The aim of the chapter: before explaining the application of the SBP tools by MF book 1 , we'll give you a short summary of the guidelines for creating a profitable trading system and for using tech analysis, which has never been done by any classic trader. The paradox results in the fact that neither the mentioned Forex classics, nor the course instructors from DCs, nor 97% of traders in the world can present the entire picture of TA.
What is the direct correlation between WA, pivots, “Head-n-Shoulders”, trend channels, rectangles and candlestick analysis?
Over the 4 years that the Academy is existing, I was surprised to notice the following tendency: those who finished the training courses arranged by Alpari, Forex Club, Teletrade and other DCs (having lost 3-4 deposits)… have absolutely no idea of how the TA/WA tools are related to each other.
· Almost all of them know separate tools (“Head-n-shoulders”, “butterflies”, S/R levels, trend channels.
· Almost nobody can combine them with each other
· As a result, traders with 5/10-year trading experience have to start the training at the Academy from studying at the School for beginners together with those who heard about “Forex”, “market”, “trading” just a month ago.
It is very simple to explain the paradox.
No trading classic gave a brief summary of the ABC (fundamentals) of Forex, combining together the tools under study.
As a consequence of this, there are separate patterns without their correlation between each other and their role in the whole process of market analysis (the general scheme cannot not be seen)
The consequences:
· Can you imagine a doctor who doesn't know the anatomy of a human body and who never considers the heart, the liver and the kidneys as inseparable/correlated parts of a human body? Moreover, the doctor is serious when trying to explain something and to cure each of the parts of the human body.
· Can you imagine a graduate of the physic-mathematical department of a university who doesn't know the multiplication table?
Have you imagined this?
So, these are 99.9% of course instructors and analysts as well as 97% of traders. I hope there is no point in explaining what these “traders” are going to end up with ( while they are dreaming of being on board the luxury yachts, reactive airliners or living in luxury mansions) each time they are going to open a real trading account.
If you have finished with this let's proceed to studying the following info: The ABC or the most concise course in TA when entering the 1st grade of Masterforex-V School. (3 pages of text instead of 300-700 pages of the classics' books on Forex TA and WA).
LESSON 1. TA PATTERNS.
The price on Forex never stands still. It always moves either up or down according to 1 of 2(3) trend types.
1. A bullish trend (under MF) is a directed upward movement from one reversal pattern to another one (in the opposite direction).
2. A bearish trend (under MF) is a directed downward movement from one reversal pattern to another/analogical one (in the opposite direction).
3. A sideways trend (a flat) is:
· In the classic TA it is a separate (3rd) type of trend, which means that the price moves within a specific price range (corridor).
· Under MF, it is just an inseparable PART of a bullish/bearish trend, a form of the correction/reversal of 1 of the 2 trend types (their reversal/continuation pattern).
Read the end of the chapter to get the explanation by MF of this thesis, which corrects Charles Dow's thesis about a flat as a 3rd type of trend, and to understand how it can help traders to be faster in understanding all the labyrinths of TA.
The patterns of the 3 types of trends
Reversal patterns as the beginning of a new trend… or what a trend starts with, as well as a trader's deals only with it.
A new trend starts with the reversal of the old one.
· If the price cannot go further up it will go down.
· Each type of reversals has the corresponding reversal pattern.
The generally accepted reversal patterns are:
· Head and shoulders (inverse H-n-S)
· Double/triple tops (Double/triple bottoms)
The questionable reversal patterns are:
· Diamonds
· Spikes and V-patterns (V-tops/bottoms)
· Saucers (by Murphy)
Conclusion:
Any bullish/bearish trend starts with one of the mentioned patterns and continues until he appearance of another identical pattern in the opposite direction.
The pattern of trading within the scope of trend reversal patterns (without taking into account the SBP by MF, only the classics)
· The pattern is found
· The positions are opened in the opposite direction
· The stop is placed above the reversal pattern signifying a downward trend/ below the reversal pattern signifying an upward trend.
A test for beginners: Which trend is present at the moment: bearish or bullish?
