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BOOK I Trade secrets at the market of Forex.

Contents
Chapter I DELUSION No1. FX Currency Pricing. Economic Factors Impact on Exchange Rate. Chapter II Forex Secrets - Delusion No 2 - Who prompts Forex quotation to traders. Chapter III MASTERFOREX-V ON FUNDAMENTAL ANALYSIS AUTHORITY IN FX RATES TRAVEL. CHAPTER IV NO. 3 DELUSION: FX LITERATURE AS A HOW-TO-LOOSE TUTORIAL FOR 90-95% OF THE GLOBES TRADERS. CHAPTER V DELUSION NO.4: SHORT-TERM FX TRAINING AT THE DEALERS'. WHY DO GRADUATES BULK UP LOSERS? CHAPTER 6 Developing the "anti-chaos" trading strategy and tactics at Forex market. CHAPTER 7 Role of trading system in successful and profitable work at Forex. CHAPTER 8 Correlatio n between binary elements and fuzzy logic at Forex market and in Masterforex TS. CHAPTER 9 Where to look for trends at Forex , or the faultless gaining of profit by a trader. CHAPTER 10 Specificities in the intra-day work at Forex. CHAPTER XI SUPPORT AND RESISTANCE LEVELS IN MASTERFOREX-V CHAPTER 12 Moving averages as the basic indicator at Forex. CHAPTER 13 Work on News. Specificities in Traders Work at American Stock Exchange on Fraiday. CHAPTER 14

Chapter I DELUSION No1. FOREX currency rate. Economic Factors Impact on Exchange Rate.

The delusion conceptually propounds that intraweek and intraday FOREX currency quotes movement is governed by either improvement or by deterioration of the states economic situation. But in reality, even in case the actual Forex news are superior to the estimated one, the FOREX quotes up/down movement is of 50/50 probability. This statement is thoroughly important. Once the job of Forex trader is gambling on FOREX exchange rates differential (FOREX pairs up/down movement), the following is to be realized to obtain faultless profit: 1. 2. FOREX pairs pricing mechanism (say at point X where you are completing the market analysis) Factors imparting growth/decline to FOREX rates (up/down from point X).

Thus, having understood the FOREX ratesfactors effective at the extra-exchange (book-maker) FOREX market and the given currency motive factors, a trader must possess distinct knowledge of whether to buy or to sell the given currency pair. So, what are these factors? FOREX student suggest unambiguous interpretation of factors responsible for the price formation and the fluctuations there of: 1. 2. Forex rate constitutes a demand-supply balance for a given goods (currency). Any violation of this balance, (for instance, in case where the estimated news is in disagreement with the issued official one), results in the FOREX rates reciprocation in chase of a new demand-supply balance. Poor demand brings about decline in a certain currency rate, with a high demand leading to the growth of the latter. The situation continues as long as the currency buy/sell demand comes to balance at another level or at another point.

Referring to the B. Williams (Trading Chaos 2 Chapter 1 The market is what you are thinking of it): Each world market is dedicated to distribute or share limited amount of something among those desirous to obtain it most of all. The market affects it by way of finding out and identifying the exact price? Underlying the buyer/sellers power absolute equilibrium point. The above point is readily established by stock, futures, bonds, FOREX and options markets, be it either via an open auction or by virtue of a computerized facility. Markets spot this point prior to any misbalance being detectable by You or by me or even by traders at the exchange floor. With this scenario holding true and it really does we are in position to jump at certain simple yet important conclusions as regards the information being circulated through the market and enjoying doubtless acceptance. Thomas Demark was more laconic in Technical analysis - an emerging science: Price movement is governed by demand and supply. Should demand exceed supply, theres a price rally and if visa versa, theres a price decline. All economists do share these underlying principles. Hence, the role of fundamental analysis for FOREX market is readily apparent. In scholar fiction one will discover roughly the following explanation, persistently wandering from book to book, from site to site and suggesting attaining successful trading at FOREX market by way of scrutinizing the countrys economic fundamental data, viz. by tracking the factors reflective of the countrys economy condition as below:

State economy condition dynamics indicators (GDP, trade & payments balance, current account, industrial production, etc. It is knowledge, that the higher the above indicators the faster the economic and the currency price growth); Stock indices, via average arithmetic index of the countrys securities market condition and dynamics. E.g.: 0.3% daily DJI growth in the USA means that this certain day the shares of 30 leading US companies, being pictured by DJU, went 0.3% more expensive. By similarity, DAX30 is the major German index, incorporating the price of

shares of the countrys 30 leading companies.

The countrys interest rate, since the higher the rate, the greater number of investors is eager to invest into the countrys economy and hence into national currency strength. Rate of inflation (the higher the rate, the quicker the National Bank will hike the interest rate). With this assumption, the CPI constitutes a key factor. Money supply growth in domestic market, which fact brings about the inflation, leading to the interest rate hike.

The countrys gold and currency reserve assets.

Variation dynamics correlation of: balances of payment, trade balance, state budget, gross domestic product (GDP), etc.

Trade and industry dynamics (industrial production, industrial orders, DGO, capacity utilization, retail sales, etc.)

Construction statistics (construction spending, new home sales, housing under construction, building permits, etc.)

Labor statistics (unemployment rate, new jobs, etc.) Society investigations (consumer confidence, consumer sentiment, purchase managers and service managers sentiment, etc.)

To be considered additionally are the countrys political stability and tranquility (clearly, any political, natural and other cataclysms are sure to turn investors nervous making them withdraw the investments from the country, thus weakening its national currency). And with the currency being the national economy derivative, changes in economic data will inevitably result in the above currency rate movement.

Conclusions: 1. Progress in economy results in the currency exchange rate rally.

2.

Decrease in economic indicators leads to the national currency rate decline.

To sum it up, critical economic and political news (whose calendar is issued in advance and is familiar to any trader) constitute a standing factor giving rise to misbalance and causing the currency rate fluctuations. In anticipation of important economic and political news FOREX pair crawl to the rates as inspired by the estimates (rumored trade), whereas upon actual news there occurs a pulse motion of FOREX pairs in accordance with the scheme below;

Forex rate grows if actual news are better than the estimated one; Forex rate declines if actual news are worse than the estimated one.

ARE YOU FAMILIAR WITH THESE ABC BASICS OF STUDYING FOREX? Do you accept that one can earn money by way of using these basics, known to every trader? Then why, having absorbed these economic axioms, 90% of Forex traders in the world are losers rather than winners. Where is the delusion of the above ABC truth, nudging traders towards losses? Let us perform sort of point-by-point analysis. 1. The currency exchange FOREX market is a book-makers one. It is gambling on rates difference without direct money delivery to the exchange market, except for hedging of traders funds by Forex brokers, via buy-sell difference especially during strong trends). Then, www.forexite.com reads: Trading is performed without actual

currencies supply, which fact cuts overheads and enables Forexite to go long and short on the currency http://www.forexite.com/forexite_advantages/forex_advantages.html. Comment: Have you ever met any book-makers; o whose logics was coincident with that of THEIR clients (traders),

o whose stakes were being made in accordance with THEIR technical analysts forecasts, economic laws and common sense? And what extent of doubt and skepticism should be attached to THEIR free recommendations, advice, surveys and forecasts, laid out at THEIR sites through THEIR analysts? 2. As a regular result, over 90% of the world traders are still loosing their deposits at FOREX each time they follow Thomas Demark stereotype that All the economists share these underlying principles.

Comment No.1. In as much as the above underlying principles are 90% contradictory to practice, it gives rise to the following question. Might these underlying principles, shared by all economists including Thomas Demark have possibly turned into dogma, alien to life and practice? Comment No.2. What should a trader lean on: practice or dogma even if supported by great names, provided that the trader is purported at earning money? 3. 4. 5. FOREX analysts issuing their daily bulky market reviews are not FOREX traders in the overwhelming majority (see detailed discussion below). And on bringing together pairs 1, 2 and 3 there appears certain regularity. Please, think over A. Elder words, that: FOREX rates and the fundamental analysis are tied together with a mile-long rope. The fundamental analysis is ultimately decisive. But anything is likely to happen prior to this eventuality. See http://forum.alpari-idc.ru/viewtopic.php?p=233365&sid=a15db5e24b0eec0a8cf725e2c5cac859). Another, yet no less renowned trader and analyst, Bill Williams underlines the same mental regularity of an experienced professional trader (level 3 of his traders skill rating as per Trading Chaos 2): On attaining level 3 you emerge as a self-provided pro trader. You are always familiar with the markets basic, usually invisible structure. You no longer need to refer to others opinions. You neednt read Wall Street Journal, watch marketoriented TV programs, and subscribe to information bulletins, waste money on information channels. Comment: Logically, there is a counter-implication, that if You are eager to become a successful trader, You are to restrict the influence of various surveys and recommendations on yourself even in case they originate from the world famous Wall Street Journal, to say nothing of crude gurus in analyst skins who use to know ahead of time where currencies will go. Forex news is a scheduled issue of fundamental data, which as a rule impairs FOREX rates a sharp pulse of motion. But then, why the currency rates movement vector is only 50% coincident with the ABC truism logics as to where the rate should rush in case of actual news being much better or worse than the estimate. And, please, make an attempt to answer the following question, stirring for every trader: why with the new being worse than expected (say, on US economy), the USD currency would initially fall by 40 pips (news work-off) but in 5 to 10 minutes it would swivel back and would display a 200-point rally, with no account to either the issued news or to common sense.

6.

Below are some examples:

Fig. 1. GBPUSD chart as of April 1, 2005 after the news, positive for the GBP and negative for the US economy. In March the CIPS manufacturing index amounted to 52.0 (with the previous data revised from 51.8 to 51.6). Oil price in NYC has grown by USD 2.40 up to USD57.70 per bbl (new record of the latest 21 years). Non-farm payrolls in the USA was minimum since last July (previous data revised towards lower values). There has been a decline in the Michigan sentiment index to 92.6 (median estimate was 92.9, with 92.9 previously). All the US indices faced a fall down. DJI at NYSE has fallen by 99.46 pips (-0.95%) towards closing at 10404.30. NASDAQ declined by 14.42 pips (-0.72%) to 1984.81. S&P500 slipped by 7.67 pips (-0.65%) to 1172.92. 30-yr US Bonds yielded 4.729 (0.037 lower as compared to the previous close). By contrary, FTSE100 has grown by 19.60 pips (+0.40%) to 4914.00. Now, the question is to certified economists: what will happen to the GBPUSD within one day or even several hours upon publication of these data? You are right, USD should not simply fall down, it should collapse. Powerfully, swiftly. Well, well And this time, the same question to experienced traders. By FOREX news headlines You might have guessed that the events are taking place at the Friday American session. Correct. Initially, anyway, the GBPUSD chart will go up by 100 pips (news wok-off), followed by a pullback. Then Forex chart starts a new rally. It is now to be tracked whether the GBP will breach the latest rally high or not. If affirmative, it will rush up by approximately 160 pips (Elliott wave 1 was 100 pips, while EW 3 is 60% longer). But if the high is not breached? The GBP currency quote will in no way come to a standstill, moreover on Friday afternoon. Hence, - down, to the starting point! And, if breached, similar situation takes shape but the counting is performed in a down direction (EW1, being the same 100 pips plus 187 pips from 1.8826 to 1.8759 being EW 3). The FOREX day trading tactics will be given scrutiny in a separate chapter. A still separate chapter will be dedicated to Friday trade at American session due to its inherent specifics and to strong seemingly inappropriate movement. The movement is, of course, appropriate. To say nothing of Friday. But it will be touched upon later. Now, getting back to the currency chart. As apparent, the GBPUSD pair movement on Friday, April, 01, 2005 is in no way in conjunction with the US economy fundamental data. Each forex trader can provide from tens to hundreds of similar instances, where the news are of a certain vector, whereas, after a fraudulent rush along the news vector, a currency applies reverse thrust. Thereafter, the next day, in daily currency surveys, certified economists are sure to explain all to us by way of inventing another undisguised nonsense, like: in spite of certain data, traders decided that the currency has already worked-off this side. But! How could this occur on Apr, 01, 2005, provided that the currency has been staying flat in a narrow range in the course of the whole of the European session?

Otherwise, another explanation may emerge, that forex traders were expecting still more inferior news on the US economy But! By how much more inferior, if according to DJ, the US non-farm payrolls MA was equivalent to 180K, with actual being +110K, estimate being +225K and prior being +243K? And in what manner do these economists count up world traders: by capita, by countries or by the funds, lost by those, who continued staying long in a holy belief in renowned academic scholars postulate of FOREX rates being tied up to countries economy statistics. I wonder if Ill ever chance to witness legal procedures to be instituted against any of those famous scholars, so that no one would dare claim that fundamental data trigger rate spikes. The same pertains to economists, writing about the way, hundreds of thousands traders throughout the globe have conspired to conclude that it is time to reverse the trends with absolutely no grounds. Is it really feasible? Such reading-matter is, but hammering a single question into ones head: is it lie or is it stupidity of those cooking daily reports for taking traders for a ride, fooling them up and keeping them from the truth, which might be of great avail to them in daily trading. Traders are not a decisive factor, thus rates movement is in no way dependent on their will. Practically in no way. Wanna check? Negotiate with tens of traders of the trading floor and arrange for a simultaneous entry long on some exotic FOREX pair. In so doing, try to push up either the NZDHKD, or the NZDCAD, or the HKDCAD. No need? I think so. Youll certainly suffer failure with the above, to say nothing of the EUR, GBP, CHF. Another example:

Fig.2. GBPUSD movement as of May 13, 2005. This is an M15 chart of the American session, where the USD pair has grown by over 100 pips from 1.8583 to 1.8481 against the news, negative for the US economy:

Most indices have dropped down: DJI at NYSE by 49.36 pips (-0.48%) to close at 10140.12; S&P500 by 5.31 pips (-0.46%) to 1154.05. NASDAQ has grown by 12.92 pips (+0.66%) to1976.80. 30yr US Bonds yielded 4.484 (0.047 drop from previous close)

There is a fall in Michigan sentiment index. In May UMich was 85.3 with med est 90.0 and prior 87.7. So it was worse than the estimate, reaching the low since March, 2003. The index decline was being observed for the fifth month.

The April US export price index was +0.6% with prior of +0.7%.

Below are other similar examples of that same day.

Fig. 3. EURUSD chart as of May 13, 2005. Hundreds of examples may be offered, where the Forex news vector is opposite to that of the currency movement. Practically, actual news may happen to be superior or inferior to the estimate. FOREX quotes up/down movement is also of 50/50 probability irrespective of the above. Why does it happen and what is the way for a trader to pinpoint entries and exits? This is going to be discussed in ensuing chapters of this book and in the Masterforex-V Trading Academy proceedings.

Chapter II FOREX Secrets - Delusion No 2 - Who prompts FOREX quotation to traders.


The delusion conceptually propounds that traders operate at a spontaneous FOREX Market(as stipulated by B. Williams, A. Elder, E. Nayman, etc.). But it is not the case. traders do their job inside a well-organized and controlled currency exchange market, governed by the Consortium of the worlds largest banks. Hence, who is pushing the currencies up and down, who defines trends, corrective actions and flats? And, who, ultimately, places a trend at a point, where the majority of traders are happy to think they have saddled the wave and are about to win an enormous profit! Now! Not to be scared! Not to close the position! Not to be satisfied with a minor profit! Later on we will discuss that sort of stupidity. Thus, one persists to continue long in spite of more and more degrading profit. Shortly, the loss starts growing with light velocity! Are you familiar with the situation? Well, who has reversed the rate? And who generally tugs currency rates? Tugging is surely centralized. Compare on-line quotes of several Dealers or banks to find out that they are per second coincident. Do each banks traders act in such synchronism, that even not seeing each other, they place identical orders so that quotation is in 100% agreement? NOTHING IS A MIRACLE HERE! But prior to further explanation, we will listen to Bill Williams, the FOREX scholar (Trading Chaos, Ch. 6): let us trace a trend formation process. Earlier, the market and the market trading venue did constitute a single physical space. Majority of large grain traders were concentrated on the floor. Their orders involved amounts, sufficient to move the market; they enjoyed better control over the market than at present. During the latest 20 years markets have grown worldwide. Now, not only Purina Ralstone, Kellog and other prominent commercial associations seek hedging their cash assets transactions. So do millions of the worlds minor profiteers and farmers, competing with them in anticipation of perspective grain price fluctuations? This fact also implies strong potential for traders with nowadays, trends not being constructed on the floor. The latter mainly ensures the market liquidity by way of tackling outer orders. The fact, that todays trends are formed rather outside the floor than on the floor, as before, enables one to trace further market tendencies with trade volume being the key thereto. Our only on-line information is restricted to tick volume, time and price. Tick volume constitutes a number of price changes per a certain time period. It is not at all a number of traded contracts. Multiple researches revealed no significant difference between actual and tick volume. Using a tick volume, we may suppose, that it represents actual volume. It is a real-time volume, thus being our key to whats going on in trading pits. Two basic elements are organic to FOREX trading: brokers on the floor and remote traders. Local brokers constitute staff, executing orders, thus earning their salaries and/or commissions. They dont possess money to be at their disposal. They are order executors. Their prospects are not burdened by prices, they getting for the orders management. Remote traders use their own money. They have to pay the price out of their own pockets, unless they are getting a good one. traders have to be much superior in skill to brokers since they independently take their own decisions, while the brokers job is to follow the others orders. Remote traders are supposed to support the market by way of taking its opposite side. As a rule, they are not at all crazy about any long-term transactions. Quite a few remote traders have been participants to our private training programs, and it is to be admitted that a 10-minute long transaction may seem quite a long-term one for some of them. Think back to the fact that trends are built up of orders, delivered to the floor from outside, but not of long-term positions entered by remote traders. Since the traders job is to take the side opposite to the orders arriving from outside, they have no prospects of trading in between themselves. They follow your money. We are emphasizing again, that tick volume is our key to understanding whats going on in the FOREX Market. Remote traders do not contribute any significant volume to trading, which might result from dealing with similar traders on the floor. Trends emerge from incoming orders. That is why we are to be certain about when and in what amount the outer order is supplied to the floor. It is presented via a tick volume change. So, we, traders, turn out to be price locomotives, dont we? And brokers on the floor just allocate and execute order, incoming from us, dont they? And on April, 1, 2005 they all (meaning: we all) together decided to swivel the trend and to stay short against all the rules, news and common sense I wonder if the scholar ashamed or not? As regards the above quotation, I have chanced to hear a single argument in favor of Bill Williams (I guess you understood for what sake Ive cited it in detail): it all pertains to the futures markets; we neither read nor use the above at

FOREX. Strange enough, these are the arguments of Williamss advocates, but not of Williams himself. This book is actually intended for both: futures markets and FOREX Market. Thats why pictures taken from both the markets are so mixed up and the author never differentiates between the Technical Analysis methods thereof. Thus, either the author does not trace any difference between the two markets, or he is not eager to reveal it to the reader. And neither in the foreword, nor in the remarks did Williams and his publishers refer to the fact that something of Trading Chaos is inapplicable to FOREX, and thus should not be made use of by a trader at FOREX. I have repeatedly come through this peculiarity of Williams (correct specific case method definition being extended to a wider coordinates scale) and it actually induced me to write this book. In all and all, the methods and advice, absolutely true and correct for a PART of FOREX Market are claimed by Williams to be universal for the WHOLE of FOREX Market without being demonstrated where the above is effective and where it isnt. The same is being done by Williamss opponents and advocates, who visualize the portion of FOREX where his methods are operable only. As different from analysts and Williamss bibliographers, traderS require much stronger to realize a demarcation with pro-Williams trading to the one side thereof and with counter-Williams trading to the other one. Logically there comes a question: what might be added to Williamss indicators in order to turn them effective at the point where they are presently ineffective (see details in chapter on the Williams Alligator). And now we are getting back to the issue of who supplies traders with FOREX rates quotation, bearing in mind that its us, traders, who exercise rates movement in accordance with Williamss standpoint. Millions of traders have actually been studying FOREX by virtue of the Trading House and it is really worth studying. This is one of the most interesting and instructive editions whose repeated reading each time brings about something new and useful. However, in some passages it smells being custom tailored. Is Williams ignorant of the fact that there is no single FOREX exchange and theres no single trading venue or floor? And that Pacific, Asian, European and American session classification is arbitrary? Did You see currency rates move, while theres a day off in the USA with the banks closed? So did I. So, who has made up his mind in the USA to trade on the floor on a day off? Then, who prompts rates, who formulates trends and turns them with no objective reason for the rate to swivel and to rush in a direction, not being requisite at all? Here is the answer, as provided by No. 11, 2002 FOREX Profiteer magazines article by Nadezhda Larina Electronic broker Systems at FOREX Market, http://www.ifin.ru/publications/read/351.stm), reading: an FOREX dealing Electronic Broking Service (EBS) enjoys wide popularity with the extra-exchange inter-bank FOREX Market. It has been developed by the Consortium of largest FOREX trading participant banks in association with Quotron informatics expert company and launched in 1993. Presently EBS incorporates 13 worlds largest market-maker banks, viz,: BN AMRO Bank, Bank of America, Barclays Capital, Citibank, Commerzbank, Credit Suisse First Boston, HSBC Bank PLC, J.P. Morgan Chase and Co.Lehman Brothers, Royal Bank of Scotland, S-E Banken, UBS AG along with Japanese Minex Corp., established by a Consortium of Japanese Banks in a joint manner with KDD Japanese telecommunications company and Dow Jones Telerate. EBS offers a completely integrated range of dealing services for the professional inter-bank market, being a leading anonymous inter-bank FOREX trading electronic dealer. It is currently used by over 2500 dealers in 850 world banks and yields a trade turnover of about USD80 billion daily. See there also: Three greatest FOREX dealers - Citibank, J.P. Morgan Chase and Deutsche Bank, together with Reuters Group PLC) have started Atriax system in June, 2001.The latter terminated the operations in spring, 2002 after having failed to stand the competition. Can you imagine a monster machine, capable of forcing three worlds largest banks - Citibank, J.P. Morgan Chase and Deutsche Bank to abandon their business plans! Or capable of reversing the EURUSD from 1.3660 to 1.1865 and thus instantaneously executing orders of all the worlds traders, going and standing short! And thus within, April-June, 2005, buying the EUR from traders at USD1.36, 1.29, 1.20, 1.19, etc. Do you see the loss? Watching the EUR slip 1700 pts after having bought it at 1.36 But, possibly, there is no loss at all? All of Larinas basic provisions have actually found confirmation 2 years later in the UK Financial Times article by Jennifer Hughes: A PC occupying trading floor (see it on Financial Times 2004).

It underlines that during the precedent 2 years the Consortiums turnover has grown by extra daily USD20 billion thus currently stretching to USD100 billion, whereas the most prominent internet-based trading platforms ensure the average of USD15-20 billion daily turnover. So, lets jump to some conclusions: 1. The FOREX Marketis not the same as it used to be earlier, say 11 years ago. 2. There is in fact a price fluctuation relative uniformity, otherwise, practical quotations similarity with all the worlds brokers and traders. 3. The reason for the above uniformity has been honestly disclosed from technological standpoint, being the flourish of electronic exchange technologies. 4. There is no mention of other reasons for similar rates at absolutely different FOREX trading platforms the world over what links together the above platform and FOREX rates at them from financial, organizational, contractual viewpoints, etc). 5. The great interest is the remark from Financial Times reiterating the changes at FOREX during the latest years as narrated by an anonymous ex-dealer (?) who compares the FOREX Market as of those 11 years ago: It used to be a hell noisy and a hell splendid! In his opinion the market has lost a significant portion of its individuality with rise of technology. A very interesting phrase: It used to be a hell splendid. I would add: It used to be a hell volatile, with reference to the fact that the daily rates travel went as far 400 to 500 pips. And theres nothing of the kind now. 6. Now, why has The Financial Times only interviewed the EBS Consortium official? J. Jeffrey and the currency transactions department director, Fabian Shey Why wasnt it desirous to interview the Reuters representatives ( UK )? Whats the reason for such kind of disrespect to the compatriots? Or were they hard to be contacted in London, where The Financial Times and Reuters HQs are located, moreover after maintaining that presently both, EBS Consortium and Reuters are dominant at the inter-bank market? Or The Financial Times possesses enough information on compatriots from Reuters to hold that the EBS Consortium officials interview is sufficient without any Reuters? 7. Please, pay attention to the following from The Financial Times: Anyway, other opinions are available. According to Justin Trenner, the current volume of on-line trading is turnover amounts to USD100 billion daily with the steep growth observed. The Financial Times thus turns out to recognize its complete inability to trace not only FOREX cash flows, but even the trading volumes at those platforms. The principal difference between stocks and FOREX is, by the way, readily apparent from the above. Those, writing about similar Fundamental and Technical Analysis methods for both the markets, are either ignorant as to fundamental difference of these markets, or they are deliberately swindling millions of traders. When pointing out, that, besides the above Banks Consortium, there exist other electronic dealing facilities (e.g. Electronic broker Service, Reuters Dealing 2000-2, etc.), N. Larina has overlooked their interrelations aspect. And there are a lot of questions: how and why there is coincidence of trends, corrections, historical highs and lows in the course of a single day, etc. And what is the way to reconcile the statement on shunt operation of EBS and Reuters Dealing facilities with the information that Citibank, J.P. Morgan Chase and Deutsche Bank together with Reuters Group Plc have failed to stand the competition? Is it attributable to the fact that the Consortium has actually acquired Reuters, maintaining its formal sovereignty in order to support traders opinion that FOREX Market is free and independent? If affirmative, then its fairly clear why the Consortium was not scared to buy the EUR on its dip from 1.36 to 1.1860, since there nothing to be afraid of with ones knowledge of the point, below which one will not drop the rate as well as the point to stage the EUR rally to in several months with no one to interfere with Your so doing. Hopefully, its now understandable who swivels trends at FOREX! The worlds largest banks Consortium does have power to reverse rates, whenever desirous, overthrowing fundamental laws, news releases, trends and common sense, just the way we witnessed on 01.04.2005 charts. But its not at all, traders, as claimed by Williams. Thats why there is obvious ineffectiveness of the Williamss Market Facilitation Index (MFI) based on fluctuations of

traded volumes; to be more precise, sometimes the indicator tells the truth, whereas sometimes it lies in a barefaced manner. The reasons are stated above: the banks Consortium pushes rates to where it needs, but not to where traders going into deals, thus accumulating the volumes, indicated on the screen. Thats why traders turn losers when making use of the Williamss MFI indicator.

Chapter III FOREX FUNDAMENTAL ANALYSIS AUTHORITY IN FX RATES MOVEMENT.


