with the d20ma
2. A n iFund Traders Sell Set-up at the top of a base can be an early short opportunity for the
watchful trader, if the base is wide enough.
3. We play BDPs more on 5 and 15-minute charts when scalping
4. A Pause (Base) VS a Bottom:
a. Pauses (bases) are narrow; Bottoms are wide, whippy and long
b. Pauses “usually” don’t cross the 20ma by much; Bottoms cross below the
20ma, and eventually become one with the flat 20ma (f20ma)
c. Pauses don’t tend to form too far below the 200ma, while Bottoms do.
d. Bottoms often bring the 20ma and the 8ma together to form one MA; Pauses don’t.
Page 210

iFund Traders Breakdown Play (BDP)

iFund Traders Breakdown Play – This short tactic will be the iFund Traders second most
frequently traded event. On many days, it will be the only pattern traded, as FX pairs tend to spend
the majority of their intra-day time drifting sideways in bases.

Patter Set-Up Short Action

Trading Note: Bases that are tight and narrow with declining highs and a declining 20ma, produce the
highest odds of collapsing to the downside, once they clear of the support. Keep in mind that these “pauses”
are not bullish, despite the apparent loss of momentum. They simply serve as pit stops on the way to lower
ground. In essence, they give the trend the ability to rest and rejuvenate before another big collapse begins.
The iFund Traders Breakdown Play is a staple amongst our traders.
Page 211

Breakdown Play (BDP)

Long period of consolidation

Igniting Bear Elephant


Page 212

Breakdown Play (BDP)

Long period of consolidation

Igniting Bear Elephant

VSS with a RBR

Once the long period of consolidation is broken to VSS with a NRB


the downside with the igniting elephant bar, the
power down trend emerges and iFund traders look
for short opportunities at or near the dmas
Page 213

Breakdown Play (BDP)

Consolidation in the lower one third of a nice


WRB, look for the break down at or near the
point of contact with the dmas
Page 214

“Section VIII”
One Bar Strategies
CHAPTER 21
Page 215

Bull 180º Play (+180)


PATTERN SETUP
1. The current bar must represent a very bearish period. This is to say that most of
the bar’s range should be red.
2. The open must be in the top part of bar’s range.
3. The close must be in the bottom part of the bar’s range.
4. The further this bar is away from the 20ma, the better.
5. Also works well if it is the VBS trigger at or near the 20ma
IMPORTANT POINTS
1. Works accurately on all FX pairs
2. Works best as a multi-bar trading tactic and can often result in healthy gains.
3. Properly used this tactic can enjoy an incredible accuracy rate.
4. When you’ve found a Bull 180, know that you have just grabbed the absolute
low for a very long period time, relative to the time period.
BUY ACTION
1. Buy one pip above the high of the red bar if and when it’s violated.
2. Place a protective stop one pip below the entry bar’s low.
Page 216

Bull 180º Play (+180)

a. What event was marked by the number 1?


b. Where would your entry and stop have been?
c. What ?
d. What price was the 8ma trail exit?
3
1
e. Is this a counter-trend play?
2
Page 217

Bull 180 Play


Page 218

Bull 180º Play (+180)

BULL 180 Tip: Strong tails and 180’s often see a


retest and form a higher low before
making the big move
Page 219

Bear 180º Play (-180)


PATTERN SETUP
1. The current bar must represent a very bullish period. This is to say that most of
the bar’s range should be green.
2. The open must be in the bottom part of bar’s range.
3. The close must be in the top part of the bar’s range.
4. The further this bar is away from the 20ma, the better.
5. Also works well if it is the VSS trigger at or near the 20ma

IMPORTANT POINTS
1. Works accurately on all FX pairs
2. Works best as a multi-bar trading tactic and can often result in healthy gains.
3. Properly used this tactic can enjoy an incredible accuracy rate.
4. When you’ve found a Bear 180, know that you have just grabbed the absolute
top for a very long period time, relative to the time period.
SHORT ACTION
1. Short one pip below the low of the green bar if and when it’s violated.
2. Place a protective stop one pip above the entry bar’s high.
Page 220

Bear 180º Play (-180)

Is this a break of the 20ma?


Do you see an opportunity
here and if so , what it is?

