THT Market Basics

This page will contain FREE INFORMATION and ACCESS to how markets work and the BASIC info you need to know when Trading/Investing – Enjoy the content

  • Newbies to trading/Investing think traders have the ability to and do buy the lows and sell the highs – all the way up and all the way down for every move the market makes – that is NOT possible, it is an Impossibility – It IS possible to get close, but it is not possible to be able to read the markets move perfectly all the time – at some point in a trend a trader will exit and then sits and watches as the trend resumes – the whole point of trading is to catch frequent bits of moves and over the course of the year it all adds up – If it WERE possible then all every trader would do would be to follow Elliott Wave Theory (EWT), I think the stats are that EWT is right circa 50% of the time, so that means the other 50% of the time it’s not able to accurately state the exact position/wave the market is in.
  • People also think there’s a way to know what the market is definitely going to do – what if I told you 95% of Traders/Investors do not have a clue! I can tell you for a FACT that as a seasoned Trader, I am just as informed as to what the market will definitely do tomorrow as you!  Where I differ from you is that I can make a best guess assumption based on a variety of tools that are contained within this course – this basically gives me an edge, but it does not give me certainty!
  • The problem here is the financial news you see in the media and TV – they HAVE to come up with guests and reasons for moves to keep their advertisers advertising because if they lost their readership/viewers their business would die!  So there is absolutely no interest in giving you facts because they’re incapable of working them out – So as  a newbie you come to trading/Investing and because you’ve seen what the media say you think there “must be” a way to know what the markets are going to do! – Take a month and notice that they NEVER tell you what the market will do, it’s always non-specific content/detail advice.  I know this for a fact as in 2007 there were not warning of a top and all the way down into 2009 they were talking of the bottom, until and this will make you laugh, in March 2009 when the bottom they’d been talking about for 2 years finally arrived – they were guessing at how much further it could fall!  They have NOT got a clue, do not listen to them.
  • The only time I ever watch the financial news is when I don’t have access to the web to see the market price for that day – I would say that I watch about 1 hour of financial TV in a YEAR – you do NOT need it
  • I would really recommend that you read Dr. Van Tharps “Trade your way to financial freedom” as he explains trading perfectly and effortlessly – my brain works in facts and figures naturally so I must admit when I read the book I had already worked out most of it for myself from my personal experience and observations – but it’s a must for any traders bookshelf
  • To make a success in the markets you HAVE to have a method(s) that works, you also need to establish rules for that method, you then have to work out risk – this is major and has its own section below – you then have to follow your rules religiously each and every time you trade
  • You also have to have a brain that accepts there’s no logic or reasoning to market moves apart from mathematical – i.e. Do NOT try to figure out a logical reason for why price printed a price of 3334 and not 3320 – because you WON’T be able to so – price does what it needs to do mathematically to grow or contract – it’s got nothing to do with PE ratios, PEG’s, value, P&L etc etc – Once you accept and realise this [sooner] the better you will be able to see potential set-ups and trades with EASE & CONFIDENCE – there is absolutely NO WAY on earth that price reflects true value in the chart of BP below – one week its worth XXXX, the next YYYY, the next ZZZZZ etc – This is RHETORICAL and won’t be answered – Try explaining logically from a fundamental point of view from 2010 to present all the various price swings – you CAN’T, this is the MARKETS and this is what ALL markets will do (or similar) at some stage in their life cycle – FACT regardless of PEG value, PE Ratio, or any other Fundamental ratio you care to look at – Price MOVED because it had to fulfil a mathematical cycle in both TIME and PRICE and in accordance to buying and selling laws of nature.  Also to the LEFT of the plunge in 2010, COUNT the “Waves” there’s NOT 5 waves, there’s 9 yes NINE waves – didn’t Gann use a Square of 9??????
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  • You do NOT need to know ANYTHING about Financial Advice, Economics, news, fundamentals etc etc AT ALL – all the information you NEED is displayed on a chart of PRICE, otherwise known as a Price Chart!
  • I’m assuming you want to make more returns than what you would achieve by just Buying and Holding – to do that you’re going to have to trade the markets to some degree – If not then this page and site is not for you
  • Most of the methods out there simply either do not work or if they do they don’t return sufficiently to make using the method worth while
  • What I personally do is find a method that suits me and my personality and that actually works – I then search hundreds of markets looking for that set-up/method and trade the method across many markets over the course of a year – this is primarily because the set-ups/methods I use don’t show up regularly so just using it on one market would not yield much opportunity, but as soon as you increase the number of opportunities or markets it makes it interesting.  i.e. my THT Trampoline set-up, that shows up once every few years per market, BUT during a year it will show up on differing markets as those markets go through their growth and contraction at differing rates to the main markets – this means that there should be (but not guaranteed) plenty of opportunities throughout the year and yearly thereafter as markets develop
  • You have to accept that you will have losing positions/trades.  These obviously have to be less in value or number overall to make trading profitable.