The chapters abstract: a trader attains much greater success at FOREX unless he is reading analytics by non-trading economists. Heres some information for meditation below: What useful can one be taught by FOREX reviews, cooked up by analytical economists, who are incapable of teaching themselves to be FOREX successful? FOREX economic indicators (released news statistics) are compiled the way required to be interpreted by analysts, who, by the end of the day, may explain any rates travel as the only naturally determined one. Important objective economic indicators (GDP, Balance of payments, etc.) are leveled up with the subjective ones ( University of Michigan, Chicago sentiment, etc.) which in no way may be checked up. Economic statistics is frequently forged even at the supreme level. Here is my attitude as a trader towards FOREX fundamental analysis and to its impact upon exchange rates dynamics. At the outset, well get to scrutinize the gambling done by FOREX analytical economists, who are striving to convince traders in exchange rates being tied up to some ersatz fundamental analysis data, viz. to economic indicators being released under daily streaming news. We will also present technique background used by the banks Consortium to manipulate news and forecasts the way to vector the rates as any certain day requisite. The earlier example dated April, 01, 2005 (when the trend has reversed against the logics of all the news released that day). The situation is an absolutely typical occurrence at FOREX, where in 50% cases rates are going DOWN the news vector while in 50% cases AGAINST the news released. Any analysts venture to far-fetch the fundamental analysis to FOREX rate quotes has long caused me nothing but smile. The FOREX analysts logics is as follows: as soon as the rates reverse against the news, next day they have the explanation that nothing unexpected has occurred with the market having already been anticipating the news, and these news have already been accounted for by traders in current quotes. Or, else, the market (or traders or other) spotted in the news release not at all what it has read earlier in the streaming news. As a result, the rates by, normal logics, staged a sharp swivel to move in sort of a wrong direction. But, my God, are traders really in need of the above analysts para-economic freaks on fundamental or other analysis, once THE RATES HAVE ALREADY MADE THEIR WAY in the said wrong direction? And why, during uptrend, no analyst has recommended going short on a currency instead of going long in case actual news is superior to the estimate? I have never come across the case. Analysts should have better derived a simple mathematical formula (hopefully they did have studied at universities) as to a FOREX pair average points travel prior and post critical news (National Bank percent rate hike, Balance of payments, etc.). By virtue of this formula we, traders, could do some calculations to estimate whether either everything is already accounted for in the current rates or further 100-200 pts grow/decline is to be expected. But theres nothing of the kind! And now, heres my standpoint as a FOREX trader on why traders will never end up by being supplied with the above mathematical prognosis formula by analysts. I will also provide backgrounds of when pro-news and counter-news entries should be effected. Fundamental Analysis CRITERIA BIASED INOBJECTIVE NATURE. Fundamental Analysis BEING ABANDONED IN FAVOR OF DAILY NEWS SUBSTITUTE. 1. All the Fundamental Analysis economic indicators are made a muddle of. See, for instance, 54 US economic indicators, ABC-arranged by analysts instead of being USD importance-rated http://www.forexite.com/forex_for_

beginners/us_economic_indicators.html 2. No difference is made between Fundamental Analysis, the state monetary policy and ersatz fundamental data-related current news (viz.: Chicago business activity index, Michigan University consumer sentiment index, National Managers Association business activity index, etc.). But, in what way is the Michigan University consumer sentiment index relevant to the US economy Fundamental Analysis? Is there any other name to be applied to this index besides the name of an ersatz Fundamental Analysis? 3. A portion of economic indicators organic to the above ersatz Fundamental Analysis evoke my personal uncertainty as regards their figures objective nature and as regards not being tailored to order of those supplying quotations to the FOREX market. Let us go attentively once again look into these indices with the view to clarify their manipulation capability with no exposition danger. - PHILADELPHIA FED INDEX constitutes the polling results of Philadelphia manufacturers as to their sentiment towards the current economic situation: - Why Philadelphia, not California or Texas. - May there be any difference in obtained figures depending upon the type of manufacturers being interrogated? - Is there anyone in position to verify and confirm the above manufacturers polling results? - Consumer price index (CPI), reflects consumer price level per a basket of goods and services. But the CPI may be properly built up, if prices differ supermarket to supermarket, from supermarket to conventional shop, from shop in the center and shop in an outskirt, from shop in a capital to shop in a province, from sell off period to new articles presentation period, etc.? Is it imaginable, how figures can be manipulated in favor of those, requiring them so badly? Or is there anyone to convince me that its very hard to change 0.4% into 0.2% or 0.6% depending upon a customers demand at any given moment? - Michigan consumer sentiment index constitutes the results of customers polling on current economic situation confidence. No comments, since it looks like interrogating no-one-knows whom on a no-one-knows subject. - Consumer confidence. A doubtful attempt to measure consumers optimism. -NAPM (National Association of Purchasing Managers) services index is representative of service managers polling results, purported at estimation of in-branch changes taking shape. Very often this index is dictated rather by psychological factors, than by actual state of affairs (???). - Chicago PMI index. It is closely tracked due to being released shortly prior to NAPM. The index exerts strong authority over the market by prompting a real NAPM value to be released. Please, refer to NAPM above. - Atlanta Fed index presents polling results of Atlanta industrials on current economic situation (???). As understandable, the list of these ersatz Fundamental Analysis economic indicators may go on along with buildup of questions and doubts. 4. Theres a so-called factor of anonymous economists estimates in relation to economic indicators preceding values. I wonder WHO are these anonymous economists, each time allegedly interviewed by Dow Jones on their expectations from news to be released the following calendar week? And WHY is THEIR opinion exactly presented to be the whole markets anticipation of THAT data exactly, but not any other? Below are some sample potential manipulating the world traders opinion, frequently encountered by myself: a frankly superior estimate leading to benign actual data being inferior to the prediction (I repeat, a no-one-knows whose prediction) and resulting in a sharp rates reversal by disappointed traders as later on indicated by analysts. a frankly inferior estimate leading to malignant actual data being superior to the prediction, thus pushing the rates forward with no other markets objective grounds.

TO SUM IT UP, leveled with objective economic indicators (GP, etc.) are ersatz Fundamental Analysis ones, manipulation by virtue whereof creates simulacrum of the rates being tied up to daily news and the states Fundamental Analysis. With prediction manipulation capability added hereto, it turns feasible to faultlessly project traders activities throughout the world. But is it accidental or not that worldwide traders training programs are as similar as 90-95% losers figures? FUNDAMENTAL ANALYSIS CLASSICAL MACROECONOMIC INDICATORS A true Fundamental Analysis, based on leading world economies comparative macroeconomic characteristics as well as on their currencies power/weakness, may be experienced not through indices of universities and various US managers associations, BUT through economic indicators, recognized by all the world leading economists. These are: - GROSS DOMESTIC PRODUCT (GDP), the principle national economy condition reflector. According to economy development Keynesian model, GDP=C+ I + S + E M, where: C is consumption, I is investments, S is state expenditures, E is exports, M is imports. GDP is expressed on terms of an index in relation to a previous period. - STATE BUDGET, constituting a correlation between states incomes and expenditures. - BALANCE OF PAYMENTS, correlating the countrys incoming and outgoing payments and falling into three major components: trade balance, balance of services and non-commercial payments (invisible transactions balance) and balance of capitals and creditors flow. - UNEMPLOYMENT RATE in the country, being a 3D structure of: frictional unemployment, related to higher remuneration job hunting or expectation after layoff (not a negative factor, since it leads to more rational labor resources allocation); structural unemployment, emerging from labor demand decline in any industrial branch due, for instance, to technological development or change on consumer demand structure; cyclic unemployment, arising during overall economic recessions. - MONEY SUPPLY INDICES (M0, M1, M2, M3). M0 = cash circulation; M1 = M0 + cheque deposits; M2 = M1 + cheque less saving accounts + money market deposit accounts + minor deposits (less than USD100K) + money market mutual funds; M3 = M2 + large deposits (in excess of USD100K). These are practically no market influential. - NON-FARM PAYROLLS. - GOLD AND CURRENCY RESERVES, being a states gold and currency backup stored in central bank and in financial institutions, as well as states gold and currency assets with international creditors. - NATIONAL DEBT, constituting state liabilities to physical persons, legal entities, foreign countries, international institutions and outstanding international law subjects. - REFINANCING RATE, being percent rate utilized by the central bank in granting credits to commercial banks on a refinancing basis, etc. MACROECONOMIC INDICATORS MANIPULATION ATTEMP AT FOREX. Macroeconomic indicators are of objective nature, thus being uncorrectable, the way it may be done to various Chicago, Atlanta and Michigan indices. That is why at FOREX we often come across surprising interpretations of the above objective indicators, recognized by the worlds leading economists. 1. Macroeconomic indicators are leveled with ersatz Fundamental Analysis ones, viz.: the University of Michigan one, as above indicated. 2. Absolutely in objective criteria are selected to estimate macroeconomic indicators. For instance, weekly number of jobless claims is released instead of its monthly fluctuation dynamics analysis per its three aspects (frictional, cyclic and structural). This data s released on Thursdays, 08:30 EST, New-York with a disclaimer that the figures are not always reflective of the actual situation. The data is under frequent perversion due to short-term factors such, as federal or local

holidays. The question is WHAT IS IT ALL FOR? 3. The macroeconomic indicators role is being undermined in every manner. See below: State budget exerts but an insignificant authority over the market (?!). Curious to know WHY? Is it that the UMich index is more important in understanding the US economy prospects and its perspective currency rating? http://www.forexite.com/forex_for_beginners/us_economic_indicators.html Balance of payments is of limited influence on the market (??). http://www.forexite.com/forex_for_beginners/us_economic_indicators.html 4. Totally different indicators are being quoted when analyzing the leading economies. See: the USA : M1, M2, M3 money supply, whereas M3 only for Germany with no indicator as such for the UK ; the UK : PPI output, PPI input with no indicator as such for other countries. RELATION BETWEEN Fundamental Analysis MACROECONOMIC INDICATORS AND FX RATES Certainly, the relation between Fundamental Analysis and current FOREX rates does exist, however it is greater in depth and mediation, than presented to traders by the majority of analysts, starting from dealers basic training. In my opinion, this DIRECT relation between Fundamental Analysis and FOREX trending finds manifestation on W1 and MN charts only. Those, supplying us with FOREX quotes, may be playing and fooling traders within H1 and even H4. But changing trend at W1 and MN timeframes in favor of the USD and establishing the EUR price, say, cheaper than that of the USD in 2005 means going AGAINST depth fundamental data. Those will never be off to commit sort of a thing. A currency price and that level of fundamental data are permanently coincident. This is not at all the ersatz Fundamental Analysis, whereto the Consortium has schooled the majority of traders (not the University of Michigan index, not the Chicago Managers Association index, not the last month Consumer Confidence index (?!), etc.), and by virtue whereof the aforesaid traders majority have got completely confused in a seemingly elementary issue of entry in favor of the news and against the news. Hence, below is the USA and Europe macroeconomic indicator related PRACTICAL CONCLUSION for traders: data as of early summer, 2005 are definitely indicative of the incapacity of the long-term USD downtrend change for its uptrend (W1 and MN charts) within the year relative to the EUR, the GBP and outstanding allies (See chapter on Which FOREX indicator is the most impartial and accurate. Ally and adversary currencies). Thus, following each short- or medium-term EURs recess, its new growth will be witnessed with earlier historic peaks potential breakthrough. The contrary option of the EUR being cheaper than the USD is a NO-NO, exactly due to fundamental macroeconomic indicators, where under European economies enjoy faster development than the USA . RELATION BETWEEN ERSATZ Fundamental Analysis AND FOREX QUOTES. Any ersatz Fundamental Analysis indicator data release (UMich, Chicago indices, etc.) is but the GROUND to urge currencies up-down reciprocation, as a function of tactical objectives of those supplying FOREX quotes. A PRACTIAL CONCLUSION for traders: I claim no relation between ersatz Fundamental Analysis and FOREX quotes from the intraday trading standpoint. Upon the above news the banks Consortium may drive the rates in any direction, whereas FOREX analytical economists will snatch on You proving and explaining that there is no unexpected occurrence and that the market with proper advance account has been long anticipating the news released, etc., etc, see aforesaid. Thats the reason for no analyst to venture to recommend entry against the news prior to its release. NO ONE knows in advance where the rates will travel under the Consortiums will after the news. This is the level of technical analysis, not that of Fundamental Analysis.

Being a trader, I observe 3 rules when jobbing on news: exit all positions prior to the news release; if not then place pending orders behind resistance and support levels to be a stop-loss safety cushion as per B. Williams. dont enter upon the first candle after the news release; enter immediately after the Consortium has definitely indicated the way it interprets the news released (see Entry and exit manual on entries and exits under the news released). IN CONFIRMATION OF MY CONCLUSION ON POTENTIAL CURRENT NEWS AND OTHER STATISTIC DATA FORGERY, I refer to Dawn of dollar empire and end of Pax Americana by A.B. Kobyakov and M.L. Khazin, (Veche publishing house, 2003, 368 pages), see on http://paxamericana.narod.ru/book/paxamericana.zip. The authors thereof have arrived at conclusions still more aggravating for traders and quoted facts on STATISTICAL DATA FORGERY AT THE LEVEL OF THE USA STATE STATISTICS, see CHAPTER V. STATISTICS AT CURTESY OF ECONOMICS: The earlier published data summary maintained, that during seven years from 1995 to 2001 inclusive, the USA boasted positive balance of payments of USD203.2 BN, while the revised data uncovered negative balance of payments of USD89.8 BN (chart 24) within that period. With the account to Q1 2002 the above deficit amounted to USD100 BN already. EVERYONE IS FREE TO READ IT IN GREATER DETAIL AND TO DRAW UP ONES OWN DEDUCTIONS! A serious Russian Novaya Gazeta newspaper (08.09-11.09.2005, in Writings on the water, see p. 15) has reiterated on another stock market vivid instance, where for the sake to meet some national (or, probably, SOMEBODYS) interest, the US governmental circles and information agencies have set on a worldwide advertising of a greatest modern discovery of nanotechnology: a single-molecule transistor. The newspaper quotes: Prospects were breath-taking. The fourth wave subject attained unusual fashion and attraction for investments. Nanotechnologies fell under the US government strictest attention being the issue of strategic importance. Hardly imaginable was the fact that all the sensation would end up in a classic panama or a shady enterprise similar to our default. Scientific companies share prices skyrocketed off-scale, whereas 30-yo Jan Hendrik Shone, the main publications author has been thought to be next years Noble Prize nominee. It all would have been sliding on smoothly, unless the results of over 100 Shones articles turned out to have not obtained confirmation. Tampering has been proved as regards three key reports on single-molecule transistor. As a result Shone faced being fired along with sharp decline in scientific companies share rates. The companies have been stung for USD100BN approximately, the amount being suspiciously close to the Iraqi war (started only 3 months later) US government expenditures. An infinite number of similar sample situations may be drawn, with statistics turning into a falsifier. Hence, the question is natural: whats the way of a trader using Fundamental Analysis statistics to build up FOREX strategies, provided that at least part of data is forged to someones benefit? I dont hold it reasonable to go deeper into the issue. A FOREX traders gains may not be facilitated by this issues deep study. To get a comprehension of FOREX currencies logics, the simple knowledge is indispensable of WHO, HOW and BY WHAT REASON supplies FOREX quoted to traders. By far we have but only answered WHO are those Internet users to furnish quotes to traders. Identically, no use sinking into the BY WHAT REASON the quotes are supplied at FOREX. Please, attempt yourself to answer by virtue of a counter-question: if You (not the Consortium) have invented a financial result-oriented game with clients WHO IS SUPPOSED TO BE THE WINNER (the game organizer or clients)? Hopefully, I have beaten off some green traders lust for instant gains at FOREX. You are facing a professionals market and becoming a profi yourself is the only way to earn money at this market. The underlying chapters are concentrative of the attempt to elucidate the core question: HOW are the FOREX quotes presented, to enable the extra-exchange FOREX market traders to attain steady gains.

Below I will purportedly and repeatedly resort to examples from books by Viktor Suvorov (Ice-breaker et al.). Our target at FOREX is a twin sister of V. Suvorovs one in history: to use official sources (i.e. absolutely verifiable materials) in legal understanding of what is camouflaged by the worlds richest market half-truth and falsehood in Fundamental Analysis and Technical Analysis methods, in published FOREX literature, in websites analytics and predictions, in actions of dealers making millions USD by means of their client traders accounts, etc. Now, please, find below an intermediate conclusion being the starting point in understanding of currencies quote logics as well as in pinpointing of CORRECT and ERRONEOUS method of operation at FOREX proposed by Bill Williams and other scholars: A trader is to be aware of one single thing as different from stock markets, FOREX traders are not opposing each other, but they fight against the almighty FOREX Game Organizer the world banks Consortium being capable of swiveling any national currency to any direction and at any moment by way of using numerous economic indicators, news releases, whose authenticity is not doomed to ever be verified by anyone. Thus, how is one to realize, at a trend beginning, but not by its end, WHAT FOR and BY HOW MANY POINTS the Consortium is pushing currency rates? Bearing the above in mind we will dedicate the following book chapters and the Masterforex-V Academy training to this issue exactly.

CHAPTER IV NO. 3 DELUSION: Forex LITERATURE AS A 90-95% OF THE TRADERS LOOSE THEIR DEPOSIT.
This delusion globally entails identical aftermaths: 90-95% of traders turn steady to loose their deposits having studied books by Bill Williams, Alexander Elder, Thomas Demark, J. Schwager, et al. Following the burn down of their first deposit traders plunge themselves again into scrutinizing Forex scholars, in this manner suffering losses of the second, the third and subsequent deposit. I will hereinafter try to elucidate where from the above regularity grows, so that no trader repeats his forerunners mistakes. This statistics is common knowledge: 90% of traders constitute Forex losers But the figure has always been giving rise to a leviathan of my doubts. It isnt because of somewhat different 95%-5% loser-to-winner ratio quoted in the Van Tarp and Brian June Intraday trading: secrets of mastership. With 90% quoted universally, there naturally emerges the question, as to whether there is someone capable to check, to specify or to disprove the above figure. NO ONE IS, besides the directors of largest Western banks providing streamline Forex quotes, but having never raised the issue. WHY? Because should this statistics be published, there will be sharp and ultimate decline in number of those chasing easy profits from the world Forex market. Otherwise banks would not keep mum in advertising purposes. Neither would they be silent if losers constituted at least by few points less than 90%. In any advertising, customer attraction is ensured by quoting beneficial maxima and non-lucrative minima. This has always been, is being and will always be a universal practice. As a conclusion, 10% Forex winners is a maximum result among traders. Its them, who have understood Forex market absolutely simple truisms and who attained steady daily earnings in amounts being gained by others within years or even the whole of life. Certainly, those are to be recollected, who in late 80s were the first in the ex-USSR to grasp laws of commerce and who began accumulating their initial stock. The rules used to be so simple that presently any schoolboy or a first-year student can show the way the capital might have been easily scraped up and augmented on the USSR debris and in the course of market relations being established in the post-Soviet space. I do exactly allow for the fact that through the years a new generation will be laughing at the way we are now incapable to comprehend the laws, where under currency rates either spike up or fall down, all of a sudden. With this provision, those seeking fast money at Forex have a much greater time limit than the ones engaged in capital building in the post-Soviet space (Forex market is incommensurably greater than that in the ex-USSR), but not to the extent thought by many. By now trends are thoroughly less numerous than they used to be 10-20 years ago. By way of taking a glance the charts history You are in the position to understand the way traders used to earn under 20- 40 pts spread, commission and slippage. A trend was followed by a trend at that epoch. AND WHATS NOW? Nowadays many of traders are impotent to gain under 3 pts spread without commission and slippage. Thus, this book is intended for those willing to perceive Forex market laws. In order to get understanding of the way 5-10% of successful traders obtain profits, lets at the outset analyze the reasons and the way the outstanding 90% of traders suffer losses. The 90%-figure looks scaring, to say nothing of 95% or 98%. It occurs despite the amount of literature on the issue equals to hundreds of fundamental books, written by authors, having gained capitals expressed by means of more than 7-digit figures (G. Soros, B. Williams, A. Elder, T. Demark). Thus, the above minimum of 90% of smart, well-read, broad-knowledged people: - scrutinize the really great traders heritage; - open accounts with Forex Broker's and banks, start trading and - loose funds up to complete rout! AND WHERES THE LOGIC? The answer springs to mind by itself... Theres something wrong in the literature (by the way, recognized throughout the world, where the deposit-killing statistics is as disappointing as it is in our country) so long as its

studying yields such oppressive results. STRANGE? No, rather natural, than strange on account of the following: 1. Being a great trader is not indicative of everyone being a great teacher. 2. Multitude of rules elaborated by scholars 10-40 years ago, has grown obsolete, since the Forex market is changing. 3. The scholars HAVE NOT revealed ALL the secrets even WITHIN THE FRAMEWORK OF THE THEN FOREX, therefore by now their advice and recommendation turn out either obsolete or nave. Thus, once ones advice and recommendations bring every 9 of 10 market participants to loose their money in each country, where ones books have used to be published and have enjoyed all sorts of hosanna in the press, THEN ONE IS NONE OF A TEACHER. Naturally, no trader will reveal his professional secrets to the full. But when studying Forex literature one gets astonished by a negligible extent the above secrets are confided at all, with a book on Forex containing 99% of common truth and 1% only of useful novelties. But should one train up even several thousands perspective traders, one will in no way burden oneself with competitors, due to the Forex market huge sale nature. Beyond a shadow of a doubt the above traders are really great. You may agree or not, but anyone, having earned USD1 bn or more, deserves being named great. So, ones books should be published as memoirs. I am not attaching any irony hereto, since these persons have acquired gains by virtue of their minds and labor, as opposite to Rockfellers, who inherited their fortunes or to Russian oligarchs, who either stole or got their capitals dirt-cheap from state authorities. Hopefully, understandable is the difference between such editions and manuals for beginners. G. Kasparov, say, is far from writing manuals for chess beginners, since the job can be better completed by others with this fact not at all undermining Kasparovs being a great chess player. And his advice and recommendation is sure to be of interest rather to a close circle of grand masters, than to those having touched the chess for the first time. Actually Kasparov is but to be respected for not being tempted by the lust for fast money, by virtue of his name in the chess world and by way of cooking up manuals for beginners. At Forex, by contrast, and for some reason, everyone deems oneself a teacher, which fact results in millions educated people worldwide leaving stock market being disappointed, angry with an inferiority complex life-time pursuit. And hence, the unanswered question for them: is that all a fraud or not, since gains are midget, whereas losses are titanic? I am recalling the book titled The Alchemy of Finance by G. Soros (the one Ive read in early 90-s). I admit, its interesting, instructive, but it is all narrated in so an inarticulate and tangled manner. As indicated in the foreword by an American investor, the theory has hardly been understood by few only. So whats the use of writing in such a manner? A theory may generally be complicated to any extent, BUT IT MUST BE wrapped in a simple, clear and understandable wording. You are welcome to attempt to read the above book once You have time to. Shortly, the Soros reflexivity theory of the countries cyclic development may easily bear a couple-sentence confinement: 1. Following liberation from totalitarian yoke, a country is granted credits, then, there is a rapid growth and flourish of economy. 2. As soon as the above credits are to be paid back, a countrys economy faces a natural recession. Is it as difficult? The question may be addressed to a schoolboy (to say nothing of an American investor): when should those countries companies shares be purchased and when they are to be advantageously sold in order to acquire maximum profit? Whats going to happen in case one is too late to sell the shares, shortly exhibiting an impetuous growth in price? Propounded long before, the Soros theory has been entirely corroborated in August, 98 by the dismal practice established in Asian and Pacific countries and later in Russia .

There still is another question: how inarticulate should Soros have been to enable his theory to be grasped by few only? The second part of the book is not worth retelling. Reading its original is sure to be much more instructive with my annotation leaving no conundrums therein. The theory is permeated by Soross strategy: enter long on whats shortly going to enjoy price growth with a 100% probability and pull out Your money along with profits before the companies enter crisis, thus facilitating bankruptcies thereof. This is the way I clearly lecture my students on Forex-related complexities, thus conveying my logics to them. Despite its own complexities (news, TA, corrective actions, etc.), Forex is essentially reduced to a very simple truth: at a certain moment one should not be late with going long or short on a currency with tertium non datum. And when asked if the Williams Alligator needs something to be added thereto, the majority of my students reply Yes!, indicating what exactly is to be added. Ill present a detailed vivisection of the issue in a separate chapter by way of proving that the Williams Alligator is but 50% effective.

Fig. 4. H1 EUR chart as of April 12, 2005. The Alligators jaws display upward opening with a fractal formed at 1.3006. According to Williams, one should enter long one point higher, i.e. at 1.3007. Upward motion continues extra 11 points. Then the rate sharply swivels to fall down by 170 pts. Another example.

Fig. 5. H1 EUR chart as of April 22, 2005. Please, figure out 1.3094, 16 pts above the previous fractal, following the Alligator upward opening. Thereafter, a sharp down swivel covering 140 pts. Hundreds of similar examples may be drawn. But what are the implications? With the Alligators mouth opened, 50% of entries should be pro-Williams while the outstanding 50% - counter-Williams (i.e. vectored opposite to the Alligator mouth opening). When embarking on Forex, You must possess clear knowledge of the difference between either of the above 50%-portions. Otherwise, You are doomed to loose even if You follow Williamss technique, let alone other ones. Even my students are in the position to advise what is to be added to Alligator in order to realize proper entry vectoring. Least of all would I want this example to be taken as a personal criticism of Bill Williams, whose contribution to the Forex theory is a significant one. And the majority of traders, like me, used to begin earning after studying HIS books. But not to go astray, even without any addenda Williams managed to make a tremendous fortune, since a skilled trader (moreover being the Alligators father) is capable to differentiate between a steady travel and a pullback, or, say, a flat, or, visa versa, a trend low for the entry to be vectored oppositely. It is all fairly understandable for an experienced trader. But what about beginners as regards their interpretation of a flat, a recovery or a trend change? These folks are sure to require assistance, especially, in information not presented in literature on Forex. Without this knowledge a trader will never perceive the ABCs of stable daily earnings. But why the Forex scholars do not clear out the issue? This query is to be addressed to them, not to me. While reading these opuses, I am getting horrified at the fact that we are being foisted expensive high-sounding titled books, which are not going to ever teach a trader how to attain profits at the market. Lets open one of them (E. Naymans Traders Minor Encyclopedia and Master-trading: Secret Files) to get the understanding of the way almost all the books on Forex are written and supposed to have the price of USD20-100. You may agree or not, but the name looks very beautiful and pretentious: Master-trading: Secret Files, 320 pages of sheer secrets HOWEVER, I HAVENT FOUND ANY SECRETS THERE! Hereinafter You are welcome to discuss an argue Yourself: 1. The interrelation between fundamental factors and exchange rate dynamics being a detailed story of how a countrys macroeconomic growing, benign rumors trading and political stability promote the exchange rate growth. A valuable secret to be practically encountered in any Forex edition. But below is a real FA secret (not paid any attention to by Nayman): why does currency use to reverse against its countrys economic news? A whole chapter here will be

dedicated to the issue. 2. Construction of two moving averages on a single chart and twin combinations thereof. The author furnishes a wise recommendation: entries should be made in the direction the MAs diverge (adding secretly that the most effective MA combination is 21, 55, 89, etc., as per Fibonacci). The pseudo-secret nature of the above recommendation underlies the fact that any MA combination (should it be 21+55, as the authors; 10+20 as in many Western trading systems; 5+8+13 as per B. Williams or 1+21 as used by numerous traders) yields the same results. Ok. It all looks great. However, E. Nayman et al., seem to have circumvented the MA intersection chief secret, through which traders suffer constant losses: a lighter MA has crossed a heavier one, say, upwards, but thereafter there is sharp downturn resulting in the MAs intersection again.

Fig. 6. GBPUSD H1 chart as of April, 21-26, 2005. A fivefold reciprocating crossing of MA 21 and 55. You are welcome to calculate traders losses. Now, lets call it a day with examples. The MA intersection technique operates perfectly in certain circumstances, while turning out impotent in others, thus inflicting losses upon traders. No criteria have ever been stipulated by Forex scholars as to entries to be effected pro- or counter-divergence of moving averages. 3. MACD construction and analysis. What sort of secret may one expect from the following statement of Naymans: a subsequent high being lower than the preceding one suggests a bullish trend depletion or even its changing with the same being visa versa under minimum MACD values. Much of a secret, isnt it? I thought it were the MACD operation principle, familiar to any Forex novice. The secret-fancier B. Williams hasnt even taken effort to advise to perform inputs change from 9, 12, 26 into 5, 34, 5 to provide for a lag killer. Assuming the above, authentic MACD secrets are not paid any attention to by scholar, which fact inflicts losses upon traders. The situation comes into effect, when upon a divergence formation, no trend change is observed with another same-trend wave taking place instead.

