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Trade

With A Day
Job System



A simple, two-stage strategy for trading
part-time in the evening. Low risk, high
profitability.
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Contents

1. Disclaimer .............................................................................................. 3
2. Important Message ................................................................................ 4
3. Introduction ........................................................................................... 8
4. Trading Goals ...................................................................................... 11
5. Trading Psychology .............................................................................. 14
6. Money management ............................................................................. 15
7. Trading Platforms ................................................................................ 17
8. Demo Trading ...................................................................................... 22
9. Configuring your chart ......................................................................... 24
10. The strategy (part 1)........................................................................... 31
11. The Strategy (Part 2) ........................................................................... 38
12. Important Rules.................................................................................. 44
13. Targets & Stop-Losses ....................................................................... 47
14. Trends ............................................................................................... 53
15. Entering a trade. ................................................................................ 56
16. Putting it altogether ........................................................................... 58
17. When not to trade .............................................................................. 62
18. Important points to remember ........................................................... 66
19. Additional strategy ............................................................................. 67
20. Trade examples................................................................................. 68
21. Conclusion. ........................................................................................ 76

Note:
Its important to read this manual in the order it has been written in for you
to fully understand its contents and get the most out of the trading
education.

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1. Disclaimer

Commodity Futures Trading, Spread Betting, CFD and Options trading


obviously have 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
these markets. If in doubt or you need more in-depth information please
contact a independent financial adviser or other suitable professional for
further advice.

Do not trade with money you cannot afford to lose and never use borrowed
money to trade with either. This is neither a solicitation nor an offer to
Buy/Sell futures, options or shares. 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 sites mentioned, including marketsmastered.com.

The past performance of any trading system or methodology is not


necessarily indicative of future results as markets are unpredictable. I
strongly recommend that you start trading the strategy described in this
manual with a period of demo trading of at least 2 months so there is no
initial risk to your funds. Please read chapter 6 thoroughly, it concerns this
subject.

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2. Important Message

Thank you for purchasing my Trade with a Day Job trading system, designed
to trade the U.S. S&P500 index in the evening between 17:00hrs and
21:00hrs (UK time) Midday to 16:00hrs New York time (EST).

It was originally designed in 2000 as a beginners system to help a friend


break into the world of financial trading and due to this the actual strategy is
very simple to use. To operate the strategy you just need two occurrences to
come up on your trading chart, and when they happen together, you then
have a trading opportunity it is as simple as that. This means your learning
journey over the next few weeks is going to be more relaxing than you may
imagine, so please enjoy reading this manual.

The strategy has not been tested on any other instrument or index since I
have been trading it, so I do not recommend you use it on any other chart
except the S&P500. Additionally, as I mentioned earlier it has been
specifically designed to work between the hours of 17:00pm and 21:00pm
UK time (midday to 16:00hrs New York EST time) so I do not recommend you
trade the strategy at any other times.

If you would like to learn to trade at other times of the day or night, please
contact me as I have other strategies/trading that will suit you.

There is NO padding or superfluous content in this trading system manual,


EVERY SINGLE WORD is there for a reason as they are important. As
mentioned previously, please do not skip over any paragraphs or chapters
as you need to read everything (in order) contained in this book so that you
can learn my strategy properly and then enjoy the profits that elude so many
newcomers in the trading world.

It is tempting to skip through to the part where the strategy is explained but
from statistics gathered since 2009 it appears that students who do this

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have more trouble with their overall trading that those who study this
manual in the correct order. They also tend to ask more questions in the
days and weeks following their download, and although I am very happy to
answer any query you may have as far into the future as you wish, Ive found
that 99% of questions have an answer within these pages, so please read
through the manual at least 3 times over the next 24hrs before opening your
new trading account and get started with your trading charts.

As you may have already found out, trading the markets is NOT a get-rich-
quick scheme, so please treat learning to trade as if you were learning any
other profession. If you were studying to be an accountant or dentist for
example, you would spend many years at University and then on-the-job
training, and while learning to trade is not quite as time consuming it does
offers greater returns when you get it right. This trading strategy gives you a
shortcut as youll shortly learn an easy to copy trading strategy that will get
you trading one particular market, and as you watch your chart every
evening, youll begin to learn more about its personality, so increasing your
overall knowledge of this fascinating subject. You will find after around six
months of trading this strategy that you will have a much better
understanding of the overall personality of the S&P500 index as so begin to
2nd-guess its movement. This skill will creep up on your unawares, but will
obviously be very welcome as it will also help you trade some of my other
systems.

Unlike the more traditional professions, you can learn to trade part-time
while keeping your day-job meaning you are still able to earn your regular
salary while you educate yourself about trading and the markets. But this
does not mean that you can just pick it up and put it down whenever you feel
like it you need to have a definite plan of action, and part of my
educational service to you is to give you some guidelines as to how you
should go about it. Please follow this manual in the same order as I have
written it, and complete each chapter before moving onto the next one.

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As a guide, you should now spend this first session of reading (that you are
presently on) by meticulously going through the manual at least 3 times
so that you can pick-up the basics of the strategy. It is imperative not to
rush through this manual, you need to take each chapter slowly and ensure
you understand EVERYTHING written, so your education is gaining a
thorough grounding.

Remember, depending on your age at the moment, potentially you could be


trading for another 30 or 40 years, so a few extra days spent reading this in
a methodical manner is a good investment. With a trading career there is no
need to have a planned retirement either, I have two good friends who are
trading in their 80s and many students have only begun their trading
careers while well into their 70s. It keeps your brain alive and challenged
every day and as long as you have a decent diet and exercise regularly you
are guaranteed to have a longer and more fulfilling life than the majority of
the population. When I started trading full-time in the 1990s I realised I
would be leading a sedentary lifestyle during trading hours so I have always
tried to cycle at least 10 miles a day during the week and I would encourage
you to think about how you can remain fit while you enjoy your new career.

I have contacted some of my more successful customers and overwhelmingly


I found that to learn this system you need to spend your 1st month
reading/practising for around 3 hrs per evening plus around 5 to 6 hours
each weekend. That will get you into a trading habit and the following
months will go by faster than you can imagine.