  • YOU as a human being will have a personality trait, you need to find out what it is and then work out how to use that to your benefit in trading/Investing in the markets – because we’re all different and what works for one person will not sit comfortable with the next person – i.e. I am very very precise, like exactness, I like to know exactly where I get into a trade and where or how I’ll exit the trade – I also like to know how much money is available from the trade should it work out (this is a big no no in the industry by the way, but it works for ME) – so when I read a trading book that says “Enter around this level……” No I want to the exact level to enter and WHY – If you can’t tell me that I need to read another book, as you don’t make profits based on if’s but’s and maybe’s – you make profits based on being right and to be right you have to keep things tight as can be.
  • It IS perfectly possible to catch and trade TOPS and BOTTOMS – I prove this in the free content on the site and also the set-ups I sell
  • The main stock Indices can NEVER go bust – it is impossible for them to go bust – How can the all the leading companies that make up such an Index all go bust at the same time! That is why in 200+ years of market data a main Index has never gone out of business or bust – they can close for business though, this happened in mid 1914 due to WWI, but they re-opened and traded normally thereafter.
  • It is perfectly possible that an Index can drop 80% though – all you have to do is look at the Dow in 1929 and the Nasdaq100 in 2000
  • If you are a buy and hold Investor – then you have to accept and sit through some pretty scary down-turns and the old adage “It’s time in the market that counts, not Timing the market” is true for YOU
  • If you plan to position trade, swing trade or be a trader then the EXACT opposite is true – “It’s TIMING your entries that counts”
  • If you decide to trade – then depending upon your chosen method(s) you have the opportunity of significantly out performing the main markets on an annual basis and therefore over the long-term.  A market will always offer you more % gains opportunities during a year than it gives you from simply buying and holding – the trick is working out how and when to nick the opportunities.
  • The OVERALL movement of the worlds stock markets over decades and centuries is UPWARDS – this is why buying and holding works – If markets just tracked sideways the buy and hold crowd would be very vocal about opportunities as they were in the period 2000-2010
  •  Different markets have different Time Cycles governing them – for example the main stock Indexes work out in a 16-18 year cycle which moves in an Inflationary & Stock market UP cycle and a Deflationary & Stock market DOWN cycle – this Alternates in an UP/DOWN sequence that can be traced right back to when the Dow opened for business in 1792 (200 years of proof)
  • Within this 16-18 Time Cycle it is possible to TIME the major turns – for example in the 1982-2000 UP Cycle – the bottom in 1994 was known in advance, the Top in March 2000 – In the 2000-2016 Cycle, the bottom in 2003, the top in 2007 and the low in 2009 were all known in advance
  • Markets all go through a period of growth, followed by small corrections, followed by growth followed by bigger corrections – Its these big corrections that are called bear markets and they typically last 2-3 years, rather than a few months for the smaller corrections
  • I would highly, highly recommend that you obtain a copy of Dr. Van Tharps books on risk – Risk and understanding it is crucial to trading – absolutely crucial – I would not do the subject justice in my explanation, hence why I refer you to Dr. Van Tharps work
  • It would also be prudent to learn about the different types of MARKET ORDERS out there from somewhere like Stock Charts or Invetopedia etc – I don’t cover them at all
  • I can 100% confirm that you CAN make money from the markets from using an Indicator – See the Indicator section below
  • In the short-term markets move a small %, they then correct and move further forward again so that all the small moves add up to bigger moves – As a trader you need to decide whether you want to capture these small moves or the bigger moves as you’ll need to use differing methods for both types – I’ll show you an example
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  • You need to simplify your thoughts on the market – yes there’s a lot going on but at the end of the day all a market will do and can do is: Move UPWARDS, Move DOWNWARDS or Move SIDEWAYS
  • The REASON markets move UP, Down and Sideways is because on a 2 Dimensional chart that IS all the movement they can make – the market in actual fact are more than 2-Dimensional and the market price action is actually printing points of force and when you measure specific points of force to one another they can reveal interesting mathematics, these mathematics suggest one of the PLATONIC SOLIDS are being BUILT by the markets – Look at my work on WD Gann – in that I will reveal how Gann referred to this nearly 100 years ago! (you’ll find that in my Gann Series posts) the Dow Jones is building a CUBE* – the observant ones about you will have noticed my Trading page on THT Sacred Geometry – do you think this statement is linked to that THT Trading Set-up?!!!!!
  • It’s hard to know where you are in the overall process of this – but this is something I’m working on in a future course I’m planning on having for sale
  • I don’t look at the news, fundamentals or economic information at all – I just see a set-up and trade it because I know it’s a high probability trade setting up that might result in me making money from
  • It is perfectly possible to make a positive return from the markets simply by tossing a coin! – I’d recommend that you test it on paper, design some basic rules and see for yourself
  • The trick to making serious money in the markets is manipulating and exploiting RISK – see chart below
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THT Wedger Set-up

