Karina Fabi - Price Action For All

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www.watchmytrading.com

@watch_my_trading_

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Until now, traders who wanted to learn about price action did
not have technical support and could access our courses
online. Finally we managed to finish the first publication that
will help you with solid bases on price action. The financial
market is dynamic and versatile and these features make
online trading the most attractive business in the world. This
material puts in writing the history of the main financial assets
over time and how we can take advantage of all this
information thanks to price reading.

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Introduction 9

Preparation 10

Price action 13

Equilibrium prices 15

Trend and market areas 18

Map of historical and daily prices

 Buyer Zone | Selling area


 EURUSD
 GBPUSD
 XAUUSD / Oro
 USDJPY
 AUDUSD

Japanese candles 42

Price identification 46

Market pressure 48

Open interest 52

Pivot point daily shifted 55

 Pivots in DAX
 Pivots in BTC
 Pivots in SP500

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Strategy 63

 Macroeconomic data strategy 68


 Non-farm payroll 74
 Interest rates 75
 Stragey on max and min 81
 Pending market orders 83

Hedge and management 85

 SWAPS 86
 Lots, margin and free margin 88
 Hedge in practice 90
 Price expiration 95
 Ranges and psychological prices 97
 Volatility and price action 102

Oil 109

International challenges 112

International opportunities 116

USDMXN 117

USDCLP 118

Monetary policies 119

Neuroscience and programming 125

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Introduction

In this publication you will find everything you need to get


started with price action. The idea is that you can apply a way of
understanding and trading the financial market, without
formulas and in simple steps, with reasoning and strategy. We
start from the general to the particular. Your first steps are
analytical and then strategic. The first three sections are about
market areas, market pressure and pivots. The last two
chapters begin to increase in complexity. We will build entry
strategies and defend ourselves with hedge. To get to
understand different scenarios, we will talk about past market
situations. In each section remember to take your own notes
and, if possible, practice on your charts.

The assets that we will use within this content are contracts for
difference (CFDs) in currencies, index and commodities.
However, the core of each topic is the price. The currency
market is the most important when it comes to transactions. The
spot, swaps and forwards market accumulate more than 5
trillion a day. This amount of active money makes the supply and
demand of the price dynamic and highly profitable with a good
strategy. You can apply the price reading system in every
instrument and also in futures. The only requirement is that the
asset must have a trading volume which is massive enough to
have generated a market history.

Without the volume of transactions, the asset will have little


activity and will not provide sufficient information. Many new
instruments that go on the market do not yet have sufficient
daily volume, and so price reading is not applicable.

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Shares in initial public offering or cryptocurrencies are
governed by different strategies. The price action will not have
enough action for you to use as a strategy.

Preparation

To start your online trading career, you need to make the


decision to become independent. Profession traders rely on
their daily market decisions. Emotional work is crucial.
Therefore, do not take this first step lightly. The path of the
trader is full of ups and downs, but with a willing and
determined mind you will be unbeatable. I recommend that if
you have not decided yet, start with the last part of this
presentation on neuroscience and then return to the first
chapter. I have dedicated a specific segment to help you
control your emotions and the way they impact your
decisions. If you have had "bad experiences" in investments,
trading, or simply money decisions, then we have mental work
to do before anything else. Go to the last chapter, perform the
recommended exercises and then get started.

Regarding your initial investment, this is for each person to


decide. Of course, investments under 2,000 USD are less likely
to cope with market volatility, but at the end of the day
everything will depend on the risk you take in each instance.

I will not linger on brokerage issues, but if I have to comment


on it I recommend that you first look into the market brokers
before choosing where to invest. Do not get carried away by
opinions in forums or experiences of traders who have suffered
loss, since that is why they have such a negative opinion. Most
of the time, even the brokers themselves are responsible for
writing bad reviews of their competition.

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Focus on regulation. You just need your broker to be in the
books of some entity that audits its activity. Your broker's
jurisdiction is key when it comes to regulations. The regulation
of brokerage companies that offer financial derivatives is non-
existent in Latin America.

Financial centers in developed countries have institutions that


are responsible for auditing and controlling companies that
offer financial products. American brokers within the
jurisdiction of the United States are regulated under the NFA
(National Futures Association) and the CFTC (Commodity
Futures Trading Commission). The brokers there have
restrictions in terms of supply leverage (currently reduced to
1:50 mostly) and to trading conditions (they do not allow
hedging). Therefore, for US brokers it is impossible for us to
trade, which is one of the conditions that we will talk about in
this book. If you are from the US and do not have the option to
trade with an overseas broker, heding is not an option. Replace
the concept of hedging with a proper take loss alternative.

Then we have the United Kingdom, also one of the highest


regulated countries with the greatest standards for trading
derivatives. There we met the FCA (Financial Conduct
Authority). The FCA is the highest authority for brokerage
companies with jurisdiction in the United Kingdom. Here we
have no limitations over hedging. However, since August 2018,
ESMA (European Securities and Markets Authority) applied a
particular regulation on European citizens, where it reduced the
ability to acquire leveraged products. There the brokers had to
reduce their offer for citizens of European jurisdiction.

To verify the regulation of the broker, the registration number,


whether NFA or FCA, must be checked on the regulator's own
page. The main advantage is that you as an investor are
protected under an institution superior to the broker and can
raise claims and other issues that guarantee good service.

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It keeps all the brokerage competition with greater
responsibility for money withdrawals, market executions and
support.

After understanding the importance of the regulatory


framework, you will analyze the spreads and commissions.
Don't think that a low spread is everything. Many times it is
convenient to pay a competitive spread plus a commission if
the broker has a solid execution structure. Very affordable
brokers may not offer a good price, or the execution may not
be the best. It all comes down to paying more than they
propose commercially when executing your order.

Professional minor capital traders are less likely to trade low


spreads and market oders. However, if your broker is in the
FCA books it must comply with giving you the best execution
at the best market price. That said, no matter how much your
broker serves you as a market and does not take you to the
open market, he will not be able to manipulate your orders. I
recommend that you conduct an investigation and be clear
about the differences between the types of execution,
regulations, spreads and leverage. This publication is about
trading and not about the brokerage industry, but it is
everyone's responsibility to keep brokers busy on improving
their transparency and support.

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Price action

The price action is the reading of the financial market based on


supply and demand of a financial instrument. The law of supply
and demand applies to the market of currencies, stocks, index,
commodities and other assets. The price action can be
assimilated from the perspective of a large exchange market,
where buyers and sellers are presented. Prices reach their daily
balance once the trading day ends.

The equilibrium price directs the supply and demand volumes


within the trading day and not the opposite. As in any market,
there are more strategic prices than others. However, the
market is only one. The trader's ability is to be able to identify as
quickly as possible the precise moment to buy and, when buyers
withdraw from the market to give room for sellers.

The price action has no dualities in its interpretation. A price


corresponds to a buyer or seller and everything is defined in a
given market area. A market above the equilibrium price will
generate buying pressure, thus increasing the price or valuation.
The market below the equilibrium price implies that there is
depreciation and selling pressure.

The inter-daily trader has only eight hours of stock market


activity per day. Depending on the country where he or she is
located, it will be convenient to trade in the Asian, European,
American market or in an overlap of the last ones. For price
action, the trading volume of the day is essential. Without
traders there are no market orders. Without market orders
there will be no price action. Therefore, it is necessary to
understand that inter-daily traders go together with banking
activity.
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If the banks are open we will have volume. If banks begin to
close, our volume or market activity begins to fall. If the market
volume of the day is insufficient, the inter-daily trader may not
have entry opportunities. The time elapsed from one market
session to another determines the equilibrium price.

The currency market has a twenty-four hour activity. The


quotes of the main currencies of the world are available all day.
However, not all currency transactions generate opportunities
on a daily basis. Depending on the day we will have assets with
more activity regarding transactions with yen, and other days
with more activity around transactions with pound or euro. The
trader must review his transactions and decide where they will
concentrate his day's activity.

If you decide on commodities, review the margin requirements,


because the money you need to work on currencies differs from
what you will need for commodities. The spreads also differ
between the groups of currencies pairs, commodities and index.
Majors, minors and exotic pais have different trading conditions
and therefore not all of them suitable to scalp. Trading with a
price has a direct relationship with the advantages that a low
spread provides; the smaller a spread, the more chances of a
clean scalping.

Scalping in price action is a technique to trade the swing or the


inter-daily. We will not have the possibility of scalping every
single day since sometimes the volume is not large enough. We
will go into further detail about the different techniques of
addressing inter-daily trading a bit later. Scalping is the trading
technique most used by inter-daily traders. The main advantage
is to reduce the risk of sudden price changes and have
sufficient liquidity to trade every day at different opportunities.
Currently the international market is not in a bullish trend. On
the contrary, buyers make quick transactions and pull their
profits.

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This behavior is typical in times of uncertainty.
However, this is not always the case. We will have years or months
of stability where countries will begin to align their monetary policy
and buyers will feel safe to hold their positions.

When trading price action do not try to backup your trading


strategy with indicators. The only chart information you will use
from now on is the pivot points daily shifted and cancelsticks.

Equilibrium price

Supply and demand will necessarily unite on a single level.


Identifying the equilibrium price is possible thanks to inter-daily
indicators (pivot point daily shifted), or simply by observing
where the market is concentrated more and for longer during
the day. The more times supply and demand manage to
consolidate at a certain price, the more matching power the
market will have. Inter-daily market opportunities are generated
when the price is as far as possible from the equilibrium price.
Speculation is born in that special moment, where the market
is not in equilibrium.

The market above its equilibrium price could be interpreted as


both buyer or as overbought, thus generating a profit pulling
and a future entry of the sellers. On the contrary, the market
below the equilibrium price could be interpreted as seller or as
oversold. Buyers will be prepared below equilibrium prices.

The price map of a given asset is the analysis of the direction of


incoming orders over time. The basis of the price action is being
able to understand the supply and demand of a given price at a
given time. History repeats itself and the financial market acts in
the same way.
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The demand for an asset at a certain price is repeated over
time each time supply and demand approach that same price.

There are theories on which the price action is based. The


theoretical framework that best explains the price action is
behaviorism. The same cluster of incentives will generate the
same market responses. Macroeconomic data is the stimulus
that will eventually cause market responses which are repetitive
over time. The macroeconomic data variable does not
contemplate a price action. The data alone does not generate a
certain behavior within the financial market.

The price path finally makes its behavior repeat itself over time.
A market asset, such as transactions in currencies, commodities,
index, stocks, etc. builds its levels of supply and demand over
time. Market areas may be exceeded in tops and bottoms, but
once the price equilibrium is reached, it tends to remain for
years in their areas.

The exercise of generating a price map is done only once, then


just renew it the following year. The main advantage of this
analytical framework is the ability to trade in the market within
areas already covered by supply and demand. However, the
trader should not confuse the analytical basis of the price
action with the strategy.

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Trend and market areas

The analyst and the trader develop in two different planes,


not necessarily aligned. Analysts talk about projections and
trends and how they can predict or anticipate market
movements. The analyst uses economic indicators as the basis
for his predictions. Moving averages, stochastic, RSI and
MACDs are just some of the tools that help direct the analysis.
Some analysts also use Elliott Wave's theory for their
projections.

On the contrary, traders ignore projections and technical


indicators and concentrate on the strategy. They focus all their
attention on entry prices, exit prices, trading areas, ranges and
swings. For a trader, recognizing the trend lacks trading sense
but they keep it in the back of their head. Analysts have
behavioral parameters, but it is traders who finally put
together a trading strategy.

Initially, start by relating the price map to the trend. The


reason for this is that until now you had only one way of seeing
the market: chart analysis. After using the price map, the
market takes on a different meaning. Price maps will help you
not only to trade as accurately as possible, but also to be
prepared for moments of transition from one market area to
another. Until now you didn't have enough tools to be able to
read the market levels, in tops or bottoms, and you chose to
anticipate selling at tops or buying at bottoms. In the worst
case, your stop loss levels would be activated and the problem
would be solved.

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All of this is about to change with your experience trading
with prices, where the loss closings with stop loss orders will
be replaced by hedging strategies that we will discuss later.

Analysts place the financial market in a different and valid


perspective for investors looking for trending opportunities.
Market areas, on the other hand, allow the trader to have its
price parameters defined outside the trend. The max, min
levels and transitions from one market area to another are
the data that define a market area. Market areas begin to be
defined during March of each year. From the third month of
stock market activity, thanks to the massive buy of foreign
exchange from banks, corporations and funds, the currencies
begin to position themselves in their market areas.

Market areas can be of two types: buy area or sell area. A


buy area means that the market entered massively into buy,
at a specific price level. That level will give us a very
important piece of information: min annual levels. Then it
will reach a max level that provides another piece of
information: annual max. Within the market area as a whole
we will have transitions.

A sell area is by default a fall in the price of a base currency at


a specific currency. Commodities and index can also start their
year in a sell zone. A sell area will not necessarily become a
buy area and vice versa. An instrument may be switching in its
area of sell or buy for years. The information provided by the
sell area is the annual max and the min are expected to
continue during the year.

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The transitions are due to the phenomenon of profit taking,
or to periods close to new market impulses. A transition zone
may have days, even weeks, where the market will not
generate adverse movements. Usually, the transition
moments that are related to those of market consolidation
occur after high-impact macroeconomic data or market
correction scenarios. The price action explains that
consolidation or market transition is a market equilibrium
that is only temporary.

In the months of January and February there is generally


no accumulation of market orders. The lack of accumulation
of orders makes market volatility more important and, on the
other hand, more susceptible to the price not maintaining its
buy or sell stability. In practical terms, when the market fails
to sustain itself due to lack of interest for the price to rise, it
will fall rapidly and vice versa. The trader must have a lot of
skill in order to trade with the price during these months of
the year.

