The basic chart reading system (within the overall Forex trading system being taught on this site) is the result of looking for that non-existent Holy Grail to trading. In my earlier days, I focused a lot of energy on space and energy, and there was an incredible amount of market behavior codification.

Then I progressed up to primary focus of time, which gave me even more ammunition toward that unattainable absolute of perfection. I really thought that I was getting closer and closer, and I was, but there was the one level above that: Creation.

Most of the “Legends” of trading, like Gann, never even got it close on the time aspect of the markets, and never even got to the level of the relevant principles of creation. You are and will be studying material that is far beyond what Gann was looking for because I have discovered the time aspects that Gann was searching out. He just didn’t have computers and software that we have today.

All successful traders trade on knowledge and confidence. Not one trades on merely belief. They know their system or analysis will work to produce profits over time, and they trade according to what their system tells them.

Right or wrong, their system and rules of their system tell them what to do, and they do it. They know that over time they will profit. They have the confidence that their system rules will produce profit. It’s not belief; it is knowledge backed with confidence.

Their system is the idea, and their confidence is taking the action required by the system.

So the basic chart reading system is based on space, time, energy and objects with the goal of creation. We are, in essence, using the agreements of this physical universe to determine which way the market should move, and help create that with a high probability of success.

In the basic chart reading system, which is the foundation of more advanced levels of the chart reading, we want to smooth out the motion of the energy particles that we call ‘the market’.

We want to know what the market wave is doing when compared to the smoothed wave so we can spot discrepancies in their action relative to each other. That’s what the MACD, the Moving Average Convergence/Divergence, is for, and what the “MACD Histogram” is for.

In fact, you could use the info on divergences with other oscillating indicators if you so choose.

We also want to know the present strength or weakness levels of the action that has taken place so we know the present time strength or weakness on a given chart. That is what the ADX, the Average Directional indeX is for: Present Time Strength or Weakness.

That makes it so we have market action being compared to the action of a smoothed wave of its action, and the current strength or weakness of that action for a given moment.

What We Are Doing In Predicting Market Action

Know here that all we are doing in predicting market action is combining consecutive moments and continually creating what is happening. We are taking combinations of strength and weakness in the past, present and future to tell us what will be happening.

Behold! The Almighty They. Who Are They?

In combining our consecutive moments to get our various combinations, we are determining what those with the most money will be doing and we can ride that until we are part of the group everyone hates: They. “They” are really nothing more than more experienced creators, better creators in the markets. “They” understands on some level the principles of creation, the conditions of creation, and follow the rules of creation better than the weak, pathetic “we” who loves to hate the almighty “they”.

“They” will always win against “we” even though “we” vastly outnumbers “they”. It’s not even comparatively close, it’s like 1000:1 or worse, where there’s 1000 “we” members for every member of “they”. And yet “they” always win. What’s the deal with that?

Closer adherence to the principles and rules of creation is the deal. When one person can out-create a thousand other people, certainly that one person deserves some awe from the thousand. And thus we hear the same shame, blame and regret from the weak and helpless “we” toward the almighty “they”. It’s incredible, and thus trading mythology is born.

If you want to be part of “they”, then you, too, will have to more closely follow the principles and rules of creation. That’s all this entire system is: what the rules and principles of creation are as applied to markets, and how to follow them.

How the Chart Reading System Will Work

So the basic chart reading system is how to determine what the market should do by reading energy action in time. The accurate reading of the energy action in time gives us the moments of highest probability entry in a future direction of creation of the coming energy action. And we get to contribute to that creation!

By our proper contribution, so shall we profit. Trading commandment number one is “Contribute properly to creation, and ye shall profit in abundance. Do not thee contribute wrongly, for thy shall be stripped bare of thine clothes to the degree of the counter-contributive violation.”

So learn well the indicators, how to use them, what they mean, and how to compare them.

Again, as always, ask if you have any questions, comment if you have any comments. Please.

Have a truly phenomenal trading day!

