Download Download PDF. Translate PDF. Small people do that, but the really great make you feel that you too can become great. The sole goal of the MM is to make a profit. The only tools at its disposal relate to manipulating price. Price is a reflection of the number of transactions and the price paid for these transactions.
A large number of transactions are required to shift the price. The bulk of the transactions are carried out by large institutions, not by small traders. Therefore, the bulk of transactions made by small traders will be made with larger institutions. This also means that a price is moved predominantly as a result of what the large institutions are doing with currency.
Their ability to dominate the market is overwhelming. It costs about 10, lots to move the market by one pip. So for a retail trader to be truly successful, they need to at least have a concept of this process so that they understand what is happening and why.
Put another way, the same number of traders would be required to initiate a transaction at more or less the same time in the same direction to move the market. So once you realise that price is moved as a result of deliberate, logical decisions the idea that price is a product of the emotional feeling of the various traders involved or of sentiment is misguided. Retail traders then, are left to react to the prices that they see, many of whom react emotionally.
In relation to learning and using this material, it involves changing the way you think about the market and it will be necessary to do the homework, absolutely essential to learn to spot the patterns. So rather than trying to trade everything that moves aim to be extremely selective and then make as much as you can from that move. This of course involves trading heavily on these highly selected setups. Then identify all the features of the 3 tiered cycle within both on a 3 day and an intraday cycle.
Understand that they will not all looked perfect but nonetheless there are variations on the theme and being able to identify the variations is fundamentally important. In other words, imagine you are the market maker and what you would need to do at different times to trap traders and book your own profit. You will need to consider "where the money is", what might drive traders to behave in certain ways and then consider the methods that have been put forward including circular trading, stop hunting, testing patience, and so on.
The features need to include: 1. Peak formation highs 2. Peak formation lows 3. Midweek reversals 4. Levels I, 2 and 3 with their consolidation levels 5. The intraday cycle 6. The US reversals 7. Areas where peak formation highs and lows correspond with intraday reversals EXERCISE 4 Make a list of all of the patterns, features and characteristics that have been discussed.
Create a definition or description for each of them. Mark them out, particularly looking for previous trap moves and the levels. Note 2. The Gap time refers to a changeover period between markets and this is usually a quiet period and represents a period when one markets office sets up plans with the opening markets office.
In trading currencies, market makers function as intermediaries in sales and purchases between two parties and two currencies. For example a bank will function as a market maker when it collects sellers of the US Dollar to then sell to investors who have Euros in exchange.
The value of each currency is based on the current market value. To beat the MM you need to understand the basic objectives of their activity. This includes strategies to trade against retails traders. The major difference between them and other traders is that they have the ability, through access to massive volumes, to move price at their will. So to make money, they aim to buy at a lower price and then sell at a higher price. They achieve this by: 1.
Inducing traders to take positions. This means that the MM can sell a specific currency at a certain price and then buy it back at a lower price when the retail trader feels too much pain from the currency value moving backward and wanting to sell it back again e.
Create panic and fear to induce traders to become emotional and think irrationally. Hit the Stops and Clear the Board. Even though they have a number of tools at their disposal, they do have some restrictions imposed on them from outside authorities. These include: 1. The IMF restricts their ability to move price to a general range so as to avoid a collapse of the market.
This is generally limited to the ADR and will involve moves of as much as pips per day in most pairs. They do not have unlimited equity so it is necessary for the market- makers to close positions and regain balance periodically. The only tools they have are to be able to buy or sell currency in different volumes at different prices. By doing this strategically, they can: 1. Entice traders to take positions by providing evidence that price is or is going to move in a certain direction. Appeal to the emotional side of traders by changing the character and speed of price changes.
Once the trap has been set, and the bait taken, cause the price to move in such a way as to cause price to move against the traders, allowing the banks to buy currency back from or sell currency back to the traders so that they are square again.
This means that the trader has entered the market by buying currency from the bank at a given price and exited the market by selling back to the bank at a lower price. Conversely, the bank has sold to the trader at the higher given price and bought back from the trader at the lower price.
