Trade With a Day Jobb

Trade With A Day Job System

A simple, two-‐stage strategy for trading part-‐time in the evening. Low risk, high profitability.

Trade with a Day Job System | Markets Mastered

Contents 1. Disclaimer .............................................................................................. 3 2. Important Message ................................................................................ 4 3. Introduction ........................................................................................... 8 4.

Trading Goals ...................................................................................... 11

5. Trading Psychology .............................................................................. 14 6. Money management ............................................................................. 15 7. Trading Platforms ................................................................................ 17 8. Demo Trading ...................................................................................... 22 9. Configuring your chart ......................................................................... 24 10. The strategy (part 1)........................................................................... 31 11. The Strategy (Part 2) ........................................................................... 38 12. Important Rules.................................................................................. 44 13. Targets & Stop-Losses ....................................................................... 47 14. Trends ............................................................................................... 53 15. Entering a trade. ................................................................................ 56 16. Putting it altogether ........................................................................... 58 17. When not to trade .............................................................................. 62 18. Important points to remember ........................................................... 66 19. Additional strategy ............................................................................. 67 20. Trade examples................................................................................. 68 21. Conclusion. ........................................................................................ 76

Note: It’s important to read this manual in the order it has been written in for you to fully understand it’s contents and get the most out of the trading education.

© Markets Mastered 2014

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1.

Disclaimer

Commodity Futures Trading, Spread Betting, CFD and Options trading obviously have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. If in doubt or you need more in-depth information please contact a independent financial adviser or other suitable professional for further advice. Do not trade with money you cannot afford to lose and never use borrowed money to trade with either. This is neither a solicitation nor an offer to Buy/Sell futures, options or shares. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this manual or any web site’s mentioned, including marketsmastered.com. The past performance of any trading system or methodology is not necessarily indicative of future results as markets are unpredictable. I strongly recommend that you start trading the strategy described in this manual with a period of demo trading of at least 2 months so there is no initial risk to your funds. Please read chapter 6 thoroughly, it concerns this subject.


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2.

Important Message

Thank you for purchasing my Trade with a Day Job trading system, designed to trade the U.S. S&P500 index in the evening between 17:00hrs and 21:00hrs (UK time) Midday to 16:00hrs New York time (EST). It was originally designed in 2000 as a beginner’s system to help a friend break into the world of financial trading and due to this the actual strategy is very simple to use. To operate the strategy you just need two occurrences to come up on your trading chart, and when they happen together, you then have a trading opportunity – it is as simple as that. This means your learning journey over the next few weeks is going to be more relaxing than you may imagine, so please enjoy reading this manual. The strategy has not been tested on any other instrument or index since I have been trading it, so I do not recommend you use it on any other chart except the S&P500. Additionally, as I mentioned earlier it has been specifically designed to work between the hours of 17:00pm and 21:00pm UK time (midday to 16:00hrs New York EST time) so I do not recommend you trade the strategy at any other times. If you would like to learn to trade at other times of the day or night, please contact me as I have other strategies/trading that will suit you. There is NO padding or superfluous content in this trading system manual, EVERY SINGLE WORD is there for a reason as they are important. As mentioned previously, please do not skip over any paragraphs or chapters as you need to read everything (in order) contained in this book so that you can learn my strategy properly and then enjoy the profits that elude so many newcomers in the trading world. It is tempting to skip through to the part where the strategy is explained but from statistics gathered since 2009 it appears that students who do this © Markets Mastered 2014

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have more trouble with their overall trading that those who study this manual in the correct order. They also tend to ask more questions in the days and weeks following their download, and although I am very happy to answer any query you may have as far into the future as you wish, I’ve found that 99% of questions have an answer within these pages, so please read through the manual at least 3 times over the next 24hrs before opening your new trading account and get started with your trading charts. As you may have already found out, trading the markets is NOT a get-richquick scheme, so please treat learning to trade as if you were learning any other profession. If you were studying to be an accountant or dentist for example, you would spend many years at University and then on-the-job training, and while learning to trade is not quite as time consuming it does offers greater returns when you get it right. This trading strategy gives you a shortcut as you’ll shortly learn an easy to copy trading strategy that will get you trading one particular market, and as you watch your chart every evening, you’ll begin to learn more about its personality, so increasing your overall knowledge of this fascinating subject. You will find after around six months of trading this strategy that you will have a much better understanding of the overall personality of the S&P500 index as so begin to 2nd-guess its movement. This skill will creep up on your unawares, but will obviously be very welcome as it will also help you trade some of my other systems. Unlike the more traditional professions, you can learn to trade part-time while keeping your day-job meaning you are still able to earn your regular salary while you educate yourself about trading and the markets. But this does not mean that you can just pick it up and put it down whenever you feel like it – you need to have a definite plan of action, and part of my educational service to you is to give you some guidelines as to how you should go about it. Please follow this manual in the same order as I have written it, and complete each chapter before moving onto the next one. © Markets Mastered 2014

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As a guide, you should now spend this first session of reading (that you are presently on) by meticulously going through the manual at least 3 times so that you can pick-up the basics of the strategy. It is imperative not to rush through this manual, you need to take each chapter slowly and ensure you understand EVERYTHING written, so your education is gaining a thorough grounding. Remember, depending on your age at the moment, potentially you could be trading for another 30 or 40 years, so a few extra days spent reading this in a methodical manner is a good investment. With a trading career there is no need to have a planned retirement either, I have two good friends who are trading in their 80’s and many students have only begun their trading careers while well into their 70’s. It keeps your brain alive and challenged every day and as long as you have a decent diet and exercise regularly you are guaranteed to have a longer and more fulfilling life than the majority of the population. When I started trading full-time in the 1990’s I realised I would be leading a sedentary lifestyle during trading hours so I have always tried to cycle at least 10 miles a day during the week and I would encourage you to think about how you can remain fit while you enjoy your new career. I have contacted some of my more successful customers and overwhelmingly I found that to learn this system you need to spend your 1st month reading/practising for around 3 hrs per evening plus around 5 to 6 hours each weekend. That will get you into a trading habit and the following months will go by faster than you can imagine. As mentioned briefly before this system was designed and written by me in 2000 for a friend who wanted to trade after he returned from his day job. He had NO intention to give up his day job as he enjoyed it so much, but over the years the amount of money he earned by spread betting made his day job redundant, so he did eventually give it up, although to this day he still only trades in the evening 2 or 3 times a week. The system has been consistently profitable and has NEVER had a losing month in all the years © Markets Mastered 2014

