Trading to Win - Bryce Gilmore

w

Course

One Doy of o Time By BryceGilmore lcl2004

A completeguideto S&P500FuturesTradingIntra-day

All RightsReserued: BryceGilmore& Associates PtyLtd. Australia. Queensland.

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Trading to WIN Course - One day at a time

[c] Bryce Gilmore2004

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The Author: I havebeena successful traderin oneform or anotherfor mostof my adult life.I haveworkedindependently for myselffor the past32 years. In 1981whileI was in Londona traderfriendof minetook me into his broker'sofficefor lunch.This is whereI sawfor the first time a completely differenttradingworld,the futuresmarkets! WhenI returnedto AustraliaI openeda commodity futurestradingaccount, bought2 contracts of ComexSilverandproceeded to try my handat trading paper.MyfirsttrademademeUS$11,500 in twoweeksandI washooked. It wasn'talwayseasygoingbut overthe next few yearsI was completely absorbed withthe mechanics of the futuresmarketsandbeganto developmy ownsofturare to explorethe methodologies of ElliottandGann.

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BryceGilmore By 1989I had gaineda reputationas an authorityon Time and PriceAnalysis and becamewell knownto serioustechnicalanalystsfrom aroundthe world. It has beena pastimeof mineto teachpeopleto trade from my earlydaysin this business. In recentyearswith the adventof electronic tradingand cheap commissionrates the growth in day trading volume has openednew doors andthat is whatthis courseis about- takingadvantage of the opportunity. I believewith the helpof this TTW courseand also my Dynamicnme & Price Analysisbook (2002), anyonewho is willing to put in the hard work will definitelybe ableto makean excellentlivingas a professional futurestrader. Formoreinformation on my profileyou shouldvisit my web site: http: / /www. bryce-gilmore.com/

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Contents: Subject

Page

Introduction

Tradingto WINTools Section1: Practical

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CloseStops

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2 3 4 5 6 7 8

Market Mechanics- howfuturesmarketsoperate Suppoft - Resistance& TREND Three Bar Swing chafts - buyingandsellingbias Old Highsand Lows- areasof support/resistance The 50o/oBalancePoint Rule The 1:1 OverbalancingRule The 2 day correctionrule

15 23 25 28 29 32 3B

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Shoft Term Trend Indicators

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Bars Bars- OutsideReversal ReversalBarc - Reversal Doji Hammers. Gravestone - Numerous examplesof Intra-day Patterns Revercal Patterns 3 drivesto a top. Reversal - Old - Breakouts ContinuationPatterns - Rectangles Support= NewResistance.

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GeneralPatternTools- Linesin the Sand- Higher HighsHigherLows- Lowerhighslowerlows- Trendlines Triangles.

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DailyRange. Days,TheAverage Gaps,GapReversal

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OpenInterest in futures markets.

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NewsEvents/ Repofts/ EconomicIndicators.

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Fail SafeTRADEENTRYtechniquesand exit rules.

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There are others but I will introduce these later in the course as they require extra knowledge to implement correctly.

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Daily RangePatterns

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Section1: Summary

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Contents )

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Trading to WIN Course - One day at a time

- tradingtools PriceGeometry Section2: Dynamic you needto understand to WIN. Ratios SacredGeometryandthe Cardinal

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Ratiosin MarketCorrections Geometric BearMarketTrends BullMarket Trends

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Alternate Waves& RetracementLevels The ReverseCross Inside, Outside& DoubleCrossLevels

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Approach My X-ABCDPriceGeometry

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Pastexamples reversals of X-ABCD Levels& Targets OddBallRetracement Bread& ButterTradingSet-ups MarketLogic

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[c] BryceGilmore2004

Section3: Dayto DayandWeekto Week Daily Check List MOB(Makeor Break)Levels 1: 1 Overbalancing levels 61.8 50 38.2levels 3 day Swing AverageDailyRange DailyTrendIndicators MarketReports Weekly Check List Timing GannLevels ElliottLevels MarketMood

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Contract Rollover - 1"t Month Thingsto considerin the rolloverperiod.

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Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Section 4: Summaries The PsychologicalAspectsof Tradingto Win in the S&P500 A day by day accountof my experiences 2003. fromthe endof July2003to midSeptember My thoughts on how to beat the market

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A look at the S&Pmarket prior to publication

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Esignal- APPENDIX

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Information on my internet Tradingto Win Group: This group is a selectclub of traders,and is steadily growing.Detailsfor entryare on the bulletinboardof my website. http: / / bryce-qilmore.com / bulletin.htm Testimonialsfor studentsand professionaltraders: Theseareon mywebsite:

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Trading to WIN Course - One day at a time

[c] BryceGilmore2004

DOUBLETOPSon 1:1's:

signalsI know Tradingset-upson 1:1 alternatewaveratiosarethe strongest of. in the market TOPSkeeprepeating It's a strangephenomenon that DOUBLE placeso often,but theydo, andyou haveto learnto takeadvantage of them whenthey line up with something elsethat seemsto be impoftantin the geometry. unfolding

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t I I I Doubletops that form without any obviousgeometryshouldbe taken cautiously.

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The bestwayto handlethemis to wait andseewhatthe marketdoesandif the top doesnot breakthe marketgenerallytries for a retest.The market mightbreakthroughon a secondor thirdattemptbut if it doesn'tthenyou just sellthe basebelowthedoubletop.

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Bread& ButterSetUps

Section2: Chapter- 1I

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Tradingto WIN Course- Onedayat a time

[c] BryceGilmore2004

DOUBLEBOTTOMS:

of geometric Normally for a doublebottomto holdit hasto havea foundation larger suchas a pricelevelfroma previous strengthin its favour.Something degreewaveseries.If it doesn'tthenit will mostlikelyfail andit is betterto tradeto the downside. besoldasa breakout won'trunawayfromthe lowin If a doublebottomis goingto holdit normally wait and see if the marketregains in my to a hurryso it is better opinion somestrengthbeforeyou buyit. then you can beginbuyingso Oncesomepatternof rejectionis recognised longasyoucanjustiffan unfolding strength onthe chaft. allthe smat traders ThereasonI don'tlikebuyingdoublebottomsis because preferto sellwhenthe marketis showinginherentweakness, as it is more than recovery. susceptible to failure Thereis no bettertradearoundin my bookthanwhena markettakesout a doubleor triplebottom.

Betterto tradethe breakof a doublebottomthan buy it. I havegenerally foundin the pastthat impoftantbottomsform quickly,they are normallya singlebar low ratherthana consolidation, i.e., unlesstheyformwithinthe middleof an upwards trendingmarketandthat is anothermatteraltogether.

Bread& ButterSetUps

Section2: Chapter- l l

Tradingto WIN Cowse- One day at a time

[c] Bryce Gilmore2004

HOOKTRADINGA RUNNER:

Somedaysthe marketwillget intoa runningmoodandyouwillslowlyrealise that it is not goingto stoprunning.It maystartoff unexpectedly but onceit getsmovingyouwillseeit happening. Youwill knowbecause the corrections will be verysmallandnot lastfor very long.The ES/ S&Pseldomcorrectmorethan2-3 points,maybe4 maximum whena runneris in progress. you Theeasiestwayto tradeit is to BUYthe hookbreakoubbut sometimes couldtry andbuythe smallcorrections whiletheyremainlessor equalto the previous onesin the series.

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All you haveto rememberis that whilethe corrections do not over balance with eachotherthe trendis stillintactandyoucankeepbuyingthe breakouts verylimitedrisk. Runners constant will normallyhappenon dayswherethe marketis receiving positivenewsfrom economicrepoftsor is beingbuoyedby the mediaand speculation from the pit. Youhaveto be tunedinto the newsto seewhatI mean.Thisis whyI amalways watching Bloomberg duringthetradingday. Runnerscan be very severereactions been in a marketthat has previously extremelyoversoldand everyoneis coveringshortpositionson the day. If youare not prepared Runners earlyenoughyoucanmissthe ridecompletely. canlastfor the entiremorningor afternoonsessionandon somedaysgo all day.

Bread& Butter SetUps

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Section2: Chapter- 11

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Trading to WIN Course - One day at a time

[c] BryceGilmore2004

RECTANGLE BREAKOUTS:

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i\' mayform as a On occasions strongrun UPthe rectangle afteran extremely seriesof tops.A bullishrectangle seldomhasmorethanonedoublebottom is that it will scenario so if the movelookslikeit is exhausting the best-case reverse directionbackdown.

aseachattempt Youshouldbe ableto recognise thissituationwellin advance traders at a breakoutto the upsideis metwith heavysellingby professional whodon'tthinkit cango higher. In thesesituations will flushall the longpositions the breakto the downside andthe movedownshouldbeverydramatic. The conclusion bar as the shottsstaft shouldend with a SPIKEVOLUME profits takingtheir all togetherastheyrun intoa nestof buyordersproviding underlying support. Bread& ButterSetUps

Section2: Chapter- 11

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

RE-ENTERING A DOWNHILLRUNNER:

Sometimes whenyou get a messybreakoutand it is followedby a steep declineto confirmthe marketweakness, you maynot be on the move.If you seea haltto the declineandthe trendlooksclearlydownyou canplana reentrywiththe trendbasedon the amplitude in the series. of the 1ocorrection The next correctionafter a move showstrend shouldnot exceedthe 1$ correction by morethan 1 tick.Youcanalwayssellat the 1:1 backup with a tight stoploss or sellthe hookon a furtherbreakdown. I preferto sellthe 1:1 as it givesyousomelatitudeif the nextbreakout is down a messyaffair. In all the yearsI havebeentradingI havenoticedthatthe problemwith most novicetradersis that they deliberate for so longoverwhereto takea trade theygiveno consideration to the factthat it is possible to stepin andout of the marketat will. If your risk is smallyou can practically enter a trend anywhere. Whenyou combinehighprobability with smallriskthenyou are tradingto WIN. If youtakethe timeto studyeverything I am sayingandwatchthe marketin you S-minute you. timeframes will beginto understand whatI amteaching Aftera coupleof yearsit will becomesecondnatureto you and you won't thinktwiceaboutit whenallthe patternsignals lineup. Thetradeentrytechniques I haveoutlinedin this chapterare yourguideto professional becominga trader,if you havefaith and manageyour trades properly youmustWIN.Onlythefearof losingwillstopyoufromwinning. "Theonlythingeasierthanmakingmoneyin the marketis losingit." Anon. Bread& Butter SetUps

Section2: Chapter- 11

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Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

LINESIN THESAND:

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Linesin the sandbecomeobviousfrom time to time when an old market resistance turnsintoa supportzoneor viceversa. it tendsto becomea decision It becomes a reliabletechnicallevelbecause pointwheretraderswill definethe trendas eitherstrongor weak.Although the criteriafits the doubletop or doublebottompatternit is even more importantin a way as a tradingsignalbecausethe LINEIN THE SAND viftuallybecomes POINT for the market. the currentBALANCE Thebesttradesusuallycomewhenthe marketreverses backthroughthe LIS at the beginning of the dayon a GAPopening. of an LISif it It usuallymakesa big difference to the suppoftcharacteristics has a price levelof 38.2, 50 or 61.8 attachedto it. For instancein this diagramif the marketreturnsto the LISand it is now a 50o/oretracement thenthe oddsaremuchmorein its favourto attractbuying.It couldevenact assuppoftfor a secondtimeas it becomes a doublebottomon the 50. BREAK OUTTMDE The abovescenario then setsup the LISfor a SELLING in myopinion. that hasd 90o/o chanceof success pattern In somecirclesthistypeof couldbe viewedas a HEAD& breakdown TheLISis basically the NECKLINE. SHOULDERS in progress. analysis. ThetradablepatternsI havedemonstrated herearefor short-term between Mostof the timeyouwouldonlyneedto takeintoaccountanywhere the opportunity. 2 daysto 5 daysdataon a S-minute frame to see time Bread& Butter SetUps

Section2:Chapter-11

Tradins to WIN Course- One dav at a time

[c] BryceGilmore2004

ONEMOREOPPORTUNTTY THATARISESSOMETIMES: Thisis an exampleof whatcanhappenwhenthe marketis tryingto breakto newhighsand becomes boggeddownas it is shedding itselfof the sellersin the way.

Thesamethingis possible in reverseon the downside but in the casewhere the marketis struggling to makenew highsit is far morelikelyto taketime breaking out intoclearground. Whenthe new breakis achievedafter a coupleof attemptsthe bearswill relentandlet it go.Thisnormallyresultsin a goodtradefor the day. Situationslike this tend to occurwhen the marketis travellinginto new groundwherethereis littleto no technicallevelsthat seemimpoftantin the biggerpicture.Thetrendcouldbe clearlyoverbought shorttermandthat will attractthe sellers,but when they try and sell the marketdown buyers reappear andtakeit backup. Generally this sort of situationoccurson low volumedayswherethereis no significant newsto swaythe previous trendin force. The key to buyingthe runningcorrectionis that the secondcorrectionleg mustnot overbalance the flrst leg.The marketshouldhavea confluence of higherlowsfrom the outsetof the new moveupwards.The only negative thingsthat appearto be therewill be the overlapping wavesinfringingon the old highs.Eachtime they do this and recoverthey sendan arrowinto the heaftsof the bears. Eventually as the daywearson the bearswill runfor the hillsor reverselong gainpace. andhelpthe upwardmomentum

Bread& ButterSetUps

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Section2: Chapter- 11

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Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

THE KAMAHL:

Nowthe reasonI callthisthe Kamahlis because it is so obvious.Kamahlis a famoussingerandoneof his popularsongshada verselikethis,"I hearthe hasthe soundsof soundof knockingit's comingdownthe hall... goodbye....." The otherreasonis that Kamahlwassucha sook,he usedto get on stageandthenaskthe audience why they hatedhimso much!I met himonceon the beachin Fiji. The basedoesnot needto be exactlypreciseas a triple bottomit could containa falsebreakon the 1ddoublebottom.Thestructuremayevenbreak downon the 3'd bottomattempt.But if the 3'd holdsthe 4tr breakwill be cuftains. In the oddcasewherethereis no breakdownfromthe baseor the market doesbreakit but gets backabovethe basequickly- it is showingnew strengthandbecomes a buy.Thisis very rarebut you still needto be aware possible. it is The longera markettradesin a confinedrangethen the ensuingmove comingfrom a breakoutshouldbe largeenoughto offera profitabletrade. Thereasonis logicalas the longerthe marketremainsstaticthe stopshavea chanceto buildupjust outsidethe congestion area. Markets onlymovefor onereason!Therearemorebuyersthansellersor vice versa.Whenyoucanlogically workout wheretheyareplacingtheirstopsyou will havemastered thisbusiness. Alwaysrememberit doesnot matterwhatthe marketdoesoverthe longer period,just think of yourselfas a JOCKEY lookingfor the pefect ridewhen present. the oppoftunity is

Bread& Butter SetUps

Section2: Chapter- 1l

Technicians wrotemanyof the booksI first readon profitingin the market yearsagoandnoneeverwentontoexplainwhatwasgoingon in the market whenthetimecameto takethe trade.

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Butwhatthey all had in commonwasthey saidto be profitableyou should alwaystry andtradewiththe currenttrendin progress.

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Let the trend be your friendwas the commondenominator I havereadin mosttradingbooK overthe years.

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Wellit is true,75o/o of the timethe trendwill beyourfriend.Notso muchthe 1 monthtrendbutthe 3 daytrend.

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Whenthe marketis reactingto pressuresfrom the most recentnewsit is trendingor feedingon the currentnewsavailable to it.

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Tradingto WIN Course- One day at a time

[c] Bryce Gilrnore2004

Section 2: cnapter12:

MarketLogic: Marketlogicplaysan impoftantpartin whetheryou will becomea successful traderor just anotherfoolfloundering aroundin the fray. Knowing whenthe signssetyou up for the mechanical is probably application impoftant as , asthe execution of the tradeitselfat the time.

As a daytraderthis is all I needto know.It doesnot matterwhatthe news will be in a monthfrom now,what is in the newstoday,yesterday andthe daybeforewill be enoughto judgewhatthe marketbiasis likelyto be on any givenday. To be a successful traderyou haveto continually keepyourmindcurrentwith the eventsof the day and forgetwhat happened lastwee( as that is over anddonewith. Eachday is a new day and the technicallevelsare clearbeforethe market begins trading. Whatis importantto the traderis how the marketreactsor confirmsas it teststhe predetermined levelsof supportor resistance. Themarketactivities will eitheragreewithyourthoughtsor theywon't.I take the viewthat whenI havean opinionon the daythe marketwill alwayskeep tellingme if I am on the righttrackor not.If I find I am out of stepwithwhat is happening I figureI bettertakea breakor reversemy opinion.Believeme it onlytakes3 smalllossesin a rowto havemeadoptthisstance. Market Logic

Section2:Chapter- 12

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Tradineto WIN Course- One dav at a time

[c] BryceGilmore2004

I'm goingto tell you a few thingsthat can happento you on anygivenday and you will alsofind they will happento you in the future sometimeor anotherandyouhaveto learnwhatto do whenit happens. 1.

ceftainis goingto happen. You startthe day believingsomething you do?Answeris - you stepbackand Thenit doesn'tso whatdo the situation. reassess

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comesalong Somedaysyouthinkthe trendis intactbut something to wreckall yourplans,sowhatdo youdo?Answeris yougetout ' the situation. of the marketandreassess

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What ever happensthat falls out of line with your thinking you fall back on the technical signals before you do anything else.

