In my youth, I used to love reading books and watching movies about pirates and buried treasure. Sooner or later, someone would discover the treasure map, leading to a wild adventure to find the buried treasure chest. In most of these swashbuckling tales, the location of the buried gold was marked with an “X” on the map.

How many times have you looked at a major move in a stock, and asked yourself “Wow, what if I had gotten in on that stock early? I would have made a killing!”

You look at the stock and rationalize why the stock moved. Maybe it was based on a strong earnings report. Maybe a new drug got approved, or there was a pending merger or acquisition. Regardless of what caused the move, many investors sit on the sidelines and watch the move happen without pulling the trigger. What if there was a way to find out exactly where to capture the lion’s share of a major stock move without guesswork?

Let’s take a look at Netflix (NFLX) in 2009

As you can see on this chart, NFLX grew from less than $50 per share to $300 over a 3-year period. That’s a 600% return on investment. A $5,000 investment in 100 shares of NFLX would have ballooned to $30,000.

What was the reason for this move and how many investors were able to capitalize on it? What if I told you that none of that really matters? What if the answer was as simple as finding an “X” on the charts?

Look at the indicator at the bottom of the chart. On August 7, 2009 the green line shot up straight through the red line, forming an “X”. That is your signal to buy.

If you bought on August 7, 2009 you would have seen your investment grow 6-fold in two years.

On August 5, 2011, the red line broke up through the green line, forming another “X”. That is your signal to sell.

If you didn’t heed the 2nd “X”, the sell signal, you would have seen 65 percent of your gains erased.

Forget the fundamentals of the stock. Don’t worry about the news. None of this matters. Simply follow these rules:

• “BUY” when the green line shoots up through the red line, forming an “X”
• “SELL” when the red line shoots up through the green line, forming a second “X”

Let’s take a look at another example:

Growlife, Inc. (PHOT) is a tiny company that has emerged as a big player in the controversial, yet booming medical marijuana industry. The firm supplies medical marijuana growers with hydroponic equipment, lighting, nutrients, and even marketing for this rapidly expanding industry.

On September 11, 2013, the green line shot up through the red line forming the first “X”. Time to buy. Over the next 7 and a half months, an investment in PHOT gained 1,080%. A $1,000 investment in PHOT would have grown to $10,080 in just over 7 months.

Knowing when to exit a trade is just as important as knowing when to buy. On April 24, 2014, the redline shot up as the green line fell, forming the second “X”. Time to sell. If you decided to ignore the second “X”, you would have watched 86.6% of your gains erased.

Now, it's not hard to imagine what could've caused this jump in the price of Growlife. After all, it was a top story during that October and November.

Colorado and Washington were beginning to accept license applications to sell medical marijuana, and the U.S. Justice Department publicly announced they would not intervene in this formerly illegal industry in these two states.

This opened up the floodgates for a new legion of customers – all clamoring for Growlife's products.

And, thanks to this increasing popularity, during a late 2013 announcement, the company revealed its earnings had jumped 278% over the prior year.

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How to pick Winners

Discovery of Hidden X-Pattern: "You will, with 100% certainty, only buy stocks that are going up"

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But none of that matters...

Growlife's stock had entered a state of high velocity before Colorado and Washington began accepting medical marijuana licenses. This state of high velocity also occurred before insider information about this company's financial successes became public knowledge.

So anybody waiting around for the news would've missed out on a good bit of those 1,080% gains.

And one final example, this time with a more conventional stock:

CSX Corp. (CSX), the railroad behemoth entered a phase of high momentum on January 7, 2008. The green line shot up through the red line, forming the first “X”. Time to buy.

CSX then shot up 45% over the next eight months. On September 3, the red line shot through the green green line, forming the second “X”. Time to sell. If you ignored this signal, you could have lost a considerable chunk of money.

So, how often does a stock form a BUY “X” Signal?

According to Keith FitzGerald, Chief Investment Strategist at Money Morning, based on a six-month investigation of winning trades , the first “X”, the “BUY” signal for a chart, has appeared on 2-3 stocks per month, every month, for the past 15 years.

Take a look at even some of the most exceptional gains in the stock market. As you can see, it’s really as simple as buying on the first “X” and selling on the second “X”.

How does the Red and Green Indicator Work?

The secret behind the X all comes down to a formula...

Here it is.

• You take the number of periods for the stock.
• Next, you subtract the number of periods since that stock hit its highest high.
• Then, you divide that by the number of periods again.
• And finally, you multiply that answer by 100.

While that may seem like a mouthful, it is important for you to at least understand the big picture.

So two spots are marked "Number of Periods."

That's simply the adjustable window of time the formula uses to determine the strength of both momentum and gravity. To keep things simple, let's use 100 – meaning 100 days.

We're looking to find the right time frame to base a specific trade on.

Now, I've highlighted part of this formula labeled "Number of Periods Since Highest High."

What this represents is the number of days that have passed since this stock's share price reached its 100-day high point for the green momentum line.

Now, for the red line, it's the same formula – you are just calculating the number of days since this same stock's share price reached its 100-day lowest low point.

So after you crunch the numbers you take these scores and you create trend lines for both the green and red lines.

At two points these two lines will meet – meaning both forces are equal.

Then, at the first point, the green line will continue shooting straight up as the red line falls.

The first X will appear.

When they meet again – the red line will be the one rising, as the green line is falling.

Their paths will cross, creating the second X.

Just like you see here.

These two Xs generally signal a 48-hour window for when you should enter and exit a trade.

Conclusion

Just like the treasure maps in the pirate books, the charts can give the exact locations to find impressive, high velocity moves in almost any stock. When you see the first “X”, it’s time to buy. When the second “X” appears, it’s time to sell.

“X” marks the Spot!

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Market Phenomena Revealed

Wall street investment strategist discovers a mysterious "X-Patterns" in winning stocks

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Keith Fitz-Gerald, Founder of “High Velocity Windfalls”, walks you through multiple examples of this simple, yet powerful strategy. At the end of the presentation you will have the opportunity to take a low cost special offer that will allow you to receive Keith’s invaluable research and start trading this strategy tomorrow!

