Magic Line Trading System A Simple, Easy-To-Learn Price-Action Trading Strategy
1. Disclaimer... 3 2. Introduction... 4 3. Trading as a career... 6 4. Getting started... 8 5. Setting up your charts... 9 6. Times to trade/timeframes... 14 7. Spotting the trade set-up... 15 8. Stop-loss and profit targets... 22 9. Going for larger profits... 27 10. Moving Your Trading Forward... 27 Please read through this manual in the order it has been written, as you will miss important points if you skip through it in a random way. If you follow all the rules and trade the strategy as I have laid out, you will master trading this profitable, easy-to-copy trading strategy in a very short period of time and enjoy it for many years to come. It is a simple PRICE-ACTION strategy that can be used on almost any chart you can bring up on your chosen trading platform, although I will suggest a few of my favourites that I have found to work very well over the past 10 years or so. 2015 Markets Mastered 2
1. Disclaimer Commodity Futures Trading and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. It is also possible for you to lose more than your initial deposit. The information contained within the manuals supplied by Markets Mastered is for educational use and it is neither a solicitation nor an offer to Buy/Sell futures or options; We, Markets Mastered, do not encourage you to follow the steps and advice. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this manual or any web site s mentioned, including www.marketsmastered.com. The past performance of any trading system or methodology is not necessarily indicative of future results. If customers act on the information provided within this ebook then this is done at their own risk, and neither Markets Mastered, nor any of its employees, agents or affiliates can be held responsible for any loss of capital or investment to customers as a result of the information supplied, or advice given. Because this system has been provided free of charge no support is offered. Full support for an unlimited period is offered on all paid-for Markets Mastered systems. By continuing to read this manual you confirm you have read this disclaimer. 2015 Markets Mastered 3
2. Introduction First of all I would like to introduce myself, my name is Nick Kruger and I have been a professional, full-time trader since 1988. I trade most days for a few hours and I publish a Trading Diary that shows you details of ALL winning and losing trades I take. If you are interested in what kind of trades I have, my diary goes back six years and you can read it at www.marketsmastered.com/blog I started marketsmastered.com in 2008 to help new and struggling traders to learn the basics of trading and also to give them a few simple, easy-to-use trading strategies that would give them reliable and constant profits from the markets. My email address is nick@marketsmastered.com and if you have any questions at all about trading and the markets please get in contact, I am always ready to help new traders. Now back to the Magic-Line trading system you ve downloaded. It is a strategy that is ideal for absolute beginners to the world of trading but also seasoned professional traders who are looking for an extra set-up to use and will be able to pick it up in 30 minutes and use it as an addition to their existing strategies. If you have traded for a while, just use it to increase your weekly earnings. When you re given something for free you usually do not really appreciate it, and believe it has no real value, this is an entirely normal reaction. This is NOT the case here; I am offering this trading strategy free of charge just to show you what you can expect if you decide you would like to learn to trade properly as a part-time or full-time career and you go on to trade any of my other trading strategies. All my financial trading systems are simple and easy-to-copy which makes them ideal to cut your teeth in the markets. This Magic-Line set-up is something I noticed around 12 years ago after I had been trading a particular chart for a number of years. I found the same pattern occurring daily and it was fairly easy to see what nearly always happened after this certain this pattern popped up on the chart. Year after year it continues to be a big winner for me and a lot of my students. Here s an email from a student who s used this system plus my beginner s strategy to start trading successfully this is the email she sent me: 2015 Markets Mastered 4
If you have a new interest in trading and you have not found a system to trade yet, this can be used as a simple, easy to use introduction to trading the markets, as it uses absolutely no indicators at all. It is a price-action set-up so there s nothing complicated to learn it is a simple concept that you will pick up in half an hour. In the following chapters of this manual I will run through everything you will need to know for your upcoming trading experience. Where to get your free trading platform from, how to configure the chart you ll be using and also how to enter and exit a trade. Also included will be important points about money management and trading psychology, arguably the most important part of trading the markets. Here are some thoughts about the system from another student. 2015 Markets Mastered 5