If you want to win over the longer-term picture you have to have a plan that stops you from getting involvedwhen things are not doing what is logicalwith your current knowledgeof the market position. Let's face it you could be totally off base with the market for some reasonand the only clue that you are out of whack is when you staft losingmoney! So when you staft taking losses forget your pride and get out immediately. If you don't you are heading for the scrap heap where all unsuccessfultraders end up. I don'tsaythis lightlyeither,I haveseenall sottsof genius'scomealongto meandsay,"Whyareyousittingout of the marketrightnow? rightnow". withwhatis happening Normally I just say,"I am uncomfoftable

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Howmanyof themoverthe yearshavesaid,"I am stayingin the marketit mustgo to hereevenif it is choppyrightnow".

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FAMOUS I.ASTWORDS! I've heardit all before.Sometimes they get awaywith it but sooneror later thatapproach themout. catches I am still hereafter 20+ years,so are manyothers,but I havewitnessed the smaftestpeopleI know. 100'sof bomboutsoverthe yearsevenamongst at a time. Theplanis 3 stepsforwardandonlyonebackwards Market Logic

Section2: Clnpter - 12

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Everyloser I have ever seen in the futures industry has one thing in common! Theytook a positionand heldit whenit was goingagainstthem.To make thingsworsetheycontinued to believethat the positionwouldcomebackso they toppedup the marginto fund morelosses.Eventually they couldnot fund the positionany longerso they hadto closeout or the brokerclosed themout. Thentherewereotherswhowentandgot somemoremoneyopeneda new positionand repeatedthe process. It was likethey had losttheir mindandwantedto provetheywererightandthe marketwaswrong. Themarketis neverwrong! Onlypeoplearewrong. It is reallyenlightening to seewhatsomepeoplewill do whenthey havean openpositionin the market.Onthe wholetheyaresayingto themselves and everyoneelse that they havea winnergoing,evenwhenthey are so far underwater thattheycan'tbreath. Thisis the reasonyou mustneverholda losingpositionno matterwhatyou think the marketmay do in the future. Because,as soon as you are your brain cannot think objectivelyanymore.You become undennrater paralysed further. to actsensibly andonlyexacerbate the situation I knowbecause I haveexperienced it manyyearsbac( morethanonceI can you. tell Eventually I learntfromit. Frommy experience in thisindustryI haveseenmanyothersdo it as well- it is a faulteveryone willfall intoonceor twiceandmaybe ableto sulvivebut if you keepdoingit youarea deadmaneventually. It is impossible to tradeout of a losingpositionmostof the time,whichis whythe losingtradesmustbecut at the firstsignthattheyarenotworking. It is far easierto waitfor a betteroppoftunity andtry againthanflog a dead horse. The marketwill alwaysbe herefor you,to be a winneryou haveto decideif youarealwaysgoingto be herefor it. Thereis no otherway! If you wantto be a consistent winnerremember whatI am sayingbecause if youdont you mightaswellforgetthisbusiness you. beforeit destroys This business requiresmoreself-discipline than the averageman is capable provided of. I have it is up to you now. thetoolsto shapeyourdiscipline; Market Logic

Section2: Chapter- 12

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Tradingto WIN Course- One day at a time

Section

[c] BryceGilmore2004

3: ctrapter1:

Daily CheckListr S&PE-Mini Justin caseyou havenot got it yet I amgoingto outlinethe dailyprocedures youneedto followbeforethe marketopensandafterit beginstrading. to giveyourselfthe Eachdayyou are goingto haveto followthis procedure 2 bestopportunity of Tradingto WIN. If you don'tthen you are lazyandyou will nevermakeit as a professional trader.I don'twantto tell you anymorewhy you can be a loser(thatwould takeanotherbook)- I just wantto showyou howto be a winner. DAILYTRENDAPPEARANCE: 1* youmusthavea clueof the currentdailytrendandyou mustknowwhere the ne>Gtechnical MOBlevelsare at. If you knowonlythis muchbeforethe marketstaftstradingyouwill havean ideaof the currentmarketMOODandwhereto switchyouropinionaboutthe priceactivityasit unfolds. daysprobable NEWSBEFORE THEMARKET OPENS: for the Neverapproach the marketfor the daywithoutwatchingBloomberg asa daytrader. latestNEWS, to yoursuccess asthisis paramount GLOBEXPREMARKET: Reviewthe GLOBEX sessionand see how the overseasmarketshavebeen influencing the USpriceactivity. If you do your analysiseachday beforethe marketopen you will place yourselfin a positionof Tradingto WIN. If youdo notthenyouaregoingto placeyourselfin a positionof tryingto "catchup"all day. It is importantto be preparedbeforeyou even considertrading.Markets sometimes movevery quicklyand if you haven'tgivenany thoughtto the currenttechnicalpositionbeforethe openyou will becomea casualtyor you will nevermakethe cut. without any preparation. BEPREPARED or suffer the consequences Day to Day Checks

Section3:Chapter-1

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

ADVICE:

Eachday beforethe marketopensyou haveto get yourselfin the ZONE.If youdont youwill nevermakeit asa trader. TheZONEto me is whereI seethe currentsupportor resistance thatis likely to halta currenttrendor confirmit is stillin force. patternsastheymovealong. OnceI am in the ZONEI canreadthe unfolding If I couldn'tdo that then I wouldnot havea cluewhat I am doingand L wouldhaveto givethe gameaway. Sometimes I haveto sit backandwaitfor moreinformation oncethe market beginstradingfor the day but other timesthe marketjust unfoldsas I originally expected. The realissueis that you eitherhavethe VIBESandyou haveCOMMITMENT or you haveDOUBTS! If you havedoubtsjust sit andwatchfor a while. Thereis no realneedto takeanytradeon anydayunlessyou havethe right SIGNS. Whenthe signsare not therejust staypatient.Eventually the market willshowits handandthenyoucanjumpalloverit. Asthe marketmovesalongkeepyoureyeon the NEWS as it will giveyouthe MOODand as the day unfoldsyou will eventually seethe BIASas you see points you howthe markethandles the MOB havecalculated in advance. Eachstepof the tradingday you will re-adjustyour MOBpointsand learn moreaboutthe strengthor weakness on the day.Whenthingsappearclear youcanhit it. Youwill be rightor wrongveryquicklybutthat is trading. Readthe patternsas the day unfoldsandyouwill alwaysknowwhichsideof the marketto beon. There are always 3 or more STANDOUT trading oppoftunities per day, Learnto recognisethem and you must WIN. Be patientif you makeseveralentriesyou haveto closeout andtheywould havebeenprofitableafterthe event- just put themdownto lostopportunity. I neverworryabouttradesI closeout for a smalllossthat wouldhavebeen profitable laterbecause I knowtheycouldhavegonethe opposite anyway. Only worry aboutthe WINNERS whenyou get them goingand dont quit themuntilthe marketgivesyoua reasonwhy. Do thesethingsand it will all turn out the wayyou want.If you don'tthen don'tblameme because I haveno ideaof yourabilityto thinkandact. Day to Day Checks

Section3:Chapter- 1

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Tradingto WIN Course- One day at atime

[c] BryceGilmore2004

MOB,S- MAKEOR BREAKLEVELS:

The traditionalMOB'sare levelsthat standout as prior levelswherethe marketfoundsupportor resistance duringthe past3 days. levelsaregoingto If the marketis generally trendingup the lowercorrection are goingto act of prioradvances be MOB'sof suppoft.The 1:1 projections astargetMOB'sif the marketmovesup into newterritory.

A BULLTRENDMOBDGMPLE: BULLISHIII\OB,s

A doubletop possibility

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BEARISHCONTIFIUATION mob's

For the continuolion down to seem real lhe markat shouldnot exceed the 1:1 level.

Basisthis currentpatternexampleoncethe marketopensit hasto do two thingsto confirma bullishcontinuation. 1. Takeout the Linein the sand(LIS)whichis MOB1. in the movedownfrom 2. Breakabovethe 1:1 levelof the 1* correction the high. If neitherof the abovelevelsare takenout andthe chaftbreaksthe recent largerdegree61.8it becomes a SELL. Day to Day Checks

Section3:Chapter- I

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

READIFI6THE 5IgN5'->>>

A breokabovcthe 1:l wouldsignal o BUYin progrcssos oll tha moin tachuicalresistoncecomosoul.

If you go throughthis exercisedaily using the currentmarketpatterni availabbto you,on anygivendayyouwill seethe obviousMOBlevels.These levelsactasconfirmation or non-confirmation of the marketdirection. Youonlybuywhenthe directionis up andyou onlysellwhenthe directionis down.If youfollowtheserulesyouwillWIN.

in cosa you or€ vlondering vuhathoppenedl

2 doys dov.rnio 61.8rctroce

THE TWO.DAYCORRECTION : Alwaysbe awarethat a correction of majordegreein a volatilemarketcanbe expected to expireafter2 tradingdaysor at leastby the 3'dday. If you lookfor the signs,i.e.,watchthe toneof the news.Thenlookfor the logicalgeometriclevelsthat couldsignalresistance or supportyou will be prepared quickly. to changedirection It shouldbecomeobviousto youthatthe overalltrendhasnot expiredby the newsand the opinionsof the "experts".Sometimes the marketwill correct whilstit is awaitingsomeveryimpoftanteconomic datato be released. Once the newsis released it will be business as usual. Day to Day Chec}s

Section3:Chapter- 1

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Tradingto WIN Course- One day at a time

[c] BryceGiLnore2004

you will be ableto placetradeswith a limited If you followtheseguidelines risk and a high probability outcome.If you ignorethe signsand tradeon opinionyouwill remainin the 90o/o bracketof losers. SOMETHING TOTHINKABOUT: If you Thefirstobjective for anygoodtradingteacheris to stopthe bleeding. present as they followmy examples the oppoftgnities and learnto recognise you will stop your accountgoing down. Onceyou become themselves comfortable thenyoucanbecomemoreaggressive. withyournewsituation Thefirst requirement of a goodtraderis to be ableto executewithoutFEAR. Youcanonlydo this whenyou canenterthe marketas closeto the SIGNAL PRICEas possible.If you take the view that when the marketdoesnot confirmyour choiceof tradeyou betterget out - only then canyou WIN consistently. Smalllosseson bad entriesset you free to start againfrom fresh,this way you do not missthe nextoppoftunity. hoping Loserswho holdontopositions they will come good becomeso confusedmentallythey are ineffective traders. Goodtradingis aboutplayingthe"hands"astheyaredealtto you. Thatis just tradersapproach. Thereis no roomfor HOPEin the professional liketryingto draw1 cardto fill an insidestraightin Poker. Nowthat I havetold you all thesethingsyou needto be awareof to trade it is up to you to do it - not me. Youmustthrowawayall the successfully crutches brokersand advisoryletters- just watchthe newsand do your Thatis whatI callTradingto WIN. ownanalysis.

Someoneasked me recently to explain my attitude to trading and this was my reply: 3 thingsmotivate the marketpriceaction! Traderc,Tradercand Traders,... Learnto recognise whattheseguysaredoingandyoucanmakemoney. is doingjust by the price Youshouldbe ableto tell whateverytrendindicator activityin the time frameyou are watching.But it paysto watcha normal indications. Stochastic for Overbought andOversold

Day to Day Checks

Section3:Chapter- 1

Tradingto WIN Cowse- Oneday at a time

[c] BryceGilmore2004

You shouldknowfrom the normallyacceptedresistance and supportlevels howthe marketis flowing.Wellyoushouldknow70+o/o of the timewhenthe trendis clear.Theflowis eitherup,downor congested. Whenyouseea clear-cut trendjust tradeit andtradeit andtradeit. Whatyou don'tknowis how manyordersarestandingin yourwayto cause pluckedandyou just the reactions, but you cantell whenthe feathers^are haveto jumpbackin afteryouseethemflying. Youneedto tradeby feelandnot by mechanical signalsto bea pro. I changemy mind10 timesa day sometimes untilI get the feelfor whatis goingon. OnceI see the signsfallingtogetherI am seldomwrongabout whatis goingto happennext. Always try and get a clear view of your objective and then you can trade with a free mind. lust oneotherthingto remember: Veryimpoftant. Thereis no priceto high to buy and there is no priceto low to sell. Yournusttradewhatyou seeandjust go with the moneyflow. Do not refuse to take a trade just becauseyou have an opinionit is overpricedor underualued. Thestrangest thingshappenandyou haveto be guidedby the you SIGNS arewitnessing notyouropinionof whatshouldhappen!

THE3 DAYSWING& AVERAGE DAILYMNGE: Alwaysmonitorthe 3-dayswingchart (and alsothe 2-dayswing)so you knowwhatit willtaketo makethe swingchartchangedirection. ln 70o/o it will not reverse of caseswhena medium-term trendis in progress untilthe medium-term trend(say5 to 10daysat least)is exhausted. Whenthe currentdaysrangefalls well belowthe averagedaily rangethe marketis stagnating. Whenthe daysrangeexceeds the averagedailyrange by a largemarginyoushouldstaftthinkingabouta countertrendtradewhen you can identiffan exhaustion pointin the patternas this is wheretraders willtakeprofitsandreverse the intra-day trend,it'sonlycommonlogic. I am continuing thischapterwith somemoredayby dayanalysis examples to illustrate whatI amdoingto workout wheremy nexttradewill comefrom.

Day to Day Checks

Section3:Chapter- I

I I I I T I I I I I I I

I I I

t I I I I

t

Tradingto WIN Course- Oneday at a time

I

Monday4h August 2003:

t I I I I I

t I I I I I I I I I I I

[c] BryceGilmore2004

Todaywas anothergoodexampleof what I am havebeenteachingyou. Alwaysbe alertto the possibilities. The highThursdaywas 1004andtoday's low was 964.75a rangeof 39.25pointsDOWNin 2 days and then the levelin 1 day. reversal rallyretraced allthe waybackto the 50o/o Qcharts GSU

Thursday l1:lOsm

Ilisplag Bars 154

4:15

r; Each day thc semeprocadura

PRIEE... NANGE 39.25 r CHAHGE 3.91S SQNg ilegrees 113

ItllOB

r

ESA3U-5

2 Doy Corraction ??? 3 bay S.u'ringbOWN g?/3g

10:36

966. EB

966.50

964. ?5

966.25

g9,/44

Thedaylookedlikethison the l-minutechaft: ES03U-1

0charts GSU s86.66

REVER,SAL DAY

s84.49 982.68 980.40

Elose 979 2

oB e7e

g78.BB 9?6. AB 9?4.44 g7z.ta s?9. ga 968.94 965.68 gg/a4/zgffi EA/EL

A8,/84

E8/84

EE/94

a8/g4

go throughthe sameprocedures so you are Eachday you mustreligiously fully preparedfor the nextdaystrading.This is the onlyway you will know what is in the mindsof the technicaltraders.The low todaycamewithin4 pointsof the criticalWave4 lowmentioned in 52:C4:P38.

Day to Day Checlcs

Section3:Chapter- I

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Onanynewtradingday: It paysto remember that the technical signalsbeingusedby the daytraders couldrelateto only what has happened duringthe currentsessionor they couldbe usingrangesout for upto 3 or 4 days. Forinstance the 50o/olevelof the currentday sessioncouldseemimpoftant to them,gapson the openmayseemto be importanton the day andthey willtry andfill themearlyin the session. The openingpriceis impoftantin respectto the initialpositions that traders staftthe daywith.It is a wellknownfactthatthe openingpriceprintsetsthe benchmarkmostdays,historically the openingpricerangewill markthe high or lowfor the dayapproximately 50o/o of the time. As the day progresses and everyonegets into stepwith the latestnewsand the developments a lot more comingfromthe cashmarketthingscanbecome predictable. Theveryactiveperiodsare normally the morningandthe afternoonsessions witha lullperiodmostdaysbetween12:00-2:00pm ET. On Monday's tradersbeginthe weekwith a freshmindso anythingis likelyto happenif institutional tradersare caughtthe wrongway aroundfrom what previous hashappened to the week.Tuesday's the tradeis normallyadjusting relevantmoodof the marketand so it goesthroughto Friday.Fridayis an unknorrun dayunlessthe trendis quiteclearas manytradersquitearlyfor the weekend.Weatherin NEWYORKcan be an importantissueon Friday's, especially if it is snowingastraderswill leaveWallStreetearlyto get home. Daysprior to holidaysand days prior to optionexpiryare battlefieldsin themselves as buyersand sellersfight it out with their view of the current marketpositionand it dependson who is prepared to holdpositionoverthe optionscloseout or holidayperiodto seewhowill rulethe roost. Thenthereare daysliketodayas we go into the open,it is now9:10amET and we havehad newstodayof a terroristbombingin lakarta Indonesia where a car bomb was explodedoutsidethe MarriottHotel and caused massivedamage,killed13 and injured200.Yet with all this the European markethasbeenrallyingin the earlysession. How the US marketwill open is yet to be decided,it is beingcalledup marginally but that meansvery littlerightnow.Thereis goingto be a huge $60 billion bond auctiontoday which is likely to influenceproceedings somewhatastradersdecideif moremoneyis destinedfor the stockmarketor not.