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that I have traded it, so that should give you confidence when learning to trade. All you have to do is follow the rules 100% and the future is virtually assured for you. There is a timetable of learning tasks later on, plus you can add your own notes to this manual. If you are planning to print this PDF document, you can make important notes in the margins of this manual, or if you are doing as most do and just reading it from your computer, just make your own notes by using the Adobe Reader functions by clicking on the “Comment” button at the top right of this document and either add text or place ‘sticky-notes’ on the page. Before we move on I would like to mention the computer screenshots in this manual. To be able to see all the important information contained within them it is a good idea to adjust the magnification of this document to around 150%, which you can do at the top of your screen to the left of the middle – see below:


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3.

Introduction

My system, in a nutshell, will enable you to earn small, regular amounts of money from the U.S. stock market using the S&P500 index. The reason I use this instrument rather than the more popular Dow Jones 30 is because the S&P500 moves with a lot less volatility than the DJ 30 and without the usual spikes as well. The S&P500 also obeys support and resistance levels very well which will prove very useful later on in your trading education. Your target will be just 20 pips (points) per evening, but to begin with to help with your trading confidence you will have a daily target of just 15 pips for your first 20 trades. Having a small, achievable target will enable you to learn this strategy without the stress of large monetary targets and so you will not be troubled with the new trader’s two worst enemies – fear and greed (more of these troublesome pair later) Your profit/loss ratio is going to be 1:1 initially so you’ll never have a stop loss larger than 20 pips during your normal trading once you have got into the swing of things. The overall performance of this strategy since 2000 is around 75%-80% winning trades, so you have a positive expectation when trading. This is important with regard to trading psychology and I will expand on this in my book on the subject which will be available in March 2014. Trading the markets should be treated just like starting any other small business – you are going to be your own boss and so are completely responsible for ALL your actions and decisions. Starting in business is not easy (otherwise everyone would be doing it ) but you have a head-start over most people as the blueprint for your new homebased business have all been worked out for your already be me (rather like

purchasing a franchise) – as I have trodden exactly the same path as you are about to embark upon with one exception – I had no guidance whatsoever, © Markets Mastered 2014

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so it took me a bit longer than it should have – but I did learn some very important lessons along the way, which I can pass onto you. And I learned to trade over a period of 4 – 5 years but having been in the markets for the past 25 years I can now show you how to shortcut that process so that you’re up and running within the next month. So you are really buying a franchise, but without the extremely large investment normally required – a friend owns two local McDonalds and they cost him £1.5m each to set-up in 1998. And he still pays a franchise fee every single month on his turnover – and that’s for as long as he runs the business, but with this opportunity all your profits are yours to keep and the money you have paid already is all you are committed to spending even though I will give you unlimited email help for as long as you need it. Additionally, you have no worries about renting expensive premises (factory/offices), no business rates, no staff hassles and as mentioned before, if you live in the UK, you have no tax or VAT commitments, what you earn in the markets is all yours to keep. And importantly, whenever you want to go on holiday you can just shut your business and it’s always going to be there when you decide to get back to work, as you’ve no customers to tie you down. In return you just need to commit to a learning programme that will ensure success as long as you follow every instruction is this manual. I would recommend that you spend at least 3 hours per evening in the beginning reading the manual if possible, watching live charts and learning to spot the two occurrences on your chart that alert you to the fact there may be a potential trade coming up. Ideally you should ensure that you have 3 hours of quiet time (with NO distractions) every evening that you can dedicate to your learning programme plus around 4 to 5 hours at the weekend. Try to find a place in your house where you can be on your own with NO radio/TV/telephone as this will be conducive to learning at a fast pace. © Markets Mastered 2014

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Having this time for learning in the beginning will pay dividends in the future, as you will be sufficiently professional in your trading to pull up a chart on your computer at a moment’s notice and trade for an hour or so a day and earn life changing amounts of money. Here is a timetable that shows you what your next few months is going to look like.

Period

Tasks

Day 1

Read through this manual 3 times making notes. Open demo trading account and investigate trading platform, ensuring you are familiar with the important features.

Day 2

Configure your charts and read through this manual two more times

Day 3,4 &5

3 to 4 hours daily in front of your charts, familiarising yourself with the two occurrences you’ll be looking for when real-time trading. Also review historic chart that I will supply

Day 6 to 20

(Weekdays) Start demo/paper trading. One trade per evening plus another 2 to 3 hours reviewing historic charts for trade signals

Day 21 to

Trade from 5pm to 9pm taking as many demo/paper trades as

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you can see. Also at least a few hours daily reading and watching historic charts

As well as actually learning to trade my strategy, there are also a few other important subjects I need to cover to ensure you become a more rounded, professional and profitable trader. The first is the subject of goals.


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4.