  • You’ll need accurate price data, charting software to analyse the said price data and a computer – you DO NOT need multiple screens – I have 1 screen only!
  • Think in terms of % moves being bigger on Weekly charts than they are on Daily Charts etc – but you also need to realise that it’s the smaller moves that contribute and make the big moves happen – this doesn’t happen in one foul swoop – takes time to form and the bigger the move the bigger the time it takes.
  • There’s lots to learn and understand, BUT, when you find a method that works for you set-up wise – you just look and consider a few things, NOT everything you’ve learnt about the markets.  i.e. for my set-ups I see it forming, I check the weekly chart (30 seconds) I then go back to the daily chart and in another minute I’ve decided if the trade is plausible or not, if it is I then start working out number of shares to buy etc and place my order – the hard work is identifying the set-up and making sure it complies to rules – approx 5 mins max
  • The part that people lose faith, get nervous or are just plain scared of [EVERY trader has been in this position] Is when they place a trade and the next thing is the market has completely moved against them and hit their stop! – It makes you feel angry and frustrated – the quicker you LEARN to take this in your stride the better – It’s what can and does happen when you trade in the wrong direction – Your overall assessment of market direct may also be wrong – this is why it’s so so so important to have a method that works and you know it works, rather than taking a “punt” you place a trade with confidence that you’ve placed the trade facing the right direction in the right set of conditions for the set-up trading
  • It is IMPOSSIBLE for YOU to FORCE the market to go in a certain direction – YOUR will means NOTHING to the market, nothing at all – ALL we DO Is piggyback on the markets moves.  When was the last time you stood in front of a moving train, stopped it dead in its tracks, turned it around and forced it [the train] to head back in the other direction or any other direction for that matter?  NEVER, right, and you never will – the EXACT same terms apply to your trading/Investing in the markets, you are nothing but hitching a lift on the markets back, when the lift is over it WILL throw you off
  • It’s often good to review SENTIMENT readings – Click through to Sentiment Readings  This is good as it gives you various sentiment readings I like the Market Vane and AAII readings:  MARKET VANE = 30-70 is Normal, 70-80 is Overbought, 80-100 is way OB and a sharp reversal from up to down is expected.  30-20 is Oversold, 20-0 is way OS and a sharp reversal upwards is to be expected.

TRENDS

“The Trend is your Friend”

