This week we are going to be focusing on the Market Maker Manipulation and content behind the scenes that played out on November 18th during the release of the FED’s Minutes, which had quite an effect on the EUR/USD. The entire move, from it’s initial setup to the profit release to the short side, was truly a spectacle to behold.
Should you have any issue understanding some of the terminology in this post, please refer HERE.
As you can see from the image above, all of the normal components of the Market Maker Business Model were present.
This is all well and good in hindsight but what we are going to be focusing on is how to read the signs leading up to, and taking advantage of the entry.
We will start small with some of the clues on the 5 minute chart, and work out to the larger time frames. As you can see in the image above, some pretty standard things played out. When news was released price whipped down to a past 8HR Average Price. This was the exact entry to test, that ended up being worth quite a hefty sum of pips. Taking that in the midst of High news snapping around can be a bit unrealistic though. There was also some play around a past Daily Average Price line, but that becomes much more pronounced on some of the higher time frames.
After taking out a past accumulation Dot (which was the best entry into the short earlier in the morning), price stalled out and started pulling back.
The real entry into this trade took place around 25 minutes post news when price completed it’s 32 pip pullback. For those unaware, the Market Maker’s Business model functions off of a 30 & 45 Pip system. Landing this entry had a risk of around 4 to 6 Pips, with a massive upside.
Of course, this is all on the 5 minute chart. Let’s take a look at how some higher time frames might have lent themselves to a long move playing out.The 15 minute chart is where things really got exciting. As stated on the picture, accumulation in the form of a 15 minute Dot took place on a past Daily Average Price line (represented by the tan line). These past levels have shown time and time again that they are some of the prices of choice for Market Maker’s to place trades of their own.
When the Market Maker’s accumulate orders at a price level, they allow the retail trader to also get in at that price. It is how they generate liquidity for their own massive trades. The retail trader’s stop levels was represented by the yellow liquidity line left near the low.
When news came out, it broke right through this level (stopping out any retail trader’s in a long position). After this stop out had taken place, price rose back up, and ended up being a rotation off of that original Market Maker entry point. This effectively took out retail traders, while protecting Market Maker interest in the pending long move.
The 1 hour chart was actually surprisingly similar to it’s 15 minute counter part. There was an accumulation Dot dead on that past Daily Average Price line, followed by a stop out of retail orders. Following the stop out, price rotated back up through the Dot, showing Market Maker’s protecting their own interests in a long position.
At this point there was a great deal of information point to the probability of a long trade, with virtually no risk. As a student of the FX365 Institute, this is an ideal setup.
With the current layout of Smart Money Profile Software, we do not track Accumulation Dots on the 4 Hour chart, however it is plain to see what took place. It was further rotation off of that past daily average price line. At this point, a trade to the long side is inevitable.
Once the long trade played out (which was worth about 120+ pips), I’m sure you can see that the market ended up backing off and going into an even larger run to the short side. Let’s take a look at that to see if there were any signs to get into this trade.
When I’m explaining the Market Maker’s Business Model to a new student, I like to use the gear analogy: The 5 minute gear spins the 15, which in turn spins the hour, that then spins the 4 hour, so on and so forth.
What was an Accumulation, Manipulation & Profit Release on its own ended up being a manipulation to the long side. This Manipulation was intended to knock out a serious number of retail traders from the on going short of the EUR/USD.
As you can see in the picture above, price traveled up and ended up bouncing off of a daily Average Price line. These price lines represent Market Maker Entries into their own trades. A Bounce off of one (especially on the daily chart) is a serious sign of a coming profit release in the opposite direction.
And since it has been mentioned so many times, here is the Daily Average Price line brought up throughout this post. It was formed May 15th, 2015, and all these months later has proven to be an invaluable price level to keep track of.
If you have ever been in a trade, only to get stopped out moments before the move takes off, I would encourage you to look into the Market Maker’s Business Model. If you ever get the feeling Forex is rigged against you, it’s because it is. Luckily for us though, the Market Maker’s system plays out time and time again on every time frame in every currency pair. Learning how to read the 3 stages of the Market allows you to get in when they do, and take your profit when they do. While it can still be hard to master, it certainly levels the playing field in Forex Markets.