Fig. 7. GBPUSD H1 chart as of April, 2005, where MA21 crosses MA55 with slight rise and sharp downturn. Another example:

Fig. 8. GBPUSD H1 chart as of May, 2005: a divergence with MA10 upward crossing MA21; a brief nudge up to 1.8916 and a sharp downturn. As different from Nayman and other Forex scholars, well touch in detail upon the ways to detect when MACD is trustworthy as a trend reversal attribute and when it is not. 4. TA classical patterns. One can not help smiling at the author sharing a secret of headnshoulders and double bottom patterns, being studied by beginners at the earliest lectures on Forex. And here goes a real key secret: in what cases the patterns are indeed indicative of a reversal but in what cases brokers trap TA pattern-fanciers? Is there someone doubting the fact that patterns are known not only to traders, but as well to

brokers with their mouths watering to make a rod for the backs of lovers and connoisseurs of the above patterns, just like on the sample chart below:

Fig. 9. GBPUSD H1 chart as of May, 09-11, 2005, a classical inverted H&S At 1.8871 theres an impetuous upward breakthrough, the Alligator rotating upwards, MACD above zero, MA8 having intersected MA21 upwards, the Williams vaunted Awesome Oscillator signaling long entry, the Accelerator Oscillator pointing up nevertheless, the rate reaches as far as 1.8916 and slips down to 1.8481 by 450 pts. To be noted: much worth scrutinizing is the phenomenon of Naymans Traders Minor Encyclopedia and Master-trading: secret files purported at understanding why over 90% of traders turn losers after reading the books. The solution, to my mind, is that the above opuses are but good ABCs OF FOREX thus giving birth to all Naymans merits and demerits. The guy is primarily awardable for having spared beginners paying USD50-200 to various Forex training courses or academies. Instead, one can download and study Naymans books, whose extracts are, by the way, quoted to trainees during their studies. Nayman is generally to be expressed gratitude to, because of his having laid out the Forex basic course in a competent, popular and accessible way. This is the point, I elucidate to every beginner, being introduced to me: first one should scrutinize Naymans books, then only its worth discussing hooks and crooks of earning at Forex instead of loosing. Nevertheless, there is a chief Naymans self-delusion about his folios really being in no way secret files with no one being able to find anything new to enable oneself to improve ones Forex earnings. These books containing neither unique techniques nor non-standard solutions are famous for the generalization and systematization of what has been the Forex knowledge prior to Nayman. But this fact is not realized by majority gripped by the Master-trading: Secret Files fascination, who open live accounts and turn losers inevitably. In no more than 3 weeks after my Secrets Of Craftsmanship Narrated By Professional Trader Or What B. Williams and E. Nayman Have Concealed From Traders internet release I found myself in receipt of hundreds of letters from people, lead astray by bombastic names of books of Nayman and others having undergone training at various distinguished DCs. Shortly upon their pre-mature success on demo accounts these folks hastened to open live accounts and faced losses. But since the Dealers staff managed to convince them in the incidental nature of the above losses, the folks ventured to go live

again and did again turn to be deposit killers. With these facts being proclaimed, I dont hold it appropriate to call any statistics science for help. Any sensible man is to get the understanding of the above losses as not being of an incidental nature. There could be NO OTHER WAY about it. Imagine, You have studied a manual of fundamental surgery. Does it mean You are able to perform surgical operations? Even having studied a dozen of manuals You are not likely to become a surgeon. Then, why the procedure is considered practicable at Forex? Is it now understandable why a dozen of Nayman-style books will bring You to the identical result at Forex, i.e. to a loss. Simple enough, but these attractive semi-manuals authors reverberate the ABC truisms (FA data importance, rumor trade, macroeconomic indicators, TA facilities, R&S levels, etc., the things being useful for a traders field of vision development, but not for profit-building). The next trader training level comprises books by B. Williams: Trading Chaos and New aspects of exchange trading, where the author propounds his own Forex trading methods along with advertising the other ones, viz. Elliotts. My book, Secrets Of Craftsmanship Narrated By Professional Trader Or What B. Williams and E. Nayman Have Concealed From Traders is purported at developing of THAT particular school of training traders to practical operation at Forex. Hardly will anyone object to the fact that B. Williams will disclose his Forex intimacies free of charge. Neither will he furnish their 100% disclosure after being paid to. In all his splendor, Williams possessed sufficient knowledge to; - to share A PORTION of his secrets in his Trading Chaos; - to share A PORTION of his secrets as a paid training; - not to share A PORTION of his secrets in the least. My book, Secrets Of Craftsmanship Narrated By Professional Trader Or What B. Williams and E. Nayman Have Concealed From Traders is also dedicated to teaching how the Williams secret methods are to be decoded properly to ensure successful Forex trading capabilities. Each of my books 20 chapters is permeated with a common logic aimed at finding relevant discrepancies in literature on Forex and at presenting my personal technique of Forex trading. B. Williams declares being capable of analyzing tens of currency pairs (of 140-bar history each) that within tens of minutes, but in no way does he explain how to, whereas, I explain, that its feasible for any wide-screen trader, provided my computer monitor being 3-currency capable only (see: Ally and adversary currencies). B. Williams sings about his magic Alligator, while I disclose and eliminate its pitfalls by, say, adding a MA233 thereto. This arrangement visualizes the whole of the 4 potential currency travel options: up/down above MA233; up/down under MA233. B. Williams lists a stop-loss to be a safety cushion, whereas I disclose and eliminate its shortcomings by way of alternatively using my own pending orders. B. Williams hold trades volume to be authentic resistance breakthrough criterion, while I quote reasons by which trades volume turns to be deceptive on Metatrader platforms (thanks to the banks Consortium) and I introduce my own levels true/false breach criteria. Now, regarding trading on news, I demonstrate the way one can turn a loser if trade like all the others and I offer my own on-news trading style. B. Williams quotes 5 bullets killing a trend, whereas I exemplify their insufficiency and I add up 11 more thereto, not denying the above 5 of them. B. Williams idealizes the Elliott wave theory, whereas I show that the combination of fives and threes is none the

idealizable, otherwise a mankind 100-year development project could have long been elaborated on the basis of Elliott waves pattern, leading to exasperation at the fact that humanity progress does not follow Elliott and Williams. The other thing is that nowadays brokers have mastered the job of manufacturing more waves out of the 5 initially. The aforesaid is applicable to each of the 20 problems of Forex. A portion of my live Forex trading methods are to be found in this book, while the other portion thereof is forwarded upon request. Those eager to continue training under my supervision as well as to trade live, please, feel free to contact me on my e-mail address below. It all could be funny unless it were sad. But IT IS sad, because the above examples are scaring in number. Bearing it in mind, do, go again through excerpts from distinguished scholars books: - Awesome Oscillator (AO) serves us keys from the Wonderland; - Accelerator Oscillator (AC) gives us with significant superiority over other traders; - using AO is similar to reading tomorrows Wall Street Journal, while using AC is reading of the day-after-tomorrows issue thereof; - by using AO solely, one may attain profits even without any knowledge of current rate; should the oscillator turn down, one may merely ring ones broker and say: Sell at the market price!. As You have guessed, these are extracts from B. Williamss New aspects of Exchange Trade. Have You read the thing? And now, please, give a glance to the a foregoing figure, depicting the way, the vaunted Williamss indicators may entail an abyss of losses. But what truly makes my blood boil is as follows. B. Williams is a professional psycho therapist and his narrative style is none of an incidental one. This is a suggestive method by virtue whereof he attempts to demonstrate the exclusive, correct and faultless nature of his trading technique. The faultlessness is to be discussed in an individual chapter, and my only claim here is that I can easily draw hundreds of examples, where one can bump into loss by way of following Williamss indicators. By myself, I am an advocate of theory of chaos. But this theory is disclosed by Williams in a very primitive and a superficial manner, which fact results in his blind follower losses. As to the author, he resorts to propaganda methods instead of providing a clearcut distinction between the cases, where the above theory is 100% effective and those, where it is not. Williams could have explained to his admirers directly, that in these certain instances the theory is to be relied upon, while in these instances it is not to. The difference is in this, this and this. In the former instances one should necessarily enter, whereas in the latter instances one should abstain from entry. But the guy havent done the job (due to either not being desirous or to not having sufficient knowledge). I was a success in finding out distinct operability criteria of the Williamss technique. To achieve this, I had to improve the Alligator, by virtue whereof I enabled my students to easily pinpoint the difference between the Williams No.1 option (a trend, encouraging profits) and No.2 option (a flat, inflictive of losses). By the by, it is supportive of the chaos theory methodological correctness and of imperfect Williamss method structure, plotted on the basis thereof. Instead of acting upon the traders consciousness Williams resorts to forbidden subconscious programming procedures, thus stimulating mans inherent and acquired instincts as if saying: If You wanna get rich, follow me! My method empowers one to trade without a single glance at a price! The Awesome Oscillator constitutes a key from a Kingdom! Etc., etc., etc The whole of the above has reminded me of another renowned late 80s early 90s post-Soviet psycho therapist, Anatoly Kashpirovsky, who, by virtue of similar methods, attempted to establish mass curing procedures the way, B. Williams attempts attraction of a mass of advocates to support his immature technique. Kashpirovskys method is also sure to possess a certain pep to have helped somebodys recovery. But, are achievements of Williams superior to those of Kashpirovky, provided that 90% of traders are losers, while out of the outstanding 10% only a half are his adherents? Hence, only 1 of 20 Williamss followers exhibits Forex-earning capabilities in a most favorable environment. Thus, under this statistics, B. Williams is better not to be idolized, the way he has been by the crowd of his admirers. On the other hand, other Forex maestros trading techniques are far worse than that of B. Williams. So, lets continue illustrating Forex truisms

being erroneous in live trading. - The Theory of Chaos of B. Williams. The author has not advised what should be added up thereto. A separate chapter here is dedicated to the issue. - Traders psychological problems. I havent found any revelations pertaining to THE WAYS OF ELIMINATING THESE PROBLEMS. - The issue of a stop-loss order is certainly important: even under trend hedging is an indispensable protective shield against market surprise. But is the problem too far complicated to require a dozen pages elucidation? Has the author beheld any secret? Wah! He hasnt noticed anything but he still has repeated all that wanders from book to book on Forex. Once I was stunned by a question put forward by one of my students after having read B. Williamss Trading Chaos: whats the use of giving so much attention to the stop-loss problem and above all whats the good of chewing over the role of safety cushions in the automobile industry as though readers are down with moronity? Doubtlessly, its funny reading that Williams has never violated traffic regulations, priding himself on the occasion. Any psychiatrist could tell a hell lot about such a personality type, although, I should admit that Williams is American, not Russian. Drawing picturesque, memorizing examples, each scholar is right to insist on protective barrier placement as a loss killer. But there is hardly anyone to introduce certain novelty into the issue and to disclose the secret as to what there should be in the traders store besides a stop-loss to insure against his deposit melting and extra losses. A separate chapter here is targeted at the issue. I have shortly come across an apophthegm: Genius is not to the effect, that nothing can be added thereto, but it is to the effect that nothing can be deleted therefrom. If You go through numerous books on Forex at this aspect angle, You are sure to surprisingly find out that 90-100% of their contents may be subject to withdrawal. WHY? BECAUSE nothing new and 100% correct is offered therein. Instead, reiteration is going on of what is familiar to any professional, since everyone is itching to exhibit ones originality by way of retelling: a paramount authority of FA over Forex exchange rates; continuation and reversal patterns; a stop-loss importance; a divergence being a component of a trend reversal, etc., i.e. book-to-book travelers. An outstanding Forex trading techniques and a genius scholar, etc., making their appearance in books abstracts and annotations are off springs of 1% originality added up by an author to 99% of common knowledge. Sale is publishers primary target, giving birth to genius mediocrities and plagiarism. Standing separately among these books are opuses by B. Williams, being admired and scrutinized regularly by the majority of scholars and by myself. But EVEN HE cannot be qualified as genius with account to the above formula. He is rather eccentric than genius. The thing is not, that his technique is addenda-allowing (this fact backs the correct Williamss choice of the chaos theory to be applied to Forex) and I easily managed to add 11 trend-assassinating bullets to the 5 of Williams. The thing is that a number of Williamss postulates ARE WRONG and thus loss- inflictive. These can be and should be subject to removal. CONCLUSION: I guess, its understandable by now, that script-writing has turned to be business for scholars, incorporating additional advertising and additional charges for their students. However, the above is not worth millions Forex losers sacrifice. Much more respect-triggering is Warren Baffet, having made a minimum of USD40 bn at the stock market without writing any books on his trading tactics. W. Baffet is the worlds second-rich man after Bill Gates, although this fact being thoroughly doubtable. B. Gates is supposed to declare the whole of his income obtainable from the Microsoft Corporation, whereas W. Baffet, being a trader, is sure to deem himself entitled to show the Inland Revenue what he really wants to. The difference is fairly evident. The profit obtained from US companies, constituting the Gatess official fortune major portion, may be kept track of, as well as the offshore profits may sometimes be properly checked. But Baffets profits attractable at all. Do You expect a man, lending his own daughter a sum of USD20 against a receipt, to allow ALL of his profits to be taxable by state? Or a moderate portion of profits is sufficient, yeah? It is entirely his job, whereas we are to learn to gain at least a spoonful of what he has acquired during 40 years of his activity at the stock exchange. Thus, to cut it short: a classical Forex literature exhibits but an anti-scientific unsystematic nature, constituting a crise de

genre and triggering losses among 90% of beginners, abandoning Forex market. In what does science differ from a philistine and amateur effort? In a systematic and objective nature, in a methodology perspective. In there any of the above to be found with scholar literature on Forex? No, but instead there is in abundance: A. Tautology and absence of new approaches. From book to book world-distinguished scholars feed traders (as if the latter were silly little chaps) with stories about R&S levels importance, technical indicators, continuation and reversal patterns, etc., which is as interesting and instructive for a professional trader as ABC reading is for a professor of philology. B. Absence of integrity. Individually, it is all clear: Elliot waves, Fibonacci levels, resistance levels, reversal patterns, etc. But whats the way it all is interconnected and integrated? In what way it is influential over each other? What is primary and what is secondary? Imagine a doctor diagnoses and cures patients without a slightest idea of interaction of digestive, cardio-vascular and other systems. This is what exactly happens to Forex beginners. They are sure to have learnt something, but they are being muddleheaded instead of having a systematic knowledge. Medical students undergo a course of anatomy. Geologists and military men make use of topographic maps. And what do Forex beginners have to this end? You are free to interrogate any scientist if he has knowledge of parts of science without having knowledge of the whole. Guess, what hes gonna answer? And now give consideration to what is being currently published on Forex and being accessible to anyone. Thereafter You will easily evaluate the outstanding contribution made by each of Forex scholars. 4. Methodology and techniques subjectivism and absence of objectivity. See live scholar, Th. Demarks Technical Analysis As An Emerging Science recommending to manually draw R&S lines from the right to the left instead of so previously doing from the left to the right. The books preface qualifies it to be refined techniques built during a quarter of a century of a laborious scrutiny of market tendencies and projecting methods. And thereinafter: Demarks empiric-data strictly scientific approaches are in striking difference from an artistic intuitive one thus constituting a rational basis for dynamic systems, mechanically outputting market signals. But, with having not disclosed his systems essence, is Demark aware that his subjective Forex trading suggestions may happen to entail severe mistakes. Yeah, he substantiates his viewpoint in chapter Why price projections may not go into effect: due to no technique being perfect. Good a science with no technique being perfect! Demark is looking rather a philosopher, than a trader with his tirade being nothing but a sophism, made use of as back as in ancient Greece to provide grounds and protection for any kind of absurd. In accordance to Demark, a mistake becomes obvious the next day as soon, as the first deal price is registered. I am itching to ask the scholar: How many points may a currency travel in a wrong direction during an earth day? I am answering myself: 100 pts or 200 pts or more. Demark diagnoses: This instance evidences a breach, indicative of a new opposite tendency. Well, Ive got it. Once there is loss, one should loss-close and enter oppositely. Take a look at the picture below:

Fig.10. EURUSD H1 chart as of March, 22 April, 18, 2005 manifesting a month-long flat. How many days should one per-Demark loss-close with the rate repeatedly swiveling as though to Demarks ill luck? The scholar has to be asked, how large should a traders deposit be to survive Demarks experiments, being ranked refined techniques and strictly scientific approaches, cardinally different from others , less scientific ones, as I can guess. The opus author will again fall soothing upon You: One oughtnt to expect herein outlined technical methods and indicators to offer profits and not to entail losses. Forex trading involves both: a profit opportunity and a loss risk. Preceding results are in no way guarantor of perspective success. Further on, with greater cynicism and hypocrisy: Should You be seeking a trading panacea, put this book aside: its in no way helpful to You. Well, whats the use of buying the book at such price? Demark, by the way, gives the interpretation of his books objective to be fuelling readers with methodology, encouraging one to systematize various TA techniques. Great! I thought, it were a new discovery of Forex regularities to be delivered to traders. But it looks, like the scholar has plunged himself into systematizing earlier 50%-correct discoveries without taking any pertinent responsibility. Hence, no avail to purchase the book and to litter ones brain therewith, since Forex rates enjoy 50/50 up-down travel chance, even under the probability theory. Thus, not too much understandable, where Demarks scientific approach manifestation is to be searched, whereas the essence of things is incomprehensible once the reversal results come evident after an earth day only with no reference to his book. John G. Murphy, another Forex scholar, outlines in the preface, that the less art more science slogan is specially topical now that greater entities begin taking interest in this area. As to myself, I have truly appreciated the preface writer Murphy joke as being filled with subtleness and tristesse. Now, pertaining to science-to-practice correlation and theoretical conclusions implementation How many scholars of those hundreds referred hereto resort to live examples while teaching long and short entries and close ups thereof? Very few of them: - B. Williams Trading Chaos, New aspects of Exchange Trading; - J. Murphy TA of Futures Markets - S. Nisson Japanese candlesticks. Financial markets graphic analysis - A. Elder Basics of Exchange Trading

- L. Williams. Long-Term Secrets of Short Term Trade - Ch. Lebo, D. Lukas Computer Analysis of Futures Markets - D. Swagger TA, Comprehensive Course and hardly few more. If You divide, say, a dozen of authors by 750 references hereto attached, You will bump into a miserable percent of those tutoring practical trading instead of delivering lectures on R&S lines right-left/left-right drawing and deeming themselves heavy contributors to Forex science. This sort of contribution is no relief for those having burnt their fund by virtue of outstanding techniques. Disappointing enough, but it is fairly lucid why 90% of beginners mutate into failures and abandon Forex. 99% of books on Forex are reminiscent of the way the WWII history has been interpreted in the Soviet Union. Dozens of thousands books have been released, both documentary and fiction, depicting and glorifying all in all: front-line soldiers, intelligence agents, guerillas, military in the rear Even professional historians proved short of power to HAVE READ IT ALL, while the books continued and continued being published. WHAT FOR? What sort of falsehood had to be curtained by an ocean of true or nearly true information about individual war episodes? The situation progressed till a certain investigator made proper use of his professional skills in information collection and analysis he has been taught in Intelligence Academy. But the fact is that he has applied the above skills of his to WWII history. As You may have guessed, we are talking about Victor Suvorov ( Vladimir Rezoon) and his books: Icebreaker, Dday, etc. He has successfully presented the war in a manner being in direct opposition to what has used to be before. With this manner realized, one gets immediate logical understanding of every episode from the war beginning to its end, embracing even what has not been clearly explained prior to Suvorovs effort: - Why did pre-war repressions take place (see The Clearance novel)?. Why has a clear-minded country leader decapitated the army on the verge of the war? Dr. Gebbels was the first to understand it in April, 1945, having written in his diary about the wisdom of Stalin, who has made the Red Army invincible by way of subjecting his military men to repressions. But Gebbels turned out to be too late to realize it, with the fact still remaining beyond numerous Russian historians comprehension up to now. - Why has Hitler assaulted USSR ? The fact has apparently nothing to do with his ambitions pertinent to land conquering and raw material sources acquisition. By that time Hitler possessed insufficient power even to seize the south of Franceand French and Dutch colonies being actually ownerless the world over, which fact required to replace French and Dutch administration by the German one only. Could the Byelorussian Baranovichi or the Ukrainian Berdichev be in some way more attractive than the French Cote dAzur? - Why there has been so a disgraceful defeat in 1941, in spite of the Soviet multiple military superiority? - Why has Stalin refused taking the 1945 Victory Parade, having commissioned Zhukov with the job? - Why has the USSRinsisted on staging the Nurnberg process show, while the democracy-adherent allies sought shooting the fascist Germany top leaders court-martial free. Why was Stalin so thirsty for the trial? Why have the HQ Field Marshalls been executed as found guilty of planning occupation of India and Iran following the USSR conquest, whereas the others having perpetrated atrocities on the Soviet territory were granted life? I may go on with tens of similar questions, nevertheless, we are discussing not the war history, but books on Forex, which issues being incorporative of two common aspects at least. Episode-friendly truth conceals truth about the SYSTEM, both in pre-Suvorov WWII history and in books on Forex published up today. Thus, TRUTH and PART OF TRUTH on each Forex aspect (fundamental data influence, Elliott waves, Fibo levels, continuation and reversal patterns, etc) are in no way interconnected so, that no trader were able to understand the entire of Forex SYSTEM. Well, I may tolerate the above system having neither been ultimately understood by the writers and the publishers pressing for tremendous royalties. Thats why reading PUBLISHED TRUTH provides no remedy for getting insight into Forex rules

and for easy earnings therein, just the way no truth about the USSR WWII plans and objectives is perceivable without utilizing Suvorovs approach thereto. By way of getting familiar with the SYSTEM, one will suddenly realize how smooth are Forex artifacts to get apparent one from another, e.g.: M5 Elliott waves constituting M15 wave I, this wave being but H1 and H4 corrective within certain Fibonacci levels. One gets clear vision of what all the Forex-traded currencies are doing now and what they are going to in half a day. Williams did have grounds to claim, he needs several tens of minutes to analyze tens of charts. He DID have understood Forex as a system, though he has offered but the system components portrayal in his books. Depending on where utilized, the Alligator may appear to be responsible either for a profit or for a loss. But Williams has not even taken pains to present a differentiation between the Alligator being a profit assistant and the Alligator being a loss bringer. The above is conditioned by the Williams Alligator being a great TA tool, but pertaining to a certain AREA OF Forex only. Other areas require other TA facilities. I will do my best to teach You to effect proper estimation of long-term and super short-term entries being appropriate for the moment. I will also dwell on why it is not difficult to add extra 11 trend-killing bullets to the 5 of Williamss; why it is easy to build up a currency travel vector daily projection. The whole thing is minimized to several criteria, being constantly effective irrespective of currency intentions. As a result, You will not have to monthly pay quacking mountebanks impotent daily forecasts. After reading Suvorovs books, any fact pertinent to the war turns sensible, clear and logical. I have embarked on the same way and I have done the same thing with reference to Forex, since literature on Forex is overloaded with falsehood even to a greater extent than that on WWII. But now lets move on with Forex scientific criteria. Stagnation and dogmatism are alternative attributes of Forex folios anti-scientific substance. Have You ever come across a criticism of any Forex-oriented theory? I mean a weighed objective criticism, assigning credits to the author for elaborating a revolutionary theory, which has by now got obsolete due to a number of objective reasons and thus requires improvement, i.e. replacement. For instance, I have found nothing of the kind in relation to the 100-year old Dow theory, originally incorporative of benign principles. But life goes on, and there seems no reason to head-hammer life-rectified Dows postulates: - a long-term trend (primary, basic as per Dow) being several years long. Curious enough to spot a currency pair to stand open for so a long period; - a medium-term trend (intermediate tendency) being several months long. As per Dow, the MTT is opposite (corrective) to the basic trend; - a short-term trend, not exceeding 3 weeks and incarnating minor fluctuations within the intermediate tendency; - intraday trend being per-Dow midget ripples, not worth paying attention to. You are now welcome to take a close look at the figures below, as of October, 2004 through March, 2005.

Fig.11. EURUSD D1 chart.

Fig.12. GBPUSD D1 chart. CONCLUSION: This theory of Dows might be deemed effective rather till late 80s, than presently. Nowadays, with 3 pips spread, 50-200 pips pullbacks and trends not exceeding a week, the Dow theory MUST BE recognized as being despairingly obsolete and trader-hostile, since, under a 3-pip spread, it is, certainly, top of recklessness and stupidity to stand open for months or years. A different trend classification is to be called for, meeting updated Forex environment standards. I have disclosed one example of dogmatism only, but there are hundreds and thousands of them. I guess theres no need to continue being proponent of the fact that presently Forex theories are obsolete in their majority, with this sort of methodology being requisite for analysts rather than for traders. As opposed, I hold it more appropriate to forward my entry and exit technique to traders willing to conduct successful and loss-safe trading.

By way of prompting: please, attempt to view Forex as a system inclusive of components being familiar to You: Elliott waves, reversal patterns, Fibonacci levels, MAs, ally currencies, etc. All the above staff is integrally intercommunicative rather than existing individually, the way, each organ is in the human body. I DID have understood it, and I realized the way B. Williams is able to analyze tens of currencies within tens of minutes in order to execute correct long and short entries. It may look surprising to someone, but a qualified doctor is capable to diagnose Your body hazards after a short examination and talking to You. The doctor has actually examined but several organs, but his knowledge system has empowered him to jump at wider conclusions, as Williams at Forex. GROSS TOTAL. Steady and regular Forex profits are real opportunity. There is hardly another area which enables one to knock up a fortune without having rich aged relatives abroad, without having to join ones native countrys throughout corruptible authorities or else. If You have discovered THAT ANOTHER area, You are free to get engaged therein. Then, Forex is not likely to be requisite.

Chapter V DELUSION NO.4: SHORT-TERM FX TRAINING AT THE DEALERS'. WHY DO GRADUATES BULK UP LOSERS?
This delusion zombies beginners into entering 2 to 3-week Dealers training schools in order to learn FX profiting. But what are Dealers schools willing to train beginners to, provided that: a). school curriculum is not stipulative of training professionals, capable of winning their own Dealers; b). school teachers are no traders (why should the management employ such kind of teachers?); c). school teachers resort to students overestimation practice thus making the latter to be quicker about opening live accounts with their Dealers; The above effort results in 90-95% of beginners loosing their primary deposit and granting the money to their native Dealers. We are now going to give the problem a detailed conclusive analysis. COMMON WORLD-WIDE FX TRAINING DRAWBACKS. No. 1 drawback is absence of a clear multi-stage FX trader professional training pattern. If You are a lawyer, it means that before You commenced Your professional activities: 1. You have finished secondary school; 2. You have graduated from the university (college); 3. You have been put through a probation period under an experienced professional instructors supervision (say, as an assistant to a notary, to a lawyer or as an ordinary employee of a juristic company), whereby You have acquired skills in Your profession. Thus, a gross total of minimum 4 stages of professionalism enhancement is observed. There is no other way about it. Can a professional engineer, lawyer, physicist, chemist be educated by way of a W2 or W3 training? Certainly, not. But pertaining to FX, the 1st stage (basic course) is detectable only, whereafter a trader attempts self-trading thus jumping directly to the 4th stage, falling into the abyss and loosing his deposit. You have hopefully got the understood from previous chapters of how many reefs are standing on the way of every trader, having opened a live account. Naturally, there come questions: - Who are the tutors of numerous FX courses, business-schools and academies? - What is being taught at the above numerous FX courses, business-schools and academies? With these queries answered, we will finalize the 9095% losers background. FX TRAINING IN EX-USSR COMPONENT COUNTRIES. I will not touch upon basic training, known universally. The ABC may be taught in a slightly better or in a slightly worse fashion, but all the tutors practice will be circa identical. Its the same about FX, where, under the basic course, one will be illuminated about: - What is FX? - Trading time. Participants and objectives.

- Fundamental analysis. - Major macroeconomic data. The extent of their authority over currency rates. - Political factors. - Technical analysis basics. - Trend indicators. Moving averages. Oscillators. Divergence. - Trade planning. - Types of orders. Quote request procedure. Transaction execution. But an ABC remains an ABC even in Africa. It may be independently learned by oneself in any FX scholars book, or, else, in may be USD200-500 lectured at Dealers primary schools. Basic knowledge is, certainly, an indispensable facility, but it is all the same as arithmetic for a civil engineer, enabling him to perform structural, material and mounting calculations, when building a house. But guess, please, how many out-of100 traders will loose upon going live after the FX primary school? Right, the 100, with no exceptions. So, those plunging basics-knowledged people into opening live accounts, are but FLEECERS! The situation is reminiscent of an eager-to-earn school-boy, being given a surgical knife, hardly after passing his school exam in anatomy. The song is the same! Any doubts? Then, Ill have to deal the final blow now. Here is an advertisement of TeleTRADE, being one of the longest working FX brokers in Russia (see http://teletradedj.com/company):

TeleTRADE DJ International has 12 years of experience in offering services at international financial markets. More than 70 offices in more than 12 countries of the world is the result of our successful operation. During 12 years TeleTRADE has brought up several tens of specialists working successfully at global financial markets in different countries of the world. And today we prepare future professionals by passing Teletrades best specialists experience to them
So, have You read it? Lets do some thinking now. Several tens (say 40-50) successful traders, divided by 70, and then divided by 12 years of successful operation Thus, how many annually? Discouraging. With proper account to the fact that advertised achievement figures are subject to overestimation, rather than to underestimation, the above number of successful traders may equal to 50, or to 20, or less. Besides the basic training, Teletrade offers a USD150 Profitrade course. And, finally, Financial English is also an option, as advertised: If You are an investor, an economist, a financial, a banker, an accountant, a trader or a financial analyst

this training course is what You need!

One of my successful students has studied German at school. How, on earth, does she manage to earn at FX without a slightest knowledge of English? Myself and Teletrade are not likely to grasp each others logic. Here, I am reading their training program, discovering all sorts of clumsiness therein: - on the one hand, one may learn that there are three steps of growing a successful trader: 1. basic training, 2. demo account, 3. live account with Teletrade; - on the other hand, to ensure successful trading one should finish a Profitrade School whose program comprises the above basic training starting with fundamentals influence on exchange rates; - on the third hand, to gain all sorts of success, one should additionally finish a Ukrainian School of Finance and Banking (USFB) under the Kiev National Economics University: The graduates are issued a joint USFB-Teletrade professional activity entitlement certificate. So, thats it! What are the graduates going to be entitled for, provided that the curriculums major portion is dedicated to fundamentals authority over the rates travel? - on the fourth hand, one comes to know, that all of the above is still insufficient for a trader earning at Teletrade. It is also requiwebsite to get training in Odessa under the FX Dealing program, so that to be awarded a National Bank of

Ukraine certificate on FX dealing. Curious it is, but why should a trader require a National Bank certificate? Perhaps, for ones intellectual power demonstration to ones own children The latter are far from needing it! Children need money, since they seem cleverer than the generation, falling for papers sealed by countrys prestigious universities banking schools. Moreover, on witnessing their parents FX-derived moneys, senior school students DO use to get willing to earn by themselves. But now back to Teletrade and to their superior education stage. What, do You think, is the emphasis laid upon at that stage? Right! Upon fundamentals authority over the rates travel, as per below: - fundamental analysis = 21 hr - technical analysis = 12 hr - FX market psychology = 3 hr. Getting amazed? The profanation is that the Teletrade education superior 4th stage (involving the National Bank certificate) is tutored by University Economical Department teachers, rather than by professional traders, capable of a large-screen trade staging, incorporative of on-line entrynexit substantiations. Now, a little digression, just to enable You to understand what I mean. With one having experienced a university teaching (then a business and then a professional trading), the benefits and shortcomings thereof start running out in relief. What kind of knowledge, do You think, these lecturers, Candidates of Science and assistant professors are going to propound? Right, they are going to teach exactly what they used to before: ECONOMICS but NOT FOREX. They are impotent to teach FX science since: a). either theyve never been FX traders due to lack of time owing to the following arrangement: - MORNING: lectures at the university; - AFTERNOON: additional earning by virtue of lecturing at a FX school, at banking and financial institutions; department sittings; next-day preparatory job; students research theses checkup; social activities; reading; - EVENING: family and private life. b). or their FX trading experience is so thoroughly incidental and amateurish, that it may not be of any value to their FX students. The above teachers are, certainly, professionals. But none of FX ones. They are craftsmen in a somewhat different area, being closely related to FX, however This kind of proximity is similar to that between a meteorologist and an astronomer, an opera singer and a ballet dancer, a doctor and a pharmacist, a firefighter and a criminal policeman, a gynecologist a gynecological facilities manufacturer, a communication engineer and a transport engineer (within a single ministry) It goes without saying, that, say, a pharmacist can be much narrative on medicine to an amateur, while not being able to teach a professional. By this reason, a FX trader may in no way be taught by a Candidate (Doctor) of Economics. These are DIFFERENT areas for professionals. Thus, any professional trader is entitled to smile ironically, while listening to an assistant professor, exactly the way an experienced therapist learns diagnosing and treatment procedures from a pharmacist (even though the latter being a Doctor of Science).

