Whatcausesaleveltobecomemagnetized?

Technicaltradersreacttoareasonthechartbasedonvariousanalyticalmethodsemployed.
Theyutilizemovingaverages,breakouts,chartpatterns,specificprices,valueareasandother
methods.Whentheseareasconvergetheycausemarketparticipantstocommitcapital.Often
priceactionbecomesvolatileandcanpullawayfromanarealikethisveryquickly.
Whenthishappensthereisoftenanoverwhelmingamountofunfinishedbusiness,or
unrealizedprofitsandlosseswhichhaveoriginatedatsuchlevels.Naturallypriceisattractedto
theselevelsofliquiditywhenthereisnootherlargertimeframeinduceddirection.

Whatarepricemagnets?
Thepricemagnetsystemwasdevisedtoidentifyareasofunfinishedbusiness.Itisdepictedas
ahorizontalraydrawnonthechart.Oncepricepiercesthelevel,thehorizontalrayisterminated
indicatingtheclearingoutofthatlevel.

1.1Intheabovechartweidentify2pricemagnetlevelswhichareshownbythehorizontalrays.
Pricehasreactedtothepriorpeakinprice.Tradersmaybeanticipatingadoubletoprejection
orabreakouttotheupside.Thiscreatesaclusterofordersaroundthislevel.Asyoucansee
priceoriginallybreaksout,pullsbacktoattempttotagthefirstpricemagnet,findssupportand
takesoffhigherleavingbehind2prints.Thenextdaythetrendstallsoutandpricetakesoutthe
twopricemagnetlevels.

MarketDevelopment
Themarketgenerallydoestwothings:developsanddistributes.Participantswilltradeanarea
(develop)untilitisfullydeveloped.Oncetherangehasbeendevelopedandallpricelevels
havebeentested,itwillseeknewvalue(distribute).Aspricedevelopesanddistributes,the
marketgoesup,down,orsideways.Inaddition,therearetypicalrangesforwhichamarketwill
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normallydevelopordistribute.TheobservantTraderwilldogoodtoknowwhenthemaximum
distributionordevelopmentrangeshaveoccurredforthemarketbeingtraded.Atoolwhichcan
helpistheDailyATR,andtheVolumeProfileIndicator.Bothwillshowwhenpricehasreached
themaximumrangesfortheday(distribution),orwillshowwhenpriceisunusually
sideways(developing).

Whenthemarketisdevelopingwewanttostayout.Themarkethasfoundavaluearea,orpoint
ofcontrolforwhichtotradearound.Thinkofitasablackhole,pricecannotescapeunlessa
forcecomesintothemarketstrongenoughtopushitout.Themarketwillrotateinthissideways
rangeforawhile.

Oncepricehasleftthedevelopmentareaitwillseeknewvalueandiscleartomakedirectional
moves.Thisiswherewepulloutourpricemagnets.

1.1Pricedevelopsinasidewayschannelpriortobreakingouttothedownsidetotargetprice
magnetsbelow.

Howtotradethepricemagnets
Tobestutilizetheindicatorwewaitforpricetofirstbecomeoverextendedinonedirection.It
mayhavequicklymovedupintoanewarea,orperhapsslowsdriftedandthenconsolidatedin
thisnewarea.Wearenotlookingatoscillatorsorrelativestrengthtoidentifythisoverextension.
Wearelookingforrangeextensionsnearingthetypicaldailybarsrange,ortheouterlimitsofthe
volume/marketprofile.Afterpriceactionbeginstoshowsignsofweaknesswelookforachange
intrend.Afterthischangeintrendisconfirmedbyaprobeoutsidethecurrentrangewelookto
enterinthedirectionofthepricemagnet.


FuturesTradeRoom.comPriceMagnetTradingGuide

1.2Oncetheuptrendisbrokenpricedevelopsbelowandpricebreaksthelowsoftheswing
pivot,thedowntrendisconfirmedandwetradeintothelowerpricemagnetforagainof18
points.