While these price movements are used to trap traders into unfavourable positions, they are not used 24 hours a day, but will be used more at certain times. The patterns are most commonly observed in the following time periods : 1. The beginning of the season quarterly 2. The beginning of the day 4. The beginning of the session 5.
The end of the session 6. The end of day 7. The end of the week 8. The end of the season. Sometimes immediate price movements are designed and used to "cover-up" the MM is price movement. The rumour mill also has a role to play in generating a public expectation of price movement.
It is not uncommon to see the general news being particularly pessimistic for example about a particular currency only to see the currency rise against it but usually after people have been trapped in line with the sentiment. Brokers and dealers have mechanisms available to them for manipulating price to enable the process of taking money from traders, who are also their clients!
They have a number of additional tools at their disposal and include: 1. Requoting 2. Trigger all stops in a given price range which is part of the dealers functions in the MT4 platform 3.
Vary the spread which is why scalping methods often fail at times when it is an advantage to them to do so. Throw a price spike to take stops out, bear in mind that they know where the stops are. Again bear in mind that they know who is in trouble because it is part of their backend platform. It is also normal to expect that this will entail a journey of 3 pushes or candles to get there.
However, it is not that simple and the 3 pushes may occur in increments of different sizes. It is important to remember this when assessing the movement as it escapes the Asian range and to not simply expect a straight 3 candle movement. For example, the 1st push or candle may be a full 25 pips. At this point price may be held for 3 or 4 candles taking a full hour. At this point it is pushed up another 20 pip making a total of 45 pips from the top of the Asian range and finally another 5 to 7 pip on top of that.
The effect of each these moves as follows: 1. Range traders who have taken short positions at the top of the Asian range will have a stoploss somewhere between 25 and 50 pips from this point. Therefore the initial 25 pip push will take-out the 1st of the stops. The 1st upward movement will begin to entice traders to take long positions on the basis of a breakout trade.
This is accentuated by the following period of consolidation where price is being held and traders will be expecting a continuation pattern to develop. It is further accentuated with the next 20 pip push further enticing long positions as price has now been rising for an hour and a half. The last move is almost always just a tap, identified as a pin. The main reason for this is that it costs money to move the market and this is a cheaper option for the MM. The following diagram shows the reasons for the movement in terms of the market makers use of the pattern.
It is also worth noting that a RRT pattern is really an M or W pattern that has occurred more quickly and thus has the same effect. The time gap between the 2 peaks of the M or W will usually last for somewhere between 30 and 90 min though occasionally longer. The fastest occurs when the pattern is defined by a railroad track in other words 15 min up followed by 15 min down. Longer periods are also common and used to gradually accumulate more positions of traders who are enticed into taking trades in the direction of the technical trend.
But what is really happening here? The MM is trapping volume and it is important to notice that each subsequent spike it is not lower or higher than the previous so that any new trades taken in the direction of the spike do not have an opportunity to become profitable. They become trapped. So in the example below, the peak low is identified and followed by 2 further downward spikes.
The important feature to notice is that each of the spikes is higher than the previous which prevents short position holders from taking any profit whilst potentially encouraging new shorts in this region.
In the example below, you can observe that on the lower boundary of the wedge, the peaks become slightly higher each time it comes down to the line. This has the effect of ensuring that none of the trades that are taken short in these regions can turn a profit. Similarly, on the upper boundary of the wedge, the same thing is happening with each of the peaks becoming progressively lower and trapping the higher level longs and pulling them down.
There is no way of predicting which direction the price will ultimately breakout. This will be determined by the net volumes that occur. In other words, if there is a greater build-up of short positions over the long positions, then the wedge will break up. Some caution needs to be applied when interpreting price movement that exceeds the high or low but closes back inside the noted high or low price.
In these situations, the market-makers have spiked the price beyond the high or low to both trigger stops as well as to further induce traders to enter in the wrong direction. These levels can then be predictably used by the market maker to plan strategy. With this understanding you can buy or sell stop hunts against the herd and in line with the market maker moves.
Simply buy the Level III corrections and sell 3rd level rises. Essentially, there is no need for a 2nd move back to the high because there are already traders trapped from further up and the MM does not want to provide an opportunity for them to close their trade at a profit, or even a small loss. Instead, price is moved down providing an inevitable loss to the traders. It refers to the pattern that is seen in a 15, 60 or minute chart over a period of a week. Level I and Level II have relatively similar patterns of behaviour stop hunt.