  • Only if you’re onboard the trend and only if you manage to get on it at the right time
  • This saying is really a cop out – the only way to make money is by trading in the right direction the market is going in (unless you trade options and create a system of selling options to make money in trendless markets etc – I don’t do this and have no intention of doing so, so no further writing about this will be made)
  • You will see that markets are trendless more of the time that they trend – the REASON for this is because markets have to balance out in both time and price and in trending markets price is moving faster than the time element and at some point has to stall for time to catch up
  • That’s not saying that you can’t catch a good trend and benefit from it – but you have to KNOW when that trend is happening
  • It would also be very worthwhile working out what the average rate of vibration is for the market you’re looking at so that you can have an idea of the price % swings the market makes both up and down over time – I simply get the statistics for the markets life or data availability for the market and work out the 50% price swing average for the market – this is NOT what Gann talks about by Rate of Vibration – this is my own system – so we KNOW for a FACT that after a market has pulled back and the swing line has turned RED, when the markets moves up and the swing line turns GREEN – then on AVERAGE (50% of the time) the market typically moves X% – Sometimes more, sometimes less – but at least you know for a fact the statistics! This allows you to PLAN.
  • If you also know the Rate of Vibration for UP Swings, you can also work them out for the DOWN swings of certain market conditions – this is left for you to discover and do should you wish to
  • Wasn’t the “Big RESET” due sometime from 2009-2016? Glad to see it arrived on time and as expected with stock markets plunging to ZERO and currencies especially the USS failing and being replaced by Gold – As I mentioned in a blog post years ago, It ain’t happening.  I hate to imagine how many novices got swept up in that hysteria and bet against the market – this is proof that you have to just GO with the TREND regardless of news, expectation or Hysteria from “expert” sources.  The “EXPERTS”  failed to see the 2000 and 2008 crashes coming, do you REALLY think they are that clever and expert!  They probably sold a fortune of courses on “How to survive the coming crash…….” That ER, NEVER came! Whoops!  Your MONEY is YOURS, just take a while to understand how the markets really work and you could potentially save yourself a fortune in wrong decisions.  The reason why Buying and Holding works (albeit at pathetic returns) is BECAUSE the Natural direction of the Stock Market is UP, as can be evidenced in a chart below of the S&P500 Index (USA) from 1963

 

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Nasdaq100 – Bull Trend

From a LOGICAL & Common Sense point of view, on the chart ABOVE – WHEN were the best times and places to get in on the trend?

The LOWS/PULLBACKS – CORRECT

Now it depends upon what type of trade you are as to how long you decide to hold on for – that is something that YOU and YOU alone have to decide and work out because it needs to suit your personality.

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Nasdaq100 Index

So in the chart ABOVE – we can SEE that for the period 2008-2017 the rate of vibration for the Nasdaq100 Index for UPSWINGS in this BULL Market on average were 17.5% in price growth – you can then use that knowledge when trading this market

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S&P500 Index – Bull Trend from 1963!

The chart ABOVE is the S&P500 Index crunching the smaller swings of the market over 6 decades pf price data we find that the Rate of Vibration for this market is on average 12%

Also remaining with the chart above – tell me, based on your new found simplified knowledge on and about trends – What is the overall trend of the stock market over 6 decades?  UP, Down or Sideways if your starting point is 1963?

The OVERALL direction of the market is UPPPPPPPPPPPPPPPPPP

Here’s some slightly more advanced Trend detection – details on chart

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Nasdaq100 Index – Bull Market

Please feel free to COMPLICATE how you work out and determine trend direction as much as you want – I think my explanation above is pretty accurate and works for me – I find placing an arrow helps and also my swing files, especially the BLUE line as that always points in the direction of the last major swing direction, you can then watch the minor swings to determine if the trend is continuing or fizzling out.

INDICATOR STRATEGIES

It is perfectly possible to trade successfully using an Indicator – I’ve done so for ages – Where it goes wrong is when you don’t know where you are in the market or using it at the wrong time.  There are only certain times in the market where using an Indicator WORKS!

I’ve no intention of show you full strategies of using all the indicators out there – I’m afraid if you want to do that you need to do what I did years ago and spend a few days testing all the available Indicators to you on actual price action to see their viability

REMEMBER – Indicators do NOT predict or measure Price, an Indicator can only measure the momentum and if its a bounded Indicator then it will be limited to a maximum of 100 to 0 – So if you see an Indicator topping out @ 100 it means the indicator could have gone higher but was prevented from doing so by the mathematical formula used to create it.