Day to Day Checks

Section3:Chapter- I

I I I I I I I I I I I I I I I I I I I I

I I I I I I I I I I I I I I I I I I I I

Tradingto WIN Course- One day at a time

[c] BryceGiknore2004

in the morningsession If anythingI wouldbe lookingfor a downmovement in mindandwill so we will seeif I am rightor not.ButI havemy parameters workwith them so it mattersnot. 9:25amETandthe GlobexS&Pfutures aretrading979.5down.5 fromyesterday's close. 9:3OAM ET. TheBELLHASRUNG: The futuresopeningrangehas penetrated the 979 MOBto 978.5and is sittingon979,theopening 5 minuterangewas979.75-977.5. In the first 20 minutesand the markethastradeddownto 977 and up to 981.25andis currently at979.25. 985to 977= 8 points. Thereis an ISMSeruices repoftat 10:00am so I will waitfor it beforeI takea trade.If the 977 levelbreaksit is the wayto go basedon my lowerMOBat 979. \ 10:00amISM camein at 65.5 muchhigherthan expected- estimatewas 58.5froma prior60.6so that is something newto consider.Theseweremy thoughtsaswe progressed throughthe earlystagesof today. 10:05am the highso far hasbeen982andthe low 977we areat the high endrightnowandreallyin a no man'slandacceptfor the 61.8retracement. 10:07am marketbreaks977hasonly3 pointsdownto makea 1:1 10:09am at thislevel. low973.5a priorswinglowfromyesterday 10:23am 977.25marketcomesbackto testthe 977breakout. - it'sa sell. 10:26am977.25- 3 topsherenow- retesthelddowntrend 10:37am 972 Nowwe arethroughthe 973.5priorlowtrendis down. 10:39am97I.5- priorswinglowyesterday at thislevel 10:40am the shoft resell 972.75 Close and on a breakof 97L 10:51am974 rallyingbacknowthe higher1:1 is at 976.5let'sseewhat happens.

IltroB 979

Siqn of weokness

ralast break

985 to 9II = I

ffi/U

Day to Day Checks

6A/94

AA/A4

ffi/94

BB/WL

gE/Ss

Section3:Chapter- I

Tradingto WIN Cowse- One day at a time

[c] BryceGiknore2004

Whenthe marketralliedbackabovethe 976.5I did not stayaroundas I had beenworkingall dayandnightfrom 3:00pmETthe day before.Butthe day progressed untilafter andthe reallygoodtradeof the daydid not materialise 3:00pmwhenthe lateafternoon session brokeallthe existingsupport.

Tuesday5th August2OO3

98?.46 !184.AB 981.OB

I Tickfrom61.8

9?8. AB 9?5.80 97Z.gg 965.CIo s66. ga

RETRACE Breoksthe 50 WEAKNESS

NoSupporton l:l

t

963.80 sEB.B8 g8/95/zgg3

s?2.96

s?2.25

969.?5

'J79.ffi

9E/ES

of the rallyrange InitiaffywhatI sawat the 97L.5lowwasa 66.7retracement of yesterday.The clue for the breakouttradewas the fact that the market The minimumtarget was sinkingafter havingmadea 61.8 retracement. wouldhavebeena 1:1 with the earlierrangeof 985-971.5andthis gavea target of 966 and then there was the doublebottom with yesterdayat 964.75.Now with the marketbelow both of these levelsthe next logical objective is a 1:1 off 985measuring the declinefrom 1004to 964.75whichis 39.25downfrom985at945.75. Anyrallyat thisstageshouldnot exceedthe 8 pointerfrom971.5to 979.5so we shouldbe prepared for tomorrownow. the MOBon the Evenshouldthe marketrallyovernightin the Globexsession upsideis the 964.75low but we also haveto considerthat the low today brokethe 960.5low backon July 1s so the marketis in a very vulnerable positiongoingintoWednesday. Justthe wayI likeit. youcanreferto S4:C1:P10 Formy biggerpictureanalysis as 54: is wherewe havebeentrackingthe marketactionfor about2 weeksnow. Youmustlearnto go throughthesestepseachdayevenif youdon'ttradeon the day,as it will keepyou in tunewiththe market. Alsolistento the Bloomberg reportsandinteruiews of the tradingdayas most of them will be rebroadcast overthe next 18 hoursor so as they try and explainwhythe marketdidwhatit didon the day.

Day to Day Checks

I I I I I I I

10

Section3:Chapter- I

I I I I I I I I I I I I

I I I I I I I I I I I I I I I I I I I I

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

OPENINTEREST: Eachdayjust beforethe marketopenthe OpenInterestfiguresfor the day become available. Youshouldkeepa trackof theseas it can shedsomelightontomattersat hand. morningthe astradingbeganon Wednesday Thesewerethe figuresavailable Phillips. member Carl TTW to usby our 6h August2003:Assupplied Contract

I tAug Volume

3I-Jul

Jfll-JuI

Ol ES lVolume 5ffi871145119: Sep-tB t 0l Dec-B

ilolume

Ol

t/olume

sml

ilolume

162

x)91

I taw Ol

1667

ud

tlolume

Ol

y'olume

Ol

3A2l

54uq dolume

571tFE 3gffi 153: E1 21t

Total

Delta

ol

ozororlsorrtr ro+mol s2w't2 zrarral48689t

31.JuI

Contrac

| &Aus

4-Auq Ol

J/t17rl0l-5[E|{Fl]'t@ll -217391 174sil 413131 27t

5/8661 6113f 1

-198701 44131 -5n71

-1721

1741

ol 555,ftr 42trt1 154! 281 11t

6283i /tgFFl

-ln

had had a The interestinginformationhere is that the OPENINTEREST dramaticdeclineon the day that the marketwashedout into the 960 low area. Thiscanonlymeanonething: SHORTCOVERING earlieropeninterestcanonlyriseas newsellersenterthe AsI haveexplained market. of existingsellersboughtbackbookingprofitson OnTuesdayan abundance new sellersdid not replacethem.Thismeans the decline;mostimportantly by existinglongsliquidating the othersideof their tradeswere consumed losingpositions. If you go backa few daysyou will seethat the selloff from the 1004high in openinterestandthenon Tuesdaytheybegan attracteda heavyincrease covering.Thismayhavebeenpartof the reasonthe marketheldup today (Wednesday) and didn'tfall off the cliff like I thoughtit might.Everylittle forgetit. pieceof information andwe shouldn't is important Dayto Day Checks

1l

Section3:Chapter- I

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Continued from:S4:C1 :P35: Thesearethe preparations I am doingfor Monday25d'August 2003: Fridaythe marketmadea convincing highandthe daysrangeresultedin an OUTSIDE GAPREVERSAL DAY.Thatis the marketopenedup abovethe prior daysrangeand reversed trendand by the endof the day havegoneall the waybackto Monday's low. "r lffi--ll

t*ervatp6---ll

s.11 @D2n3 15:3000 9S475 s5 25 991.75 9S275 Btrs 35

6s,967

F Alsessirrs

,f*il*-d+r4L'T[{r*

lurr,

tee4^?

3 doy SWIlrlE - DOWN PREPARATIOI'IS for Mondoy25th August?OO3:

Friday's lowtestedthe 38.2retracement of the entiremovefromthe August 5m- 958.25low.Technically youcouldexpecta reactionbackup at this level but it occurredrighttowardsthe closeand hadno chanceto tell us if there wereany buyersthere.A breakbelowthe 38.2andthe nexttargetis the 50 andif thatbreaKthe61.8. Eventhoughthe 3-dayswinghasturneddownthere is alwaysthe chance thatthisdownmovecouldonlybe a onedaycorrection at thistime.Untilwe havebeengoingdownfor morethan2 daysI will bearthisin mind.Oncethe marketbeginstradingI canseewhatit is doingas I nowhavemy downside guidelines. If the marketfindssupporthereI haveto alsodetermine whatwill constitute a buy situationfor me. In this caseit is quitesimplebecause the current rangewe areworkingwithis onlyFriday's range. The largestcorrection in the movedownon Fridaywas3.25pointsso that is the startingpoint. Dayto Day Checks

t2

Section3:Chapter- I

I I I I I I I

t t I I I I I I I I I I I

I I I I I I I I I I I I I I I

Tradingto WIN Course- One day at a tirne

[c] BryceGiknore2004

Friday'sESlow was991.75 so a movebackabove995from hereconstitutes an overbalance andwe wouldhaveto consider a changein relativedegree. tnervat lE--l

,u lffil

|- rutsessirns

s7.01 @tz2@ 15:55:@ 99250 9S2.75 s1.75 992.00 % {3

Bars-l 5

Evcnif we makeo lowcr low crd rolly trtOB 1& 2 will rernainimportcrt:

Mythinkingat this pointin time is this: 1 . Thetrendis nowdownanda breakof Friday'slowconstitutes a SELL. 2. A breakbackthrough997will be the 1* indication we cango higher

but I wouldstillSELLa retestof 997if it comes. 3. A breakbackthrough999.75wouldstartme thinkingthat thisdecline is only a one-daywonderbut I would still sell at the 38.2 for a continuation backdown. 4. A sellat997onlyrequires a ^6 (3/4 pointstoploss). 5. A sellat 999.5onlyrequiresa 1 pointstoplossandyou couldreverse longat 1000.5for a testof the 50 andgetyourmoneyback. 6. If the 50 (1002)breaksthe marketis backabovethe psychological 1000levelconvincingly, I wouldthen expecta retestof Friday'shigh andperhaps the 1014area,so I wouldbecome a buyer.

t

So you can see that basedon my preparation oncewe begintradingon planof actionto follow. Monday I havea clear-cut

I I I I

Followsimilarstepseachdayandyou will knowwhatis requiredto be done to makemoneyon an intra-daybasis.Youwill beTMDINGto WIN. Asthe marketmovesalongI will re-adjustmy planto takeintoconsideration any changesto retracement levelsand any 1:1 levelsthat mightcomeinto play. Dayto Day Checks

l3

Section3:Chapter- I

Tradingto WIN Course- One day at a time

[c] Bryce Gilmore 2004

Section 3! chapterz:

Weekly Check List: No tradingmanualwouldbe completewithoutgivingyou a run downof all thethingsyou needto remaincurrentwithon a week-to-week basis. Besides the normalthingsthat influence the marketon a day-to-day basisthe underlying strengthof the marketwill be fairlyobviousby the week-to-week activityaswe continually moveforward. Someof the longer-termissuesthat will affect the market strengthor weakness arethe technical aspects, but underlying thesecalculations arethe political andeconomic considerations. It paysto keepan eyeon the LONGTERMINTEREST MTESas thesecannot be manipulated by the FED the FEDcantry andinfluence the marketwith its overnightratemanipulations but whenit comesto costof borrowings for government, companies or publichousing,the ratesare governedby an auctionsystem. Basically moneyfromthe economy will find its way intothe variousavenues of investmentbasedon rate of returnsand the perceivedsecurityof such investments. Theabilityof banksto makenewloansis limitedto the amount of fundsthey can attractfrom investorsor pensionfunds.If longratesrise thenthe borrowermustpaymoreandthe increases are passed on downthe line. llave Trader 155.00

t

US I-B0HI!S 6?. Coupon

IIEEHLY

1,l5.AA t5i0 = 4!,

Whotyouconread intothis charfrightnowisthat borrowingcostsore increosing onddemandis quite strong, iiy reod isthst the moneyis dryingup.

135.EE 125.E6 115.94 185.gS

1OO: PAR6%

95.48 g5.aB

The bond quoteswork os on index whero lOO : a couponrote of 6-o./" The index ulorks in reverse/inv€rs€for yield.

?5.09 65.68 55.88 45.8A Hairr

Weekto Week

5O = t*. I 31llec99

I

I lSSepBB

|

| BBJunBl

t4

|

I ZZFebE?

I I I I I I I I I I I I

i

I

I

15Hov82

rlllllillll 15ffugB3

Section3: Clnpter-2

I

t I I I I I

t I I I I I I I I I I I I I I I I I I I

Tradingto WIN Course- One day at a time

[c] Bryce Gilmore 2004

A goodavenueto monitoris the trendin the 10 yearT-Bondsas thesewill overall. tellyouif the costof moneyis increasing or decreasing withcompany Let'sfaceit unlessthe costof moneyis movingcommensurate fund expansions then the to business earnings changes opportunity andGDP at an is goingto be limited.Right now the cost of moneyis increasing = rate (the indexhasbeenheadingdown ratesrising).You unprecedented in a positionto take on haveto ask yourselfthe question? Are companies theirownprofits? moredebtfor expansion or cantheyexpandby reinvesting are Thenagaininvestment moneycouldbe in shortsupplyandrateincreases an obvioussignof it. Therecouldbe manyreasons for this rightnowas realestatehasboomedin years recent as the stockmarketdeclinedand the FEDdroppedshort-term growth.The realproblemfor the FEDis that ratesdramatically to encourage growth. theydon'tknowwherecheapmoneywillflowto stimulate I sawa similarinstance of thisway backin the earlyBO'swhenan economic recession and fall in stockpricesresultedin a massivedrop in shott-term ratesand a boomin real estateprices.Realestatecontinuedto boomfor someyears,up untilabout1989whenthe ratesbecameso highonceagain the sidessplit and cleanedthe clocksof those who couldn'thold their positions. The stockmarketdeclinedfor a whileuntil ratescamedownand thentook off in a wild ridethroughthe 90'sas techstocksofferedthe best gambleof the century. or The pointis that whenthe costof moneygoesfrom cheapto expensive abilityto repaywe can have expensive to cheaprelativeto the economies largeswingsin stockpricesandrealestateprices. goingto provideuswith trading Knowing whentheseinfluences are possibly we shouldreflecton oncea week. opportunity is an impor[antexercise few yearswatchingthe WhileI am on this subjectit hasbeenan interesting go into a boom.I real world stockmarketfall into disarrayand the estate themselves at the haveseenpeoplemakefortunesbecause they positioned "It's all overwhenthe righttime but the old sayingkeepsringingin my ears. fat ladysings"! it hasto bejust Whenthat is I haveno ideabut basedon pastexperiences aroundthecorneronceagain. As a traderit will neveraffectme so I don't care but for thosewho are hockedup to the eyeballswhenthe trend in long-termrateshascertainly soon turnedthe cornerI canonlyexpectto seebloodin the streetssometime in the realestatearena.The pointI needto concernmyselfwith thoughis will it benefitthe areaI makemy moneyin? Weekto Week

Section3: Chapter- 2

Tradingto WIN Course- One day at a time

[c] Bryce Gilnore 2004

So eachweekit is a goodideato watchwhat is goingon andevaluate the progress of the marketsyoufollowwiththe currentcostof moneyavailable. Boomsof any kind havealwayshadtheir foundations basedin a poliryof creditexpansion and they alwaysend because the creditexpansion cannot pace. keepup the It is simpleeconomics really.

THELONG.TERM POSITION OFTHEMARKET: On a week-to-weekbasisyou shouldreviewthe long-termpositionof the market.

r Z1ffug8?

r

r Z6tlctll0

r

r

r

07Jan94

r

14]lar9?

t ZEI{a906

r

r

l

15tu9t3

Whenyou lookat the marketin thiscontextthingsdon'tlookthat badvisually but the low last year was a drop in valueof 50o/ofrom the all time high. Whichmeansto recoverallthe lossesit hasto go up a 100o/o in value. Presently the marketappearsto be in a recoverymodeandat its recentbest hadgained32o/o in valuefromlastyearslowpoint. Economic figurescomingthroughthe pipelinewouldsuggestthat the US economyis on the mendas companies The are returningto profitability. biggestdrawbackright now appearsto be the unemployment figures.But that is not our majorworryas valuations of stocksrely on their underlying profitsandpaydividends. assetvalueandtheirabilityto produce Historically the establishment looksat PE's(Priceto earningsratios)and a benchmark PEvaluation of a solidcompany is 15timesearnings.