As mentioned briefly before this system was designed and written by me in


2000 for a friend who wanted to trade after he returned from his day job. He
had NO intention to give up his day job as he enjoyed it so much, but over
the years the amount of money he earned by spread betting made his day
job redundant, so he did eventually give it up, although to this day he still
only trades in the evening 2 or 3 times a week. The system has been
consistently profitable and has NEVER had a losing month in all the years
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that I have traded it, so that should give you confidence when learning to
trade. All you have to do is follow the rules 100% and the future is virtually
assured for you.

There is a timetable of learning tasks later on, plus you can add your own
notes to this manual.

If you are planning to print this PDF document, you can make important
notes in the margins of this manual, or if you are doing as most do and just
reading it from your computer, just make your own notes by using the
Adobe Reader functions by clicking on the Comment button at the top right
of this document and either add text or place sticky-notes on the page.

Before we move on I would like to mention the computer screenshots in this


manual. To be able to see all the important information contained within
them it is a good idea to adjust the magnification of this document to
around 150%, which you can do at the top of your screen to the left of the
middle see below:

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3. Introduction

My system, in a nutshell, will enable you to earn small, regular amounts of


money from the U.S. stock market using the S&P500 index. The reason I use
this instrument rather than the more popular Dow Jones 30 is because the
S&P500 moves with a lot less volatility than the DJ 30 and without the usual
spikes as well. The S&P500 also obeys support and resistance levels very well
which will prove very useful later on in your trading education.

Your target will be just 20 pips (points) per evening, but to begin with to
help with your trading confidence you will have a daily target of just 15 pips
for your first 20 trades. Having a small, achievable target will enable you to
learn this strategy without the stress of large monetary targets and so you
will not be troubled with the new traders two worst enemies fear and
greed (more of these troublesome pair later)

Your profit/loss ratio is going to be 1:1 initially so youll never have a stop
loss larger than 20 pips during your normal trading once you have got into
the swing of things. The overall performance of this strategy since 2000 is
around 75%-80% winning trades, so you have a positive expectation when
trading. This is important with regard to trading psychology and I will
expand on this in my book on the subject which will be available in March
2014.

Trading the markets should be treated just like starting any other small
business you are going to be your own boss and so are completely
responsible for ALL your actions and decisions.

Starting in business is not easy (otherwise everyone would be doing it ) but


you have a head-start over most people as the blueprint for your new home-
based business have all been worked out for your already be me (rather like
purchasing a franchise) as I have trodden exactly the same path as you are
about to embark upon with one exception I had no guidance whatsoever,

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so it took me a bit longer than it should have but I did learn some very
important lessons along the way, which I can pass onto you. And I learned to
trade over a period of 4 5 years but having been in the markets for the past
25 years I can now show you how to shortcut that process so that youre up
and running within the next month.

So you are really buying a franchise, but without the extremely large
investment normally required a friend owns two local McDonalds and they
cost him 1.5m each to set-up in 1998. And he still pays a franchise fee
every single month on his turnover and thats for as long as he runs the
business, but with this opportunity all your profits are yours to keep and the
money you have paid already is all you are committed to spending even
though I will give you unlimited email help for as long as you need it.

Additionally, you have no worries about renting expensive premises


(factory/offices), no business rates, no staff hassles and as mentioned
before, if you live in the UK, you have no tax or VAT commitments, what you
earn in the markets is all yours to keep. And importantly, whenever you want
to go on holiday you can just shut your business and its always going to be
there when you decide to get back to work, as youve no customers to tie
you down.

In return you just need to commit to a learning programme that will ensure
success as long as you follow every instruction is this manual. I would
recommend that you spend at least 3 hours per evening in the beginning
reading the manual if possible, watching live charts and learning to spot the
two occurrences on your chart that alert you to the fact there may be a
potential trade coming up. Ideally you should ensure that you have 3 hours
of quiet time (with NO distractions) every evening that you can dedicate to
your learning programme plus around 4 to 5 hours at the weekend. Try to
find a place in your house where you can be on your own with NO
radio/TV/telephone as this will be conducive to learning at a fast pace.

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Having this time for learning in the beginning will pay dividends in the
future, as you will be sufficiently professional in your trading to pull up a
chart on your computer at a moments notice and trade for an hour or so a
day and earn life changing amounts of money.

Here is a timetable that shows you what your next few months is going to
look like.

Period Tasks
Day 1 Read through this manual 3 times making notes. Open demo
trading account and investigate trading platform, ensuring you are
familiar with the important features.
Day 2 Configure your charts and read through this manual two more
times
Day 3,4 &5 3 to 4 hours daily in front of your charts, familiarising yourself
with the two occurrences youll be looking for when real-time
trading. Also review historic chart that I will supply
Day 6 to 20 (Weekdays) Start demo/paper trading. One trade per evening plus
another 2 to 3 hours reviewing historic charts for trade signals
Day 21 to Trade from 5pm to 9pm taking as many demo/paper trades as
60 you can see. Also at least a few hours daily reading and watching
historic charts

As well as actually learning to trade my strategy, there are also a few other
important subjects I need to cover to ensure you become a more rounded,
professional and profitable trader.

The first is the subject of goals.

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4. Trading Goals

As that great motivational speaker, Brian Tracy once said You Cannot Hit A
Target You Cannot See so I encourage you to sit down and decide what
exactly you want in the future if youve not already done this.

Obviously by having an interest in trading the markets and buying my


trading system manual, you have made at least one decision, you want to
become more profitable in the markets and carve out a career as a
professional home-based financial trader.

I have found that all the way through my life, whenever I had a compelling
goal to work towards, my work was always more successful and the journey
much quicker when I write down the goals and refer to them every day, so I
encourage you to do the same. Another way of looking at this is:
When you leave the harbour in a boat, and you have not got a definite route
planned and an ultimate destination to head for you are just going to bob
around in the water for days and weeks, being directed wherever the tide
and weather want to take you. Eventually you will end up somewhere but is
it somewhere youll enjoy?

If you have a definite goal in mind, you can make plans to go for your
ambitions and the journey will be much clearer. I have an excellent eBook by
Brian Tracy which you can download for yourself here.

