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156 Cards in this Set
- Front
- Back
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Define an ugly trading environment.
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Flat LTs, STs sewing LTs shut, Macds tight, weak moves within a tight range. LTF Charts flatline
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Define good Risk to Reward.
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The potential for gain is at least 2x your risk. The target is 2x the distance away from entry as from your area protecting the trade
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How do we use weak retracements?
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At a breakout of resistance, look for a weak retracement back into support to use as a spring board to reach next target.
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How do we trade breakouts?
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Compression & Roll-n-Go Setups only.
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What do you look for when an area has been tested?
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It takes several bars to test an area. Look for the strength of the Macd reaction when a new area is reached.
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It is a good practice for these to be attached to those…
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Ideally Sts are still attached to Price Bar at entries (critical in Momo's)
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What are the primary trading areas.
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Must trade off of MB, LT, or Fib - never "out in space"
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What is a Pocket of Power?
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Multiple areas stacked up & trending in favor of a trend trade - the cradle out of the "pocket" is highest percentage winner.
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A Strong Macd Reaction means that the Area should _______
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A strong macd reaction off of an area (fib, mb, lt, or 1:1s) means that the area should hold (must be a fresh test)
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A Weak Macd Reaction means that the Area should _______
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A weak macd reaction off of an area (fib, mb, lt, or 1:1s) means that the area should break (must be a fresh test)
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Define Bullish and Bearish Divergence
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Macd Divergence occours when price action gets ahead of macd movement. "The Macds are holding back"
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Define Retracement Divergence
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Retracement Divergence is due to different amount of retracement (movement) in price vs Macd
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Discuss difference between Divergence and No Divergence
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If there is no divergence stay with the LT trend, w/ divergence you may counter off of OBs, with a MB target
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How do you best review the market when first starting?
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Check for News, Review 5&15 min charts for current direction; xfer relevant fibs, note the larger trends
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How do you determine trading direction?
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A close outside the LT determines the direction provided: No STM + Room to Target.
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What are the four direction clues of the Macds?
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MACDs: Weak down favors long, Weak up favors short; Strong down favors short; Strong up favors long
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What are the Jaws?
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Where the Small Triggers make a strong cross of the Large Triggers indicating possible change in direction
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What does Retracement Divergence indicate?
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Retracement Divergence provides a clue for direction of future pop off of spring load - Macds lead the way
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What is the weakened LTs tell?
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Potential change in market direction - exercise caution trading around weak LTs
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What is the first consideration in taking a Divergence Counter Trend Trade?
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If we have not completed a move to a fib, be very cautious in taking a counter trade
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What is the primary Divergence tell?
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Divergence shows the potential for a change - use extreme caution in STM
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What is the spring load Macd tell?
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When you see a spring load ask - what is my direction expected out of spring load? Direction in = direction out.
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What is the T3 - Prime Directive
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Direction, Area, Macds, Risk to Reward, Strong Entry
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What thought process helps get your mind in the right direction?
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Think General to Specific - work from large trend to current price action
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When comparing Price action Vs. Macds, which one rules?
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Trust the Macds, but don't fight either
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What if the Tick chart says up and the LTF say down?
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When tick chart disagrees w/ LTF trend, only use very strong setups with tight management
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When do you give up on Divergence Counter Trend Trades?
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If you lose on a DCTT then NO MAS! - if you can break even then keep trying if you wish.
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A Strong Trending Market will tend to change direction at…
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multiple time frame support or resistance.
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Describe entry Bars
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Entry bars show a price reversal in confirmation of your anticipated trade setup, thus providing the final piece to open a trade.
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Describe the entry process
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Buy at or near close of a clear reversal bar into your direction off of your chosen area (Fib, LT, or MB), small bar entry = less risk
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Describe the ideal entry bar
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The double top or double bottom is the strongest entry bar
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Discuss initial risk considerations
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Avoid large bars for entries - risk ='s bar size + 2 ticks minimum. Use the Area for protection of the trade - Stacked areas provide greater protection
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When in doubt…
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Sit it out.
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How close do you need to be to the area to enter?
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Do not trade from space, the price bar should be connected to the base area - certainly within 1 or 2 ticks (a little space if everything else is perfect)
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How do you know what a market is going to do?
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YOU DON'T - DON’T THINK ABOUT BIG ISSUES - JUST READ INDICATORS!!! Don't trade the news.
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List Siva's Five Rules for Success.
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Direction & Macds & STs Favor the trade w/ Room to Target. Enter on Strong Attached Entry Bar
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Name Siva's Rule of Congruence
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LTs and Macds Must agree on trade direction!
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What is Jeremy's Primary M.O.?
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Trade only with strong MACD formations in your favor.
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What is space between the Large Trigger Lines?