To exemplify market areas we will consider different


instruments to show how a market area is analyzed. All
instruments have their pre-established market areas. The
shares also have entry or exit levels or prices. Little by little,
cryptocurrencies will also have their defined entry and exit
prices or profit pulling. The price history and the volume of
trading money are the basis for the definition of market
areas.

We will not go into detail regarding the fundamentals by


which the instruments trade in the area of buy or sell. In
another section we will mention how monetary policy,
economic conditions, changes in government and other
scenarios are those that generate market zone changes
quickly. A market area is preserved from March to March.
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That is, an instrument that enters the buy zone in March
remains in that area for the entire year. What was affected at
the beginning of March can only be changed by extreme
conditions.

In the following sections you will see the price map of the
transactions we take to trade. My intention is that this
information will help you to trade as soon as possible and,
therefore, the intervals or charts that you will see are in times of
4 hours and 1 hour. These are also general price maps. Each day
will trade with different strategies depending on the market
pressure of the moment and wether or notit is a day with high
impact data.

Important: When the prices and intervals proposed below


expire, this edition will be updated with new ones. Contact our
team support to receive updates for each year and month of
trading map price.

Map of historical and daily prices

EURUSD

Historical max 1.40


Historical min 1.0350
Buy Zone: over 1.10 towards annual max from the last 3
years 1.15, 1.16 to 1.20
Sell Zone: below 1.10 to average annual min 1.06 and
1.04.
Transition: between 1.08 / 1.09

It trades in the sell area from 2015 to 2016 against


monetary stimulus policies of the European Central
Bank.
Current monetary policy is dovish. The transaction is
preserved under sell pressure. (Figure 1)

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PRICE MAP

Between 1.11 and 1.0950

Explanation:

Price-based strategies: before using these strategies in your


account place the price lines as they appear in the chart
above.

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To explain the SELL ORDERS, we will use the symbol "<": less
than ¨x¨ or below of ¨x¨, and to explain the BUY ORDERS we
will use the symbol ">", greater than ¨x¨ or above of ¨x¨ ...

< (less than or below)

> (more than or above)

< 1.10 sell to 1.0983 or also better explained: trader sell down to
last price of 1.0983

< 1.0980 we sell to 1.0972

Conclusion: sellers interval below 1.10 to 1.0983

< 1.0970 We stop entering the market and wait for


buyers.

Note: On days with a price between 1.0980 and 1.0970 do not


leave anything open inter-daily. If you are going to buy, close it
before the end of the European market. If the market closes
selling below 1.0980 or 1.0970 it will fall to 1.0950 and
extensions. You will have to wait several days to meet with the
buyers again. If you are going to sell the risk is lower if you leave
it open, but it is a transition area highly sought after by buyers.

BUY

>1.10 buy up to 1.1030

>1.1030 buy up to 1.1050

>1.1055 buy up to 1.1070

>1.1070 We stop entering the market and wait for


sellers.

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Note: On buy days between 1.1070 and 1.1060, close before
the European market closes. Do not forget that these prices are
below 1.11 and if this fails to close "bought" the day between
those prices, it is better to retire and wait for the sellers.
Or, buy the next day if it exceeds 1.1070.
PRICE MAP

Between 1.0915 and 1.0983

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Explanation:

Decision making:

Before using these strategies in your account, place the price


lines as they appear in the chart above.

SELL

<1.0950 sell to 1.0940

<1.0940 sell to 1.0930

<1.0930 we sell to 1.0920. Any intraday sell that takes time to


reach its inter-daily target between these two levels will be
canceled.

The volume of the intraday market is a max of two hours.


These intervals presented below are intended to be covered
within 5 to 10 minutes preferly use 15 minutes charts for a
clear follow up.

BUY

>1.0930 buy up to 1.0940

>1.0940 buy up to 1.0950

>1.0950 buy up to 1.0970

Note: Any inter-daily buy that takes time to reach its target,
between levels of 1.0950 and 1.0970, will be canceled. Below
1.10 the buyer does not get enough participation.

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Between 1.0904 and 1.0886: HIGH RISK

Below 1.0904 and above 1.0886

Important: Ideally we will wait for sellers below 1.0880 to


1.0870 and buyers over 1.0910, up to 1.0920. Do not enter sell
as soon as reaches below 1.0880. That sell must be canceled
immediately if it takes more than 5 to 10 minutes to fall to
1.0870. Avoid sell between this interval as much as possible,
since buy between 1.0910 and 1.0920 can cause complications.
It is always better to wait and when in doubt not to enter.

This interval is of very high risk. Therefore, if the day does not
propose a defined strategy, any entry in this specific interval
should be avoided.

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PRICE MAP

Between 1.1090 and 1.1115

SELL

<1.1112 sell to 1.1104

<1.1110 sell to 1.0997

<1.0997 sell to 1.0990.

Risk: Under this last price we avoid sell, since it has a high
potential as a buy price.

BUY

>1.0990 buy up to 1.0997 extended to 1.11

>1.1104 buy up to 1.1112 extended to 1.1115

Note: Any inter-daily buy with latency between 1.1112 and


1.1115 will be canceled. High sell potential at this level.

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PRICE MAP

GBPUSD

Note: At this currency pair, as in the previous one, your main


strategy is for sell. If during the day you are at the psychological
levels of 1.21, 1.22 and 1.23, stop. Do not rush. Remember that
your main strategy is to sell. However, by passing these
psychological levels the price gains more strength, reaching a
sell area. Avoid buy in 1.21, 1.22 or 1.23. Wait for a formation
of at least 10 to 15 pips, or wait for the day to close as “buy”
and enter the Asian market, or wait for the next day.

Between 1.1980 and 1.2100

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SELL

<1.21 sell to 1.2080

<1.2080 sell to 1.2055

<1.2050 sell to 1.2034

Below 1.2030 to 1.2020 and 1.2010, we sell, and any delays in


completing the interval will cancel all sells in the area. Risk:
High buy potential in that interval.

BUY

>1.2010 buy to 1.2030 and extensions

>1.2050 buy to 1.2080

>1.2109 buy up to 1.2130

Any inter-daily buy exceeding 1.21 and 1.2110 that does not
complete its inter-daily interval must be canceled within the
inter-day.

Risk: Because it is a max in an area with high sell potential.

GBPUSD

Between 1.2130 and 1.2260

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SELL

<1.2260 sell to 1.2250

<1.2250 sell to 1.2230

<1.2230 sell to 1.22

Note: Above 1.2200 the buyer will have more control over the
price than the seller, even if we are still in a sell area. Sell
GBPUSD above the 1.22 zone will take a long time until drops
again, therefore scalping to sell above 1.22 and not closing that
sell trade can imply high risk.

Risk: Sell intervals above 1.22 are high risk.

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BUY

>1.2130 buy up to 1.2150

>1.2150 buy up to 1.2170

Note: A buy below 1.2200 is high risk. If you are trading in this
first interval, do not keep a buy without closing while below
1.2200 in the inter-daily market. Floting buy trades below 1.22
are not safe.

>1.22 buy up to 1.2220, 1.2230 and 1.2250

>1.2250 buy up to 1.2270 and 1.2280

Note: Between 1.2150 and 1.2170 we are at a high risk. Buyers


and sellers have power in the area. We will enter avoiding a buy
very close to 1.2170, we better wait 1.2200 levels.

XAUUSD- Gold

20 year gold activity.


Historic top: $ 1,889 an ounce
5-year historical bottom: $ 1,047 an ounce
Buy area: over $ 1200 an ounce, up to
1560
Sell area: under $ 1200 an ounce, up to an area of 1047.
(Chart 2)
Between 2018 and 2019: Min of 1200 to a max of 1560.

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SELL

<1300 to 1270 sell zone

I will divide the gold intervals into two charts. It is an asset very
complex to divide into tight intervals, as the price action is
presented. I will do my best to represent the buy opportunities
and corrections.

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Buys are traded during specified times that are determined by
new tops, or after a market correction (sells). The general
strategy is LONG. Years of dovish monetary policies are
conducive to safe havens such as commodities.

CHART 1

BUY

>1300 The buy transition begins.

>1320 to 1350

>1350 to 1430
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> 1430 to 1530 and 1550 and extensions

Note: At this commodity a buy strategy is maintained, always.


When economic cycles begin and the recovery phase and
interest rates begin to rise, there will be years of decline for
metal commodities. Sells are only welcome under 1300, 1400 or
1500 dollars. Be especially careful with buys in 1550, 1530 or
1400 and 1450. Do not keep to buy without closing on a day that
fluctuates between those prices. Those levels are correction
(sell).

Psychological prices are very important for this particular asset.


Remember that it is the only asset in the world that does not
loses value. It only fluctuates due to the movement of money
from investors in other instruments. But it doesn’t mean it loses
its status or value.

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BUY

> 1480 to 1490

>1500 to 1515.50

>1515.50 to 1527

Note: Interval between 1490 and 1500: HIGH RISK. Do not stay
as a buyer in the inter-daily without being able to go out on a
buy that has not exceeded 1500. Any buy trade left holding at
this highs are higly risky. Stick to your two hours of opening
market as reference to close a trade. If no target reached
withing that timeframe consider a loss taking decition.

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SELL

<1517 to 1515.50

<1515.50 to 1500

<1500 to 1490

Note: A sell interval between 1500 and 1490 is of HIGH RISK. If


the day indicated to sell and you do not reach your target, that
sell must be canceled. A sell above 1500 is the same as getting
ahead of sellers. Pay close attention around 1500 level.

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USDJPY

Between 105.50 to 110

SELL

<108.00 to 107.50 and 107

<107 to 106.50 and 105.80

A sell that fails to close in the inter-daily below important levels


such as 108 or 107 will be canceled in the inter-daily. These
prices are also important transitions for the buyer interested in
closing just at the 109 level, and these investors will keep their
buys.
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BUY

>107.00 to 107.50

>107.50 to 108

>108 to 108.50

>108.50 to 109

Note: Buys below 110 are in the selling pressure zone.


Between 109 and 110 we enter a buy transition, or up to
114, or a sell once again at 105.00. We avoid going into
buy or sell between days with a price between 109 and
110. Do not keep buys or sells without closing between
109 and 110.

(Chart 3)

AUDUSD

Historical max 0.80


Historical min 0.69
Buy area: above 0.7650 and 0.80
Sell area: below 0.7689 to 0.69
Transition: between 0.7650 and 0.75 area
(Chart 4)

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PRICE MAP

SELL

<0.74 to 0.7320

<0.7320 to 0.72

<0.72 to 0.7030 and 0.7050

Note: the interval between 0.7030 and 0.7050 is correction to


the buy. Sells are the trading preference for this year 2019.
When you have days between 0.7030 and 0.7050 make sure
you do not have any unclosed buys. Passing 0.7030 it will trade
between 0.68, 0.67 and 0.65.

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SELL

< 0.68 to 0.6760

< 0.6760 to 0.6720

< 0.6720 to 0.6690

Note: between 0.6700 and 0.6690 there is a high buy


potential. If you are trading in this interval do not leave an
active sell in the day. A high buy potential may generate an
important correction.

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Japanese candles

The price activity should be calculated with tools that shape the
market, so that it is easy to read. Japanese candles fulfill that
purpose. If we imagine the market as just prices, without the
complement of a chart, it becomes complex and it is difficult to
define a strategy, although the result should be the same. If we
group all buy prices in one row and all sell prices in another,
market entry and exit strategies should be reflected in Japanese
candles under the same result.

Chart traders use candle formations as a guide for market


behavior. The formations of the candles vary accordingly to the
temporality of the analysis. However, in the price action,
candles are used to support the information collected by the
trader regardless of training, patterns or temporalities. Buy or
sell prices will continue to be used to buy regardless of the
candle that precedes the chart.

In conclusion, candlesticks are a system of reading the market


price that is then reflected in the chart with two main variables:
indecision and continuity. Candles of indecision are those
commonly generated when the market price has no activity.
That is, we see a price but not enough market interest in trading
in it. Continuity candles, on the other hand, are all those that
provide information and the trader can assume a price increase
or decrease. To trade on the price the final formation of the
candle is irrelevant. What we should pay attention to is the
closing of the candle.

42
Let’s remember the formation of Japanese candles:

The body of the first candle is buy and of the second is a sell
one. The activity of the price around volume is what we pay
attention to. When the Japanese candles begin to form these
present two important pieces of information: the opening and
closing is when we already get on business. If the market
reacts for buy at a certain price, then the closing of the candle
will be above that price. If, on the contrary, the closing of that
candle is lower than the buy price, the market did not find
enough capacity to buy.

43
The same goes for sell prices. The trader detects a sell
price and the closing of the candle (at the chosen time) would
close below that price. If the candle closes over that price, then
a second formation or second opportunity should be expected.
The prices are always the same. The chart temporality only
increases or decreases the wait for the entrance. If the price of
an ounce of gold is $ 1,300 for the buyer, then any formation
of candles, whether 15 minutes to 4 hours, when closing above
that price confirms a buy.
Closing candle higher than a
buyer price of $ 1300 confirms
buy.

Closing candle below $


1,300 does not confirm buy.

In certain situations, market entries may be made during the


formation of the candle without waiting for its closing. Let´s
focus on 15 minutes candles formations. Market pressure
during active or open market hours is generally the time
when we do not have the necessary waiting time to enter at
the candle closings. In cases where buyers and sellers are
ready, it is possible to enter the market when the price is in
transition without waiting for the closing of its candle.