3. Trading as a career Trading is now a much more popular way of earning a monthly salary than it was when I first started in the late 1980 s. Advances in technology have made it much more accessible for the ordinary person and there is no longer a need to have your own stockbroker to place your trades through. When I first started I used to phone my trades through to a broker and they would then phone back to confirm that the position had been successfully placed. The trading world has changed dramatically since then and that s good news for you as there are not many markets you cannot trade from your kitchen table these days. It is accepted that the earning potential from trading the markets is at least equal and in most cases very much better than the established professions such as Doctor, Dentist, Lawyer or Accountant. That s the good news, but I have to temper it with a word of warning. You re not going to achieve a high monthly salary within the next few months, despite what you may have read elsewhere. If it was easy, everyone would do it. You could not hope to be earning $20,000 per month as a Lawyer in a couple of months, so why would anyone imagine that trading could get you that as well? Despite that fact, with concerted effort and thorough training coupled with a focused goal, you have a good chance of making money from trading the markets, whether you want to do it full-time or just use to as a means to earn extra money every month for a few luxuries. I should know, I ve done exactly that but had to teach myself nearly 30 years ago. Since 2008 when I first began to make my trading systems available I have been able to help many trading beginners become full-time traders, and many more trade part-time around their day jobs to earn a substantial 2 nd salary. This is typical of the emails I receive on this subject. With my help, you can become a professional financial trader. 2015 Markets Mastered 6
Let s get going. 2015 Markets Mastered 7
4. Getting started To get going you ll need charts to start trading and if you already trade you can use your own favourite charting software. The strategy set-up just needs basic candlestick charts so you do not need anything complicated. No indicators, no moving averages nothing, just plain candlestick charts. If you re new to trading you need to start using this system with a demo account. This is trading account that uses pretend money instead of having to use your own funds. It is important that you learn to trade any new system with a demo account first so you can iron out any potential problems first before you put any of your own money at risk. This period of demo trading will allow you to get used to trading the system and also allow you to experience the highs and lows of being-in-the-market which will affect the decisions you will make in the future if you decide to take this opportunity further. I will say very quickly now, I do hope that you follow on from this first step into trading, as it s a unique career, I cannot think of any other job that allows so much freedom coupled with the fact you have the potential of earning the same or much more than a doctor or barrister but without having to work 8 hours a day in fact 2 or 3 hours is more normal. Anyway lets get going with the system. Obviously you ll need charts to use this system and as I mentioned earlier, if you have traded for a while or you have already chosen a favourite trading platform, go with that. There is no complicated chart set-up, all you need is a completely plain candlestick chart that s all, nothing else. If you do not have any preference, I would suggest you use Metatrader MT4 charts, they re easy to use and ideal if you are a beginner. If you already have your own charts, please skip the next chapter and go straight for the strategy description. Metatrader software has a large number of instruments available to trade and once you ve got used to trading this simple strategy you can go onto trading with quite a few of these charts I tend to have a favourite four instruments that I trade (and I ll let you know which ones they are in my other trading systems) but first you ll be trading with just two charts to begin with. Initially you will trade the S&P500 index (emini futures) and you ll be able to this any time of the day or night, so it does not matter where in the world you live. You can trade around your job so it s an ideal skill to learn without giving your current career, but you may want to shortly. Once you have spent some time trading the S&P500 index, you can then move onto a couple of other instruments which I will tell you more about further on in this manual. 2015 Markets Mastered 8