1.3Aselllimitorderisleftbelowtheconsolidationareathatappearstobeoverextended.Price
breaksthelow,triggersthesellorderandtargetsthepricemagnetslower.

Buying/Sellingwithlimitordersfromthepricemagnets
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Itispossibletoutilizethepricemagnetsasbuyingzonesinthecaseofanoveralluptrend.
Oftentimespricewillwickdownintothelowerpricemagnettothetickbeforecontinuinghigher.
Alimitordertobuywithabuiltinordermanagementsystemmaybeleftatickabovethebullish
magnetforittobetriggered.

Trends
Inthecaseofastronguptrend,priceoftenpartiallyretracestowardsthepricemagnetbutwill
fallshortandcontinueinthedirectionofthetrend.Thisisastrongsignofsupportandsuch
levelscanbeusedtohidestops,magnetsontheothersideofpriceshouldthenbetargeted.

1.4Pricemagnetsprintinauptrend,priceretracesandconsolidatesalongtheuppermagnet
beforebreakoutouthigher.

Trailingbehindmagnetsinastrongtrend
Inastronguptrendpricemagnettendtoactasaccumulationlevels.Trailingbehindthe
magnetsisaviablestrategyforbothlockinginprofitswhileallowingenoughroomforthetrend
tocontinue.


FuturesTradeRoom.comPriceMagnetTradingGuide

1.5Trailingbehindpricemagnets.(See1.6forcompletedtrade)

1.6Thischartisthecompleted1.5chart,PriceMagnetsusedasatrailingstopaidduringa
dailybreakouttradelasting7days,resultingin662ticks.

MoreonPriceMagnets
PriceMagnetsworkbecausetheyautomaticallyshowuswheretradersareintroubleintheir
positions.WeknownotonlythatthereisanimbalanceintheBidxAsk,butthereisabove
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averageintentioninmovingpriceoutoftheareabybothsides.Byutilizingacombinationof
complexmethodsderivedfromyearsofvolumeprofileandorderflowtrading,wewereableto
combinethetechnologytocreatethePriceMagnettradingsystem.

TimeFrames
ThePriceMagnetsperformontimeframesbetween1060minutes.Thisisbecausethesystem
readsmultipletimeframesforadditionalconfirmationandonlyprintsthemostrelevantprints.
OccasionallylevelsmaybefoundonDailychartsaswell,theselevelsarealsotradeableunder
thesamesetofrules.

Practicemakesperfect
Thebestpracticeatradercanmakeistomanuallybacktestbygoingbackafewmonthsand
watchinghownewpricemagnetprintsaremade,thenmakingpredictionsonwhereandwhen
thebesttimeistogetin.Spendthetimetomasterthis,dontbelikethemajorityoftradersthat
dabble,committoexcellenceanddedicatetimeeverynighttolearningthepatterns.Youwill
starttonoticethedifferencebetweenpricecontinuinghigher/lowerorrevertingtotakeouta
pricemagnet.

Ialsorecommendwatchingthechartsonmarketreplaysothatyoucanfastforwardthemarket
ataconstantrateofspeed.Findaspeedthatyouarecomfortablewith.Theideaisthatyouwill
learntorecognizethesepatternsatamuchfasterratewhichwilltranslateintorealtimepattern
recognitionduringlivetrading.Youwillinstantlyrecognizeasetupbecauseitwillpopoutfrom
thechart.Ifeverythinglooksgoodandyourecognizeasetupprimedforreversionbacktothe
pricemagnetthentakethetradeinsim.

Dontgetdiscouragedifnoteverytradeisawinner.Keepyourlossessmall,butnotsosmall
thatyouaretakenoutbythemarketsregularmovements.Allowsomewiggleroomsothatyou
dontgetstoppedoutofwhatshouldofbeenagoodtrade.