Watch this Video to see the x Pattern in Action

Award-winning Approach to Identifying Institutional Trading Opportunities

Developed and used to win trading competitions around the world, the Hoffman Inventory Retracement Bar (IRB) Trade has become one of the most popular ways to identify where short-term countertrend institutional inventory has subsided and when it’s time to re-enter into a trade’s original trend direction. What you will learn here is how to identify when the conditions arise to make the trade, the entry points, and exit strategy.

What is the Hoffman Inventory Retracement Trade (IRB)?

The IRB Trade is a strategy that is used to identify specific types of institutional trading activity that is counter to the prevailing trend at hand, and then identify entries when the short-term countertrend inventory activity has come to an end and the market is likely ready to resume’s its original trend.

While it is common folklore in the investment industry that institutions, like wolves, travel in packs, the reality is that institutions are not all sitting around at a table conspiring as a group about how to part retail traders with their money. The institutional investment business is extremely competitive and these firms are very much out for themselves and have their own objectives and performance metrics to achieve to appear most attractive to prospective investors at any given time.

Therefore, this strategy is designed to identify when one or a handful of institutions are moving inventory in and out of the market and are straying away from the markets current path causing a short-term retracement against the trend. We are subsequently looking for the market in question to resume its preexisting trend when those short-term countertrend institutional activities and inventories have dried up.

The Rules For The Inventory Retracement Bar (IRB) Identification

IRB Characteristics

In an uptrend – Look for candlestick bars that open and close 45% or more off their high.

Figure 1 shows four individual and unique examples of the IRBs in an uptrend for illustrative purposes

In a downtrend - Look for candlestick bars that open and close 45% or more off their low.

Figure 2 shows four individual examples in a downtrend for illustrative purposes.

Trend Identification

In the absence of the advanced trend identification systems Rob Hoffman uses, a simple approach to trend identification is looking at the 20 EMA (Exponential Moving Average) and asking yourself if it appears to be in approximately a 45 degree angle based on the timeframe you’re looking to trade over the 20 bars of data (i.e. 5 min., 60min, Daily, Weekly, etc.). The next higher timeframe above the one you’re looking to trade should also be flowing in the same direction. For instance, if you’re trading off of a 5 minute chart and it’s in an uptrend, you would like to see that your 10 or 15 minute chart also in an uptrend. It should be flowing in the same direction. If it’s sideways, or worse yet, trending in the opposite direction, your trade is much more likely to fail.

The Entry Strategy

Once an IRB and proper trend is identified, the next step is to allow the market to move along and wait for the price action to break one tick/cent/pip below the low of the IRB in a downtrend. In an uptrend you’re looking for the market to break one tick/cent/pip above the high of the IRB. While it is not an absolute, it is preferred that the price breaks beyond the IRB within the next 20 bars based on the time period you’re trading. For example, if you’re trading off of a 2 minute chart, you would ideally like to see the break in the next 40 minutes. In general, the sooner (i.e. the next five bars as an example) it is better for trend resumption.

The Trailing Stop Exit Strategy

While many traders are specific dollar target traders, the preferred method is more of a support and resistance target based methodology backed up by a trailing stop to ensure you are not giving back those profits during any snapbacks against your position. Typically, Rob
Hoffman prefers a trailing profit stop moved up to 50% trailing of profit achieved when you’ve made it 50% of the way to the intended overall profit target. Then move the trailing stop to 80% of profit earned as you approach 80% of the way to your intended target. Then move the stop to 90%+ of profit achieved as the major support or resistance target level is hit. At this point, if no further progression is made in price, then trail right to the current bid/offer with the intent to exit. If one more spike of energy comes in to trap unsuspecting retail traders with a false breakout, we manually trail immediately behind price during the spike until it pauses, then we’re taken out with profit. Either way a win-win trading opportunity. Common major levels include key Fibonacci levels, previous day’s highs and lows, daily, weekly and monthly pivot points, etc. For maximum comfort with the strategy, it is preferred that you use this with your own favorite support and resistance levels.

Figure 3 Live Trade Example: Below the middle chart highlights in yellow the intended target, a pivot point. As we approach 50% of the way to the target, we trail the stop to 50% of profit earned.

Figure 4 Live Trade Example: As we approach 80% of the way to the target, we trail the stop to 80% of profit earned.

Figure 5 Live Trade Example: As we approach intended target we trail the stop to 90% of profit earned. This gives the trade an opportunity to have one more false breakout move above the target that allows us to pull out a little more profit.

Figure 6 Live Trade Example: If trade holds target and fails to break through we move stop to current bid/offer and wait to be taken out of the trade. If one more spike of energy comes in to trap unsuspecting retail traders with a false breakout, we manually trail immediately behind price during the spike until it pauses, then we’re taken out with profit. Either way a win-win trading opportunity.

Figure 7 Live Trade Example: The bid was hit and the maximum profit achieved!

Stop Management

Based on the premise of this trading strategy, the expectation upon the entry is that the market will continue into the original direction it was heading after its brief institutionally driven pullback against the trend. Very frequently, after breaking through IRBs, the market will actually rapidly accelerate with fast action and wide ranges as everyone starts to realize that the brief pullback was merely a pause by one or a few institutions against the intended direction as the market moves to catch up with its original intent.

With that said, once a trade is entered, the price should not retrace back beyond the opposite side of the IRB. For instance, if the trade is entered one tick/cent/pip below the low of the IRB in a downtrend, it should not stop and reverse to one tick/cent/pip above the high of that IRB. If it does, that market may be forming more of a reversal pattern and thus the need to exit the position and move on to the next opportunity or use one of Rob Hoffman’s phenomenal market reversal strategies to capture the move.

When not to use the strategy

This strategy was primarily designed to identify and take advantage of trend continuations after counter trend institutional inventory exhaustion. Therefore, this trade is not to be used in a sideways market conditions as continuation failure will frequently occur.

Why This Strategy Works

In general, the market tends to trade directionally with as few retail traders on board the correct direction as possible.