Trading Goals

As that great motivational speaker, Brian Tracy once said – “You Cannot Hit A

Target You Cannot See” so I encourage you to sit down and decide what exactly you want in the future if you’ve not already done this. Obviously by having an interest in trading the markets and buying my trading system manual, you have made at least one decision, you want to become more profitable in the markets and carve out a career as a professional home-based financial trader. I have found that all the way through my life, whenever I had a compelling goal to work towards, my work was always more successful and the journey much quicker when I write down the goals and refer to them every day, so I encourage you to do the same. Another way of looking at this is:

When you leave the harbour in a boat, and you have not got a definite route planned and an ultimate destination to head for you are just going to bob around in the water for days and weeks, being directed wherever the tide and weather want to take you. Eventually you will end up somewhere – but is it somewhere you’ll enjoy? If you have a definite goal in mind, you can make plans to go for your ambitions and the journey will be much clearer. I have an excellent eBook by Brian Tracy which you can download for yourself here. Please get a piece of A4 paper or more preferably a Goals Journal and start by writing down your ultimate 5 year goals in the subjects of personal, money, health, family and finally trading/career/job and for each of those goals write down what you need to have achieved within the next 12 months to make your 5 year goals achievable. Once you’ve done this you can look at what you need to achieve in the next 3 months to be able to reach your yearly goals. Then write down everything you need to get done in the next


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month to enable your 3 month goals to become a reality. Then drill down to weekly and daily goals. This is the basis of goal setting, and will get you going to motivate yourself over the next few months of learning my trading strategy as you’ll have a solid inspirational vision of where you’re heading. It is far better to actual write your goals down on paper rather than on a computer or smart phone as the actual process of writing embeds your goals in your subconscious mind quicker and with more strength. Here are a few well-known quotations regarding goals that will reinforce the importance of carrying out this part of the educational process and may give you a start to your list.

“A goal without a plan is just a wish” “Goals are dreams with deadlines” “Don't say you don't have enough time. You have exactly the same number of hours per day that were given to Helen Keller, Pasteur, Michelangelo, Mother Teresa, Leonardo Da Vinci, Thomas Jefferson, Albert Einstein, Donald Trump and Richard Branson “Motivation is when your dreams put on work clothes” “You must have long-range goals to keep you from being frustrated by short-range failures” “Obstacles are those frightful things you see when you take your eyes off your goal”


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To get you going with your goal setting exercise, where do you see yourself in 5 years time? Do you want to be trading full time? Do you want to stay in your present job and trading part-time a few evenings a week? Do you just want to be trading in the evenings leaving your days free? Perhaps you just want to trade early in the morning? That’s the beauty of financial trading, you really can please yourself. Once you’ve written down your 5 year goals you can then get busy with what you need to do in a year’s time to be able to get to your ultimate goal. Then work down to your 3 month goals and finally your weekly and daily goals. This is a very important part of life in general, not just for trading but for your overall well being so do not skip over this stage, it will only take you around 30 minutes but it’s worth much more, so do it now and look forward to a very different future. We now come to your trading. It is often quoted that trading is 20% strategy and 80% psychology which is partly true but in my opinion misses out on another important subject that I feel is imperative for trading success. So I am going to add one more constituent to that quote so we get 60% psychology, 20% money management and 20% strategy, and that’s in order of importance. So firstly let’s deal with psychology.


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5.

Trading Psychology

The most important subject to master when learning to trade is your mind. A major part of trading psychology is discipline - that is trading your strategy exactly by the rules. To start with I will be telling you the rules, so you may think that it’s all sorted but that is far from the truth. You will still be susceptible to fear and greed unfortunately, the two most common emotions that new traders will encounter. You will encounter greed while you’re in the market when instead of shutting off a trade at a predetermined level; you think the market may go higher so giving you extra profits. This will sometimes end in a losing trade as the market reverses just after your have reached your initial target. You will also encounter fear when you have a few losing trades in a row and then are not sure whether to enter another position as you are fearful of yet another loss. These feelings cannot be cured overnight but I have certain strategies that will help you and negate them almost as soon as they raise their heads, and they appear later in this manual so I do encourage you to read every word and take all the advice I give you. The whole subject of trading psychology is a huge one so I cannot cover it in enough detail in this trading system manual but you’ll be able to read my trading psychology eBook entitled ‘5 Steps To Trading Confidence’ that’s going to be available in March 2014.


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6.

Money management

Money management in trading is a strategic technique employed to conserve your trading account as a run of losses when trading with too high a stake will result in severe depletion of your funds. Larry Hite, in Jack Schwager's Market Wizards* (1989), mentions two lessons learned from a friend:

1. Never bet your lifestyle -- never risk a large chunk of your capital on a single trade; and 2. Always know what the worst possible outcome is. *Please contact me about downloading this book. A well known rule in trading is the 2% calculation which means never risk more than 2 percent of your capital on any one stock. This means that a run of 10 consecutive losses would only consume 20% of your capital. When trading this strategy, even though it has a high probability rate of winning trades you must have the same degree of safety, it’s no good

building up your trading account only to have it wiped out by three or four losing trades. These are the calculations you should use while trading the “Trade With A Day Job” strategy plus all my other trading systems. For ease of calculation for every £1000 you have in your trading account you will be able to trade at £1 per pip. So if you have £3500 in your account you are then able to trade at a level of £3.50. The maximum stop loss for this strategy is 20 pips per trade and is often less, but we will use 20 pips for calculations. To begin with, after you have completed a period of demo trading, you will start off with just a £100 balance, meaning you’ll be trading at 10 pence per pip (£0.10) © Markets Mastered 2014

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Trading at this level means that if you have a run of ten losses in a row with

a £100 account balance you will lose upto 200 pips (10 x 20 pips) which at

10 pence per pip comes out at £20. This is 20% of your account balance, so

equating to the 2% rule as shown above.

As your trading advances and you start to trade more of my systems you will

find that you can be in 2 or 3 trades at the same time, but this 2% rule will

still protect you from wiping your account out.

Generally in the UK and Europe you will need a minimum of £500 to open a

trading account but I will introduce you to a company that not only has a

good demo trading platform but will allow you to open a real-money trading

account with just £100 and trade at just 10 pence (£0.10) per pip for an

unlimited time.


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7.