However Level III tends to be choppy with a wide range and represents an area of profit-taking for the institutions and signifies the beginning of an accumulation period for another cycle.
The reasons for this behaviour can be understood if you consider what happens during the rundown: 1. On day one, you the retail trader are selling and the institution buys from you. On day two, you are selling and again the institution buys from you. However, on day three the retail trader is again interested in selling and the institution buys up heavily. Now they move price up aggressively triggering stops and taking a profit. In effect, they are using a scaling-in method to book their profit.
After the market has run down for three days and traders have taken losses, these individuals react by pulling away from the market quite literally and having a few days off before coming back to trade. During this period the market is choppy and relatively stagnant until the traders have returned to play in the game again. To remember the patterns use the following: 1. Additionally, the areas of reversal in both are often synchronised so that they occur at the same time in different timeframes.
Using this knowledge it is possible to convert a spot trade into a swing trade when you enter it from a peak formation high peak formation low. Another way of recalling this key issue is "The patterns are the same no matter the timeframe".
So it is obviously important to count the levels so that you know what part of the cycle price is in at the current time. Quite obviously if you are able to enter a trade at these peak reversals then you are in a good situation to run your trade for the full extent of its journey.
This is the only place that has a high level of certainty in directional movement. It is also important in making these assessments to consider the bigger picture and where the market is in cycle. This includes looking for a midweek reversal which will generally correlate with one or both of the intraday reversals.
With an awareness of the longer cycle and assuming you are in the correct place within the cycle, it is possible to convert a spot trade to a swing trade from one of the 3 day cycle peaks to the other given an appropriate entry.
This would involve going from one peak formation high to the next peak low and may take several days. On an intraday trade, it is still important to understand where you are within this larger cycle as it will help you to make a judgement about how far a run my last.
For example, if price has just passed the peak high and is at a Level I accumulation then an intraday long trade after a bearish stop hunt, while valid, will not be likely to produce consistent results.
Hence, it is a good idea to not take trades against the longer trend at a Level I accumulation. The Dharma period occurs after the US markets have closed and before the London markets have opened. During this period there tends to be little activity and the market just cycles back and forth between two price points. This occurs because Bank A will buy a quantity of currency from Bank B [1].
This causes price to rise. This is followed by bank B selling the same currency to Bank C [2]and this causes price to fall.
This process goes around in circles and so the price simply oscillates back and forth. After a while, the range begins to widen [3]. This has the effect of triggering pending orders placed by breakout traders. However, when they are triggered, price is quickly pulled away and they will often be stopped out on the other side of the range which is also widening.
The stop hunt involves a deliberate movement outside of the range to what will become the high or low of the day. The move usually occurs in three pushes which can be as simple as three candles though you will sometimes see a small pause in the form of a pullback in the middle of this.
Good luck to all of you Gary Lynk Profitable Approach To Trading After years of wandering and searching in the trading wilderness, and after spending untold thousands of dollars many of them wasted , I have finally stumbled upon a trader, a teacher, a mentor who is able to bring it all together and present a credible, cohesive,effective, and profitable approach to trading. Much appreciated Joe! My last 3 trades using BTMM have all been successful averaging 30 to 72 pips.
About Author cryptopals. April 21, at pm. Harry says:. September 5, at am. Leave a Reply Cancel reply Your email address will not be published. Search for:. Join Us On Telegram. Forgotten Password Cancel. Remember Me Lost your password? Community Forum Access Obtain access to the recorded Monday Night Training Boot Camp sessions Read through discussion threads and trade exmaples Collaborate and communicate with other like minded traders that discuss what you are seeing on the charts, and how to capitalize on them.
Good luck to all of you Gary Lynk. Profitable Approach To Trading After years of wandering and searching in the trading wilderness, and after spending untold thousands of dollars many of them wasted , I have finally stumbled upon a trader, a teacher, a mentor who is able to bring it all together and present a credible, cohesive,effective, and profitable approach to trading.
Don Krueger. The BTMM course really opened my eyes!
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