This strategy is so effective due to its ability to find high probability areas where three things are happening to retail traders in an uptrend:

1. Buyers are being distracted from taking long side trades when they see the pullbacks off the highs, scaring them into believing the move is over.
2. During pullbacks, sellers are being given false hope that any shorts taken earlier in the uptrend may finally start to work.
3. Buyers who bought the high during rapid wide range ascents hoping it will go higher get stopped out on the pullback.

After all of these events above, once a new IRB to the upside appears and is pierced, the market is much more likely to move without all of those traders above on the right side of the market.

In a downtrend these three things are happening to retail traders:

1. Sellers are being distracted from taking short side trades when they see the pullbacks off the lows, scaring them into believing the move is over.
2. During pullbacks, buyers are being given false hope that any buy side trades taken earlier in the downtrend may finally start to work.
3. Sellers who sold the low during rapid wide range descent hoping it will go lower get stopped out on the pullback.

After all of these events above, once a new IRB to the downside appears and is pierced, the market is much more likely to move without all of those traders above on the right side of the market.

Used During International Trading Competitions

Figure 8 shows one of the seven trades taken using this strategy during the International Trading Competition held in Paris, France. The black vertical arrow highlights the IRB and the black horizontal arrow shows the intended area of entry for trades using this strategy.

Rob’s Strategy Checklist

Key Points To Remember

No more weight is given to any IRB based on whether its close is above or below the open (i.e. green or red candle).

In addition, think about the concept of over extension. If the IRB has an extraordinary range as compared to the Average True Range of the last 10+ bars before it then the break back through the IRB is far more likely to fail. This will more likely result in an entry that has a higher likelihood of reversion to the mean as much of the energy and profit opportunity has potentially dissipated leaving the trader with a much smaller profit or perhaps a stop loss.

Trail your entries to reduce the risks of reversion to the mean while still giving a trade a chance to push into your intended direction.

Use proven trend qualification tool like Rob Hoffman’s. In the absence of a well-tested tool of your own, trade in the direction of an approximately 45 degree angled 20 EMA.

This strategy has very diverse applications across many markets and asset classes. For instance, in addition to trading conventional equities, futures, options and FOREX instruments, traders can consider using this strategy to analyze underlying equities and then trade high delta, in the money options plays as an example for active options day traders. So very diverse indeed.

The Conclusion

What we have shown you here is a simple, award winning strategy that you can take away and explore here today. Rob Hoffman has used this tool to help him secure wins in many of his 19 domestic and international trading competition wins. It is an excellent tool used for identifying where retail traders are misjudging the markets movement. It shows where one or more institutions is temporarily breaking away from the trend due to short-term inventory acquisition or liquidation. Once that inventory need is exhausted the overall market is free to resume the existing trend offering new opportunities for retail traders to trade back in the direction with the overall trend.

THE SPECIAL OFFER

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WATCH THIS IN-DEPTH VIDEO HERE!

ABOUT THE AUTHOR

Since I have been asked to share one of my favorite day trading strategies, that’s exactly what I’m going to do in this video. I will keep it short and sweet, and I will give you all of the information you need to find the trading opportunities for my strategy.

The first thing I highly recommend is for you to figure out what kind of trend you are trading in. If you trade stocks, options, futures or any other type of market intraday, there are several studies you can plot to determine if you are in a valid downtrend or uptrend. When I analyze the markets, I always start with the longer time frames first, and then dial down to the period I am trading.

By using the Ichimoku Cloud, I can easily screen for stocks that are in valid uptrends and downtrends. It’s very easy to identify trading opportunities on larger time frames, and then dial down to lower time frames to find your entries.

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ABOUT THE AUTHOR

If you have been trading for any length of time, you have probably noticed that the markets are moving sideways A LOT. Consolidation is a huge part of the market’s balance and so it makes sense to learn strategies that take advantage of the sideways/consolidating type of market conditions.

Often, ranging strategies are high probability but they do not offer a good Risk to Reward. But today, you will learn a strategy that has both a high win rate and the opportunity for some very good R:R.

The entire strategy can be boiled down into just a few steps. If you read the report carefully, you should be able to begin implementing the strategy virtually right away. Though, as always, I do recommend trying new strategies on a demo account and getting comfortable with them before trading them live. With that, let’s dive into the steps.

Step 1

Identify range­bound markets on Daily or 4 Hour Charts

A ranging market is simple to identify. We are looking for clearly defined sideways movement that is sustained with several tops and bottoms.

One thing to remember is that a sideways market should have similar priced tops and bottoms. They do not have to be identical for us to consider it a range, but if the back and forth movement doesn’t have a consistency to it, it’s very difficult to take advantage of.

You can see in situations, demonstrated by the green example, that a more consistent top and bottom will improve the chances that the market reacts at the expected time so that is what we are looking for.

The red example shows you a sideways market that is not in a cleary defined range. So while the price is certainly going back and forth, the market is less responsive to a clear top or bottom range that we can utilize.

The truth is that once you’ve mastered this strategy you can still use it on less predictable ranges, but I recommend beginning with the more clearly defined ranges until you see some success.

Here are a few examples of real ranging market conditions:

In the second example, I used a 20 and 50 EMA to show you how moving averages can also signal a ranging market as they quickly begin to flatten and intertwine with one another. This is, of course, a lagging indicator but for those of you who like indicator confirmations, moving averages are an easy way to confirm a ranging market.

Once you find a ranging market, you can move on to the next step.

Step 2

Identify an Overextension Within a Dead Market

In this step, we are looking for the market to extend itself within a sideways market. More often than not, extended steep moves will pull back to settle toward reasonable prices, but this is even more true when the market is in a defined range. When it begins to accelerate and get overbought or oversold we are very likely to see it “snap back” like a rubber band once the it runs out of orders to fulfill.

It’s this “Snap” that we are eventually looking to take advantage of within the Rubber Band Reversal, but first we must define the stretch point of the band.

As always, I like to use multiple time frames to get a complete, accurate view of the market, so once we have a ranging 4 hour or Daily market condition, we’ll zoom into a 60 minute chart to find an over­extended point within the market.

On the 60 minute chart, we’ll add a Bollinger Band (standard settings) and RSI (standard).

The Bollinger Bands and RSI give us a double confirmation to find over­extended conditions. Bollinger Bands are a great indicator for this because they shrink down and quickly define a range which, in turn, makes it obvious when the market is stretching out of that range.