Please get a piece of A4 paper or more preferably a Goals Journal and start
by writing down your ultimate 5 year goals in the subjects of personal,
money, health, family and finally trading/career/job and for each of those
goals write down what you need to have achieved within the next 12 months
to make your 5 year goals achievable. Once youve done this you can look at
what you need to achieve in the next 3 months to be able to reach your
yearly goals. Then write down everything you need to get done in the next

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month to enable your 3 month goals to become a reality. Then drill down to
weekly and daily goals.

This is the basis of goal setting, and will get you going to motivate yourself
over the next few months of learning my trading strategy as youll have a
solid inspirational vision of where youre heading.

It is far better to actual write your goals down on paper rather than on a
computer or smart phone as the actual process of writing embeds your goals
in your subconscious mind quicker and with more strength.

Here are a few well-known quotations regarding goals that will reinforce the
importance of carrying out this part of the educational process and may give
you a start to your list.

A goal without a plan is just a wish

Goals are dreams with deadlines

Don't say you don't have enough time. You have exactly the same number
of hours per day that were given to Helen Keller, Pasteur, Michelangelo,
Mother Teresa, Leonardo Da Vinci, Thomas Jefferson, Albert Einstein,
Donald Trump and Richard Branson

Motivation is when your dreams put on work clothes

You must have long-range goals to keep you from being frustrated by
short-range failures

Obstacles are those frightful things you see when you take your eyes off
your goal

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To get you going with your goal setting exercise, where do you see yourself
in 5 years time?

Do you want to be trading full time?

Do you want to stay in your present job and trading part-time a few
evenings a week?

Do you just want to be trading in the evenings leaving your days free?

Perhaps you just want to trade early in the morning? Thats the beauty of
financial trading, you really can please yourself.

Once youve written down your 5 year goals you can then get busy with what
you need to do in a years time to be able to get to your ultimate goal. Then
work down to your 3 month goals and finally your weekly and daily goals.

This is a very important part of life in general, not just for trading but for
your overall well being so do not skip over this stage, it will only take you
around 30 minutes but its worth much more, so do it now and look forward
to a very different future.

We now come to your trading. It is often quoted that trading is 20% strategy
and 80% psychology which is partly true but in my opinion misses out on
another important subject that I feel is imperative for trading success.

So I am going to add one more constituent to that quote so we get 60%


psychology, 20% money management and 20% strategy, and thats in order
of importance.

So firstly lets deal with psychology.

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5. Trading Psychology

The most important subject to master when learning to trade is your mind.

A major part of trading psychology is discipline - that is trading your


strategy exactly by the rules. To start with I will be telling you the rules, so
you may think that its all sorted but that is far from the truth.

You will still be susceptible to fear and greed unfortunately, the two most
common emotions that new traders will encounter.

You will encounter greed while youre in the market when instead of shutting
off a trade at a predetermined level; you think the market may go higher so
giving you extra profits. This will sometimes end in a losing trade as the
market reverses just after your have reached your initial target.

You will also encounter fear when you have a few losing trades in a row and
then are not sure whether to enter another position as you are fearful of yet
another loss.

These feelings cannot be cured overnight but I have certain strategies that
will help you and negate them almost as soon as they raise their heads, and
they appear later in this manual so I do encourage you to read every word
and take all the advice I give you.

The whole subject of trading psychology is a huge one so I cannot cover it in


enough detail in this trading system manual but youll be able to read my
trading psychology eBook entitled 5 Steps To Trading Confidence thats
going to be available in March 2014.

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6. Money management

Money management in trading is a strategic technique employed to conserve


your trading account as a run of losses when trading with too high a stake
will result in severe depletion of your funds.
Larry Hite, in Jack Schwager's Market Wizards* (1989), mentions two lessons
learned from a friend:

1. Never bet your lifestyle -- never risk a large chunk of your capital on a
single trade; and
2. Always know what the worst possible outcome is.

*Please contact me about downloading this book.

A well known rule in trading is the 2% calculation which means never risk more
than 2 percent of your capital on any one stock.

This means that a run of 10 consecutive losses would only consume 20% of
your capital.

When trading this strategy, even though it has a high probability rate of
winning trades you must have the same degree of safety, its no good
building up your trading account only to have it wiped out by three or four
losing trades.

These are the calculations you should use while trading the Trade With A
Day Job strategy plus all my other trading systems.

For ease of calculation for every 1000 you have in your trading account you
will be able to trade at 1 per pip. So if you have 3500 in your account you
are then able to trade at a level of 3.50.

The maximum stop loss for this strategy is 20 pips per trade and is often
less, but we will use 20 pips for calculations.

To begin with, after you have completed a period of demo trading, you will
start off with just a 100 balance, meaning youll be trading at 10 pence per
pip (0.10)

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Trading at this level means that if you have a run of ten losses in a row with
a 100 account balance you will lose upto 200 pips (10 x 20 pips) which at
10 pence per pip comes out at 20. This is 20% of your account balance, so
equating to the 2% rule as shown above.

As your trading advances and you start to trade more of my systems you will
find that you can be in 2 or 3 trades at the same time, but this 2% rule will
still protect you from wiping your account out.

Generally in the UK and Europe you will need a minimum of 500 to open a
trading account but I will introduce you to a company that not only has a
good demo trading platform but will allow you to open a real-money trading
account with just 100 and trade at just 10 pence (0.10) per pip for an
unlimited time.

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7. Trading Platforms

As you now know, my strategy is a simple method of trading the S&P500


index. In the UK you can do this via spreadbetting, and in other parts of the
world you can trade CFDs (Contracts For Difference) or if you reside in the
U.S. and Canada you can trade e-mini contracts. The S&P500 chart is widely
available and is featured in all trading platforms I have ever encountered.

If you are in the UK spread betting enables you to be able to earn money in
the markets without paying income tax on your profits, so making a career
of successful trading an even better proposition, so I recommend you use
this way of trading.

If you currently trade no doubt you will already have a favourite trading
platform and as my chart set-up is very simple, youll be able to use any
charts that are available at the moment.