5. Setting up your charts Once you have downloaded the Metatrader MT4 software and opened the programme, you will see this view of a trading chart. I have highlighted functions at the top of the chart screen which you should familiarize yourself with before you start trading. This trading platform is a tool you ll be using for many years to come so it is wise to learn all its functions before you begin, the same as you would learn how to use a computerised accounting package if you were learning to be an accountant. Spend 2 to 3 hours playing around with the platform now, remember it s a demo account so matter what you do, you cannot lose any money! Now you have the basic chart on your screen, you need to get the correct instrument up to trade. To do this, at the top of the screen click on View and then select Market Watch and this will bring up a list of available instruments. You should look for the S&P500 which on the GKFX platform is designated SP500SB see chart below. 2015 Markets Mastered 9
If you cannot see the S&P500 listed right-click anywhere on the list and select Show All and you will then see every available instrument. 2015 Markets Mastered 10
Once you can see the S&P500 listed, simply right-click on it and select Chart Window and you will see the chart come up on your screen. Now you have your basic chart, you can personalise it. Press F8 and the Chart Properties window will come up. The settings I have used in this manual are below; you can copy them or configure the charts as you wish. You just need a basic candlestick chart without any indicators. 2015 Markets Mastered 11
And finally you chart will look like this: 2015 Markets Mastered 12
These are the buttons for entering trades and changing timeframes: Your charts are all ready for trading now. 2015 Markets Mastered 13
6. Times to trade/timeframes Initially you will be trading the S&P500 which is one of the three main indices in the U.S. Their trading session is from 9:30am (EST) to around 4pm (EST) Monday to Friday which equates to 14:30pm until 21:00 GMT in the UK or one hour ahead in Europe. As well as being able to trade at these times, you can also trade on the futures markets which operate 24 hours per day although there are times when the markets are quiet. If you live in the UK or Europe I would suggest you trade between 7am and 9pm unless the market is still moving well upto midnight (the start of the Asian session). Once your experience grows and you move onto trading further instruments, you can trade 24hrs a day using forex pairs. When you get to this stage email me and I will suggest some FX pairs to start with. With regard to trading timeframes, do not go below 15 minute charts as there is too much noise and your trades will not be consistently profitable. Ideally you should start trading the strategy one at least one hour charts although to keep your trading down to 5 or 10 minutes a day, I would suggest you just trade off 4hr/Daily and Weekly charts. Remember, with any trading system or instrument, the higher timeframes are much more profitable to trade. 2015 Markets Mastered 14
7. Spotting the trade set-up This strategy will show you periods on your chart where the price is going to reverse. There are two parts to this system and the first part to this set-up is familiarizing yourself with certain candlestick patterns that you ll use with this strategy. Candlesticks on a chart will give very good clues as to where the price may go in the near future and in my 25+ years experience in the markets I have found just a few that work very well at showing a change of trend direction. There are a few patterns but they can be grouped together as longshadow candles. You will see in various candlestick books that they have various names such as Doji s, Hanging Men etc. but I have always tended to group them together and named them descriptively (as they all have long shadows/wicks) Candles that have long shadows are showing that there has been a battle between buyers and sellers and, depending on how the candle ends up, it gives a clue as to who has won. The subsequent candle will often confirm the change in sentiment The shadows (or wicks) can be seen in these examples of candles that are the best to use with this strategy. They are my favourite types of candles and play a large part in all of my various trading systems. These are the candles to use with this system. The candles above that are for a move upwards are the ones you will see at the end of a downward trend and the candles for a move downwards are those you ll notice at the end of a price move up. At this stage I would suggest you take an hour or so to look at your charts just to see if you can spot these types of candles as they are important for this strategy but also are going to help you in your future trading. 2015 Markets Mastered 15