Weekto Week

l6

Section3: Chapter- 2

I I I I I I I I I I I I I I I I I I I I

I I I I I I I I I I I I I I I I I I I I

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Often the marketover valuesa stock basedon the PE if it believesthe company will improveits earningsovertime.So purevaluations on PEratios guide- theyareonlya ballpark figureto go on. arenotan accurate In recenttimesthe overallPEratioof stocksin the S&P500 hasbeenas high as 2511,whichin my mindis the reasonholdingthe currentmoveupward back. Theredoesn'tseemto be any other strongreasonas there is plentyof investment moneysittingon the sidelines by all repofts. The main reasonthe marketfell over in the first placewas becauseof fraudulentaccountingpracticesand a weakeningeconomy. overualuation, Thento top it all off the USAbecamea targetfor terrorismthat hasviftually brought the airline and travel industryto its knees. Reducinghotel occupancies, retailsalesandthe ensuingunemployment all addedto the drop in consumerconfidence, whichthen found its way into the stockmarket sentiment.Investorsturnedto real estateand otherthingsas well known companies The majorworld droppedin marketvalueby as muchas 70o/o. sharemarketsfollowedsuit reducing the apparentwealthin the worldby an percentage. enormous Neveftheless life as we knowit hasgoneon relatively undisturbed andthereis no reasonto believethatthingswill change. The worldhas beengoingfrom one crisisto anotherfor as longas I can remember andthe stockmarkethasbeengoingup anddownwith it at the sametime. - the top 500USstocks.Onehasto realise My mainfocusis on the S&P500 thereare thousands in the USand as time goesby and new of companies grow they increasein wofth and becomebiggerthan existing companies S&P500 Whenthishappens theyarethenmovedintothe indexto companies. replacethe onesleaving.As a resultthe S&P500is hypothetically a growth index.Thisis wherethe indexfundsget theirnamesfromas theyswapand changetheirportfolios to reflectthe stocksin the index.Soyou canseewhy like ENRON a majorbankruptcy can affectthe indexfor a while but then whenit is replaced elsethe bleeding canstop. by something It is my view,if the worlddoesnot changemuch,the S&P500bearmarket thiscentury. bottomof 2002is the lowestwe will everseethe S&P500 Sohavingsaidthat I canmoveontowhatI wouldbe lookingat eachweekto keepconfirming myview. As I haveexplained in otherchaptersthe marketmovesalongin ups and downsthat relateby timeratio.SoeachweekI needto research the existing timecyclesso I canseeif the existingoneshaveanyrelevance to the current marketposition.

Weekto Week

Section3: Chapter- 2

Tradingto WIN Course- One day at a time

[c] Bryce Gilmore2004

Recentlythe S&P500futures marketmadea doubletop on the E-Miniat LOL4JS(July14b day session). This doubletop coincided with a 1:1 time so as we are approaching a re-testof this double rycleof majorimportance top it is becoming moreandmoreinteresting. Technically I nowneedto seeif thistimeryde lookslikeit hasanybearingon the immediate future. llave Trader LZg3.8E 1163.OO Itz3.g6 1083.6S 1843.BB 1683.66 s53.00 9u3.60 883.08

Evcntuallyit hos to breqk onewoyl

843.00 883.A6 ?63.A0 ftat ios

lC la lenilar

cd/ab=

1.844

To see the currentshort-termpositionof the marketyou shouldrefer to S4:C1:P21 on. We are at the crossroads technically becausethe currentrally high is up against a 61.8retracement. One thing on my mind this weekend(16h August2003) is the possible implications OUTMGEon the Eastern Seaboard of the USAthis of the POWER week.Therewerea lot of disruptions to the transportindustrynotto mention the lossesto the freshfoodindustryandthe retailbusinesses. Losses would haveto bein the 100'sof milliondollars. Neveftheless the situationwill becomeclearbeforelong.The purposeof my explanations is to showyou the detailI go throughto stayin tunewith the marketaction. I am a firm believer that you needto understand everylittlethingthat might be in the mindsof the tradersas it is the traderswho takepricesfrom one levelto anotherandnotanythingelse. You need to understand the technical, the fundamental and the psychological aspects surrounding the traders to be successful today. WeektoWeek

18

Section3: Chapter- 2

I I I I I I I I I I I I I I I I I I I I

I

I I I I I I I I I I I I I I I I I I I

[c] BryceGilmore2004

rradingto wIN course- one dayat a time

numbersintosomesystemandhopingit will Thereis no pointjust crunching with any work becauseit won't.Thereis no needeitherto get involved "Guru" market planetarybullshit promotedby some of the so-called as a ASTROLOGY Stayawayfrom thosewho promoteFINANCIAL forecasters. they say boilsdownto tradingtool if you want to makemoney.Everything absolutebullshit.Theylive in a worldof makebelieveand to saythe least people.I haveseenit all overthe yearsandI knownow theyaredelusionary anythingtheysayas impoftant. to neverevencontemplate and Heliocentric Justto provemy point here.arethe combinedGeocentric positions'for planetary the 14hJuly2003andaboutthe onlythingthat shows of the 13h. up is a fuli moonon the evening ANGIJS

GEOCD{IRIC Sfi

CgcleTrader

37814.73 Ilag GI,iT 14/ 7/ZBB3 5:31 Gt{T

Phase 1?4d Z4n

llDncun? 12L Z7 t9 lE UEHUS 161 38 5 Cn HRBS 338 38 51 P i

274

RSPECTS

Ji:i'i:ilfi l, i.:

SffTUNH 9 5 1 8 5 UNRilUS 332 1? 48 NEPTUHE 312 21 22 PLUTO 257 34 2A Sun 111 24 4

B-------------

SUN ERRTH

l,loon 59 46 296

tn Pi ffq Sg Cn Cp

3B

SUI{ RNSLES HELIOCENTNIC

Cgc lefrader

37814.73 Ilag G}IT 14/ ?/2893 GIIT 5 : 3 1

Phase 1?4d Z4rn

RSPECTS gB

HERCUNl ui 152 4? Uf,NtJS 8? 4? 24 G e I,IRRS 386 Z8 ? fiq

139.33 156.33 14.93 145.s3

SRTURN S3 22 1 UNAHUS 338 23 3? NEPTUNE 311 33 5? PLUTO ?58 38 3? IRRIH ZSl Z4 4 I't0olr 116 53 46

Weekto Week

1 6 1 .S 7

Ctr

1BB Pi

38.S9

fiq

za.26

Sg

32.74

Cp

IRNTH SUN

t9

Section3: Chapter- 2

Tradingto WIN Cowse- One day at a time

[c] Bryce Gilmore2004

MEDIUMTERMTRENDINDICATORS:

TrcndTrader $&P5[0

TR E H0

IEP|lfiTINTE

IIPEH t s # .l [

[3[815

illflt/Ult4 9t2.5[ v85- 5{t 1 .[ [

f,ange

Trcnd Waue Indicator

-5t.6 -t9-$

St0ltf tdtD FR$T -

IHIIICf,TIIR

[E] 2ll[1B;Gilnore

$P5IN

6Mr]

5[ ]t-fi- - ssr

[ He t YS I $

+ifl0 llfiY l{-nit-fi.c-0 IIIEGTIONNLIilIIEII $H0RTTtftt'l $tlll'l $T0EIfiSTII 3 IIRY[NH[E

t+.1

HfiftHtT -

Iutt IutL

IEfi[ l'lERll TftEHII ltF

-

UP

$TftEHGTII $ullish . LT llnly [T llnll STEEH[TII

0[Ens[[fitT HF 9S6.15

[LISE l S ? .l 0 tilt.5[ l.S[

Yesterday TilrRV f,hange

UP ltF IP P { I $I T I I I H L0HC L0H[ OUT t0H[ fiTTIIIH t0tlE LIHE

ltHtT [fiY F0REtfiST ll igh tl$ - 6ll Lotll tS?.1X ISI 56 9S8-l? if [1'l 1[

9$r-r9 983-ll5

+ 16 - 15

Sll It /f ffi Il I tt2-8[$ 97t.5[

According to this repoftunlessyou knewanythingaboutmarketgeometry youwouldhaveto saythe trendis on the up. This is effectivelywhat the systemtradersare seeingso it paysto keep informed. s&P540 High Loru Rge

4 t{R1 sE8.Z? 1il t-tHZ s B 3 .8 5 59 lrff3 gB?.?4

1014.86 958.58 56.38

T

n

E H D T R R D E

18..-

50 doy iifiA

Slow Trend

STOCH 1ffS AE { J

n

ztl 9.18

T

L3

t(

tt

z

You shouldreferto your trendindicators eachtime you are approaching a beginto show stronggeometriclevelin the market.If the trend indicators signsof overbought or oversoldat impoftantlevelsthey becomeveryuseful indicators. if the 61.8comesout the marketwill be metwith In this instance rightnow. anotherfloodof buyingorders.Thetrendis in the balance Weekto Week

20

Section3: Chapter- 2

I I I I I I I I I I I I I I I I I I I I

I I I I I I I I I I I I I I I I I I I I

Trading to WIN Course - One day at a time

[c] BryceGilmore2004

COMMITMENTOF TRADERSREPORT:

Finallythe commitment to your overallviewof of tradersrepoftis essential the marketposition.

120000 100000 80000 60000

ao

40000

€ 2oooo 9

n U

-20000 -40000 -60000 -80000

L2 OE

o3 .".^5**${s}*'is}+i.}si"{'"s*,'-{r"{us

It's a littlehardto makea lot of senseout of thisotherthanto saythe middle of Juneperiodwherethe marketrandownfor a whilesawthe publicliquidate longswhilstthecommercials amountof shorts. boughtbacka substantial The activitysince has been relativelyflat exceptfor the odd days we witnessed recently. positions haveremainedquiteresoluteto the Nevertheless the unreportable net remaining longsidewiththe commercials basically andnon-commercials shoftwithoutapplying in recenttimes. anypressure positions wouldbe Eitheranotherswingup or downin the non-reportable significant for me on a commitment basisbut as we are at a crossroads situation technically rightnowthatis onlygoingto beseenwhenit happens.

In any caseif you followthe analysisprocedures I am showingyou each week.Youwill findthat everything will lookafteritselfandyouwill important neverbe the wrongway aroundin the marketfor morethan a day at the worst.

Weekto Week

2l

Section3: Chapter- 2

Tradingto WIN Course- One day at atime

[c] Bryce Gilnore 2004

Week ending 22ndAugust 2OO3:

Fridaythe marketopenedon its high 1012.25and closedon its low 992 DAYpattern. REVERSAL forminga GAPOUTSIDE Anysignificant dailyreversalpatternsuchas this is a realsignfor technical analystsand as I have said so manytimes beforeit is impoftantto go haveanymeritbasis to seeif the TIMINGFACTORS throughall the exercises methodologies. the GANNor ELLIOTT ]lave Trader

Totcl timc 1.618

1eS3.gB 1153.66 ITz3.EA

ry

1083. Bg ffi43.49 1003.60 s63.86 9z3.BA 883.66 843.04 g03.BB ?ffi.48 f{aitr

Z1sep61

and The breakdownon the dailyactionhas beenexplainedin S4:C1:P34 present so T1meis situationin the dailystochastic. showsthe overbought reversal. is in favourof a significant everything llave

HSEXLY

frader

u3g.m ror*'w

oRW: (

g8s.m

(

s64.08

?64.m

Weekto Week

-

22

Section3: Chapter- 2

I I I I I I I I I I I I I I I I I I I I

I I I I I I I I I

t I I I I I I I I I I

Tradingto WIN Course- One day at a time

[c] BryceGihnore2004

peoplefromtaking I hadto laughon FridaysinceI havebeendiscouraging any noticeof planetarypositionsin this chapter.But I haveto admitthere wasa significant aspecton Fridaythatwouldhavebeenpsychologically active in the mindsof anyonewhopractices Financial Astrology. I am surethat if today'shighturnsout to be anythingof majorimportance I amgoingto copsomeflackin the yearsaheadas hashappened in the past. Neveftheless I will stillstickto my originalwordsin thischapteras evenif the planetscan be provento be importantI havebetterwaysto time the market andmywaysarefar moreaccurate asa tradingtool. Thesewerethe aspectsfor Fridaythe slqypilotswouldhavebeenfollowing and I mustadmitif enoughof them divedinto the marketit wouldhave helpedfuelthe selloff thatoccurred on the day. HETIOEENIRICSUHRHGTES

f,gcleTrader

Phase 61d {5r,r

ss

HENf,UBY

Ilag 3?854.11 GllT zz/ 8/Z-B,43 GHT 14:31 Neu.rYork 9:31om ffSPECTS 48.63 OppositionL 7 7 . 4 4 Conjunction z . B 4 OPPOS I TIOII 1?S.84 1Z;5.74

URftHUS 338 4S 3

pi

TIf,tsTUHTJ

ERRTH SUN 278

Eorth / Sun - Venus,Mors,Jupiter & Uronusore oll linedup.

This is somethingyou wouldnot see happenvery often and it is hardto imaginewhat it reallymeansin an economic senseonly a psychological sense.ButI do remember backin 1987whenthe marketcrashedit did do it phase. duringan Eafth/Sunfupiter Opposition My mainpointin showingyou this is just to makeyou awarethat it paysto keepan eyeon whatothertradersmaybe usingevenif you don'tbelievein it. I am in the business of playingoff the otherplayersnothingmore. Weekto Week

Section3: Chapter- 2

Tradingto WIN Course- One day at a time

[c] Bryce Gilmore 2004

ANOTHERCOMPOI{ENT OF THE S&P 5O0 is the DJIA - the top 30 Industrials. this earlierbut it wasnot relevantuntiltoday.This I shouldhavementioned obseruation mayhelpyouweighyouropinionof the S&Ppositionon a weekly basis.It paysto keepbotheyesopenif you havetwo.

o Effi--'l

rt*."a $I--l

F !,ltlssions

/LL TIAAEHT6H 1500l]

1mo0

DOW JONES INIDUSTRIAL ovclog€: the 3O top slocks in th€ 5&P 5OO

Oct loth Lovr ->l Apr

Jul

Oct

Apr

Jd

Oct

The DJIAbackedoff a 50o/oretracementleveland the word will be out by Monday, believeme. Whichever way you chooseto look at thingsthere will alwaysbe some for you to fall backon comingfromeitherthe suppofting technicalevidence performing stocksin the index. DJIAor the major lookslike "the FatLadyis aboutto sing". Certainly Nowwith all the informationwe haveextractedfrom the data we haveat handwe cango intonextweekfullyprepared. we shouldhave because Wedon'tneedanyoneelse'sopinionor newsletters, career. If you haven't every trading dayof our doneour ownworkeachand thendon'texpectto get the resultsI get. - I Preparation and marketanalysisis the only way you can be successful is losersall thinkmy approach noticetimeandtime againthat the invariable too muchworkandas a resulttheyfail. Youhavea choice!Dothe workor fail- thereis no otherway.

Weekto Week

24

Section3: Chapter-2

I I I I I I I I I I I I I I I I I I I I

I I I I I I I I I I I I I I I I I I I I

Tradingto WIN Course- One day at a time

[c] Bryce Gibnore2004

Tuesday 2ndSeptember 2OO3: A WEEKMAKES. WHATA DIFFERENCE

Lastweek the marketdeclinedfor two daysand then found its feet once again. Thetwo daysdowndid not violatethe uptrendeventhoughthe 3-dayswing didturndown(seemy rulesin 51:C8). Todaythe S&Pbrokeout into new territoryand the DJIAbrokeabovethe page. levelshownon the previous retacement 50o/o of the marketrightnow. Thiscanonlyleaveuswith a bullishconclusion S&PsBB date 638582 hi rnz.sg

Cgclelrader

TuasdoyZnd Saptanber 2OO3 qfler o LongWeekendlhe morkei shruggadoff the consolidotionperiod railh a nice break lo a new high. la date

?Bfi.5B &3831?.

Lookingbackat the positionof the marketon the closebackat August22nd DAYyou can seewhy it paysto remainflexible REVERSAL andthe OUTSIDE in youropinionandnottry andbe a forecaster. callmeearlylastweekandaskme if I had FunnythingI hadan acquaintance positions on Fridaythe 22no.He saidhe was goingto seenthe PIANETARY in the DJIA take a long-termshort positionbasedon the 50o/oretracement planets. I wonderhowhe is feelingthisevening. and It doesn'tbothermethat the markethasmadea newhighafterthe signalsI wasworkingoff a weekor so backas I wasflexibleand revertedto the long DAYto turn backup on REVERSAL sideagainwhenwe madethe OUTSIDE Tuesday August26s. Follow Do the worK followthe rulesand thingswill lookafter themselves. will it do. what whatthe marketdoesanddont try andforecast Weekto Week

Section3: Chapter-2

[c] Bryce Gilmore2004

Tradingto WIN Course- One day at a time

SectiOn 3l chapterg:

ContractRollover: TheE-Minitradesthe followingdeliverymonths: 1. March- CodeH 2 . J u n e -M -U 3. September - Z 4. December The tickersfor the variouscontactmonthsthis year are ES03H,ES03M, ES03Uand ES03Z. ES is the symbol,03 denotesthe year and the code denotes the deliverymonth. (U) andtodaythe the current1* monthwas September Up untilyesterday (Z). activecontractis December The exchange rulesdeemthat the activetradingvolumeroll to the forward on a Thursday. month1 weekbeforethe deliverydate,it usuallyhappens The reasonfor this is to supposedly defusethe volatilityon the lasttrading anddeliverable daywhenyou havea triplewitchingwhereoptionscontracts futurescontractsreachsettlement.

Retrccementlevelsare ofthe recent decline sver 3 doy!