If you are new to trading I recommend you use the metatrader MT4 platform
from London-based GKFX. Their demo platform is easy to use for beginners
and is exactly the same charts youll use once you go onto trading with a
real-money account. The features are such that you will probably never use
them to their fullest extent, I have been using this type of chart for the last
10 years and find them far superior to others.

If you live in the UK you can access the GKFX demo account application form
here: https://www.gkfx.co.uk/Register/DemoAccount

If you live in any other part of the world (except the U.S. or Canada) you
should Google GKFX demo account followed by your country of residence,
so if you live in (say) Saudi Arabia, simply search GKFX demo account Saudi
Arabia

This is the page you will be directed to.

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It is a simple one-page form as you can see from the screenshot above.

If you live in the UK you should tick Spread betting as the account type and
for all other countries specify Forex/CFD.

It is best to allocate the minimum amount for your demo trading account
and in the UK that is 5000. This will make your demo trading period more
life-like.

Once you have registered youll be directed to a page with download


instructions for the Metatrader MT4 trading platform plus a username and
password which youll only need once as you will be able to log-on
automatically every day after the initial session.

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Once the software is installed on your computer you should have an icon on
your screen for quick access. You can register multiple demo accounts if you
want an MT4 platform on different computers.

After installation you will then be able to launch the Metatrader platform.

This is the screen you will see once you click on your GKFX Metatrader link.

As you can see from the above screenshot there a few functions (mostly at
the top of your screen) that youll be using in your trading career, so I would
suggest that you spend an hour or so playing around with the platform
getting used to all the features do not worry, you can do NO damage at all
by pressing the wrong buttons.

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Along the bottom of the chart above you will see the chart names I generally
trade with but to begin with you will only need the S&P500.

On the GKFX software it is named SP500SB and you will find it the Market
Watch list.

To access the Market Watch list click on View at the top left of your screen
and select Market Watch

If you cannot see the S&P500 listed simply right-click on the list and select
Show All

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Your trading platform is now set-up, and as mentioned previously, you


should spend an hour or so getting used to all the functions that the
Metatrader platform provides.

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8. Demo Trading

It is imperative that to begin your trading of this strategy you demo trade.

There are very important reasons for this and they all relate to trading
psychology. Humans attach a great deal of importance to losing money and
when you trade it is inevitable that you are going to encounter losing
positions, and a period of demo trading will get you used to these situations.

The period of demo trading will ultimately vary slightly from person to
person, but to begin with you must aim for at least 60 trades before you
reassess your progress. I suggest you contact me once youve reached that
number and we can look at your trading and see if you are ready to open a
real-money account and start trading with your own money. In most cases
however, you will know if youre ready.

This number of trades is designed to firstly get you used to trading the
strategy but also to become comfortable with the emotions that come with
trading the markets.

Using real money straight away when learning to trade will expose you to the
twin emotions of fear and greed that I mentioned earlier in this manual. You
will be fearful of losing money and also try to stay in trades after you should
be out of the market as youll try for extra profits, and when you experience
failure your emotions will run wild making you unstable and totally unable to
trade with a level head.

By trading without real money you can be totally detached from the emotions
that winning/losing money brings. Very briefly it means that (for example) if
you had 3 losing trades in a row (while trading with your own 1000 trading
account) you may not want to risk a fourth losing trade, but when trading
with a play 5,000 you will not have the same emotions, so you should just

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trade like a robot, entering and exiting trades as I show you in this manual
totally devoid of any emotions.

By trading without the risk of losing any of your own money, you will get
used to the ups and downs of the markets and by the time you start trading
with real money you will enter and exit trades exactly as the rules tell you
without hesitation or emotion exactly the same way as you perform any
other normal everyday task such as driving to work.

A more in-depth study of trading psychology can be found in my book on


trading psychology book which as mentioned previously will be available in
March 2014. Please contact me to register your interest.

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9. Configuring your chart

After downloading your charting software you are now ready to configure
your charts. I will illustrate this mainly by chart screenshots.

In the following chart screenshots I will show you how configure your own
chart so they 1) look similiar to mine and 2) are what youll need to trade
this strategy.

The 1st chart that youll see has green candles on a black background which I
personally find hard to read, so if you would like to change your own chart
from this set-up one that is the same as mine just follow the instructions
below.

Copy the properties shown below to replicate my own chart. This will give
you a clearer chart, although you can spend more time during this stage and
personalise your own chart to suit yourself.

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You will be using candlesticks so click on that icon at the top of your chart
as shown on the chart above.

Once that is completed your chart should look like the one below. You can
now clear the Market Watch window from your chart as you will not need
that any more during trading until you begin, at a later date, to trade my
other systems.

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For this strategy you will be using just the 5 minute timeframe.

Apart from candlesticks, the only other feature you will need on your chart is
an oscillator the MACD.

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You can place that on your chart by the following process:

Click on the Indicators button at the top of your screen.

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Once youve clicked on the MACD button, you will see this window for the
MACD properties.

Click on the Parameters tab and copy the exact settings.

Then go to the Colors tab and ensure that the top color in the window is set
at None with the second color set at whatever you feel appropriate.

Once that is all completed you can click OK and your chart is ready, and it
should look like this:

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You now need to save your settings and this is done by means of templates.

Once the templates window appears on your screen, you will be able to name
your settings and then name the template so you can retrieve when you next

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open the platform. After this it should always automatically come up with
these settings.

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10. The strategy (part 1)

The first part of the Trade With A Day Job strategy uses candlestick
patterns. Although there are many of these patterns you will use just a few in
the first few months and when you have got the hang of the strategy you can
then go onto using a few extra ones.

The first set you will be using are candles with long wicks or shadows as
shown below. As you will be taking both long and short (up and down)
trades, there are different shape candlesticks for each direction.

The various candles I have shown above are ones that signify a price reversal
situation. As you will notice, the candles I use for up (long) trades all have
their wicks (or shadows) below their bodies and vice versa for down (short)
trades. Included in the above selection are long shadows, spinning tops and
dojis all can be found in Steve Nisons Japanese Candlestick Charting
Techniques Book which I can send you if you contact me today.