Trading Platforms

As you now know, my strategy is a simple method of trading the S&P500 index. In the UK you can do this via spreadbetting, and in other parts of the world you can trade CFD’s (Contracts For Difference) or if you reside in the U.S. and Canada you can trade e-mini contracts. The S&P500 chart is widely available and is featured in all trading platforms I have ever encountered. If you are in the UK spread betting enables you to be able to earn money in the markets without paying income tax on your profits, so making a career of successful trading an even better proposition, so I recommend you use this way of trading. If you currently trade no doubt you will already have a favourite trading platform and as my chart set-up is very simple, you’ll be able to use any charts that are available at the moment. If you are new to trading I recommend you use the metatrader MT4 platform from London-based GKFX. Their demo platform is easy to use for beginners and is exactly the same charts you’ll use once you go onto trading with a real-money account. The features are such that you will probably never use them to their fullest extent, I have been using this type of chart for the last 10 years and find them far superior to others. If you live in the UK you can access the GKFX demo account application form here: https://www.gkfx.co.uk/Register/DemoAccount If you live in any other part of the world (except the U.S. or Canada) you should Google “GKFX demo account” followed by your country of residence, so if you live in (say) Saudi Arabia, simply search “GKFX demo account Saudi Arabia” This is the page you will be directed to. © Markets Mastered 2014

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It is a simple one-page form as you can see from the screenshot above. If you live in the UK you should tick Spread betting as the account type and for all other countries specify Forex/CFD. It is best to allocate the minimum amount for your demo trading account and in the UK that is £5000. This will make your demo trading period more life-like. Once you have registered you’ll be directed to a page with download instructions for the Metatrader MT4 trading platform plus a username and password which you’ll only need once as you will be able to log-on automatically every day after the initial session. © Markets Mastered 2014

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Once the software is installed on your computer you should have an icon on your screen for quick access. You can register multiple demo accounts if you want an MT4 platform on different computers. After installation you will then be able to launch the Metatrader platform. This is the screen you will see once you click on your GKFX Metatrader link.

As you can see from the above screenshot there a few functions (mostly at the top of your screen) that you’ll be using in your trading career, so I would suggest that you spend an hour or so playing around with the platform getting used to all the features – do not worry, you can do NO damage at all by pressing the wrong buttons.


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Along the bottom of the chart above you will see the chart names I generally trade with but to begin with you will only need the S&P500. On the GKFX software it is named “SP500SB” and you will find it the ‘Market Watch’ list.

To access the ‘Market Watch’ list click on ‘View’ at the top left of your screen and select ‘Market Watch’ If you cannot see the S&P500 listed simply right-click on the list and select ‘Show All’


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Your trading platform is now set-up, and as mentioned previously, you should spend an hour or so getting used to all the functions that the Metatrader platform provides.


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8.

Demo Trading

It is imperative that to begin your trading of this strategy you demo trade. There are very important reasons for this and they all relate to trading psychology. Humans attach a great deal of importance to losing money and when you trade it is inevitable that you are going to encounter losing positions, and a period of demo trading will get you used to these situations. The period of demo trading will ultimately vary slightly from person to person, but to begin with you must aim for at least 60 trades before you reassess your progress. I suggest you contact me once you’ve reached that number and we can look at your trading and see if you are ready to open a real-money account and start trading with your own money. In most cases however, you will know if you’re ready. This number of trades is designed to firstly get you used to trading the strategy but also to become comfortable with the emotions that come with trading the markets. Using real money straight away when learning to trade will expose you to the twin emotions of fear and greed that I mentioned earlier in this manual. You will be fearful of losing money and also try to stay in trades after you should be out of the market as you’ll try for extra profits, and when you experience failure your emotions will run wild making you unstable and totally unable to trade with a level head. By trading without real money you can be totally detached from the emotions that winning/losing money brings. Very briefly it means that (for example) if you had 3 losing trades in a row (while trading with your own £1000 trading account) you may not want to risk a fourth losing trade, but when trading with a ‘play’ £5,000 you will not have the same emotions, so you should just © Markets Mastered 2014

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trade like a robot, entering and exiting trades as I show you in this manual totally devoid of any emotions. By trading without the risk of losing any of your own money, you will get used to the ups and downs of the markets and by the time you start trading with real money you will enter and exit trades exactly as the rules tell you without hesitation or emotion – exactly the same way as you perform any other normal everyday task such as driving to work. A more in-depth study of trading psychology can be found in my book on trading psychology book which as mentioned previously will be available in March 2014. Please contact me to register your interest.


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9.

Configuring your chart

After downloading your charting software you are now ready to configure your charts. I will illustrate this mainly by chart screenshots. In the following chart screenshots I will show you how configure your own chart so they 1) look similiar to mine and 2) are what you’ll need to trade this strategy. The 1st chart that you’ll see has green candles on a black background which I personally find hard to read, so if you would like to change your own chart from this set-up one that is the same as mine just follow the instructions below.

Copy the properties shown below to replicate my own chart. This will give you a clearer chart, although you can spend more time during this stage and personalise your own chart to suit yourself.


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You will be using candlesticks so click on that icon at the top of your chart as shown on the chart above. Once that is completed your chart should look like the one below. You can now clear the ‘Market Watch’ window from your chart as you will not need that any more during trading – until you begin, at a later date, to trade my other systems.


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For this strategy you will be using just the 5 minute timeframe.

Apart from candlesticks, the only other feature you will need on your chart is an oscillator – the MACD. © Markets Mastered 2014

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You can place that on your chart by the following process:

Click on the ‘Indicators’ button at the top of your screen.


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Once you’ve clicked on the ‘MACD’ button, you will see this window for the MACD properties.

Click on the ‘Parameters’ tab and copy the exact settings. Then go to the ‘Colors’ tab and ensure that the top color in the window is set at ‘None’ with the second color set at whatever you feel appropriate.

Once that is all completed you can click ‘OK’ and your chart is ready, and it should look like this: © Markets Mastered 2014

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You now need to save your settings and this is done by means of templates.

Once the templates window appears on your screen, you will be able to name your settings and then name the template so you can retrieve when you next © Markets Mastered 2014

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open the platform. After this it should always automatically come up with these settings.


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10.

The strategy (part 1)

The first part of the “Trade With A Day Job” strategy uses candlestick patterns. Although there are many of these patterns you will use just a few in the first few months and when you have got the hang of the strategy you can then go onto using a few extra ones. The first set you will be using are candles with long ‘wicks’ or shadows as shown below. As you will be taking both ‘long’ and ‘short’ (up and down) trades, there are different shape candlesticks for each direction.