If the price cross, from bottom to top or from top to bottom,


the $ 1,300 per ounce of gold, the trader may decide to enter
into a buy or sell without having to wait for the closing of that
candle in formation. Market entry strategies with
macroeconomic scenarios are also a scenario where the
trader can lose the opportunity to enter upon waiting for
confirmation of closing.

44
Price identification

Start the practice with the following exercise:

Select the EURUSD cross. Now draw price lines on the


mentioned prices and write next to them what kind of prices are
based on the closing that the candles have in that area of the
market during one hour. The first thing you will do is go back in
time looking for the closest dates to look for market behavior on
that price line. Do not try to arrive exactly at the closing of each
candle every time you reach the price of the exercise. The
important thing is to identify it in such a way that you know
that market activity existed around the prices we mentioned.

Therefore, you will see that for example the price of 1.12 in
EURUSD is a buy price and at the same time represents a level of
important decisions for both sides of the market. You will also
notice that over 1.12 the price fails to hold very far, and then
you will see that below 1.12 the price drop is also important and
is directed around 1.1180. You have just identified a market
interval that is understood as follows: EURUSD below 1.12 sel up
to 1.1180. Then, potential buy at 1.1180 towards 1.12. That is a
market interval.

Do not try to stun yourself with all the market candles that you
will see in an hour around your price in question. We are
interested in knowing only if 1.12 is a level of buy or sell. Around
your price there will always be higher and lower market activity.
You will have hundreds of candle shadows that will be presented
to confuse you. Keep calm and think strategically. First and
before entering the market, visualize your entry. View both
scenarios.

45
At the beginning, your internal dialogue will look a bit
disorganized. Over time your question order will be cleaner
and faster at the same time:

Reflect on asking all the necessary questions:

Where is the price today regarging the central pivot point or


PP? (there is a chapter dedicated only about pivots)
-Above it or below it?

-What is today´s pressure market? Buy or sell?

-If I am at 1.12, should I buy or sell?

If I go on sell,

What risk do I assume if the price starts to rise?

If I buy, what risk do I assume if the market starts to fall?

What tolerance of loss of liquidity do I have if I buy and the


price falls?

What tolerance of loss of liquidity do I have if I sell and the


market goes up?

The strategy is reduced to the fact that when entering sells,


your reflection continues and you have not yet entered the
market:

OKAY. Sell then. Second part:


When selling, what target or how far do I hold the sell?
If I sell and the price goes up, where do I start to cover
myself?

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Where do the sell positions expire? Do I wait for the
15-minute candle closing to go on sell below 1.12? Or
do I enter without confirmation? Is the market
volume good or do I wait for it to reactivate?

Perform these reasoning steps by writing down all the


necessary information with the following prices:

EURUSD

1. 1,1200
2. 1, 1215
3. 1.1180
4. 1.1140
5. 1.1100

That sequence of questions will teach you how to think about


the market in a strategic way, adapting to the scenarios and
quickly understanding which path will lead you to an entry
that is as safe and possible.

Now we are going for another currency crossing, USDJPY. We


begin to order the questions of the first exercise on the price
112 at the crossing:

If I am at 112.0, which scenario is more convenient? Buy or


sell?
What risk do I take if I sell and the price starts to rise?
What risk do I assume if I buy and if the market starts to fall?
What tolerance of loss of liquidity do I have if I buy and the
price falls?
What tolerance of loss of liquidity do I have if I sell and the
market goes up?
Second part:

For sell, what target or how far do I hold the sell?


If I sell and the price goes up, where do I start to cover
myself?

Where do the sell / buy positions expire? Do I wait for the


closing of the 15-minute candle to go on sell below 1.12? Or
do I enter without confirmation? Is the market volume good
or do I wait for it to reactivate?
Market pressure

The term market pressure is used in two situations. First in the


opening of the market and second in the tops and bottoms of
the day. When the financial activity begins, the market already
has a starting price that arises from the previous session of the
market. If the market closed as buy in the previous session, we
are likely to start the session at a buy price. If the session of the
previous day closed as sold, then we will have new sellers or
sell pressure on the next day.

Market opening is generally around the average daily price of


the previous day. The price action determines the market
pressure and how it will lead the trading day. The market
session begins between 8 am and 9 am, ending at 5 pm.
However, of this entire time range only the first two hours
present inter-daily trading opportunities. After the first two
hours, the trading volume drops considerably and the intervals
begin to close.

The second situation in which the expression of market


pressure is used is at max and min levels. The inter-daily market
will have a max price and a min price. Just then, when it seems
that the price has already determined your daily interval, the
pressure of new orders can generate new tops or new bottoms.

When all market indicators begin to generate sells, over-buy


signals, fast moving averages cross below slow averages. It is
there where market pressure returns. The indicators cannot be
ahead of the price, but the price will always be ahead of any
indicator signal.

48
Therefore, the indicator information is of little use for an
inter-daily trader. When the price action determines the buy
pressure during the day and we already have the max of the
session, it is likely that all indicators give a signal of sell. At that
time, when the market is ready to take a reversal, the price
gets a max again and increases the buy pressure.

Graphically we can anticipate how to assume the market


pressure of the area thanks to the shadows of the Japanese
candles. The trader will hardly pay attention to the
information of the shadows of the candles. Traders that trade
based on candles use only body information. However, a good
practice on how to know what market pressure I have in a day
is reading the shadows as well. Let's look at some cases:

Notice the candle surrounded in circles. Its upper shadow is


significantly more important than the lower one, which is
almost null ((Figure 5). In this case it indicates that below
1.3507 the market doesn’t hold for buy, at the USDCAD
crossing. Therefore, the buyer must pull his buying profit in
the area of 1.35, or the seller can prepare to enter.

49
Let's go to another example of how to understand the market
pressure in the inter-daily. Here we have gold (XAUUSD). The
first line from the bottom up in 1280.23 marks the lower
shadows, which are more important than the upper shadows.
Both cases indicate a buy pressure over 1280 (Chart 6)

The line in 1288.12 indicates the max price recorded over 1286.
The second line from top to bottom in 1285.98 marks the
beginning of sell in the area. The conclusion for the inter-daily
trader is that above 1280 the market is bought terms of gold and
below 1288 it does not continue to buy. Both scenarios are
useful for planning the inputs and can be detected very simply.

50
(Chart 6)

Finally, let's look at the EURUSD crossing at the most


psychological min levels of the pair. Among the lines marked in
the chart of 1.1119 and 1.1122 we have the most important
shadows in the area. Again, if the inter-daily trader is selling
below 1.1130, you should keep in mind the buying pressure
between prices 1.1122 and 1.1119. (Chart 7)

51
(Chart 7)

When talking about a buy market, this leads us directly to the


concept of open interest (I.A.). This concept is not measurable
with indicators, but with the price. The main concern of inter-
daily traders is how to realize when a market position can be
sustained and when it cannot.

Open interest

The OI (open interest) is measurable once again thanks to the


price. The concept of open interest is the most important that
you will learn by trading in inter-daily. Identifying it will lead you
to understand what levels of risk you can take and, therefore,
increase your profits. The formula is very simple: market closing
prices higher than opening prices means that the market is
sustained or "bought". When a market closes there are two
possible paths: the market closes its positions and the price falls,
or the market holds its positions and closes above its opening
level.

52
The precaution to be taken when trading under the concept of
AI is that it should preferably be carried out with assets within
the bull market or buy markets.

If you are in an asset or crossing under selling pressure, for


more than one day the market closes as "bought" with open
interest, it may be an isolated case and the price will fall again.
Therefore, do not take this concept of open interest with all
assets. Currently, given the monetary policy decisions, currency
crossings based on Euro and Pound will have open interest days.
However, these are not buy markets.

Let's go with an example: the EURJPY crossing opened in


Europe at 123.00 and you entered as a buyer with a 123.20
target. Then, the market closed exceeding your price of 123.20.
Conclusion: this will continue to speculate a rise. Therefore you
decide to stay "bought". Your analysis was correct to the extent
that the market accompanies, but most likely the next day your
buy is in a max area and the market has taken its profits.

If the European Union enters a cycle of rate increase and the


monetary policy accompanies the market, then the positions of
the buyers will have more benefit by staying for a day or two
with open interest. Crossings, specifically with YEN, are the least
reliable in terms of open interest. You can hold your position for
two, three to four days, but eventually the correction will occur.
Therefore, the inter-daily trader takes a lot of advantage by
reading the open interest to be able to sustain itself in the
market for over 24 hours. Just remember to handle it with
caution.

Open interest is, in conclusion, "market transactions" that,


given the appreciation of the day, left the price higher than
what it started at.
53
When the market does not hold market positions, then there would
be no open interest. Investors or traders would have no interest in
holding positions under speculation that the price will fall the next
day. The prices, when closing below their opening, do not generate
market interest to holdin open positions.

Example of sold market

The first two circles are the opening levels at 1. The second two
are the closing hours. In the first image we have the first candle
indicating sell and the second indicating buy. Then, the next two
circles are on two sell candles. In this case, the European market
closes almost equal to or less than its opening (circle 3) and the
closing of the American market closes almost the same or lower
(circle 4) than its openings. (Chart 8)

(Chart 8)

54
Consider performing the following exercise until you find a quick
analysis on how to consider a bought market (open interest) or
a sold market. Enter the EURUSD crossing and refer your chart
to time. Then analyze the last four sessions of the market.
Identify the opening candle of Europe and the opening candle of
the United States.

Next, identify the European market closing candles and the


United States closing candles. Write down in each session on
which days the market ended with an open interest and on
which days it closed as sold. Repeat the exercise with as many
currency combinations as you want. The price of commodities
also goes through this phenomenon.

Pivot point daily shifted

The volume of the currency trading market increases by more


than 20% year-over-year. The fluctuation of the main currency
pairs causes the price to fluctuate above the reading capacity
of the indicators. The tool that makes a trading strategy
effective and eliminates the slowness of the indicators are the
daily pivot points. Conventional indicators lack the speed of
identifying inter-daily opportunities. Daily pivots are the
analytical framework on which the price is displayed during the
day.

Traders are increasingly trading with price action through


daily pivots. From this moment on, all market understanding
will change for technical and fundamental traders.

The pivot point daily shifted formula is the only tool that will
serve to understand the price. The indicator, by itself, will not
give input and output signals to the trader.
55
No indicator fulfills the function of a human being in putting
together an entry strategy. The pivot point is the only
fundamental tool for any trader that starts trading with price.
Within the different formulas, the daily shifted is the most
accurate for inter-daily trading.

The formula of the pivot point daily shifted indicator follows


the price with high inter-daily accuracy. The pivot point will
divide the trading range of the day between buyers and sellers.
Within the different formulas, the daily shifted is the most
accurate for inter-daily trading. The trader, based on such
information, will know at which levels he can buy and on which
to sell. The pivot point daily shifted can be downloaded and
installed on any customizable platform. If you do not find it on
the internet you can request it at: info@watchmytrading.com.

It consists of three resistance levels, three support levels and


a central pivot. (Chart 9). Being a daily formula, this indicator
will move as the day progresses. Therefore, visually you will
see how the lines of the pivots go along with the prices and
divide when they cover 24 hours. It is not necessary to change
the settings. This will be configured by default into 8-hour
shifts. The formula that composes it is the following: max
price, min price, opening and closing price / 3. The values you
consider are naturally those of the previous market session.
Therefore, your pivots are a reference of the market session
that has just finished.

The lines that are seen in the pivots are not necessarily the
prices we have to consider. If you extend a line on each pivot
of the indicator towards the price, you will have an X value.
However, between one line and another of each pivot there
will be a space, and that is the area of supports and resistances
that serves to identify buy prices and sell prices.
56
Do not consider the exact line that marks the pivot on the
price. You will have days when the entries will be below or
above each pivot line. For example, on market day X, we will
have between the pivot S1 and S2 more than 20 sell prices,
which are not necessarily those indicated by the green line of S1
and S2.

Once the three market sessions that make up a trading day


end, the new pivot point will begin to be seen. The
interpretation of the indicator, once again, has no relation to
the trader's final strategy. However, the pivot point drives the
market activity to understand with greater advantage the
course of the day. Ideally, the pivot point has better applicability
within larger volume instruments.

If you try to use the pivots inside a low-volume instrument, you


will see all the pivots together without being able to follow up
correctly. Assets that have low inter-daily trading volume are
not conducive to an inter-daily trader. The configuration of the
pivots, when using opening, closing, max and min prices, needs
the price to fluctuate sufficiently during the day.

As a general rule, when the price is above the central pivot the
pressure of the day will be to buy and will indicate a buy day.
When the price is below the central pivot, we would have, on
the contrary, a day of sell pressure. Resistance levels provide
two types of information. On the one hand, they report that the
price reached daily tops. Secondly they inform about the
possibilities of these max. That is, it can be a max in R1, R2 or
R3.

57
(Chart 9)

58
59
Image of Pivot Points in DAX instrument

This is how your indicator will look in one hour in the Dax
index. The image contains three full days of trading divided by
the pivot and one last session that is just starting. A market
session represents the eight trading hours of the stock market
of a country or region. If we join the session of Asia, Europe
and the United States, they complete 24 hours and, therefore,
you will see the Japanese sails moving within the frame of the
pivots day after day. The prices above the central pivot
indicate buying pressure up to R1 within the trading session.

You don't need any other tools to build your strategy. Simply
follow the price positioning BY above or below the central
pivot. With this information you already have enough data to
think about your inter-daily strategy.

60
Day 1: the price in the Asian session is below the central pivot
(gray line), indicating sell up to S1 and S2 (lower green lines).
Then, at the beginning of the European session, the market
began to buy by positioning the price above S1, indicating buy
up to S2, and then to the central pivot again. Once above the
central pivot it reached R1 (upper red line). At the closing
session, the price reached above the central pivot, indicating
that the day closed with an index buy above 11,500 points.
When the price closes above the central pivot it indicates that it
will continue to rise in subsequent hours or that it will be in
consolidation.