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Director of Education
In time, the four hour work week can be a reality for professional Forex currency traders, especially Forex365 Institute graduates.
Yes, the Forex365 Institute’s Market Maker Course supports a PIP business owner’s goal of capturing 50+ PIPs a week—a number that will allow strong and steady trading account growth and the rise of your PIP value to $100 and beyond.
Imagine, whether you’re an employee or a business owner, reducing your weekly work hours from forty to sixty or more, down to fifteen (as a Forex365 Institute student), and then down to four (as a seasoned, veteran professional Forex currency trading Forex365 Institute graduate).
The four hour work week concept is simple—exclusively trade high news where we normally expect the most price action volatility and movement. With smart (emotionally intelligent), high probability trades using the full complement of Smart Money Profile tools (the Market Maker Course software package), capturing 50+ PIPs a week is exceedingly doable for all disciplined, responsible and determined (never day die—failure is not an option) students.
In the image above, my five-minute chart shows an example of high news trading. In this case, it was on Wednesday, August 19, 2015 at 11:00 am PST—Federal Reserve FOMC meeting/minutes release.
I did five trades over the course of about two and a half hours. The first three trades were shorts and the last two trades were long. A quick summary of the five trades follows:
The trading consisted of five trades for a total of 113 PIPs in a two and a half hour time frame. To me, this is the ultimate in PIP business ownership as a professional Forex currency trader. I still have a ways to go to do this consistently, but I’m on my way. The good news is that this is available to all my fellow instructors and students at the Forex365 Institute.
In my last post about my prolonged summer slump, I discussed the importance of finding the right balance between trading too large and too small of a lot size. In reality, Forex trading is very much like walking a tightrope 500 feet in the air with winds swirling in all directions. Choosing the right lot size is like a tightrope walker choosing a pair of shoes that fit properly. Sure, it’s important, but there’s a heck of lot more work to be done. Here are 12 competing interests that Forex traders have to balance against each other at all times:
If you have been trading for even a month or two, I’m willing to bet you have run into most, if not all of these dilemmas we face on a daily basis. Heck, we could easily add a ton more examples to the table. We could spend hours discussing the nuances involved discussing the different issues we must balance in our trading. For now, I think it is important to remember that becoming a successful trader is not a matter of pulling a huge trade or having a great week where you’re up 100+ pips. Yes, of course you have to be able to read the market and pull positive trades. However, a truly successful trader is someone who repeatedly and consistently makes great decisions day in and day out.
When you consider the dozens of subtle twists and turns that we must successfully navigate during every session, it is no wonder that most people fall off the tightrope and never get back up. However, we have some tremendous advantages over the general public. Unlike 99% of retail traders: we are taught to understand and follow the market makers’ business model… we have the virtual classroom at our fingertips… we receive incredible support from the Fx365i instructors… we are welcomed and encouraged by the community development team… and of course we have great support from our fellow traders at the institute. As someone who has been struggling mightily as of late, I am taking a deep breath and focusing on making great decisions. As long as I’m still up here on this tightrope, I’m going to keep working on becoming more nimble in my decision making and stabilizing my balance.
I absolutely love hearing from my fellow traders. Please reach out to me at email@example.com if there’s ever anything you’d like to discuss.
The SMP (Market Maker course) trading program allows us to use 20-20 hindsight. That is, the charts don’t change over time as the WealthSmart (Moment in Momentum course) charts did. I say, “wow!”, because this is big deal; this really does allow us to use 20-20 hindsight to speed up our learning and earning curves. Let’s do it guided by the 20-20 words, below:
Yes, there will be some after trading session work to do. Spend a few hours a week (weekday evenings or on the weekend) reviewing the charts. You’ll see setups and entries that you missed during the live trading sessions.
You are responsible for the pace at which your personal learning curve moves ahead. I suggest that you not only review charts by yourself, but show and share interesting charts (setups and entries) with your fellow students and instructors. With the Smart Money Profile program you’re looking at and interpreting market maker content maps (paths to the PIPs). The more the better to speed up your learning curve.