The various candles I have shown above are ones that signify a price reversal situation. As you will notice, the candles I use for ‘up’ (long) trades all have their wicks (or shadows) below their bodies and vice versa for ‘down’ (short) trades. Included in the above selection are long shadows, spinning tops and dojis – all can be found in Steve Nison’s Japanese Candlestick Charting Techniques Book which I can send you if you contact me today. The reasoning behind using these types of candles is that during the 5 minutes that the candle is forming on your chart, they give a clue as to what the buyers and sellers are doing, and more importantly what’s going to happen in the next 10 or 15 minutes. © Markets Mastered 2014

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When a candle forms with a long shadow (or wick) it shows that one set of traders (buyers or sellers) are predominantly in charge. In the example to the left there is a long shadow candle at the point of a price reversal. In this case, the sellers that were in charge driving the price downwards have been overwhelmed by buyers during the 5 minutes that it took to form the long shadow candle. In the last few minutes of the candle, buyers have been dominant and driven the price higher and this buying has continued in the next (blue) candle. In the Trade With A Day Job strategy we will be looking for situations where the price changes direction after short periods in a certain direction and now you can see that using long shadow candles will give you an early warning of price direction. You should use these candlestick patterns whenever you see them on your chart, as long as the second part of this strategy (see chapter....) is also present. The entry and stop-loss levels for these patterns are worked as shown below using a ‘long shadow’ candle.


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Once you have been trading the strategy for a few weeks and your confidence has grown, you can then move onto some more patterns. These are shown below:

It is important that you have a good working knowledge of these particular candlestick patterns so it is a good idea if you spend the next hour scrolling through your S&P500 chart and practice spotting these patterns. © Markets Mastered 2014

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I will now provide some chart screenshots with these patterns present to assist you. (As mentioned previously, please enlarge this document so you

can see details on the chart )

And some more patterns below.


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As you will notice, these particular candlestick patterns often occur at major turning points on the chart, and you’re going to take advantage of this fact in your trading. To test your skills at spotting these candlestick patterns there is a chart below without the pattern names attached – please list all the names before looking at the answers on the next page.


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Within a few days experience has shown me that most people will be able to spot these candle patterns quite proficiently, and the more you use this strategy the better you will be and seeing them as soon as you look at any chart, not just this set-up. And now to the second (and last) part of this strategy, but first scroll down for the answers to the candlestick patterns in the chart above.

The patterns on the above chart are as follows: 1. Hammer/Long Shadow 2. Engulfing Candle 3. Doji 4. Hanging man/Long Shadow 5. Hanging man/Long Shadow © Markets Mastered 2014

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6. Piercing Line 7. Thrusting Line 8. Thrusting Line 9. Long Shadow 10.

Engulfing candle

11.

Spinning Top

12.

Hanging Man/Long Shadow


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11.

The Strategy (Part 2)

The next (and final) part of this strategy is the use of oscillator divergence to add to candlestick patterns. You will be using the MACD for this in conjunction with the price/candlestick part of the chart. This strategy will concentrate on one type, hidden divergence. More normally divergences signal a potential trend reversal but they can also be used as a possible sign for a trend continuation. Always remember, the

trend is your friend, so whenever you can get an extra signal that the trend will continue, this is good. As you know, trends move up and down, bullish is up and bearish is down. Hidden bullish divergence happens when price is making a higher low (HL), but the oscillator is showing a lower low (LL). Candles will move upwards but periodically there will be a break in buying momentum and this causes the price to fall slightly for a short while before the upward trend continues. Once price (the candles) makes a higher low in an uptrend, check to see if the oscillator does the same. If it doesn’t and makes a lower low, then we’ve got some hidden divergence in our hands. Firstly, here is the price making higher lows (HL)


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If you then add a MACD oscillator to your chart you would expect it to move in the same way, and in most cases it does. But occasionally it will act differently and instead of producing higher lows that are the same as the PRICE (candles) it will produce a lower low as shown in the illustration below.

If we now add a MACD to the candle chart from above we get your complete trading chart that you’ll be using for this strategy.


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I have added a couple of the HL lines in to demonstrate divergence in a moment. As you have seen on the previous page, we are looking for a higher low (HL) on the candle part of your chart but a lower low (LL) on the MACD. On the chart below, you can see that we have divergence between the price and MACD at least three times where I have added lines onto the MACD.


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This is bullish hidden divergence and is one of the patterns you will be looking for when trading this strategy. Please note – if you draw divergence lines below the candles, you MUST also draw your divergence lines below the MACD. I will go into this more later but you can also see that at the end of the divergence lines I have drawn in on the chart above, there are also valid candle patterns. Next I will show you how to spot bearish hidden divergence. This occurs when price (candles) is in a downtrend and this is what you should be looking for:


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In an overall downtrend the price will make lower highs (LH) as you can see from the chart below.

On the chart below, I have added a couple of divergence lines on the MACD, when you have a bearish (downward) trend you are looking for higher highs.


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Not every one of the lower highs (LH’s) on the candle part of the chart will have a corresponding divergence line on the MACD as you can see above but when does occur they do have a high success rate.


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12.

Important Rules

When drawing in the divergence line on the MACD part of the chart, you must always ensure that the line starts at a definite ‘point’ on the line as I have shown in the chart below.

You cannot start a divergence line on the MACD between points as I have shown at point A on the chart below


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The length of the divergence line on the candlestick part of your chart must be a minimum of 7 candles.


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As you know, this strategy works on the S&P500 during certain hours due to occurrences in the market over in the U.S. This means you are restricted to trading the strategy between the hours of 17:00 GMT and the close of the market at 21:00hrs which equates to midday – 16:00 EST. If you are uncertain regarding which hours you should trade if you live outside Europe or the U.S. please contact me. Generally you will find that if I notice a valid trade dead-on 17:00 I will take it, but if it is 5 minutes earlier I will leave it as there needs to be a definite cut-off time for beginning to trade. You can use your own discretion after you’ve traded the system for a few months. The futures market will continue after the 9pm closing time but you will find that volume in the market is severely depleted so there are very few trading opportunities after this time. If you would like to continue trading after 21:00hrs please contact me and I can advise you. Do not take more than two trades per evening – I will cover this point in the next chapter.