Day 2: the price started above the central pivot, this indicates
that the day was to buy. Then, at the opening of the market in
Europe it returns to the central pivot and falls below it. At that
time sellers began until S1. Once the price is above S1, it again
signals buy until the central pivot.

Day 3: the day begins on the central pivot and immediately


after it is below it. The pivot point indicated that the day would
be for sell and falls to S1 and S2. Then, position on S2, indicating
buy up to S1. From S1 it goes to the central pivot. In conclusion
the day closes as "bought."

61
Image of the pivot point in Bitcoin (BTC)

Here you will see how the indicator has given correct
information to trade the BTC in the inter-daily. However, the
trading volume is smaller than that of the index and currencies.
Therefore, the price has remained in the last three sessions
above the central pivot with little approach to R1, except for the
previous market session, where it did manage to rise to R1 and
R2. Therefore, the buyers above the central pivot have had
excellent days, exceeding $ 4,000 bitcoin.

62
Pivot point image on SP500

In this image of the SP500 we have a market session for sellers


and the other two trading sessions for buyers. In the first
market session the price is below the central pivot point, giving
opportunities to sell down to S1 and S2. The following session
remained between the central pivot, without exactly reaching
S1. In the last session we see in the chart, the price remained
above the central pivot until R1 and R2, and then returned to its
central pivot.

Strategy

In this segment we will isolate everything related to pivots and


market areas and then put together an entry strategy.
"Strategy" means prior planning that momento of market
opportunities. An entry will change depending on the scenarios,
such as: high impact data, consolidation, min, max and long
term. For the inter-daily trader, the planning differs if the entry
is made with a macroeconomic data or a market day without
high impact information. The trader that trades in the long term
should consider the min and max, both weekly and monthly.
63
The common denominator when putting together a market
entry strategy is of course market price. The trader will have
to consider three essential pieces of information: entry price,
exit price and expiration price. The primary goal in this phase
is to have absolute clarity of the execution price. Many inter-
daily market intervals have one or several prices to enter that
will deliver the same result to the market. Once execution is
made the trader will enter in a period of important of
emotional control.

For the inter-daily trader, price action involves following the


market pressure of the day. Many opportunities will arise that
may go against the daily market pressure. This is, some days
will be to sell but the pressure would be dominated for buyers.
Other days will to buy but the pressure will under sellers
control. The trader who plans for the long term is waiting for
reversals over the min and max levels, and adds to the promise
to buy at the best min and sell at the highest max. In this way,
it is understood how the long term implies seeing the market
from a different perspective.

Long-term market entries require another type of analysis


and are generally planned contrary to the price action on intra-
daily. In this scenario, the trader faces different risks by
maintaining a floating order in the market generally fifteen
days, one month or three months. For which the market must
be presented at important psychological levels.

Traders looking for scalping opportunities, on the other hand,


will have a buyer for each seller and for each buyer a seller.
This situation generates two phenomenons: volatility and
liquidity. Upon entering the market, our position will not be
positive so quickly, especially when we trade on
macroeconomic data.

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The price fluctuation around the order exectuted is normal,
as long as the swing limit is understood. Expect to see a
fluctuation of 10 and even 20 pips around your trade. That is
the main reason why stop loss is not recommended. The
order will be valid as long as it does not expire. If expiration is
done then take the loss but
To simplify the explanation of putting together a market
strategy, we will consider examples of psychological price levels.
To exemplify, we will go to the world's most traded currency
crossing, EURUSD. More than eighty percent of the international
market is made in these two currencies.

The exchange of Euro against the Dollar came into effect since
2001, when the euro begins to circulate as a currency adopted
by 16 countries. From then on it gains ground in the difference
contract market thanks to its inter-daily trading volume and its
highly competitive spread. As mentioned before, the inter-daily
trader will have more performance in its trade during the first
two hours of the market.

The concept of inter-daily trading is understood as trading only


in the active marke. This does not mean that the position should
remain floating 24 hours just because your broker is open to
trade. On the contrary, it implies that during a market session
you must enter the times the volume yields. Generally, only the
first two hours of opening are the most active for the market,
unless it is traded with a macroeconomic data in closed market
hours.

To start identifying the price action, the trader needs to rely on


the Japanese candle reading system. Japanese candles are the
oldest tool in the financial system and are still applicable to price
action. While we focus attention on the price, remember that
this has a fluctuation to which we must adapt. For this we use
the closing of the candle in its chart temporality of fifteen
minutes. What we evaluate is the closing of it.

Market prices will be previously identified. However, closing


the candle will determine its "confirmation" or not. If the price
range of the day is from point A to point B, then our price must
be within that range or interval.
65
If we have identified the buy prices or the sell prices, then we
only need to wait for confirmation. If the market opens for buy,
then the Japanese candle must close above the buy price. As
seen in the example, the eighth black or blue candle in the buy
state is the opening of the United States market. The moment
the candle is closed, it is above the central pivot point.

On the contrary, if the pressure of the day is to sell, market


prices must be contained within that interval. Since it is a sell
entry, the closing of the candle of its fifteen minutes must be
below the seller's price. The confirmation will look as shown
here: the eleventh blue selling candle is the American opening
that closes below 1.1380, confirming the same price as in the
previous example, but in this case to sell.

66
To exemplify what parameters must be taken into account
when putting together an entry strategy, we will simulate a
market opening in Europe. The temporality to use should be
between ten and fifteen minutes. A lower temporality is
possible, but the price fluctuation will get you out of focus. If
the opening of the European market begins with buying force,
wait for its first 15 minutes to execute. From there, any of the
following fifteen minutes is valid to wait for confirmation. The
trader can find support in the pivots to determine the strength
of the market of the day. Remember that pivots do not build a
strategy, but are only a guide to price activity.

The second data we need, after identifying the entry price, is


the target or exit price. The target price should not be
improvised or thought after executing the entry. It is essential
that this is specified before entering the market. The starting
price, target or profit pulling, will be a price where we know
that the market will make a rebound. A buying entry will have a
default target where we already know that the market failed to
sustain at those levels before.

67
Planning a buy does not equal or means that the target or
starting price will necessarily be a sell price. For this reason, the
trader must establish two targets or possible levels where it will
reach its buy level.

An entry for sell is, by default, a price level where potential


buyers will enter. It is essential to establish two possible targets
or starting prices of the selling position. A target or exit price of
the sell will not necessarily be a buy price.

Macroeconomic data strategy

This section is divided into two aspects with respect to


macroeconomic data. On the one hand, the correct reading of
the macroeconomic calendars, and on the other how to trade
it. The first thing to know about high impact data is that not
everyone will have an impact on the market. The
macroeconomic calendars, by default, will have all the
information that interests the trader to trade within the
market. However, only some of this data will have a truly
trading impact.

Calendars publish information that is not necessarily relevant


to the financial market. The information published by the
countries of their economic indicators will have a direct impact
on their currencies. The classification of the impact are high
medium and low and will be directly related to market
opportunities, however, this is not always the case. Despite the
effort of the news portals to have the most precise
classification of the impact of the final data, only the market
determines the relevance of the information. Most common
web sites to check calendars are www.forexfactory.com and
www.investing.com. During the past ten years the data that
generates the most volatility and impact on the market has
been:

68
1- Non-farm employment data of the United States and
unemployment rate (published simultaneously).
2- Interest rates of the country in question.
3- Retail sells.
4- Minutes of the federal reserve of the United States.
5- Consumer inflation.

To trade with high-impact data, traders in price action ignore


forecasts and data from previous months and only focus on the
strategy. There are days of high impact publications that are not
necessarily numbers of economic indicators. Speeches by
presidents of central banks, testimony from key members in a
country's economy, minutes from central banks, speeches on
relevant topics, are just some of the scenarios that would be
appropriate to trade in the market and are not necessarily
economic indicators. However, not all speeches or testimonies
are relevant to the market.

High profile public figures have quite important public


speeches. However, not all of them will be about minutes or
testifications that interest the financial market. When you see in
the economic calendar a day that appears a presentation of
speech of a public figure check that it will be about monetary
policy.

While the objective of trading is to enter the market based on


the result of the information, there is often little time to quickly
interpret the data. The information published may or may not be
positive for the country that publishes the information.
However, the trader should not assume a correlation between
the result and the impact.
69
There are several reasons why the data will not necessarily
correlate with the impact on the market. The interest rates of
the countries are discounted in the market days before.
When a maintenance, increase or cut in the interest rate is
published, it can finally have an impact opposite to the
expected result.

We will go into detail about each particular data later. This


section is only intended to expand on how a strategy is
planned in a fundamental trading scenario. When planning an
entry at the time of publication of data, two important
moments will occur:

The first impulse, which will last a few seconds, is the most
important within the scenario of the data. After the first
fifteen minutes confirmation it will be the second phase of
entry. The first market impact is what every trader wants to
take advantage of. However, this presents trading difficulties.
The first impulse lasts just a few seconds. Examples and live
recording videos over high impact trading are published in
our youTube channel. Find it as Watch My Trading.

In these cases, it is suitable to plan a market entry with


pending orders that surround the market price. If the trader
tries to trade after the information is published, two things
will probably happen: the broker will not execute at the
indicated price or when executing it will produce a very
important delay, so the entry will finally be late. To avoid this
problem, the trader will be able to take advantage of the
initial momentum surrounding the market price.

The price can also be confirmed before the publication of


the data. In this case, the market will already be placed and
we will have enough information to buy or sell before it is
published.
70
However, the risk of execution before having data can be highly
unnecessary. Surrounding the market price implies identifying a
higher buy price, where there will be a pending buy or "buy
stop", and a lower sell price, where there will be a pending sell
or "sell stop".

It is essential to consider that volatility is a factor that the


trader must handle with extreme skill. Pending orders must be
set up a few minutes before the data is published.

GBPUSD

Day opens for sellers, below the central pivot.


Impact: positive for the pound.
Price above 1.31 before publication. Confirmed to buy.
Strategy: buy stop at 1.3112, or buy stop at 1.3115. Sell stop at 1.31.
Result: +60 pips
Target 1: at 1.3130
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Target 2: at 1.3150

USDCAD
Day opens for buy above the central pivot.
Impact: positive for the dollar.
Price above 1.3230 before publication. Confirmed to buy.
Strategy: buy stop at 1.3230, or buy stop at 1.3240.
Sell stop at 1.3220.
Result +60 pips
Target 1: 1.3250
Target 2: 1.3360

In both charts we show how it trades in a different opening scenarios,


but with equal impacts, which increase the value of the currency. In the
first case, the GBPUSD cross opened to sell. However, the price fell to a
strategic level for the buyer market. In price action this type of day
involves buying against market or opening pressure.

72
The best option is to buy at a safe price higher than the min
levels, such as 1.3110 or 1.3115, or place a "buy stop" in the
case of a previous publication of high impact data.

In the second case, on the contrary, the market opened for


buy of the USDCAD transaction. The price had a buyer impact
against the data scenario. In these cases, if the price is already
confirmed as higher than 1.3230, you buy by executing directly
on the market. It makes no sense to specify on what data the
given scenario was treated since, as I said at the beginning, in
price action we focus on the strategy and not on the
information.

High impact data have the particularity of generating volatility


before the information is published. This phenomenon only
generates market noise and activation of stop loss orders.
Pending orders surrounding the price should not be activated
before the data comes out. The objective is that if the market
opens for buy against the impact we arrive at that buy price
with our order, and if it opens for sell then we arrive at that sell
at the right time.

We still have other challenges. The use of "stop loss" or "tke


profit" should be out of the calculation. Trading the market
momentum is as we see it; a challenge. However, the reward
after a good risk calculation is highly compensated.

The trader can analyze which scenario would be less risky


before planning a strategy on the momentum of data. When
using pending orders it is easier to calculate where you will
enter without risk to buy and where to sell. If the market is for
sell or sold, then the buy or the "buy stop" must be at a much
higher price that is not activated by volatility. You could also, if
necessary, completely discard the buy scenario and only go for
the sell scenario.
73
If, on the contrary, the market is for buy or as a buyer, sells
or the "sell stops" could be discarded by the trader.

Market impulses are usually in some cases up to 250 pips.


Non-farm payrolls of up to 320 pips have been registered in
the first minute of publication. In certain scenarios the two
pending orders will be activated and we can win on both sides
of the market. The most important thing is that the orders
are not activated before the information is published. Our
only objective is to avoid technical problems and enter the
market at the right time regarding the price. After this first
impulse we can continue trading the same data, but at the
most stable prices that occur after 10 or 15 minutes

Non-farm payrolls:

This data began to gain popularity during the crisis of the


United States in 2008. Before that year this data had a normal
market impact, such as unemployment in any other country.
The balance of the last crisis of 2008 meant the loss of more
than 8 million jobs. Since then this data has become a key
factor for monetary policy decisions in the United States. It is
published on the first Friday of each month and affects all
transactions of dollar-related currencies, American indexes
and even the gold price on certain occasions.

The data is published by the labor department and does not


account for the agricultural sector. The impact of information
may exceed that of interest rates. Simultaneously, the
American economy discloses its unemployment rate. The
combination of both data makes the information doubly
important.