They SOLD the 5O on a lxl

retest Theyhought the retest

CONTRACTROLLOVERinto bacember

Thisis the December contractES03Zin 5 minuteinteruals. Youwill obserue from the chaftthereis negligible volumein the December contractthe day beforerolloverandthentodayit lightsup. ContractRollover

Section3: Chapter- 3

I I I I I I I I I I I I I I I I I I I I

Trading to WIN Coune - One day at a time

[c] Bryce Gilmore2004

Just so you c;;tnseethe differencehereis the expiringSeptember contract, the ES03U andit stillhas5 tradingdaysuntilexpiry.

l,lardly ony VOLUAIEtodoy but it is still troding

Theseare the total volumeand openinterestfiguresfor yesterdayand the weekaswe wentintothe rollover:

Therearetwo thingsto notein thesefigures: 1. 2.

Howthe OpenInterestin December is buildingup as we headinto the rollover. The volumein December is not all represented in the additional openinterestfigures.

ContractRollover

Section3: Chapter- 3

I saidto my studentgroupthe otherdaythat I hatethisrolloverperiod- the reasonis that whenwe comeinto the rolloverthe heavyplayerscomeup withall sortsof schemes thattheythinkcanmakethemmoney.

I I I I I I I I I I I I I I I I

Theproblemis,youneverknowwhentheywill strikeandsendthe marketup or downseveralpointsunlessyouhaveeyesin the backof yourhead.

t

Tradingto WIN Course- Oneday at a time

[c] Bryce Gihnore2004

Let'stakethe buildup in the December openinterestfirstas it isjust a simple matter. Theseare the positionsbeing taken by either new trader'senteringthe marketthat knowthe rolloveris comingor theyaretradersmovingtheiropen positions intoDecember. fromSeptember Evenwith the rolloverapproaching increase therehasstill beena conslstent in overallopeninterest.Nowwe knowthat meansmorenewsellersentering the market,and buyershaveaccommodated them. But up until todaythe previous two daysweredowndays.(Seethe chartS4:C1:P39) "Whyis the volumegoingintoDecember Youcouldaskyourselfthe question, notfullyrepresented in the OpenInterestbuildup in December". Well the simple answeris that arbitrageis taking place betweenthe September contracts in thistimeframe. andDecember If you look at the low priceyesterdayin the Septembercontractit was 1009.25 contract 1007.75. andin the December Yes,a discount in December of 1.5points. Nowunderstand this: The reasonfor the discountin a forwardmonthfuturescontractagainstthe currentmonthis that SELLERS haveto OFFER LOWER sotheycanget buyers to transactbusiness. It reflectsthe factthat sellersarethinkingthe marketis heading for a downturnandwantto makesuretheyget intoposition. Thenthereare the guysBuyingDecember thinking and SellingSeptember that comethe day beforeSeptember contractwill fall expirythe December into linewith the September contractandtheycan pickup the 1.5 pointsin the spread. Youalsohavethe realheavyplayerstradingoff positions in the September contractagainstoptionspositions at thistime.

I will be muchhappiertradingwhenthe September contractgoesoff the boardandI knowtheseguysareout of the way.

ContractRollover

28

Section3: Chapter- 3

I I I

I I I I I

t I

t I I I

t I I I I I I I I

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Here'sthe problemI haveduring rollover week. 0charts ESU 1835.66

Sepietnber Controcl:

ffi36.48 1033.60

Herc's tha problan I hoveduring rollover uueak:is the irend bock up or not???

1839.SE 1AZ7.Ag rgz4.86

13

r0zt.Ea

10^4

1618.69 ffi15.04 IALZ.BE uag.BB 69,/I?,/Z$g'3

Thecurrentrallyhasoverbalanced both lxl's but it is wedgedon the 50o/o retracement? Theoverbalance of the 1xl's wouldindicatestrengthyet the 50 possible retracement indicates resistance. ficharts f,SU 1838.SS

ESBSU_38

1032^6

1831- BB 1026.BS tgzt.g6 1816.BB 1811.06 1468.Ag 1841.AB ss6.BB

Is this o 5O% relrocanreni reversol?

9S1.00 986.48 gig/EE/ZBE3

(wellit brokeit The September contractis rallyingfrom a 50o/oretracement by 2 ticks). I knowin my mindthat the 982^4 low andthe 1032^6highweremadeon pointsof force. geometric highvolumetradingandwerelegitimate It's the December levelswhenyou go backthis far that becomea mental problem for meastheywerenot madeon highvolume. ContractRollover

29

Section3: Chapter- 3

Tradineto WIN Course- One dav at atime

[c] Bryce Gilmore2004

u34.AB 1831.08

DECEMBER CONTRiCT

taza.sE

t

1025.BB Ig2Z..BB 1019.BE

I I I

1S16.AB 1413.68

10u.Ea 168?.BB Bg/lz/zw3

All the rangesare identicaloverthe pastcoupleof days.It is whenyou go backa bit theyvaryslightlyandI am continually wondering whichcontractis leadingthe otherduringthe rolloverweek. 1831.AB L6Z6.W LEZL.gA 1S16_ sO 1811.48 1086.00 1901.09 ![|6.BB !t!t1.00 s86.BB

DECEJIABER CONTRACT

aS/ffir?$Tt

It maybe nothingto worryaboutbut the reasonI worryaboutit is because pointby over2 ticksis causefor in my bookany breakof a stronggeometric concern. At the lowtodaythe December E-Minicontractbrokeifs 50o/oretracement by over 1 full point.Nowwhenit happened it lookedto me like it couldkeep goinglower,but whenit brokebackabovethe low of yesterdayI calledit a buy.The problemfor me at the timewasthat I couldnot buythe 50o/o level "lost geometry. withanyconfidence dueto the motion"in the you reallyneedto referto the pit contract Whensomething likethis happens andseewhatit did. ContractRollover

I I I

Section3: Chapter- 3

t I I I I I I I I I I I I

I I I I I I I I I I I

t t I I I I I I I

Tradingto WIN Cowse- One day at a time

Qcharts

[c] BryceGilnore 2004 sPfftz-68

CSU

1g3s.0g lffiB.AB

Igz5.w tgzg.BB 1615.BB 1418.E0

1010.5

1

1885.AB lgw.gg gss. BE 9SS.AS 985.44

gs/Ea/zBBs

Youhaveto askyourselfwhy the Pit cantradeto a perfect50o/oretracement ESoverruns sometimes. andthe Electronic deviation of 2 ticksmaximum Nowif youwereusingmy accuraryparameters from perfectgeometryyou canhavecompletefaiththat we hadmadea 50o/o retracement andacton it. I haveseenrepeatedinstancesof deviationsin the ElectronicESto the PIT in a retracements in the past.The lasttime it happened tradedpriceat 50o/o bigwaywasbackat the March31st2003lowwhenthe EStradedat 840and hadcalculated to 841.5retracement the SPtradedonly841.5andthe 50o/o boughtit whenjust ScottManyalertedme to it on the dayandI immediately a minuteor so beforeI thoughtthe 50 hadcomeout.

ContractRollover

Section3: Chapter- 3

Tradingto WIN Course- One day at a time

[c] Bryce Gilmore2004

Another way to possiblyresolveany dilemma is to inspectthe CASH CHART:

5&P5OOCASHINbEX LO32.4t

ffi33.49 L0,2E.EE LBZ3.8g 1818.BB 1813.ES 1BBg.gB

ua3.ss 9glB. BS

s93.08 s88.08 a9/98/?ffi3

NowI havelookedat it underthe microscope saythat we I canconfidently havemadea 50o/oretracement at the lowtoday. The next issue becomesthe lx1 correctionsupwards.The ES has overbalanced but the SPhasn't.The SPhasjust brokenthe 50 backup yet the CASHandthe EShavenot. Pointis we are righton a criticalMOBat the endofthe day. Anotherissueis the discountin the December contract.The CASHlow today points was1007.71so the discount was2 full in the futures.Thisis a bearish signnota bullishsign. In anycasethe onlyconclusion I canarriveat is if it breaksupwardsI should pointI shouldbe a seller. bea buyerandif it staysbelowthe balance Thebiggerpictureis interesting whenyoustandbackandtakea goodlookat whathashappened in the past8 tradingdays.Themarkethasgonesideways to downwith a strongfinishon Fridayafternoon. The Bloomberginteruiewsare all decidedlybullish,the main comments comingthroughare blamingthe currentsluggishness on a marketthat has goneto far to fast.The majoritythink that as soonas the currentsetback resolves itselfthe buyerswill return. I'm not entirelyin agreement with theirviewsbut I don'thaveto worrywhat the marketdoesin the longtermI am onlya daytrader. The marketcango anddo anythingit likesfor all I care.I will knowhowto handleit. ContractRollover

32

Section3: Chapter- 3

I I I I I I I I I I I I I I

t I I I I

t

I I I

[c] BryceGilmore2004

Tradingto WIN Course- One day at a time

If the marketcomesbackdownand breaksthe largerdegree50 I should expectsupportat the major1xl level.If the lxl failsthenI canbe a happy that will happenare remotein bearandselllike crazy,althoughthe chances myeyesat the moment.

t

LikealwaysI haveto wait untilthe markettellsmewhatto do. I keepsaying on a onedayat a timebasis. hasto be handled thatthisbusiness

I T I

Monday15s September2003: INSIDEDAY

t I I I I I I I

I I I I I

Mondoy 15th Soptember2003 LEZ6.g8 1 0 1 82

1A18.58

I1'L51DEbAY

1gr?.06 1815.54 1914.60 1812.58 1611.OB 1BOS.5B 1688.BB 1086.58 Bg/15/ZBA3,

E5 Sep-03 Dec-03

ll

6g/a1

Eg/tg

BS,/LZ

gg/tz

Eg/15

Bg/15

ol Volume 6/17E 52[ffi1 1ffi

Total Deha

ES OI increosed lOOk

SP Sep-tl3 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-O5 Total

7142 2757

Delta

Todayturned into a lacklustreaffair with a downwardbias.The market openedbelowthe balancepointon our chartand beganto retreat.Overthe previoustwo tradingdaysthere has beena substantial build up in Open newsthe marketjust groundout the Interestandwithoutany encouraging day.The mainnewsstillaroundthe marketis the $140millionpaypackage H(CHANGE. STOCK awarded to the CEOof the NEWYORK ContractRollover

JJ

Section3: Chapter- 3

Tradingto WIN Course- One day at a time

[c] Bryce Gilmore2004

NOWWHATHAVEI NOTICEDOVERTHEPASTFEWDAYS? Outsideof the buyingFridayat the 50 levelof largerdegreethe playersare sellingintoany50o/o retracements. Theydidit onThursday andagaintoday. The S&Prallyfrom Fridaycouldnot sustainitselftodayandthe big 6 point correction wasoverbalanced slightlywith the marketfinishingthe daynearly on its low.I mentioned the significance in a reviewof of the 6 pointcorrection Friday's dailyrangein 51:C18:P112. The continuingbuildup in the OpenInterestis comingfrom the Fundsand the Commercials sellinginto the NonReportable sideof the market.If this trendcontinues something hasto giveone-wayor the other. Thereis ongoingtroublewith the occupation with of Iraq andthis combined the Israeland Palestinian conflictis not addingany confidence to the stock marketsituation.PresidentBush'spublicopinionpopularityhas dropped significantly as the costof the Iraq invasioncontinues to growand increase budgetdeficits. Continued talk of moreterroristactivitycontinues to deter peoplefromflying. Althoughthe economic figuresreleased overthe pastfew monthsindicatea recoveryof some descriptionthe employmentfiguresshow little to no improvement. The progressof the recoverydependson consumer spending whichhas beenvery good in recentmonths,now if it stallsor consumer confidence fallsthe marketwill be susceptible to sharpsetbacK. 5&P 5OO lsf Month ContinuousFutures Prices High Lotrt Ege

tg3z.7g 958.50 74.2A

4 Hfl1

taL5.z8 18 I,IRZ 1471.24 50 llfi3 996.11

Bcck below old hiqhs

Trend Indicotors ore oll funting down.

Youonly haveto reviewthis dailychartof the S&P500'sprogressin recent monthsandyou canseewhy the FundsandCommercials areaddingto their positions. short

ContractRollover

Section3: Chapter- 3

I I I I I I I

t I I I I I I

t I I I I I

t

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

I

lst MONTHCONTINUOUSFUTURESCHART:

t

Now that we are in the rolloverperiodand the activetradingmonthis pricesto our continuous the December December we shouldbe appending futureschart.

I

technical analysis. Thischartis the onewe usefor all ourLONG-TERM

t

an active TheS&P500 futuresbegantradingin 1982andI havebeenkeeping recordeversince.

I I

I I I I I I I I I I I I I

l^lave Trader 1558.88

lst ,l,ilonthConlinuous Futures

bISHTHLY

nErnffcEt{f,ttrs

1560.69

8.888 ft.333 E.3jBZ a.447 8.4S6 8.508 B.577 6.618 8. EE? E.?AV 8.786 1.008

ffi50.48 120i8.86 ffi59.88 SOB,BB ?50. 88 649. BB

"-'---?6"7.50 1836.86 la?s.s8 trzE,BL 1153.46 LL7g.?5 1232.8s 12ffi.92 1385.44 fi37. ?E 1491.41 15?4.88

456. A6 3Bg.BB lsE.AA

s.ss

30Jul8Z

3OSep86

3fll,ecg8

Z8Feb95

ZSla999

Whenyou examinethe currentmarketpositionrelativeto the bearmarketof 2000-2002 we haveyet to retrace1/3'dof it. The38.2is a wayoff at 1075.5 (see:S2:C2:P18) duringthe (1068on SPX),if you recallfromearlierchapters Onewas50o/oand Bearmarketthereweretwo very impoftantretracements. equalin length,(alsosee: the other 38.2o/o and eachwere approximately 52:C3:P23). Fromthe low in October2002we havenowbeenup 265whichis 25 points largestcorrection on the waydown.Thiscouldmean morethanthe previous we aregoingto go higheror it couldmeanthatwe haveonlyjust movedthe if you believewe arein a wavecountup intoa higherdegree.Nevertheless, recovery, onewouldexpectthe marketto makeit backto the 38.2or the 50 beforeit ranintoa brickwallfor a time.Wellthatis the theoryof ElliottWave if youbelievein it. arealsothinkingalongthe same Mymainpointis this,100'sof otheranalysts If we indeeddo continueup linesandadvising theirclientsof the possibility. the 38.2levelat 1075(SPX1068) in thistimeframewe will haveto negotiate problem for this marketwith the current and that couldcreatea technical stateit is in.

ContractRollover

35

Section3: Chapter- 3

Tradineto WIN Course- One day at a time

[c] BryceGilmore2004

youshouldkeepa correctrecordsoyou In anycaseno matterwhathappens areworkingoff. will knowthe preciselevelsthe professionals Tuesday15s September2003: Anotherdayanotherdollar!Marketshiftsup a gearasthe buyersreturn.Now theonlybarrieraheadis a testof the 1031high. 1834.Bg 1631.EB

The someold things continueto tell the story:

1031

1028^2

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andtodayas a I wouldexplainthe changein sentimentbetweenyesterday The early morning combination of no bad newsand technicalbreakouts. Afterthe breakoutof the 50 only left the 61.8andthe 13x13as resistance. testof the 61.8the marketcamebackto the 50 levelasthe marketdigested the FOMC Theoldclich6sayingis, prior resistancebecomesnew minutes. suppo$ sotheyboughtit andoff it went. of the NewYorkStock Thecontroversy DickGrasso the Chairman surrounding Exchange is an oldstorynow. Thismarkethasits sightsset on the 1075levelrightnow.The3 daytrendis positiveonceagainas the bearsare gettinghoseddown.The bearshavea smallchanceof a doubletop at 1031but judgingby the finishtodaythe buyersshouldkeepcomingfor the timebeing. mayget a Withonlytwo daysleft untiloptionsandfuturesexpiryconditions rightnow. littlevolatile,that is the onlythingto consider It's timeto remindyouonceagain: If the market is going up you buy it - If it is going down you sell it. Youcan keeploadingthe gun untilyou run out of bullets.Whenthe SIGNS will act in their sameold are clearyou can be surethat the professionals ways. ContractRollover

Section3: Chapter- 3

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Tradingto WIN Course- Oneday at a time

[c] BryceGiknore2004

I

Thereis nothingnewunderthe Sun.Themethodologies I havetaughtyou in this coursewill keep you on the correctpath if you continueto do the preparation workandtakeit onedayat a time.

l

I recommendTTW traderc to keep a continuous 1$ MONTHSWING CHARTof significant market swings:

I I I

Thisway you will havea properperspective of wherethe markethasbeen andan ideawhereit maybegoingin the future.Youwon'tbe guessinglike mostof the otherswhowill be losingtheirmoneythroughlackof knowledge. Theswingswilltakeon the appearance of wavesin lesserandhigherdegree.