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13.

Targets & Stop-‐Losses

As I have mentioned previously, the overall target per trade for this strategy is 20 pips after an initial period of getting used to the system. On the S&P500 a one pip movement would be (say) from 1843.0 to 1843.1 and to show you on a chart, you can see below there is an 8 pip movement. To make it easier to work out, you should just ignore the decimal point, so just look at it as 18430 instead of 1843.0

To begin with, you should be looking for a target per trade of 15 pips or a movement of 1.5 on the chart. Doing this will get you used to a smaller target which in turn gets rid of any stress that you may have when entering a trade. I cover this point in greater detail in my trading psychology book mentioned earlier. Once you have traded this strategy for a number of weeks you will find that you are more comfortable about being in the market and you will


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automatically raise your trade target up to the normal 20 pips. If you have any doubt about the timing of this move, please email me for advice. Initially you should go for just one trade per evening, if it is a winner. This strategy helps with the overall discipline of trading and also prevents over trading when you first start out in the markets. It is a good idea however, once you’ve had your one trade for the evening that you continue to watch the chart until the close, just to get used to the indexes movements, to learn how its personality works. If your initial trade is a loser, you should then look out for another trading opportunity and quite often this will occur almost immediately so do be on the lookout for it. This next trade will have will have a target equal to your previous loss, the idea being that you will come out at break-even on the session. So if your stop-loss was 18 pips, that’s what you’re going for in the next trade. If on this second position you hit target but the price seems to be going on further in the right direction, you should move your stop upto your target level to safeguard the profit you already have and then watch your chart closely to see if you can get an extra 5 or 10 pips in profit. Move your stop up (or down) to ensure you do not lose any gains if the market reverses suddenly. Do not have more than two trades per evening session during the initial two months of trading this system. Once you are more used to the strategy and can understand the personality of the S&P500 you will find that you gain a 6th sense as to what the price is going to do next, so you will be trading much more professionally and as a result will take trades that turn out positively more often. Students report this occurrence as soon as 3 months into trading the index but can often take upto a year. You cannot rush or predict this kind of thing, but when it happens you’ll certainly realise it. © Markets Mastered 2014

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The stop-loss will different for each trade as you will work it out individually using whatever candle pattern you’re using for the trade. Here’s a candlestick pattern to remind you where the stop-loss is placed.

This is a long shadow candlestick pattern that was shown earlier in this manual. As it is bullish reversal, we are expecting the price to go up, so the stop-loss will be placed at the bottom of the low of the candle, in this case it’s the shadow (wick) This level is always placed one pip away from the low (or high in the case of a bearish reversal) As you can see, it is quite easy to work out the stop-loss level of each candlestick pattern – it is at the opposite end to the entry level. The actual amount of the stop-loss should not exceed 20 pips as that’s your target for each trade, although once you get used to the strategy and are trading it exactly as I do, you’ll find that because you have so many winning trades and hardly any losers, you can stretch the stop-loss value upto 22/24 pips after the initial 2 months of trading. To work out the amount of the stop-loss in pips you need to take into account the two levels you already know (stop-loss and entry) but you have also factor in the spread which the trading company charges you for each trade, and which forms part of their profit. If you’ve been looking at trading for a while you’ll know that the spread for different instruments vary greatly, and the average spread for the S&P500 is © Markets Mastered 2014

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around 4 pips which is what we’ll be working with when using the GKFX trading platform. In the past, many new students are aghast that it’s not a lower figure (EUR/USD and FTSE100 can be as low as 1 pip) but do not worry, this strategy has worked perfectly well over the last 14 years with this spread. It’s just a cost of doing business, exactly the same as tax, rent and wages are when you run a small business (but you’ve none of those with trading

from home of course). I have found that new traders who worry unduly about seemingly large spreads are really just struggling with their own trading – if you have a profitable system you can trade with a spread of 15/20 pips with no adverse effects. I will now run through an example of stop-loss calculation using figures from an S&P500 chart and valid candlestick pattern. Firstly here is the chart. It shows a bearish (downward) reversal candlestick pattern in the form of a long-shadow candle (candle “A”)


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The top of the candle (top of the wick) is 1847.5 so as previously mentioned; the stop-loss is placed at one pip (0.1 S&P500 points) above the top of the candle making the stop-loss level 1847.6 and the entry level is one pip (0.1) below the low of the candle as it’s a short (downward) trade – 1846.6 To play the trade out you would have entered on the 2nd candle after the trigger candle (A) at a level of 1847.5 and to this you would need to add the spread so your actual entry price would be 1846.6 minus 0.4 (4 pips) equalling 1846.2 To calculate the stop-loss amount we would take the stop-loss level of 1847.6 and then take away the actual entry level of 1846.2 (1846.6 minus the spread) giving us an actual stop-loss amount of 14 pips (1.4 S&P points)


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For this strategy that trade would have been acceptable from a risk/reward point as the target is either 15 pips if you’ve just started trading the strategy or 20 pips if you’ve been trading for longer.


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14.

Trends

As you have now learned, trading using hidden divergence gives you a chance to join in on established trends, but you also need to recognise when a trend has possibly finished, so you do not get caught going into the market in the wrong direction. An easy definition of a trend is when prices (candles) are forming lower lows (LL) in a downtrend and higher highs (HH) in an uptrend, and this can be seen in the chart below.

As you can see, the candles in a downtrend form lower lows together lower highs as I have marked. Once the trend has changed the candles then form higher lows (HL) and higher highs (HH) and this is quite easy to spot once you’ve had a small amount of practise. Slightly trickier is spotting when the trend actually changes, and the point that I have marked on the above chart at A shows where doubt may start coming in. At this point you could argue that the downtrend is still intact but © Markets Mastered 2014

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once price goes above the high of that candle A, the trend has usually reversed. If you then see higher highs and higher lows this is then confirmed and you can start looking for hidden divergence in the new direction. In the chart example below I have shown another trend change. At point A the price is still in an uptrend but as soon as the low of this candle is breached it could be argued that the trend then changes to bearish, and quite often at this point there will be a valid candle pattern for you to get into a trade. Although this may end in a losing trade, this situation is more rare than a successful trade with the trend, so there is no problem with taking these trades when they occur. Here’s the chart.