Do You think, other FX dealers are better? I regret, but how deep people are in their blunt faith in the better! Lets visit the Forex Club website, offering training in the International Academy of Trading. The basic young warrior training will be provided against RUR6,000. At that point justice should be done to Teletrade, offering this sort of training free of charge. In case, You want to further take master-classes, aimed at training FX professionals, it will be RUR2,000 payable per class, with the number of classes being sufficiently numerous. You are welcome to read comment of those, who have undergone the FX Club schooling. But, please, be attentive, while reading, with proper account to the above comments being prepared and screened by the website creators. I am quoting: Andrey Fyodorov was explaining this method during the lessons, but I didnt perceive much of it without

practice

Do You think, its all right? Or You guess, that having made payment, one is not to put any extra question? But one does ask a lot of questions. Then why hasnt she perceived that method immediately? Either the method is fruitless, or it is being explained the way, no one can get any understanding of. It is natural to ask questions in case something is not understandable. Here goes another students passage: I guess I am shortly going to test his trading systems. What the meaning? Does it mean she continues trading the way she used to before? No need for any further quotations. Savage, ignorant, militant absurdity. Supplement 2 of this book furnishes more detailed information on the FX Club trading academy. Alexander Elders (millionaire and FX TA scholar) standpoint is that, if reliable, any method should be simple enough to be accommodated on a post stamp reverse. If negative, I will have to take pains to find proper wordings, since the website requires tactful behavior. With reference to ally and adversary currencies, here is the pattern to enjoy easy placement on a post stamp reverse: GBPUSD lifting EURUSD lifting AUDUSD lifting USDCAD deflating USDCHF deflating The situation gives rise to no questions since being of objective nature and is reflective of a complicated procedure. The questions are triggered at the method application stage. Sort of, shall I enter or shall I wait a little? Or, why is this pair traveling slower? But if a method is not essentially comprehended, what is to be done, when it comes to its application? Joseph Stalin is said by his contemporaries to be used to clear and laconic expounding of his thoughts and ideas. He is also said to be used to requiring identical narrative fashion from his subordinates, reasoning that once one cant do it, he is sure to be ignorant of the subject, he is talking about. Thereafter, certain things were inferred to by Stalin in relation to nonlaconists. FX TRAINING IN THE USA AND IN EUROPE. You are sure that in other countries the FX training system is more effective, arent You? Then, why is the 90-95% loss rating is of universal character? EXAMPLE 1: Infos zur Burg Windeck finden Sie unter www.burgwindeck.de They arrange for a 2-day seminar covering: 1. Traders carrier planning.

2. Psychological barriers negotiating. 3. Trading system development and documenting. 4. System testing. 5. Friday evening comfy soiree. 6. Open discussion at a restaurant. The seminar is intended both for beginners and for advanced traders seeking success in system trading. Knowledge obtained in spot trading is as well applicable to stocks. Beautiful environment, etc. Price: EUR540 VAT inclusive. Night and breakfast: +EUR65. Please, refer to: http://www.tradingsuxess.de/ My standpoint is that the seminar directors do not have any slightest idea of what they are going to teach inasmuch as: 1. The seminar is intended both for beginners and for advanced traders... Is it to involve sort of a joint session between first-year schoolchildren (not knowing a multiplication table) and advanced graduates of a University Mathematics Department, whereunder during two (!) days they are to be told stories equally interesting for all of them (between comfy soirees and restaurant discussions(?). 2. Any skilled trader is aware that after such FX comfy training ALL the students MUST loose their live accounts. EXAMPLE 2: www.nybt.de Seminar topics: 1. What is FOREX? 2. Entry rules. 3. Exit rules. 4. Demo trading. 5. Trading psychology. Guess, how much is it (in terms of time and money) for the distance coverage from the ABC (What is FOREX?) to top (entries, exits, psychologies)? You will never guess it. Four (!) hours all in all, and You are a Soros or a Baffet (in Your dreams, certainly)! Refer to: www.nybt.de 1-day seminar for beginners Seminar duration: 17:30 through 21:30 Price: EUR99.00 + 16% VAT EXAMPLE 3: www.rosstrading.de offering a 2-day seminar in FOREX day trading Seminar topics: 1. Why do currency rates move? 2. Whats the way currency rates move?

3. Who moves currency rates and how is it going on? 4. Why is our method being extensively used for trading? 5. How to reverse a position? 6. Trading strategies. 7. Best trading periods. 8. When should trading be stopped? 9. Miscellaneous Price per 1 student/2 days: EUR1284.48 + 16% VAT, totaling to EUR1490.00 I wonder, why cant a qualified engineer, doctor, economist be educated within 2 days (moreover, within 4 hours)? With this provision, why are professional traders being universally placed under education in this fashion? EXAMPLE 4: 30-day training with FXCM. Curriculum. Introduction into the FX market (Days 1-2) 1. Welcome to FXCM. 2. Trading main components. Technical Analysis (Days 3-11) 3. Introduction into the TA. 4. Candle chart models. 5. Fibonacci levels. 6. Moving Averages. 7. Relative Strength Index. 8. Bollinger Bands. 9. MACD. 10. Stochastic. 11. Conclusions. Fundamental Analysis (Days 12-15) 12. Who pushes the market. 13. Long-term FA. 14. Short-term FA. 15. Conclusions. Money Management (Days 16-22)

16. Money Management. 17. Trading psychology. 18. TA (repetition) 19. Statement analysis, day 1 a poor statement. 20. Statement analysis, day 2 the Dealers statement. 21. Statement analysis, day 3 the best statement. 22. General conclusions and a farewell speech. Et cetera, et cetera, et cetera OTHER EXAMPLES to be found at http://www.traderhouseglobal.com/seminarlive.htm http://www.tradingacademy.com/forextrading2day.shtm In greater detail: see http://www.profitradefx.com/eng/eng/services/workshop_content.shtml 3-day seminar at the price of USD1995.00 DAY I. 08:30 17:00: All You must know about Forex. 1. A little history. 2. Who are jobbers (Your adversaries)? 3. Null sum jobbing. 4. When exactly should You trade at this 24-hr market? 5. Asian, European and North-American sessions particulars. 6. What may be Your profit expectations? 7. Four principal currencies, intersections and behavior rules. 8. Long or short? No difference at FX. Trading. Part 1. 1. TA counter FA Whats to be used, when FX trading? 2. Position trader versus day trader. Which is preferable? 3. Trend lines: how to use with currencies? 4. Support and resistance: how to find them? 5. Moving averages being reliable indicators.

6. Indicators and oscillators being beneficial. 7. What You should actually remember on TA. DAY II. 08:30 17:00: Trading. Part 2. 1. What orders are to be utilized for Your profit maximizing? 2. Risk management (what to do to remain alive in this market). 3. What is most profitable? Learn to make USD1,000,000 within 5 years. 4. Factors influencing traders profitability. Trading system: to use or not to use? 1. Mechanical trading versus controlled trading. Which one is better atFX? 2. How to design Your own FX trading system? 3. Winning trading system sample (plus overall explanations based on 4 trading systems of mine, offered to You) 4. What software is to be used for charting and trading? 5. Streaming charts. DAY III. 08:30 17:00: Are You ready for trading now? 1. Trading psychology. 2. Cupidity and fear, as being Your worst enemies. 3. Loosing positions elimination when trading currencies. 4. Winning positions promotion when trading currencies. 5. Own capital: sound quantity to begin with at FX. 6. Your FX traders daily routine. Let us initially try a demo station! 1. A recommended FX broker (open a demo account) 2. Currencies to start with. 3. Simple trading strategies. 4. Beginners mistakes and how to avoid them. 5. Trading tips and tricks, capable of saving a hell lot of money. PAID TRAINING, CONSULTING

1. http://www.forexmentor.com/ Price: USD495 Composition: - 6 hours of live instruction from Peter Bain on 3 mastered DVDs; - 6 hours of interactive video clarifying the system main strategy on 2 CDs; - 6 hours of sample practical trading on 6 CDs; - Currency Trading manual, 150 pages; - plus 6-month unlimited access to Peter Bains tips website at USD179. 2. http://www.theforexedge.com/trainingCD.php CD price: USD1,895 (one-month e-mail support inclusive). 3. http://www.realitytrader.com/index.html Intensive training. Package price: USD1,500. Composition: - 1-month Realty Trader Room full membership; - 30-minute chart on the trading day (20 sessions monthly); - live consultations on traders progressing steps with general reference to advanced trading methods; - trading day preparation supervision. 4. http://www.forex-trainers.com/fx-training-overview.htm Live consultations. Price: USD95 per hour. SO ARE YOU THROUGH WITH READING? NOW, PLEASE, THINK IT OVER! Any sort of education, cocking a student for steady success in FX trading, should provide for theoretical basics of the proposed trading system, being brand new, i.e.: teaching a student trader up to certain exact aspects of operating a new TS. By way of example, in compliance with the Masterforex-V educational concept, each student is forwarded a package, containing: a). a detailed presentation of each component, organic to the Masterforex-V trading system, incorporating relevant examples; b). explanations pertinent to each components difference from those of other authors (e.g. the Masterforex-V Academy beginner is to understand mistakes, made by B. Williams and his Level 5 students in entries and exits when utilizing Moving Averages); c). a faultless definition of entries and exits, to be found at Masterforex-V binary clusters superposition points. The above sequence results in the students prompt (days to weeks) understanding of the systems elements essence and interaction and in his standing ready for demo-account on-line daily testing of the Masterforex-V trading system. With this in mind, the students nickname is activated to provide access to the Masterforex-V Academy closed , where he attains the opportunity of taking decision to begin demo-testing his trading system by way of asking questions

to experienced traders and encouraging more automatic entrynexit policy. CONCLUSIONS: From my (traders) standpoint, the above FX Brokers training methods for beginners may be referred to as HOW-TOLOOSE tutorials, due to: - absence of systematic methodology (see chapter Classical FX literature: complete crise de genre ) - absence of reliable and proven training techniques (no grounds for their being available!). Successful traders are selfjobbers, while LOSERS plunge themselves into teaching beginners to things familiar to them and responsible for their deposits killing; - none of successful trading experience, being possessed by training staff; - absence of consulting curators for live-trading beginners to eliminate bottlenecks with; - certain Dealers unfair standing, whereas beginners are purportedly ill-educated or intensely assisted towards deposit killing. An ALTERNATIVE training option is offered in chapter Training At Masterforex Trading Academy. 1. Here, in the open section, I attempt presentation of my book Secrets of Craftsmanship, Narrated by a Professional Trader in the fashion, that the secrets disclosed therein, constitute further FX markets cognition stage for traders, following the books by B. Williams with the provision that I furnish free quotations of his thousand-dollar priced methods. a). B. Williams claims being able to analyze several tens of currencies (140 bars each) within several tens of minutes without disclosing the way he does it, whereas I reveal the fashion any trader can easily do it (with my computer monitor being presently 3-currency capable only), see Ally and Adversary Currencies; b). B. Williams is hosanna-singer to his magic Alligator, whereas I reveal the latters shortcomings and the way to eliminate them by way of incorporating a MA233 thereto, thus visualizing the whole of the 4 potential currency traveling options (up/down above MA233 and up/down below MA233) along with manner thereof. c). B. Williams resorts to a stop-loss being a safety cushion, whereas I reveal its limitations and I offer its alternative in the shape of pending orders, being used by myself. d). B. Williams quotes Trading Volume to be an authentic resistance breakthrough criterion, whereas I unblanket the backgrounds responsible for the Trading Volumes fraudulent behavior at Metatrader platforms (remember the Consortium?), immediately offering my own true/false breakthrough criteria. e). B. Williams demonstrates 5 trend-killing bullets, whereas I exemplify their insufficiency, offering 11 more without denial of those, exhibited by Williams. f). B. Williams idealizes the Elliott wave theory, whereas I provide evidence of a threes and fives combination being in no way totemizable (otherwise a 100-year projection of the mankind development might be built, irritative of not actually following Elliotts and Williamss concept), moreover with modern brokers being able to a greater number of waves out of the existing five. 2. Profound FX tools knowledge is reflective of ones experience upgrading sequence. 3. Demo station trading enables Your entrynexit pattern automation. A closed forum (forum) has been inaugurated to be source of consultations, inclusive of addenda to entrynexit manual + forum residents, investors, Western brokers direct chat + current FX situation discussion. 4. FX live mini-account reading facilitates erasing barriers between demos and lives. 5. Other training commitments are expected to be made by me, unless You prove incapable to, at least, double Your deposit. GROSS TOTAL: hard daily labor is a precondition to Your self-sculpturing a FX professional, along with a certain level of knowledge and a FX-experienced instructor being able to give You some in-trade steering. With this arrangement You are

certain to successfully challenge professional upgrading natural stages. Generally, the above pertains to any trade or profession. Im not venturing to claim being ultimate truth by virtue of my training concept. Moreover, I am not in pursuit of sounding convincing to anyone. Should there be anyone holding, there is ANOTHER FASTER way to become a FX professional, do, please, apply Your daring! Let the Market be our arbiter!

CHAPTER 6 Trading chaos: B. Williamss contribution and the reasons why millions of traders all over the world lose their deposits when they work according to the techniques of this author.
The book Trading Chaos" by B. Williams is the classical edition that deals with giving the technical analysis to Forex . It is of a great interest not only to me but also to millions of B. Williamss admirers all over the world. From the viewpoint of mine as a trader, this book is so popular because B. Williams tried to do the following: 1. To present Forex chaotic market as a system, making use of the chaos theory. 2. To depict his vision of logic of the structural components motion in this chaos: a) the strategy (Elliots wave theory); b) the tactics (the fractal analysis; the use of fractals and the so-called key factor i.e., financial and economic instruments. 3. To submit 5 levels of the professional training of every trader. Each of these levels is clearly described and specified as well as the corresponding goals and the instruments that traders must be capable of using at each of these levels. In particular, the following chapters of the book in question are dedicated to the problems enumerated below: Chapter 6. The first level a trader- novice. Chapter 7. The second level an advanced beginner. Chapter 9. The third level a competent trader. Chapter 11. The fourth level a skilful (trading) trader. Chapter 12. The fifth level a trader -expert. 4. Besides, B. Williams enumerates 5 bullets that can kill any trend i.e., its reversal points (points of reference). Starting from such points, one can develop new strategy and tactics of the work within the trend. 5. B. Williams also recommends making a business plan. In this control list, one must clearly specify the working rhythm, the signals from the big finger concerning the deal opening, stop-loss levels, cushion pads (suspension pillows), etc. 6. As a professional psychotherapist and trader, B. Williams submits practical recommendations to the beginners and skillful (competent) traders - see Chapters 11 and 12 from Trading Chaos. The essence of his attitude to traders principal psychological problems can be approximately formulated as the following. We learn how to integrate into the market basic structure and establish contacts with the market via realizing our own prejudices and by the development of our individual trading programs. You should compare this approach with other psychoanalysts viewpoints. Such specialists" try to make money at Forex market rather incompetently (see Chapter 23, dedicated to traders psychological problems that arise during the work at Forex and methods of their healing). 7. As the logical continuation of Trading Chaos, B. Williams has written another book see New Dimensions in Exchange Trading. In this book, the author presents his business approach i.e., Profitunity via the web. He has introduced the indicators (AO, AC and Alligator). Now they are regarded as the obligatory) components of the majority of Forex trading systems. He tried to specify (detect) all market signals and open deals at the moment when such signals coincide simultaneously, which must be confirmed by different indicators. I would like to keep on complimenting B. Williams for his accomplishments and contribution to Forex theory but for one snag to it. Several years ago I started to reflect on certain aspects of B. Williams theory. That is, as a rule, 95-97% of traders had lost at Forex before the edition of Trade Chaos 1, -2 and New dimensions. At the same time, notwithstanding all achievements and discoveries by B. Williams, the number of traders -losers still remains the same even after the editing of these books. This circumstance forced me to scrutinize many of B. Williams positions more impartially and in detail. I have cardinally reconsidered my views on the trading at Forex.

As I see it, one must clearly distinguish domains where techniques by B. Williams and other authors are applicable and where they do not work but only accelerate the process of losing money by a trader. Only after having learned how to detect this boundary one can develop ones own trading system that will bring profits at Forex . Further, I try to submit my views on Forex market. Starting from the theory, I make a transition to its practical application. In this way one can better understand logic of the currency pair movement at Forex market. Consequently, this approach helps us to trace out a general pattern of opening and closing of transactions at Forex . CHANGES in FOREX MARKET. FOREX CONTROLLABLE SYSTEM instead of CHAOTIC MARKET and ITS CONSEQUENCES for TRADERS WORK Previously Forex was a chaotic market. B. Williams tried to find elements of a system, making use of the theory of chaos. At present the system tries to disguise its goals and plans with the help of a superficially chaotic character of movements in this market. As regards Consortium, the PRINCIPAL CONCLUSION that a trader must make after reading this chapter is the following. This market has ceased to be spontaneous. Now it is organized and controllable. At present volumes of transactions, opened by traders, have ceased being of great influence. Somebodys interest to push a currency towards this or that direction has become much more important. Often this interest aims at usurping an N- transaction volume and a number of traders orders. The primary goal has become to reverse all currency pairs into the opposite direction. This is why the currency often moves against the volume, news and the common sense. The charts on April 1, 2005 perfectly illustrate these tendencies. I sincerely hope that everybody sees that these graphs do make exceptions but they dont confirm the rules of Forex. This is why the techniques of working at Forex, written by those classicists who dealt with the spontaneous market, will more and more diverge from the currency real (true) quotations. It is necessary to mention that at the spontaneous market the direction of the trend and its intensity coincide with the trading volume. At present the base of Forex market is changed in its essence. Now its being driven by INTEREST of a certain grouping but not by spontaneous forces. This grouping prescribes the currency quotations to us at the market. It is ready to reverse currency pairs against any volume of traders orders. The reader should recall one of A. Elders principal ideas this author is the classicist of the stock market technical analysis, a trader and the professional psychotherapist. He states that the market is being driven by a crowd (flock), which opens the deals towards one direction. This results in the trade formation. It is justified when one deals with the chaotic market. But what does happen at Forex market at present? Let us again return to the example of USD trend reversal from the bear type to bull one. The charts on April 1, 2005 are depicted below.

Chart 8.1. EUR/USD movement

Chart 8.2. GBP/USD pair movement.


Let us scrutinize GBP/USD pair behavior on April 1, 2005 after issuing of positive data on GBP and negative ones concerning USA economics. During March, in Great Britain CIPS manufacturing index made 52.0 (the previous value had been reconsidered from 51.8 down to 51.6). In New York, the oil price heightened by $ 2.40 - up to $ 57.70 per barrel. It was the new record-breaking high price in 21 years. During March in USA Nonfarm payrolls were minimal to start from July of the previous year. Its previous value was revised towards its diminution. Michigan sentiment index was 92.6 in March (the forecast had been 92.9 it had coincided with the previous value). All USA indexes had fallen down. I hope you take on trust that at the same moment all other currency pairs were adjusted for benefit of USD rate rise against other national currencies. Those who do not believe can check it these data are public and open to general use.

There arise the questions. 1. Can traders all over the world open transactions in USD bear trend almost at the same moment (from M1 to H4 and D1). That is, under the condition of the issue of negative news on USA economy, all traders simultaneously started to buy USD and sell all national currencies. Consequently, USD rate began to sky-rocket. Clearly, this situation contradicts the news, logic and common sense. 2. One should pay attention to the synchronous character of motion of all national currency pairs. The difference in time makes from a fraction of a second to a minute. The charts on April 29, 2005 serve as another example.

Chart 8.3. EUR/USD pair movement

Chart 8.4. GBP/USD pair movement


Analysts attract our attention to the following facts. In the European session EURO/USD pair rate had increased up to the point 1.2976. In the American session it fell down to 1.2852, minimal to start from April 15. The rate fell more than by 120 points. Analysts emphasize the fact that high values of several other USA indices (CIPS and Chicago PMI) pegged USD rate. In USA in March the personal income index was +0.5%. At the same time, the prognostication had been +0.4%, which had coincided with the previous value. In USA in March the personal spending index made +0.6%. The prognostication and the previous value had been +0.5% and +0.7%, respectively. In April Chicago PMI made 65.6. The prognostication had been 63.0, whereas the prognostication and the previous value had had been 63.0 and 69.2, respectively. As the consequence of this second fortuitous reversal of currencies, USD trend at H4 was changed - from April till the end September, 2005 i.e., during half a year (at least when his chapter was being written). As the result of this reversal, national currencies were depreciated with respect to USD. The corresponding indicators (gauges) are the following: EURO fell by 1100 points (from 1.2972 down to 1.1865); GBP fell by 1900 points (from 1.9164 down to 1.7271); CHF fell by 1600 points (from 1.1882 down to 1.3484); AUD fell almost by 500 points (from 1.7844 down to 1.7365). It is an absurd joke, isnt it? That is, the trend has reversed synchronously with respect to all national currencies by 1000-1900 points for half a year just because of the following events in USA on March, 2005: Chicago PMI index was +0.5% instead of +0.4%; personal spending index made +0.6% in place of the previous value +0.7%. Were these events stimulated by traders wishes and expectations? That is, does it look like all traders simultaneously were being staking wrong over and over again during half a year! Giving analysis to all the events of those two days, one can see a striking alternative: 1. Either we assume an absurd possibility that there does exist a world-wide plot of traders - big gamblers at Forex included. That is, traders can always act synchronously, whereas National Banks of all countries keep on remaining oddly passive. 2. Otherwise, proceeding from these and hundreds of thousands of the analogous examples, we must admit that Forex is not a spontaneous, unpredictable and chaotic market any more. Now it is replaced by a market, controlled by somebody. In terms of Financial Times and the journal Currency profiteer (speculator), this parent group (the organizer of Forex ), is called Consortium. Below I use this term as well. Consortium is capable of the following: a). in a fraction of a second to reverse USD trend more than by thousand of points with respect to all national currencies of the world; b). not to give any chance to National Banks of all countries in the world to prevent the steep fall (or rise) of their national currency rates with respect to USD. Surely, it is assumable that National Banks closely collaborate with this Consortium. However, in this context another statement is important. That is, USD rate reversal occurs simultaneously with respect to exchange rates of all national currencies. However, it looks rather dubious that this very day wishes of all National Banks suddenly coincided with the purposes of Consortium. Probably, another situation is more realistic. At least some of National Banks were forced to obey Consortiums resolution - i.e., to reverse USD trend with respect to other currencies, their own included. Thus, there emerges a completely different model. One must not follow the crowd (the flock), trading volumes and postponed orders at Forex . Giving analysis to a series of factors (the trading volume included), it is necessary to understand the interests and aims of those who give quotations at Forex . Our goal is to trade together with those

individuals. Very often it is against the crowd and volume of transactions opened by traders. It is illustrated by the example of the charts on April 1, 2005. One can study chapters of the book Trade secrets more in detail in http://www.masterforex-v.su/. The book Trade secrets is discussed at the traders forum see http://www.masterforex-v.su/. Lets dwell on the difference between the goals of Organizer and common participants of any of financial games. Imagine yourself in the position of an organizer of any financial game, the game of Forex included. In the shoes of Organizer, first of all you must determine your goals and principles, opposite to those of other participants of this game. 1. For the game organizer it is to gain profit regularly and stably. 2. For this purpose, Organizer tries to establish the game rules as simple and impartial as possible. His goal is to make this game attractive for all other participants. In this way Organizer collects a large audience of traders, independently of their age, profession and other differences between them. And now one should look at the familiar aspects from this viewpoint. a). The fundamental and technical analysis; the army of economists-analysts and other specialists who teach all participants to work at Forex as all do. b). The classical version of notions of the support and resistance levels (indicators, advisers, etc.), intended for placing all suspended orders and stop-losses approximately at the same points. c). An abundance of news and factors that influence the currency quotation behavior. As the result, one can readily explain the movement of any currency pair in any way one likes however, such explanations are submitted post factum . In case of logical gaps in impartiality of the currency pair movement explanation after the issue of news, foul (forbidden) methods are always at service. It is just impossible to refute this reasoning! There are the examples: the market is unpredictable, the currency has already finished working for the given news before its publication, the participants have noticed a negative aspect of the index high values, which for sure will manifest itself in future, an unknown clearing bank has placed an order for buying a given currency in a large amount - under the condition of the bear trend (when all trader stake on sell), etc. Can you prove the opposite? Surely, you cannot. You should compare the behavior of the controllable and spontaneous currency markets under the condition of force major . Only the force major factor is totally unpredictable by Organizer. Such circumstances impartially and clearly indicate the difference between the spontaneous and organized (controllable) markets. In any area, extremities always play the role of the moment of absolute truth. That is, such extreme situations indicate weak and strong points of any system. It relates to politicians behavior at crucial periods in a State, to putting on trial equipment and to the situation at the currency market under force major circumstances. The Episode #1. The force major circumstances in USA on September 11, 2001. There is the difference in the behavior of spontaneous and controllable money-markets.

Chart 8.5. EUR/USD pair movement

Chart 8.6. GBP/USD pair movement


The results of trading at Forex on September 11, 2001 ( Forexite Ltd.) are the following. The dollar rate sweepingly fell as compared with the principal national currencies. EURO/USD rate increased more than by 200 points (from 0.8965 up to 0.99167). GBP/USD rate increased more than by 210 points (from 1.4559 up to 1.4773). USD/JPY rate fell almost by 330 points (from 121.84 down to 118.58). The reason for drop in USD rate was the terrorists attacks on New-York and Washington. According to news agencies, terrorists had had high-jacked passenger planes. The latter were directed at Trading Center in New-York and Department of Defense (Pentagon) in Washington. The planes had fallen down, which caused the subsequent conflagration and collapse of Trading Center two sky-scrapers. As the result, the trading at New-York Stock Exchange did not take place that day. It was suspended for a not fixed period of time.

