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.T HE T RA DER S L I FEIn my view, the most important takeaway you could have about the fivebasic market structures is the underlying issue of order-flow balance orimbalance.All the competing time frames will show one of these twostates all the time.The critical thing is to assume that the larger timeframes are the dominant order flow.Because range can form at any time and usually is first apparent onshorter time frames, you want to watch for potential range formation onthe lower time frames as a clue that the order-flow balance will resumein an unbalanced state on the higher time frames.For example, when adowntrending market reaches a weekly low, you will likely see range formon the 1-hour time frame or less when the low is reached.That rangeneeds to be studied for clues that the dominant order flow is continuingto sell highs, making the short-time-frame range a pause before a deepermove lower.If the weekly low happens to be a multiyear or an all-time low,that range may be the beginning of bottoming.Obviously, in an uptrend,your clues are for higher prices or top.If the market has already put in a top or a bottom, then the rangeon the smaller time frames is usually a pause before more price action inthe direction of the developing trend is seen.In other words, when securerange is below a top in price or above a bottom in price, it usually is apause before more in the direction of the developing secure trend.I callthat the pause that refreshes. In other words, once a market has toppedor bottomed, and the new trend the other way is developing, there willbe range trade on lower time frames regularly that you can use to add toopen trade winners in the direction of the new developing trend.If you want to make the most from your understanding of order-flowbalance and imbalance, you need to study range more than anything else.That s because range always will end in order-flow imbalance, creating achange in price.P1: OTAJWBT329-c19 JWBT329-Jankovsky July 24, 2010 7:59 Printer: Yet to comeP1: OTAJWBT329-c20 JWBT329-Jankovsky July 9, 2010 12:46 Printer: Yet to comeCHA PT E R 2 0ConclusionEverybody s buying? Then sell, sell!! What? Every-body s selling? Then buy, buy!! Al Czervik in Caddyshackhen I first saw Caddyshack as a young man, I thought RodneyDangerfield s character was the best in the whole movie.AlWCzervik was the kind of businessman I thought most reallywealthy people would be like.I had no idea how true his words wouldbe as I got older.Al was absolutely right, even if he couldn t golf tosave his life.In the final analysis, when trading in a zero-sum market, in orderto be the winner you have to do something different from the loser.If you choose to execute for an entry hoping to profit, you must dothat at or near the price/time relationship that will draw other tradersinto the game on that side.It really doesn t matter if those ordersare other traders hoping to profit or those traders taking a loss; youmust be fairly close to the point where the order flow will go into animbalance on your chosen side.Otherwise you will be the loser.We have discussed a lot of interesting variables that all contributeto that process.I personally think that the overriding factor is alwaysthe loser in the market.The loser in the market is the one who will paythe winner.You really can t expect to be a consistent winner unlessyou are willing to accept that the loser is your source of profit.Untilyou will take the step in your thinking that helps you uncover and183P1: OTAJWBT329-c20 JWBT329-Jankovsky July 9, 2010 12:46 Printer: Yet to come184 CONCLUSIONtrade against the loser in the market, your results will most likelybe less than you could have had.That, of course, includes net losses.Multiple time frames help disclose the relationship between thewinning trader and the losing trader at the most basic level becausethe loser is thinking (and therefore acting) in a way that is not see-ing the whole picture.The loser is looking at prices in different waysfrom the winner.The loser usually is evaluating price rather than ob-serving the underlying market structure.Your goal is to see this rela-tionship from the whole perspective.Accept the fact that the loser isattempting to make money from trading right now, and he or she de-fines that differently from the winner.The loser is always using lowertime frames.The winner is using higher time frames.How the loseranalyzes the lower time frames are your best clue to what they will donext.Remember that the loser is trying to answer the questions Whatdoes this mean, and what do I do to profit? The winner is trying toanswer the question Where is the loser?The market is a crowd.Crowds behave in a predictable fashion.Time compression is the inevitable result of the crowd all doing thesame thing, the same way, at the same time.When the crowd makesits move, it usually does so in order to avoid pain and a deeper lossfrom the point of view of the individual participants.Can you see thateventual inequality happening? It is always there, just waiting.As youbegin to understand crowd behavior better and see how time com-pression is disclosed using multiple time frames, ultimately you willhave the advantage of exploiting the change in the order flow.Thatchange in the order flow is all you need to profit consistently.Thanks for reading.P1: OTAJWBT329-babout JWBT329-Jankovsky June 15, 2010 8:18 Printer: Yet to comeAbout the Authorason Alan Jankovsky is a 20-plus-year veteran of leveragedtransaction trading.Trading extensively in futures, options, andJFOREX since 1986, first as a customer and then as a regis-tered broker, he is self-taught and self-educated.Working in almostall facets of the business, he has authored several trading systems,trained other successful traders, and been published in many indus-try periodicals.His numerous articles on global cash FOREX haveappeared in Traders Savvy, The Perspective, SFO Magazine, FuturesMagazine, FX Magazine, and many other industry publications.He isa regular guest on FOREX TV.com and the Jack Bouroudjian Showas well as other business radio and television shows.He is the au-thor of Trading Rules That Work: The 28 Essential Lessons EveryTrader Must Master (John Wiley & Sons, 2006), a regular Amazontop-100 best seller in the category of futures. His second book, TheArt of the Trade: What I Learned (and Lost) Trading the ChicagoFutures Markets (John Wiley & Sons, 2008), is an autobiography ofhis education as a trader and is also a regular Amazon top-100 best-seller in the category of biography/business. He has focused on thepsychology of trading as the key component to a successful trad-ing methodology and teaches a six-week course on trading psychol-ogy every quarter to traders around the world.He appears regularlyas a guest speaker at many public and private trading forums and hasbeen invited to speak at round-table discussions offered by eventssuch as the Orlando Money Show and the New York Traders Expo.He provides daily trade coaching and analysis for subscribers to hiseducational Web site, working directly with traders of all skill lev-els.Born and raised in Chicago, Mr.Jankovsky is an avid sailor andprivate pilot.185P1: OTAJWBT329-babout JWBT329-Jankovsky June 15, 2010 8:18 Printer: Yet to come186 ABOUT THE AUTHORMr.Jankovsky can be reached through his Web site, www.theliononline.com, or by e-mail at jaj@theliononline.com.He pub-lishes his personal trading results weekly
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