You can read about the details and the 1st difficulties in trading with the classic reversal patterns (not solved by the classics – SHOULD BE STUDIED LATER) in book 2 by MF-V
· The classic patterns of trend reversal
· The “Head-n-shoulders” pattern or how to solve the puzzle unsolved by Eric Naiman
· Elder and Naiman's chartism with their “argue in absentia” about the “Diamond” pattern
· The “Saucer” pattern or the rounded top/bottom pattern. Find Murphy's mistake and the reason why Elder and Shwager didn't consider them as reversal patterns
· V-patterns or spikes. The drawbacks of defining the criteria for this reversal pattern with Murphy and Shwager
· The reasons why traders lose when using the classic reversal patterns
And other reversal patterns, created by Scarley (butterfly etc.), Bollinger, Larry Williams, Demark, Masterforex-V etc., are studied separately at the Academy.
LESSON 2 FOR BEGINNERS. A TREND CHANNEL – A DIRECTED PRICE MOVEMENT WITHIN THE RANGE OF THE CHANNEL CREATED BY THE NEW TREND.
The classics use a reversal pattern (for example H-n-S) as a starting point to draw a trend channel in the opposite direction, within the framework of which the new trend unfolds/progresses).
The picture is taken from Jack Shwager's book “Technical analysis. Comprehensive course”
MF's pattern of classic trend channels
The pattern of a trader's work within the scope of the reversal pattern (without taking into account the SBP by MF, only the classics).
· Trend channels are drawn starting from the reversal patterns
· Positions are opened from the pullback – from the channel border in the direction of the trend
· If the channel border is broken through in means that the trend is over, the positions should be closed. The trader should wait for the forthcoming reversal pattern
A test for beginners: trading within the borders of a classic trend channel
You can read about the details and the 1st difficulties in trading with the classic patterns of trend channels (The classics' unsolved problems and mistakes) in book 2 by MF-V
· 7 ways of drawing the trend channels and MF's criticism – read “Entering the market while trading inside the sloping channels. The classics' contradictions and mistakes'.
· The essence of the problem unsolved by the classics: the breakout of the channel at the pullback in most cases… doesn't signify the trend reversal.
· MF was the first to solve the problem through the tool of the new TA called – MF sloping channel (MF SC)
LESSON 3 FOR BEGINNERS. SUPPORT AND RESISTANCE LEVELS WITHIN THE SCOPE OF TREND CHANNELS.
The price movement goes through the barriers called support and resistance levels, which often coincide with bunches of the exchange and off-exchange market orders.
· Support levels are below the price
· Resistance levels are above the price
The pattern of S/R levels in MF TS.
The pattern of the synthesis of lessons 1-3. Reversal patterns, trend channels and S/R levels in MF TS.
· A “Head and shoulders” pattern
· A trend channel
· Support levels
I hope this MF pattern helped beginners to find the answer to the question asked in lesson 2 about whether it is necessary to open or close the position after the channel breakout.
You will probably be surprised to find out that some classics give the completely opposite recommendations – they only open the deals (together with the crowd) where you are going to close them basing on the synthesis of only the classic TA tools.
You can read about the details and the 1st difficulties in trading with S/R levels (The classics' unsolved problems and mistakes) in book 2 by MF-V
· The differences in the techniques of calculating S/R levels that are found in works of the following classics: Alexander Elder, John Murphy, Demark, L. Borselino, Eric Naiman, Edwin LeFevre , Shwager etc.
· True and false types of S/R-level breakout. A kickback from the technical level
· The correction of the classic WA mistakes by MF concerning the calculating of S/R levels
· The unsolved trap for traders by Larry Williams and its solution by MF
LESSON 4 FOR BEGINNERS. TREND CONTINUATION PATTERNS WITHIN THE SCOPE OF TREND CHANNELS.
Kickbacks from important S/R levels give birth to a flat, within the scope of which trend continuation patterns start unfolding.
· Rectangles
· Gaps
· Flags, pennants, wedges
· Triangles
The pattern of the synthesis of lessons 1-4. Reversal and continuation patterns, trend channels and S/R levels in MF TS.
· The beginning of a bullish trend – a triple bottom
· The end of the bullish trend – the breakout of the bullish trend channel and a “Head-and-shoulders” pattern.
· A continuation pattern of the bearish trend
· The continuation of the bearish trend
LESSON 5 FOR BEGINNERS. THE CLASSIC WAVE ANALYSIS OF TRADING.
The pattern of a 5-wave impulse/a 3-wave correction and Fibonacci levels.
The same movement the classic WA considers through the pattern of a 5-wave impulse and a 3-wave correction within the framework of Fibonacci levels.
