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Once you get the following method down you have the ultimate guide to catching a high probability market turn. I think what most people always forget when they attach all their indicators, that we are still trading a market. If you buy and sell a physical product you are trading a market. That is something you should never forget especially when trading the foreign exchange market.
“I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.” Paul Tudor Jones
Also make sure to read the following article on my website: The Smart Money Business
THE FAIR VALUE OF PRICE
The fair value of price is the base of our method.
How do we find the fair value of price on the charts?
Look at the following chart example. If buyers and sellers agree on a fair price, what does that mean? Price would slowly go up and down bringing us to some sort of accumulation. Means further that price should go sideways.
We are in an uptrend. What we are looking for is a certain movement of price. We can definitely say buyers and sellers agreed within these areas of accumulation.
But I want you to look at a bigger picture. Let me draw a line here. What you can see now is that price is moving around that line from the upside and the downside. This is our fair value of price seen from a different point of view. Long term positioned traders like funds etc. are positioned long. But still, price always returns to its fair value where buyers and sellers agree on a price.
This line is our fair value of price.
EXCESS AREA
Now that we know the fair value of price, we know that these areas always have two sides. One side where price comes from above and one side where price comes from below.
We not gonna take trades just based on a simple line, that would be crazy. Let us get back to our first example chart. We are in an uptrend. We want to enter a trade when the smart money realizes that no buyers and sellers want to buy or sell for a certain price anymore. This brings us to the second type of line we gonna draw in to identify certain areas where price exceeds its limits.
What we are going to do, is to duplicate our fair value price line and drag it up. In a downtrend, you draw the upper line first. In an uptrend, you will draw the lower line first. In this example, we are in an uptrend. Let us drag our line and drag it down. And you want to drag it down to the point whereas little as possible price reaches over that line.
Once we are done with that, we duplicate our fair value line again and drag it up. Now, this is really a visual part. You want to drag the line up at approximately the same distance as you dragged the lower line down. What we have now is some sort of channel. As you can see now. We have areas were price reaches outside the channel. This is an excess area. An area were price could not go higher. The smart money had to bring the price back to the fair value to attract buyers again.
THE STOPHUNTS INDICATOR
Let us get back to our marked up pairs and attach the StopHunts indicator. It has some heavy calculation under the hood and it already took several months to optimize it to load faster and not crashing your MT4.
It gives you an indication where stops are being hunted by the smart money. But as you can see in the picture below, in combination with the concept of the fair value of price and excess areas, this gives you the highest probability you can ever get.
UPDATE: Short summary of what my method is about.
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UPDATE: If you go to my website, you will find 3 "different" methods. Watch the video below to see why
StopHunts is the end of my journey and the evolution of my methods.
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For more information visit the-tradersedge.com/stophunts
HAPPY TRADING!!!