The reasoning behind using these types of candles is that during the 5
minutes that the candle is forming on your chart, they give a clue as to what
the buyers and sellers are doing, and more importantly whats going to
happen in the next 10 or 15 minutes.
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When a candle forms with a long shadow (or wick) it shows that one set of
traders (buyers or sellers) are predominantly in charge.

In the example to the left there is


a long shadow candle at the point
of a price reversal. In this case, the
sellers that were in charge driving
the price downwards have been
overwhelmed by buyers during the
5 minutes that it took to form the
long shadow candle. In the last few minutes of the candle, buyers have been
dominant and driven the price higher and this buying has continued in the
next (blue) candle.

In the Trade With A Day Job strategy we will be looking for situations where
the price changes direction after short periods in a certain direction and now
you can see that using long shadow candles will give you an early warning of
price direction.

You should use these candlestick patterns whenever you see them on your
chart, as long as the second part of this strategy (see chapter....) is also
present.

The entry and stop-loss levels for these patterns are worked as shown below
using a long shadow candle.

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Once you have been trading the strategy for a few weeks and your
confidence has grown, you can then move onto some more patterns.

These are shown below:

It is important that you have a good working knowledge of these particular


candlestick patterns so it is a good idea if you spend the next hour scrolling
through your S&P500 chart and practice spotting these patterns.

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I will now provide some chart screenshots with these patterns present to
assist you. (As mentioned previously, please enlarge this document so you
can see details on the chart )

And some more patterns below.

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As you will notice, these particular candlestick patterns often occur at major
turning points on the chart, and youre going to take advantage of this fact
in your trading.

To test your skills at spotting these candlestick patterns there is a chart


below without the pattern names attached please list all the names before
looking at the answers on the next page.

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Within a few days experience has shown me that most people will be able to
spot these candle patterns quite proficiently, and the more you use this
strategy the better you will be and seeing them as soon as you look at any
chart, not just this set-up.

And now to the second (and last) part of this strategy, but first scroll down
for the answers to the candlestick patterns in the chart above.

The patterns on the above chart are as follows:

1. Hammer/Long Shadow
2. Engulfing Candle
3. Doji
4. Hanging man/Long Shadow
5. Hanging man/Long Shadow

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6. Piercing Line
7. Thrusting Line
8. Thrusting Line
9. Long Shadow
10. Engulfing candle
11. Spinning Top
12. Hanging Man/Long Shadow

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11. The Strategy (Part 2)

The next (and final) part of this strategy is the use of oscillator divergence to
add to candlestick patterns. You will be using the MACD for this in
conjunction with the price/candlestick part of the chart. This strategy will
concentrate on one type, hidden divergence.

More normally divergences signal a potential trend reversal but they can also
be used as a possible sign for a trend continuation. Always remember, the
trend is your friend, so whenever you can get an extra signal that the trend
will continue, this is good.

As you know, trends move up and down, bullish is up and bearish is down.

Hidden bullish divergence happens when price is making a higher low (HL),
but the oscillator is showing a lower low (LL). Candles will move upwards but
periodically there will be a break in buying momentum and this causes the
price to fall slightly for a short while before the upward trend continues.

Once price (the candles) makes a higher low in an uptrend, check to see if
the oscillator does the same. If it doesnt and makes a lower low, then weve
got some hidden divergence in our hands. Firstly, here is the price making
higher lows (HL)

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If you then add a MACD oscillator to your chart you would expect it to move
in the same way, and in most cases it does. But occasionally it will act
differently and instead of producing higher lows that are the same as the
PRICE (candles) it will produce a lower low as shown in the illustration below.

If we now add a MACD to the candle chart from above we get your complete
trading chart that youll be using for this strategy.

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I have added a couple of the HL lines in to demonstrate divergence in a


moment.

As you have seen on the previous page, we are looking for a higher low (HL)
on the candle part of your chart but a lower low (LL) on the MACD.

On the chart below, you can see that we have divergence between the price
and MACD at least three times where I have added lines onto the MACD.

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This is bullish hidden divergence and is one of the patterns you will be
looking for when trading this strategy. Please note if you draw divergence
lines below the candles, you MUST also draw your divergence lines below the
MACD.

I will go into this more later but you can also see that at the end of the
divergence lines I have drawn in on the chart above, there are also valid
candle patterns.

Next I will show you how to spot bearish hidden divergence. This occurs
when price (candles) is in a downtrend and this is what you should be
looking for:

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In an overall downtrend the price will make lower highs (LH) as you can see
from the chart below.

On the chart below, I have added a couple of divergence lines on the MACD,
when you have a bearish (downward) trend you are looking for higher highs.

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Not every one of the lower highs (LHs) on the candle part of the chart will
have a corresponding divergence line on the MACD as you can see above but
when does occur they do have a high success rate.

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12. Important Rules

When drawing in the divergence line on the MACD part of the chart, you
must always ensure that the line starts at a definite point on the line as I
have shown in the chart below.

You cannot start a divergence line on the MACD between points as I have
shown at point A on the chart below

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The length of the divergence line on the candlestick part of your chart must
be a minimum of 7 candles.

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As you know, this strategy works on the S&P500 during certain hours due to
occurrences in the market over in the U.S.
This means you are restricted to trading the strategy between the hours of
17:00 GMT and the close of the market at 21:00hrs which equates to midday
16:00 EST. If you are uncertain regarding which hours you should trade if
you live outside Europe or the U.S. please contact me.

Generally you will find that if I notice a valid trade dead-on 17:00 I will take
it, but if it is 5 minutes earlier I will leave it as there needs to be a definite
cut-off time for beginning to trade. You can use your own discretion after
youve traded the system for a few months.

The futures market will continue after the 9pm closing time but you will find
that volume in the market is severely depleted so there are very few trading
opportunities after this time. If you would like to continue trading after
21:00hrs please contact me and I can advise you.

Do not take more than two trades per evening I will cover this point in the
next chapter.

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13. Targets & Stop-Losses

As I have mentioned previously, the overall target per trade for this strategy
is 20 pips after an initial period of getting used to the system. On the
S&P500 a one pip movement would be (say) from 1843.0 to 1843.1 and to
show you on a chart, you can see below there is an 8 pip movement. To
make it easier to work out, you should just ignore the decimal point, so just
look at it as 18430 instead of 1843.0

To begin with, you should be looking for a target per trade of 15 pips or a
movement of 1.5 on the chart. Doing this will get you used to a smaller
target which in turn gets rid of any stress that you may have when entering a
trade. I cover this point in greater detail in my trading psychology book
mentioned earlier.