Pis. The 5-wave impulse/3-wave correction pattern.
The pattern of the synthesis of lessons 1-5.
· The picture – all the downward correction inside the cannel = correction B = 76% = a-b-c
· A reversal pattern (an inverse H-n-S or a double bottom (shortened C) = wave B and a FZR)
· A new trend channel for wave 3
You can read about the details and the 1st difficulties in trading with the classic WA (The classics' unsolved problems and mistakes) in book 2 by MF-V
· The fundamentals of WA are given at the 11th grade of the School
· Over 30 mistakes made by the WA classics are corrected by MF in his new WA
LESSON 6. WAVE LEVELS, ELDER'S TRIPPLE SCREEN SYSTEM.
Wave levels imply the price movement analysis on charts with the help of several levels of measurement (from the biggest to the smallest ones)
For example, you consider the same notion of distance
· 0.5 meter
· 2 meters
· 10 meters
· 100 meters
Thanks to what you can analyze separate PARTS within the scope of an ENTITY with the same degree of accuracy.
In the classic TA the analysis is performed through “the triple screen” system by Elder
· SHORT-TERM trend
· MID-TERM trend
· LONG-TERM trend
In the classic WA the analysis is performed through 8 wave levels
The list of Prechter's 8 wave levels, similar to Elliot's ones can be found at the 11th grade of the School (the Main WL, the Super WL, the Major WL, the Primary WL)
In the TA and WA created by Masterforex-V the amount of wave levels in NOT limited.
· MF was the first to develop the distinct criteria of distinguishing any wave as a part of waves that belong to other wave levels ì 1 , ì2, ì3, ì5, ì10, ì15, ì20, ì30, ì40, í1, í2, í3... d1, d2, d3, w1, w2 etc.
· These wave levels by MF make it possible to consider a certain movement SIMULTANIOUSLY and FULLY (in a complex way) on all the POSSIBLE charts/levels – figuratively speaking, “from the microscopic screen to the screen of the universe”, which is a more comprehensive and complex analysis as opposed to the Elder's 3 screens (why not 4 screens?) or Prechter's 8 screens (why 8?).
The essence of all the mentioned wave levels (by Elder/Prechter/MF) is the same – to distinguish the parts within the scope of the WHOLE (the entity).
· The 1st screen (a SHORT-TERM trend) shows us the details of the movement, which were analyzed earlier in the chapter (from a reversal pattern to another one - marked with circles on the picture below)
The 2nd screen lets us consider the 1st screen as a part of the movement of the senior TF
The 3rd screen lets us consider the 1st and the 2nd screens as components of the movement (TF) senior to the 2nd screen.
What is the easy way to discover the universal algorithm of the whole TA and WA?
Under MF, it is easy to do… if Charles Dow's main delusion/2nd mistake is corrected. He says that a flat is a 3rd type of trend, which was thoughtlessly repeated by all the classics (Murphy, Shwager, Luka, Naiman etc.)
· If it was true then bullish/bearish trends would continue from a reversal model till the 1st flat…yet continuation patterns inside flats would be obliged to turn into reversal models with 100% confidence. Then traders would open positions in the opposite direction as soon as they saw the 1st signs of a flat (the trend is over, it means that the reversal is near). Of course, it is not true.
Under MF, a flat is not a separate/3rd type of trends (as the classics suppose), it is just a PART of a bullish/bearish trend.
The new criterion developed by MF is very simple:
Find a flat as an MF starting point (not every flat is suitable to be considered as the MF starting point – the criteria are given at the Academy)
Wait till the flat turns either into a reversal pattern or into a continuation one.
Example 1A. A flat – an instance of the “triple bottom” reversal pattern (the flat being the beginning and a part of a bullish trend)
Let's recall the examples from the first lessons.
Example 1B. The same flat – an instance of the “rectangle” continuation pattern (bearish trends).
· The bearish trend continues as flats are not considered a separate type of trends, yet trends continue from one reversal pattern to another reversal pattern in the opposite direction.
Example 2A.
· The beginning of a bullish trend – a “triple bottom” pattern
· The end of the trend – the breakout of the bullish trend channel and a “Head-n-Shoulders” pattern.
· The support levels = 76% from wave 1
· A new upward reversal (an “inverse H-n-S” pattern and a new bullish channel)
Example 2B
· The “inverse Head-n-shoulders” pattern turns into a “flag” continuation pattern.