Oh, by the way, don’t limit yourself to today’s charts and then tomorrow’s ‘today’s charts.’ Look left—scroll your charts to the left to last week’s and last month’s charts. It’s all good—more market maker content, more setups and entries to identify, more maps to practice reading.
This process of looking left, using history to advance your learning curve pace is known as back testing. There’s a wealth of information back there thanks to unchanging charts (20-20 hindsight).
Now, to best look left and back test I suggest that you make the experience as ‘realtime realistic’ as possible. You do this by emulating video replay of the price action … 5-minute candle by 5-minute candle and do the same with each 15-minute and 1-hour candle.
How? Put your ‘current candle’ on the right edge (so that you cannot see the future) of your chart and use the right and left arrows on your keyboard to move into the future or back, again, to replay. Use your ‘stop action’ to explain what you see developing on the charts. Talk about speeding up your learning curve, this is it.
Next, let’s look at the earning curve part of all this. It seems to me that we’re looking at simple and straight forward cause and effect happening here. Speeding up your learning curve means seeing more trade setups and entries sooner rather than later in your student experience. What follows directly will be distinguishing high quality setups and entries from those that are not so. You’ll get better, sooner, at reading and interpreting market maker content maps. Next, more winning trades and less losing trades—this is the cause. The effect—quicker to the lot ladder and faster up the lot ladder.
Yes, the lot ladder—the business spreadsheet that explicitly shows why we only need to capture a modest number (30-40-50 PIPs) of PIPs per week. Let the lot ladder, by way of reinvesting your profits, do the heavy lifting. This is the power of account compounding (similar to compounding interest that Albert Einstein called the eighth wonder of the world). The numbers grow slowly at first, but then take off.
The direct result is, in not a very long time, dramatic account growth. Again, straight forward cause and effect.
The consequence to this quicker and faster move up the lot ladder by way of your account balance growth is your all important PIP value growth. This is the ‘biggy’ in your career as a professional Forex currency trader. I’ll say it again and I’ll never tire of saying this, it’s not the quantity of PIPs captured, it’s the quality of PIPs captured by way of high probability winning trades as the result of accurate market maker content map reading (identifying high probability setups and entries).
In time (which you can speed up) you’ll arrive at the number one destination found on all of the market maker maps—the $100 and bigger PIP value.
Do as I’ve suggested, above, and I expect all of our earning curves will eventually go straight providing to each of us the earning power to live the good life.
The value of patience and discipline in Forex trading cannot be overstated. In order to be a successful trader, you must possess these two traits with unwavering consistency. As I have gone through various phases of learning, failure, and success over the past 17 months, I have had moments and weeks where I have been extremely patient and disciplined. However, maintaining that unwavering consistency has been one of the biggest challenges in my trading.
Lately, for a little over a month now, I have finally started to exhibit some reasonable level of self control. I realize I have not yet absolutely mastered these essential survival skills. Even during the past month, I experienced back to back days where I allowed myself to over-trade (the only two truly bad trading days I have experienced since mid-May). As such, I am constantly seeking new thoughts and inspirations for how and why to maintain steadfast patience and discipline. I believe I am starting to turn the corner. I find that I am no longer easy prey for the market. I now lie in wait and take quick small bites out of the market.
So, what has been working? What is helping me maintain my patience and discipline? I go through a routine before each trading session. The first thing I do is look at the lot ladder. I must warn you, without the right mindset, this can be a double-edged sword. The lot ladder allows you enter the number of pips you expect to average per day (along with some other variables) and then see how much money you will be making each week if you climb the lot ladder one rung at a time. The reason this is so dangerous is that you can make the mistake of raising your daily pip goal so that you can make huge money so much faster. This is completely counter-productive as it leads to over-trading, not covering profits, etc.