Once you have traded this strategy for a number of weeks you will find that
you are more comfortable about being in the market and you will

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automatically raise your trade target up to the normal 20 pips. If you have
any doubt about the timing of this move, please email me for advice.

Initially you should go for just one trade per evening, if it is a winner. This
strategy helps with the overall discipline of trading and also prevents over
trading when you first start out in the markets. It is a good idea however,
once youve had your one trade for the evening that you continue to watch
the chart until the close, just to get used to the indexes movements, to learn
how its personality works.

If your initial trade is a loser, you should then look out for another trading
opportunity and quite often this will occur almost immediately so do be on
the lookout for it.

This next trade will have will have a target equal to your previous loss, the
idea being that you will come out at break-even on the session. So if your
stop-loss was 18 pips, thats what youre going for in the next trade.

If on this second position you hit target but the price seems to be going on
further in the right direction, you should move your stop upto your target
level to safeguard the profit you already have and then watch your chart
closely to see if you can get an extra 5 or 10 pips in profit. Move your stop
up (or down) to ensure you do not lose any gains if the market reverses
suddenly.

Do not have more than two trades per evening session during the initial two
months of trading this system. Once you are more used to the strategy and
can understand the personality of the S&P500 you will find that you gain a
6th sense as to what the price is going to do next, so you will be trading
much more professionally and as a result will take trades that turn out
positively more often. Students report this occurrence as soon as 3 months
into trading the index but can often take upto a year. You cannot rush or
predict this kind of thing, but when it happens youll certainly realise it.
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The stop-loss will different for each trade as you will work it out individually
using whatever candle pattern youre using for the trade.

Heres a candlestick pattern to remind you where the stop-loss is placed.

This is a long shadow candlestick


pattern that was shown earlier in this
manual. As it is bullish reversal, we are
expecting the price to go up, so the
stop-loss will be placed at the bottom
of the low of the candle, in this case
its the shadow (wick) This level is
always placed one pip away from the
low (or high in the case of a bearish reversal)

As you can see, it is quite easy to work out the stop-loss level of each
candlestick pattern it is at the opposite end to the entry level.

The actual amount of the stop-loss should not exceed 20 pips as thats
your target for each trade, although once you get used to the strategy and
are trading it exactly as I do, youll find that because you have so many
winning trades and hardly any losers, you can stretch the stop-loss value
upto 22/24 pips after the initial 2 months of trading.

To work out the amount of the stop-loss in pips you need to take into
account the two levels you already know (stop-loss and entry) but you have
also factor in the spread which the trading company charges you for each
trade, and which forms part of their profit.

If youve been looking at trading for a while youll know that the spread for
different instruments vary greatly, and the average spread for the S&P500 is
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around 4 pips which is what well be working with when using the GKFX
trading platform.

In the past, many new students are aghast that its not a lower figure
(EUR/USD and FTSE100 can be as low as 1 pip) but do not worry, this
strategy has worked perfectly well over the last 14 years with this spread.
Its just a cost of doing business, exactly the same as tax, rent and wages
are when you run a small business (but youve none of those with trading
from home of course). I have found that new traders who worry unduly
about seemingly large spreads are really just struggling with their own
trading if you have a profitable system you can trade with a spread of
15/20 pips with no adverse effects.

I will now run through an example of stop-loss calculation using figures


from an S&P500 chart and valid candlestick pattern.

Firstly here is the chart. It shows a bearish (downward) reversal candlestick


pattern in the form of a long-shadow candle (candle A)

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The top of the candle (top of the wick) is 1847.5 so as previously mentioned;
the stop-loss is placed at one pip (0.1 S&P500 points) above the top of the
candle making the stop-loss level 1847.6 and the entry level is one pip (0.1)
below the low of the candle as its a short (downward) trade 1846.6

To play the trade out you would have entered on the 2nd candle after the
trigger candle (A) at a level of 1847.5 and to this you would need to add the
spread so your actual entry price would be 1846.6 minus 0.4 (4 pips)
equalling 1846.2

To calculate the stop-loss amount we would take the stop-loss level of


1847.6 and then take away the actual entry level of 1846.2 (1846.6 minus
the spread) giving us an actual stop-loss amount of 14 pips (1.4 S&P points)

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For this strategy that trade would have been acceptable from a risk/reward
point as the target is either 15 pips if youve just started trading the strategy
or 20 pips if youve been trading for longer.

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14. Trends

As you have now learned, trading using hidden divergence gives you a
chance to join in on established trends, but you also need to recognise when
a trend has possibly finished, so you do not get caught going into the
market in the wrong direction.

An easy definition of a trend is when prices (candles) are forming lower lows
(LL) in a downtrend and higher highs (HH) in an uptrend, and this can be
seen in the chart below.

As you can see, the candles in a downtrend form lower lows together lower
highs as I have marked. Once the trend has changed the candles then form
higher lows (HL) and higher highs (HH) and this is quite easy to spot once
youve had a small amount of practise.

Slightly trickier is spotting when the trend actually changes, and the point
that I have marked on the above chart at A shows where doubt may start
coming in. At this point you could argue that the downtrend is still intact but

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once price goes above the high of that candle A, the trend has usually
reversed. If you then see higher highs and higher lows this is then confirmed
and you can start looking for hidden divergence in the new direction.

In the chart example below I have shown another trend change. At point A
the price is still in an uptrend but as soon as the low of this candle is
breached it could be argued that the trend then changes to bearish, and
quite often at this point there will be a valid candle pattern for you to get
into a trade. Although this may end in a losing trade, this situation is more
rare than a successful trade with the trend, so there is no problem with
taking these trades when they occur.

Heres the chart.

The final chart (below) on the subject of trends shows a few points on during
a trend change.

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During the first part of the chart (on the left) the price is in a downtrend with
lower lows being developed.

Here is the chart.