74
On Wednesdays or thrusdays of the same week is also
published the advance on the creation of final employment.
By "data in advance" it does not mean that it is related to the
final data two days later. The way you will see it presented in
the economic calendars is as follows:

Advance data regarding non-farm payrolls has lost interest of the


market, since it does not function as a predictor of job creation.
Important: Job creation does not always correlate with the fall or
rise in unemployment rate and vice versa. That said, trading with
the non-farm payroll has a double impact and a double
opportunity at the same time. If unemployment fell and the
creation of unemployment increased, everything favors the dollar
and the impact on the market is in most of the instruments.
Opposite case; if unemployment increased and job creation
decreased, everything hurts the dollar. Mixed cases can also occur
where unemployment increases but job creation is positive, or
employment declines but job creation is lower than expected.

Interest rates

In second place are the interest rates of the economy. This


data is not ambivalent. The interest rate has only one purpose
and is to regulate the economy. The decision on this data
comes from the Central Bank of the country, or from the
Federal Reserve in the case of the United States.
75
We will work with CB (Central Bank) and Fed (Federal Reserve
of the United States) from now on. In general terms, if the
economy falters then there will be an intervention on its rate. If
the economy is stable then the interest rate will remain the
same.

The financial market, gross domestic product, bond market,


unemployment rate and other economic indicators, are those
that have direct interference on the decision of what is the
interest rate. The central bank, at the end of the day, has the
function of ensuring a stable economy. If any indicator presents,
within two to three consecutive months, an imbalance then the
central bank will intervene by changing the interest rate.

In the economic calendar you will see the current interest rate
data and its forecast. It is generally not a piece of information
that does not meet your forecast. Within a week of publication
of this data the market will be prepared for the information.
However, it is the CB and the Fed that are responsible for making
the best decision and this may be different from the forecast.

There is also the possibility that the country in question may


decide on the interest rate in a closed market. If the result of the
interest rate is implemented in a closed market, this will have an
immediate impact on the currency. However, the financial
market will have a more frustrating opening. The currency
market works all day. Therefore, the trader does not have to
wait for the country's financial market to open in order to access
the interest rate.

The cases of decision making on the interest rate in a closed


market, or that is not within the expected schedule is very
occasional, but possible. Returning to the trade on this data, the
market will have discounted or assimilated the result a few days
before. If minutes before publication the market is at a buyer
price, then the rate will increase or remain the same.
76
If, on the contrary, the market does not hold as "bought" and
at the time of publication the price is for sell, then the market
would expect for the interest rate to be cut or remain the same.

Something important about the interest rate: the market


reacts based on what needs to be done. If the Fed continued to
raise its interest rates but the financial market is not yet
prepared, then this increase in rates would harm the economy
in the long term. If the decision of the CB or FED is not
consistent with the economy, then an increase can actually
cause a depreciation of the currency and have a negative impact
on the economy. Sometimes, even if the CB or FED maintains
the same interest rate this may not favor the economy. In the
following examples I will show you how the final strategy has
been against the interest rate data. Transactions are just
examples. Under this same analysis you can trade all interest
rate data.

Something important about the interest rate: when trading


with the New Zealand interest rate be prepared for high
volatility. Unlike the impact on the publication of interest rates
in the United States, European Union, Canada and Australia,
when you trade in New Zealand you will have greater volatility
before the publication of the data than you would normally
have. Therefore, if you specialize in trading with high impact
data, when you write down the New Zealand interest rate be
prepared with a good plan. Up next I will show you an example
of volatility and how you can take advantage of this data
without mishaps. You can enter the market with the following
transactions for this occasion NZDUSD, AUDNZD, NZDCAD,
NZDJPY. I recommend that you choose only one or two
transactions at most and keep in mind those with the smallest
spread. My preference for the New Zealand interest rate data is
NZDUSD only.

77
Strategy on published data 03/27/2019

Analysis:

The price, at the time of the opening of the Asian market, was
above the central pivot point and with a closed price above
0.69. Everything indicated that the market would react as "buy",
given the forecast of maintaining rates. However, strategically
we must consider the context of the price to plan the orders
around the market price. The market was placed to buy and
expected a good impact. However, the publication of the data
was accompanied by its corresponding statement. The
statement warns that if the domestic consumption of the
economy continued to contract, they will consider a cut for the
next interest rate decision. In conclusion, the impact of the data
was negative for the currency given that there was sell in all
transactions with the NZD.

Strategy:

The strategy behind the chosen strategy of entry is correct in


terms of prices and market projection. However, as a
fundamental rule when trading with a volatile and high impact
data such as the interest rate in New Zealand, no order must be
activated before the final impact.

Precisely with this data the "buy stop" type pending buy
orders were above 0.6910, which were activated before the
impact. In these cases you must act as soon as possible, closing
the position and leaving at a higher price. Therefore, if the buy
prices were between 0.6910 and 0.6912 consider a price higher
than the max levels to prevent previous volatility from activating
your order.

Once this adjustment is made you can take full advantage of


the sellers. "Sell stop" type sell orders were placed around 0.69.
Under this price the market was for sell in its whole.
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To summarize, you will see in the chart how the market
minutes before was below the tops of the area of 0.6920, but
above 0.69. The market was completely aligned for buyers, but
the impact resulted in sell. Therefore, the caution is to consider
a "buy stop" higher than the max in the first measurement and
then that such order should not be activated by volatility.
Remember that impact is important. What happens before is
just market noise.

Chart: NZDUSD
Price before the data: 0.6909
Price after data: 0.6808
Total pips on impact: 102 total pips
Entry duration time: 1 minute.

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Data strategy published on 05/08/2019

Analysis:

The price at the time of opening of the Asian market was below
the central pivot point and with a closed price below 0.66.
Everything indicated that the market would react to sell, despite
the forecast of maintaining rates (expected impact: increase).
The previous day, the main trading partner of New Zealand,
Australia, maintained its interest rates despite a cut-off forecast
of 25 basis points. That is to say that at the fundamental level
there was no surprising scenario and a maintaining of the rates
was in line with the decision of Australia. However, rumors of
rate cuts had already begun.

Strategy:

When planning an entry in order to trade this data, the market


had already discounted the information and the sell was
assured. The uncertainty component was present by raising the
price up to 5 pips before the publication of the interest rate cut
(25 basis points). The entries had no major adjustment. The
price was already discounted and buys were quickly discarded.

80
Chart: NZDUSD
Price before the data: 0.66
Price after data: 0.6526
Total pips on impact: 75 total
Entry duration time: 1 minute.

Trade at max and min

Market prices will eventually reach min and max levels at


different times of the year. The trader must take special care
when trading in these situations. An error in calculations and an
erroneous assimilation of data can lead to buy at tops and sell at
bottoms. Let's explain the possible mistakes and then how to
avoid them. The first assumption of the beginner trader is to
consider that at min or max levels the market will generate a
reversal.

81
The price action trader does not trade during the day. The
second problem is to trade with indicators of moving averages.
These generally begin to cross, implying that a min is indeed a
potential buy area and the tops are a potential sell area. In
another section we will review how the indicators tend to give
us information contrary to the price action.

The solution of any trader when trading at min or max is not to


act impulsively. If the market is at min or max weekly then it will
interest the trader in the long term to enter the market,
speculating a possible reversal. The inter-daily trader sees the
market from a different perspective. When identifying your daily
min in the market, two things can happen: daily consolidation,
or new min during the day.

The same situation occurs with the tops. The last price that the
market quoted during the trading day in the United States and
Europe on the day is the level that the market will consider as
the next level of buy. In min and max the market will necessarily
have a rebound. However, by then the trading volume will be
over. Weekly, monthly or annual min and max are analyzed by
the long-term trader and an inter-daily trader can join a long-
term strategy as well.

Entering the market in "sell", if the market pressure is for buy, is


a high risk situation for the inter-daily trader.

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Pending Market Orders

All platforms will offer two types of orders; those that are
executed at the moment or those that are executed at a future
price. The most important thing in both types of orders is to
consider the spread. At the time of executing an order,
whether on the spot or at a future price, we will have a spread
to pay, which ideally should be floating. When having a trading
account, the spread is an important element to understand.
The buying and selling differential is what the spread will finally
give us. By having more buyers and sellers in the market we
will then have a smaller spread, since the price of supply and
demand are less far apart. Industry brokers will have the
possibility to offer a fixed spread. However, this is not
competitive over high volume pairs.

The important thing about the spread is that we can trade


more frequently in assets or transactions that are more
profitable. The most expensive transactions are those in which
the price of supply and demand are further away, given that
the trading volume is low.

The required margin of the broker in the original position will


remain neutral when two opposing positions are held within
the market.

Pending orders to cover "buy stop" and "sell stop" in


MetaTrader4.

Spot order: sell


Hedge: buy stop or buy

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Spot order: sell

Hedge: sell stop or sell

Now, we mention the hedge as an exit plan for an order that


is already on the market and that for different reasons is
facing a reversal. However, it is essential to understand that
the initial position being hedged will have an expiration time.
Upon entering the market to "buy" and go through an inter-
daily reversal for sell, the buying position may not be held at
buyer levels.

84
The trader must consider in these cases that the most
appropriate thing to do is to close the original expired position.

Let us keep in mind that hedging an inter-daily reversal


position is done only as a way of facingthe volatility of the day,
but this original position may not remain at prudent levels and
may even expire during the following day or days. Holding a
negative position will have two consequences: first, this
reduces the liquidity available in the trading account to
continue entering the market, and secondly, if the swap
difference is negative, interest must be paid for each day the
entry is sustained.

Hedge and management

Addressing the issue of hedge necessarily implies


understanding that in the financial derivatives market it is not
realistic to use the "stop loss". Inter-daily or long-term trading is
equally risky if there is no loss exit plan. Losses generally occur
for two reasons: expiring trades or market prices are no longer
valid. It can also go through international crisis related to the
instruments that are being traded. The main disadvantage we
have with inter-daily trading is that we witness all the volatility.
A long term trader does not care about volatility because he
does not perceive it. Taking advantage of the volatility
translates into opportunities. Volatility paired with emotional
trading translates to bad decisions.

Defining emotional trading starts from the premise that we


have no control over the market, but only over our emotions. In
an upcomingnext section I will give you advice on how to start
generating new beliefs. In the meantime, I will give you some
indications of how before you learn to manage your account,
you must learn to control your emotions.

85
The hedge system is a great thing that will always save you as
long as you first learn to control the emotional side.

The hedging system is a way of protecting a position when


the market goes into reversal, correction or simply to take
advantage of the opposite market within the same day. This
system was born in the late 70s as a protection from a
possible financial market crisis. The stop loss system is a way
of closing a position by automatically taking a loss at a future
price. Hedges are simple to use in trading terms. However, the
main challenge is the predisposition of a trader to take an
opposite order against a position he has within the market.

Therefore, the first thing to consider in front of the hedges is


that a trader must understand that for every sell in the market
he or she can open a buy if the market presents an inter-daily
reversal. On the contrary, for each buy in the market, the
trader must be prepared to open a sell if the market does not
respond to the price entered. Understanding this intention will
make everything easier on the road ahead and you will be
prepared for every scenario. Hedging yourself in the open
market implies understanding two phenomena that occur
simultaneously: winning in reversals and overlapping account
margin.

SWAPS

Every day, after 6 pm or 7 pm, your trading account enters into


another financial product called swap. The swap is the
differential of interest rates between both currencies. Since your
position is not yet liquidated, you are borrowing an asset. That
loan falls within the interest calculation.

86
If your position is held during the weekend, those interests are
accrued with credit / collection during Wednesday. You will see
on Wednesday that, after 6 pm or 7 pm, the swap differs and no
longer represents the accumulation of the previous day, but
represents three total days of interest.

You will find information on interest rates in all economic sites


and economic calendars. The amount of swap that is earned or
paid will vary depending on your lot in the floating position. It is
not the same to hold floats of 0.5 lots than of 5 lots. Make sure
you are clear about what transactions and what type of
positions are paid and in which swap they are paid. This
difference may define whether or not to enter the hedge
process. Therefore, in order not to return to the issue of swaps,
make a note regarding those currency crosses in which you
charge interest and of those currency crosses in which you pay
interest. When paying interest, the money leaves your own
trading account. Therefore, liquidity will be affected if the
hedging process exceeds the liquidity capacity of your account.

An example: the AUD and NZD currencies are par excellence


the assets that pay swap in buys with the JPY (Japanese yen).
Therefore, if you buy any crossing based on AUD or NZD against
JPY you will be paid a daily interest. In these cases, if you enter
the process of hedging a buy it would not be a problem to earn
money in the process. If instead you enter a sell you will have to
pay interests day after day for those sells. In these cases it is
better to take the loss as soon as possible

In the scenario in which you earn interest on your positions,


your liquidity will also be affected by the fall in the price with
respect to your entry price. Therefore, we must keep in mind
that the priority before starting a hedge process is knowing
what is the limit that we have. Setting a percentage or amount
would not make sense since there are assets or transactions
that have larger market intervals than others.
87
For example, XAUUSD (gold against the dollar) and oil (WTI)
have intervals that exceed up to three times the inter-daily
activity of currency transactions.

A market price may expire against a 20, 50 or 120 pips


difference in a currency cross. For some traders, 20% to 30% of
the drawdown from the entry price could mean more than 50%
of the trading account. Therefore, standardizing in a percentage
the risk assumed in drawdowns is not viable. The only way you
will carry out a reversal scenario is to open lots consistently,
assuming that each market entry could suffer a reversal. That
way, your trading will be consistent and you will have enough
liquidity in your account to face reversals.

Lots - Margin and Free Margin

The correct management of your trading account is


undoubtedly the main skill you must develop. The correct
management of your available margin will help you not to use
more than the capacity you have to face all kinds of scenarios.
The first thing I recommend when opening a trading account is
to open with the same amount of lots at all times. You will have
days and moments of over confidence and you will be tempted
to increase the capital or risk of entry. The key is not to change
it. Always keep the same amount you had defined at the
beginning.