Timingisveryimportantwhenitcomestousingarelativelysmallstop.Ideallyyouwanttohold
yourpositionuntilpricepassesthroughthepricemagnets.Thiscouldtakeafewhours.Ifyou
havegottengoodatreadingdirectionandtimingfromthebacktestingthisisyouredge.
Combineitwithpropermoneymanagementandgivetimeforthenumberstoworkthemselves
out.

Dontbediscouragedifyoulose$500inonedaybecauseyourstopwastootight,orthetrades
didnotworkout,orifyougotouttooearly.Ifyougobackandanalyzeyourtradesandcontinue
applyingthemethodovertimeyoushouldstartseeingpositiveresults.Inmyexperienceit
typicallytakes12weekstogetenoughtradesintomakeameasurabledifferencesodon'tput
toomuchimportanceonanyonesingletrade.

Keepinmindthatmarketconditionscantakeafewdaystochangeandthatincertain
conditionsmeanyouwon'tperformaswellasothers.Keepyourlossessmall,takeonlythe
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setupsyourecognizeandfocusonexecutingyoursetupsthesamewayeachtimetoperfect
yourstrategy.
Intimethelargerwinnerswillbeginmakingbackthelossesinjustafewtradesandifyoucatch
awinningstreakoralargetrendyouwillbequicklyelevatedtoanalltimehighinyourPnL.

Duringyourpracticesimexperienceyoushouldbetradingsimilartohowyouwouldwhen
tradinglive.Besuretotradetheproperamountofcontractsaswell.Forsmalleraccounts
exploreminicontractswhichmaytradealowas$1pertickandmaybemoresuitablefor
smalleraccountsizes.Beingabletositthroughadrawdownisimportantinanytradingsystem.
Knowwhatdrawdownlevelyouarecomfortablewithandadjustasneeded.

Afteryouhavetradedthesystemeverydayforamonthyoushouldhaveenoughtradesto
analyzeforusefuldata.

Ifyourhitrateisunder50%thenyourwinnersshouldbemuchlargerthanyourlosers.
Ifyourhitrateisover50%thenyourwinnerscanbecloserinsizetoyourlosers.

Besuretocalculatecommissionsandfees.Keeptrackofyourrecordsinaseparatefolder,I
recommenddoingfor3monthssoyouhaveenoughdatatoanalyzeforclues.Iwillbehappyto
reviewyourpracticeresultseachmonth.

Practiceisimportantbecauseyouneedtofeelthetrade.Youmustfeelcomfortableputtingona
potentiallosingtradethatcouldverywellturnintoawinner.Youmustgetanexperientialfirst
handexperienceofthestrategyyouareexecutingforasubstantialperiodoftimesoyouhave
theconfidencetotradeitlivewhenyouareready.

Itsthosethathavebeliefinwhattheyaredoingthatsucceed.Theothersgiveupassoonas
thingsstarttolooklikeachallenge.Doyourbacktestingandexecutesimtradesinforward
testingfor3months.Keepnotesandrecordssoyoucantweakasyougoalong.


FuturesTradeRoom.comPriceMagnetTradingGuide

Samples

1.7SellingCrudeOilandusingmagnetsasmaindirection


FuturesTradeRoom.comPriceMagnetTradingGuide

1.8CrudeOilclearingoutmagnetsverydecisively.

1.9Goldformingabullflagwithpricemagnetsabove


FuturesTradeRoom.comPriceMagnetTradingGuide

2.1Goldcompletingthebullflagformation,takingouttargetedpricemagnetsandretracingto
piercethenewestmagnetsbeforecontinuingimmediatelyhigher.

Tradingpricemagnetswiththevolumeprofile
Thevolumeprofileisanindicatorthatplotsvolumetradedatprice.Fromanauctiontheory
standpointwecanutilizethevolumeprofiletoshowuswherepriceislikelytospendmoreor
lesstimetradinginthefuture.Wecanalsoutilizetheprofilesbuiltinstandarddeviationlevelsto
identifythevalueareahighsandvaluearealowsofthetradingrange.

