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Level 1 lesson 7

Elements of my software.

My software is called PAT for short, those letters stand for Professional Activity Tracker, sowhen I mention the word PAT in the future you will understand to what I am referring to.Just as a side note here, The name Professional Activity Tracker is broker down asfollows.

1. e track what the market makers are u! to.". To do this we look at their activity.#. e deem them to be the !rofessional element that controls the market.

Technical jargon

Technical $argon is often an im!ediment to effectively learning any sub$ect and trading is

no different in this res!ect. It is for this reason that we are going to be demystifying mysoftware by looking at all the individual elements that make u! the whole and how we usethose element to assist us in $oining in on the market makers !rofit cycle.

%owever, it is very im!ortant that whilst I am going to be breaking down the individualelements, you should kee! in mind that when we are using the software we never takeanything in isolation.

&ets start with the word PIP or PIP'. These are units of measure that are relative todistance traveled between different !rices.()am!le 1.""#* to 1.""#+The distance traveled from one !rice to another is + !i!s.

e are only really interested in the last or " digits.

4 digits use:As an e)am!le, if I want to draw your attention to a !rice level on the chart I would mentionall last digits, so I might say -look at the level ""#*2 digits use:" digits are used more when we are actually trading and thinking about entry or e)it !rices.Imagine again that we are both looking at a chart, and that we can see the changing

market !rices fluctuating u! and down. I could now use the last " digits and you would

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instantly be able to reconcile what !rice I was talking about.

'o where does the !rice come from hat does for e)am!le 1.""#* actually relate to

This !rice is relative to what is known as the cross currency !air that you may be lookingat. hich leads to another 2uestion what is a cross currency !air

3ow we have two 2uestions that we need to answer before we can gain understanding ofwhere !rice comes from.&ets first deal with currency !airs. There are 1**4s of currency !airs, they are thecurrencies of different countries, so for e)am!le if you were to see (565'7 this wouldre!resent two currencies, one is the (568 9(uro!e: and the other the 5'7 5nited 'tates7ollar. &ets take another e)am!le ;

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%ere on this chart you can see in the to! left hand corner the letters (565'7 this is tellingus that this chart is re!resentative of the currency !air (uro and 5nited 'tates 7ollar.@urther down on the chart you can see a blue horiontal line, to the left of the line inside ablue bounded bo) you can see the digits. 1."+#B.hen you are looking at my software this blue line on any chart will be constantlyfluctuating and re!orting to you the current 2uoted !rice 9in this case: of the (568 againstthe 5'7.?ou can see that when I took this screen shot of my software the current !rice at thatmoment in time was 1.""#B.

This current 2uoted !rice is known as the &IC( P6I0( and from now on I will use the term

live priceinterchangeably with fluctuating price. 'o now when I use the term &IC(

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P6I0( I will be taking about the constantly fluctuating !rice that is being dis!layed in mytrading software.

rice moving or down

hen I use the term price moving upI am referring to the !rice shown by the live !rice

line increasing against the o!!osite currency that makes u! the currency !air, the o!!ositecurrency being in this case 5'7. To further e)!lain this, let us imagine that as this e)actmoment in time you have some (568 currency and you wanted to change this to 5'7. Atthis e)act moment the live blue line was showing, let us say 1."+**. This means that each(568 that you have is worth 1."+** 5' 7ollars.3ow let4s move forward + minutes in time, now the live !rice is showing 1."B**. Thismeans the the (568' that you have, are now worth more, that is the (568' haveincreased in value against the 5'7. 3ow each (568 that you have is worth 1."B** 5'7ollars.

I am sure that now you could work this out what would ha!!en if the live !rice moved

down to say 1."**.

! "rief summary at this point.

If we say a !rice is going u!, that going u! is relative to the cross currency in that currency!air. hether a !rice is rising or falling we are always then dealing with 83( !rice againstthe cross currency in that !air.

If !rices are going u! then the blue line will be going u!, if !rices are going down then theblue line will be going down.

'o far we have covered. Pi!s, 0urrency !airs and Prices. e also know what the term live!rice means. 3ow let4s have a look at time.

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Time

Time on the chart is applica"le to two areas.

The to! left of the chart shows the time frame of the chart that we are looking at. In thiscase we can see that this is a 1* minute time frame chart. This tells us that each and everybar that you see on the chart is re!resentative of 1* minutes !rice action. Price action ismade u! from the constantly fluctuating live !rice.

The highlighted area at the foot of the chart showing time allows us to 2uickly locate an

area on the chart based u!on time relative to that day. As an e)am!le. If I say you -look at

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the lowest bar on the DthJuly you can 2uickly find this.