When you combine the defined ranges with stretched Bollinger Bands, you get a pretty good idea of when price might make a turn around. But we also like to use the RSI to make sure that price is clearly overbought or oversold.

The vertical lines represent when the RSI is above 65 or below 35.

**Please Note: ​ The RSI is NOT an entry signal. It simply helps our patience and discipline as we are forced to confirm an overbought or oversold condition before going to the next step.

The Bollinger Band and RSI are what allows us to be certain that the market has stretched like a Rubber Band and is ready for a potential snap back in the opposite direction.

Now we know that the market is in position for our Rubber Band Reversal, but we do not have the ability to enter the trade yet.

This is where a LOT of traders get tripped up. The see the RSI shoot over 65 or 70 and they are too trigger happy­­they just begin shorting the market. The problem is that more often than not, when the market hits 65 or 70 it is still in a momentum phase and we simply don’t know how long that momentum will last. We do not know how far the rubber band is going to stretch. So it’s very important to utilize the next steps in the strategy to make sure you have a complete plan and are jumping into trades early.

We wait for the price to pierce the upper Bollinger band and simultaneously, we want RSI levels to be above 65 levels. After both conditions are met (Bollinger Band pierced and RSI overbought/oversold) we can go to Step 3.

Step 3

Find an Entry

To find a high probability entry, we look for a unique combination I have used for a long time.

The combination is a 15 Minute Reversal Candlestick (pin bar, inside bar, engulfing, etc.) at a whole number.

Whole numbers are important because of their psychological value. A maximum number of orders are placed closer to the 50 or 100 levels, for example, at the 1.3050 or 1.3100 levels.

In this shorter time frame, we consider anything ending in a 0 (for 4 digits) or 00 (for digits) to be a whole number. The key is that almost every time the market shows rejection around a whole number, we get SOME follow through.

Often, it is only a few pips but when you combine it with the right market conditions like we are doing in this strategy, your odds of catching a reversal that moves 20,30, 50 or even 100 pips is very, very high.

Many times, price pushes slightly above the whole numbers and then quickly reverses, sucking in amateur longs, who get trapped and are forced to cover, thereby aggravating the fall.

On other occasions, the institutional orders push price right at the whole number or even a few pips before. Either way, if you are prepared with a plan to trade around these whole numbers, you can take advantage of these scenarios.

Once we see a 15 minute candle show rejection at a whole number, we are ready to place our entry.

Here you can see a real trade example of the market spiking through to the tops, piercing the band, above 65 on RSI and getting our 15 Minute rejection candle right at 1.4340.

With our criteria met, we can go ahead and set up the trade.

Step 4

Execution, Stop Loss and Take Profit

With a market order, we will enter as soon as the 15 Minute candle closes (advanced traders can zoom into a 5 minute and anticipate the reversal momentum to improve R:R)

For this particular strategy, our Stop Loss and Take Profit are very easy.

Once the entry is made, we can place the Stop Loss a few pips above the entry candle or previous candle (whichever has a higher high) and we can place our Take Profit at the mid­band of the Bollinger Bands.

The midpoint of the BB will change as the trade progresses but it should remain at the price of the midpoint at the time of the entry candle.

So the full trade setup would look like this:

Here, you have an ENTRY (green line) right as the candle closes, a TARGET (blue line) at the midpoint of the BB bands at the time of the entry candle and a STOP LOSS (red line) a few pips above the high of the piercing candle.

In this case, the entry candle is relatively long given the high piercing wick so our Risk/Reward is about 1:1 (still not bad for a range trading strategy). But as you’ll see with practice many entry candles are smaller and the R:R can be 2:1 or even 3:1 in some cases.

Plus, once you become a Rubber Band Reversal Expert, you can zoom in even closer to a 5 minute chart and get ahead of the momentum. Often, once the rejection of the whole number begins to happen, price falls quickly and waiting for the 15 Minute to close can cost you a fair amount of pips. So I like to get in early when I see that rejection taking place.

Either way, it is a great strategy for ranging markets and I hope you take advantage of it!

Summary Points to Remember:

1. Look for a range­bound market on the Daily charts and 4 Hour Charts.
2. Once you have chosen your currency pair, select the 60­minute time frame and overlay.
3. Wait till the price pierces the upper Bollinger band and RSI is above 65 or below 35.
4. Zoom into the 15 Minute chart to find our entry.

5. On the 15­minute chart, we want two important conditions to be fulfilled.

   • We want a reversal bar
   • We want to enter the trade close to a whole number
6. The profit objective is at the midpoint of the Bollinger band, where we take our profits.

With those few steps you can take advantage of the very common consolidating markets we see. If you have any questions about trading the strategy, you can email me at [email protected]

I do ask that you try to be as specific and clear with any questions as I get lots of emails!

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ABOUT THE AUTHOR

Are machines taking over the markets? Does an individual intraday trader even have a chance at getting a return when algorithms snatch away profit?

Surprisingly, the answer is yes to both questions.

The rise of algorithms or programs that look for patterns and execute trades in and out of stocks in milliseconds (High Frequency Trading or HFT) has created a choppy sea that even technical signals can’t keep up with.

Today’s stock market is highly influenced by algorithmic trading. But because of enforcement to reduce spoofing (fake orders), glitches at major firms that caused big trading losses and the SEC’s analytics screening system, even proprietary traders are experiencing reduced profits.

The search is on for the next evolution in computing power that delivers more reliable returns.

So as an individual trader without the resources to build your own proprietary trading system or without the desire to sit back and watch the algorithmic trading system do your trading for you, can you jump on the evolutionary bandwagon and benefit?

Yes. A company founded by active traders who were tired of being scooped by the effects of HFT and algorithms decided to fund the development of a predictive analytic platform using machine learning, a form of artificial intelligence.

EOTPRO Developments are motivated to give individual traders like them an edge over the effects of proprietary algorithms.

It’s taken their team of data scientists and traders six years to get DeepStreet EDGE V 2.2 right. It was, as you might expect, a far more difficult challenge than they first expected.

Here is the how and why behind why it works.