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Thischartis currentrightnowandcontains the swinglevelsof the active1s period. monthEScontracts overthe It is an EsignalES#F continuous chart and was preparedby one of my TTWcolleagues, Yigit Balligilwho livesin procedure Turkey.We haveour own automated for Esignal to produceswing thesecharts. Higherhighsand higherlows meanthe trend is UP. Lower highsand lower lows meanthe trend is DOWN. If you maintaina longer-term biastowardsthe medium-term trendyou can't gowrong.

ContractRollover

J I

Section3: Chapter- 3

Tradingto WIN Course- One day at a time

[c] Bryce Gilmore2004

as the trendunfolds.You or over-balancing Swingswill be under-balancing levelsof priorrangesasyourguide usethis information andthe retracement to tradersentiment. Theonlythingthat changes of as the marketmovesforwardis the DEGREE larger degree TREND.Largerdegreemovesbegetlargerdegreecorrections; swingswill unfoldin 3 to 5 wavesof lesserdegreeswingsasa generalrule.

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Anothereducated colleague of mine,SteveRifkinwhoyoushouldall knowby now as Steveis runninghis own day tradingeducationprogramfor S&P my own chaftto traders,sent me a chartthis morning.I havereproduced illustrate hispoint. pricesas a meansof identiffing It refersto alsousingthe Globexcontinuous geometry at importantswinghighsandlows. with corrections Stevewasableto tie in the 1:1 geometryin the consecutive low the 1005^2 the other an exact38.2 retracement of the entirerangeat day. I thinkthe pointStevewas makingto me, wasjust to saythat you should examineeverypossible angleandthe answerwill betherein morewaysthan one. Thereis no doubtnowthat after yesterday's buyingspreethat anyonewho that we mattershasseenthe relevance of the 1005^2lowandwill consider haveat the leastonemoreleg up in similardegree.Thisshouldat leastget us upto the vicinityof the 1058/1060 area.

ContractRollover

Section3: Chapter- 3

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[c] Bryce Gilmore2004

Anothercolleague from California hasalreadypointed of ours,PaulBonanno group so outto ourTTW thatthe nextCASHINDEX1:1comesout at 1056.55 betweenall of uswe havethe marketcovered. I am very proudof theseguysthe way they havetakento the educationI haveprovidedandthe way they can nowwork it out for themselves without anyhelpfromme. WhenI retireI knowthat the effort I havemadewill be remembered forever asthe wordspreads to thosefewwhocanlearnto thinkfor themselves.

Tuesday17u September2003:

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guidance, Anothersmallrangedaywith no purposeful I watchedfor technical a whileandwhenit couldn'ttest the old top at 1031I left it alone.Nowwe have only 1 more tradingday until the September/December rolloveris complete. Tradersarewatchingnot onlythe ES-Zchaft,but alsothe SPX,the SP-ZandSP-Uchartsandit is becoming confusing dueto the rolloverperiod. DickGrassohasresigned fromthe NYSE todayat the requestof the boardso nowthat newsis out of the ainruaves. Anotherdistraction rightnowis the hurricane off the EastCoastof the USA. Stillin general termsthe marketshouldbe heading up.Thereis nothinggoing on that saysit shouldn'tbe excepttechnicalsellingby the fundsand the commercials. andthe buyers Seehowthe OI went up on the riseyesterday absorbed it.

ContractRollover

Section3: Chapter- 3

Tradine to WIN Course - One day at a time

[c] Bryce Gilmore2004

5P - 0I 5P 871n1

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2003:It couldbe impoftant. Tjmewillbe"square" 38.2on 30hSeptember 2003:This Thenthereis anothermajortime fallingon the 23'dSeptember just yet, that it is I am aware but couldalsobe importantit is hardto say something I needto watchon the day if we are makinga higherhighthan recently.

40

I I I I I I I I l

we needto be time and priceconjunction As we get closerto this MAJOR just mean to anything. it out in case turns its consequences awareof

ContractRollover

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Section3: Chapter- 3

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Tradingto WIN Course- One day at a time

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[c] BryceGilmore2004 This is onotheriechnicolopinionI hoveof the morkot - I hovamentionedthis ogesogo ond why I thought ltliner & Plechier v.rere on lhe wrongtrock.

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just warningthattheseare Justbearin mindthat I am not makinga forecast in the pathof this marketin the nearterm. BTW the two biggestobstacles Minerand Prechter werecallingthe marketDOWNall the way up fromApril in myopinion. knowledge 2003:it'sa sadindictment of theirself-professed Oneshouldneverrelyon egoaloneandignorewhatthe marketis tellingyou! Youknow,I can be the cruellestcriticknownto manbecauseI alsohaveto acceptanycriticism thatcomesmyway. in yourtradingcareeris goingto be deciphering Oneof the biggestobstacles whoknowswhattheyaretalkingaboutandwhocanproveit works.Manyof the thingsI havetaughtyou in this courseare not originalin any way whatsoever,it is just the way I combinethem that makesthem the most effective tradingtoolsyouwilleverlearn. comeout with.Or The marketdoesnot listento the thingsMineror Prechter "Guru" he wasbadlywrongfromApril for that matterArchCrawfordthe Astro on aswell. on July2nd2003: Justgo backandreadwhatI wrotein S2:C4:P39 Pleasenote: thesefuturetimingdatesand pricepricelevels AlthoughI am mentioning thereis no reasonto believethey will actuallybecomefact.The dateswill comeandgo andthe marketwill dowhateverit wantsto at the time. guidelines to beawareof that is all. Theyaretechnical Whenthe time comesthe marketwill showits handin a varietyof ways whichwe will be ableto identifywithandactaccordingly.

ContractRollover

41

Section3: Chapter- 3

Tradingto WIN Course- One day at a time

[c] Bryce Gilmore2004

Thurcday18h September2003: IASTTRADINGDAYES-U Todayyou will seethe reasonfor takingeachdayas it comesandnottrying to forecastmorethanonedayin advance. f,sa3z-15

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Todaythe marketwent exactlythe oppositeof what the average"Joe Blow" in the street expected.Maybethe triple witchingwas what we neededto breakthe overhead resistance the marketwasup against. Nowall thosepeoplewho havebeencallingthe September 8s Highthe final getting highfrom Marchhaveto eat Crow.Theymustbe usedto it by now, the flavourof CrowI mean.But you knowthe stupidthing?The lazypublic will continueto buytheir newsletters andadvice,followthemand losetheir hardearnedmoney. Thismarketrallyfrom Marchhastarnishedmanyreputations sinceit began, but if you studywhatI havebeenwritingoverall thesemonthsyou will see that it wasn'tveryhardto stayon trackandkeepmakingmoneyallthe way. All you haveto do is takeit ONEDAYATA TIMEandforgetaboutforecasting whatwill happento far out. To makemoneyall you haveto do is just tradefrom levelto levelin the just keepaddingup. It is easierto make5 smallerpictureandall the pennies to 10 pointsa daythan hit a homerfor 50 or 100pointson a mediumterm trendfollowingposition. Therewill be dayswhereyou catchthe volatileruns you either up or down if keepenteringpositionswhen the opportunityis signalled, thesearethe bonusdays. Youjust haveto treat this business of makingmoneyas a job and always remember the basics. ContractRollover

Section3: Chapter- 3

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Section 4! chaptert:

The PsychologicalAspectsof Trading to WIN: a Perhaps the mostimpofiantadviceI cangiveyouto assistyou in becoming on winningtraderin the futuresmarkets,is sayto you to only concentrate in it totally. onemarketandspecialise Youneedto developa specialinterestin the marketyou selectto tradeand youneedto understand its habits. who maketheir living Eachindividualmarkethasa hardcoreof specialists "Jack of all tradesanda masterof tradingonlythe onething.Youcan'tbe a none"andbe successful. my tradingcareerI havemovedfromonething Fromtimeto timethroughout to another.I first begantradingSilverandthenmovedontoGold.Whenthe After equities. Goldmarketwentintothe doldrumsI begantradingindividual sometimeI movedintoequityfuturesandthe localSharePriceIndexfutures I havetradedUST-Bondswhen it was an 8olo as the volumesincreased. to a 60/o the contractspecification couponbut droppedit whentheychanged currencies overthe yearsbut foundthat couponcontract.I tradednumerous myselfaroundovermorethanonecomplexI wasless whenI wasspreading effectivein keepingon top of anyof them.Youwill seeby my writingsover the yearsthat I havefollowedandtradeda widerangeof marketsand my techniques canbe appliedto mostof them. marketbut whenI couldsee Fora time I hada loveaffairwith the Soybean platformsbecame in electronic the increasinginterest the S&P500after available I madeit my newhome. On a week-to-week basisI often lookto seewhat someof my old favourites I do not strayfromthe aredoingjust out of interest.Butfor tradingpurposes S&Pnowdays. I haveseriously studiedthe habitsof the S&Pplayers;this givesme a clear you makemoneyfrom, it is by going It is not the professionals advantage. thatmakesyoueasymoney. withthemoverthe top of the inexperienced News I getthroughthe Bloomberg TheS&Psuitsme because the information act on news and seruiceis all I need to stay informed.Professionals prominent provides with traders. constant interuiews technical's, Bloomberg the pointis Youcannottradeeffectively unlessyou havecurrentinformation, tradersthinking. newsmayquicklychangethe professional newfundamental

Psychological Aspects

Section4: Chapter- 1

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

not just the It's no joke believeme and it appliesto all tradingoccupations futuresmarkets. Psychologically whenyoutakea tradein a marketwhereyouareawareof all the outsideinfluences,you take the trade basedon knowledgeof the technicalpositionand your personalbeliefin how the tradershaveacted edgeover in the past.Thisgivesyou a massive undersimilarcircumstances the restof the field. As longas you understand that you havethe edgeyou are morelikelyto handlethe management of the tradea lot betterthanif you wereworkingin thedark. If youcanjust understand thismuchyoucanlift yourtradingresults10fold. STAYFOCUSED: to adjust Marketconditions are alwayschanging and if you are not prepared withthe marketyouwill nevermakea consistent success of trading. You alwaysneedto havea clearopinionon whichdirectionthe marketis mostlikelyto go. If you don'tthenyou are betteroff to standaside. I'll giveyou an idea- I didn'ttradetoday,I did on Tuesdayand hada good day but the way the marketbehavedtowardsthe end of Tuesdaywas very mixed,sotodayI tookthe dayoff. Therehavebeenno neweconomicreports the pasttwo daysand the next are due tomorrow.Thereappearsto be a perception but therehasbeen in the marketthat manystocksare overualued no followthroughto the downside. The3-dayswingis stilldownbut we have just hadtwo insidedaysin a row.The marketis poisedto go one-wayor the otherandI am not surewhichway.Themarketis yet to tell me. Q2 Eorningsreporting seoson{SECONb WEEK) 993.A0 gg1. B9 98S.60

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PsychologicalAspects

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Section4: Chapter- 1

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Therestof the weekwasno differentto the start- down,up,down,up. Weaks Troding Ronge- 25 poinis Motrday

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in the 1015 As I saidsomewhere 3 weeksagothe marketcouldgo sideways - 960rangefor sometime beforewe havea clear-cutoutcometo the Elliott WaveCountI put fonruard backat S2:C4:P38. Sofar my ElliottWaveopinion is intactunless960comesout on a dailyclose. The mostpositivethingI cansayaboutthis marketrightnowis that the 3dayswinghasturnedup again;so anybreakabovethisweekshighandI will bea buyeragain. ThisCHART showsthe 3-dayswingssincethe 12hMarchlow. w3

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Themostlikelyreasonwe havebeenexperiencing of lateis choppyconditions W3 is major that manyanalystsbelievethat the highI havelabelled a bear marketrallyhigh.It maywellbe but untilthe marketcanbreak960I am not in thatcamp,although I mustadmitI ambeginning to wonderrightnow. Psychological Aspects

Section4: Chapter- 1

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Tuesday29b July 2003: You know it is becomingincreasingly moredifficultto makeany senseof wherethis marketis headingin the future.The past6 dayswe havebeen stuckin a 27-pointtradingrange.Notwithstanding therehavebeensomevery good PATTERN geometric ratiosI am accustomed to seeing tradesbut the havebeensadlymissing. All I seein thistradingpatternis CONFUSION! tlrhart'; [5U rF1?.08

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The marketseemsto rallyon the flimsiestpieceof newsor rumourandthen whenrealitystrikeshomeby wayof somefactualeconomic newsthe market takesa dive. With the ConsumerConfidenceback down at a four month low and unemployment for Juneon a nineyearhighit makesyoubeginto wonder. Commentators keepinsistingthe USeconomyis in recoverymodebut you can't see anythingreallypositiveto agreewith their forecasts.OK some companyEPSare improvingbut the stocksthat are showingearnings improvements havealreadybeenbidwayup on thisexpectation. Alsosincethe Junet6tr nighthe BONDMARKET has beenon a consistent downtrend.Usuallythere is an acceptedbeliefthat moneymovesbetween the BONDMARKET and the STOCKMARKET. An old beliefis if bondsare goingup the stockmarketwill go downandviceversa. Contrary to popularbeliefthe stockmarkethasbeentotallyindifferent to this accepted beliefin recenttimes. As far as I am concerned beliefslikethisare onlyoldwivestalescirculated In my opinion by brokersto get morebusiness. it is goodto remember this so you don'tfall for the psychological trapsthat thesefalsebeliefswill causeyou.The samegoesfor any othertwo markets that peoplelike to makethe samecomparison.Eachindividualmarket marches to its ownbeatandshouldn'tbeassociated withanother. PsychologicalAspects

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Section4: Chapter- I

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Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

ffi3.88

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THES&P? WHAT'STHEMESSAGE IN ALLOFTHIS REGARDING Whatdoyoudo whensituations occurlikewe arein now? PSYCHOLOGICALLY YOUCOULD BECOME CONFUSED! andtradeoff the Wellthe onlythingto do is be awareof the newsreleases PATTERN WITHTIGHTSTOPS. SIGNALS was released at Todaywhenthe Consumer Confidence and Unemployment 10:00amon badfiguresthe marketbrokesuppoftand droppedlikea rock. the Hussein hadbeencaptured, Thena rumourstartedin the pit thatSaddam the early rumourturnedout to haveno substance andaftera doubletop with reports. morninghighthe themeof the dayturnedbackto the economic ESEgI-5

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At timeslikenowit is worthrecalling the doubletop in Marchof 2002as the conditions are vaguelysimilarin termsof investorexpectation. Moneyhas recentlycomeintothe marketat an unprecedented paceasthe earlystaters havebecomecomfoftable thatthe worstis over.Wellwhoknows?I don'tbut the signsaresayingto me- don'tbe an investorrightnow! Psychological Aspects

l0

Section4: Chapter- 1

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ANOTHERPROBLEMON THE HORIZON:

plansarefindingdifficultymeetingthe retirement Companies with self-funded currentpaymentcommitments from fund profitsas the interestratesare at income suchlowlevelsandthe streamintotheirfundsareat verylowlevels. Theirtraditionalassetsto backtheir fundshavelost billionsand billionsof dollarsoverthe pastfew yearsandrightnowtheyareshowinglittlehopeof recovery. It is saidthat companies withtheseplanswill haveto dip intotheiroperating profitsto top up the outgoings on the currentcommitments. Anotherthing about the incomestream of the retired sectionof the communityis that they no longerenjoythe benefitsof the high interest will Thisphenomenon regimeandtheirdisposable incomes arefallingrapidly. flowthroughto the consumer demandsideof the marketandstagnatesales andbusiness incomes fuftherin the future. equationleadsoneto with the increasing Thisfactorincluded unemployment nowcouldbe with conditions we are experiencing believethat the economic has run up an unprecedented for The us a Iongtimeto come. USGovernment habitthey deficitthis time aroundand if they do not curbthe overspending policies of today. havefallenintothe futurewill be mortgaged by the stimulus Futuregenerations will have difficultieswhen it comesto socialseruices entitlements on the currentpath. that thingscan only You don't needto be a Rhodesscholarto understand people along. improveif havemoneyto spendto spurbusiness Frommy part all I am spendingmoneyon right now is livingand business expenses, and indulgences such as boozeand cigarettes.I enteftainment for it if andI will be compensated don'tneedto travelunlessit is on business incomebut I have I go anywhere. I haveno debtandI havea considerable no reasonto go out andspendmoneyfor no reason. Theremustbe plentyof peoplein my positionbutthe majorityof peoplewho want to spend do so by borrowing;the private debt level is at an highlevel.Sowheredo we go next? unprecedented Notto far fromhomeI suggest. Withterroristthreatsall overthe worldthere your neckout if youlivein a safeenvironment. is no reasonto stick Anotherthing the occupation of Iraq is provingto becomeanotherpolitical nightmare as it dragsout andwith the priceof oil on the riseit addsanother negative economy. to costof an expanding Anyrruay theseare onlysomeof the thingswe shouldgivesomethoughtto whenwe thinkaboutwherethe marketcanfindanyextrabuyingimpetus. Psychological Aspects

tl

Section4: Chapter- I

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

It seemsto methatthe stockmarketis runningon emptythe waythe indices havebehaved overthe pastmonth. Stillit paysto be optimistic. Therealestatemarketshouldbe slowingdownby nowandlet'sfaceit, it has beenoverextendedmorethanI haveeverwitnessedin the past.Evenif your apparentwealthhas increasedin valuewith the explosionin real estate valuesyou areno betteroff realistically asyou havenowhereto go exceptto borrowagainstyour assetand plonkthe moneyinto someother form of investment. who The only onesgainingare the governmentdepaftments haveraisedthe landtaxesbecause of it. I bet halfthe reasonthe stockshave beenbid up so stronglyin the past4 monthsis throughborrowingagainst real estateand investingthe moneyin the market.Now if the alternative investments dont peformthenit is cuftainsfor thosepunters. If you reallywantto seethe stateof the nationyoushouldgo visita CASINO, wellyou don'treallyneedto just havea lookat howthe dailyvolumeon the E-Minihasgrownin the pasttwo years.Thegamblers areall movingontoour your tuf thesedaysandit is asclearasthe noseon face. Thetrendnowin investment circlesis to learnhowto sellshort. I am alreadyan expeftat it so wheredo the peoplecomefromto buyadvice from me. I can see it in the salesof the booksI havewrittenoverthe past two yearsor so. The worldis an amazingplacethe way it goesfrom brickwallto brickwall andthenmakesmoreheadway. Whatreallyamazesme is howpeoplefind me as I don'tadvertise exceptfor my web site and overthe pastcoupleof yearsI am sendingout booK to placesI haveneverevenheardof. Oncethe majorityof my bookswent to Australia,USA,HongKongand Singapore whichthey still do, but nowthere are increasing numbersgoingto Sweden,Germany,Poland,Greece,Spain, Ireland,Turkey,IndiaandevenRussia. Italy,SwiEerland, UnitedKingdom, WorldWide Neveftheless the pointI am makingis that thereis an increasing you you you want to take BUY if canSELLbefore trendto tradefutureswhere advantage of a fallingmarket. Peoplewantto learnhowto tradePAPER andyou haveto considerif that is PRODUCilVE? Maybeit doesnot matterso muchas the oneswho canlearn will onlybe a smallpercentage of the worldmarketsin any to do it effectively to be for moreand morepeopleto takematters case.Butthe trendappears who intotheirown handsratherthanleaveit in the handsof the institutions years. havebeenon a summerholidayallthese