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Either side of LT or space between is the same - do not wait for breakout if conditions are right. Less risk on a backside entry!
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When may you enter a position?
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Wait for entry signal to complete, then pounce.
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Where do you place initial stops?
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Initial stops are behind areas that allowed you into trade.
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When areas are weak and spread out, you must…
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require a great look for the macds
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When all indicators are weak and flat, you must…
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demand a strong macd formation, and a stacked area to trade out of. Stack & Mac
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When trading into a key fib…
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a strong macd formation is required.
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When looking for the entry signal, reversal patterns in space…
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should be ignored. Never trade from nothing.
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In a STM only, when looking for an entry on the wrong side of the LTs, you must wait for what formation?
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Price action must weaken the STs to take a trade on wrong side of LTs for the cross back over the LTs.
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Divergence potential at a fib means…
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the fib has potential to hold.
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Bullish & bearish divergence forshadows
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a potential change in direction
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Retracement divergence also forshadows
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a potential change in direction
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Divergence occours because the price action is?
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stalling at an area (generally a fib) that has the potential to cause a change direction.
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If prices are blowing through fibs with no divergence then…
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We are in a strong trending market (possibly one-way) - look only for trend trades -(Fib to Fibs, TTCradles & Bollinger Band TTs)
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What is the tendancy on days where fibs are wide apart?
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The market tends to consolidate on days where the fibs are wide apart
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If both 5&15 minute charts agree on direction...
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Trade in direction of Minute charts trend, or else require a perfect stacked setup and manage tight and fast.
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If both minute charts say opposing directions…
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Expect slow and grinding moves – you need to see stack & mac.
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Why must we be aware of big news events?
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The market can move against us very fast, and our stop could get blown thru and never triggered.
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Define a strong one way trending market.
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a strong one way trending market is defined by near verticle trend channels on the longer term chart.
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Define a Strong Trending Market
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Strong, Verticle Large Triggers.
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If you are between tight fibs with flat LTs…
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expect a choppy sideways market until everything gets tight for a Compression breakout, or you get a clear Roll & Go signal.
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When in Doubt…
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Sit it out.
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If there is little room between fibs, then expect what movement?
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Expect Chop
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If you can’t tell the context of the market from the minute fib and/or you could make arguments for both directions…
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Beware, it may be leading into chop – so if you do take a trade, be very picky which ones you take.
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If you’ve taken a trade against context that has failed to hit its target, or didn’t go far…
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then another trade setup that occurs against context straight afterwards is very risky and not worth taking.
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List some key words that are red flags when contemplating a trade.
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Kinda, Sorta, Maybe, Could, Should, Might, Must, Surely, Couldn't, If, hopefully ….
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Swings that don't reach areas indicate what?
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Swings that don't reach areas indicate chop.
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When the triggers are "bumpy" expect what?
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CHOP
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Define "gaining strength" in the LTs
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The LTs opening up and increasing the slope indicates that the market is gaining strength.
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Define the losing of strength in current direction via LTs
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LTs closing indicate losing strength
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Describe the space outside the STs and LTs
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The space outside the ST & LT lines are dead areas. Avoid trades out in space.
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If LTs weaken during a trade what should you do?
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If they start to weaking during a setup be really careful! Anticipate a reversal.
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What is the space between the LTs lines?
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The space within the LT lines is an accecptable area for a trade.
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Define Loss of Momentum (LOM.)
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Volume with no continuation in direction - weakening STs. Price crosses over Sts to pinch them shut.
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Describe a Strong Trending Market (STM)
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LTs and STs opening up with sustained strength, Macds having repeating runs of sustained strength, price action blowing thru fibs in one direction.
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Describe Chop
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LTs closed and flat, STs weaving LTs shut, Macds unclear, Horizontal movement on LTF charts
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How do we know there is Sustained Strength
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ST lines are straight and spreading apart - Macds are spread apart and consistent in their distance apart w/ a steep slope
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How do we know we are losing strength?
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ST lines are wobbly and pinching or rolling over - Macds are bumpy. Price action is closing within the STs to pinch them off.
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How do you know that Small Triggers are gaining strength?
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Opening Up = Gaining strenth & likely affirming trend
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How do you know that the Small Triggers are losing strength?
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Squeezing Together = Losing Strength & potentially changing trend
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The only reason to wait for the pb to be on the trade side of the STs is…
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if the STs are strong against you. If they are weak against you the trade side does not matter much.
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Why do we wait for the Small Triggers to pinch in our trade direction?
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It greatly increases our chance of success even though we will likely get a poor fill. Weight it out.
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How do you know you can trade back into the LTs?
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In a STM w/ No divergence, you may still look for primary direction in spite of the ST/LT cross.