The Trading Power Behind Predictive Analytics

What is predictive analytics and how is it any different than what you or proprietary traders are using today to select trades and time your entry and exit points?

An optimized machine learning model today can comb through big data, and determine what price and direction a stock or an index is about to move to next, before it actually happens. This predictive output provides a true leading indicator.

To evaluate whether you should add a predictive analytics platform to your trading system, you will want to understand how machine learning works and how far the development of predictive applications have come.

Before we dive into the mechanics, you may be curious to see DeepStreet EDGE’s predictive power in action.

Case in point, global macro events always destabilize the markets when you don’t expect it.

Central bankers from around the world issue opinions on monetary policy randomly, without notice and the markets react. Your long trade is suddenly moving against you and your signals did not give you a heads up until the move has been made.

Algorithmic trading won’t give you a heads up either before or during such events. A computerized trading strategy also relies on lagging indicators to spot patterns that meet its criteria. The instruction may or may not have been looking for the global macro pattern.

In Figure 1 below, DeepStreet EDGE recognizes that a central banker is about to speak (a global macro event) and provides a subscriber a notification BEFORE the market reacts.

Figure 1 – DeepStreet EDGE NQ Chart October 24, 2016 showing the power of knowing in advance that a central bank governor (Charles Evans) has just released a speech that is about to move the market. How many trading opportunities can you see in this chart as a result of this prediction?

How is this prediction even possible if the governor has not yet spoken? Read on so you get a better perspective on how machine learning and predictive analytics can give the individual trader an edge without having to hire a team of data scientists to interpret the results.

It’s important to think about the time line that traders use to look for an entry or exit signal.

Traditional technical analysis uses signals to let the trader know when patterns that have produced a reward in the past are present again in the moment. The theory is that if the same pattern is present now, then entering a specific trade will deliver the same result as before.

Algorithms are designed to find these patterns in the past too.

Before Machine Learning, there was no realistic alternative to this rear view.

While algorithmic trading used to provide an edge, it may surprise you to hear that today even Hedge Funds struggle to find strategies that beat the S&P or simple index funds, despite the investments they have made in algorithmic trading.

Further many hedge funds are chasing the same strategies so there is little to exploit now. So if the pros can’t find returns, why would you want to bother with algorithmic strategies either, or even trust your technical trading signals?

Your trading system may need an overhaul too just like proprietary traders are discovering.

Let’s look at the MACD, in figure 2 below, this signal is marketed as a ‘leading indicator’ which is supposed to predict when to enter a trade.

But look more closely as to how all the volatility from algorithmic trading and HFT has made the signal late to the party.

Figure 2 – the MACD has become an unreliable signal due to algorithmic and HFT produced volatility.

You will notice in the chart above when the MACD give you a signal to the down side (note the red bars), the market moves up and against you first. You may have gotten out of your trade having lost before the market actually moves down again. Looking at the green bars, the same dynamic occurs, the market drops, then moves up and later, doesn’t let you know about the next drop before moving back to the previous price.

The algorithmic trading instructions exploited the opportunity first, so the individual trader is working with stale information that the MACD can’t compensate for.

So what do you do when you can’t find alpha, don’t have the funds to beat the computerized systems and can’t rely on traditional signals anymore?

Some are going to index funds. Others are looking to new forms of big data and machine learning to super charge their strategies and returns again.

Chasing Alpha Drives Evolutionary Changes In Trade Selection Technology

If algorithmic trading is now failing the market, what’s next? Machine Learning mining big data for other patterns, or artificial intelligence.

One source of big data is social media. Scoring the sentiment analysis provides the ability to determine how a social media tweet or news story would affect a stock.

There are several companies like DataMinr that have commercialized tools to speed up the predictive capability of sentiment analysis. They have raised millions of dollars from Wall Street and Silicon Valley in their bid to be the first to predict stock movement.

But is determining whether Starbucks stock will move because a series of tweets came out with the name of the coffee company in the tweet actually Artificial Intelligence at work?

Not quite. Trading social media scored with sentiment analysis powered by natural language processing and machine learning is deceptive and possibly even confusing. There is a lot of ‘noise’ in those tweets.

Let’s examine what you would need to have in place to actually reduce the risks that sentiment analysis alone introduce to the intraday trader.

You have to give the model and the machine the right base of data to learn from. The creation of your model starts with having the right data sources. What is the primary mover of stock prices? It is not historical data.

It is News. And not any news. You need news streams that have yet to impact the market.

In simple terms, to build your predictive model you feed in vast streams of news, not just social media and tweets. Then show the machine what happened to every stock and index as a result of the news. This feedback loop increases the machine’s confidence that it can predict price movement even more accurately with the next piece of news on any stock.

Then you multiply all that activity by thousands of news items every day. Social media is only one source of activity that could, or may not move a stock.

You also need to then aggregate those thousands of changes in price movement of every stock so you can make the prediction as to how all that news will move an entire index.

You are now talking about collecting all the inputs that affect price and movement so that your particular machine learning model can spot thousands of patterns and relationships between disparate data that humans can’t, and turn these relationships into increasingly accurate predictions.

Up until now, this was an immense computation problem as a well as a data source problem. It is very difficult to get all the right input feeds that contribute to stock price movement… and house that data in one massive location so it can be analyzed.

For the active trader, having access to a tested machine learning model with the right data sources can level the playing field against the effects of algorithmic and high frequency trading.

Every iteration in the learning model increases the accuracy of the probability. Or in simple terms, the platform becomes more capable over time about predicting that a stock or index will move to a certain price.

Up until now, you needed millions of dollars and access to data scientists to develop such a learning model. The average retail investor has not been able to tap into the power of that predictive engine.

But even those well-funded hedge funds able to employ data scientists have struggled with interpreting how to best interact with such enormous data sources and pull out actionable, immediately useful trades and signals to time entry and exits.

As an individual active trader, should you even care about the struggles the pros are having with developing their own machine learning models?

Yes.

For two reasons: First, developing a reliable machine learning model means managing a team of software, math and data scientists while evaluating the merits of their latest models. These are not skill sets easily available on the market. Traders, not software project managers or data scientists run the average Hedge Fund.