At point A the downtrend is still intact even though in hindsight you can now
see that the trend has changed and at point B there is a long shadow candle
to further confirm this change.

After the price breaches the high of candle A you can see at point C the
trend has definitely change to bullish so you should now look for
opportunities going long.

Further on in this manual there are actual trade examples of trades I have
taken in the past so you will be able to see trend changes in action.

But first we have a chapter on putting it all together, combining the two
different parts of the strategy.

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15. Entering a trade.

Once youve got a trade opportunity, you are then ready to enter the market
with either a long or short position.

On the Metatrader MT4 platform this is a very simple one click operation.
Before you do that however, you should open up the Terminal window of
your platform so that you can see exact details of your trade once you are in
the market.
At the top left of your page click View and then Terminal

This will then bring up the Terminal window at the bottom of your screen.
You will see complete details of all trades that are open as well as historic
trades for your records. You will obviously need these once you start earning
money from your trading.

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Entering a trade is just a one click operation directly from whatever charts
you have open. At the top left of the chart click on the arrow and a trade
panel will drop down.

This is the trade panel (below)

To enter a trade you should first fill in the stake value in the small panel in
the middle, the minimum is 10 pence (as shown)

Once thats done simply click either the buy or sell button and youre in a
trade. You will see it come up in the Terminal part of your screen where you
can change the order and close the trade off (with one click again).

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16. Putting it altogether

As you have seen in the previous pages, there are basically two parts to this
strategy, candlestick patterns and hidden oscillator divergence using the
MACD indicator.

Over the past 6 years since I have been helping new traders trade this
system the most often asked question is what do I look for first when
trading this strategy.

First of all I would like to say that after trading this strategy for a month or
so, you will not need to ask this question as you will be so used to spotting a
valid trade opportunity youll see all the components to the set-up all at
once, but to begin with you will need to approach the strategy like this.

Once you have switched your S&P500 chart on and you begin to watch for a
signal, firstly see if there is a good trend occurring with a small price
reversal/consolidation. Next you need to look for a valid candlestick pattern,
so it is imperative that you commit these patterns to memory and using my
strategy to remember these in chapter 10 will accelerate this process. Please
use this as you will not the need to keep referring back to chapter.

Once you can see a valid candlestick pattern starting to emerge you can then
see if there is also some hidden divergence already present.

As part of this system I will be sending your my actual trade examples when I
trade the strategy, usually 2 or 3 times a week if I am not on holiday (see my
Trading Diary) Below is one such chart that I sent out to customers last year
(I will show you more in a future chapter) and I will use this trade as an
example in what to look for on your own chart.

The chart below is from a trading session I had in October last year (2013)
and I will describe the process you should use.

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Firstly, heres the chart:

I would have switched on my chart around 5pm as usual and on this


occasion I would have noticed that there was an established bullish (upward)
trend meaning I would be looking for a pause in this upward movement
when a valid candlestick pattern would maybe appear with some hidden
divergence as the price pauses and traders take profits.

As you can see, around 17:15pm the price pauses, forms a long shadow
candle and then moves downwards for 10 minutes (2x 5min candles). If you
were watching the same chart, you would have then seen that a spinning top
candle started to form at 17:25 and while this was occurring you would have
then looked for any hidden divergence. In this case there was divergence, so
you just then need to see what happens after the spinning top candle is fully
formed. Either the price would continue downwards in which case the trade
opportunity would be no more, or the trade would be triggered by the price
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on the next candle going more than one pip above the high of the spinning
top candle and in which case you would have entered the trade.

Thats it - that is all you have to look for when looking for a trade. Heres
another example, coincidently another long trade.

Again it was an opportunity soon after the system start time of 17:00 UK
time although at the time I was trading in Spain on Central European Time
so the system starts at 18:00hrs.

The price was clearly in an uptrend and just before 5pm the buyers slowed
and sellers took over the market for a short while this is usually because
traders who have bought earlier in the day are then cashing in on some of
the profits achieved, and if the trend is strong, it should then re-establish

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itself. At 17:15 a Doji is formed on the chart and looking down at the MACD
there is a very clear hidden divergence situation, so you would just need to
get ready to enter the market if the price goes one pip above the high of the
17:15 Doji simple as that.

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17. When not to trade

There are times when it is not advisable to trade the strategy.

As mentioned previously, you should only trade the system between the
hours of 17:00 and 21:00 GMT (18:00 22:00 CET) Monday to Friday. This
set-up has not been tested for any earlier, so I cannot guarantee results.

As the strategy is entirely traded on the American S&P500 index there are
also bank holidays when the U.S. Stock Market is closed.

Below is a list of days when the S&P500 is closed:

Martin Luther King Day


Washingtons Birthday
Good Friday
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Christmas Day

I have not advised of actual dates as most of them change year to year so
please see this website for exact dates. Please note there are also sometimes
an early finish on the day before the bank holiday whoever you are trading
with will advise you in advance.

There are also economic announcements that come out weekly and monthly
which can have an adverse affect on the market sending it up or down with
great volatility in a matter of seconds. The biggest one of these is the
monthly U.S. employment figures known as the Non Farm Payrolls and the

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numbers come out on the 1st Friday of each month. I suggest that you do not
trade on this day especially in the first few months of learning this strategy.

I do have customers who do trade after the NFP announcement so it entirely


your decision once you are trading with your own money, although I never
trade during that day, I much prefer a break away from the markets.

Other times when you should not trade are all listed on the Forex Factory
calendar which you can find here. The important times you should be wary
of are marked in red and applicable to the U.S. Dollar as you are trading the
U.S. market. See screenshot below for an example. Generally you should be
out of the market around 15 minutes before the announcement.

To ensure the announcement times are correct for your country make sure
that the clock at the top of the page in synced with your computer clock.

Most evening announcements that will affect this strategy are around 19:00
GMT, but always check daily at 17:00hrs or whenever you turn on your
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charts to trade the system. I like to check on Mondays to see whats ahead
for the rest of the week and then set alarms on one of my phones.

Another time to avoid trading is when the volume is low, resulting in limited
movement of the candles. One of the ways to spot this is by the shape of
the candles, you can see an example below this is an actual screenshot that
I sent customers one evening last year.