The final chart (below) on the subject of trends shows a few points on during a trend change.


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During the first part of the chart (on the left) the price is in a downtrend with lower lows being developed. Here is the chart.

At point A the downtrend is still intact even though in hindsight you can now see that the trend has changed and at point B there is a long shadow candle to further confirm this change. After the price breaches the high of candle A you can see at point C the trend has definitely change to bullish so you should now look for opportunities going long. Further on in this manual there are actual trade examples of trades I have taken in the past so you will be able to see trend changes in action. But first we have a chapter on putting it all together, combining the two different parts of the strategy.


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15.

Entering a trade.

Once you’ve got a trade opportunity, you are then ready to enter the market with either a long or short position. On the Metatrader MT4 platform this is a very simple one click operation. Before you do that however, you should open up the Terminal window of your platform so that you can see exact details of your trade once you are in the market. At the top left of your page click “View” and then “Terminal”

This will then bring up the Terminal window at the bottom of your screen. You will see complete details of all trades that are open as well as historic trades for your records. You will obviously need these once you start earning money from your trading.


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Entering a trade is just a one click operation directly from whatever charts you have open. At the top left of the chart click on the arrow and a trade panel will drop down.

This is the trade panel (below)

To enter a trade you should first fill in the stake value in the small panel in the middle, the minimum is 10 pence (as shown) Once that’s done simply click either the buy or sell button and you’re in a trade. You will see it come up in the Terminal part of your screen where you can change the order and close the trade off (with one click again).


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16.

Putting it altogether

As you have seen in the previous pages, there are basically two parts to this strategy, candlestick patterns and hidden oscillator divergence using the MACD indicator. Over the past 6 years since I have been helping new traders trade this system the most often asked question is “what do I look for first” when trading this strategy. First of all I would like to say that after trading this strategy for a month or so, you will not need to ask this question as you will be so used to spotting a valid trade opportunity you’ll see all the components to the set-up all at once, but to begin with you will need to approach the strategy like this. Once you have switched your S&P500 chart on and you begin to watch for a signal, firstly see if there is a good trend occurring with a small price reversal/consolidation. Next you need to look for a valid candlestick pattern, so it is imperative that you commit these patterns to memory and using my strategy to remember these in chapter 10 will accelerate this process. Please use this as you will not the need to keep referring back to chapter. Once you can see a valid candlestick pattern starting to emerge you can then see if there is also some hidden divergence already present. As part of this system I will be sending your my actual trade examples when I trade the strategy, usually 2 or 3 times a week if I am not on holiday (see my Trading Diary) Below is one such chart that I sent out to customers last year (I will show you more in a future chapter) and I will use this trade as an example in what to look for on your own chart. The chart below is from a trading session I had in October last year (2013) and I will describe the process you should use. © Markets Mastered 2014

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Firstly, here’s the chart:

I would have switched on my chart around 5pm as usual and on this occasion I would have noticed that there was an established bullish (upward) trend meaning I would be looking for a pause in this upward movement when a valid candlestick pattern would maybe appear with some hidden divergence as the price pauses and traders take profits. As you can see, around 17:15pm the price pauses, forms a long shadow candle and then moves downwards for 10 minutes (2x 5min candles). If you were watching the same chart, you would have then seen that a spinning top candle started to form at 17:25 and while this was occurring you would have then looked for any hidden divergence. In this case there was divergence, so you just then need to see what happens after the spinning top candle is fully formed. Either the price would continue downwards in which case the trade opportunity would be no more, or the trade would be triggered by the price © Markets Mastered 2014

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on the next candle going more than one pip above the high of the spinning top candle – and in which case you would have entered the trade. That’s it - that is all you have to look for when looking for a trade. Here’s another example, coincidently another long trade.

Again it was an opportunity soon after the system start time of 17:00 UK time – although at the time I was trading in Spain on Central European Time so the system starts at 18:00hrs. The price was clearly in an uptrend and just before 5pm the buyers slowed and sellers took over the market for a short while – this is usually because traders who have bought earlier in the day are then cashing in on some of the profits achieved, and if the trend is strong, it should then re-establish © Markets Mastered 2014

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itself. At 17:15 a Doji is formed on the chart and looking down at the MACD there is a very clear hidden divergence situation, so you would just need to get ready to enter the market if the price goes one pip above the high of the 17:15 Doji – simple as that.


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17.

When not to trade

There are times when it is not advisable to trade the strategy. As mentioned previously, you should only trade the system between the hours of 17:00 and 21:00 GMT (18:00 – 22:00 CET) Monday to Friday. This set-up has not been tested for any earlier, so I cannot guarantee results. As the strategy is entirely traded on the American S&P500 index there are also bank holidays when the U.S. Stock Market is closed. Below is a list of days when the S&P500 is closed:

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Martin Luther King Day

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Washington’s Birthday

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Good Friday

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Memorial Day

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Independence Day

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Labor Day

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Thanksgiving Day

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Christmas Day

I have not advised of actual dates as most of them change year to year so please see this website for exact dates. Please note there are also sometimes an early finish on the day before the bank holiday – whoever you are trading with will advise you in advance. There are also economic announcements that come out weekly and monthly which can have an adverse affect on the market sending it up or down with great volatility in a matter of seconds. The biggest one of these is the monthly U.S. employment figures known as the Non Farm Payrolls and the


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numbers come out on the 1st Friday of each month. I suggest that you do not trade on this day especially in the first few months of learning this strategy. I do have customers who do trade after the NFP announcement so it entirely your decision once you are trading with your own money, although I never trade during that day, I much prefer a break away from the markets. Other times when you should not trade are all listed on the Forex Factory calendar which you can find here. The important times you should be wary of are marked in red and applicable to the U.S. Dollar as you are trading the U.S. market. See screenshot below for an example. Generally you should be out of the market around 15 minutes before the announcement.