The average self-managing trader trades in this market with an


initial investment of $ 1,500 to $ 2,500. When exceeding 3,000
to 5,000 dollars they opt for a management service. The truth is
that no one is better than oneself to know how much tolerance
one has for losses. Management services are not a guaranteed
win. The main advantage of always opening with the same
amount of lot is to be able to isolate the emotional part of
trading.
88
Automating the amount of lot with which you enter the market
will give you discipline. Then you must be clear about the margin
required to open positions. Each broker has its own
configuration on the following concepts that you should know
before trading:

• Spread
• Leverage
• Margin requirement
• Level of "stop out" or "margin call"
• Conditions on margin requirement increases

In trading terms, when you start trading your account it all


comes down to how much you use of your initial capital for
risk. The risk is reduced to the float of each entry. Entering
with a standard lot would imply using 0.25% to 1% of the
capital of your account, depending on its configuration.
However, it is one thing to enter with a lot thinking that you
will be using only that amount of money and a very different
one is to enter with a standard lot knowing that the float could
triple if I face a reversal. That said, always handle a risk that is
sufficient and moderate to go through reversals, no matter
how safe it seems to be the entry you are going to make.

After understanding the risk in each position the rest can be


summarized figuring out how to work on each one. Ideally,
each entry should be exclusive in its assets and lineage. That is,
trying to diversify the risk of entering different positions or lots
over different prices will eventually bring chaos. In your first 4
to 6 months, enter the market in a single position with a max
of two floats, without diversifying the lot in different prices.
89
If you use the hedge system in many positions you will not
be able to to continue. Therefore, if you can risk 250 USD of
every 1,000 USD you invest, only enter with the equivalent
of 250 USD, but do not try to diversify the 250 USD in
different positions.

On the other hand, be careful with assets such as gold and


oil since the margin requirement is higher than that of
currencies. Commodity assets in general are better traded
with a capital that exceeds $ 5,000. The manipulation of the
price in commodities is an uncontrollable variant and is a
factor that is always present in all commodities. We will not
expand on the issue of managing the trading account, but
practice in a demo account the activity of your lot, mini-lot
or micro-lot, on the behavior of your margin and free
margin.

Remember that the important thing during your learning


phase is to control the emotional part and the only way to
do this is to automate your strategy as much as possible. If
you change your mind because the strategy does not work, it
is not necessary to adjust it, but to learn from possible
mistakes.

We are going to give a practical example of how a hedge


with prices would work. Continue practicing in a demo
account with the prices you have at the time of your reading.
Here I will use the following current prices:

Hedge in practice

EURUSD sell 1,111


Sells Target: 1.1170
Reversion: from 1.1206
Sell expiration: 1.1220
Investment: 2000 USD

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Entry: USD 260 or equal to 1 standard lot at 1: 400 leverage

Hedge: "buy stop" of 1.1206 (consider that pending orders can


be activated by spread. Therefore, in an active market always
control the spread and add the corresponding pips to the
price)
Buy stop: 1.1208 with 260 USD or 1 standard lot
Target of "buy stop": 1.1213.
Gain: 5 pips - 1.3 (approx) = 37 USD
New "buy stop": 1.1215
Target "buy stop": 1.1220
Profit: 37 USD
Price confirmed above 1.1220: Beat the sell orders of 1.1180.
"Drawdown" or order difference at a market price of: 40 pips
or 400 USD
Accumulated in hedge: USD 74
400-74 = 326 USD remaining
Closing of 0.30 (approx.) Will vary depending on the base
currency

From the expiration price of the sell, the equivalent of the


hedge gain begins to close. In this case, it starts at 1.1220. If
you exceed the lot and your liquidity already exceeds 1,000
floating dollars, start closing the sell of 1.1180 at the first
reversal price of 1.1206 and do not wait to start closing at
1.1220.

New "buy stop" 1.1223


Target of "buy stop" 1.1228
Remaining: USD 363 or 0.70

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Second hedge: buy stop of a lot (remember that I am hedging and my
margin is overlapped between 0.70 and 1 lot = margin used equivalent
to 0.30 lots).
(Enter a demo to test this equation before applying it.) Everything will
vary based on your required margin and the characteristics of your
account.

Next "buy stop" = 1.1230


Target buy stop = 1.1240
Profit = 100 USD
Partial closing remaining: USD 263

Price closes below 1.1240 and sells return. I do not add sells to
my position until I am at a level according to my price. In this
case, EURUSD would need to fall to 1.1220 to consider a sells
again.

The process continues until EURUSD returns to the price of


sellers. Since 2018 and considering 2019, the transaction has
been in a sell market. Therefore, our example is only for cases
of economic decisions or fundamental events that can generate
a reversal outside the macro strategy of the crossing. In the
worst case scenario, the hedge process could extend up to 4
days or more. Everything will depend in the price being higher
than 1.1220. The faster it rises, the more we will earn and the
faster we will liquidate the expired position. Logically, the
example presented is just a scenario that explains the procedure
and everything will depend on current market conditions. It is
always advisable to rehearse as many times as necessary on
how to take expired positions until it is automated within the
strategy.

92
Covered earnings are used to close expiring positions. Then
you will have two paths in the market:

1- Enter new market intervals, or


2- The sell continues until it reaches the levels of my first
sell.

Let us now explain some conclusions that you should


consider and keep in mind when you decide to enter
with a hedge system:

1- EURUSD now trades at new intervals between a min of


1.1220 and a max of 1.1250. The hedge process should
not be delayed given that no matter how much I earn
from buys, I must close the expired sell in advance.
Reducing the sell is essential when hedging. It is not
optional. Remember that the more days we hold the
remaining float, the more SWAP interest that we must
pay in case of negative swap will accumulate.

In the best case, we would charge swaps if the interest rate


differential is positive (check your broker's page which
crossings or assets have payment swap and which
collection swap). Make sure to keep that information
up to date.

2- EURUSD trades at most at 1.1220, without expiring


sells of 1.1180. Stop hedging the buy and
maintaining the initial sell.
3- Important: the price will make you want to continue
selling, but remember that if you continue to sell from
1.1220, your required margin increases and you are
no longer hedging a position, but are adding to a
previous loss. Therefore, only to the extent that your
price is again within the range, continue to sell.
93
4- EURUSD below 1.1206: I can add sells until I reach my
initial 1.1180, not before.
5- If this whole process seems confusing, you will be
tempted to use "stop loss" again. Remember; It is not
a market to take losses with that system. Automate
hedges by practicing as much as you can, but don't try
to replace it with a "stop loss".
6- Hedging yourself from a reversal frees up the margin so
that you eventually and gradually "win over the
market". The good news is that over time you will gain
so much experience that you will stop using hedges
first considering the swap and close your position
before the market tries to reverse your price. In
conclusion, it is a learning process to help you reach a
level of trading as disciplined and accurate as possible.

The quantity of lots to open in hedge must be the same


as the original position. Before applying this hedging
technique, use a demo account and you will see how your
original position is hedged against an opposite order.

The margin requirement will be blocked. That is, it will be


neutralized or equal to zero and, therefore, your
percentage of available margin will appear as available.
However, remember that we are hedging, but the liquidity
of your account will be equally affected. That said, hedging
a position is not the solution. It is a process that must be
completed as soon as possible. When this process starts
you can continue to cover a position for one, two, three or
more days. However, it must come to an end. The end of
the process is reduced to two scenarios: total market
reversal and total closing of the hedged position, or, the
price returns to its intervals and finish hedging.

94
An active lot, whether for buy or sell, requires X amount of
money to support itself. To the extent that the position
increases in loss proportionally, so will the percentage of
margin. The hedge is a partial bailout, but it must be
accompanied by partial closings of the position or the trading
account must have sufficient liquidity to face reversals. The
term used to measure floating loss is "drawdown".

Price expiration

The way that the price action gets you out of a losing position
is through the expiration of the buy and sell levels. For this, the
trader will understand in which market levels their positions
expire. To give a practical example: EURUSD trades in the inter-
daily of 1.1340 and 1.1362. The trader goes into buy at 1.1352.
Therefore, if you face an inter-daily reversal it should be
covered naturally below 1.1340. However, the expiration level
of your order will be below 1.13. This means that the market
trades in areas where there may be fluctuation and drawdowns,
but they are acceptable in inter-daily trading and do not require
taking losses. Everything will change if the price rises or falls
below 1.13.

To understand the expired prices the trader must understand


in what ranges it is trading. The psychological levels or prices
are a guide of where to trade with caution and in which levels
to be able to release your trading with piece of mind. Inter-daily
market intervals are considered from the min or max of the
European session to the min or max of the European session. I
will summarize this in the following points for better
understanding:

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1. The inter-daily interval is considered as the overlap
between Europe and the United States.
2. Psychological levels are the prices where the market
begins to consolidate.
3. The psychological price is where the market closes
without decimals.
4. A buyer price expires when the market expires at the
min of the buyer range.
5. A selling price expires when the market expires at the
max of a sell range.

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Psychological ranges and prices

Below we will see some examples of inter-daily market


intervals. This same example of analysis must be done before
entering the market to take into account what levels we must
keep in mind for reversals and expirations.

EURUSD
1 hour
Inter-Daily Interval
Total: approx 20 pips.
Min: 1.1180
Max: 1.1213
Buyers prices: 1.1180 to 1.1190
Below 1.1180 expiration of buys. Start of sellers

Inter-daily intervals are on average between 20 to 25 pips. In


the days of high impact data we can see a range or scope of up
to 180 total pips, but these are extraordinary cases. The
important thing is to manage the market area with flexibility,
understanding that volatility can give an often wrong
perspective on expired prices.

97
EURUSD
1 hour
Inter-daily interval: 17 pips approx
Min: 1.1185
Max: 1.12
High impact day at market close, up to 1.1237.

98
On days where the market breaks the max psychological
levels, such as 1.12, the market tends to generate a new upper
market interval. The new EURUSD range has bottoms at 1.12
and tops at 1.1220 and 1.1230 approx. In this new interval the
buy prices will be at 1.12 and not at 1.1180.

In cases of reversal the fundamental thing is to take into


account the inter-daily trading intervals versus the levels of
market reversal.

The expiration of market positions can be anticipated once


the trading session is over. If the day was one forbuy and the
market failed to sustain itself and meet its estimated buy
intervals, then it will probably close as a "seller." If the market
closes "seller" it means that it will close below the opening
prices of the European and United States markets. Only with
that information is already enough to prepare to close the
expired orders of the market session that has just concluded.

A buy entry into the market will have a hedge level and a final
expiration level. What follows after the expiration is to
gradually take the loss of the order that failed to close in the
inter-daily. In this situation, the trader can choose to hold the
order until the start of the next market session.

99
The previous image shows the start and closing time of the European and
Asian markets. The letter A is about the opening time of Europe.
Therefore, the opening is considered as a "seller" since it opened
downwards. The pivot point also provides that information, thus
averaging the start of the market below the tops of 1.1360 and 1.1350.
Letter B is the beginning of the United States session, also below the
central pivot and below the tops of 1.1360 and 1.1350. Letters C and D
are the hours of closing prices. The C marks the closing of Europe. It can
be seen that at a certain time he managed to hold himself above the
central pivot point although below the max. Finally the letter D closes
again below the central pivot point and below the max.

The example image clearly represents a day that was only for sellers.
However, near the close of Europe we had an attempt on the part of the
market to stay close to the tops. A more experienced trader would have
handled the hedge above 1.1360. However, less experienced traders
would begin to take losses from that hour where the market formed
above the central pivot. The sellers of that day did a good job of analysis
and strategy. However, at the time of hedging over 1.1360 the problems
would have begun. On this particular day, a sell would have expired above
1.1360.

100
GBPUSD
1 hour
Inter-daily interval: +100 pips
Min: 1.2694
Max: 1.2780
High impact day, with max up to 1.2817

101
In the previous example, the price remained below the tops of
the area of 1.2730 during the opening of Europe. The day
indicated that it would be for sell, with a max at 1.2730. Along
with the opening of the United States, volatility began and the
market pressure of the day changed from sell to buy. In a
matter of an hour the price was above 1.2730 and the market
strategy had changed. After the American opening there were
only buyers dominating the market.

However, we expect new confirmations to continue trading


since we could have a wrong perception. Then, an hour before
the close of Europe, the price was again below 1.2730,
returning sells back to 1.27. Finally, the closing of both markets
was considered higher than the opening prices, but below the
tops of 1.2730. In these cases two possibilities open up: the
Asian market could liquidate the price again the sellers would
return, or buy again until 1.2730 and retake the buyers.

Volatility and price action

A normal challenge for traders is to distinguish volatility using


price action. The open market will always have more price
fluctuation than a market that is closed or near closing. That
said, when handling hedges we should always be prudent and
consider a higher than normal spread. A hedge could
accidentally leave us covered due to the volatility and not to the
market activity. Returning to the previous example, if the max is
between 1.1350 and 1.1360, always observe the price activity
above the level 1.1360. A methodical trader will cover at 1.1350
where there you can win on buys, keeping your initial sell.
However, you will have more caution with the a hedge at
1.1360.
102
A last buy could be activated close to 1.1360 only by a
widening of the spread. In the open market, 3 or 4 pips do not
make a difference for the price action, but for pending orders.

At the beginning it can be conflicting to doubt the


management of the hedge. The tendency of all traders to start
trading under a hedge is to change the strategy. More than
50% of traders will try to return to the "stop loss" and the same
will directly choose not to use hedges. The strategy should not
be changed, although it is essential to adjust the price levels to
cover and have more tolerance on volatility days. Eventually
you will have enough experience to know which levels are
more convenient to hedge than others. The truth is that it is
not possible to predict when a trading day will be more or less
volatile.