· The bearish trend continues within the scope of the bearish trend and the trend channel on the senior TF.
The pattern of a flat as an MF reference point (an MF starting point).
· A flat is a part of a bearish/bullish trend
· The same flat can turn into the following patterns depending on the direction of the breakout (which level is broken: S or R):
a. Either a rectangle (the continuation pattern of a bullish trend)
b. Or a “triple bottom” (a reversal pattern from a bullish trend to a bearish one)
Thanks to these discovery of MF's everything is put in its place and you have the first reference point, which can help you in the following:
· You needn't recollect in a hurry various flags, pennants, triangles and stuff during the trading process
· Instead of seeing a bunch of TA patterns you will begin to see the entire picture of the market, the exact logical place and “the coordinates” of each pattern within “the coordinate system” of the market. Each step of the market will be simple, logical and clear to you.
· Instead of combining the 3 primitive screens of Elder's system you will learn to combine over 20 TFs into an entity by using standard trading terminals (MT4 etc.).
What does the basic Forex training course teach you?
The material given in the chapter is valuable because:
· It allows you to learn much more valuable information on the topic than 99% traders do, including the classics (Elder, Williams etc.).
· This level of training is the basis of the Preparatory group for entering the 1st class of the School for beginners under Masterforex-V Academy and learning the fundamentals of Forex.
The Academy is the first to name the basic course of Forex training a “school”. It was done deliberately to prevent (once and for all) DCs/BCs from cheating the beginners when saying that the course is enough to open a real trading account and to profit at Forex.
Imagine a pupil of an ordinary secondary school in a trader's place in order to realize the essence of the “monkey business” of Forex training that DCs/BCs are engaged in.
· The school course in literature gives only the guidelines of the difference between the creative work of Pushkin and Shakespeare, Gogol and Hemingway including the first basic skills in studying their classic masterpieces and discussing them at the first lessons.
· No school teacher would ever call a school-leaver a professional philologist, a literary critic or a Pushkin scholar.
· No school teacher would ever consider a school-leaver to be among the 3% of the best Pushkin scholars.
What about novice traders, which the same things are imposed on?
The nonsense that is imposed on them is nothing but a scam.
If you are not afraid of the difficulties in becoming a professional trader, if you are ready to follow the path that has never been followed by any classic (including the correction of their bad mistakes and delusions + daily practice in applying MF's new TA to real-time trading) then we proceed to the next level.
Everything like in real life, starting from childhood:
· The 1st grade of the School for beginners is laid open to public at the Academy website
· The 2nd grade
· …
· The 12th grade
· The preparatory department
· The Academy
· The specialization at the Departments (you choose a department on your own) etc.
The famous classic of another science (V.I.Lenin) urged everybody to study (theory + constant practice, so that in 6 months such a dialog (taken from the closed part of the Academy) was natural for you).
(Masterforex-V @ 27.5.2009, 18:00)
Are you getting on well?
(SVPovetkin @ 27.5.2009, 20:20)
Thank you, Vjacheslav Vasiljevich!
(prokoppoloUA @ 27.5.2009, 21:59)
Yeaaah… GBP has been awesome today…. Everybody must have made a good profit J
(vsmark @ 27.5.2009, 18:32)
+1. The trading day is awesome. Everything went off without a hitch…Yet the main thing is that I made the profit consciously… or almost consciously. Almost 450 pips (!!!) of the total profit (with a couple of lots) with 2 currency pairs. My profit for today is 3 times as much as the one I have planned to make.
You can discuss the chapter with the Academy members who study the SBP techniques created by Masterforex-V by following the link
Part I - Delusions of Forex Market (typical error 97% losers traders: how and what to change on the way to success in Forex) >>
Read more
Chapter 4 - Trading: the 1st reference point by MF (the Pattern by Elliot / MF). What main element is not enough for the classic Technical and Wave Analysis to make profit? >>
Chapter 6 - Technical levels of support and resistance in Masterforex-V Trading System. >>
Chapter 7 - Moving averages: The basic Forex indicator. >>
Chapter 9 - Trading on news. Features of trader's work on Friday at American session. >>
Part 3. Forex investment funds >>
Book 2. Technical analysis of Forex in the Masterforex-V Trading System >>
Book 3. Masterforex-V “Points of opening and closing of positions at the Forex market (basic course)" >>
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