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How do you anticipate the reaction to an area.
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By previous testing of that area
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How do you handle an active trade showing divergence?
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If at an area with divergence potential and weakened macds - get out on blink (sell bar.)
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How do you know a STM is over?
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A Macd Trend change takes a complete cross requires a strong Macd move above ZL, and strong Price move above MB.
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How do you know there is a Strong Trending Market (STM?)
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In a STM the Macds will Lie about divergence - wait for Macds to tell the truth before trusting divergence again.
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How much Data for a Macd read?
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It takes "several" bars to read Macds
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Name the 5 common Macd BB patterns.
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Spring Load, Strong Move/Weak Retrace, Rolling Over, ZLR, Opp Bob Reject
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What do you look at for Macds?
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Spacing, Angle, Change, Position Rel to Bollinger Bands
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What is best setup out of a flat choppy market?
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Look for compression in price action and macds to breakout of Chop.
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What is the greatest rookie error?
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TRADING AGAINST THE MACDS!!! NEVER NEVER NEVER NEVER
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What is the spring load Macd tell?
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Spring Load, the direction in defines the direction out.
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What you look at for Bollinger Bands?
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Width, Change in Width, Location, Slope, Spread
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When does a retracement change a direction?
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When there is a strong move above the MB and a strong Macd move above the ZL.
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In a trade, how do you avoid missing the big moves?
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Avoid jumping out on sucker closes (price close peaks above STs) - generally you'll get another bounce in trade direction
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In a trade, How do you get a sense of the market?
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Review the markets trade potential by reviewing longer time frame charts, then narrow in onto the shorter time frames
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In a trade, How do you handle stop placement?
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When prices retreats and then moves off of an Area, move stop up 2 ticks behind it.
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In a trade, How do you trail a stop?
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Trail stops behind price entry signals and newly crossed areas
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In a trade, be aware of this warning sign…
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Look for divergence as target approaches: "Did anything change?"
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How do you handle the trade when getting near a target?
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Look for Divergence vs. LT strength during the trade and especially at target areas
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How do you know when to get out?
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Anticipate the next move - if it does not follow script get out.
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How do you know when to get out?
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Review what is against your trade Vs. What is in your favor when deciding to stay or go
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How do you know you should stay in a trade that starts to go against you?
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Watch the Macds - Has anything changed that got you in?
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How long are Macd signals reliable?
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Macd reactions are valid signals only within 2 minor swings - fresh is best
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How long should you hold a trade?
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If price bar closes just barely on wrong side of STs: review Macds and give it one more bar - or - exit on clear St wrong side close
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How long should you hold a trade?
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Hold the position as long at the Macds stay on trade side of Bollinger Bands, and STs show strength
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Is it OK to add on to a trade?
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You may only add on when you get new Setup buy signals within the current trade - all other rules apply to the new trade
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Is it OK to re-enter a trade?
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You may enter or re-enter anytime you have valid reasons to enter. Money in the bank is to be treated as if it is saved and hard earned.
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May I retreat a stop?
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Let the stops work, and never back a stop for more loss potential after initial set
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Name the two basic exit strategies
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Real (not sucker) close on wrong side of STs, or if there is divergence - exit on a blink.
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What good are 1:1s?
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1:1s are great areas to protect a trade.
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How can you anticipate a change in direction?
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Divergence indicates potential change in direction, exit on a blink w/ divergence.
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What if you find yourself "hoping" that it goes your way?
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Do not hold and hope - sell on a reversal if Macds also blink
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What if you get a reversal bar against the trade?
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When you get a reversal bar against your trade - allow the stops to protect trade if reasons for entry are still good, otherwise exit.
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What if you get a reversal bar against the trade?
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Review what areas are with trade - what areas are against trade - is the entry still valid?
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What is consistancy in trade management?
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Take the first exit - or - wait for the LOM. Be consistant.
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What is your thought process as the trade approaches the target?
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Whenever near a target - look for divergence - did anything change to close the trade?
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When do you close a Divergence Counter Trend Trade?
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Get out on the first reversal bar. Out at first blink.
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When do you close a trade sans divergence?
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Exit with confirmed LOM (close wrong side of STs or 3x inside STs) or out at targets.
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When do you close a trade showing divergence.
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The blink and out rule applies to any trade showing divergence (div. indicates potential for change in direction)
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When do you give up for the day?
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If you loose 1/2 of your daily goal get out. If your goal is 40 ticks then daily stop loss is 20 ticks.
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Where do you place the default entry stop?
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Stops are moved 2-ticks behind newly executed entry signal bars or just behind area protecting the trade
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Sliding on the opposite bolling band says…
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you may continue to the next target.