However, I have set my daily pip goal at the Fx365 Institute’s long-time suggestion of just 7 pips a day. Once you have been trading on the Smart Money Profile platform for some time, you know this is truly a modest goal. Before any trading session, I look at where this highly obtainable goal can take me. Here is a screen shot of what one part of my lot ladder looks like:
I take a few moments to really focus on the truth that averaging just 7 pips day turns a $1,000 account into a $20,000 a month income in a ridiculously short time frame. I mean, this is incredibly powerful stuff. It helps me cover smaller trades rather than trying to swing for the fences. I still need to get better at not caring if the trade runs another 30, 50, 100+ pips. It’s tough knowing that I could have made my whole week on one trade, or hearing that someone else pulled a 40 when I had better entry and only pulled a 10 or 20. However, I come back and look at the lot ladder again and realize I only need 2-4 of my modest winners a week. I have to always remember, trading is a long-term race. By taking those smaller positives, I avoid taking negatives that make it harder to reach my goal. Then, at the end of the week when I have made my goal and am moving up the lot ladder again, I am one week closer to the financial freedom that $20,000 a month brings. Isn’t that the whole idea?
My other monumental struggle has been to avoid over-trading after taking a negative. Now, although I am making significant progress towards trading at indifference, there are still times when I take a negative trade and literally feel the stress prickling through my body (what a horrible feeling). When this happens, I absolutely must exhibit tremendous discipline and STOP TRADING until I have calmed down. If I look at where I want to be by the end of 2015, I ABSOLUTELY CANNOT ALLOW MYSELF TO DAMAGE MY ACCOUNT.
At those crucial moments, I lean on something Fx365i’s Head Trader Wade Guth once told me. He asked if I was planning to trade tomorrow. I said yes. He asked if I was planning to trade next week. I said yes. Next month, next year, etc? Yes, yes, and yes. So he asked me, “Why on earth would you get worked up about one trade or one negative day?” I also reflect on Shane Guth recently telling me that the biggest thing he NEVER wants to do is let one bad day cause him to lose his buying power. Live to fight another day!
Over this past month, I have also started telling my wife how my trading went each and every day. She has believed in me and allowed me to stay on this journey despite several months without positive results. Believe me, it is not easy to tell her when I am down for the day. However, when I have taken a couple of wrong trades and walked away with relatively small losses, I can proudly tell her I kept my discipline and didn’t throw money out the window like an idiot. Knowing I will have to report to my wife on a daily basis helps me maintain steadfast discipline and patience in my trading.
One last thing I think about is basically a lesson from Rhonda Byrne’s famous book, The Secret.” The Secret teaches that if we want something, we have to hold it in our mind’s eye, believe we have already obtained it, and be fully grateful for having received it from the universe. So yes, I am thankful for my huge trading account. More importantly, I am thankful for being a highly successful trader with tremendous patience and discipline. I know I did not get to this point by getting emotional and overreacting at every unexpected twist and turn in the market. I am thankful for the self control and confidence that made me the trader I am today.
I realize the lot ladder may not help everyone. Of course everybody is not married or willing to discuss their daily results with their significant other. I also know that not everyone has the same view of The Secret as I do. That is not the point. What is important is that I have found ways (and will continue to seek and find new ways) to exhibit patience and discipline in my trading. If you are struggling with patience and/or discipline in your trading, maybe you can use one of my tools. Some of you will have to come up with something totally new that works for you. The key is to find something that truly resonates with you – something powerful enough to give you the internal fortitude to do the right thing in the face of strong negative emotion. Once you find ways to be patient and disciplined, you will be much more likely to survive in the unforgiving Forex jungle.
Two quick notes:
1) One other thing that has helped is writing this blog. Thank you so much to everyone who reads it and especially to those of you who reach out to discuss your own trading experiences with me. Thank you, thank you, thank you!
2) In regards to the 7 pips, you may be saying, “Well what about the commission?” On my personal spreadsheet, I subtract 1.5 pips from each trade to come up with what I call “net pips.” This number will vary depending on the pair you trade and whether you are in a micro account. I can help you figure out the exact number if you need help with this.
As always, please feel free to reach out to me at firstname.lastname@example.org. I LOVE hearing from fellow traders!
Smart Money Profile Trader