Core Concepts

First and foremost before we get into any of the methodology its best to understand the logic behind the way
the methods and strategies were developed in the first place.

Many times traders will find a system that on paper appears to be very profitable but once they dive into trading
the system they find that they can't really reach the level of success that the system offers, most often they will
find that they fail to even be profitable. It's my opinion that the main reason one can't trade a system or method
as well as the originator of these system is the fact that everyone that tries the system never understood the
logic behind the way the method or system was developed.

Here the first thing we want everyone to understand first is the logic used and why trades are entered, once
the logic is understood our traders will have a grasp of what it is they are trying to accomplish and have the
same view of the market and its movement as the originator of the methods and strategies.

The biggest part of understanding the market in the same light as I do is understanding when the market begins
to trade higher or lower. The objective, somewhat contrary to everything you've seen in the past, is that I look
to sell when the market is moving up and I look to buy when the market is moving down. The trick is that when
the market is moving, whether it be from the daily movement or the retracements into those daily movements
it will always change direction. It's the change of direction that will get you in long at the bottom of a movement
and short from the top of a movement, that does not mean we will be trying to pick tops or bottoms in the
movements but rather we will look for selling opportunities when the market is moving up and the reverse for
buying entries when the market is moving down. We do this by identifying when the market begins to trade
lower after it's been moving up and to trade higher after market has been moving down.

The logic is in the candles themselves as each period (candle or bar) from each time period has a support point
and a resistance point, that being the high of the candle and the low of the candle. For example as the market
moves down you will see each period or candle close, then the next one opens and then closes below the
previous, so it continues to make lower highs and lower lows. In the charts below is a representation of this.
We see that the potential buying opportunity comes once we see price trade higher by breaking the previous
periods high (price is breaking the pattern of lower lows and lower highs) now we get a candle that trades at a
higher price than the previous period. This is the key to understanding when the market is showing the
potential to reverse and retrace into the movement down, signaling a long entry potential.

Figure 1 shows the example of lower highs and lower lows, from this we know the market is moving down.

I would like to stress the fact that this is not a trading method in itself, this is merely meant to get you into the
mindset of the originator of the strategies (me) you will learn later. The later strategies are meant to take
advantage of this logic. Learning this first is important.

As we follow this formation of candles down an opportunity will possibly arise once it shows a break from this
pattern by a period that trades higher than the previous periods high. This is confirmation that buying is now
present where previously there wasn't enough to slow the downward movement or push the price back up. The
best opportunities will come when it is easily visable the market is moving down and with experience you will
be able to discern a good opportunity from a bad one just from the price action you're watching.

Figure 2 shows the opportunity we are looking for as we see a candle that trades higher than the previous candle
high.

We see a break from the current downward flows and the previous high is broken indicating that the market is
attempting to retrace now and provides us with a long opportunity.

Based on what we've seen so far we are going to take it one step further now and in the next examples we will
split the market by color coding the chart into a long condition and a short condition using each candle or period
to determine these conditions. For the long market condition we will use blue and for the short market condition
we will use red. Figure 3 shows the starting point from where we will split the market into long and short using
each candle, from there we will follow each new candles high and low points as time elapses.


From here we move the color coded section of the chart to each candles high and low and we see clearly the
long and short entry points into the market based on this time frame. Each time frames candles or periods will
have different entry points but each time works exactly the same, the difference is each higher timeframe is a
stronger support and resistance point. The higher the timeframe the stronger the support or resistance will
be from each period.