This vertical dashed line on the chart is drawn in at midnight. As @ore) is traded " hours,so this is not really relative to start or end of day, however, for our !ur!oses es!eciallywhilst training we will refer to this as a day dividing line.

&et4s now look at a different time frame.

This looks like that same chart and in fact it is a!art from one detail. This chart containse)actly the same dataas the 1* minute chart, every fluctuating !rice was e)actly thesame. %owever, the one difference in this chart is that now each bar that you see on thechart is re!resentative of a1+ minute time frame.

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#hy different time frames

7ifferent time frame charts have the misleading effect of slowing down or s!eeding u! thedata you are looking at. The reality is of course that the live !rice fluctuating u! and downmoves as it moves and is not relative to time at all.Most traders consider time frames to be of the utmost im!ortance, but since the livefluctuating !rice is constantly moving and has no connection with time whatsoever, whatwe are actually looking at is a constant stream of fluctuating live !rices.It is only human intervention that arbitrarily decides u!on time frames.

?ou will recall from earlier lessons that we never take a single bar in isolation to meananything. 0om!are this to the trading method used by the masses which directly !lacesmeaning u!on individual bars and then further relates meaning to them relative to thesha!e of them when com!ared to a !revious bar.It takes very little logical reasoning to work out that as the market is a constant stream of

!rices that have no relationshi! to time, it is folly to im!ose time and meaning to individualand unrelated blocks of !rice information.

$o do we use time "ars% &

?es we do, however we do not name them, !lace meaning u!on them or treat them asindividual blocks that mean anything. In fact we use them to show us how the constantstream of ever fluctuating !rices are being mani!ulated by the market makers and tofacilitate trading with small sto! loss orders, which translates for us into lower risk andhigher reward. 96isk reward will be covered later on:

e use three main charts, but some users may add in a fourth chart as !ersonal choice tomonitor how an overall day has turned out, this fourth chart would be a day chart.

8ur three main charts are 1* min, 1+ min and B* min.

As we get further into the course and we start looking at live charts you will 2uickly realisethat I mostly show 1* min charts on my trading videos, however even though I recordmostly showing this chart, the 1+ and B* min !lay a large !art in reading the market.

&et4s now have a look at the role of each time frame, but before we do this we $ust need todefine a term called spread.

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$pread

hen you hear the term s!read this is referring to the highest !rice that the live !ricetraveled to and the lowest !rice the live !rice traveled to in the given time frame.

8n the above chart you will see I have marked !oints A,

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#hat does spread tell us%

The '!read of a bar !rovides us with the !otential to define when a market is !icking u!!ace, that is more and more traders are entering the market which may be the cause of awider s!read. Another way you could com!are this would be like looking at a thermometerand then seeing the suns rays strike the thermometer and noting what ha!!ened, wewould of course see the mercury inside the thermometer start to rise. This would tell usthat the tem!erature is increasing.

'ince we want to be trading when the market is !icking u! !ace we want to be !ayingattention to the s!read of bars, but of course always in a direct relationshi! to deci!heringthe market makers !rofit cycle and never $ust taking the individual s!read of a bar to meanany one !articular thing.

8> now we have defined s!read we can now return to time frames.

The 1* minute chart !rovides us with lower risk and tighter sto! loss !ositions, howeverthis is not $ust down to distance. hat I mean by this is that $ust because a 1* minute bar

may have a s!read that is less than a 1+ minute bar this does not automatically mean thatwe use the ten minute chart for this reason alone.

To e)!lain this in more detail I will now bring in the B* minute chart.

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(ach bar on this chart contains B* minutes of market data. ?ou might think of this as aglobal overview, on this chart we are better able to see the overall trend of the market. @ore)am!le we can look at this chart and say -Is the overall trend of this market trending u!9steadily increasing !rices: or trending down 9steadily decreasing !rices:3ow of course trends change and in this chart we can see that at first the market wastrending u!, then down, then u! again, however what is the overall trend over the threedays that we can see ?es it is trending u!.

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This tells us that whilst we may be discovering market maker !rofit cycles in the 1* minchart, it would be wise to also add into that the overall trend of the market.

&et4s now take a look at a 1*minute chart overlaid on to the B* minute.

hat you can draw from this is that the 1* minute bar chart allows us to literally look inside

the B* minute bar. An e)am!le of how to use this would be to look at the B* minute chart togain the overall trend. In this e)am!le we can see that the B* min chart has shown asteadily falling market until the B* minute bar I have !ointed to. If we had been trading this

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market at this time, we may well have favored selling the market, as u! until this !oint themarket had been falling in !rice.