One should be taught to trade only by professionals and rely only on oneself...
For your information: the Faculty of Flat Break; Automation; Auto-Trading opens a new department - TS of Flat Break + Volumes.
Commencement of classes. In August the Department will start classes on the trading system primarily focused on volume analysis and price behavior at approaches to important levels. Why it is volume analysis that was added to the Flat Break trading system? Igor Kazakov (IGor-K), Head of the Department, answers.
Volume-based trading
When speaking of trading as a whole, it should be noted that volumes are increasingly more used in technical analysis. It is hard to imagine a trader working with stocks or futures and not using volumes as tips. There is one reason: volumes help us see levels that were of great interest both to sellers and buyers. They are, so to speak, dynamic support and resistance levels and, as a result, the price will surely react at approaches to them. Why shouldn't we use the same tip in trading foreign currencies?
I think many are aware that this is not about forex volumes because this market has no such concept as traded volumes. For this purpose we'll be using currency futures volumes. Why futures? Because they are traded at specific exchanges whose rules clearly define the size for each futures contract. This allows accurate record-keeping of all actual trades. Since the world's largest turnover of currency futures is at CME (Chicago Mercantile Exchange, Chicago, USA), we will proceed from the volume of trades made at CME.
We will not dwell on the concept of futures in this article. It is unnecessary altogether. It is enough to know that we use this trading instrument to analyze volumes and apply this analysis to trading major currencies for which futures contracts are available: euro, pound, franc, Australian dollar, New Zealand dollar, Japanese yen and Canadian dollar.
Let's get back to volumes again, in particular, to what is behind them and how we should interpret 'a reaction to volumes'. First we should be clear about what a certain level means as above, 'a level that was of maximum interest both to sellers and buyers'.
First, this is the price at which a maximum number of trades were made for the maximum number of contracts. It means sellers and buyers found each other at this level, the largest number of sell or buy limit orders was concentrated at this level.
What else? A large buyer or seller interested in this very price can stick to this level. This can be either a certain hedge fund or just a large investor. At any rate, they are focused on one price and will try to move the pair to it at any cost. This does not, however, mean they need it this very minute - they can keep the level for a few hours, days or weeks until they get the number of contracts they need.
This is why they say 'the price moves from a volume to a volume'. By the way, this phrase is the main premise of volume analysis which has been around for several decades.
Why is the Flat Break trading system taken as a basis?
This trading system has a concept that has helped and is still helping many traders: the Morning Flat Zone and its break. Yes, it is the Morning Flat Zone that serves as a kind of starting point, while volume levels help identify take profits and see potential reversal points. At any rate, these are the levels that should be monitored as there are two options: a break or bounce.
Since volumes serve as support and resistance levels to a degree, it is very clear where the stop-loss should be put.
According to the rules of the Flat Break + Volume trading system, the SL is put within 40 pips of the MFZ boundary. (From my own experience, this is the maximum SL I have had in the past half a year with the TP potential of about 150 pips.) The average stop in the system is 20-30 pips which is quite a good figure for the forex. A positive mathematical expectation was never cancelled: the minimum risk to reward ratio is always 1 to 1.5-2.
So, the Flat Break + Volume trading system utilizes the following tools and concepts: the Morning Flat Zone, volumes. Too few, you might say? Why should we complicate things? Classical authors said that 'a trading system should be as simple and clear as possible'.
Now a few examples of analysis and how the price reacts to volumes:
Not the best example but it makes clear what I said above - the SL in the system is small!
This is practically an ideal illustration of how well morning analysis performed
The training program includes a mandatory practice week: each morning we will analyze volumes, make entry decisions and, in the evening, look into trades for the day.
Here you can register for the course. Like for training at other Departments of the Faculty of Flat Break; Automation; Auto-Trading, you should first gain basic knowledge of the Flat Break trading system.