TobrieflyexpoundonprofiletradingIwillhighlightthemostimportantaspectsinvolvedinprofile
trading.AdditionalcontentonprofilestrategymaybefoundintheFTRTradingCourse.

Thevolumeprofileshouldbelookedatasabellcurve.Abellcurvefullydevelopsinto6sigmas
butisseparatedfrom1,2,3and6standarddeviations.
6stddev=99.9999998%
3stddev=99.7%
2stddev=95%
1stddev=68%

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Thestandarddeviations(sigmas)weareinterestedinarebetween1and3sigma.1sigma
holdsthebulkofthetradingdata.Thisiswheretheinstitutionsaccumulateanddistributethe
majorityofcontracts.Priceactionistypicallychoppyandmeanreverting.2sigmasholdthe
outliersthatattempttobreakoutbuttypicallyfailtospendmuchtimeatsuchlevels.The3
sigmasaretypicallynewhighs/lowsthathavebeenmadeandthevolumeprofiletypicallydoes
notdistinguishbetween99.7and99.9999998%soweignorethe6thsigma.

2.2Goldchartwitha1sigmaprofile.Bluelinesindicatevalueareahighandvaluearealow.
TheGoldlineshowsthePointofControl(POC)whichcontainsthemostvolumetraded.This
currentprofilerepresentsallviewableonscreenchartdata.

Inchart2.2thelowestpricemagnethasnotbeenpierced.Thevolumeprofileindicatesthatthe
lowermagnetisoutsidethe1sigmatradingrange.Thismeansthatithasa16%chanceof
beingpiercedduringthedevelopmentofthatprofile.Youcanseehowpricecamedownintothe
areathepreviousdayandwasswiftlyrejected.Thecurrenttradingdayalsoshowsahigherlow
beingformed.However,theoveralltrendgoingbackabout5daysshowsthatitisdown.This
meansthatwewillbelookingtotaketradesintothelowerpricemagnetassoonaspricegives
aconfirmationthatthedowntrendisresuming.Wearelookingforpricetogetrejected
somewherehigheratwhichpointshorttradesintothemagnetwillbeinitiated.Thisswing
patternwillbecoveredinthenextsection.

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SwingFailurePatterns
Wearelookingtokeeptherulesforenteringpositionsinthedirectionofthepricemagnetas
simpleaspossible.ThereforeIwillbediscussingthemosteffectivewaytotradeatrend.The
rulesareobjectiveandtwotradersshouldbeabletoproducethesameresultswithoutchecking
eachother'swork.

Myautomatedtrendtradingsystemsaredesignedtocapturetrendswhentheyexist.Itoften
takessmalllossesasthepriceitpaystobeinvolvedinthelargertrends.Wedontwanttomiss
anysetupsthatmeetourcriteriabecausethattradecouldmakeourweek,monthorevenyear.

Whenmanagingatradeinsideanexistingtrendwedontwanttoexitunlesswehaveareason.
Oftentimesthiscanresultingivingawayalargepartofthetradesopenprofit.Atthesame
time,allowingthetradeenoughwiggleroommeansyouwillbeinvolvedinthemegatrendthat
persistandbuildaccountstonewequityhighs.

Wewillbeusingthissamemethodforenteringandexitingtradeswiththepricemagnetsystem.

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2.3Asimplemovingaverageswingbreaksystemusedtoshowtrailingrules.

In2.3weoverlayafastandslowmovingaverage.IFthefastisabovetheslow,andprice
crossesabovethemostrecentswinghighwithin5bars,THENgolong.
Entriesareshownbythebluecircles,exitsshowsbythearrows.