To ensure the announcement times are correct for your country make sure that the clock at the top of the page in synced with your computer clock. Most evening announcements that will affect this strategy are around 19:00 GMT, but always check daily at 17:00hrs or whenever you turn on your © Markets Mastered 2014

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charts to trade the system. I like to check on Mondays to see what’s ahead for the rest of the week and then set alarms on one of my phones. Another time to avoid trading is when the volume is low, resulting in limited movement of the candles. One of the ways to spot this is by the shape of the candles, you can see an example below – this is an actual screenshot that I sent customers one evening last year.

As you can see, the candles on the far left of the chart are of normal shape and size but as the volume decreases there are more dojis and gaps. It is times like this where you should stand aside and forget about trading. It would be useful in the first few months of trading this strategy to still sit back and watch the chart without trading just to see how the price moves in times like this. It is one of the ways you will learn the S&P’s personality which is going to help you enormously in the months and years to come. As you know, there is an end time for this strategy as well, and this is mainly because at the close of the U.S. trading session at 16:00hrs New York time. I would suggest you also stop trading at this time as the volume lowers © Markets Mastered 2014

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dramatically and candle movement is virtually nonexistent on most days. Just look at a chart now to see what I am explaining, or see chart below:

As you can see, once the U.S. session ends the candles get smaller and trading range is also restricted to a much smaller extent. Any trading after the U.S. session close is all on the futures markets, mainly in Asia at that time of the night. After a very short while trading you will be able to judge when to trade and when to step aside and have an evening off.


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18.

Important points to remember

This is a quick recap to remind you of the important points of the strategy. The strategy works between 17:00 and 21:00hrs UK time just on the S&P500 index. Use a demo trading account to begin with, to learn the strategy. Continue trading on your demo account for at least 60 trades before contacting me about real-money trading. You will be trading on the 5 minute chart, no other timeframe and you need just candlesticks and the MACD on your chart. Use just hidden divergence and not regular divergence. Look for a valid candlestick pattern first and then see if there is divergence present. Ensure you check Forex Factory’s economic announcement calendar for news that will affect the S&P500 during the evening trading session. Even when you’re not trading, try to watch the S&P500 chart as much as you are able, it will help you understand the personality if the index and this in turn will help your trading in the future.


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19.

Additional strategy

An additional strategy I have traded on the S&P500 over the past 14 years is the 5 o’clock reversal. Quite often you will find that the price reverses dead on 17:00 UK time and to take advantage of this you do not need any divergence, just a good reversal candlestick pattern, examples are highlighted below. Use just these patterns not the wider selection that can be used in the main Trade With A Day Job strategy. These are the patterns for the 5 o’clock reversal:

Stop-loss is worked out in the normal way as described earlier in the manual and your initial target should be 1:1 so equal to your stop-loss (inc. the spread)


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20.

Trade examples.

As I mentioned earlier, as part of my service to you I will be sending you my own trades as chart screenshots so that you can see exactly how I am trading the system. To be included in this please ensure you signed up for the daily emails when you downloaded this manual. In the following pages I will show you actual examples that I have sent out to students during 2013. I generally take the chart screenshot a few seconds after I come out of the trade and then highlight the candle pattern used together with details of the hidden divergence line. Here are some examples:

The chart above shows quite a simple set-up during an established bullish trend that started as the U.S. trading session kicked off. I was going for © Markets Mastered 2014

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more than the normal 20 pip target but as you can see, the price hit a resistance level and did not seem to want to go higher. The chart below is interesting as the upper divergence line on the candle part of the chart is horizontal – actually forming a support level. When this occurs it dows show quite a reliable signal as the S&P500 index does obey support and resistance level very well. I went for the normal 20 pip profit and did not take a second trade, probably because I was going out. Here’s the chart:

The chart below shows two trades, the first one was stopped out with a small loss but the second went on to give me a good profit (+31 pips)


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You will often find that if you have a losing trade, there is a subsequent opportunity almost straight away, so keep your eyes peeled for this. The chart below shows a ‘short’ trade in a bearish trend. The divergence line is 8 candles in length, just above the minimum amount allowable.


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Incidentally, the chart also shows another trade I took using my trendFX “Beginners” strategy. The chart below shows an interesting situation. Occasionally you will find that you have more than one place to place your hidden divergence line, and this chart shows two positions that were valid during that particular trading session. As well as the normal lower high (LH) on the candles, there is also a horizontal resistance line, which as mentioned previously, is a good signal. Here’s the chart:

The chart below shows a ‘long’ trade which turned out to be a loser.


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The chart below shows a fairly standard bullish hidden divergence trade using a spinning top candlestick pattern – the divergence line was 9 candles in length.


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chart below shows two trades, the first one was stopped out at minus 11 pips but as mentioned previously, the trade signal almost immediately afterwards turned out ok.


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This trade (Below) was a standard short trade using a piercing line pattern.


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This next trade example shows a horizontal divergence line again for the candles.


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21.

Conclusion.

So that’s my beginner’s evening trading system and I hope you’ve enjoyed reading this eBook. Now it’s time to put it all into practice, so please re-read it once more and get going with your demo account. As I have mentioned before, spread betting companies I speak to regularly report that around 80% of new traders fail in the first six months of opening an account, so stack the odds in your favour and learn this strategy thoroughly, stick to the rules I have laid out and you have a very good chance of succeeding. I know the strategy works as I have traded it almost every week for the past 14 years, and well over a thousand students have also used it to launch a profitable trading career. As you know, I will start sending out my daily trade screenshots to you in the next few days, but if there’s anything you’re not sure of or you want some general trading advice, please email me directly and I will help you in any way I can. My email address is [email protected] I will always aim to get back to you within 24hrs unless I am abroad – please check my blog/trading diary to see where I am at any time. There is also a few extra strategies that you can trade alongside this main set-up in the evening for some additional profits, just email me for details. If you want to trade at other times of the day or night I can also help you, just contact me. Thank you again for purchasing this beginner’s trading system and remember I am here to help you reach your goals in the markets. With best wishes, Nick © Markets Mastered 2014

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Trade With a Day Jobb

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