Here I will show you some complete examples of what your


analysis should look like before entering the daily market. I will
use all the tools explained in this section on pivot points,
prices, hedges and market closings.

Instrument: EURUSD
Chart temporality: time
Date: February 18-22, 2019
Asset projection: sell
Macro situation: Dovish European Central Bank, low interest
rates unchanged.
Max prices: from 1.1330 to 1.1350
Min prices: from 1.1270 to 1.1250

103
PP: indicates where the central pivot points are located in the three
different market sessions.

PP 1: prices below the central pivot point at the opening of the


European market, indicates a day for sell. Full daily swing up to S1
(green line). Then, opening time of the United States. Swing reverts
from S1 to center pivot again.

Strategy: preference of entry to "sell", in favor of projections .The sell


is confirmed below the central pivot point in the European opening.
Then, the opening of the United States confirms "buy." Hedge: "buy
stop" 1.1310, above 1.1310 the sell expires.

Opening prices: below 1.13, full swing up to 1.1250.

Closing prices: above 1.13.

Volume: active day in volume and high volatility.

Closing of the day: The trading session of that day closed as a "buyer"
for EURUSD. The price is expected to continue to rise during the next
Asian session.

PP2: Prices above the central pivot point, full swing up to R1. Opening
of both markets in buy and market closing prices equal to the opening
prices.

Strategy: buy against projections. You enter without confirmation, a


price close to the max of 1.1310 is expected, considering 1.3020 and
1.1330 as target. Hedge: sell stop 1.1290, below 1.13 the buy expires.

Opening prices: above 1.13

Closing prices: at 1.1330


104
Volume: low, in consolidation between 1.13 and 1.1330

Closing of the day: the trading session between Europe and the
United States closed unchanged or equal to the opening prices.
Both market sessions failed to sustain prices in the max zone.
This information would imply a consolidation for the next
session of the market, or sells.

PP3: prices in the European session close above 1.13 of the


central pivot. Then, the American session closes below the
central pivot of 1.13, towards the target of 1.1280 in S1.

Strategy: the opening of europe confirmed sells below 1.1310,


with a full swing up to 1.1280. Hedge: buy stop at 1.1310, above
1.1310 the price will rise to 1.1320 and 1.1330. However, sells in
this case will not expire unless they exceed 1.1350. The buy stop
at 1.1310 is done with double the lot or contract of the sells
position. The interval ranged from 1.1290 to 1.1350. If the sell
expires above 1.1350 it is better to be prepared with large
covered positions, since then you have to take losses due to the
impact on your account and this would be smaller.
105
The American opening confirmed buy above 1.1280, with a
full swing of up to 1.13 and 1.1320. Hedge: sell stop 1.1270

Opening prices: Europe session opened above 1.1310 and


the American session opened above 1.1290. In the European
market the sell prevailed when crossing the central pivot,
while in the American session the buy prevailed above S1
towards the central pivot.

Volume: high, added to a volatility in the area of daily max.

Closing of the day: both markets closed around the opening


tops in R1. Everything would indicate that during the next
session we will have a day of possible consolidation in max,
or more buys.

Instrument: Gold
Chart temporality: time
Date: February 18-22, 2019
Asset projection: buy.
Macro situation: risk aversion.
Max prices: from 1345 to 1250
Min prices: from 1240 to 1238

PP 1: Prices below the central pivot in Europe and


confirmation above the central pivot during the American
session, towards R1, R2 and finally R3.

Strategy: Buyers prices are expected in S1 until the central


pivot and then another buy is made, going over the central
pivot to R1 and R2. The market completes its daily swing in
favor of projections despite the opening of sells in the
European market.

Closing of the day: the closing prices were higher than the
opening ones, which would indicate more buys for the next
trading session or possible consolidation.

106
Volume: high volatility

PP2: market opens above the central pivot, surrounding the


area of R1.

Strategy: since the price is in consolidation and is below an


important max such as 1,350, it is preferred to wait for a sells
confirmation below the daily min, or a possible buy above the
max of 1350. A day like the one that is presented in the chart
had no entries.

Closing of the day: prices closed at the same opening levels,


staying below the max. This information provides guidelines on
a possible consolidation or sells correction for the next market
session.

Volume: low, low volatility.

PP3: Europe opening below the central pivot, market at S1,


below S1 and falls to S2, and finally to S3 around the end of the
day.

Strategy: it goes on sell in the first hour of the market. No buys


are attempted despite being in the buy zone.

Closing of the day: the market closed below the opening prices
of 1340. Everything would indicate that it will continue to
decline during the subsequent session.

Volume: high with low volatility.

107
Instrument: AUDUSD
Chart temporality: time
Date: February 18-22, 2019
Asset projection: sell
Macro situation: dovish central bank.
Max prices: 0.7190 to 0.7180
Min prices: 0.71 to 0.7090

PP1: Prices above the central pivot towards R1. At the end of the session it
manages to rise to the next level or R2.

Strategy: the buy above 0.7150 is confirmed up to a target of 0.7170. After


the first target, the second of 0.7180 is achieved. The entry of the day is the
first buy, up to 0.7162. It is preferred to close the buy before R2 or 0.7170
and 0.7180. Below those tops the chances are low that the price will rise
and the buy may not be able to complete your swing.

Closing of the day: the market closed above the openings, which would
indicate that the market would go beyond the max of the area in the
following session.

108
PP2: the European market opens below the central pivot,
thus confirming its first sells below 0.7160 to S1, S2 and
finally the area bottoms. Then, the opening of the American
market had buying pressure at a bottom of 0.71 to S2.

Strategy: a first sell is made after S1 to ensure that the


market leaves the area of max 0.7150. The sell is held up to
0.7110. The buy of the American market is not made, but is
sold again when confirming again below 0.71 or below S1,
up to the target area of 0.7090. Hedge: 0.7160 buy stop.

Closing of the day: the market closed at the crossroads


below its opening prices, which indicates that it will
continue to fall in the following market session.

Oil

Within the energy commodities, the most common to enter


the market with is oil, both Brent and WTI.

109
Both commodities have an important trading volume that allow
for good inter-daily swings. Traders must keep in mind the dates
of the rollovers. Unlike all other financial assets, oil has an
expiration of the contract price and implies that there will be no
market activity until the new price begins.

It may mean a smaller or sometimes very important market gap.


If you decide to specialize in this commodity, keep in mind the
rollover dates. A position that is held just on a due date will not
be possible to control until the new market price begins.

The price map of WTI oil is divided as follows:

Historical levels

> 50 buyer zones


Max: levels of 60 and 70.
<50 vendor zone

Min: levels of 40 and 30.

The following chart shows the activity of oil since the last 4 years
in daily chart. The WTI presents a buyer area above $ 50 per
barrel. From there it exceeds the max, towards 64 and over 64,
continuing up to 74 dollars. On the contrary, below the area of
50 dollars the east barrel falls to 44.60. Once below 44.60 this
gets a min of up to approximately 35.80 dollars. We decided to
divide the price map given a general spectrum to give a
spectrum of all possible WTI intervals.

110
Next we will segregate in more detail the market areas of
2019:

February-March: the year begins at a buyer level above 50


dollars.

Max area: 63 and 66 in the year

Min area: 54 and 52

The information that affects the price of the WTI varies year
after year. Currently, data such as oil inventories ceased to be
published in the calendar. The price of oil is manipulated by
producing countries, thus c

111
International challenges

The international currency market has had historical milestones


that few traders will forget. Only five years ago in 2015 we
witnessed the collapse of the Swiss franc. The Swiss franc was in
a fictitious fluctuation against the euro. The euro was not
supposed to fall from 1.20 against the Swiss. Euro-Swiss franc
(EURCHF) trading was stable and profitable for 3 good years.
The formula was simple: the Swiss bank did not go below 1.20
euros per Swiss. It was a matter of buying euros at 1.20 against
the Swiss and the rest was work of the fluctuation that was
established. The Swiss decided to cut this practice of artificial
fluctuation and in a matter of seconds it was worth 0.85 instead
of 1.20.

That trading day on January 15, 2015, the most susceptible


pairs to enter the with market and taking advantage of the
preset fluctuation, were mainly USDCHF and EURCHF. I will
show you the supposed feat that meant to have traded that
January 15 in the following charts.

112
However, the alleged sells of the traders were not recognized
by the brokers, since at the time of selling there was no
counterpart to buy them. Therefore the positions were not
specified, but only a price gap was seen that went from 1.20 to
0.97 in the EURCHF, and from 1.02 to 0.82 in the USDCHF.

EURCHF
Price before crash: 1.20
Price after the : 0.97

113
USDCHF

Price before crash: 1.02

Price after crash: 0.83

The international agenda of each country can be defensive,


protectionist or quite the opposite. Depending on the
objectives of the trade balance, this will be in consequence to
the management of its economic policies. In most of the
countries of the European Unionh there is an open and free
trade agenda which seeks integration. In 2016 everything
changed. The citizens of the United Kingdom voted mostly for
the referendum to leave the economic bloc. By then, the
world's perspective on economic integration was very
different.

114
The international economic agenda of the United States also
has a duality between integration and protectionism.
Agreements are reached and the NAFTA, a free agreement
between Canada, Mexico and the United States, which are still
in force. However, the opposite is true with its main Chinese
trading partner. The import tariff protectionist strategy is
commonly used to safeguard the national industry. This strategy
must be carried out within a limited framework and in certain
products that do not affect commercial ties.

The challenges presented by the use of protectionist strategies


for the future of trade integration will continue if a diplomatic
conversation between the two affected parties is not
established. The United Kingdom's relationship with the
European Union will now be based on an uncertain future, full
of complications on migration and economic issues. The main
currency affected will be the pound, more so than the Euro. The
United Kingdom will lose ground in the economic arena of the
European Union. Companies and labor will be gradually
deployed to countries that are within the Union.

The treaty of the European Union is flexible in terms of the


freedom of countries to be able to withdraw unilaterally from
the economic bloc (Article 50). Both the United Kingdom and
future countries that decide to take back control of their policies
affected by their relationship with the economic bloc may do so.
That said, the euro as a currency is constantly threatened by the
situation of the countries that acquire the currency.

115
International opportunities

Presidential elections are unique opportunities to trade from


the moment candidates appear. Each representative will have
a different and antagonistic position regarding free trade,
trade policies, monetary policy, immigration, etc. This diversity
of proposals begins to gain importance in the financial world
and investor speculation begins. Equity investors who trade
their money in the foreign exchange market. Typically the
candidate with more openness to integration and more
aggressive around monetary policy issues will be the one who
takes the impulses and rises of the currency. On the contrary,
his opposition candidate who has a more conservative profile,
both in commercial and in monetary policy, will not have
followers in the financial and economic market. Therefore, the
candidate who more ...

Transactions between emerging currencies or group of minors


present inter-daily opportunities, but the schedules are tighter.
Remember that the prices of the Mexican peso and the Chilean
peso only work during the hours of activity of those countries.
Therefore, no matter how much the dollar is active, the
fluctuation of the other currency will only fluctuate if the
market is active. That said, when trading in emerging markets
it is necessary to take into account the opening hours of the
market and its closing. The trade of the majors group with that
of the minors is not the same. In addition to this, the spreads
are considerably higher than the majors.

Let's look at examples of market areas for both crosses.


However, we will not go into the strategy or fundamental
issues. Keep in mind all the data that affects emerging
currencies and don’t forget about the volatility of both
transactions. Next I will comment a little on the operative
market zones and the price transitions in both cases.

116
USDMXN

Zona de compra > 20 dollars

Sells area

<20 dollars

Annual min 2019 18.80

Annual tops 2019 19.50

Buyer prices and intervals

18.80 to 19

19.08 to 19.50

19.50 to 20

117
The crossing is below $ 20 and responds to a sell area.
However, this year began with buyers accumulating from the a
min of 18.82 to 19.00. Then it exceeded $ 19 and continues to
accumulate buyers. Therefore, it could be interpreted as
starting within the area below $ 20, but with new bottoms.

The strategic levels of this crossing are for buyers entering


18.80 and 19.08. For sellers the strategic levels are 19.22 and
19.50.

USDCLP

Buy area

>500 dólares

The crossing is at its historical tops. The crossing has not


responded to selling areas, but year after year it has presented
an accumulation of buyers as well as new tops until those
presented between 2018 and 2019.
118
Surpassing $ 650, go up to the 680 area. 680 sellers enter
However, after passing the 680 this gets new tops at 695.
Within the fluctuation between 680 and 695 new buyers have
followed up to a max of 700 dollars.

The difficulty of emerging crosses is the direct and important


relationship with commodities. The Brazilian real and the
Mexican peso have market corrections directly related to the
oil price corrections. The status of regional trade relations and
Latin American integration is also a framework for market
corrections of these currencies.

The need to unite trade borders and form unbreakable blocks


has encountered a common problem: unwanted immigration.
Economic interests are not often accompanied by national
interests.

The United States, with its pretentious plan to make China


pay for patents, royalties and rights with a counterattack of
import tariffs as a result of diplomatic conflicts.

Monetary policies

Monetary policy is made up of several edges that ultimately


determine why central banks raise or cut their interest rates. In
simple terms; regulators of the economy may have an
expansive or contractive monetary policy. An expansion policy
occurs when a monetary authority uses its tools to stimulate
the economy. An expansive policy will have a lower rate than
normal, or increase the total money supply rapidly. Stabilize or
lower unemployment, contribute to the gross domestic
product and maintain a stable exchange rate are within the
objectives.

119
For the inter-daily trader, trading with the publication of
interest rates is the most anticipated event. Unlike trading on
economic indicators, interest rates are par excellence the main
data that provides an impact on the market and even possible
reversals.