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Look for this formation in the Small Triggers as a concern…
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The Sts may "Cradle" off of areas that must be crossed in order for the trade to continue. Be Aware of all obstructions.
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A Strong Market is _____________ on High Volume
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A Strong market is bullish on high volume
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A Strong Market is _____________ on Low Volume
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A Strong market is bearish on low volume
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A Weak Market is ______________ on High Volume
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A Weak market is bearish on high volume
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A Weak Market is ______________ on Low Volume
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A Weak market is bullish on low volume
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Define a Strong Trending Market.
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STM is when Divergence, Areas, and Fibs are breaking when they should hold. STAY WITH TREND!!!
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How do you know a Strong Trending Market is broken?
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To break a Strong One-Way Trending market: Must have sustained strength thru MB, ZL, and LT, or the LTs needs to flatten out. Look for ZLR to press the change
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How do you recognize a Choppy Market?
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Weak Range Bound Chop is when the STs sew the LTs shut, only allow 1 trade out of chop to minimize losses
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How do you trade a Strong Trending Market?
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STM goes straight line breaking fibs and areas that should hold you may trade off of MB back into LT near OB
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What are the Setups for breakouts from a flat/choppy market?
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Look for Compression Trade or Roll and Go to break out of a flat market
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What is Fosterbe's Trading Mantra?
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I have no opinions on Market's movements, they move as lighting - erratic beyond all understanding - I only trade the indicators.
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Avoid this high risk entry:
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Avoid entries on large bars
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Avoid trading during these times:
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Don't expect much with the open, news, close, roll-over days, or options expiration/witching days.
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Avoid trading off of these areas:
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Do not trade off of Small Triggers, or out in space
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Define "Room to a Target"
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Make sure you have room to the opposite outer band for a minimum 1:1.5 Risk to Reward (2:1 recommended for newbs)
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What is our Risk to Reward Rule?
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Make sure you have at least a 2 to 1 risk to reward ratio to the OB or next untested area target!
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What is the "best" trade?
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The Stacked Cradle - Look for STs rolling off of LTs within a stacked area and a clear Macd signal for the best Risk to Reward
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Where do we look for trades?
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Look for entries from Fibs, LTs, or MB - Entry bar must be connected to with a signal from the area at entry.
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How do you review current market condition when looking for a setup?
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LT Strength and Price Bar relative position; Areas to trade from; Macd-BB Status; ST Status; R/R; Location of fibs on 5&15; Check: divergence , pick out targets & obstacles
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What is the danger in trading with the STs in Jaws?
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They tend to snap shut.
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What trade Setup may you anticipate late in a market move?
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Divergence Counter Trend Trade tend to work at fibs or outerbands when STM action gets tired (Lts weaken)
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What trade Setup may you anticipate late in the Jaws?
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Look for potential Jaws setup right after strong Lt/St Cross
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What trade Setup may you anticipate to breakout of a flat market
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Look for a Roll and Go or Compression Trade to breakout of flat Large Triggers
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What trade Setups may you anticipate in a Strong Trending Market?
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F2F, Cradles & Bollinger Band Trend Trades
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What trade Setup may you anticipate a strong ST/LT Cross (Jaws?)
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Look for Momo at strong Lt/St Cross
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What trade Setup may you anticipate at a weak LT/ST Cross (Jaws?)
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Look for an RNG with a weak Cross that gains strength
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Why must you always be aware of divergence?
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NEVER take a backsided trend trade when you have divergence - the trend may be over.
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What are the requirements for a Momo?
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Signal From Area; Sus Sts & Macds; $+Sts Connected @ Breakout; 2x R:R; Good Entry Bar - GO
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What are the requirements for a Cradle?
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In a STM; Ideal Sts lead & curl off LTs @ Stacked Area; Macd & LTs are Weak againast trade; STs are on the correct side of LTs; Good Entry Bar - GO
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What are the requirements for a Roll and Go?
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Macds & Small Triggers take off, LT crossed or pinching off, Good Entry Bar - GO
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What are the requirements for a Compression Trade?
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A Roll and Go from Spring Loaded Macds.
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What are the requirements for a Jaws Trade?
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Est Dir, St X Lt; Lt Weakening; Area & Sig; ZLR, OBBR, or Spld;
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What are the requirements for a Fib to Fib?
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Must break a Fib area and pull back to it; Check Macd Reaction @ 1st Cross of Fib; Check Divergence (big div no go); Lt & St roll into trade; Room to next Fib: Strong Entry Bar
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What are the requirements for a Divergence Counter?
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Divergence near a fib; weak Lts; Sts and Macds turn; +RR; Strong Entry, first exit
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What are the requirements for a Bollinger Band Trade?
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Strong Macds with weak retracement Start to reject/roll off of opposite bollinger band, A cradle based on Macd movement
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