PsychologicalAspects

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Section4: Chapter- 1

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Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

the Wellyou mightwonderwhy I persistin teachingpeopleto understand players players with. identiff thatthe smaft markets, the andthe mechanics It's reallyprettysimple! themto WIN. I liketo seepeopleWINandtheypaymeverywellfor teaching It's reallya WIN-WINsituationin my mind. but Youknowoverthe yearsI havewrittenmanybookson tradinganalysis I havealwaysfelt I wouldlike as I havegottencloserandcloserto retirement to leavethe very best on the tablethat evena high schoolleavercould understand andfollow. - I neverhavebeen.I havealwaysbeen I am not partof the establishment personsuitsmy lifestyleas I don'thave my ownman.Beingan independent to answerto anyonemostof the time. reminded of the futilityof the I am continually As moreandmoretime passes systemas it standstoday. The education systemhaschangedso muchsinceI wasa kid at school.In my daysif the teacherthoughtyou wereout of orderyou stoodin lineand took a belting.Todaythe kidsare not allowedto be hit for any reasonand is to saythe leasthopeless astheydont havea cluewhatthe theirdiscipline real worldis all aboutuntil they haveto get out and suppottthemselves. Theyonlylearnwhentheyhaveto getout andfendfor themselves. The systemtodayteachesthemto cheatas besttheycanand not worklike the olddaystaughtyou.The moderndaysystemis notteachingpeopleto be boundby their word anymore.The new deal today is to get awaywith It's a realdilemmawhenyou have whateveryou canandhideyourmistakes. in companies taking in universitygraduatesand makingthem specialise foxholes andnot knowwhateverelsegoeson outsideof them. In normalbusiness todaya persongoesout andgetsa job and is taughtto do onespecificthingwithoutknowingthe effectof theirjob on the scaleof the wholeoperation.It's a patheticsituationin my mindandit extendsto all thingstodayin regularbusiness. Youknowwhenyou go to the supermarkettodaythe kidson the registers can'tevendo mentalarithmetic,they just swipethe bar codeswith their machines andwhenthe totalcomesup they punchin how muchmoneyyou gavethemandthe machine tellsthemwhatchangeto giveyou back. Butthis is the newera andwe just haveto workwith it. I thinkthe longerit goeson the greaterthe advantage thereis to the personwho canbecomea of masterof all the facetsof the realworld.All it takesis an understanding youaredealingwith. the competition PsychologicalAspects

13

Section4:Chapter-I

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

I have I mightappearto be veeringoff trackat this pointbut psychologically changein accepted a perception that we havebeengoingthrougha massive valuesthroughoutthe past 20 years.The internethas made a major is as this sourceof information is transacted to the way business difference available to everyonein the safetyof theirown home.Thingshappenmuch fasterasa resultof it. IN THEMARKETS: You know that in the daily marketactivitywe have lots of optionsand of success. oppoftunities to taketradesthat havea highprobability I am not surewho believesme andwho doesn'twhenI declare Sometimes rightat the timethat the marketis a sellor a buy.I do it liveon my training sitetime in andtime out. Butto my mindit seemsto me it is onlywofththe valuewhenthe markethasrunits courseandmy calleitherwonor education lost. AnythingI say in the heatof the marketcouldpossiblybe seenas purelya guess.But I shouldassureyou it is not a guesson my paft, my callsare inspired froma wellfoundedbeliefthat I havethe oddsin my favour.I know (prettywell mostof the time) what the otherplayerswill do underceftain andI go for it. technical situations whenthey seem to act on technicalsituations Psychologically I am prepared good tradershave that all trading so clearto me. This is the one aspectof learnt.If youseeit andit look realgo for it. If youarein doubtleaveit go. myselfoverandoveragainas I writethis manualbut I am probably repeating canonlyhelpin the long Repetition it is importantthat you get the message. run. to trade Overthe yearsI haveseenmanyotherpeopletry andteachstudents just can think they don't I and the resultshavebeenfar from satisfactory. traderwho to anyoneother than anotherprofessional explainthemselves whattheyaretalkingabout. to understand alreadyhasthe experience in manydifferentvaried WhatI amtryingto do is provideenoughinformation place you may pick it up point in one ways that even if you miss the somewhere elsein thistext. whenI first studiedGann& Elliottworkyearsago,way Youknowsomething, backin the early80's.I hadto readand re-readmanythingsoverandover again,pageby page,to get their ideasinto my mindandtry to understand whattheseguyswereon about.It wasn'texactlysimpleby anymeans.

PsychologicalAspects

t4

Section4: Chapter- 1

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Tradingto WIN Course- One day at a time

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Wednesday6thAugust 2003: Howthingscanchangein oneday! the marketopened fromyesterday Evenwith all the bearishsignalsapparent going to fall overbut anddisplayed somestrength.At first I thoughtit was yesterdays points correction 1:1 with a whenthe impliedresistance at 8 up on cameout it wasobviousthe markethada fair bit moreupside. 9S0.BA

Wadnesday6th August 2OO3:

s87. BB

Today storted off with me looking to sall but as foon ali 966.25 come out I reversad inio a buyar.

984. BA s81. O0 978.84 9?5.04 S?Z.EE 969.80 966.BB

966.?5 ->>

983.80 968.99 EE/816/?0/8'3 !f61.?5

g6e.Z5

959.25

961.00

gB/W

andas it went into The highfor the dayterminated on the 61.8retracement is straightout of the the reversalpointit unfoldedas a 1:1, this behaviour lowandback text book.ThemarkethasnowclosedbackdownnearMondays below50o/o of the daysrange. after The one thing that standsout to me abouttoday is the resilience technical breaking the 960 Iow.In my mindthereshouldhavebeenmassive jump sellingfromthe todaybut it didn'tappear. s&P58S date Glg617 hi 1aL4.8g

CgcleTrader

GEOIIIIETRIClcvels The nexi AITAJOR thot could oet os orpport in a fur{fier

llain

PsychologicalAspects

Section4:Chapter- 1

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Thursday7s August 2003: INSIDEDAY Thb Weeks Cirl+ndrrr G? 5.7% 3.5% Aug07 08:30Productivity-Frel Aug07 08:30InilialClaims B8/il2390K 40CIK Aug07 10:80Wholesale Jun 0.0% 0.2% lnventories Aug07 15:00Consumer CreditJun -$0.48$5.58

3g5K u.0%

2.1o/o1.9% 393K 3BBK -0.4%-0.3%

$6.08

$ 8 . 1 8$ 7 . 3 8

4.0o/o

The marketbeganthe day on a weakernotefor the first 15 minutesand foundsupporton a 78.6retracement of the previousimpoftantrange.Bythe endof the dayit hadworkeditswayallthe waybackto a doubletop. s?6.Eg g?4.68

s?z.ss S?8.BB s68.BB 966.00 964.68 962.Ba s66. BA 9/8,/97/ZAB3 88/95

Ag:38

:165.75

S6?.64

964.25

SEs.BE

Bi8,/97

goodeconomicrepoftsthe Withthe absenceof any badnewsandreasonably marketaimlessly trendedup throughout the day.Thepatternfor the daywas mixedto say the leastbut at this point in time the markethas remained abovethe 960breakfromtwo daysback. It lookslikeeachrallyup as.itunfoldedhadthe daytraderssellingintoit. The lackof followthroughon eachdeclineindicates therewasverylittleconcefted conviction by the bears.Todayalsowasan insidedaywith a 13 pointrange andthe time up fromthe low is two daysnowwith a rangeof L7 points,not either. an inspiring example of buyingconviction Thefactswe havegoingintoFridayarethese: 1 . The3 daytrendis downandto turn up the markethasto tradeabove 982andeffectively 985to lookconvincing. fromthe 958.25 2 . Todayis onlythe seconddaywe havebeencorrecting lowso it is stilldebatable if the lowis impoftantin the biggerpicture. 3 . Thecurrentmarketpositionis on a doubletop witha 61.8retracement labelattachedto it. Psychological Aspects

Section4;Chapter- 1

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Tradingto WIN Course- One day at a time

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a the 975.25doubletop it still hasto negotiate 4. If the marketbre.aks

at 981, largerdegree38.2a littlehigherandthena 1:1 at 979a 50o/o 985. high at a 3 dayhighat 982andthe sruing levelsin the next10 resistance of technical 5 . Buyersfacean abundance pointsto the highside.Thecleargroundis onlyabove985.

If the marketcanget above985I wouldhaveto takethe viewthatthe lowat negative 958.25has becomemajorsupport.If not then I am still basically future.The wholebasisfor my outlookis basedpurely aboutthe immediate go throughthesesameexercises nothingmore.I religiously on probabilities prepare. The marketwill tell us soonenoughwhatis onedayat a time and goingto happen. geometry At today'shigh and the BD doubletop we had someinteresting approach. basismyX-ABCD whichis worthrecording Current Bange 13.25 prior ranges cIl-EC 1. BB0 CII-RB B. ?86 8.508 clt-xft Beuerse Eross RIFBC L.ZIZ Insiile Gross CII-RII B. ?88 0utside Eross BI}-ffI] fi, EBB Ilouble Gross HII-XC B.73S Fetrace 2 9.57? cFxu AII-XR E, 836

If fhcy orc Aoingto noke on effort to ssll this market down this is tho plocefo do it. X

985

gg./8?lZAE3 H ai n 8?/39

thingsI can seeat this stagefor the 958.25lowto be The mostfavourable buttheyareonlylesserdegree. imporLant aresometimingelements Friday8s August 2003: Todaythe marketopenedaboveyesterday'shigh on reportsof betterthan normalretailssales,the highfor the daywas980 only 5 pointshigherthan the previous close. The whole days trading range was 7J5 points as the market rocked backwards andforwardsall day,finallyclosingat 978. Goinginto Mondaywe have980 as the 3-dayswinghighwhichwasalsoa major38.2of allthe declinedownfromthe doubletop at L4t4.75. on the marketpositionstillopen. Theactiontodayleavesmy conclusion PsychologicalAspects

Section4: Chapter- I

Tradingto WIN Cowse- One day at a time

[c] BryceGitnore 2004

Theonlythingthat couldbe importantif the marketis to reversebackdown of thetotal fromhereis the factthattoday'shighmarkeda 38.2retracement declinefrom the majordoubletop at t0t4.75. Normallythis wouldbe an importantgeometricretracementlevel; but the way the whole pattern whatthe hellis goingon evolvedfrom the doubletop leavesme wondering here. 1s17.68

X

to14,7n

xs63u-68

1411.O0 1485.A0 sgg. BB 9S3.00 sE?.Eg 981.B0 s?5.09 s6g.06 sffi.aa

Cb = 70.7 of AB

a'J/0i5,/z;B,0'3 E7/89

Bz/LE

g7/ZZ

g?/?fr

I I I I I I I I

t

Eg/94

Thepatternis full of overlaps fromoneendof the chartto the otherandthe on the way down currentleg up hasoverbalanced the prior20.25correction into the recentlow.Thishasthe hint of higherpricesbeingpossibleso you canseemydilemma. hazyto me I just step At timeslike thesewhenthingsbecometechnically picture clear.I figurethat if becomes backandleavethe marketalonetill the I can'tcomeup witha reasonably no oneelseis goingtoo be able conclusion to either. In anycaseI am off fishingfor 4 or 5 daysfromtodayso maybewhenI get backI will havea clearersituation to workwith. s1.BA s?s. o8 s??. B0 975.99 s?3.48

I I I I I I I

9?1.44 s6s.9s 96?.B0 s5.09 963.SB il

W$B/Zw,3 EWBE

PsychologicalAspects

ffilg?

0iE/A?

aa/6a

ffilffi

E8,/tr8

Section4: Chapter- 1

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Tradingto WIN Course- One day at a time

[c] Bryce Gilmore2004

Monday, Tuesday 11th/12th August 2003: Qcharts ESU

ESA3U-18

Ilisplag Bars

I$onduy

Tuasday

za4

PNICE,.. RRNGE 32.25 CHffHGE 3.378 SQN9 degrees 93

I didn'tmissmuchby takingsomedaysoff but the sell at 985 at the old swinghighwasa legitimate sellingpointand if you didn'tget that thenthe breakbackthrough980 wasthe nextcaboff the rank.TuesdaylooK a bit day. moredifficultbutthe worst-case wasa break-even scenario is nowthe The only resistance tomorrowof any majortechnicalimpoftance (993)from 1014.75to 958.25,so goinginto Wednesday 61.8 retracement this hasto be my mainfocus.If this marketattractssellingat this levelI will sell,if it breaKthroughI willbuyit.

Qcharts 8SU 1AZ3.AA

ES93U-58

101?.B0 1S11.BS 1Ba5.aE ggg.B6 gs3.E0 S8?.BB 981.BB s?5. g0 s69.AB

still! Business Ifuarr.y

s53.86 BB/g5ragtrt

g6/13

w/98

g8/lz

NowI am goingto catchup on the newsand see if the chaft lookslike it makessomesenseto me.Thetrendis up againby hookor by crook, PsychologicalAspects

T9

Section4:Chapter-1

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

BeforeI go on to Wednesday I shouldshow you why 985 was a solid resistance levelfor sellerson Monday. g8g. gB

Prior SwingHigh985

985. BB g81.Bg

;26;:5-

RevarseCross 2.000:1.OOO

S??.BB g?3. BB gEg.BB 965. BB 961. BB

Wednesday13s August 2OO3: Easymoneytodayfor thosein the know!Themarketopenedon it's highand madethe 61.8(993)highfor the dayin the first2 minutesof trading. Thisactionprovideda HOOKTHEOPENSELLtrade.Whenever the market youcantakethe tradewithtotalrisk openson a technical levelof impoftance controlas the stoplossfor thistradeonlyhadto be at 993.5.Thefirst burst of selfingtook the marketbackto 987.25beforethe 10:00amBusiness Inventories repoftwas releasedand then the marketmade986 on a spike volumeburstbeforesomeconsolidation couldnot set in. The consolidation improveon a 50o/orecoveryand set up anotherSELLfor a 1:1 targetdown onceagain.The first 2 hoursof the daywerehighlypredictable if you knew the implications of the technical signals. 9S4.50

993 816 61.8 9i3lam

gs3. BB 9S1.5S

.,,*n[ud

999.9S

r

988.58 SS?.BB 985.59 984.04

E:E3IF1

982.50 ffi,/LS.ZBSS

_ g8/lz

PsychologicalAspects

lii l Bg:31

r Sn.sS

r

l r Sxl.BA

r 9S2.0O

r

r rlrlill g!U.ZS ffi/t3

Section4: Chapter- I

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Tradins to WIN Course- One dav at a time

[c] BryceGilmore2004

ESB3U-64

Ocharts ESU

razS.aa taLT.sg

Wadnesdoy 13th August 2OO3

1014.75

fill.8A

1004

ffiBs.BA

Jr-lstas expected rigilrt out of thc text book

gsg. B0

ss3.ga s87.96 981. BA 9?5. BB 969. SB 963.6S EE/9,5/ZgB3

after Bythe endof the daythe retreatfromthe morninghighwascontained of the total with a 38.2 retracement a 13.25pointdeclinewhichcoincided would (a level everyone suppoft moveup from 958.25 no-brainer technical havebeentargeting).