The events in USA stimulated the drastic strengthening of CHF rate. In American session USD/CHF rate fell more than by 530 points (from 1.6895 down to 1.6365). EURO/CHF rate fell more than by 200 points and came down lower than the level of the strong psychological support - 1.5 CHF for 1 EURO to the point 1.4950. The matter is that CHF is considered saving (salutary) currency under the conditions of various world crises. Consequently, investors were anxious to buy CHF as many as possible in such an uncertain situation, induced by the act of terrorism in USA. (see http://news0901.fxeuroclub.ru/news_147221.php). Do you get it? Panic captured the whole world - in the first place, USA itself. At the same time, USD rate fell with respect to - EURO by 2%; - GBP by 1.47%; - JPY by 2.7%. Now let us determine the real fall in USD rate all over the world. As the starting point we take Special Decision by National Bank of Ukraine. The board of directors of National Bank of Ukraine adopted the resolution, in accordance to which National Bank of Ukraine could fix a rate without taking into account demand and supply. After the act of terrorism in USA on September 11, currency exchange centers in Ukraine raided USD buying rate from 5.25 down to 3.0-2.5 hrivnia (Ukrainian national money) per $1. USD selling rate was being maintained at 5, 35 hrivnia per $1. National Bank of Ukraine stipulated that USD exchange rate had not to deviate from the official rate more than by 10%. Only after threatening to cancel the license to work at the currency cash payments market (Available Funds), currency exchange centers return to buying of USD in cash according to the rate that had been in force before September 11, 2001 (see http://www.dinform.ru/archive/docs/full/2001/10/s22118345.html). That is, in contrast to the controllable market, the spontaneous one reacted to one day of the force major of September 11 by the double fall in USD rate and more! Thus, the difference between the reactions of the currency exchange spontaneous and controllable markets makes 50 times and more. Is it a pure accident? Thus, it looks as at that day the traders, one and all, deciding to stand by USD - so that in their transactions they did not stake on USD rate slump? Or, probably, some of traders bought USD against other national currencies, even not knowing whether USA economics will retain the leading positions in the world or it will level with undeveloped countries (e.g., such as Ukraine). Is it possible? You just imagine what would happen if another plane or two were fallen on reactors of nuclear power plants in USA so that the major part of America would turn into Chernobyl zone! It is horrible to imagine what could happen to USD rate at the spontaneous market in this case. At the controllable market of Forex USD rate would fall down just by 1-2%. I hope that my opponents, who deny the existence of a system controlling Forex market, do remember the elementary economical laws. The spontaneous market is a barometer that establishes the real price of goods on the basis of the demand and supply (in the given case, it is the real rate of exchange of any national currency). The Episode #2 . The hurricane Katrina and the flood in USA on September 7, 2005. USD rate stably increases. Chronicle of events. As the result of the dam (dike) debacle, several states in USA become submerged. The industry, agriculture and transport network were destroyed. There started panic not only among common inhabitants but among officials of various ranks as well. Hundreds and thousands of people perished. There were cases of looting. Many looters (and, maybe, just desperately hungry and thirsty people) were shot by soldiers of USA army. The government of USA declared this hurricane to be a disaster on a national scale. For the first time a new plan of civic defense was introduced (see BBC. The total chronicle of events: http://www.gazeta.ru/2005/08/29/box.4732.shtml). Katrina was bringing USA to ruin. Senators from Louisiana asked $250 milliards from the federal budget for getting over Katrina after-effects (http://www.startua.com/news/c/2005-09/27-15611796.asp). Thus, it is an illustrative example of the greatest natural cataclysms in USA in the last decades. Even the poorest country in the world Haiti provided the financial help for USA ($ 36 thousands). The help of Ukraine made 1 million of hrivnias ,

etc. What did happen to USD rate at the controllable Forex market? Notwithstanding all economical laws and even against the common sense, USD rate increased!

Chart 8.7. EURO/USD pair movement

Chart 8.8. GBP/USD pair movement


. Brief conclusions for traders . As I think, the thesis that Forex has turned from the spontaneous market to the controllable one does not need further

proofs. Hence, traders must introduce amendments into strategy and tactic of their work at Forex. What are the conclusions, significant for traders, logically follow from these facts? Under the new conditions of the controllable market, a trader must not follow the crowd (flock). As B. Williams, A. Elder and many other authors have fairly emphasized, the crowd pushes the price at any spontaneous market. On the contrary, at the organized Forex market orders must be opened in advance of Consortiums interests! How to do this? In the next part Ill describe the method that has helped me personally to make money at Forex . I try to find the core of a good sense in each technique of the successful work at Forex . Is it necessary to rediscover the well-known principles? There are many prosperous traders who openly and honestly present their methods of gaining profits at Forex . If their techniques are successful, it means that these authors have a thorough grasp of the problem in its essence. However, in practice, each of the techniques sometimes brings profits, whereas in other cases it is disadvantageous. And it does not matter, whether this technique is developed by B. Williams or by a not celebrated but a successful trader. Conclusion #1. It is necessary to clearly delineate the domains where a given technique does work and where it fails (as well as the corresponding reasons). In such a way we can clearly understand what of the method by a given trader is worthwhile to be used as well as how and when to make advantage of it for our work at Forex . Conclusion #2 . Your trading system must not be just a mixture (farrago) of various techniques. This rule is especially important for the beginners. After reading heaps of books on Forex , all of them make complaints about such a mess in their heads instead of enlightenment. However, in a way it is a quite natural result. It is just a logically explicable consequence of a formal combination of different techniques. The reader should keep in mind that each technique, not being panacea, contains a lot of mistakes. As a beginner has written to me, the results of his work at a demo account had worsened after scrutinizing new basic publications concerning Forex . Conclusion #3. A trader must develop his own trading system. In order to gain profit, the following steps must be taken: a. you choose just any technique developed by any author-trader (e.g., mine or B. Williamss, or somebodys else); b. you must get used to work with the demo account according to this technique to such extent of automatism that you sense it as your own initial (original) trading system of the work at Forex c. Only after this you should start to study additional literature. You must clearly see what pointes, borrowed from other authors, can help you personally to work at Forex , to improve your trading system for getting extra profits. In the next parts of the book, Ill dwell on the problem how to clearly delineate the areas where the world-known and popular techniques, developed by various traders, do work and where they must not be used. Objectiveness of Forex turning from the spontaneous market into the controllable one. The pattern of this process Any profitable business transits from the spontaneous to the controllable one. It is an objective stage in the evolution of business undertakings. In each branch of a big and super profitable business the initial stage of the chaotic competitive straggle is already has been passed through (petroleum, gas, ferrous and non-ferrous metallurgy, precious metals, arms traffic, etc.). At present all these areas are definitely divided between the principal participants. That is, there exist certain financially-industrial groupings, well-controllable and protected from intrusion of a concurrent. The same concerns the biggest and most conservative area of business i.e., its financial branch, the world market of currency exchange included. Can it be otherwise? Can Chaos rule the market where the turnover exceeds $1 trillion per day? Can the biggest banks and governments depend on Chaos i.e., be dependable of the off-floor traders such as me and you? Can these organizations be worried about the direction in which we (traders) could turn the trend of all national currencies at this or that second? It is ridiculous to imagine! To realize the power of the grouping that has organized the game of Forex all over the world, we should refer to the

thesis from the journal Speculator. In June, 2001 the three biggest dealers at Forex market - Citibank, J.P. Morgan Chase Deutsche Bank together with Reuters Group PLC had started up the system Atriax . However, the latter did not meet competition and stopped operations in spring, 2002. The author of the paper just hinted that even the alliance of the 3 biggest world banks could not make any serious competition to Organizer of the game at Forex (to Consortium or somebody else). In this connection, how one can take on trust the principal thesis by B. Williams concerning Trading chaos that rules Forex? Whats important, all methods of this author issue from this postulate. The following conclusion by B. Williamss also raises doubts. He states that trends are created by traders, whereas brokers just realize these trends and place traders orders. According to B. Williams, the fact that now trends are made rather off-floor than on floor (as it was earlier) permits detecting what next will happen at the market (see Trading Chaos, Chapter 6). And now let us ask a simple and, in a way, a cynical question. Who is B. Williams himself from the viewpoint of those financial groupings, to which he imputes the role of brokers on floor the individuals who are authorized just to realize orders of their traders? At the same time, I would like to emphasize that even Deutsche Bank has surrendered to the power of these groupings! So, to what extent can B. Williamss techniques be correct if their basis is principally erroneous? Let us enumerate the fundamental mistakes made in Trading Chaos. It is necessary to facilitate understanding of the techniques and practical recommendations given by B. Williams concerning the work at Forex . 1. B. Williams sees Forex as a spontaneous market, uncontrollable by anybody. According to this author, it is chaos but not an organized system that would have its own strategy, tactic, techniques, goals, methods of fraud, etc. 2. B. Williams mentions the pair trader + broker. However, unconsciously or deliberately, he has omitted the third participant of this very process. This is banks and the world financial system in general. Surely, this organization will not just take a detached view of the traders arbitrary game with the basic world currencies (USD, EURO, GBP, CHF, etc.). Let us now evolve B. Williamss idea by ourselves. Our aim is to demonstrate absurdity of his chaos theory applied to the up-to-date market of Forex. How brokers and banks market-makers can pay off profits from traders deposits if the traders total earnings would be bigger than the market-makers profit in this period? Being in shoes of market-makers, National Banks, governments of leading countries of the world, etc., how will you conduct yourself on the eve of the news issue? For instance, after the publication of Michigan University Index, USD can go up by 150-200 points with respect to all national currencies. That is, in several hours dozens of milliards of USD will be redistributed. Somebody will earn the money, whereas somebody will lose it because of the difference in rates of exchange (quotations). What will you do in the place of the biggest financial groupings? Would you just be sitting and taking sedative pills? Would you just be trying to guess what steps will be taken by professors of a Michigan University? Will 0.3% be added to the index previous value (91.4) or subtracted from it? Whats important, this difference makes milliards of USD for somebody! Possessing such capitals, would you just be sitting idly and waiting for God knows what? More probably, you will try to make this process controllable and predictable. Rather you will do your best to gain profit with the help of such indices and news. I think you will try to let the others lose their money. What does the theory of chaos at Forex represent by itself if Organizer of the game has trained all traders to act according to the stereotype? a). To place stop-losses and postponed orders at the same places. b). If the issued news are better than the prognostication, one must stake on buy. Otherwise (if the news are worse than the prognostication), it is necessary to stake on sell. c). If a quicker moving average crosses the slower one upwards, the order must be opened on buy. In the case of the downward crossover, the order must be opened on sell. d). In the case of divergence, one must try to work against the trend. B. Williams and other classics at least had to mention that it was basically absurd to work like this at the beginning of the trend and in the middle of it. e). The deal must be opened by one point higher than the previous fractal if B. Williamss alligator has already opened

the jaws, etc. And now you must think over the following aspects. - Is it chaos or a system, the antipode of chaos? - To whom is profitable this approach? - Is it profitable to Organizer? Or, maybe, to the participants, who have decided that it is an easy way to earn money. However, from whom are you going to take off money if all traders are trained to work by rote, unimaginatively? This is why the given chapter is named Anti-trading chaos to be more precise, it is the anti-trading system. Further Ill not dwell on absurdity of the chaos theory by B. Williams when applied to Forex . I hope it is quite clear. Any trader can find a lot of evidences of the fact that Forex is a controllable market. There are also many examples that prove fallacy of B. Williamss conclusion that traders form a trend and "push" it. Here I just briefly formulate my concept of rules of the game at Forex. For me understanding of these rules has considerably facilitated gaining of profit at Forex (analogously, to win a football match, one must know the rules). As I get it, the game of Forex and its rules in their essence are the following. 1. There is Organizer of the financial game (the Alligator) and participants (victims). 2. Organizer always tries to demonstrate: a). objectivity and honesty of the rules established by himself; b). simplicity of the analysis, predictability of the situations and the possibility of earning money easily and regularly by one of the numerous methods of the analysis (FA, TA, etc.). 3. All participants of the game are subjected to the same psychological treatment by Brokers, authors of numerical classical works on Forex and analysts via their sites and prognoses. That is, such specialists teach every trader to work as all others in the world do. As the result, Organizer beforehand knows the traders line of conduct in these or those situations. The percentage of players-losers is stable about 90%. 4. A rapid growth in the number of fraudulent machinations developed by Brokers has become a logical continuation of the above-enumerated rules of the given game. Economists from Brokers have quickly grasped that the number 90% of traders-loses is very close to the figure 100%. What for will they send clients transactions to the foreign market (the market-maker bank)? In fact, traders will lose all the same! Besides, it is possible to slightly help traders in their losing by knocking down stop-losses - all traders keep their stop-losses approximately at the same place. In addition, the following tricks can be done as well: the slippage (opening of transactions at a price much worse than the price at which the trader wanted to open the deal); computer pending at the beginning of the heavy movement in currency pairs. One can give many analogous examples up to the undisguised fraudulent nonpayment of earned profits to traders. Such Brokers-tricksters are legally protected. Each trader signs an agreement that he is acquainted with risks at Forex. These centers are also protected from the viewpoint of finances. If in flats the sums of orders of the traders who open transactions on buy and sell are approximately equal, Brokers can always hedge the difference between buy and sell with a market-maker under the condition of a heavy trend. The only thing that cheats from Brokers are afraid of is the unmasking of methods of their work. Really, this will put an end to the afflux of new victims! There are several sure signs of a fraudulent Brokers. In my educational course I enumerate some of such indications. However, here I give only one characteristic (traders should think about it well). If Brokers has one point of spread, you should calculate expenses on the marginal trade, in detail described in all classical manuals of Forex . For instance, let it be thought that you open the order for one lot. Forex Brokers supposedly buys EURO to the sum of $ 100 thousands for you. When you close the order, Forex Brokers supposedly transfer EURO to USD again. Thus, if you open 10 deals with EURO/USD pair during a day, your Forex Brokers is supposed to send money abroad and get it back 10 times, buying EURO for USD and v.v. All these transactions must be made exceptionally for you! Is it realistic? In a next-door bank you should ask the conditions for the transfer of $100 thousands abroad and back. You will learn the

cost of the commission for such services and the time required for this transaction (in half a day, the next day, etc.). Here I do not mention the papers that must be prepared for each transfer. I also say nothing about the time required for collecting all signatures. I wonder, during this period of time what changes will occur in EURO/USD rate as the latter is altering every second? 5. To earn regularly at Forex, you have to master yourself. That is, a trading scheme must be developed. According to this scheme you will work against generally accepted rules. As it is already mentioned, these rules are popularized by Organizer of the game at Forex . Sticking to these rules, more than 90% of traders all over the world lose their money. 6. Developing my trading system, I have made use of numerous generally-recognized techniques of the work at Forex (by B. Williams, etc.). Surely, there is a kernel of good sense in any technique that enables earning money even if in 50% of cases. Therefore, the traders task is to differentiate the conditions, under which a given technique can provide profit. It is also necessary to understand where, when and why this technique yields a loss to the trader. Naturally, a trader must use only this first part of the system, where one can gain profit. 7. For the development of your own trading system, you must do your best to organically integrate different techniques, profitable at Forex. Various methods of giving analysis to Forex from different viewpoints do help us to more thoroughly and profoundly understand this market and, consequently, to gain profit regularly. 8. The game of Forex is widely spread all over the world. In addition to speculators, there are other participants in Forex e.g., individuals who need to exchange currency for their business. All these factors provide an objective opportunity to gain profits bigger (and more regularly) than in any other financial game of the world. 9. Therefore, Forex gives a real opportunity to get into the principally new financial market and to become a really independent. Anybody can be engaged in trading at any point in the world. For sure, a State, much as it would want it, cannot deprive a trader of his production facilities because in this area gaining of profit depends just on ones techniques and skill. 10. Forex gives you just a chance to earn money. However, not everybody can learn how to gain real profit. Even after having mastered the fundamentals of making money at Forex , a trader needs to learn a lot of additional factors in order to transform his potential abilities into real money. In this connection the following aspects are very important. a). the psychological stability (the absence of fear and hazard, the ability to work automatically at the subconscious level, etc); b). a reliable broker (the traders profits, being virtual, materialize only if you can convert it into real money at any second); c). self-perfection via mastering new techniques of gaining profit, learning from an experienced instructor and due to exchanging opinions with other traders; d). the possibility of obtaining money from the investor for the asset management. This gives the opportunity to proceed from the level of ones own deposit of several hundreds or thousands of USD to the principally new level of the work at Forex. In this way one can simultaneously reinvest a part of ones profits into the deposit and to spend money on heightening of ones own well-being. There is a simple example. At mini- Forex , many traders do not earn a lot of money: even if a trader has doubled his deposit in a month, his profit is small (e. g., by making $100 out of $50). Besides, a part of it he must take off from the deposit for the daily needs. At the same time, a trader earns $2500 if he gets $5000 for the asset management from the investor on a fifty-fifty basis (and the right to lose not more than 25% of the investors money). Ill not give examples of large deposits because the tactics of work with them are principally different as well as the percentage of profit. For helping to solve this set of problems, I have opened Internet Masteforex-V Trading Academy for the subscribers (http://www.masterforex-v.su/). There I submit the principles of my work at Forex . In this site every trader has an opportunity to directly communicate with my subscribers from 40 countries of the world, with investors and with brokers of western banks. Besides, one can participate in giving analysis to the current situation at the market, etc. 11. Not everybody can cover a distance from the chance (the dream) to its realization i.e., to making real money at Forex . As a trader, here you work against Organizer of this game, who is the professional. That is, to earn money regularly by taking it away from Organizer, one must become the professional himself. Do not hurry to open a real account at least till the time when you will learn to do the following: a). As B. Williams himself, in several minutes to clearly see two possible alternatives of currency pair movement at the beginning of each session. Correspondingly, you must develop two business plans, where points of input into the market

and output from it must be clearly designated. b). To work out ones own tactic of the work with the demo account at Forex to perfection. The aim is to augment the demo account at least 2.5-3 times in a month. c). To develop the long-term and intermediate strategies (not less than a month and a week, respectively) - as well as the short-term tactic (the intra-day trading session). Acquisition of this knowledge will help you to gain profit. d). After opening of the real account, at the beginning you must work only with trends (under the conditions of flats you must deal with demo accounts). It is necessary to clearly distinguish one from another at the beginning of trading. e). You must choose two ally currency pairs and work with them continuously, accumulating experience. 12. There can be reasons why your demo account does not augment regularly (in particular, maybe you are too busy at your main job). In this case, you better forget about Forex ! You must not open a real account there. It means that Forex is not intended for you. After the coming out of my book Trade secrets, I have received such a large amount of letters from the people who have come to the same conclusion ( Forex is not for them). They have arrived at this opinion after losing dozens and even thousands of USD. These facts are worthwhile to be thought over. Surely, it would be better to learn by the experience of others but not at your own expense. By the way, there is completely nothing humiliating in the inability to make money at Forex . Some people do not understand technology, or literature. Others do not come to know fine arts, politics or sports, etc. Does anybody consider oneself inferior because of this reason? Surely, not at all! Analogously, I perfectly well realize that the reaction to the last two items of my vision of the game at Forex can be inadequate. It will stimulate an immediate tide of slander and lies concerning me and my book. The reason is that Im not an employee of BROKER but a trader. I try to understand recent rules of the game at Forex, its mechanisms and to explain them to others. More in detail you can get acquainted with Trade secrets at the site http://www.masterforex-v.su/. Ill send you a package containing the analysis of the techniques. Besides, there are concrete examples that will help you to understand how, when and where you may open deals with currency pairs and where they must be closed.

CHAPTER 7 Role of trading system in successful and profitable work at Forex.


Any trader must develop a trading system of his own. I is the principal condition for the regular and stably-profitable work at Forex . Every successful trader whom I know does hold this opinion. That is, such system must clearly and impartially indicate points of the entrance into the market and the exit from it. The lack of a systematic method results in the loss of the traders deposit. The work according either to an imperfect trading system or to the traditional one does not save the situation. It can just prolong the distance from opening of the trading account to the inevitable loss and nullifying of this account. Let us again dwell on T. DeMarques viewpoint (he is the analyst, financial consulter and adviser to the biggest marketmaker banks at Forex ). According to his opinion, there are three different approaches to giving analysis to the charts. The first one is superficial and subjective. Mainly it is based on intuition. To put it briefly, this approach is a common guessing. In this case, neither a strict analysis nor grounding is required. This is why the majority of traders restrict themselves to working at this elementary level. For pity, such traders sacrifice logic and consistency to the simplicity and convenience. As regards the second approach, it implies the development of certain market indicators. The latter help detecting the condition of overbought/oversold at the market. Many traders make use of the analysis of this type at least, partially. However, as a rule, traders use just the most well-known indicators and stick to the generally-accepted means of their interpreting. In other words, the total lack of a creative approach is evident. Such traders do not try either to develop indicators of their own or to improve the ones already available. Besides, dealing with these indicators, such traders relay on them too much. They do not pay attention to their drawbacks. The third approach is the most effective and valuable. It consists in the development of the systems capable of generating signals for by and sell. However, not every analyst has reached the necessary degree of education. Many of analysts are rather inexperienced and they do not want to continuously perfect their skill. After mastering this system to perfection, you will become independent of numerous advisers. You will know the newest achievements in the area of the technical analysis. Thus, you will be capable of being totally responsible for actions and solutions of your own. Searching for a trading system I wonder how many trading systems (TS) one can find at Forex sites! As a friend of mine joked, the number of so-called profitable TS had exceeded the number of successful traders for a long time in advance. This situation is perfectly clear to any skillful trader. However, how a beginner (a novice) can resist such a powerful (intensive) flow of advertisings of miraculous TS and wonderful Grails? However, the process of coming into existence of such TS and their advertising is purely logical and natural. You can compare the information obtainable via Internet with the potentialities inherent in PC technologies that continuously increase. That is, any programmer, incompetent even in the fundamentals of Forex , can take the list of all indicators, available in Internet. Such an individual can create the database of his own, issuing from several hundreds of indicators. He develops a mechanical TS (MTS) on the basis of an arbitrary combination of two or three indicators. After this the author claims that due to points of their intersection the program will depict the points of output from the market and input into it. What do we get finally? - Just millions of wonderful black chests! Let us put on trial these black chests. Our aim is to trace out how this programmer has managed to earn larger-than-life sums of money at Forex due to his MTS. For this purpose, we use large-scale time charts and volatile currency pairs. With the help of PC, we pick out those MTS which have yielded the positive results more than in 50 (70) % of deals made during several past years. As the evidence, we can submit the account history. In Internet, this service costs $10-20 - for those who do not want to do this work by themselves (or cannot). Now let us compare this account history with the given MTS testing history during several past years. Can you imagine the number of individuals who would be eager to buy such a MTS from you? In addition, how many nave investors will want to invest their money into your business? Any way, the risk of your exposure is equal almost to zero. Now let us scrutinize the situation. a). For buyers of MTS: It is almost impossible to dispute the fact of testing MTS with the help of the transaction history during several years. Therefore, such a proof, in practice, cannot be contested. And what is more, the author of MTS can improve its parameters. He can adjust them to the best results in the course of the transaction history. Such authors do not care how their systems will work in future.

b). For investors: Your dealer can come to an agreement with your investor that the loss would not exceed 25-30% of the investment deposit. Naturally, this item of the agreement will be observed. The author of MTS and the dealer can divide this 25-30% of the lost money between themselves. To the investor, they can explain that the market is unpredictable and we, being decent people, have let you know about this fact in advance. And now you do imagine the profits, potentially obtainable due to dozens and hundreds of such MTS. Their parameters can be adjusted to the history of transactions at Forex . Besides, such MTS can be sold by various physical and juridical persons if you work together with an unscrupulous Forex Brokers. This very idea is expressed by other traders. For instance, D. Cyplakov , the author of digital indicators ( Finware Technologies LTD), states the following. One must keep in mind that such systems are rather precisely adjusted to the bygone situations at the market (curve fitting). At present, it is impossible to prove their reliability at the real market, directed at future. The reliability of the results obtained with black chests makes another problem. A trader who works with a given TS must be really confident in his system technique. This confidence permits maintaining the trade discipline for a long time. Surely, it is difficult to follow the instructions prescribed by a program if its logic is obscure - especially, when the fortune has turned away from you. At what stage in the traders work at Forex the study of the corresponding literature is harmful to the development of ones own trading system I can tell a paradox. Reading dozens of thousands of traders letters, I can clearly trace out the same tendency. It is wellknown to me because of my own experience. After first failures in working with real accounts, the trader starts with zeal to read books about Forex , one by one. He tries to find out the reasons of his losses. The more this trader reads, the more he becomes perplexed. Such an individual becomes muddleheaded. I hope that the reasons of this are clear to the readers. a) There are a lot of various techniques (TS) of work at Forex . b) The majority of these TS have become out of date even at the time of the writing. For instance, this has happened to Trading chaos 2 by B. Williams. Other editions are reliable just partly. Otherwise, the authors just retell truisms concerning divergence, the classical reversal figures and the trend prolongation. c) There exists neither a general technique nor TS that could logically synthesize a large number of indicators into a single whole. Thus, a beginner (a novice) at Forex tries to choose data for his TS, systematize and aggregate them. However, thousands of analysts did not succeed in doing this earlier. You can guess what will remain in the mind of a trader-beginner after the reading of dozens of books (especially, as the majority of them are written by traders-losers (the so-called analysts))! Surely, it will be just a mess of bits of information! After the very first failures, a beginner should do the following: 1). to refuse from the work with real accounts; 2). to give analysis to the reasons of the failures. Let us suppose that you do relay on your TS and you can trace out the logic of the currency movement up to 1 point as many traders who graduated from Masterforex Trading Academy can do. The incessant study of quotations given by the Main Computer at Forex indicates that you work not against other traders but against Computer Organizer of this game at Forex . In this case, you should search for the reasons of your failures in the realm of the traders psychology. (In detail, see http://forum.masterforex-v.org/viewforum.php?f=37 ). Maybe you cannot clearly see the logic of the currency quotations at Forex . In this case, the psychological complications will be postponed till future. At present you must develop profitable TS of your own. It is no use for you to read books one after another. First, you must thoroughly master one of all TS. The aim is to perfectly understand this system and practice it for second nature. One must start with the demo account. Later on it will be possible to proceed to real accounts at Forex . After this, you will see any literature from completely another viewpoint. New information will be ranged seriatim instead of the previous muddleheaded state of mind.

Fundamentals of developing a profitable Masterforex -V TS. First of all, let us develop the concepts, to which TS must correspond from the viewpoint of a working trader. This system must meet the following demands: It must be perfectly logical and clear to a trader. It must contain various simple elements. Points of their intersections must indicate the points of input into the market and output from it. The system must be equally efficient in any time intervals to start from minutes and up to weekly charts. The difference consists in gained profits and the duration of opened positions at Forex . The system must be applicable to any of currency pairs, the quotations of which are given at Forex . To a trader, the system must indicate correlation between the tactic and strategy. Generally speaking, the strategy in a shorter chart corresponds to the tactic in a longer one. For instance, by the strategy in the chart M1 one can trace out the

tactic in M5. Analogously, the strategy in M5 (10) depicts the tactic in M15 (30) and so on up to weekly and monthly charts. Developing ones own TS for the successful trade at Forex .

1. You should not invent a bicycle anew. As the basis, you take a TS developed by an expert at Forex . You must study this system up to perfection. You must clearly distinct the weak points of this system from the strong ones. Briefly to say, you must reach the level of the automatic opening and closing deals according to this system. 2. Criteria of the traders skill at Forex : there are at least 3 degrees (levels) of knowledge. A trader needs accessible means for demonstrating his viewpoint at the situations at the market. These means are books, sites, etc. There he can present his logic of the analysis of the market and a part of his techniques (TS elements). Any individual can study and use them. A paid educational system is necessary as well. It makes the logical development of the first degree (level) of the skill and knowledge. In practice, every experienced and well-known in Internet trader is the author of a paid system of studying Forex (e.g., A. Elder, B. Williams, L. Williams, etc.). There is the third degree (level) of skill and knowledge. Naturally, any author never completely reveals his secrets and tricks (the reasons are evident). The criterion of achieving this level is the traders ability to explain any change in the movement of any currency pair from the viewpoint of the traders own TS. 3. After mastering TS developed by any of Masters, you must feel it as your own. Your work with demo accounts must be perfected to automatism. You must also work through all variants of input into the trading and output from it. For this, it is necessary to exploit your TS up to the limit. That is, during one trading session you must arrange dozens of deals with different currency pairs simultaneously. After mastering the work according to a given technique up to perfection, a trader can clearly detect the following: - The out-of-the market flat; - The intra-session trend; its evolution in immediate several hours and the currency corresponding positions; - The intra-session flat correction; - A new wave over the trend; possible variants of the currency pair movement; - The trade reversal. Accommodation of your TS to your personality. That is, someone is satisfied to regularly gain 20-30 points per a day working with one currency pair. This person does not arrange long-term deals. On the contrary, someone prefers to work with a weekly trend, etc. Self-perfection and analyzing of your work according to your TS every day after the end of trading.

- You must see how many items of profit you have earned. - You must understand when you have opened the deal correctly, where you were late, and when you were afraid of adding a deal in the intra-session trend, etc (the analysis of your work on closing the deals is analogous). - You must estimate your work during the given intra-day trading session by yourself. That is, if you have gained 50%profit during the trading session, your mark is 5. If the gained profit makes 40%, the mark is 4 and so on. Dwelling on elements of Masterforex Trading System I have discovered the following: More than two dozens of new elements of the analysis are found out. They can help us to predict the tendency in currency pair movement at Forex . This discovery is principally new. It has no analogies in the literature concerning TS at Masterforex -V. A different approach to the essence of the moving average combination. That is, not figures themselves are important but the principles of their movement. New Fibonacci levels and technique of their application. The stock reserve of the currency pair movement in the trading session. The difference between true and false breaking through the levels of support and resistance. The new classification of trends. The intra-session and weekly trends are the most important for the traders work Criteria of the beginning of intra-session and weekly trends. The principles of a false attack (lunge) of the trend and its intensity (potential). Trends and flats in the currency pair movement; the traders tactic in each of these cases. Criteria of the trend end and beginning of the correction. Criteria of the trend reversal and replacement. Specificities in the currency pair movement in the cases of the coincidence of intra-session and weekly trends and discrepancy between them. Specificities in the movement of EURO/USD and GBP/USD pairs in the cases of coincidence of their group movement and discrepancy between them. Currencies-allies as indicators for work with 2 or 3 currency pairs (I work with GBP/USD, EURO/USD and, additionally, with USD/SWISSI). Specificities in the work with currency pairs after the issue of news. The correlation between the edited news statistics and the trend characteristic. The development of a simple and reliable indicator of the noise (rumors) at the market. This index helps us to explain the movement of any currency pair up to 1 point. The methods of replacement of stop-losses with the lock and techniques of termination of each deal. The method of study (scanning) of TS developed by other traders. The principally new methods in solving the traders psychological problems (the fear, diffidence, etc.). Compatibility of elements of my TS with any other TS (3 shields developed by Elder, sloping (slanted) channels

elaborated by DeMarque , Fibonacci standard levels, etc.). As the result, each element of any of world-known TS gives prompts to a trader and supplements TS in the real trading. The system of educating and training of traders, based on the principally different theoretical fundamentals. It includes the free-of-charge basic course in School of Trading for beginners (see http://forum.masterforex-v.org/). Besides, one can practice in Masterforex Trading Academy. A student also gets the opportunity to communicate with traders from more than 40 countries. An individual can learn the more experienced traders opinion and receive answers concerning daily trading. In addition, the communication via Internet at the closed forum (http://forum.masterforex-v.org/) is much more convenient. It positively contrasts with various other seminars and training systems. The latter require maximal costs and yield minimal opportunities of acquiring the knowledge and skill, necessary for a trader.