Interest rates of the following countries, in order of relevance:


United States, Canada, Australia and New Zealand. Emerging
countries generate opportunities to trade with interest rates,
but do not announce their adjustment dates well in advance and
sometimes decisions are made while the economy moves
forward.

As to what to expect from interest rates there are three


possible scenarios: it can be maintained, increased or cut. The
objective as traders is to anticipate the announcement and
trade beyond the forecast provided. When it comes to interest
rates, the trading analysis steps are as follows:

1. Current interest rate X.


2. Predicted interest rate = (maintenance, increase or cut)
3. Market price minutes before the announcement
4. Plan an entry strategy
5. Possible failures

120
Canadian interest rates

USDCAD 10-24-2018
Forecast: 1.5%
Result: 1.75%

USDCAD
Price before the data: 1.3095
Price at the first minute of publication: 1.30
Price final 20 minutes: 1.2970
125 total pips

Background: the interest rate goes up accompanied by a stable


policy statement, hawkish trend.
Measures the Canadian dollar against the US dollar.

121
Trading this data was predictable based on the forecast and
the result, but not in terms of strategy. As can be seen in the
chart, the price during the last second before the data was at
1.3095, below the central pivot point. The price below 1.31 was
for "sell." However, in order not to have execution problems
given the volatility or possible gap, it is decided to surround the
market price only by taking a sell scenario.

USDCAD 04-24-2019
Forecast: 1.75%
Result: 1.75%
Sell stop entry 1.3090 to target 1.30.
USDCAD before the data: 1.3440.
Price at the first minute of publication: 1.3506
Price final 20 minutes: 1.3518
78 final pips
Background: interest rates remains the same accompanied by
a dovish statement. Monetary policy under international pressure.

122
For this data, the market was above the central pivot point and
it was decided to enter as "buy" with a pending order at 1.3450,
at target 1.35 and 1.3510.

06-14-2018 1.75%
Forecast: 1.75%
Result: 1.75%

EURUSD before the data: 1.1388


Price at the first minute of publication: 1.14
Price final 20 minutes: 1.1418
78 final pips
Background: interest rates is maintained accompanied by a
dovish statement. Monetary policy under international
pressure.

123
This day the Federal Reserve rates were published. Here the
price was below the central pivot point and with a preference
to sell below 1.14. The strategy in this case was to enter into a
"buy stop" type buy in the area of 1.14, avoiding volatility
between 1.1390 and 1.1388.

EURUSD 18-05-2018
Forecast: 1.50%
Result: 1.50%

EURUSD before the data: 1.1388


Price at the first minute of publication: 1.14
Price final 20 minutes: 1.3518
78 final pips
Background: interest rates is maintained accompanied by a dovish
statement. Monetary policy under international pressure.

124
125
Neuroscience and programming

All traders, whether professional or beginner, will sooner or


later need to make mental adjustments to increase and develop
their skills as traders. Without a correct mentality online trading
is unattainable. In this section I need you to pay absolute
attention. Stop at every moment that you need to in order to
assimilate each concept, but above all take your own notes of
the tools that I will present to you. The final objective of this
section is to achieve self-discovery. You think you know yourself,
but more than 80% of your creative potential is not yet explored
or exploited.

Absolutely no one outside of yourself can tell you what you


should change and what you should accept: only you have that
power. To get that control over yourself, let's start with the
most important thing, something you can apply immediately.
The power of the word. Each of us has a set of acquired skills
and abilities that derive from brain plasticity. It is shown that the
human being can change his way of thinking by changing only
what he says. I will start with this first tool. Then I will guide you
on how to control the conscious and subconscious emotional
part.

From this moment on you already know that your mind reacts
to what you say. What you say verbally has a direct impact on
the result. Let's start quickly to produce the changes you need.
Completely eliminate your self-destructive statements from
your vocabulary. "I’m no good for this," "I'm a mess," "I don't
have support for this or that." Absolutely everything that your
reality is presenting to you at this moment has been and is the
result of how you have intensified a single moment of your life
with self-destructive affirmations.
126
Human beings are experts in this matter. It is as if from the
moment we possess the power to reason and speak, we
acquire the ability to self-destroy. They have made us see that
we fail all the time, in school, work and family. In the world of
trading, when a person is in their first two months where
everything is going very well, suddenly begins to lose control of
the strategy and negative emotions flood it. Next step, they
begin to remember that they were not good at math, or that
they would really give up why they had no formal education in
economics or finance. Others will use other techniques; They
will blame the economic situation or international instability. ¨
I think that becoming independent now is very risky. I'm not
ready yet¨

Learning about your brain and how emotions are responsible


for your trading decisions will awaken a sense of alertness in
your thoughts. You will control more easily not only your
trading, but every aspect of your life. The first thing to know is
that emotional management is not like learning trading. For
emotional control you must have patience and work slowly.
Small changes in daily mental habits generate great results
later. Your brain is a muscle, but instead of referring to
breaking and regenerating muscle fibers here we break
thought patterns and replace them with new ones.

Millions of nerve cells work as patterns that provide thoughts,


emotions and activities essential for your body to function. Our
brain is made up of three parts or sub-brains. The first and
most primitive we have is the reptilian, then we have the limbic
system and above the first two the neocortex. It seems that we
have evolved enough and that thanks to reasoning we have
control over ourselves.

127
However, I guarantee that emotional self-control will be your main
challenge in life.

We are not naturally positive. Being positive is a state to which we


must arrive by reasoning. There are those who take a few seconds to
enter the positive state after a problem or obstacle. There are those
who get it after several days and those who do not arrive at all, paying
in emotional consequences of even depression. The reason is that
when it comes to problems, our first brain is the one that activates the
fastest. This first older brain we have only knows how to do two
things; fight or run away. Fighting is the state where we face the
problem and activate a plan. To run away is to listen to it and protect
ourselves against danger.

At this point you will already be aware, because hundreds of


thousands of traders and entrepreneurs do not fight in adversities.
They automatically run away from the problem, from the lack of
supply and take refuge in what they know as "safe". The system is not
prepared to train people who reason or think for themselves. The
system is everything. From school education to family. There will be
exceptions, but the vast majority of people will "run away" whenever
they can because no one taught them to fight. To quickly put yourself
in a state of guard is to change the situation for a new thought
pattern.

I will tell you how the process of fleeing a fight was personally for me.
In my first 6 months of trading, back in 2008, I lost my first investment
account with 23 years. At that time I had no emotional preparation
and traded with conventional indicators. By then I was based in the
United States, in the city of Honolulu, Hawaii. Not everything was a
paradise for the United States that year. Barack Obama assumes and
being Hawaiian the whole state was partying. All but me, of course.
That same year began the interest rate cuts in the Federal Reserve and
everything I had learned seemed to make no more sense.
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I contacted New York hedge funds. I needed to know what was
happening and there was clearly a lot to learn. Trading in crisis
situations is not strategic, but emotional. I managed to make a
place for myself in Wall Street and I moved to the city. From
Queens to Manhattan, five months taking the subway at 6:30
am to be on the trading floor at 7:45 for the line up of the day.
The training of a trader on Wall Street is the closest thing to
entering a battlefield. They were just shouting for prices and
being prepared to take orders. Of course, there you learn how
not to listen to your brain and trade with emotional coldness,
fast and without overthinking.

Continuing with the theory of emotional control, the study of


the brain consists of two parts: on the one hand the scientific
one, which measures the communication of the brain with our
body from those three brains.

On the other hand, the programmed part of the mind that is


what finally forms our character, personality and defines our
attitude in life. That said, I will focus attention on the second
factor because it is the one we can finally adjust. My adventure
about the world of the mind began at an early age. A high
interest in the metaphysics instilled by my mother led me to
find tools to help and transmit all that power, to friends, family
and later to traders.

The moment you discover that you are a fully adaptable


creation entity and that you can finally change your reality in a
thousandth of a second, your whole world will open to give you
space. Already at this precise moment you should be bursting
with emotion. You just understood that you are lord and master
of everything.
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Each of the problems or what you call problems, tragedy or
crisis was all created by you.. Every chaos in your life was
created by you. Neither the country where you were born, nor
the economy that you had to go through, nor the studies you
chose, nor your partner, absolutely nothing has to do with your
current situation unless you choose it from advance. If you
already understood then pay close attention to this section.

Everything works within systems which are formed based on


imposed values, beliefs and customs. We would live in chaos
without the system. Systems are created based on fear. Without
fear there would be no system that organizes the wills of human
beings. Thanks to fear we have a school, political and family
system. Little by little you will understand how fear has
determined your life by limiting your freedom of thought. That
is about to change now.

The first exercise is to quickly occupy that space of the mind


that works on autopilot and you will control your thoughts, so
you will not give rise to the brain to continue to be governed by
fear. Fear has different forms and disguises itself as different
characters.

At this point you will wonder why this neuroscience apparatus


is important. I still can't explain what relationship it has with
online trading. Nobody taught us or showed us that money is
the one who should work for us and we who must have the
training to make it work. The accepted belief system is not
made for the formation of independent thinkers, creators and
artists. Our belief system was imposed on us from the first
moment in the name of "fear." Parents, teachers, social circles
have worked fervently to know and understand that work is the
result of training and that has a price in the market.
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The funny thing here is that the world's wealth accumulates in
only 1% of the population and none of those people work for
money. None of the billionaires of our era inherited wealth, all
are self-made.

Get used to the fact that when deciding to be a trader you are
already an entrepreneur. Your job is to dedicate yourself to
moving money from one side to another that will then help
you generate new sources of income. Entrepreneurs have a
very different lifestyle from the rest of the people. When you
are asked about your vacation you will not know very well what
to say because perhaps in your first 5 or 6 years of entrepreneur
you do not have time for distractions. When family or friends
organize weekend walks you will still be working on your ideas.
Your phone, laptop and internet are infallible allies in your
entrepreneurial phase, wherever, whenever.

Your brain will face many changes, since so far it only knows
how the systems within which it is trained to function work. The
good news is that neuroscience has shown that the brain is
totally trainable to the new and different. Neuroplasty has
delivered results of new microcircuits that are formed by
relating different concepts.

Once you understand that what you know and think does not
necessarily come from your free thinking, the question you
should ask yourself is: where is everything I have learned stored
and how do I unlearn all that to really change my life?

If I really want to have freedom and I think I deserve to live on


what I really want, if I understand that my training has nothing
to do with how much I will earn in life, if I know that the wealth
of the world is unlimited and I don't have to set small goals only
because society has been limited by the achievements of its
peers, so how do I start?

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Now we have entered the most fascinating part of the human
mind. On a rational level you are understanding everything you
are reading. However you have a sub-mind that is on constant
autopilot. That sub-mind is functioning as a perception filter of
everything you do and what surrounds you. This sub-mind or
subconscious is ruling and boxing every second of your day in
different areas that it already knows. The problem in adulthood,
unlike children, is that everything new that you don't know is
considered a threat.

Any new idea you have or new experiences that you want to go
through, is sub-mind does not know them. Therefore, it will take
care of flooding you with bad filters or thoughts to take you to
what you know to keep you safe and secure.

Now you will begin to understand why it is dangerous to start


an independent activity or experience new things without
mastering your wild mind. Rationally you can be prepared to be
independent. You will surely have savings to launch yourself into
a new activity, you will have support from family, partners and
friends. But pay close attention to this. If you are not training
your mind to the unknown you will stay on the road. Your mind
will do everything possible to fail you, it will fill you with
negativity whenever you can.

Failure is part of the process. Become friends with failures and


obstacles. Make them part of the success and not a way to avoid
them to stay safe. Your sub-mind is not here to obey you, it is
too wild to listen to you. Its only function is to keep you alive and
for that it will drag you to what kept you alive all this time. That
which it knows you have done before and kept you safe, then it
will try to take you there again and again.
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When that time comes, you stop to take control again. You
must control that subconscious that is trained to fear. Repeat
to him that you are in control now and that it must obey you
and accompany you in the process.

This natural hypnotic state law in which we stay alive applies


to all areas, not just work.

It is no accident that hundreds of thousands of Wall Street


traders and promises are working in banks or financial
institutions for a fixed and "safe" salary. It is no accident that
hundreds of thousands of inventors have given up their ideas
that could improve and change the world as we know it, and
are working on research and development in universities or
companies. It is no accident that artists, composers, actors are
currently in temporary work until a new opportunity arises.

The history of mankind has been written by human beings


who have known how not to belong to the system and have
taken every opportunity along the way to develop. If we study
the mind of each individual who has made a change in the
world outside the known, to name a few; Henry Ford, Abraham
Lincoln, Voltaire, Tesla, within the hundreds of thousands of
contemporaries; they have in common only some aspects:
disciplined, creative, socially isolated, visionaries,
communicators and meditators.

The age at which the human being has the greatest


opportunity to break with the paradigms and develop his
creativity towards his true purpose is precisely after finishing
his formal studies. Those are the glorious years of greatest use
to break the system and have an autonomous thought of
everything imposed. However, many adults between their 40s
and 50s manage to get out of the cages of collective thought
and acquire their own.

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All the remaining work has to do with what habits you will have
to change, what new thoughts you should adopt and, above all,
how you should speak to fully enter the training of the mind. I
will stop for a moment to talk about new habits and language.
Language is the basis of everything, the way you communicate
may require adjustments and changes.

The pseudoscience that will help you apply your language skills
is neurolinguistic programming. It has been proven that words
have power over the formation of your brain neurocircuits and
generate a certain emotion to each word you mention. If there is
anything I can guarantee you is that every minute spent on your
mind is worth it and your trading results will improve.

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