The models that have been created so far inside hedge funds are friendly to data scientists, but unreadable to active traders.

While the big institutions have been trying to solve the problem of what data to include, what to exclude and how to interpret, train the model and forecast a news alert for their own benefit, EOTPRO has been quietly developing a solution to give Active Traders their own advantage.

For instance, as a trader, you want to know how useful any social media source is to any stock’s movement. However, unless you have the right data sources and model to compare social media to, you can’t actually prove the predictive value of Twitter. A single data source like social media seems tantalizing but leads you down the garden path. You can produce cool charts and visuals showing the sentiment score that excite people about the potential. But the active trader would not know if the scores have high predictive value or not, until the trades don’t produce any better returns than other indicators.

EOTPRO proved this year that social media and sentiment analysis has a 2% positive predictive effect compared with numerous other data sources. What this research means is that if your model is exposed to a lot of social media you have to be able to filter out what is noise and what is market moving.

How would you know if your technology platform has the correct filters? The data scientists know, but the hedge fund manager might not unless they know to ask such questions.

How come more data comparison to prove models is not done? With the state of computing power on the planet today, it can take months to prove the value of a single model.

Given that you could test thousands of permutations in any given model, the chances of discovering what is noise and what is worth paying attention to are low unless you’ve tested discrete data sources one at a time before bundling them altogether in various combinations.

A systematic validation of data streams before throwing it into the hopper with the rest is an essential discipline that takes time. Hedge funds are losing money now. They need new strategies. They may skip essential, but not well understood steps.

So as a trader, if you have doubt about your trading system then you don’t have a credible user experience. There may be little value being extracted from those millions being invested in machine learning.

The team at EOTPRO didn’t just want to ask big data questions to uncover the sentiment of thousands of news stories. They wanted to glean advanced knowledge (true leading indicators) before any other trader gets to see that news, so that their fellow individual traders had an equal playing field against the supercomputers.

So they measure the effect of each data source so they know what has predictive value and what needs filtering out.

In developing DeepStreet EDGE, the EOTPRO founders wanted to know:

1. When to trade any stock or option in the Dow 30 or top 100 stocks on Nasdaq, the S&P 500 or the Russell.
2. When to trade futures or ETFs
3. What price change to expect from the statistical probability assessed before stepping into a trade.
4. What level of confidence they could expect from the trade, based on the statistical probability.
5. How long it would take to get to that price.
6. When to get out.
7. When not to trade at all.

Seven seemingly simple goals that would replace out-dated, out-maneuvered, trading signals that computerized trading have made irrelevant and in fact risky for retail traders to rely on.

There were two failed attempts before EOTPRO found the correct way in to wrestle big data from 45 different data sources to deliver on their goals. It’s how they discovered the poor predictive value of social media!

The 8 Goals That Give Traders a Reliable Edge Even During Volatility...

The Crucial Difference Between Algorithmic Trading & Machine Learning

Machine Learning actively interprets and scores numerous data sources to predict a trend.

But all Machine Learning technology is not created equal.

The data sources the machine learns from and the visual analytics that tell you what to do with that prediction trend is what creates a reliable leading indicator.

Remember the global macro event? How does DeepStreet EDGE know in advance what a central banker anywhere in the world is about to say before they speak? EOTPRO has secured access and tested the right sources of early news, before it’s released to the web.

The real question you would want to ask yourself is, how reliable are any of these technologies at modifying and managing your risk in a way that makes trade selection, entry and exit fulfill your expectations?

The 8 Goals Your Technology Platform Should Deliver To Equal The Playing Field to Counter The Effects of Algorithmic Trading

To evaluate whether any of the many platforms offering predictive reliable accuracy that could provide you with an edge, these 8 goals must all be part of the predictive analytics platform so you have useful and actionable intelligence:

1. Early News You want deep data from news sources that arrive into your big data stream EARLIER than journalists receive a news alert, so you know that the data source has yet to be priced into the market.
2. Accurate Scoring The Machine Learning Model then has to have an effective ‘scoring’ system so you know that it is rating the value of that news to move a stock in a direction AND filtering out the irrelevant noise.
3. Price Prediction By Stock Prices change fast. In fact HFT is designed to exploit latency in stock prices, which the average human can’t compete with. You need a model that tells you how much a stock will move so that you know whether the trade is worth taking BEFORE HFT acts.
4. Confidence in the Prediction You need to know the confidence the Machine Learning model has with respect to any stock price movement. You might not want to take trades that have less than 70% statistical probability of moving to a certain price. Lagging indicators can’t give you this kind of risk management for your pool of capital. Neither can cool sentiment analysis tools.
5. Timing How long will it take for the stock to move to that price? You need to know how soon the price prediction will be reached, so that you don’t get stuck in a trade that’s retracing against you.
6. When to Exit Knowing in advance that a stock will only move up to a certain price and within a specific time frame allows you to time your exit which is the second most important risk-reducing activity after selecting the right trade.
7. When NOT to Trade Stocks don’t move up or down in isolation of other macro variables and news sentiment. There are times when a stock might have a great entry point but other uncontrollable variables (Brexit, Elections, The Fed, Social Unrest) are working against you. You need a platform that alerts you to this, BEFORE you take a trade so you can protect your pool of capital.
8. A Visual Dashboard Because of the pace of the market, you need a visual graphic ‘at-a-glance’ dashboard that tells you which stocks or futures to pay attention to before it happens. You want to learn how it works quickly and easily without having to be a data scientist or read lengthy manuals.

Figure 3 – This is the DeepStreet EDGE dashboard. You can see that the machine learning model suggests that JPM will move (green line with boxed ends) up $0.09 in the next 44 minutes. The model has a 77% confidence in this prediction. Below the JPM chart are other trader alerts that the model says have predictive capacity to move to a certain price. Subscribers listen to EOTPRO’s traders interpret what’s going on as well as take traders for their own accounts. This real time live audio training (see Club Room Audio box at bottom right) at market open is how subscribers learn to use the platform quickly.

If you are a futures trader, you can see in Figure 4 below how DeepStreet EDGE is clearly pointing in the direction the market is about to move next (green arrow at 53% confidence).

