First and foremost, the following vision for the FX365 Institute and its students is wholly my personal view as a student and instructor.
Why the change from two trading products to one? In my opinion, the answer is simple—to more quickly than ever before bring all of our students to higher levels of success as professional Forex currency traders.
Technically, the school’s reinvigorated mission statement is to get our students into real money accounts sooner, and, up the lot ladder faster. Ideally, by the end of year one, we’d like to see our students earning at least $1,000 a month in their Forex trading accounts and be on their way to $100 PIPs and beyond in year two.
So, what can our students expect as they are taught the Market Maker course employing the SMP trading software?
Certainly, we WealthSmart traders will, no doubt at first, go through a period of adjustment and uncomfortableness. It’s sort of like putting on a new high collar dress shirt and shiny new shoes. Initially, the collar might cause a little neck irritation and the shoes might feel a bit stiff to the feet; but, in time, these sartorial changes can ‘make you look like a million dollars.’ With the changeover to SMP, I believe it will not ‘make you look like a million dollars’ … but … perhaps … ‘make you a million dollars.’
What else? Certainly SMP offers more trading choices. As a major advocate of WealthSmart’s moment in momentum trading, I want to assure everyone that you can do precision moment in momentum trading with SMP, and, if you choose, you can extend your trades because SMP helps you see the Market Maker’s price targets and you may decide to go along for the ride. Taking SMP trading one step further, you can even decide to go beyond intra-day trading and do inter-day swing trading if that suits you. More choices, that’s a good thing.
Finally, as I see it, two really big game changers. First, with the SMP software, we now have a map with which to see each Market Maker business cycle play out. Many retail traders, by placing entry orders, provide the Market Makers with a map of where their entries, stops and profit-limits are located. We now get to turn the table on the Market Makers and to some degree get to see their entries, stops and profit-limits. This is a game changer.
The second game changer, as I see it, gives us the ability to speed up our learning curve. How? WealthSmart did not allow hindsight or historical studies of the charts because its indicators are signals that change size, color, shape and location. SMP does allow hindsight, that is, historical studies of the charts because it uses locations to provide information on Market Maker actions. Locations on a map don’t change.
I say … WOW! If we choose, we can do some homework called ‘back testing (looking left).’ We can invoke ‘hindsight is 20/20’ and look back at prior Market Maker business cycles of accumulation, manipulation and profit release using SMP’s location tools (boxes, dots, average price, best price, liquidity lines, grid lines). We can learn to read Market Maker maps that will help us find the gold.
So, let’s see … more choices in our trading, a map to help us navigate the Market Maker landscape, and the ability to personally speed up our learning process. The ‘long and short of it’ is clear—the school’s getting better at what we teach so that our students get better at trading. This is a win-win outcome.
Lets begin with the definition of heuristics:
Heu·ris·tic: Is any approach to problem solving, learning, or discovery that employs a practical methodology not guaranteed to be optimal or perfect, but sufficient for the immediate goals.
As a Trader, you are a professional problem solver. Defining Market direction is your never ending problem, and unfortunately, if you are wrong you don’t usually make less profit; you lose entirely.
This blog is the first in a series of identifying heuristics that Traders (really everyone for that matter) depend on to make profitable decisions. Many Trader’s lifelong goals are to create trading systems aimed at cutting their emotional ties to the Market. Most of the time these systems fail, but that is an entirely different topic that we have covered in the past (The Trader’s Prison). For the rest of us learning to read what story the Market is telling, heuristics play a large role in our processes to define a trading opportunity. This is a well researched subject, and I would recommend anyone interested in learning all you can about it. Many of these topics can be found in Daniel Kahneman’s Thinking, Fast and Slow.
Confirmation Bias: Also called myside bias, is the tendency to search for, interpret, or recall information in a way that confirms one’s beliefs or hypotheses, in order to make quicker decisions based on relevant information.
This bias is all too common in trading. A good example of this bias taking place is when you first sit at your computer and think to yourself “look at that, the market is running short/long. I think this is a great time to go in the opposite direction. There’s no way it’ll keep going.” A brief scan solidifies your stance on Market direction and you enter a trade.
Only after you enter and begin full concentration on exactly what trade you just made does it dawn on you how terrible your analysis really was. This bias stems from allowing intuition to take the reigns on your mind, and leaving your initial notion unchecked, foregoing a thorough analysis.