Using these candles you then move onto the second part of the strategy. For this part you need to be able to recognise support and resistance areas, and the chart below will give you a few examples. Notice the kind of candle patterns that occur at these points of support and resistance. As you can see on the chart above, the valid candles on the previous page are usually present when there is a support or resistance level so the last part of this strategy is getting the rules straight for when there is an actual trade set-up as you need to know when a support/resistance level is going to result in a trend reversal. 1. For a trade set-up you will need a minimum of THREE candles to form a support or resistance point. These candles do not need to be together. 2. The third or last candle in this series must be one of the valid candle patterns illustrated earlier. This is the trigger-candle 3. It s ok if there are more valid candles at the support/resistance level 4. For a long trade set-up, you can enter the market as soon as the price has gone one pip higher than the high of the last candle in the pattern (example below) 5. Vice-versa for a short trade set-up, so you can enter the market as soon as the price has gone one pip lower than the low of the last candle in the pattern 6. Your trade entry is always after the support/resistance level collection of candles. 2015 Markets Mastered 16
7. The 3 candles in this pattern can be spread over a period of time, even upto 10 to 15 candles long. Firstly here are examples of the Trigger-Candle. Although the charts below show the 3 rd candle being the trigger, it could be the 4 th or 5 th in a series. 2015 Markets Mastered 17
Here are examples of both long and short trade set-up showing the entry and stop-loss levels. INCREASE MAGNIFICATION OF CHART TO SEE ALL DETAILS 2015 Markets Mastered 18
Once you have established there is a support level and at least the third candle of the series is one of the valid candles (as shown above) you then wait for the price to go above the high of that third candle. Once the price has done this, you have a valid trade and you can enter the market. If the price does not go high enough so does not trigger a trade, simply wait to see what happens. If the support is a strong one, the chances are you will have a valid set-up occurring again very soon, so keep your eye on the chart. And now an example of a short trade set-up. INCREASE MAGNIFICATION SO ALL POINTS ARE CLEAR Please go through your own charts now for the next hour or so, spotting valid trade set-ups. Here are some more examples: 2015 Markets Mastered 19
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Keep working through your charts to spot trade examples like this. Use the features on the MT4 platform to draw in support and resistance levels and take screenshots to save for future reference. 2015 Markets Mastered 21
8. Stop-loss and profit targets The stop-loss levels for each trade have been shown on chart examples above and are one pip above/below the trigger candle. Your profit target for each trade initially should be equal to your stop-loss amount, giving you a 1:1 risk reward. Here is how to work out the stop-loss amount, so giving you your target profit as well. Firstly, here is a chart showing you stop-loss and entry levels again. The mathematics is very easy and you will find yourself doing all this in your head after a few days. Taking the example above, you can see the long-shadow trigger candle has a high of 1660.2 and a low of 1659.4 so a total length of 0.8 or 8 pips. One pip on the S&P500 is a 0.1 movement on the chart. The entry level is the low minus one pip at 1659.3 and to get an accurate entry point for working out profit/loss amounts you need to add the spread. The spread is the commission that trading platform providers charge and is the main way of earning a profit from your trading. In the case of the S&P500 the spread is 4 pips so as the entry is 1659.3 and it s a short trade, the entry point including the spread is 1659.3 minus 4 pips (0.4) giving us 1658.9. This is the figure you ll use to work out the stop-loss level, and then the profit level. 2015 Markets Mastered 22
So if you your true entry level is 1658.9 and the stop-loss level is set at one pip over the high of the trigger candle at 1660.3 we have a stop-loss amount of 1.4 or 14 pips (1660.3 1658.9) If this trade was stopped out after entry your trading account would show a 14 pip loss. Now you have a stop-loss amount and you re starting off with a 1:1 profit/loss ratio you can set your take profit level on your chart. The true entry amount including the spread is 1658.9 and as your profit target is going to be 14 pips, you will be getting out of the trade at 1657.5 (1658.9 1.4) Once you have traded the system for a number of weeks and you have got used to spotting the trade set-ups you can move onto capturing larger profits. I cover this aspect in Chapter 10 of this manual Entering a trade Entering a trade on the MT4 platform is a simple two click process the first time, and then it can be completed in just one click. If you are using a different platform you are probably familiar with the trade entry process. Before you get ready to enter a trade, it would be a good idea of you open up the Terminal part of your MT4 trading screen, as this is where you ll see all the details of any trades you currently have running. Recent trades will be shown on the Terminal but it also a good idea to have chart screenshots of each trade as well, for your own trading education. Here is how you open the Terminal 2015 Markets Mastered 23