Figure 5 – The green lines and red lines are the past predictions for the NASDAQ overlaid on the actual market trajectory. The green arrow is pointing out in front of price, before the market moves. Traders are able to add multiple other signals to these charts to customize their view. This means you can combine your traditional trading system with DeepStreet EDGE and have the best of both a predictive analytic system and traditional technical analysis.

Summary

Lagging indicators, employed by most traders today, are quickly becoming out-dated and un-useful as trading tools because of HFT and algorithmic trading. Even Hedge Funds can’t find opportunities to exploit using these tools.

Machine Learning technology can give the individual Active Trader a true equal playing field, and even an edge against the effects of algorithmic trading employed by hedge funds and big banks.

It is vital to use a platform that delivers actionable knowledge with a precise level of confidence you can rely on so you can manage your risk and capital.

Use these 8 goals to evaluate whether other innovative technologies give you what you really need before investing time and energy in changing or adding to your technical trading system.

THE SPECIAL OFFER

So how accurate has EOTPRO’s model become? Join us in the Club Room at market open and ask Bill Dennis the head trader that question. We update our accuracy scores every day.

DeepStreet EDGE is Machine Learning in action, which you can experience by getting a free 30-day trial made possible by the publishers of this book. If you are an Intraday experienced trader, go to this link to activate your trial subscription

Get an All Access Pass to Deep Street Edge Here!

ABOUT THE AUTHOR

In the following video, I will share with you a High-Risk, High-Reward Strategy that you can use to reliably trade weekly options. This strategy will help you easily identify breakouts using the Ichimoku Cloud.

The Ichimoku Cloud is a technical analysis method that uses the past, present and future to help traders identify at a single glance if a security is in bullish or bearish territory.

You will learn the 6 key components that make up the Ichimoku Cloud. It can be used for any security, including futures and forex trades as well. You will learn the best time frames to use for the Ichimoku Cloud whether you are a day-trader, swing-trader, or long-term investor.

THE SPECIAL OFFER

Click Here to get my course on Trading Weekly Options with the Ichimoku Cloud at a special, discounted price

ABOUT THE AUTHOR

If you are a futures or Forex trader, this chapter will show you a strategy to reduce your risk to the current strategy you are trading. Stock traders sometimes buy option puts to hedge their risks, but what about Forex traders or futures traders? The strategy in this chapter will discuss using Nadex as a hedge against risk for futures and Forex trades.

In this chapter, you will learn the following concepts:

• The three important things you must know to begin making money in trading.
• How to reduce risk by up to 75% or more while having stop/losses that are up to 400% or more larger than what you use now to decrease the probability of getting stopped out by a spike in the market.
• How to get stop/losses for pennies on the dollar with the Whipsaw Elimination Strategy.
• How to hide your stops from the market with the Ultimate Hedge Strategy.
• How to find the right spreads for your trade.
• How to know how far the market will move today.

But first, let’s take a look at a fairly typical trade setup:

The chart above is the GBP/USD, but it could be any market. You plot a trend line and see a bearish trend. You identify a pullback for an entry signal. You exercise caution and set your stop/loss above the highest candlestick. Your risk is 65 pips or $650 dollars, so you are prudent in setting your stops, but there is a greater amount of risk capital in play. And then this happens:

This really hurts. The market starts threatening your stop/loss. What do you do? Move your stops, take the hit? Go long because there is a trend reversal? And the worst part about it is that it is a slow, agonizing march toward your stop/loss. So you take the hit, and lose $650. And then the market decides to slap you in the face.

Your initial instincts were right. The market was in a downtrend, but it decided to spike upward and stop you out before it made its move downward.  The net result is that you lost $650 dollars. This chapter will show you how to prevent this from ever happening in the future. You will learn how to place the exact same trade, use less money and never get stopped out again. You can combine this strategy with your current Forex strategy to create a massive stop/loss for a fraction of the cost.

To make money in trading, you need to master three things:

1. You need to lean to reduce your risk.
2. You need to increase your leverage.
3. You need more time to be right.

In the trading example above, the trade had $650 dollars of money at risk, and as soon as you made it, the market spiked and took you out. You were right, but you needed more time to be right.

Trading futures, options and Forex can be very expensive. Traders can be required to have upward of $30,000 on hand to fund accounts and have a considerable amount committed to margins. This is where Nadex comes in very nicely, as the table below illustrates:

Day trading the EUR/USD (Equalized Size 125,000) and other instruments requires considerable capital to fund an account, margin requirements are high, and leverage varies. When you look at the table above, you can easily see a comparison of trading the same instrument across multiple trading platforms. The significant advantage of Nadex is reduced capital risked, a huge leverage advantage, and best of all, you can’t get stopped out in a trade.

Other benefits of using Nadex as a trading platform are:

• You can’t lose more than you put up in margin. The amount of cash you risk is your margin.
• You still get very good leverage.
• You can trade stock indices, popular commodities and Forex pairs.
• Price is driven by the underlying market.
• Every pip is worth $1.00 per spread bought or sold.
• Nadex is an exchange that facilitates transactions between buyers and sellers.
• Nadex is regulated by the CFTC, and does not take a position in any market.
• Nadex is now available in 49 countries! (Previously USA, Canada & Mexico).

Let’s talk about some basics to trading Nadex spreads:

• A spread is defined by a floor and a ceiling. In this EUR/USD example, the spread is between 1.2400 and 1.2500, which is 100 pips. Each pip is worth $1.00, so the spread is worth $100.
• If the price moves above the ceiling or below the floor of the spread, you can’t get stopped out. Nadex spreads are based on a defined time period that you choose, and the trade is active until expiration of the contract.

• Using this example, if you SELL at 1.2490 and the ceiling of the spread is 1.2500, your maximum risk is 10 pips or $10. Remember, with Nadex, your risk is your margin. If you placed the same trade on Spot Fx, your margin would be $250.

  
• Since the spread is 100 pips and you are risking 10 pips, your maximum profit is 90 pips if the trade ends at the floor.

• If you BUY the spread at 1.2410, it’s the exact opposite. Your risk is 10 pips from the floor of the spread, and your maximum profit is 90 pips above.