51.8oftotol

993.06 98!t.EB

t0t4J5 / 958.?5

3 Day SraingUP

ES93U-1S

985.06 981.68 '

s??.aa s?3.BA

972.75

3 day low

s6s.00 s6s.BB s61.86

9_79.75 supPorT

IlllOB'sare very clcar os we movs along intoThursday

-13,25

E8,/13/Zgg3

once As we headintoThursdaywe haveto go throughall our preparations again.The differencetodaythoughis I needto checkthe time ryclesfor todayas the 61.8 of higherdegreecouldbe very impoftantin the larger degree. higher. to the marketcontinuing Justthe samethreethingsstillgivecredence the 30.5rallyof 1. 993 highis 34.75up from958.25andoverbalances similardegree. 2. Supporttodaywason a 1:1anda 38.2retracement. 3. The3 Dayswingis stillUP. Psychological Aspects

2l

Section4: Chapter- I

Tradingto WIN Course- One day at a time

[c] Bryce Gilrnore2004

of the 34.75pointrangeup The3 day low is at 972.75andbeyond50o/o fromthe 958.25low. The earlywarningsignof a continuance downhingeson the 6.25point interlude rallytoday.If the currentupswingcannotbreacha 1:1 of that (986)andthe smaller degree50thenthe lesserdegreetrendis down.

994.06

ss1.BB s8s.50 s88.B0 986.59 Sffi.BB s83-59 saz.E6 sffi.5s gB/L3/Z@'3 BE/IZ

g/8/T3

BB/LZ

E8lI3

BE/L3

BB/T3

Youalwaysneedto understand that I dont carewhat the marketdoes tomorrowas I am prepared onewayor the otherto readthe signsandact levels. on themat the appropriate I only play the probabilities day by day. As each day passesnew probabilities unfoldandthat is whatI needto keepabreastof. TIME ?? ETBONACCI rgL?.89 1S11.Bg 1Bg5.0B 99S. SB !H3.90

ill

SB?.BB

:; l ll -l- -

981. BS

llr

$75.S4

t I I I I

61,8

9gz.58

I I I

g6s. a0

t I I I I I I I

s3.06 s57.BA

15JunB3 ?6JunB3

BSJultrl

19JulB3 3lJul&l

13AugB3

the factthat 8/13 = 0.618, 8/5 = 1.618soft of leavesroomto consider sometradersusingthis technicalaspectcouldthinkthe time of this rally hasexpired.Whoknowsjust yet anyway- betterto be prepared. PsychologicalAspects

Section4: Chapter- 1

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Tradingto WIN Course- One day at a time

[c] Bryce Gilmore2004

Thursday14tr August 2O03: rangetestedthe 1:1and Themarketopenedjust belowthe 50 of yesterdays lookedlikeit wasgoingto fall away.I tooka sellon the declinebackdownto low.Thiswasa goodtradeas I closedout just test the 38.2at yesterdays beforethe testof the 38.2andthentherewasa falsebreakreversal. E503U-5

61.8= 993

9!t3.66 s91.54 gs6.BB sE8.5A g8?. 86

s85.58

If fhis lineof support onthe 50 lineholds there is o potentiolto remoinup butthe marketneedsto

!m4.68 982.56 g81.AA FolseBreok of 3B.Z->>l

9?9.54 BE/L4/2ffi3

aE/12

EB/IZ

BB/13

88/13

A8/14

[, A8/14

The problemwith falsebreaksof this natureis that you canneverbe sureif the falsebreakis a signof moreweakness to comeor a reversalthat just failedto holdthe levelit shouldhave.It doesnot becomeobviousuntilyou haveretracedat least50o/oof the prior swing.I madeseveralothertrades bothon buysideandsellsideduringthe nexthourwhichresultedin a small lossjust on transaction costs.I felt I wasgettingout of stepwith the market whenit did not accelerate afterit brokebackthroughthe openingprice;so I afterthat it was stoppedtradingfor the day.Lookingbackat whathappened a wisemoveon my paft as the markettradedin a S-pointrangefor the rest of the day. The line of supportthroughoutthe afternoonwhere you see the triple for Friday's session. bottomsis at 986.5so this is our ls pointof reference the resistance and high low are and today's 979.25 Outsideof that the 993 The50o/o levelof the 2-dayrangeliesat 986. supportMOB's. The Not muchto work with in my opinionuntil the directionis confirmed. is goingto comeif the marketwereto breakup bettertradingopportunity throughthe 993levelasthat is whereallthe shoftstopswill besitting. NEWSFI-ASH: afterthe closethe marketwashit by PANICwhena massive powerfailurestruckthe easterncoastof the USAencompassing NewYork and surrounding areasall the way downfrom Canada.The first thoughts werea terroristattackbutthat hasnowbeendismissed. PsychologicalAspects

Section4:Chapter-I

Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

/lAqjor pow€r shuidovlnson ihe Eqstern Seoboordofter the norket closadfhe doy sessiontodoy - ot firsi they thoughr is wos tct'rorists

993.AB s91.58 99g.AB

.-- Doy SessionClose

988.50 987.BB 985.54 s84.46 g8z.s6 s81.64 9?9.50 a8,/L4/ZggA

PonicSallingon newsof g7g.?51' POWER.FAILURES BB/14

16:45

gBA.5B

97tl.Z5

6LOBEX 978.?5

!|?9.?5

A8,/L4

Anotherimpoftantlessonin the life of a traderas panicstrikesthe fragile stateof the market. of the marketas nowit is unsure Thiscomplicates the currentcomplexion for the Fridaydaysession. whetherbrokerswill befullyoperational Latestnewsis that a lighteningstrikeat a powerstationin NiagraFalls tookoutthe powergrid. in the confusion, the marketdivedand hassince Lookat what happened why you cansleep bouncedback.At timesliketheseyou canappreciate you don'thaveto worryaboutwhat easywhenyou area daytraderand goeson whenyou are not in the market.Beinteresting to seewherethe all tradingdecisions Globexis Fridaymorning.As far as I am concerned for now. areon hold

lrternational Edition I lletscape.com

Lights coming back on across blackoutarea . Power slowly comingback afier massive blackout;rnetroNew York could have power by 1 a.fi. . Officials not sure what caused outsge across 9,300 square rniles trom Detroitto New York to Canada . Canadianofficials say fire at a power plant in NiagarsFalls,New York, is suspecled cause . New York Gov. Patakisays half of state affected

lhe Empire Stde &rildng remaire dark * buildir€s are lit bybackup gensdors.

Aspects Psychological

oths

. Video: * New Yorkers react I Mavor: Normalbv mornino . Galler iesr Suotes I lmasesI Blackout oreo: Map I Elgllg . Conlrolledchaos as liqhts oo out in New York

24

Section4: Chapter- I

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Tradingto WIN Course- Oneday at a time

[c] BryceGilmore2004

FALSEBREAKS: I'll just put this in hereuntil I decidewhereit needsto go in the contextof the coursebut it mayjust end up stayingherein the end, psychologically thesesituations aredifficultto dealwith mostof the time. Thefirstthingwe needto defineis whatconstitutes a falsebreak? 1. Is it just a breakof a priorlowor highor doubletop or bottomby 1 to 3 ticks? 2. Is it a breakof a mathematical levelof extremeimportance, saya 50, 61.8or 38.2 by 1 to 3 ticks? 3. How far is far enoughto considera legitimatebreakand then a reversalnotto be considered a falsebreak? 4. When is a false breaka failed signalthat makesit an important reversal signal? Allthesequestions needto be answered in the contextof the currentmarket action. In consideration of the guidelines we needa planof howto actwhenwe see whatwe consider to bea falsebreakout. .A

Jlity DEF1NIl mctl,.O -' i i'-.

/

.,/

tl

/

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l-r'l -i l

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To my minda falsebreakoutcannotoccurwhilstthe priceis still strivingto geometric reacha legitimate targetas that targetwasin my opinionalways achievable. But shouldthe targethavebeenpreviously achievedand then the market makesthe "FALSEBREAK"and reversesalmost instantaneously it has exceeded the geometric targetandFAILED. Sothe questionis howdo we dealwith situations likethis as theycanoccur whenwe leastexpectthemto! Psychological Aspects

Section4: Chapter- 1

Tradingto WIN Course- Oneday at a time

[c] BryceGilmore2004

Let's staft with points #L and #22 Is it just a breakof a priorlow or highor doubletop or bottomby 1 to 3 ticks? In the strictsenseanybreachof a priorlowor highby 1 to 3 ticksthat does not proceedcouldbe seenas a false breakoutthat did not succeed. The reasonthey dont succeedis becausethere is no followthroughbuyingor sellingpoweras the marketteststhe new level.This situationshouldbe viewedas a sign!Themarketis talkingbackto youat the timeandif youare youcantakeadvantage listening of the situation. But more importantlyif a false break occursat a level that would be recognised levelof resistance by manyas an impoftantgeometric or suppoft, saya 50 levelor 38.2or evena 61.8and breaksit by 3 tickswith no follow throughyou shouldimmediately view it as a FAILEDSIGNALand cut any breakout tradeimmediately andlookto tradebackthe otherwayat the next signthe markethasreversed. If you ignorethesesignsyou couldbe missing a lot of low riskentryopportunities. Youdon'thaveto givethemmorethan you oneshotbecause theyshouldbe definitiveif theyareworkingotherwise just takea smalllossandstandaside. Therearenumerous instances whereyouwill encounter thesesituations on a dayto daybasisbutthe betteronesarewhenthe markethasbeenmovingin reasonable ranges(larger:say 8 pointsor more)priorto their occurrence. Falsebreaksin a 5 pointrangearenotwofththe botherbut if youget a false breakreversal whentheyoccuraftera 10 or 15 pointrangeor greaterthey havea lot moreriskrewardfor youto trade. YearsagowhenI wasstudyingthe GanncoursematerialGannusedto refer to the phenomena he called"lostmotion".Thatwaswherethe markettraded pricelevelthat technicians up or downslightlyaboveor belowthe geometric like us wouldtarget.It did not seemto botherhim that the marketcould breachlevelsslightlybut it took me a long time to cometo gripswith it personally. But as life goeson andyou becomemoremarketsawy you will seethat you haveto dealwith thesesituationsall the time.Theyprobably occurbecause the marketis gettinghit with a lot of orders"at market"andit driesupthe bidsor offerson the priceexactgeometric ticklevel. Theoddsof a falsebreakat an impoftantgeometric levelcouldbe as highas you 50/50but they shouldneverexceed3 ticks.If takethis possibility into accountyouareonlyriskingat maximum5-6ticksby tradingfor a reversalin trend.Whenthesetradesdo workyou canoftenget a runnerbackthe other wayfor a muchlargerreturnthanwhatyourIosses will everaddup to. Whenthe markettestsknownimportantgeometriclevelswhereit hasthe potentialto reversedirectionremembera "failed signalis the strongest signal".This meansif the breakoutfailsthe trendis goingto reversefor at periodandmoneycanbe made. leasta temporary Psychological Aspects

Section4: Chapter- 1

I I I I I I I I I I I I I I

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Tradingto WIN Course- One day at a time

[c] BryceGilmore2004

Points#3 and 4#: breakandthen a legitimate #3: Howfar of a breakis far enoughto consider a reversal notto be considered a falsebreak: In my mindonceboththe ES& the SPbreaka levelby morethan1 full point redundant levelbecomes to myfutureanalysis. thatgeometric #4: Whenis a falsebreaka failedsignalthat makesit an impoftantreversal signal?Usually whenit falsebreakson a spikevolumeandis followedby a 5minutereversal bar. backthroughthe originalbreakpointby morethan Oncethe marketreverses signal. 1 full pointon a reversal barpatternit is givingyoua reversal to confirmthe situation. will continue EachS-minute barfollowingthe reversal Friday15h August 2003: Hereis a goodexampleof what I havebeentalkingabout.Righton the 10:00am5 minutebarwith no repoftsreleased at the timethe marketbroke yesterday from by 1 point,touchedthe 50% downthroughthe triplebottom retracement on a 1:1andrebounded backthe otherway. Fridoy 15fh '4ugust2O03

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The low was 985.5 and one of my novicestudentsmanagedto SELLat 985.75probablynot beingawareof the 50 there at the time. He sayshe His mistakewas closedout at 987.5for a lossof 3.5 pointson 2 contracts. not reversing longwhenthe marketcamebackinsidethe break,if he did he wouldhavegot hislossbackandmademoney. A seasoned traderwouldhaveknownthe riskof the 50 and1:1 beforetaking thetradeandboughtwitha Stop& Reverse orderbelowthe 50 level; Psychological Aspects

Section4: Chapter- I

Tradineto WIN Course- One dav at a time

[c] Bryce Gilmore2004

1:1 with the alternate The 50o/oretracement of any rangeand a coinciding wavearethe basictoolsI havebeenteachingmy studentsto be awareof for years.I wouldneverhavesoldthat breakif I hadseenall the impliedsuppoft belowit. Whenyou considerthe situationin retrospect the buy signalwasa stronger signalthanthe choiceto sellthe breakin the first placeandalsoa buyright at the 50 wasevenwarrantedor the sellshouldonly havebeenmadeon a breakofthe 50 andnot before. In any caseI havediscussed the matterwith him on the phoneandhe has realisedthat he jumpedthe gun by only lookingat the triplebottomas his signto takethe sell.My adviceto him wasto alwaysthinkonestepahead. Askyourselfthe questionbeforetakingthe trade,"Whatwill I do nextif my tradedoesnot workout?Andthentry to workout all the thingsthat cango wrongbeforehand". As for the day I was not tradingbecauseof the POWER OUTMGEon the EasternSeaboard. Lookingbackoverthe day (afterthe close)my datafeed showsan outrageor systemclosurefor 45 minutes.Everything shouldbe backto normalby Monday. The closetodayat 990.75hasthe marketpoisedfor an assaulton the 993 (61.8high).Oneway or the otherthereis a tradingopportunityloomingas we go into nextweek. THISWEEKEND I HAVEBEENWRITING- the WEEKTO WEEKchapter whichexplains the largerdegreepictureof wherethe marketpositionappears to be.SeeS3:C2:.PL4 gg!t.86

6oing inlo the ltlondoy doy sessionthe overnighl 6lobax hod olreody brokcn through lhc 993 resistoncelevel:

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Section4: Chapter- 1

I I I I

t I I I I I I I I I I I I I I

t I I I I

Tradingto WIN Course- One day at a time

[c] BryceGiknore2004

Qcharts ESU 1401.04 9S?.9S s93. BB 98s.68 g85.AA s81.08 s77.98 g73.BA

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The marketopened993.5 retestedthe 993 by 3 ticks to staft with then signalled a HOOKbuy backthroughthe opening.Thisadvancedidnt attract the softof volumeI wouldhaveexpected andwhenit wasn'tgoinganywhere I bailedthe positionfor a scratchtrade.Thesecondtest of the 993 breakout madeit backto 992 and couldnt go downany further.On the breakup throughthe 993 the volumestaftedto rise a little and there were good indications that it wouldstayabovethe 993thistime.I didn'thangaroundto findout asthe breakouthadbeentoo sloppyfor my liking.It looked-like short you from 2 minute coveringratherthan new buyingto me. As can see the chaftthe wholedaywasa grind. The reasonI didnt worryaboutit wasthe limitedpotentialbetween995and my 999target.Untilthis marketcanbreakabove1015(if it can)the buyside nowis goingto befairlyfragile. PsychologicalAspects

29

Section4: Chapter- I

Tradineto WIN Course- One dav at a time

[c] BryceGilmore2004 1015

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Wellanother dayis overandwhatdidyoulearn? It paysto take everyday one at a time is what I think, that is the best approach. ESIGNAL

65

Section4: Chapter- 4

Tradinsto WIN Course- Onedav at a time

[c] Bryce Gilmore2004

I

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Wednesday L76 March 2OO4tSt Patrick's Day goingintotoday?I'm not exactlysurebutone yesterday Howdo youevaluate thingfor ceftainis thatthe 1100levelis the support.1113andthen1125is Thisat leastleavesus a lot of optionsandthat is all we the upperresistance. needto knowto workeffectively.

but it is In thiscourseI havegivenyouthe meansto outwitthe otherplayers, you. for excuse is no you now there to do it. I cando it so stillupto

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for usto Eachdaythe marketopensanddoeswhatever,but it leavesSIGNS takeadvantage of. Whatmoredo youwantin life?

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tomorrow?I don't. Whocareswhathappens is just a Merry-goRound.The Youwill reatiseaftera whilethat this business contesteachday is to readthe tapecorrectlyandoutwitthe otherplayersas the daygoeson. You shouldgive this somethoughtif you want to succeed;it is the best adviceI cangiveyou.

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