Today we’ll cover what happened with what I was talking about last night and how to really use the divergence patterns in combination with the basic trading model I talked about earlier. Now, really, you can be 55% wrong with this stuff, and with the risk, money and profit management stuff you’ll learn in the coming membership site (yes, there will be free level), you will be able to make 6X the profits you’re likely making, assuming that you’re a profitable trader already.

From the point we ended last night in the video, well look at what happened, what caused the buying and selling patterns that followed, and show you that you would have made a profit, twice - even though the market didn’t move much. Take a few minutes to watch the video below…

I want your comments, questions, and even your suggestions and criticisms on how I can make these videos better for YOU. I already know this stuff, but what I don’t know is what you don’t know, or need explained differently or more clearly, or more specifically.

Remember that the purpose of this site is to train more highly profitable forex traders - and you can learn all this basic stuff as my gift to you. Of course, later on some day, I might develop some sort of a program to teach more advanced principles, but until you know the basics COLD, there’s just no way you can possibly qualify for such a thing. (I’m really picky about who I train and what has to be known before we even start.)

The primary characteristic in successful traders (in any market the public can trade and has sufficient volume) is strict discipline in managing the trading system being used. When the trading system says to trade, you trade. When the system says to add on, you add on. When the trading system says to exit part of the position, or all of the position, you exit. The system says what actions to take. And your job is to know how and when to take those actions.

Remember, also, that the elite traders of the world are also those who have their goals aligned in the proper order of importance: FIRST is to preserve your capital, protect your funds, and SECOND is to profit from trading. You can see how discipline really plays a major role in trading.

How do you get really good at managing a trading system? The same way you get really good at anything: Practice. What’s really cool about practicing managing your trading system today versus 1995 and earlier is the ability to “paper trade” a system.

Another time we will cover how to properly use paper trading to get up to speed on managing your system trading forex. And tomorrow we will cover the rules, specifically, of using the divergence combinations with the basic trading model I talk about in the videos.

Stay great, ask questions, make comments, and have a truly phenomenal trading day!

Risk and money management in trading is essential to long-term success in trading. I don’t just say that: It’s the very foundation of the very successful traders in every market.

Risk is basically exposure to the threat of loss. When ever you begin a position, you are exposed to the possibility of loss. There’s no way around it. The threat exists. That’s why we use mental or actual stops. (A stop is an order type, which we’ll cover another time, but in this context, it means stop loss. A stop loss is the price point at which you want to stop taking losses on a position or trade.)

Money is an idea backed with confidence. At least that what the central banks write, and every great thinker on the subject has written, so to me it’s a certainty - it’s definitely true. Confidence manifests itself in several ways, and those ways will eventually be covered by themselves here.

Management is essentially control. There are many things that you as a trader can and do control in your trading. There are some things which are out of your direct control, but that you can work around. You can control when and where you place your orders, which type of order, which indicators you use, which fundamental info you use, how you analyze it, how good you are at the various parts of your trading system, etc.

So Risk Management is controlling your exposure to the threat of loss.

Money Management is controlling your money - sitting in your account unused, being used, and additional that will be added when you close all or part of your position.

The 2 Primary Goals of Trading

There are only two goals in trading:

There are no other actual goals in trading. Every other conceived goal is one of the two above.

The two goals are in their order of importance.

When your goals are out of alignment with the two goals above, if your primary goal as a trader is to make money rather than protect your capital, THEN and only then will you be struck with greed, fear, “gotta make this work” (meaning you won’t), trigger shyness, and all the other bad emotion that ruins trader after trader.

That last paragraph is VERY important. When you are feeling greedy, your goals are out of sequence. When you’re fearful, your goals are out of sequence to what is required. That is the source of the bane of trading emotions: Your own goals are out of sequence of the rules of the game, or one goal is missing completely. Period. There is no other source of greed, fear, etc. than that.

Review: Two goals of trading are to protect your funds, and then to profit. You can control your risk to the degree you know how. You can control your money to the degree you know how.

Risk and Money Management tied to the Two Primary Goals of Trading

Risk management is the first goal: to preserve your capital, protect your funds.

Money management is the second goal: to profit from trading.

There will be no video for this post. It is very concise. Read it again and again, I suggest.

Have a truly phenomenal week!
Russell