To make this wrong into a right, I cannot stress the importance of an analysis “ritual”. Much like many of you drink your coffee in the morning, it helps you get into the correct mindset to kick things off. Asking yourself important questions pertaining to the movement such as, “why is price moving this direction?”, “has a stop-out taken place?”, or “what does this say about retail beliefs?” This leads us to our next heuristic…
As a side note: FX365I strongly discourages its Traders from jumping on the charts and placing a trade immediately without any analysis, but everyone slips from time to time.
Substitution: This heuristic is meant to more efficiently answer complex questions by replacing the question, usually without our knowing, with an easier question. An example could be you asking yourself “what is the secret of happiness?”, when many people will often instead answer, “what is my current mood?”, without realizing they’ve done it, or the effects that could have on the answer. This heuristic is necessary, as it helps with intuitive thinking, but can be detrimental to a Trader when left unchecked.
An example of substitution in Trading is watching strong movement on the charts and thinking to yourself, “how could I take advantage of this setup?” When instead we ask ourselves, “how did I feel last time I missed the Trade of the day?” These two questions lead to very different answers, one logical, while the other is emotion driven and feels good because of how intuitively it was answered. As a Trader this heuristic is at full force if you have already taken a negative trade.
To work around the substitution effect a Trader has got engage hard mental work on answering the exact question they are asking themselves. Intuition feels good, and there are certainly moments it can be helpful, but letting it run free before you have a real plan is account suicide. Emotion in Trading is widely regarded as taboo, but is not inherently bad to have. The entire reason you started Trading is because of the emotions you experienced regarding the “Pro-Trader Dream”. Accepting that we all have these flaws in thinking (which are actually benefits in countless other contexts) and working at keeping a reign on them is much more realistic than completely eliminating them. Learning how our psyche works in a bizzaro world like the Forex is hard work, but obviously worth it. That’s it for now! Be on the lookout for next weeks piece on Heuristics in Trading. And be sure to subscribe to keep up to date.
Director of Smart Money Course
So you just watched the Market run several hundred pips. There is a very real chance you hit your stop in the moments leading up to this move taking place. Even if you were unable to get the ideal entry into this trade, maybe you were able to get a few trades out of the bottom/top before the market died back down.
If that were the case, you had just stumbled into the latter parts of the Profit Release stage, or the payout cycle. This phase replicates business practices of top casinos throughout the world.
The final installment in this series will focus on the Profit Release stage of the Market Maker’s three stage process of Manipulation in the Markets. “Point of Origination graphic from Smart Money Course Virtual Classroom.” Anyone that has heard of trading has likely also heard that it is somewhat similar to gambling, or like going to a Casino. While this is true, it may not be in the way that many would assume. There are two pieces to any Casino; The patrons, and those who actually run the Casino. It would be incredibly foolish to think the massive Casinos in Las Vegas operate on mere chance of whether or not patrons of their business could clean them out any given night. Any thinking person realizes that while some do win at the tables, the majority of the time, the House comes out on top. This is the exact structure in which the Forex Market is run as well.
Similar to when someone “hits it big” in a Casino, the Profit Release phase functions much the same for Market Makers. This phase is generally easy to see, easy to trade, and most importantly, very seldom happens. This is when the Retail Trader is allowed to make a profit in the Market, keeping them coming back. Identifying a Profit Release, even in hindsight, can be beneficial to moving forward in many ways. While Content Traders shun any pattern like signals, there is one visual that accurately depicts a Profit Release. In the event price completely breaks clear of a price range (a range price has stayed in for several months, usually several hundred PIPs wide) and then begins a new Accumulation, you can label the push to this new price as the Profit Release.
Because of what a Profit Release is; when Retail Traders are allowed to make a profit, the best course of action is to look for a pullback and get in! This is supposed to be the easiest trade, by design, meaning do not over-think these phases too hard. Like any other trade the kill switch for this would be taking your profit upon the market going back into an accumulation phase.
If the market is in Accumulation about 75% of the time, is being manipulated 20%, then that leaves about 5% of time left for a Profit Release to take place. While this phase is rarely taking place, that is no reason not to study it. If you are able to make decent forecasts of profit targets, these can be some of your most profitable days.