Just click on View then from the drop-down menu click on Terminal You will now see the Terminal at the bottom of your computer screen. The Terminal will show you everything you need to know about your trading account, whether it is a demo account or a real money account. The terminal below is one of seven live trading accounts I use for my trading. 2015 Markets Mastered 24
The Terminal window will show you your account balance and also the current profit or loss for any trades that are currently running. The screenshot above shows no trades running at the moment, but if there were any positions you can also alter or close the trade here. The Metatrader MT4 platform allows One-Click entry and exit of trades once you have set this up. Below is a chart screenshot showing the one-click buttons for entering a trade. 2015 Markets Mastered 25
So that s everything you need to know for the basic system and once you have traded it for a few weeks you can then look forward to a more profitable trading career. The next chapter will show you ways of doing this. 2015 Markets Mastered 26
9. Going for larger profits Once you have completed your basic education with this strategy and you ve been trading it for a few weeks, it should then be time for you to look for bigger profits from each trade and also taking more trades. There are a few ways to do this. Firstly you can increase your profit/loss ratio from 1:1 upto 1.5:1 which means if you have a stop-loss of (for example) 20 pips, your previous profit would also have been 20 pips (one to one profit loss ratio) once you had taken the spread into account. You should now move that profit level upto 30 pips for a 20 pip stop-loss. On a trade such as that, once you have hit your old target of 20 pips, you should move the stop-loss upto break-even, so if all does go wrong, you will not now have a losing trade. 10. Moving Your Trading Forward Just over 70% of new traders who download this Magic-Line trading system ebook go onto trade my most successful trading set-up, the UTB Pattern that is part of my Any-Time trading system manual. The Any-Time system manual contains SEVEN separate trading set-ups for spotting price-reversal situations on virtually any chart you can find and any timeframe. The most profitable of the seven patterns in the manual is definitely the UTB set-up. So far this year (2015) I have had just over 91% success rate with it and as you can read in my Trading Diary, I have trades with it most days that I trade. So what is the UTB pattern? It is a price-action pattern that occurs time and time again on any chart and any timeframe. There are NO indicators or oscillators, just a plain chart as you use for this Magic-Line strategy. It alerts you to the fact that price is in the process of reversing and will give you an exact point to get into a successful trade. It has low stop losses and over a 90% success rate just look at my Trading Diary for countless examples. If the price reversal does not complete, the pattern will not complete either, so it keeps you out of losing trades and this alone gives new traders confidence to trade it. Here are a few comments from new traders that have been using it. 2015 Markets Mastered 27
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I have hundreds of emails which say basically the same, but you can get some idea from the messages just how successful the UTB is. Basically, if you want to turn your trading around, you really need to use this set-up. And it does not matter what type of trader you are, the UTB suits every style whether you trade short term on 15min/30min charts, it is ideal for this type of trading. If you trade on longer term charts, you can also use the pattern for this as well. And it works on ANY chart, whether it s equities, commodities, forex anything at all. In the past 20 years I have never seen a chart that this pattern will not work on. And as you ve downloaded this Magic-Line system manual, you can now have the UTB pattern at a special introductory price. The normal website price for the Any-Time system manual is $145:00 ( 97:00) but you can download the 85-page system manual for just $66.50 ( 44:00) As usual, it comes with my 60-day money back guarantee, so try it out and see if it works for you as well. 2015 Markets Mastered 32
If you re not happy in any way, I will refund your money with pleasure. Time to turn your trading around? Download the Any-Time system manual now click below: Anytime Trading System - $66.50 So there you have it, a simple, price action trading strategy that you can pick-up and use in the next 30 minutes plus further trading systems that will help you become a full-time professional financial trader. A career that you can be proud of, and one you can use to earn money way past the time when all your friends are retiring with small pensions. I wish you all the best in your future trading career, and will look forward to hearing from you soon. Remember, if you need help I am here to assist you. Any questions, JUST ASK With best wishes, Nick Markets Mastered Trading Education. 2015 Markets Mastered 33