Here’s a chart with the more common Indicators displayed on it

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In order for an Indicator to move, PRICE needs to have moved FIRST – so ALL Indicators are called LAGGING Indicators

Notice on the chart above – similar movements are made by the Indicators in line with price action – It because they ALL do a similar job, the reason why they differ slightly is because of the mathematical formula used to create the indicator (above my head I’m afraid)

In this next chart I’ve removed a few of the Indicators and inserted the DTosc that I personally favour – the reason I do so is because it is highly accurate and it ventures into the overbought and oversold zones frequently  – to profit from this all I have to do is create/build some rules and we could use it successfully to trade with

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So why don’t we do just that? Let’s create a Trend following trading system that WORKS:

RULES are:

  1. Use a 10, 20 and 30 Simple Moving Averages (SMA’s)
  2. The 10 SMA must be above the 20 SMA and the 20 SMA above the 30 SMA = Perfect order and signals a bullish stance (see chart for visual evidence of what this looks like)
  3. Price must pullback towards the SMA’s – but the 10 SMA MUST not tick down – the 10 SMA MUST remain pointing upwards and ABOVE both the 20 and 30 SMA’s
  4. The DTosc must then make a bullish reversal – ideally in the Oversold Zone but not necessary
  5. Go long 1 tick above the high of the current bar – as long as the DTosc is still bullish we simple move the entry order to the current days high if not taken in today
  6. Stop is placed 1 tick below the low of the entry bar
  7. I would skip trades that demand a large range risk (range between Entry and Initial Stop level), as ifs it’s too wide you’ll only end up making 1-2R or less which is pointless
  8. THT accepts no liability whatsover if people choose to try to use this free of charge system – enter a trade at your own financial and mental risk and NO gurantees are made that you will be able to make this method work – that is down to YOU and YOU alone

I’ll not detail how to manage the trade as there’s many methods – trailing stop etc.  The point is to show you how to quickly design a trading method that WORKS and is profitable (guess whose uses this method still? Yep ME!) Remember that the key to profits is how YOU manage the trade – this systems gets you in, YOU’VE got to get out at a profit

As you can SEE and PROVE to yourself – the BEST moves to get into following the bullish perfect order SMA’s crossover is pullback #1 and #2

The system has a high win rate and is often good for 2-5R – not brilliant but you need to now think – If one market in a year is likely to give say 5R (5R might be 2% x 5 = 10% profit return) then to make 30% I need to roll this method across 3-4 markets!

You would also benefit from ensuring that the SMA’s fan out from one another and in a smooth transition – refer to the chart below for visual confirmation – with a bit of “daylight” between SMA as shown for the 3 trade potentials on the chart – IF the SMA’s are jolty and Erratic I personally would skip the trade potential as it suggests that price could whipsaw around still and is not transitionaling smoothly- think smoothness as shown in the graph below

Or you could get smart with the risk you take and instead of placing the stop 1 tick below the entry bar, place it higher up – you’d need to test it properly though – I prefer to play it safe and give myself a full bars range for risk.

There’s also a couple of entries NOT mentioned or displayed on the chart to the left side of the chart – see if you can find them (around the arrows)

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How you decide to use RSI, MACD, CCI or STOCHASTIC Indicators for this method is entirely up to YOU.  I’ll let you fiddle with as you can SEE those Indicators don’t move like the DTosc – If It were me using them – I’d just say the Indicator needs to make a bullish reversal regardless of where it sits within the 0-100 range.  you CAN fiddle with the settings for the Indicators but as different phases of the market come into play you’d need to alter the settings to suit and you never know that in advance! only hindsight.

TRIANGLES

  • I’m not going to dwell on this too much as they’re much much more important that you think – Just notice the Triangles in EVERY single market out there

PLEASE NOTE: THE ABOVE IS NOT A CONCISE OR FULL LIST OF EVERYTHING AVAILABLE WITHIN THE MARKET – IT’S A LIST OF WHAT THE HOVIS TRADER DEEMS IMPORTANT – THERE ARE MANY MANY OTHER TOPICS THAT MIGHT SUIT YOUR PERSONALITY BETTER THAN THE CONTENT DETAILED ABOVE – IT IS YOUR RESPONSIBILITY TO RESEARCH, TEST AND WORK OUT WHAT WORKS FOR YOU. 

Neither does this constitute financial advice in any respect

Trading is a highly skilled and risky profession Trade at your own risk

IMPORTANT NOTICE! No representation is being made that the use of this strategy or any system or trading methodology will generate profits. Past performance is not necessarily indicative of future results. There is substantial risk of loss associated with trading securities and options on equities. Only risk capital should be used to trade. Trading securities is not suitable for everyone. Disclaimer: Futures, Options, and Currency trading all have large potential rewards, but they also have large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don’t trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, stocks, ETF’s, options, or currencies. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

* As Identified by the amazing Bradley F Cowan in his Four-Dimensional Stock market structures and cycles

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