As you can see, the candles on the far left of the chart are of normal shape
and size but as the volume decreases there are more dojis and gaps. It is
times like this where you should stand aside and forget about trading. It
would be useful in the first few months of trading this strategy to still sit
back and watch the chart without trading just to see how the price moves in
times like this. It is one of the ways you will learn the S&Ps personality which
is going to help you enormously in the months and years to come.

As you know, there is an end time for this strategy as well, and this is mainly
because at the close of the U.S. trading session at 16:00hrs New York time. I
would suggest you also stop trading at this time as the volume lowers

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dramatically and candle movement is virtually nonexistent on most days. Just


look at a chart now to see what I am explaining, or see chart below:

As you can see, once the U.S. session ends the candles get smaller and
trading range is also restricted to a much smaller extent. Any trading after
the U.S. session close is all on the futures markets, mainly in Asia at that
time of the night.

After a very short while trading you will be able to judge when to trade and
when to step aside and have an evening off.

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18. Important points to remember

This is a quick recap to remind you of the important points of the strategy.

The strategy works between 17:00 and 21:00hrs UK time just on the S&P500
index.

Use a demo trading account to begin with, to learn the strategy. Continue
trading on your demo account for at least 60 trades before contacting me
about real-money trading.

You will be trading on the 5 minute chart, no other timeframe and you need
just candlesticks and the MACD on your chart.

Use just hidden divergence and not regular divergence. Look for a valid
candlestick pattern first and then see if there is divergence present.

Ensure you check Forex Factorys economic announcement calendar for news
that will affect the S&P500 during the evening trading session.

Even when youre not trading, try to watch the S&P500 chart as much as you
are able, it will help you understand the personality if the index and this in
turn will help your trading in the future.

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19. Additional strategy

An additional strategy I have traded on the S&P500 over the past 14 years is
the 5 oclock reversal. Quite often you will find that the price reverses dead
on 17:00 UK time and to take advantage of this you do not need any
divergence, just a good reversal candlestick pattern, examples are
highlighted below. Use just these patterns not the wider selection that can
be used in the main Trade With A Day Job strategy.

These are the patterns for the 5 oclock reversal:

Stop-loss is worked out in the normal way as described earlier in the manual
and your initial target should be 1:1 so equal to your stop-loss (inc. the
spread)

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20. Trade examples.

As I mentioned earlier, as part of my service to you I will be sending you my


own trades as chart screenshots so that you can see exactly how I am trading
the system. To be included in this please ensure you signed up for the daily
emails when you downloaded this manual.

In the following pages I will show you actual examples that I have sent out to
students during 2013. I generally take the chart screenshot a few seconds
after I come out of the trade and then highlight the candle pattern used
together with details of the hidden divergence line.

Here are some examples:

The chart above shows quite a simple set-up during an established bullish
trend that started as the U.S. trading session kicked off. I was going for

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more than the normal 20 pip target but as you can see, the price hit a
resistance level and did not seem to want to go higher.

The chart below is interesting as the upper divergence line on the candle
part of the chart is horizontal actually forming a support level. When this
occurs it dows show quite a reliable signal as the S&P500 index does obey
support and resistance level very well.

I went for the normal 20 pip profit and did not take a second trade, probably
because I was going out.

Heres the chart:

The chart below shows two trades, the first one was stopped out with a small
loss but the second went on to give me a good profit (+31 pips)

Markets Mastered 2014


Trade with a Day Job System | Markets Mastered 70

You will often find that if you have a losing trade, there is a subsequent
opportunity almost straight away, so keep your eyes peeled for this.

The chart below shows a short trade in a bearish trend. The divergence line
is 8 candles in length, just above the minimum amount allowable.

Markets Mastered 2014


Trade with a Day Job System | Markets Mastered 71

Incidentally, the chart also shows another trade I took using my trendFX
Beginners strategy.

The chart below shows an interesting situation. Occasionally you will find
that you have more than one place to place your hidden divergence line, and
this chart shows two positions that were valid during that particular trading
session.

As well as the normal lower high (LH) on the candles, there is also a
horizontal resistance line, which as mentioned previously, is a good signal.

Heres the chart:

The chart below shows a long trade which turned out to be a loser.

Markets Mastered 2014


Trade with a Day Job System | Markets Mastered 72

The chart below shows a fairly standard bullish hidden divergence trade
using a spinning top candlestick pattern the divergence line was 9 candles
in length.

Markets Mastered 2014


Trade with a Day Job System | Markets Mastered 73

chart below shows two trades, the first one was stopped out at minus 11
pips but as mentioned previously, the trade signal almost immediately
afterwards turned out ok.

Markets Mastered 2014


Trade with a Day Job System | Markets Mastered 74

This trade (Below) was a standard short trade using a piercing line pattern.

Markets Mastered 2014


Trade with a Day Job System | Markets Mastered 75

This next trade example shows a horizontal divergence line again for the
candles.

Markets Mastered 2014


Trade with a Day Job System | Markets Mastered 76

21. Conclusion.

So thats my beginners evening trading system and I hope youve enjoyed


reading this eBook. Now its time to put it all into practice, so please re-read
it once more and get going with your demo account.

As I have mentioned before, spread betting companies I speak to regularly


report that around 80% of new traders fail in the first six months of opening
an account, so stack the odds in your favour and learn this strategy
thoroughly, stick to the rules I have laid out and you have a very good
chance of succeeding. I know the strategy works as I have traded it almost
every week for the past 14 years, and well over a thousand students have
also used it to launch a profitable trading career.

As you know, I will start sending out my daily trade screenshots to you in the
next few days, but if theres anything youre not sure of or you want some
general trading advice, please email me directly and I will help you in any
way I can. My email address is nick@marketsmastered.com I will always aim
to get back to you within 24hrs unless I am abroad please check my
blog/trading diary to see where I am at any time.

There is also a few extra strategies that you can trade alongside this main
set-up in the evening for some additional profits, just email me for details.

If you want to trade at other times of the day or night I can also help you,
just contact me.

Thank you again for purchasing this beginners trading system and
remember I am here to help you reach your goals in the markets.

With best wishes,

Nick

Markets Mastered 2014

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