  
• You can close the spread any time you want to before expiration to capture profits or limit losses. When the contract expires, remember that you are trading an underlying market, and not physical commodities, for example. Corn will never be delivered to your doorstep if you trade corn futures on Nadex.
• Your profit is the difference between your strike price and the price of the market at the expiration of the contract, or the price of the contract if you close the spread early. If you BUY this spread at 1.2410 and it settles at 1.2480, then the difference is 70 pips, and $70 is deposited in your account, usually within a matter of seconds.
• There are a wide variety of spreads and timeframes to choose from in Nadex. Choose the spread that works the best with your trading plan and risk/reward tolerance.

Duration and Expiration of Nadex Spreads

Nadex offers a wide variety of spreads, both in terms of markets you can trade (indices, commodities, Forex) and time intervals:

• Intraday – as little as every 2 hours. Time frames can depend on the markets being traded. Forex trades are available in the overnight hours when the commodities and some indices are closed. All times listed on Nadex are Eastern daylight time (EDT). Some spread times can include:
  • 8am-10am EDT
  • 9am-11am EDT
  • 10am-12pm EDT
  • 11am-1pm EDT
  • 12pm-2pm EDT
  • 1pm-3pm EDT
  • 2pm-4pm EDT
• Expiration and Settlement
  • Days of expiration
  • Time of settlement (All quoted in Eastern time)
  • Spread Range/Width: Distance between the floor & ceiling of the spread
  • No. of contracts: Number of spreads per expiration, per range. For example, you could have one in the middle, one high and one low.
• Trading Hours: Times when new trades can be entered, and when open trades can be closed before settlement.
• Commissions: Since you are placing an order on an exchange without a broker, there are no commissions charged. There is an exchange fee of $0.90 cents per $100 contract, per side. You are not charged a settlement fee if your contract expires out of the money. If you trade one $100 contract successfully, you are charged a $0.90 to execute a trade and $.09 to settle the successful trade for a total of $1.80 in transaction fees. Transaction fees are capped at $9.00 per side. If you trade over 10 contracts on a transaction, your transaction fees are capped.

The chart above shows the overlap of five Nadex spreads. The longer you have until expiration, the wider the spread:

• The yellow background is the Daily Spread between 1.2700 – 1.3300 ($600)
• 8 Hour: The blue spreads are two 8-hour spreads:
  • 1.2875 – 1.3125 ($250)
  • 1.2750 – 1.3250 ($500)
• 2 Hour: The Orange spreads are two 2-hour periods
  • 1.2950 – 1.3050 ($100)
  • 1-2900 – 1.3100 ($200)

Nadex offers binary options and spreads on the following markets:

The Whipsaw Elimination Strategy is simply using a Nadex spread. As long as a spread is active within a defined time period you can’t get stopped-out.

The Ultimate Hedge Strategy

Now that we have a basic understanding of Nadex spreads, we will apply Nadex spreads to help you get stop/losses for pennies on the dollar.  You will also learn:

• How Nadex spreads work
• Nadex spread example
• How to find the best spreads
• How to know how far the market will move today

Let’s go back to our original example:

We identified a trend, placed our trade, set a conservative stop/loss, and got stopped out on a market spike before the market continued downward. We lost $650. Let’s look at the same trade, using an 8 hour Nadex spread:

A Nadex spread was available with a ceiling of 1.5700 and a floor of 1.540 (250 pips). If you sell 10 contracts at 1.5665 then your maximum risk (and margin) is 35 pips or $350.  In the previous example, our risk was $650, and our margin requirement was $3,138. In the Nadex spread, we didn’t get stopped out and took a $750 profit within 8 hours. In the previous example, we got stopped out immediately on a market spike and lost $650. We satisfied the criteria for making money discussed earlier in this chapter. We risked less money, we had better leverage, and we had more time to be right. Here is the side-by-side comparison of trading a Forex spot trade vs. making the same trade with Nadex spreads:

Here’s another way to look at the original trade in this chapter. What would happen if we took our original Spot Forex trade, went short and hedged it with a Nadex spread instead of a stop/loss?

A Nadex spread is available with a floor of 1.5700 and a ceiling of 1.5950 (250 pips). You buy the spread at 1.5710, which becomes your margin, and you risk $100 instead of $650. When the market spiked, you had a 240 pip Nadex insurance policy protecting your trade. The market continues downward to your profit target. Your gross profit is $960, less your $100 Nadex spread loss for a net profit of $860.

If you trade Forex or futures, you can trade the way you normally do do, but use Nadex spreads to minimize your risk.

Using the Apex Investing Institute Website to Help You Find the Right Nadex Trade

If you sign up as a member on the Apex Investing Institute website, you will have free access to a wealth of information to help you identify the right Nadex spreads and binary options to trade. They also have tools to help you learn how far the market thinks it will go in any given trading day. The graphic above is a screenshot of the Apex Nadex “Spread Scanner” utility which will return spreads to you based on the money you are comfortable risking, your expected reward and the time period you are looking for. Apex also offers free chat rooms for their members and several services which can be purchased at a reasonable price if you need them.

Conclusion

Nadex spreads are an excellent way to trade with less risk, get better leverage, and they buy you the time to be right. Since you are placing your orders directly on an exchange without a broker, you don’t pay brokerage commissions, just exchange fees. You can’t get stopped out during a trade, and you have the flexibility to exit a trade at any time before contract expiration.

If you trade futures or spot Forex, Nadex spreads allow you to trade the way you normally trade, but they can buy you stop/loss protection for pennies on the dollar. There are no large margin requirements with Nadex. Your risk is your margin.

Nadex is regulated by the CFTC and is now available in 49 countries. To get a free 2-week Nadex demo, funded with $25,000 worth of play money go here www.TradingPub.com/demo

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THE MOVIE

Watch the Video of this Presentation here- www.TradingPub.com/Nadex10. During the presentation Darrell Martin does an excellent job of explaining how Nadex spreads work, and how they can be used as a standalone trading instrument or as a hedge against risk in your current trading strategy.

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Get hundreds of hours of free Nadex Binary and Spread Education!.

Create a free account at www.apexinvesting.com

ABOUT THE AUTHOR