Trading System

This is to give a brief overview of our trading system, as it is frequently the basis for the messages that we send. We developed this system over fifteen years ago and refined it several times as we continued to study the markets. As with most systems that consistently work, we have applied the techniques to the cash markets as well as to the futures markets.

The basis of the system is that the market trades in mathematical patterns. The patterns that are established are based on relationships between the high, low, close and opening range (or opening price as the case may be). When we refer to the high, low or close, we are referring to the information that is established for the previous trading period. For daily charts, for example, let’s say that Monday’s bond market has a range of 9400 to 9500 and settles at 9416. On Tuesday’s trading day, we will refer to 9400 as the low, 9500 as the high, and 9416 as the close. We then get an opening range of prices when the market opens on Tuesday. You should constantly be aware of these prices as they often provide support or resistance. And are the basis for buying or selling on momentum when the market breaks through.

There are several other points that must be considered. When we are referring to the high, low and close, we are using information that is based solely on the day trading session. We'll let you know if we think that any data from the computer trading session is relevant. But you don’t need to worry about that right now. And there will be times when we give you trades based on weekly or monthly data. We'll specify when we think these longer-term indicators are relevant.

Returning to the structure of the system, we are able to determine support and resistance points before the market opens. These are static points in that they remain the same throughout the day. After the market opens, we are also able to identify three more support/resistance points. These numbers are very relevant when we have gap days.

As we noted above these support/resistance points are beneficial, particularly when considered in the proper perspective. That is, there are many systems that solely give support/resistance points that can be useful as stopping points for the market. But we believe that as markets move during the day (or whatever time period you are using), such static support and resistance areas can break down. What was support at 10:00 may no longer apply at 11:00. New support may only be a couple of ticks away but that is important to know, particularly when trying to scalp the market. So that we believe one of the strengths of the system compared to most others is the fact that it identifies changing support and resistance points. And even more importantly, it identifies changing objectives for the market to reach based on where the market has already traded in relation to the high, low, close and opening range. And we also believe that one the major benefits of the service that we are providing is to keep you informed of these changes in market conditions as the patterns change. Most services just give information at the beginning of the day. We  keep you up to date on a constant basis.

With that in mind, the following is a brief overview of what we believe is the crux of the system. That is, how the market develops patterns which help us to predict price objectives as the market moves back and forth. These patterns are based on the relationships between our indicators of the high, close, low and opening range. Once the market trades above or below one of these indicators, it establishes a relationship if it trades on the other side of that same indicator (or another indicator). It is not essential for you to be able to describe these relationships. We will keep you informed of price objectives. But let us give you one small example of what we are talking about. Let’s say the market has traded ten ticks below the bottom of the opening range. When it comes back through the top of the opening range, it may establish an objective of trading ten ticks above the top of the opening range. There may be certain roadblocks to prevent it from getting there, which those who have learned the system are able to recognize. Again, we'll be keeping you informed of those possible roadblocks and what the objectives actually are. But just being able to recognize the potential objective to which the market may trade should be of great benefit.

What is important for you to recognize from the above paragraph is that the indicators of the high, low, close and opening range are always to be considered as natural support and resistance areas. But once the market breaks through one of these points, there is usually momentum created. The amount of momentum is based on how far the market has previously traded above or below certain points. Again, don’t worry about how far that objective is- that’s our job to inform you. But once the market has broken through, be ready to cut your losses if you are on the wrong side of the market. And better yet, start trading in the direction of the move through the indicator until the market reaches its objective(s).

In summary, it is not necessary for you to learn any parts of the above discussion in great detail.  What is important is to be able to identify the relevant indicators. So commit these indicators to memory each day so that you do not get caught on the wrong side of the market if the market creates momentum through these areas.