Ifwetrailstoplossesbelowtheswinglows(greenlines)thenwecanseehowitallowsprice
enoughroomtocontinuehigherdayafterdayeventhoughitmaygiveawaysomeopenprofits
inthelastday.Itgetsusoutofthetradepriortoapotentialcorrectionintheuptrend.Inthenext
chartyouwillseethepricemagnetsoverlayed.
Whenthetradeisexiteditmeansthecurrenttrendisfailing.Seehowpriceimmediatelyclears
outthepricemagnetsbeforecontinuinghigher?

2.4Pricemagnetsoverlaidonchart.Pricetargetsmagnetsassoonasthecurrenttrendhas
ended.

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AlsoapplicabletoStocksandForex
Thesameswingbreak/trendbreaksetupfunctionappliestobothStocksandForexaswell.
Canyouidentifythepointsatwhichthecurrenttrendwasfirstoverextendedbeforebeing
breached?Couldyouhavetakenadvantageoftradingthesetupintothepricemagnetwitha
relativelysmallstop?

Forex

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Stocks

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RISKDISCLOSURE:
Futures,Forex,Stocktradingcontainssubstantialriskandisnotforeveryinvestor.An
investorcouldpotentiallyloseallormorethantheinitialinvestment.Riskcapitalis
moneythatcanbelostwithoutjeopardizingonesfinancialsecurityorlifestyle.Onlyrisk
capitalshouldbeusedfortradingandonlythosewithsufficientriskcapitalshould
considertrading.Pastperformanceisnotnecessarilyindicativeoffutureresults.

CFTCRULE4.41HYPOTHETICALPERFORMANCEDISCLAIMER:
HYPOTHETICALPERFORMANCERESULTSHAVEMANYINHERENT
LIMITATIONS,SOMEOFWHICHAREDESCRIBEDBELOW.NOREPRESENTATION
ISBEINGMADETHATANYACCOUNTWILLORISLIKELYTOACHIEVEPROFITS
ORLOSSESSIMILARTOTHOSESHOWNINFACT,THEREAREFREQUENTLY
SHARPDIFFERENCESBETWEENHYPOTHETICALPERFORMANCERESULTS
ANDTHEACTUALRESULTSSUBSEQUENTLYACHIEVEDBYANYPARTICULAR
TRADINGPROGRAM.ONEOFTHELIMITATIONSOFHYPOTHETICAL
PERFORMANCERESULTSISTHATTHEYAREGENERALLYPREPAREDWITH
THEBENEFITOFHINDSIGHT.INADDITION,HYPOTHETICALTRADINGDOES
NOTINVOLVEFINANCIALRISK,ANDNOHYPOTHETICALTRADINGRECORD
CANCOMPLETELYACCOUNTFORTHEIMPACTOFFINANCIALRISKOFACTUAL
TRADING.FOREXAMPLE,THEABILITYTOWITHSTANDLOSSESORTOADHERE
TOAPARTICULARTRADINGPROGRAMINSPITEOFTRADINGLOSSESARE
MATERIALPOINTSWHICHCANALSOADVERSELYAFFECTACTUALTRADING
RESULTS.THEREARENUMEROUSOTHERFACTORSRELATEDTOTHE
MARKETSINGENERALORTOTHEIMPLEMENTATIONOFANYSPECIFIC
TRADINGPROGRAMWHICHCANNOTBEFULLYACCOUNTEDFORINTHE
PREPARATIONOFHYPOTHETICALPERFORMANCERESULTSANDALLWHICH
CANADVERSELYAFFECTTRADINGRESULTS.

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ThePriceMagnetIndicatorwascreatedforusewiththeNinjatrader7Platform.

Installation:
1. Downloadthe.zipfiles(donotunzip)
2. StartNT7
3. Theindicatorcontains2.zipfiles,importthembothviatheNinjascriptoption.
4. File>Utilities>ImportNinjascript
Openachartandrightclicktoopenyourindicators>SelectthetwoFTRPriceMagnet
Indicators.

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