Chapter 8 Correlation between binary elements and fuzzy logic at Forex market and in Masterforex-V Trading System.
Forex has much in common with Fuzzy logic by Lotfi Zadeh and Fuzzy Thinking by Bart Kosko. In fact, the new branch of the science of Forex is named Fuzzy logic. The latter issues from the titles of the editions mentioned. The details one can find at http://www.fuzzy-logic.com However, it is not recommended to overestimate the significance of this approach and these articles. i.e., one must not get caught into an endless loop of it. At the same time, it is absolutely necessary to comprehend the essence of Fuzzy Logic theory. As applied to Forex , it means to see the multiple-choice character of the evolution. That is, the process depends on the starting parameters and on factors arising in the course of the development. Each of such elements is binary i.e., it is formally logical. However, the correlation between these components (factors) can yield results cardinally different. This is why often mathematicians are powerless at Forex . Specialists of this profile are used to deal with the binary systems, where the multivariate development is not implied. That is, 22=4 forever, independently of news, correlation between trends of various types, currency pairs, etc. At Forex , only the system elements (components) can be measured accurately. Otherwise, the currency pair movement would be predictable in advance for years. Such things are inadmissible especially at the controllable Forex market. That is, the very same elements in various combinations can result in various variants of the currency pair movement at Forex . For instance, even a fresh graduator from Master Forex -V Trading Academy can detect points of opening and closing of the session trend. After several weeks of the training, the graduator will be able to do this with the error just within several points for the currency pair with the volatility of 50-100 points. Within the framework of a session trend, the principles of opening and closing deals are systemized in Masterforex -V Trading System. These rules, being binary, are clearly defined and logical. They perfectly fit for gaining profit in the course of a trading session under certain conditions, known beforehand. The further prospects for trends (the session, weekly and bigger (longer) ones) depend on a combination of at least hundreds of component. The latter are also binary. Let us take into account the following factors: 1. One must calculate the ratio of the inter-week trend to trends that last from several weeks to months. One must see what the session trend represents by itself i.e., is it a wave of a bigger trend, the trend correction, a flat or the bigger trend reversal. 2. It is necessary to determine the correlation between the session- and weekly trends under the different conditions. a) One must distinguish the cases when the natural recoil does not exceed 23%; the natural recoil makes 38%; the natural recoil is 50%; the natural recoil varies within 62-76 %; the natural recoil makes more than 100%. b) It is necessary to see the correlation between ally currency pairs within the framework of the session and weekly trends. That is, one must consider the following situations that can spring up: EURO and GBP fall or rise with respect to USD together; EURO and GBP fall or rise independently one of another; EURO and GBP rise, while Australian- and New Zealand Dollars cannot break through their flats otherwise, they can starting the reversal. You see, situations can develop in totally different ways. 3. One must understand the role of the awaited news under the conditions of various combinations of the session and weekly trends. Clearly, news can be better or worth than prognostications. The reaction to the issued news can result in the flat, correction, the trend reversal or its prolongation. You should try to understand (feel in your brain and fingers) the inner interconnection between such factors. One must issuer from the following factors: a) Each of the reactions is binary i.e., it is natural. You can clearly detect the point, where the session trend starts in order to open a deal. b) The binary element combination is also important. For instance, the news is much better than the prognostication, while the market has reacted just in the form of the currency pair flat at Forex .

By giving analysis to this example, you should try to find out a sequence of such binary elements by yourself. This can help you to understand the principles (logic) of the currency pair movement. It is necessary for deciding whether to open a deal either on sell or on buy. The following factors are important: The point of the currency pair exit from the flat and the exit character. The correlation between ally currencies. The time (moment) of the breaking through the flat level. The character of the currency pair movement (flat- or trend- wise) as well as the movement of ally currencies during a session trend. The levels and sublevels as components of a finer dimension during the currency pair movement in a session trend. News issuing in every certain time interval. Points at which a session trend can be closed with the accuracy up to several points. The reversal character at the end of the session trend. In Masterforex -V Trading Academy, one can find these materials in the section Zigzag-fractal system. Estimation of the correction for the possibilities of the development of the trend, its transformation to a flat or the reversal. The role of the session trend for a bigger trend (the weekly, etc.). It must be emphasized that each of these elements is binary. The combinations of various characteristics of binary elements yield different variants of the movement of a given currency pair within the framework of Forex binary (vague) logic. For instance, there is the logic chain of the binary elements A flat; A heavy session trend; The session trend end; The correction to the trend; A new wave towards the trend. Depending on characteristics of each of the above-enumerated elements, this logical chain can stimulate the following changes: A new wave of the trend. A flat. The trend reversal. Thus, there exists a wide range of various binary components. On the basis of them a large diversity of ways of the currency pair movement is formed within the system of Forex binary (vague) logic. As an example, one can see the charts that depict the movement of GBP/USD and EURO/USD pairs on February 13-14, 2006. At the site http://forum.masterforex-v.org/viewtopic.php?t=1432 one can find an open lesson given by Masterforex -

V Trading Academy on February 13, 2006. You must study the currency pair movement charts (see http://forum.masterforex-v.org/viewforum.php?f=4). After this, you should try to trace out the trading binary logic that follows from the concept of binary elements. The aim is to understand the following aspects: a) All deals at the European session were opened upward from fractals only on sell (as regards GBP and EURO, to start from 1.7500 and 1.1908, respectively). b) The point of deal close (buy-in) was located at the lowest local peak (the margin error was just several points). c) On the contrary, all deals at the American session were opened on buy. d) There was a warning that the flat-like movement upward was to be awaited. In this connection, it was recommended to open only super short deals from the recoil because any heavy movement was not expected at the American session. Naturally, participants of Masterforex -V Trading Academy gained profits even at such a difficult (tense) day at Forex . There is another example. On February 14, 2006 (Tuesday), participants of Masterforex -V Trading Academy were holding up (making) prolonged deals on sell at the European session. In the vicinity to 1.7300, it was recommended to close those deals. However, at the American session all deals were short and on buy. Further, you should try to perform the next task by yourself. First, one must give analysis to the currency pair movement on February 13-14, 2006. After this, it is recommended to predict the currency pair movement on February 15, 2006, making use of the binary element concept. Then you can look at this movement at your point-of sale terminal, determining the following. a) What binary elements did stimulate exactly this movement? b) What an alternative was possible (at what point and under what conditions, which were binary as well)?

CHAPTER 9 Where to look for trends at Forex , or the faultless gaining of profit by a trader.
As far as Im concerned as a trader at Forex , the problem of finding a proper trend is one of the keystones in understanding of the market. On the surface of it, it is quite simple. One has just to make use of the trend definition as the currency stably-forward movement, then to open a deal concerning the trend and to gain profit. In the trend absence (a flat, lateral movement), one must not take risks and stay outside the market. Otherwise, as it is written in all the manuals of Forex , one should open deals on sell at maximums of uptrend and on buy at minimums of downtrends. It is so logical and simple, isnt it? However, the first thing that makes me wonder is the following. Authors of numerous books concerning Forex pass the problem of the trend detection clear criteria over in silence (respectively, they do not dwell on opening deals by a trader in this trend). Even B. Williams has omitted this principal problem (the author who has written about Elliotts waves, fractals, changes in the momentum direction, divergence, target zone, cushion pads, etc.). So, what is the trend by definition? What are its criteria? In what a temporal chart is it detectable? I mean that one wants to open a deal not just for fun but in order to gain profit faultlessly and regularly. As I can see, this problem is not elucidated in the literature. However, the problem of the trend detection is primary with respect to the problems of a fractal, Alligator, a wonderful indicator, etc. Thus, who does teach whom and to what? How can one gain profit? For instance, in what cases the stochastic indicator is applicable? Let us suppose that this indicator fails to function in a trend. At the same time, we do not know how to detect these trends One can clearly see the logical consequences of this situation. So, the stochastic indicator exists by itself, indicating something every second (as well as many other classical indicators at Forex do). Forex market is operating separately. Traders are on their own as well they either work or play. It is necessary to find out the keystone of the whole system in order to link all of its elements together. That is, we need a certain indicator to detect the trend. Respectively, we can distinguish a flat, the trend replacement, etc. Various indicators are applicable at different stages in the currency pair movement. Dozens of various indicators and techniques are developed by Classics and Masters of Forex . Such specialists do not see the system as a whole. All the same, they try to prove the reliability of their mathematical techniques of detecting particularities, whereas the whole pattern remains unknown. Therefore, it is worthwhile to dwell on this problem more in detail. The scheme of the examination is the same as in all chapters of this book. That is: a) elucidation of the problem in the classical literature; b) the unresolved contradictions that hamper a trader to gain profits regularly; c) my approach to this problem and, respectively, the method of gaining profits. CONCEPT DEFINITION of TREND in MANUALS of FOREX Here I do not want to dwell on the basic definitions again. What a trend represents by itself, its classical figures of reversal and continuation, the movement channels, etc. all these aspects are in detail elucidated in the corresponding literature. As a matter of fact, the beginners pay $150-500 to various Forex Brokers for this information. Any fundamental course of Forex takes for granted the following definition of a trend, formulated by Ch. Dow in the 1930s. The trend is the tendency in the price movement when each of the next maximums is higher (lower) than the previous one (the same relates to the minimums). There are the three types of trends: bull the price is going upwards;

bear - the price is going downwards; lateral - the price is moving within the trading range (channel), unable of breaking through the levels of resistance neither from upward nor from downward. Is it so easy? On the face of it, "The Trend is Your Friend ". That is, one must open deals only in accordance with the trend direction. In this way, one can receive a profit automatically - the gaining will just come to you! At the same time, why do 90% of traders keep on losing their deposits at Forex ? There are even verses dedicated to this problem. It can be translated approximately like this: A trend should me whisper how to enter and when to exit. In vain, Im visiting forum with friends. To quit it! We howl and wail. Here Im not going to discuss this work of art (as well as the quality of the translation). However, the essence of the problem is depicted perfectly. That is, any trader-loser asks the same question: What is the trend in its essence? The problem becomes obvious. Even the concept of trend is obscure. That is, nothing is clear and simple notwithstanding the information submitted in every manual for the beginners. And what is more, many traders in earnest consider that there are no long-term prospects for trends at Forex. Nobody understands the concept of trend; Some traders, rather experienced and successful, dont mind the problems of this kind i.e., they dont care for the trend concept. They are not interested in detecting trends at Forex. At Forex , the problem of the trend identification is important from the only point of view. That is, a trader wants to understand how to detect a trend and its criteria (not post factum !). An individual wants to clearly see the applicability of such criteria to any currency pair at any second. The goal is to open deals at the very beginning by making use of these criteria in order to regularly make money at Forex . As regards any trader, this problem is purely practical. To work in accordance with the trend, which is my friend, it is necessary to calculate the point of beginning of the trend and its direction. In this way we get a section (segment), where a trader can gain profits faultlessly. From this practical viewpoint we will examine classifications of trends given by various classics of Forex . We want to detect various trends (i.e., the price directed movement) according to their techniques. Our goal is to regularly gain profits when we work with these trends. TREND CLASSIFICATION by CHARLES DOW The classification submitted by Ch. Dow can shock and muddle up a contemporary trader. Really, towards what direction a deal must be opened? Must it be done either upwards, or downwards? Or, probably, it would be better just stay out of the market because of the flat. Ch. Dows theory is still not disproved by anybody. According to this theory, there are the following types of trends. 1. A long-term trend lasts several years (according to Dow, it is the basic trend). Can you imagine what a currency pair it must be to make you to stay in this deal during such a period? 2. A medium-term trend lasts several months (the intermediate tendency). According to Dow, the direction of this trend is opposite to the long-term basic trend. In its essence, the intermediate trend is corrective (it depicts retracement ). Below one can see the charts of the two principal currency pairs movement. The medium-term trend of the duration of several months is depicted. However, the long-term (basic!) trend of the duration of several years is absent. 3. The short-term trend lasts not longer than three weeks. It consists of short-term oscillations in the framework of the intermediate tendency. 4. The comment . According to Dow, the intra-day trade is just small ripples, and not much attention should be paid to it. Nevertheless, the fact of its existence must be mentioned. There arise the questions: a). How many traders do work in the long-term trend of the duration of several years? Personally I do not know anybody. How is it possible to keep the deal open during such a long time interval? Above all, towards what direction this deal must be carried on? See the charts D1 that depict the movement of EURO/USD and GBP/USD pairs.

b). How many traders do work in the medium-term trend and hold up deals opened during several months and longer? And what is more, traders must risk! Really, according to Dows theory, the medium-term trend, being corrective to the basic one, goes in the opposite direction. Personally I know a few of such traders. c). How many traders do work in the short-term trend? According to Dow, such trends last not longer than three weeks, being just short-term oscillations in the framework of the intermediate tendency. A few of traders work with short-term trends as well. d). Nowadays the majority of traders work with intra-day trends. 100 years ago such trends were regarded as absurdity and nonsense. Ch. Dow considered such trends to be just small ripples, not worthwhile of ones attention. Thus, there at least three types of trends (the bull, bear and flat). This figure must be multiplied by their four varieties that differ in the duration. You can see how many variations are possible! In addition, in what direction and for what time interval must a trader open his deal? You can imagine what an extended front of operations analysts of Forex have! You can find the technical analysis given by JPMorgan Securities Ltd. London to USD/SWISSI movement on September 27. The medium-term trend is of the bear type; during the short-term trend the upward retracement occurs. The long-term trend is ascending (the uptrend). Issuing from the recommendations given by JPMorgan Securities Ltd and FXEUROCLUB , who can tell me towards what direction a deal must be opened? (Is it the uptrend or downtrend?). In any case, post factum such analysts can explain anything. They had warned you. Why were you guided by the medium-term trend under the condition of the short-term retracement ? Why did not you pay attention to the long-term trend? Are you an investor who disregards the short-term downtrend when the medium-term trend is directed towards the opposite direction, while the lateral trend lasts already for two years? These are the reasons for your losses. As it is evident, the number of such answers to traders is unlimited. The FIRST CLASSIFICATION of TRENDS according to E. NAIMAN Let us examine how another up-to-date classic of Forex presents the trend classification (see The traders small encyclopedia by E. Naiman ): - the long-term trend, the period of which makes two years or longer; - the prevailing (dominant) trend; its period is one year; - the primary cycle (or medium-term trend); its period is within 9 -26 weeks; - the trade cycle of the duration of 4 weeks; - the semi-prime cycle; its period is in the middle of the duration of the primary and trade cycles; - the a / b cycle of the duration of 2 weeks. Another important aspect of the formation of the cycles and giving analysis to them must be mentioned. It is the right- and left translations. The right translation consists in the following. In the first phase of the cycle (the uptrend) the impulsive lines are tilted to the right with respect to the time like axis. The left translation occurs in the second phase of the cycle (the downtrend) when the impulsive lines are tilted to the left with respect to the time like axis. As regards the application of the right and left translations, the following fact is the most interesting. In the bull trend the rise is slower than the decrease (the retracement ). In the bear trend the rise (the retracement ) is quicker than the decrease. If you notice such dynamics in prices, you can classify the trend type and predict the reversal more accurately. The classical theory of cycles marks out the following 5 phases (stages) in the cycle development: - the preliminary phase (the introduction); - the rise (development);

- the maturity; - saturation; - decrease and recoil. Can you understand this classification? Personally I cannot. Besides, I think that the trend up-to-date classification by E. Naiman (2003) is even more perplexed than the classification by Ch. Dow (1930s). In addition, in another part of his book E. Naiman submits one more classification of trends. The SECOND CLASSIFICATION of TRENDS according to E. NAIMAN The duration (life time) of the trend and its life cycle. As regards their duration, trends can be the following: a) the short-term trend; b) the medium-term trend; c) the long-term trend. All trends differ in their life time. The analysis may be given to various intervals in the course of the trend life time. On average, the long-term trend lasts 2-2.5 years. The medium-term trend lasts from 3-6 months and up to a year. The short-term trend can last from 1 day to 3 months. The trend life time can be determined by giving analysis to the trend life cycle (TLC). It is very important to correctly determine the cycle duration. How to discern TLC a). the beginning (the birth, childhood and youth); b). the middle of the term (the maturity); c). the end (the old age and death). Even you may have no time to detect the trend beginning. However, it does not matter so much. More importantly is to get at least into the middle of the trend. The trend center is much more profitable than the first stage because of the speculative warming-up. You must be especially careful when the trend is dieing. You risk having no time to gain profit. Even worse, you can suffer heavy losses (take a bath) if you will be enable to react to the trend reversal. The THIRD CLASSIFICATION of TRENDS according to E. NAIMAN Bell curve model This model of the price dynamics is applied by financial and technical analysts of Forex already the last 30 years. This cyclic model is based on the study of the three fundamental types of the market dynamics: a) the long -term trend; b) the medium-term trend; c) the short -term trend. According to this model, the long-term trend lasts 4-4.5 years. The cycle bull stage lasts 281 months. The bear stage lasts 151 months. To understand whether a given trend is a long-term one, it is recommended to make use of monthly

charts. Long-term trends are mainly used by those investors who carry out real investments. The medium-term trend duration (the second cyclic wave) is 201 weeks. The bull stage lasts 121 weeks. The bear stage lasts 81 weeks. Generally speaking, one can see the medium-term trend twice a year. Its bull stage coincides with the bull stage of the long-term trend 3-4 times during the total cycle. The bear stages of these trends coincide 1-3 times. The majority of traders prefer to make deals exactly in periods of the unidirectional dynamics of development of these trends. To detect medium-term trends, it is advisable to examine weekly charts. The results of giving analysis to medium-term cycles are valuable for those traders who possess substantial investment resources to hold on the positions open during rather long time intervals. The short-term trend is the third wave of the cycle in question. The total short-term trend lasts 391 days (as it is considered, there are 240 trade (marketing) days in the calendar year (CY)). In one CY there can be 5-7 short-term trends. To detect them, it is advisable to examine daily charts. Both traders and short-term speculators analyze short-term trends for their work. The best positions for making the corresponding deals belong to interval where the price movement direction in the medium-term trend coincides with that of in the short-term one. Thus, the long-term trend lasts 4 years and 1 month. The bear stage lasts 42 months, and the bull stage duration is 8 months. The long duration of the long-term trend first stage is conditioned by the protracted medium-term trend at the beginning of the complete cycle The latter makes 107 weeks, and consists of 87 bear weeks + 20 bull weeks. The medium-term trend duration varies within 7-37 weeks. In general, short-term trends rather precisely depict all principal oscillations of the price about the medium-term trends. There are 3 short-term trends, where the dynamics development direction coincides with that of the long-term trend. In the retracement (correction), one can single out two basic shortterm trends, which is in the perfect agreement with the theory. It is difficult to distinguish short-term trends from mediumterm ones because of the negligibility (minority) of the second stage in the complete cycle development. So, should a trader remain in a deal during 1 day, 3 months or 3 years in order to gain the maximum profit? The FOURTH CLASSIFICATION of TRENDS according to E. NAIMAN The trend 4th classification by E. Naiman has confused even me. Let us try to understand what types of trends exist according to it. Below we issue from Naimans recommendations for opening deals. Possible strategies of the work. The choice of one of the three techniques available depends on the period under analysis and the traders preferences. The first strategy consists in keeping the positions open during a long time interval (from a few days and up to several months). This strategy is used by large-scale investors (investors-strategists) and semi-professional speculators. It is the most effective in the trend springing up. This approach is the least profitable when trends are lateral or stagnant (sluggish). A kind of security against losses (a cushion pad of a sort) and the corresponding work at the terminal market of options are necessary. The second strategy consists in the work with medium-term trends of the duration up to several days. It is also popular mainly with semi-professional speculators. This approach combines advantages, inherent in various working strategies. On the one hand, this strategy can be long-term enough. On the other hand, it can be rather short-term. A suspension pillow of a kind (a security net) at the market of options is also desirable. The third strategy implies opening of short-time positions (their duration varies from several minutes up to some hours). This strategy is applied by speculators-professionals, who know the market well enough and already have developed a sense of it. The positive aspect of this approach is the following. Unexpected messages and changes in the price that appear at the moment when you were out of the market do not affect your trading. At the same time, indirect expenses are rather heavy (the commission, spread, communication services, etc.). Besides, there are great risks of unfavorable short-term oscillations of the price. That is, a trader must be continuously concentrated. The whole day long such an individual works under the condition of self-control and stress. CONCLUSIONS MADE by NAIMAN about HIS CLASSIFICATION of TRENDS As it is mentioned above, Naiman writes that, as regards the trend types, there are no strict rules, established once and forever. Anybodys opinion about an object under analysis can be too subjective. Therefore, it cannot be taken for granted and must be thoroughly checked by a trader himself. In the theory of cycles it is important now and then to look anew at the regularities discovered by you earlier. The so-called the rule of mirror is one of the best means of avoiding subjectivism. That is, logic of the development of any cycle must be confirmed not only directly. The inverse pattern, as if reflected in the mirror, must also prove the correctness of your model. For this purpose, you should reverse a sheet where the cycles are plotted. The cycles must be seen all the same

(this can be done with the help of a mirror). The principal problem of all cyclic theories is the following. It is easy to see a certain pattern in the past, while at present it is rather dubious. As regards the future development, in practice, it is totally uncertain and unpredictable. You try to set up hypotheses of your own. If the market confirms them, you can use such hypotheses as the foundation of your practical work - otherwise, you are not obliged to apply the incorrect theory. Briefly speaking, the essence of Naimans approach can be depicted in the following dialogue: - Where is the trend? Where must one open and close a deal to gain profit at Forex ? - I do not know... But I submit the trend classification - Can one work faultlessly according to this classification? - No, it is impossible. You must decide by yourself or take a sheet of paper. I beg your pardon for dwelling so much on Naimans approach to the trend classification. This is done on purpose. Really, Naiman has correctly depicted various aspects of the existence of different trends at Forex . He has demonstrated that as a trader can gain profit with these trends. However, the trend classification is so unsystematic. No correlation between different trends is traced out clearly. As a result, even an experienced trader can be perplexed by the four sorts of trends described by Naiman . General conclusion The traditional approach is of no use to traders. It is suitable only for analysts, who try to scientifically explain the reasons of traders losses at Forex post factum . I hope that now it is evident why Dows classification of trends is still acknowledged and approved almost by all analysts at Forex . In practice, they do not want to change anything in this classification. In addition, each of such analysts has his own vision of these sorts of trends, which introduces an additional confusion (mishmash). TREND CLASSIFICATION according MASTERFOREX-V Let us begin with a platitude. The theory is viable only if it depicts the reality correctly, helps to understand it better and predicts its further development. Often practice leaves a theory behind. In this case, turning into dogma, the theory hampers the development of practice. As the result of this in the case of Forex , traders will inevitably make mistakes consequently, they will lose real money (above it is demonstrated by the examples of Dows and Naimans trend classifications). At Masterforex -V, the trend classification is the following: 1. the intra-session trend; 2. the weekly trend; 3. the trend that lasts several weeks/months That is, I try to classify trend from the viewpoint of a working trader. I use this very classification by myself, and it does help me in the practical work at Forex . The correlation between the three kinds of trends is clear. One can trace it out at the very beginning of the intra-session movement of ally currency pairs in contrast to the majority of systems developed by analysts, where this correlation becomes understandable only post factum . For instance, two kinds of trends (the intra-session and the weekly ones) coincide at the beginning of the trading session. In this case, it is a wave of the general trend. This wave can be detected even by a beginner at Forex to say nothing about more experienced traders. If the trends do not coincide, there occurs retracement (correction) of one kind of trends with respect to the others. A trader can see the area of this movement, clearly distinguishing tactic from strategy of his currency pair movement. This is the only way to detect a trend of the duration of several weeks/months. Respectively, from the very beginning the trader can see towards what direction it will be worthwhile to open a deal - but not post factum when the movement is

already dieing out. For instance, in for GBP/USD and EUR/USD pairs (see below) the segments of this trend are clearly observable. a). April 18 July 20, 2005; b). July 20 September 5, 2005; c). September 5 November 28, 2005; d). November 28, 2005 The corresponding charts clearly indicate what a trader had had to do on any of those days. At the same time, one is interested in gaining profit but not just in acquiring materials for the analysis. The work with the intra-session trend permits us to understand the situation at Forex at a given moment (the intra-session trend, the retracement , reversal or the weekly/monthly trend continuance). Naturally, it serves for gaining profit. The trend of the 1st type is an integral part of a longer trend, its continuance or retracement . Thus, the principal difference of this classification from other ones consists in the following. The 1st and 2nd positions are introduced as new. The long-term trend lasts several weeks/months. The next (4th) position can be examined as well. However, being a trader but not an investor, Im not interested in taking it into account in my practical work at Forex . The intra-session trend at Forex : proofs of its existence and practical application . The proof #1 . At present the trend classification is of a somewhat dogmatic character. Therefore, let us dwell on practical problems i.e., the methods of up-to-date traders work and time intervals during which deals are being kept open. Understanding of these practical aspects will facilitate us the understanding the theoretical problem of the trend classification. At the traders forum a poll is being carried out. It is dedicated to the present-day techniques of traders work at Forex . All interested individuals can take part in this forum. One can register oneself as a participant just in several minutes The question is formulated in the following way: On average, for how long do you keep the position open at Forex ? a). the intra-session trading during 1 day; b). several days (up to a weeks); c). from a week till a month; d). from a month and longer. As it turned out, the overwhelming majority of traders work exactly during the intra-day trading session (more than 80%). Just a few traders keep their orders open from a week till a month. The results could shock all those theorists who still consider the intra-day trading to be just a trading noise. The proof #2 . Let us compare the charts of GBP/USD and EUR/USD movement with the currency pair spread extent.

Chart 11.1. GBP/USD movment

The chart11. 2. EUR/USD movement


Working with these currency pairs, I always suppose that per session the stock reserves (the stability factors) of GBP/USD and EUR/USD pairs make ~70 and 40 points, respectively. There arises the question: why should not a trader work within the intra-day trading session? Really, the spread makes 2-4 points, while the currency pair stock reserve (the stability factor) more than 15 times exceeds the spread? Im wondering do such up-to-date authors-analysts at least sometimes open the point-of-sale terminal when they talk about the market noise. Why do they vigorously talk traders out of working within the intra-day trading session? Naturally, here the up-to-date authors are implied but not those who lived decades ago.

The proof #3. Let us examine intra-session tends from the viewpoint of the criteria of the trend itself. a). According to Ch. Dow, the trend is defined as the price directed movement when each of the next maximums is higher/lower than the previous one. Analogously, each of the next minimums is higher/lower than the previous one. From this very viewpoint, let us examine the charts M15 of GBP/USD movement in the Asian, European and American trading sessions on December 12, 2005. We can clearly see that each of upward fractals is higher than the previous one. Respectively, each of downward fractals is lower than the previous one. Thus, there are precise criteria of the trend type in each of trading sessions.

Chart 11.3. GBP/USD movement

Chart 11.4. GBP/USD movement.