As a closing thought; learn to read accumulation and manipulation tactics, and you will nearly always find the clarity needed to make good judgements in the Market, leading right into the Profit Release. Remember, this is the Market Maker’s Business; not ours.
Thank you for reading the “Identifying Market Manipulation” Series!
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Director of Smart Money Course
To view the Smart Money Course click HERE]
When Investment Banks and Financial Institutions (I.E. Market Makers) hold price in a tightly confined price range, it is the beginning stages of Accumulation. This is the stage that they collect orders to be used later for manipulation. As the Retail Trader begins placing trades (and stop orders) in this seemingly unimportant area, the Market Makers to put it simply, are doing the same. These areas are essentially where Market Makers are layering their own trades. They are looking for, like all Retail Traders, the best entry they can get. The only difference is they require vast amounts of liquidity to place their trades.“What does Accumulation look like?”
Accumulation is generally preceded by a push, followed by setting a tight box shaped area of price action. It can build straight to the right, or be slightly slanted long or short. What’s important is that it is a confined area of price. An Accumulation is not affected by time, they last as long as the Market Maker sees fit.
“What do I do once I’ve Identified it?”
The easiest way to take advantage of identifying an Accumulation is by drawing a line straight through the middle of it. This line represents the Average Price of buyers and sellers in that zone. Since Market Makers are also getting into their own trades in these areas this is an important price to track. If you have identified it correctly, you will be amazed at how often there is a clear rotation off of these prices. Market Makers will often bring price back to the accumulation at some point to knock out Retail Traders. They will take it far enough for stop taking, but not so far as taking themselves too far out of the money. Following a clean rotation off an Average Price line the Market will often run several hundred pips in the opposite direction. The other benefit of identifying Accumulation is knowing that some sort of Manipulation is eminent. It is from the Accumulation area that the Market Makers will begin to manipulate the Market usually by taking price through prominent highs/lows near the accumulation against the overall bias. This is the time that is usually best to place a trade. After Retail Traders have already been taken out. Thanks for tuning in! Next week will finish off the 3 Part series of Identifying Market Manipulation! To stay up to date on any cutting edge Market Manipulation tactics be sure to subscribe.
-Shane Guth, Director of Smart Money Course
To view the Smart Money Course please click HERE
Here at the Institute we encounter countless people with Trading backgrounds. One of the largest hurdles most of them have trouble overcoming is their willingness to accept how much manipulation there really is in the Forex Market.
Our methodology focuses on shorter term trades (Usually less than a day in any given trade), which is where you see the most prominent manipulation of price; especially during high news events. By reading the manipulation, thereby using it to our advantage is how we are able to get our consistency from our trading. After all, who doesn’t want to be in the same trade as Goldman-Sachs’ Forex Division?
The following article is what we teach to our new students trying to get their arms around what really takes place in the Manipulation cycles.“Just how much is it really manipulated?”
If you are looking at a chart smaller than a 1 week time frame, you are watching the Accumulation, Manipulation, Profit Release process in action. Investment Banks and Financial Institutions trade lager lot sizes than any Retail Trader could ever dream of, and those trades require a massive amount of liquidity to cover. Hence, leading into any major Market swings (which you know they are taking advantage of) they need to set the stage beforehand by getting the Retail Trader to either buy in the wrong direction or set their stop at a convenient level they have set up for the pending stop-out.
Have you ever had a trade going where hit your stop at the final push short/long only to turn at that very point and massively push leaving you behind with a big negative? That last push up/down is actually why the Market moved your foreseen direction after you got stopped out. Countless other Traders had their stops there as well, which after gathering the liquidity that was there, causes the Market to turn from that very point. From your pocket straight into the Market Makers.”Reading the manipulation/stop-out is key to the best entries and confidence to catch swings.” Market Makers know where the liquidity in the Market is. When you place a stop order you are sending your battle plan straight to those that would use it against you. This is no reason not to use a stop-loss, but rather a reason to learn how to read manipulation. Even if you were to not place an actual stop order in the trade, your “comfort level” to ride it negative would still be at roughly the same price level.
Luckily for us Retail Traders it takes a simple process to run the complex Forex; one that can be learned.
Stay tuned for the part 2, which will cover more of the technical aspects of the Manipulation process.
Also be on the lookout for our Primary Course. A FREE course designed to teach the basics of the Market Maker’s Business Model.
Director of the FX365I Smart Money Course