VBS with
GBR,NBB
Page 221

Bear 180º Play (-180)


This Bear 180 is showing the “no follow through”
concept –when something that should happen (bull
elephant break-out bar leading to a move higher) does
not, (no follow through) and the opposite signal
appears, (the bear 180) get ready for a big move in
the opposite direction of the original signal
Page 222

Bear 180º Play (-180)

BT

BT
Page 223

Red Bar Ignored (RBI)


PATTERN SETUP
1. Bar 1 must be a bullish green bar. This is the bar that dictates the direction of the
trade.
2. Bar 2 must be a red bar. The best red bars stay (trade) within the top 1/3 of Bar 1,
without trading above Bar 1’s high, but this is not required.

IMPORTANT POINTS
1. This tactic works amazingly on all times frames, and can be seen often on 5 and 15
minute time frames
2. Works accurately on all FX pairs
3. This tactic has an amazing accuracy rate.
4. This buy tactic helps traders jump on board strong trends already in motion.

BUY ACTION
1. Immediately buy when Bar 3 (or 4) trades one pip above the highs of Bar 2 (red bar).
Note: This signifies that the very brief negativity of the red bar was nothing more
than a breather for the pair. When red bars are ignored, explosive moves tend to
follow.
2. Place your stop one pup below the low of your entry bar. Note: This makes this
tactic very low risk, especially when the red bar is of the narrow range variety.
3. Use a trailing stop strategy until
a. Your objective has been met
b. The low of a reversal bar has been violated, or
c. Your incremental sell approach has led to you running out of lots to sell.
Page 224

Red Bar Ignored (RBI)

Powerful surge with 2 bull elephant bars, then a textbook


RBI forms in the upper 1/3 of the prior solid green bar, this
is an incredible risk/reward opportunity to add to a
winning position, or get it if the initial move was missed
Page 225

Red Bar Ignored (RBI)

Very powerful trends will offer multiple opportunities to


maximize a winning position, and RBI’s offer some of the
best risk/reward possible, look to add each time these
appear in a power trend move. RBI

Notice how both of these RBI’s stayed in the upper 1/3 of


the prior solid green bars making this a very high odds play

RBI
Page 226

Red Bar Ignored (RBI)

a. What kind of trend is in progress?


b. What is the event marked at #1?
c. Name the event and location, along with entry and stop price at #2?
d. Name the event and location, along with entry and stop price at #3? 3

1
2
Page 227

Red Bar Ignored (RBI)

This is it, the moment you have waited for,


the opportunity you have been dreaming
about, do you see it?
Are you ready?
What should be getting ready to do any
moment?
Page 228

Red Bar Ignored (RBI)

CHA-CHING!
Page 229

Green Bar Ignored (GBI)


PATTERN SETUP
1. Bar 1 must be a bearish red bar. This is the bar that dictates the direction of the trade.
2. Bar 2 must be a green bar. The best green bars stay (trade) within the bottom 1/3 of
Bar 1, without trading below Bar 1’s low, but this is not required.

IMPORTANT POINTS
1. This tactic works amazingly on all times frames, and can be seen often on the 5 and
15 minute time frames
2. Works accurately on all FX pairs
3. This tactic has an amazing accuracy rate.
4. This short tactic helps traders jump on board strong trends already in motion.

SHORT ACTION
1. Immediately short when Bar 3 (or 4) trades one pip below the lows of Bar 2 (green
bar). Note: This signifies that the very brief bullishness of the green bar was nothing
more than a breather for the weak pair. When green bars are ignored, explosive
moves to the downside tend to follow.
2. Place your stop one pip above the high of your entry bar. Note: This makes this
tactic very low risk, especially when the green bar is of the narrow range variety.
3. Use a trailing stop strategy until
a. Your objective has been met
b. The high of a reversal bar has been violated, or
c. Your incremental cover approach has led to you running out of lots to cover.
Page 230

Green Bar Ignored (GBI)

Stop

Entry
Page 231

Green Bar Ignored (GBI)

The flat wavy 20ma indicates the sideways trend and


the price is making measured moves above and below
the 20ma. Once the sideways range is broken , a
powerful move to the downside begins, and the GBI
sets the stage for some fat juicy profits
Page 232

Green Bar Ignored (GBI)

VSS on a “peek-a-
boo” break of the
d20ma

Power down trend under way, and the GBI appears giving
the iFund trader a chance to add to the existing short, or get
short once the low of the “little green bar of hope” is broken
Page 233

Green Bar Ignored (GBI)

Yes, this is a real chart


Yes, this really happens
Yes, you will see this again and again
But will you know what to do?
Will you be ready?
Page 234

Green Bar Ignored (GBI)

The GBI will produce some of the best


risk/reward opportunities, and is one of the
most powerful events that delivers consistent
profits to the iFund trained trader
Page 235

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