Chart 11.5.GBP/USD movement


b). When the trend is over, there starts the natural retracement (correction) towards the direction opposite to the trend movement. The correction is equal to various Fibonacci levels. It is clearly depicted in the given intra-session trend charts. The proof #4. If during the intra-day trading session the currency pair movement is heavy, then in the end of this trend the natural retracement occurs. It makes at least 23-38% in accordance with Fibonacci levels. That is, the retracement is inevitable and it substantially exceeds the spread in magnitude. Consequently, why should a trader keep on holding the position open further? Is it because some analysts somewhere and some time denied the intra-session trend existence? Evidently, only unqualified theorists, talking about the market noise, can recommend issuing from charts D4 to traders in their work. The proof #5 . You should carefully study where traders of one of the first-rate informational agencies (Dow-Jones agency) place their orders for the buy and sell of currencies. EURO: orders for buying are at 1.1950/60 (options), 1.1935 and 1.1890; orders for selling are at 1.2000. YEN: orders for buying are at 116.30/40; orders for selling are at 116.75 (options) and 117.00 (options). STERLING : orders for buying are at 1.7660; orders for selling are at 1.7700. The difference in 40-60 points testifies that these orders are intended for the intra-day trading session. The proof #6 . Let us examine the levels of support and resistance, edited by world-leading banks market-makers. One can see the analogous recommendations i.e., to work within the trading session (or a day). According to Deutsche Bank, EURO remains in the neutral corridor. Today a good resistance is registered in vicinity to 1.2255. The breakout of it will tempt the bulls to concentrate on the level 1.2395. The support level is located at 1.2125/35, the next value being only at 1.1980. The last support level is the critical one. As another example, let us consider the trading strategy by Saxo Bank on December 9, 2005: EUR/USD - (1.1782) Long 1.1765, SL 1.1690, target 1.1905; GBP/USD - (1.7489). Off-floor USD/JPY - (120.69) Short 120.80, SL 121.50, target 118.40; USD/CHF - (1.3041) Short 1.3030, SL 1.3095, target 1.2870. As one can see, both Deutsche Bank and Saxo Bank place their orders within the intra-day trading. There arises the logical question. In the cases of the breakout of the levels of resistance or support, why should not a trader open his order and enter the market? The only reason is that some theorists, pretending to be classics, refer to this

movement as to the market noise. Probably, such analysts must come down to earth and revise their views on Forex after examining the work of real traders. The proof #7. Let us dwell on the results of real traders work; the profit gained within an intra-day trading session. In http://forum.masterforex-v.su, one can find examples how traders from Masterforex-V Trading Academy work at Forex . There is no doubt that the commercial account balance is the principal criterion of the traders success at Forex . If the positive balance (up to several hundreds of percents per month) is the result of the intra-trading session, it serves as absolute proof that the stable movement of currency pairs does exist within the intra-day session. Skillful traders who have mastered the technique of intra-day trading gain profits by this method. Conclusion. There is a manifest discrepancy between the theory and practice. As it is evident, the overwhelming majority of traders work in intra-day sessions. The Maintenance Staff (banks, Forex Brokers, leading informational agencies) works in the same regime. In fact, the up-to-date market of Forex is formed by such organizations and individuals (the chain trader Forex Brokers informational agency). At the same time, there are analysts who, not dealing with any link of Forex , claim that intra-session/day trends do not exist. Such theoretical conclusions have turned into dogmatic statements long time ago! The proof #8. However, it must be mentioned that a series of theorists have already acknowledged the intra-day work existence (so to speak, they validate it). For instance, E. Naiman has recognized that the short-term trend can last from a day till several months (see above). The proof #9. Practice is the criterion of correctness of any theory and technique. Analysts of the old traditional school of Forex ignore the intra-session/week trend (or even deny its existence). Confusing real traders, this viewpoint causes irreparable damage to the real trade at Forex . As an example, let us examine the situation on December 12, 2005 (the charts D1).

The chart 11.6. Movement of GBP/USD pair.

The chart11.7. Movement of EUR/USD pair.


The graph clearly indicates that on December 12, 2005 B. Williamss Alligator had not reversed upwards yet (the reversal appeared after the heavy movement on that date). However, on December 12, 2005 there had been the lateral trend (flat) of USD with respect to EURO and GBP. The flat had started on November 28, 2005 and lasted several weeks. About two weeks earlier (December 5-9, 2005) there had been USD bear lateral trend (flat) of a weeks duration. The day after December 12, 2005 I received a letter from a skillful trader. He informed me about his enormous losses induced by the currency pair reversal (stop losses worked). Besides, about a dozen of his colleagues were taken in the same trap (captured by the same trick) notwithstanding the fact that their experience of work at Forex varied from 2 to 8 years. At the end of his letter my colleague wrote that the losses were inevitable because of the absence of any signs of the reversal at all. In its essence, such viewpoint is typical of traders who belong to the old traditional school. This approach logically results in the loss of their deposits by more than 90% of traders. When this happens, the theoristsdogmatists just can say that the market is unpredictable. However, Forex is perfectly predictable and logical. To confirm this, I want to quote extracts from the closed forum of Masterforex Trading Academy on December 12, 2005 during the on-line trade. - Vert : Lets wait and see. In the case of the upward breakout, well buy. In the case of the downward breakout, well sell. Otherwise, well do nothing. - F. and M.:The movement is started, the levels are broken. I have been right to buy. Now it is important to get out correctly. Good lack to everybody! - I:I have gained some profitI want more but Im afraid of opening in the middle of the channel. As regards EURO and GBP, likely, it would be possible to open at the breakout of Fibonacci 61.8% from D1. Maybe, professionals have done this way. It must be taken into account. - b: Not bad! I pocketed 45 points! If I were not afraid of entering as I had written, I would got at least 75 points. Thats all right we are still learning. Long live Profit! - I: First time I have successfully closed the deal according to MasterForex technique. In reserve I have 90 points in GBP and 50 points in EURO. Now I go out, its enough. - S: The trading is successful. Now the retracement is =15.24 ( Kiev time). So, Americans, you come! Masterforex estimated the movement in the European session as classical. Nobody lost! However, issuing from the traders questions, it would be worthwhile to attract your attention to certain details.

In that session the levels function perfectly. The reason is that all conditions for playing the trick on the majority of traders have been prepared. First of all, in England has happened the technogeneous catastrophe the greatest one to start from the World War II. You guess towards what direction the majority of traders orders would be opened in accordance with the fundamental analysis canons. That is, when I keep on writing that you must try to open your deals against the flock, it means against the canons. However, one can combine different techniques of the analysis in the presence of the necessary prerequisites. More in detail this subject is elucidated in the paid enclosures. Ibidem one can find specificities of trading at the American session, analyzed by the corresponding examples. Dwelling on problems of logic and intuition . A series of examples of opening and closing various deals and the corresponding reasoning are in detail examined in the paid enclosures. To the beginners I recommend to work according to the standards. It is better to take less but for certain. Those who are confident in themselves can try the technique of getting into the lock. It is just impossible to lose working by this technique (in detail see the paid encloses). That is, an individual of a certain experience can break rules, clearly being aware of the risk taken deliberately. Respectively, one must realize when (to start from what point) it is necessary to acknowledge the made mistake and to get into lock. After this one must add positions in the opposite direction. I hope the idea of breaking the readers own rules is not too perplexing - in case of the possibility of gaining profit more than 70 points, whereas the lock is half the value. Traders write to me, tell about their experience and ask for advises. Of course, here I cannot go into details of the analysis given to the trend intra-session motion because it is the authors techniques. However, the principal point is evident. Every participant in Masterforex Trading Academy is horrified when the price is starting to approach his stop-loss against all rules of the traditional Forex . To prove that the above-described situation was not accidental, I cite on-line posts on December 13, 2005 (it was the day that followed the issue of news about the rise in the interest rate; at first this information caused the fall in USD rate; further USD started to slowly rise again). - A: Today the scheduled meeting of FOMC of USA Federal redundant system (FRS) took place. The level of basic interest rates was discussed. As the majority of economists had expected, Federal fund rate increased by 0.25% - up to the level 4.25% (December 13, 2005; 19:14 GMT). So many traders were entrapped! - Ser and Br: It is nonsense! USD rate must increase together with Federal fund rate rise! - B: What a trick FRS played by removing the word soft from the announcement (statement)! - And:The scheduled meeting of FOMC has heightened the rate. Again the consortium has demonstrated that traders must not believe the base. What is about the flat? Personally I had time to take 34 pips upward with GBP. - Several other traders: The best thing is to close the deal. It is just the beginning! A and B: The direct the rise in the interest rate is already taken into account in the price. However, not the rise itself is important (it was expected for sure by everybody) but the comments about the rate policy in future. In what way are the interest rates taken into account in the price? If it was done yesterday, it was a kind of fun i.e., USD in advance had fallen down by 200 pips with respect to EURO and GBP. If it was starting to be done last week, then up today USD has fallen down by ~500 pips with respect to GBP. Consequently, the base must be considered to be a heavy movement. However, its direction is not prognosticated. Otherwise, why did Masterforex write about such situations? I hope that changes in the traders approach are evident. Instead of intricate dogmatic theories, traders clearly see what is going on at the market. They can take into account many factors simultaneously. They understand the notion of trend anew as a stable movement, in the course of which one must gain profit. What is important, many participants of the closed forum at Masterforex Trading Academy are the beginners. Their

experience at Forex is just about several months. One should compare their posts with those of competent analysts in the same situation! Below well dwell on Forex Brokers Alparis review of the European session on December 12, 2005. According to this Forex Brokers, in the European session USD was continuing its fall down to 90.76. Our prognosis for USD index, presented in the reviews, still is realizing with the regular reflection. We dont know what can be done with such inversion. According to a dealer, traders are not inclined to make transactions with USD before FRS meeting on the subject of interest rates. Therefore they work with other currencies. Comments d) With what a dealer an analyst from Alpari could communicate in the heat of the trading? The text testifies that this dealer was at the working place at that time and he saw the number of deals opened on each of currency pairs. e) Since when dealers are allowed to communicate with clients-traders and give interviews about prospects for currency movements, especially during the trading? Or the analyst does not know these rules? f) How it can be that traders are not inclined to make transactions with USD before FRS meeting if during the daily session USD fell almost by 200 points with respect to GBP and EURO? g) What is the source of such deep knowledge that a unanimous dealer possesses? Such an educated individual can find a work much better than to be a dealer. Let us return to Forex Brokers Alpari again. The specialists examined the American session review, edited only the next morning. Alpari was very surprised that the market was reversed only because of mere surmises, the results of FOMS not being awaited. According analysts from this Forex Brokers, important technical levels can be passed through only on the basis of verified information, presented by reliable sources. Further these analysts dwell on the Asian session review (December 13, 2005). Because of the losses, they went out of trading for long. I think it is enough to give such examples of Forex Brokers Alpari technique and its results the picture is completed. At Forex Brokers Alpari cite and forum it is forbidden even to mention the word Masterforex already from several months ago. I was personally obliged to apologize to 40 traders for this banning from entering Alpari forum (for some individuals this prohibition will be valid for 10 years). The only reason was that those people spoke favorably of Masterforex or just wanted to know the other traders opinion on this or that part of my techniques. We now dwell on another specificity of the trend characteristics. The intra-session trend is the means of gaining profits but not the method of classifying traders according to intra-day or not-intra-day trading. I wonder, at so many forums they try to artificially divide traders into two groups those who work during a day (intra-day) and all others. As far as Im concerned, not traders must be classified but their techniques of gaining profits. Each of such techniques is just one of facilities for gaining profit. The more of such facilities (techniques) a trader possesses, the higher are his chances of gaining profit. Really, nobody classifies carpenters in accordance with the tools they use (a plane, fret-saw, ax, hammer, hack-saw, etc.). Analogously, in any area a professional must to perfection master all facilities. A professional chooses those ones that are most suitable for given circumstances. On the contrary, analysts of Forex do not notice evident things. They keep on inventing new classifications (indicators, techniques, etc.), thus confusing traders and themselves as well. The site http://forum.masterforex-v.su contains an illustrative example of the traders attitude to this classification (the intra-day or not-intra-day traders). Traders vote for the intra-day trading as the basic means of gaining profit at Forex . They fairly mention that it does not matter for how long the position is opened either a week or several seconds. Everything depends on the situation at the market. As the market is chaotic, we cannot change it. It is unnecessary to see everything in absolute terms. This is the comprehension of the currency pair motion in its essence. Nobody knows in advance what level a currency pair can reach during its motion in the trend or in the corresponding retacement . It becomes evident only when the currency pair in its movement reaches certain levels at certain moments. The trader must know at least several points (goals), where a currency pair can stop and turn to correction. However, only a Guru can exactly predict at which points this will happen (see B. Williams).

CHAPTER 10 Specificities in the intra-day work at Forex.


As it is demonstrated in the previous chapter, there are trends of four types: the intra-session trend; the weekly trend; the trend of duration of several weeks; thetrend of duration of several months. A zigzag-like movement of any currency pair at Forex consists of various combinations of such trends. A smaller trend makes an integral component of a bigger trend (either the trend wave, or, on the contrary, the retracement (correction) of a longer trend towards the opposite direction). What any trader wants to know about Forex. An individual is interested in knowing the correlation at least between the first (and shortest) trends at the beginning of the trade but not at the end of it. That is, one wants to learn the clear and simple rules, according which it would be possible to regularly open deals quietly and work within the intra-session trend with confidence. In addition, one is interested in understanding of the correlation at least between the intra-session and weekly trends. Our aim is to gain but not to lose. One must keep cool. It is of no use to spend your nerves and health. Even if the currency has moved in the wrong direction by 15 points, it will return in a moment. Anyway, the only direction where the currency can go is that towards which you have opened the deal. The problem is just of being too late for entering the deal. As regards the given situation, the recommendations are the following: a). If there are no signs of reversal in the currency pair movement, you must open the deal once more after the recoil (rollback). b). If there are signs of the reversal (the preceding movement was the false breakout), at first you should open one deal towards the opposite direction. You get into the lock, where the quantity of damages, being fixed (stipulated), does not increase (in Masterforex Training Academy one can get a special course of training to the technique of making the lock). Further, you add deals towards the direction of the currency pair movement in the given session. First of all, you compensate your damages and then you gain profit. Under the condition of false breakouts of the levels of resistance/support, the margin of the currency pair movement is always larger than in the case of the level true breakout. That is, the trader can gain higher profits. What a trader who follows (sticks to) these rules must see: a). faultless levels of resistance and support with respect to each of ally currency pairs. (very often they are not those mentioned in sites by respectable analysts (but not traders)); b). clear criteria of the true and false breakout of these levels and the intra-session trend beginning; c). the synchronous (or nonsynchronous) character of the ally currency pair group movement; d). the time, velocity and type (manner) of the currency pair movement; e). the next level (the intermediate goal), to which the currency pair is tending; f). the reserve (margin) of the currency pair movement for the trading session; g). the point of the intra-session trend end (surely, one must know the clear criteria of the movement finish; when such signs appear, one must fix (register) ones profits); h). the point that confirms the beginning of the intra-session trend retracement; at this point one can also work with the correction against the trend at the super- short distances - in particular, you can make the lock narrower if you have got into this lock at the trading session beginning.

According to B. Williams, it is the fifth highest degree of the traders qualification. Reaching this stage, the trader is not nervous but he feels satisfaction at his work The education at Masterforex-V Trading Academys closed forum is based on the study of these simple (and therefore reliable) principles and their practical verification (see http://forum.masterforex-v.org/). The reasons why the majority of traders never reach this fifth highest degree of trading The reason consists in the classical Forex dogmas, according to which the technical analysis starts at least from daily charts. In his The Technical Analysis as a New Science, T. DeMarque writes the following. 1. The daily information is the most accessible; for dozens of years analysts work mainly with daily charts. 2. Making use of daily charts, a trader must not continuously keep an eye on the market intra-day behavior. The trader runs less risks of being trapped because of price corrections. Not at all rare in the intra-day database, such corrections make the real pest of it. 3. There is the probability of making a deal at a price, closest to the value stipulated in the order. This probability increases if the trader uses the market signals, based on the intra-day information. Here I would like to mention J. Swaggers rule #44 from his book The Technical Analysis. Complete Course. The author claims that intra-day solutions are almost always wrong. He does not recommend to be engaged in the intra-day trade. Below I submit other rules developed by this classicist of the technical analysis. 7. Looking at the chart, you should follow your instinctive impression - especially if you do not mind to what kind of the market this chart relates. Comment. What about the discipline and following the strict rules? 8. The fact that you have missed a substantial part of the new trend must not keep you away from trading within this trend as long as you can detect the reasonable point of the damage arrest. Comments. How must one understand this statement? Seemingly, the author admits uselessness (nonoperability) of his TS. a) How to detect the reversal point not only within the trading day but in longer trends as well? b) What does the notion the reasonable point of the damage arrest implies? c) What are the criteria of the trend change? d) About what kind of trend does one talk - the long-term, intermediate-term or the short-term ones? (We have dwelt on the difference between such trends in the previous chapter). e) Even a trader-beginner can give a dozen of examples of a situation like this. The stop-loss (the reasonable point of the damage arrest) was located at a peak of the short-term trend. Then the currency again rushed along the intermediateterm trend. 14. The newly-formed price models (or the market behavior) can tend towards the direction opposite to your position. In this case, you must immediately go out of any deal even if stop points are not reached yet. You should ask yourself: If I need a position at this market, what its direction must be? If the answer does not coincide with the direction of the real position that you hold, you must close it. Actually, if values of the contrary indices are rather substantial, you reverse the position. Comments. How to combine (reconcile) this thesis with the words do not be engaged in the intra-day trading? 21. Let us suppose that you cannot watch the market during a time interval (maybe you are traveling). Under these conditions, there are two outlets. First, you can liquidate all positions. Otherwise, you must make sure that active stop-

orders are placed in all open positions. No comments. If one can earn money not watching the market, what profits can gain those individuals who sit in front of their monitors during the trading? 31. Do not fix a small quick profit gained at the deals the direction of which coincides with that of the principal trends. In particular, if you are fully confident in the deal, you should not fix the profit in the first day. Comment. How to detect the principal trend? Which trend is principal (even in the framework of the old classification (the long-term, intermediate-term and short-term trends))? And what is about the stop-loss? If the deal is open towards the principal trend direction, whereas the retracement (correction) starts developing in the opposite direction. 45. It is obligatory to check markets before the closing on Friday. Often the situation becomes clearer at the end of the week. The best price of entering the deal and going out of it is obtainable on Friday. At the stock exchange opening on the next Monday the price is worse. In particular, this rule is important when you hold a substantial position. Comment. In fact, J. Swagger admits the existence of a weekly trend. We now attract the readers attention to B. Babcocks viewpoint ( see How to trade trends). This author states that for the successful trade your time scale for measuring the trend must be not shorter than 4 weeks. Therefore, you must enter the deal towards the price movement direction, which remains unaltered during 4 weeks and longer. There is a good example of the strategy based on trends. One must buy when the price of close is higher than 25 days before. One must sell when the price of close is lower than 25 days before. When you work in such a long trend, you really follow the market, not trying to predict it. Comments. Thus, it is recommended to wait during 25 days, and then put the order on the 26th day. However, towards what direction it must be done? You look at the daily charts. For the convenience of calculating various currency pairs, one candle corresponds to one day. You can estimate the logic of the well-known authors reasoning by yourself. See http://forum.masterforex-v.org/viewtopic.php?t=1086&sid=56d24db698c0ca12a9385e9b7ebadb37

Chart 12.1. USD/JPY pair movementduring 4 hours.


The descending trend came to an end exactly on the 26th day. After this the trend reversed and turned to the ascending one. There is the analogous example. On January 3, 2006, the daily and weekly trends coincided at the American session. GBP

passed more than 200 points during the session; EURO passed more than 160 points. There arise the following questions. 3. Under the condition of the coincidence of the daily trend with the weekly one and the recoil from MF zone, is the movement regular? Naturally, it is! (The methods of determining the levels of the weekly trend beginning are explained in the educational course at Masterforex Trading Academy). 4. According to classics of Forex, a trader must do the following: a). DeMarque recommends to wait at least till the end of the day; b). B. Babcock advises to start to count out 26 trading days in the current month; c). J. Swagger recommends not to be engaged in the intra-day trade. If the total trend is descending, one must stake on sell with GBP and EURO against USD and install the stop-loss at a reasonable point of the damage arrest. 3. Now let us see what advices the analysts of respectable sites gave to traders that very day. Forex Brokers Alpari made a review of the Asian session on January 3, 2006. Specialists of this center stated that the principal event of the day was to be the edition of the protocol of FOMC meeting dedicated to rates on December 13. Participants of the market were going carefully to study FOMC minute charts. The reason was the following. For the first time after a long period from the text of the final (concluding) instruction the Committee withdrew an important phrase about the stimulating character of the currency policy. In the past year the last trading day was finished with the positive sentiments towards USD. The latter still has chances to win back losses at the Asian session on Tuesday (December 13, 2005). See http://www.alpari-idc.ru/ru/analytics/review/3338.html Comments. The analysts from Alpari, are they Guru? How can one know where and by how many points the currency will go in the forthcoming session? And what is more, the estimation is made issuing from the data that are to be expected on the basis of the fundamental analysis. You can imagine how such analysts can confuse traders with the help of the fundamental analysis by suggesting who and where will regain the money in the next trading session. You can also see www.forexite.com. Here about the same day it is written the following. Dealers note that, generally speaking, currency rates still have not left the ranges established recently. The pressure on USD rate is explicable by the following fact. Under the condition of low activity some investors start to close long positions in USD rate. http://www.forexite.com/forex_news_analysis/public/03.01.2006_08-40.html Expectation of an increase in the American stock indices gives a certain support to USD rate. The investors attention is concentrated on the issue of protocol of the last meeting of Open Market Committee of USA Federal redundant system (FRS). http://www.forexite.com/forex_news_analysis/public/03.01.2006_13-25.html Comments. How should a trader open the position? Should it be done at the beginning of the session trend? Or, maybe, it is better to do this after the issue of FOMC meeting protocol. That is, the position is to be opened after the careful study of this protocol by participants of the market. As a trader to a trader, please, explain to me the following. Are such analytical reviews, edited on the eve of the trading, useful or harmful? If such reviews are detrimental to a trader, what for do Forex Brokers prepare them? Ill give no further comments upon such nonsense and dogmas written by classics of Forex and their followers analysts from various Forex Brokers. Better let us dwell on trading systems developed by up-to-date working traders at Forex. Their descriptions are available in Internet. One can find the list of such systems at http://forum.masterforex-v.org/viewforum.php?f=25. Especial attention should be paid to Scalping/pips according to TS developed by Paramon (see http://forum.masterforexv.org/viewforum.php?f=40); SSV (A little dragon and his forecasts; http://forum.masterforex-v.org/viewforum.php?f=20) and Trading signals from poor yen the daily statistics (see http://forum.masterforex-v.org/viewforum.php?f=16). As a trader, Im convinced that TS, developed by a real trader, can be much more useful to a trader-beginner in his

learning how to really gain profit. Any TS must be profoundly comprehended by a student. Its application must be brought to perfection. The trader must work according to this system almost automatically. Under these conditions, the work with such TS will be much more useful than reading of dozens and hundreds of books written by the classics of Forex (nottraders). A thoughtless observance of advices given by such respectable analysts can be disastrous. Such analysts, writing nonsense one after another, serve for interests of various Forex Brokers but not for those of traders. Ill give no further comments upon such nonsense and dogmas written by classics of Forex and their followers analysts from various Forex Brokers. Better let us dwell on trading systems developed by up-to-date working traders at Forex. Their descriptions are available in Internet. One can find the list of such systems at http://forum.masterforex-v.org/viewforum.php?f=25. Especial attention should be paid to Scalping/pips according to TS developed by Paramon (see http://forum.masterforexv.org/viewforum.php?f=40); SSV (A little dragon and his forecasts; http://forum.masterforex-v.org/viewforum.php?f=20) and Trading signals from poor yen the daily statistics (see http://forum.masterforex-v.org/viewforum.php?f=16). As a trader, Im convinced that TS, developed by a real trader, can be much more useful to a trader-beginner in his learning how to really gain profit. Any TS must be profoundly comprehended by a student. Its application must be brought to perfection. The trader must work according to this system almost automatically. Under these conditions, the work with such TS will be much more useful than reading of dozens and hundreds of books written by the classics of Forex (nottraders). A thoughtless observance of advices given by such respectable analysts can be disastrous. Such analysts, writing nonsense one after another, serve for interests of various Forex Brokers but not for those of traders.

Chapter XI SUPPORT AND RESISTANCE LEVELS IN MASTERFOREX-V


Support and resistance are the known cornerstones in forex technicals, wherein: 1. a current forex rate (CFR) is surrounded by levels of: a). resistance being superior to CFR; b). support being inferior to CFR. 2. a level breakthrough triggers a leap to a consecutive support/resistance; 3. a false breakthrough is responsible for a rate backstroke (say, from resistance to support). Thus, having data on resistance and support levels and being armed with R/S true/false criteria, a trader grows faultlessentry skilled to ensure smooth level-to-level trading. To be found below is a graphic drawing of a flat followed by an R/S up/down breakthrough.

Fig.1 In actual sample GBPUSD trade dated January, 31, 2006 the support breakthrough has triggered a bullish in-session trend. Simple, isnt it? Affirmative at a glance, but 95% of traders loosing their forex deposits are calling for natural questions: 1. Whats the reason, the world traders are getting entangled in so a seemingly simple regularity? 2. Whats the way of correct detection of R/S levels for currencies to use to jet off from? 3. What attributes are inherent to true/false breach differentiation? It is, thus, to be concluded that a trader will never achieve steady FX gains unless the answer is found to the above three simple questions.

CLASSICAL BOOKS ON RESISTANCE AND SUPPORT LEVELS Forex scholars books, when analyzed, are giving grounds why 95% of traders turn deposit-killers. The point is that under different technical scholars: a). fairly different understanding is being attached to support and resistance; b). no distinct criteria (except Demarks technique) is in service to finding a support and a resistance; c). there is no clear-cut interfacing between R/S levels on different timeframes. Below is sort of understanding classification: 1. R/S are understood by SOME SCHOLARS to be horizontal lines drawn along price highs and lows a). For A. ELDER (view: Basics of exchange trading http://forum.masterforex-v.org/viewforum.php?f=9 ): support and resistance are horizontal (or almost horizontal) lines linking several minima (maxima).

Fig.2. Support and resistance Legend<: - = GBP - < = support - < - resistance b). J. MURPHY also indicates that points 2 and 4 represent uptrend support levels. The figure depicts uprising support and resistance under an uptrend with points 2 and 4 being support levels which use to be coincident with earlier lows. Points 1 and 3 indicate resistance levels, which use to be coincident with earlier highs (see: Technical analysis of the Futures Markets http://forum.masterforex-v.org/viewforum.php?f=9 ).

Fig. 3a and 3b. Uptrend and downtrend support-resistance levels 2. SOME SCHOLARS believe support-resistance to be sloped lines drawn along price highs and lows (trendlines, actually) as below:

Fig. 4. Trendline-fahion support-resistance pattern a). T. DEMARK

Fig. 5. Bid pivot points (TD-points) building up a resistance level The TD-points are peculiar of price values being not exceeded within 2 adjacent days. The points are specially emphasized on the chart.

Note that the price movement above the TD-line is mirrored by same after the downbreak of this line. Price projection Z is made by way of the following calculation: - difference is taken between Y being maximum price above the TD-line and X being special price immediately below the TD-line; - the obtained value is subtracted from A-B line breakthrough price. b). L. BORCELINO is also a user of inclined lines as support/resistance (view: Manual of Daytrad-ing http://forum.masterforex-v.org/viewforum.php?f=9).

Fig. 6. Quoting L. Borcelino: As evident form these examples, trendlines, drawn across preceding highs and lows,

constitute perspective support and resistance projection. 3. E. NAYMANS combined commitment of inclined and horizontal R/S levels (view: Traders Minor Encyclopedia http://forum.masterforex-v.org/viewforum.php?f=9): A resistance line connects market important maximums (highs, peaks), And further on: R/S lines drawing should be preferably done through price concentration areas, rather than through highs/lows extremes (???). Per minimum price trendline (a support):

Fig. 7 Example of E. Nayman using resistance/support levels at trade station:

Fig. 8 4. MOVING AVERAGES based resistance/support levels. a). E. NAYMAN: Bollinger Bands are sort of peculiar support/resistance lines

Fig. 9 5. ROUND NUMBERS being support/resistance levels a). E. LEFEVRE (view: Memories of an Exchange Profiteer http://forum.masterforex-v.org/viewforum.php?f=9) underlined: Rates, having, for the first time, traveled 100, 200 or 300 points, are almost sure to cover additional 30 to 50 pips b). D. SCHWAGGER: One is to be especially cautious about dollar holdups. With USD781,25 best working on T-bonds and USD425 on soybeans, temptation is raising to find optimum holdup for each market. It is advantageous to establish a round number to comfortably use it all of the markets. CLASSIFICATION OF WEAK AND STRONG R/S LEVELS AS VIEWED BY FOREX SCHOLARS J. MURPHY classifies support and resistance (view Technical Analysis of Futures Markets, New York Institute of Finance Prentice Hall, 1986) proceeding from: price in-domain residence period (1); volume of trade (2) and price domain age (3). 1. The longer the price reciprocation period within a certain support/resistance area, the more critical the area. By way of an example, if a certain stagnation area observed a 3-week price up/down movement with subsequent rally thereof, this support domain is more important than that having observed a 3-day price reciprocation. 2. Volume of trade is another means to evaluate importance of support/resistance. If, say, a support formation did involve a huge volume of trade, it means a huge number of contracts passing from hands to hands, hence the support levels is ranking high and visa versa: the less the volume of trade, the lower-ranking the support. 3. Still another support/resistance importance indicator is its age in relation to the present moment. Since we are dealing with traders reaction to market moves and to positions they have entered or have failed to enter, it is fairly clear, that the younger the event and the reaction thereto, the more important the event. Seven years later (in 1993), A. ELDER has confirmed 2 of 3 J. Murphys postulates dated back to 1986. His classification of resistance/support levels is guided by: - number of test tangencies it sustained (the greater the number the stronger the level). Within a fortnight an immediate support/resistance is formed; within 2 months the level grows accustomed to by traders, thus attaining medium power; within 2 years actually a stereotype is built radiating strong support and resistance. - price scatter dominating a support/resistance level (the wider the range thereof the stronger the level). A wide-range turning-point price consolidation is similar to a high fence surrounding valuable property. A congestion zone equal to 1 % of current price (4 points with S&P500 at 400 level) yields insignificant support/resistance, whereas a 3% area is responsible

for medium levels with a 7% area possessing sufficient power to be a strong trend killer. - The greater the volume of trade in a support/resistance area, the stronger the levels. Huge volume within a congestion zone is indicative of numerous emotional jobbers involvement. As opposite, minor volumes point out traders indifference towards the level being intersected, hence being attribute of the levels deteriorated health. Weak support/resistance levels are capable of bringing a trend to a halt, while strong ones may appear trend reversers. Traders buy support and sell resistance, thus turning their impact into a self-justifying projection. SCHOLARS VIEW ON SUPPORT/RESISTANCE SEATING POINTS 1. T. DEMARK recommends: - plotting resistance upon bid TD-points - plotting support upon ask TD-points. 2. D. SCHWAGER (view: Technical Analysis. Complete Course) insists on drawing resistance and support in the vicinity of prior lows and highs. Support and resistance are to be viewed as approximate areas rather, than exact levels. It is to be emphasized that any previous high is not at all a premonition of perspective prices dry up thereat or thereunder. Instead, it is indicative of a resistance to be expected near that level. By analogy, a previous low is not at all illustrative of further price declines halting thereat or thereabove. Instead, it is indicative of a support to be projected close to that level. Depicted below is a support zone governed by relative prior highs and lows concentration: gold, futures.

Fig. 10. Continued by D. Schwager: Some technical analysts use to treat previous highs and lows as being endowed with, sort of, holy significance. A previous high, being 1078, is deemed by them a strong resistance. In case the market displays a spike higher, say, as far as 1085, they reason the resistance to have been breached. Its not correct. Support and resistance are but to be looked upon as cloud-shaped areas rather than exact levels. 3. J. MURPHY resorts to plotting support and resistance in a local peak-wise fashion (i.e. by local highs and lows): A resistance level usually coincides with the previous peak level.

Fig. 11.

Fig. 12. 4. A. ELDER: Resistance and support are to be preferably plotted (see Fig. 13) through congestion zone margins (CZM) rather than through highs and lows. CZMs constitute traders mind-changing areas, whereas highs and lows are only reflective of panic among weakest jobbers.

Fig.13. Continued by A. Elder: Beware of support/resistance false breaching, indicated as F in the above figure. Breaches are followed by amateurs, with professionals being opposite travel jobbers. Now, pay some attention to the charts right corner, where prices have bumped into strong resistance. Its high time to hunt for shorting with a stop-loss to be placed slightly above the resistance level. To be noted is a pronounced regularity, not referred to by A. Elder: the support/resistance levels drawn through previous local peaks are not extended by him after false breaching thereof. 4. D. SCHWAGER gives the following explanation when resorting to projection of 2 (!) inclined support and resistance levels: - Standard lines are usually drawn through price extrema (highs, lows), attributable to traders emotions, therefore these points may not reflect the markets real trend. - An inner trendline is to be plotted closest to the bulk of relative lows and relative highs, ignoring extreme points

D. Schwager himself is the recognizer of the subjective nature inner trendline method, but in so doing he jumps to a very important conclusion that ordinary trendlines are: - similarly subjective (!); - far less helpful (!), than inner trendlines. One of inner trendlines shortcomings is their inevitably random nature, even greater than that possessed by ordinary trendlines, being restricted by extreme highs and lows, at least. In practice, not infrequently, several options prove available as regards inner trendline plotting procedure (see Fig. 14). Nevertheless, my experience advises inner trendlines to be of greater avail than ordinary trendlines when spotting potential support/resistance areas. BRIEF CONCLUSIONS: 1. Each forex scholar offers his own interpretation of support/resistance levels, meaning different entities thereby (inclined, horizontal, inclined-horizontal, MA-based, round numbers-based, etc.). 2. There exists no clear-cut technique to define points to plot support/resistance levels through (except that of Demarks). 3. In real time trading, that said, these levels discovery on forex charts automatically entails absolutely different conclusions.

Fig. 14. Legend: - << << < = ordinary trendline; - << << < = inner trendline. TESTING AND PRACTICAL INCONSISTENCY OF CLASSICAL SUPPORT/RESISTANCE DETECTION METHODS Jeffry Owen Katz and Donna L. McCormick have disclosed results of their testing of the above scholars recommendation procedures in their Encyclopedia of Trading Strategies: TEST PROCEDURE 2 A channel breakthrough-operated system. Closing prices are utilized only; next day market price entry at session opening; commission and slippage being accounted for. The above test has been performed exactly the way the previous one, but with no account to slippage (3 ticks) and commission (USD15 per dealing cycle). Although the model displayed perfect operation with no account to dealing expenditures, it has turned out a complete fiasco in practice. Even the best-in-sample solution has proved loss-responsible only, and, as expected, the systems beyond-sampling poor operation came into being. Note: In compliance with E. Naymans theoretical outlook, a channel upward breach is alleged to be a STRONG (!!!) trading signal at an uptrend. TEST PROCEDURE 6 It is a closing price breakthrough system with next day per stop-order entry. The model longs via a stop-order at the point of breaching a resistance appointed by recent highs and shorts via a stop-order at the point of breaching a resistance appointed by recent lows. As expected, the system exhibited much poorer operation with low profit and deteriorated statistics within sampling. The model proved killer to the per-deal average of USD798, with profit rating being 37%. TEST PROCEDURE 7 The procedure involved volatility punch with next-day opening entry. The model longs upon next-day opening with provision that todays closing appears superior to the volatility upper edge. The model shorts in case of the price falling below the above edge. The optimization period embraced 240 dealings only with 45% being profit-bringing. TEST PROCEDURE 9 Involved is volatility punch triggering a per stop-order entry. The model effects a market stop-order entry immediately after passing a breach point. The sampling period incorporated 1465 dealings, each being of 6-day average duration. The system has ensured 40% profit with average gain of USD931 each. Under all parameter combinations only longs were winning. Both shorts and longs proved loosing outside sampling limits. Only 29% were winning out of the total of 610 dealings. BRIEF CONCLUSIONS: Testing data, supplied by Jeffry Owen Katz and Donna L. McCormick, constitute convincing grounds that forex scholars trading systems involving support/resistance breakthrough (the way these are described by the scholar) are rather likely to result in loss than in profit. This is one of the reasons for 95% of traders to turn their forex deposits killers. Inasmuch as the support/resistance related theory is so mixed up and subjective, it is only to be guessed what sort of support/resistance reading-matter may be offered by modern forex brokers websites.

Lets resort to sort of a brief investigation of support/resistance levels by way of May, 12, 2005 sample trading day analysis. As of 09:00 MSK: - EURUSD 1,2860 - GBPUSD 1,8850 Support/resistance recommended by Alpari analysts http://www.alpari-idc.ru/ru/analytics/levels/view/20060512/: - EUR/USD 1,2720 1,2475 1,29 1,3160 - GBP/USD 1,90 1,9150 1,8540 1,8130 Comments: the Alpari Analytical Department Director Roman Pavelko is hardly able to teach beginners, assuming the following: a). he has mixed up the EUR and the USD support and resistance; b). being an intraday trader, he recommends going long on the GBPUSD at a 150-point distance from the current morning price, whereas it is common knowledge for any Masterforex Academy beginner, that after a 150-point travel any position on the GBPUSD should be squared at a local high, instead of waiting for a further 150-point intraday leap to 1,9150. c). have You ever heard about an intraday trader, indicating a 450-point difference between support and resistance in his pending session trading plan (GBPUSD 1,90 1,8540)?

Fig. 15

Fig. 16 d). these recommendations aftermaths are apparent: the GBP has punched 1 point to 1,9001 and swiveled down to 1,8871; the EUR reached 1,2958 and reversed to 1,2853. That said, do You think, someones going to fire R. Pavelko from the Alpari Chief Analyst position? I rather doubt the fact. Hence, the question is: why should R. Pavelko be source of such sort of recommendations to nave Alpari beginners and why is Alpari management happy about situation where traders turn losers after following these recommendations? Brokers recommended support/resistance on the EUR/USD and GBPUSD as of June, 12, 2006 morning: www.fibo-forex.ru - EUR/USD: support 1.2780, 1.2740, 1.2685/90 1.2600, resistance 1.2890, 1.2930/40, 1.3000. (see: http://www.fibo-forex.ru/pages.php?page=90) - GBP/USD support 1.8740, 1.8670, 1.8560, resistance 1.8890, 1.8940, 1.9000 http://www.fxteam.ru EUR/USD support 1.2820 resistance 1.22940 (???) GBP/USD support 1.8805 resistance 1.8950 (see: http://www.fxteam.ru/rus/forex/morning-signals/?action=show&id=2261) www.fxclub.org The June, 12, 2006 information on technical levels of EUR/USD GBP/USD is missing with the support/resistance levels themselves being quoted in incidental unsystematic fashion.

(see: http://www.fxclub.org/trader_analytic/sec29/ and http://www.fxclub.org/trader_analytic/sec1249/) www.e-capital.ru EURUSD: - support: 1.2840, 1.2800, 1.2770/50, 1.2720, 1.2670, 1.2630, 1.2600/1.2580, 1.2540, 1.2500, 1.2460, 1.2400/1.2390, 1.2350, 1.2300, 1.2250. - resistance: 1.2890/1.2900, 1.2960, 1.3000, 1.3040, 1.3100, 1.3150, 1.3200/10. GBPUSD - support: 1.8840, 1.8800, 1.8740/30, 1.8700, 1.8670/60, 1.8630, 1.8590, 1.8535, 1.8500, 1.8450, 1.8400, 1.8360, 1.8300, 1.8270. - resistance: 1.8870/80, 1.8915/20, 1.8940/50, 1.8990/1.9000, 1.9060. (see: http://www.e-capital.ru/5_ta.asp) www.forexpf.ru EURUSD: RES 4: $1.2990 RES 3: $1.2965 RES 2: $1.2940 RES 1: $1.2915 CURRENT PRICE: $1.2890 SUP 1: $1.2830 SUP 2: $1.2795 SUP 3: $1.2755 SUP 4: $1.2685 (see: http://www.forexpf.ru/_newses_/newsid.php?news=298261) GBPUSD RES 4: $1.9080 RES 3: $1.9000 RES 2: $1.8960 RES 1: $1.8915 CURRENT PRICE: $1.8895 SUP 1: $1.8815 SUP 2: $1.8725 SUP 3: $1.8725 SUP 4: $1.8515 (see: http://www.forexpf.ru/_newses_/newsid.php?news=298262) Are You not getting mixed up? Each broker presents his own support/resistance levels different from others. With the above diversity of levels being recommended any true/false breach of any technical level proves out of question. Should we attempt to simultaneously depict all the support/resistance levels furnished by various forex brokers, well ultimately find ourselves facing a picket fence thereof. The arrangement is reminiscent of J. Schwagers Technical Analysis. Complete course, raising a question: Is technical charting to be referred to as a prediction engine or as folk arts? Probably, the best way out here is: 1. In view of huge number of forex scholars opinions, let everyone answer this question independently with the purpose of finding out the way to faultlessly pinpoint support/resistance levels. 2. Let everyone decide whether he is going to believe the support/resistance levels, released daily by various Brokers and Dealers, provided that: a). one has no idea of the definition principles thereof; b). the above levels being offered at websites by non-traders or by ex-losers. Otherwise the natural result will remain equal to 95% of losers worldwide.

SUPPORT/RESISTANCE LEVELS CONSTRUCTION UNDER MASTERFOREX-V TRADING CONCEPT 1. Support and resistance levels are to be split into those of flat and trend: a). support/resistance levels are horizontal when in flat; b). support/resistance levels are inclined when in trend. 2. Various kinds of support/resistance are intrinsic to various trend types (if You are considering 4 trend types, You will face 4 R/S grids; if 5 trend types are being dealt with, there will emerge 5 R/S grids respectively). 3. A larger trend is of greater significance in respect to a minor one, whereas minor trend support/resistance levels are of more accurate nature than those of larger one. This issue has not at all been touched upon either by forex technical scholars, or by modern analysts. 4. All the 4 trend-type support/resistance detection procedure is elaborated in the fashion enabling the Masterforex-V Academy hundreds traders to daily set up support/resistance levels with 1-2 points deviation, due to forex quotes difference from various Brokers. This aspect has not been considered by forex technical scholars either. 5. It appeared indispensable to simultaneously analyze the minimum of 2 ally currencies support/resistance levels (say, GBPUSD, EURUSD, etc.) since there is the formula: True R/S level breach by the forex pair 1 + False R/S level breach by the forex pair 2 = EITHER False R/S level breach by the forex pair 1 OR True R/S level breach by the forex pair 2 This aspect has not been considered by forex technical scholars either. 6. Minor timeframes intermediate R/S levels (for the sake corrective depth calculation) ARE DIFFERENT from those being manifested under forex trendwise travel. This aspect has not been subject to investigation by forex technical scholars either. 7. The available technical analysis scholar literature on support/resistance levels contains plentitude of helpful and data. The objective is to effect independent synthesis of T. Demarks, A. Elders, E. Naymans, J. Murphys, D. Schwagers et al techniques with the above Masterforex-V principles in order to attain proper understanding of the way prior binary regularities tailor further movement perspectives. 8. A combination of 4 trends and more is helpful in 1-4 point-accurate detecting forex trading session local extrema. With the above said, it proves strange to hear the statement of Ch. Lebau and D. Lucas (see: Computer-aided analysis of Futures Markets (http://forum.masterforex-v.org/viewforum.php?f=9), reading: We do not believe in exact price prediction popular practice. BUT THEN: - Whats the way the Masterforex-V Academy students manage to profit now and then? - Are they being no-readers of forex analysts numerous websites? - Do they independently establish support/resistance levels on multiple timeframes of numerous ally currencies? - Do they check their established levels against a primary source (wherefrom the Brokers analysts use to crib a support/resistance)? - Do they understand principles of true/false breaching of each level and of a bounce therefrom? - Are they capable of calculating in-session currencies travel margins to a destination, whereafter

the above currencies bounce off and exhibit corrective reversal? THE QUERY MAY GO ON

CHAPTER 12 Moving averages as the basic indicator at Forex.


The given chapter is dedicated to the problem of Moving Averages (MA). It is one of the principal indices at Forex. In their book "Computer analysis of future markets", Ch. Lebo and D. Douglas state that the greatest sums of real money are earned by making use exactly of the MA index. Even taken together, all other technical indices are less helpful. This is true. However, Ch. Lebo and D. Douglas have not mentioned that 19 of 20 traders do lose their game when they mainly use this index (MA). Here I try to expose the origin of such a high rate of losses and losers (19 of 20 traders!). The losses are caused by a somewhat simplified approach to the utilization of this so important technical index by "classicists" of Forex. The analogous view on MA index is inherent in the up-to-date analysts as well. Further, traders do the same. However, for the latter misunderstanding of the analytical approach to MA results in losses of real money at Forex. The ground course concerning MA one can get gratis in School of Trading for the Beginners at Forex, attached to Masterforex-V Trading Academy. Otherwise, the same information will cost you $200-500 at training courses, attached to Forex Brokers. Take a look at the charts submitted by J. Murphy in his book "The technical analysis of future markets" (Part 9). There plots are keep on "migrating" (roaming) from one manual of Forex to another.

Chart 14.1. There is an example of combination of the 10-days simple MA (SMA) with the 40-days one. The reader should pay attention how accurately the tendency in price movement is repeated by the short 10-days MA. The 40-days MA is behind of the price movement somewhat farther. MA value evens up (levels) the spread of prices. At the same time, these MA are always keep on being behind from the market dynamics in time. The 10-days MA is designated as the solid line; the 40-days MA is presented in the form of the dotted line.

Chart14.2. There is an example of the 20-days simple MA. Traders regard intersectios of MA curves by prices as signals for

opening the corresponding positions. In the period that corresponds to the chart right border, the price indices are below the MA curve. This indicates that the market is at the stage in decline (fall, decay). One should pay attention to the following fact. The 20-days MA curve evens up (levels) the price dynamics. All the same, this 20-days MA curve is keeping behind from the market dynamics in time.
According to these pictures, everything is clear - isn't it? That is, at a certain point one must stake on "sell", at another point one must stake on "buy", etc. Probably, looking at this chart, any beginner could think that his account would be doubled after several days of the work at Forex. However, in fact, just 1 of 20 traders does earn his money. At the same time, all traders (19 losers included) make use of MA index in this or that form during their work at Forex. Hence, one must get to learn how to make use of MA in order to gain profit but not to sustain damages.

First, let us examine the problems concerning MA. One must understand the reasons why the majority of traders lose their money when using MA. After this, one must find the way-out. The problem #1. Which charts the classicists of Forex do not include into their manuals. Let us scrutinize the graphs given below. After this, you can clearly understand why 19 of 20 traders leave Forex for good.

Chart 14.3. From March 24 till April 16, 2006, in EUR/USD pair movement the 10th and 40th MA intersected one another 11 times.

Chart 14.4. From January 13 till February 3, 2006, in USD/JPY pair movement the 10th and 40th MA have 12 times intersected one another.

Chart 14.5. From February 16 till April 16 of 2006, in GBP/USD pair movement 10th and 40th MA have 13 times intersected one another.

Chart 14.6 (the continuation (prolongation)). From March 14 till April 7 of 2006, in GBP/USD pair movement 10th and 40th MA have intersected one another 9 times.
The conclusions are the following. Here we deal with a flat. In contrast to the trend, in a flat MA don't "obey" the rules submitted in the classical manuals. Rather on the contrary, when a quicker (faster) MA intersects a slower one, it can be a sign of an imminent reversal. Respectively, a deal must be open in the direction opposite to the MA opening. Such a situation is typical of a trend within the time frame (TF) smaller than a flat within a larger TF. Conclusions. One must not regard MA separately from the flat and trend - how it has been done in all classical manuals of Forex. As regards the duration in time, a flat is longer than a trend. First of all, you must learn to clearly distinguish the moment of the flat finish (end) from the start of a trend (and v.v.). Only after this you may open a real account at Forex. Otherwise, you will lose your money - as it does happen to 19 of 20 traders. The problem #2. Within what TF one should work with MA. Some classicists of Forex prefer D1 (DeMarque). J. Murphy uses M5 (for the intra-day trading) and up to W1. E. Neiman and B. Williams use D1, W1, etc. However, these specialists avoid answering the principal question. That is, what a trader must do when MA are reversed towards different directions in various TF.

For instance, within M5 MA go upwards. Within H1 they go downwards. On the contrast, MA do come together in the chart H4. A. Elder has partially explained this problem in his three-shield system. Advantages and drawbacks of this approach are examined in a separate chapter. The problem #3. There can be trends strong (heavy) or weak (feeble). Let us examine a trend of the simplest kind - i.e., the intra-session one (see the chart on February 13, 2006). To the participants of Masterforex-V Trading Academy, I recommended the following. a). As regards the European session on February 13, 2006, I advised to make super-short deals on "sale" with GBP/EUR pair. b). As regards the American session on February 13, 2006, I advised to make super-short deals on "buy" with the same currency pairs (GBP/EUR). c). As regards the European session on February 14, 2006, I recommended to make a prolonged deal on "sale" (all over the trading session). d). As regards the American session on February 14, 2006, I advised to make super-short deals on "buy" with the same currency pairs. In any classical manual of Forex the criteria of the difference between the strong (heavy) or weak (feeble) trends are not pointed out. Consequently, the two advices to a trader can be given. A). to "allow the profit to come in (to flow)" when the trend is strong (heavy). B). to open super-short deals to gain the profit of 10-20 points because the currency pair movement is restricted, which is detectable during the very first movements. This technique, when used in the daily trading in Masterforex-V Trading Academy, gives reasons to doubt the correctness of the statements made by Ch. Lebo and D. Lucas. In their book "The computer analysis of future markets", the authors state that MA indices always indicate the trend direction. However, with MA one cannot estimate the trend strength (the heaviness or weakness of this trend). It is especially important if one estimates the trend strength with the help of MA indices, taken from other systems of Forex technical analysis. Problem #4. MA index drawbacks exert influence on other technical indicators, based on them (MA). Therefore, such indicator will deceive a trader during trades even more than MA do it. For instance, there are MACD (Moving Average Convergence/Divergence ), Alligator, Awesome Oscillator, CCI (Commodity Channel Index), Moving Average Envelopes, Moving Average of Oscillator, Bollinger Bands, Stochastic Oscillator, etc. All such indices are based on MA. When developing such indices, the authors issued from MA. Further each of them added to this basis what he liked. It could be the rate of change in the price, the trading volume, the closing price value with respect to the previous data, etc. Who has added what to MA does not make a secret. One can learn it, for instance, from MetaTrader software engineers from MetaQuotes Software Corp. In this connection, there arise the following questions. 1. What for each author adds to MA a characteristic according to his own choice? 2. Why there are so many indicators and, consequently, their developers? Why an improvement, made by one creator, has not satisfied a subsequent author? 3. What a drawback is inherent in the notion of MA itself - so that they must be infinitely (and to no effect) be improved, being unusable in their original form? Each of corrections made in MA is all the same imperfect. Really, just MetaTrader software contains dozens of technical indices. The majority of them are just another attempt at bringing those very MA to perfection. And this relates just to the indices selected by MetaTrader software engineers! The reader can guess how many indices have been sifted out (rejected)

by these specialists. Probably, the reader will be confused when I'll tell that the number of indices excluded from MetaTrader software is even larger than that of the included ones. Hence, a large number of professionals waste their time, understanding that the indices available are unusable. You can judge by yourself. Let us put oscillators at the foot (bottom) of the chart. One can pick them out of one's choice - even all of them. In practice, all charts demonstrate the same. That is, each of newer designers has realized the drawbacks in the work of his predecessor. However, an original oscillator, developed by every new specialist, indicates the same data as oscillators developed by a previous author. In this connection, one of my students (a military man in the past) made joke: "it is like to keep on reparing the reciprocator instead of replacing it by the jet". Problem #5. According to J. Murphy, the following approach is axiomatic in the framework of the classical Forex (see "Technical analysis of future markets"; Part 9). The point of entering the deal is the crossing of a slower MA by a quicker one. For instance, if MA #10 intersects MA #40 top-down, this corresponds to opening a deal on "sell". I can give thousands of examples when the deal opening in accordance with this formula was too late. This can happen in the cases of the trend strategic/tactical correction - especially under the conditions of strategic reversals. Otherwise, the deal opening according to this formula can be erroneous (fallacious) - in a flat. The above-given charts illustrate some cases when the opening according to this formula is wrong. Thus, a vicious circle becomes developed. On the one hand, the period length must be taken into account in order to exclude the "market noise" influence. On the other hand, one must consider the delay in MA as compared with real changes in the market. This problem is still unsolved. The higher is MA number (100, 200), the weaker is MA reaction to the "market noise". At the same time, the delay in MA during reversals is more considerable. The smaller is MA number (5, 10), the more intensive is MA reaction to the "market noise". That is, an ordinary (common) correction can be mistaken for a heavy and rash reversal. Problem #6. For traders, improvement in MA results in consequences even worse. All theorists and traders acknowledge that MA are being late. However, methods in solving the given problem are imperfect (so to say, "middle-of-the-road"). For instance, instead of simple MA, the following improved versions are submitted: * Exponential Moving Average; * Smoothed Moving Average; * Linear Weighted Moving Average. There are individuals who prefer to change simple MA into exponential MA, etc. (they consider this to be the means of optimization this index). J. Murphy struck such "admirers" the heaviest blow. In "Technical analysis of future markets" (Part 9), he quoted a certain statistics. These data were initially submitted in the paper "Computers will help you in the game at future markets" by Hockhaimer in YB "Commodities", 1978. There the analysis is given to effectiveness of different ??? (TA) in the period 1970-1976 at various future markets. The conclusion is the following. The simple MA is the most effective. Ch. Lebo and D. Lucas arrived at the analogous conclusion. These authors admit that there is a seeming (apparent) refinement of weighted- and exponential MA. However, in practice, every test observed or carried out by them indicates decided superiority of simple MA to all others from the viewpoint of gaining profit. According to Ch. Lebo and D. Lucas, the application of exponential MA, as a rule, results in "jerking", too costly for traders. This confirms the authors' opinion. That is, if a method of entering the deal is based on obscure calculations, there are more negative consequences of its application than positive ones. The future trade is rather art than a science. The mathematical refinement of a method does not guarantee profits. Such conclusions makes a true shock for those who neglect the problem of MA - for those who just prefer to replace simple MA by exponential-, smoothed- and linear-weighted ones. In particular, this concerns E. Neighman. The latter, in "Trader's small encyclopedia", persistently (strongly) recommends to apply the exponential MA (EMA). He states that simple MA to times reacts to one change in the course. Figuratively speaking, the simple MA (SMA) "barks" as a dog. For the first time this happens when a new value is received. For the second time the "barking" is heard when this value is quitted from the calculation of MA. As compared with SMA, EMA reacts to the change in one value of the course just once - i.e., when this value is received. This is why EMA is preferable. Comments. As the charts given below indicate, MA crosses the price 11 times. However, where did E. Neiman see dogs who cannot "bark" more than once or twice? One can imagine how many traders have lost their deposits due to the

recommendations given by E. Neiman - a "cynologist" at Forex. The charts submitted below confirm my statements. Everybody can compare SMA with EMA in order to independently answer the following question. Is it preferable to apply rather EMA than SMA (as E. Neiman insists)? Or the difference between these indices is minimal? As one can see, analysts of Forex just play with exponential-, smoothed- and linearweighted MA. In practice, various "improvements" in SMA do not heighten the working trader's profits.

Chart 14.7. EUR/USD pair movement on April 17-24, 2006

Chart 14.8. EUR/USD pair movement on April 17-24, 2006


Both J. Murphy and Hockhaimer were perfectly correct in pointing out the difference between SMA and EMA. At the same time, they have not drawn the principal conclusion that one can easily make issuing from the statistics submitted by these authors. That is both types of MA just slightly differ one from another. Besides, the same drawbacks are inherent in the both variants of MA. According to J. Murphy, deals must be opened after a slower MA is intersected by a faster one. However, in this case occurs a substantial (time) delay. This is depicted in the above-given charts (the intersection of MA ##10, 40). One can clearly see that MA intersection takes place when almost a half of the path is already passed through. According to J. Murphy, a deal must be opened not after the first intersection of MA ##10 and 40 but after the second one (the so-called "optimization"). However, I can give a large number of examples where the 1st intersection yields hundreds point of profit. At the same time, the 2nd intersection occurs in a flat (in its essence, it is attenuation of the previous basic movement). That is, J. Murphy does not recommend opening a deal during this basic intensive movement! Besides, as one can see in these charts, MA 12 times intersect one another. According to J. Murphy, which intersection is the 2nd one? How can J. Murphy recommend such "optimization" when it results in the following? Table 14.1

The kind of commodity assets

The best combination

The net accumulated profits or damages

The maximum The total The num sequence of damages number of of profit deals deal

GBP DM JPY SWISSI

3,49 4,40 4,28 6,50

117,482 78,631 120,899 172,454

-7,790 -3,909 -4,367 -7,467

160 169 131 148

68 78 74 66

As one can see, J. Murphy's results after his "optimization" are worse than 50/50. That is 322 deals of 608 are made at a loss. J. Murphy made an attempt to artificially combine MA with timing loops (time cycles). For this purpose, he made use of Fibonacci number "mysticism". That is, he chose Fibonacci numbers according to his own tastes. Applying such numbers in some cases, under other conditions he "happily forgot" about them. In this sense, the case of MA ##10 and 40 is typical. J. Murphy has not elaborated a universal combination of MA. In each example different combinations of MA are submitted (either 10-40 or 1-21, or 13-34-144, or 4-9-18, etc.). And what is more, according to J. Murphy, MA duration must be chosen so that it should correspond to the cycles that determine the given market development. As a trader, I arrive at the distressing conclusions concerning J. Murphy technique of MA application at Forex - as J. Murphy gives examples of currency pairs. J. Murphy uses different combinations of MA at the daily trades. Hoever, as a trader, he has not elaborated his own "working" combination of MA. Different MA can be required for different charts. J. Murphy clearly garbles historical examples of situations at the market, suitable for various combinations of MA. J Murphy himself considers that one can get a reliable prognosis with the help of his charts. The reader can develop his own opinion concerning this statement. Just I wonder, of what kind this "reliable prognosis" can be. Really, a universal technique of giving analysis to the market is not developed. In addition, in different situations different MA are used. However, J. Murphy never kept back that he was not a trader but a "technical analyst" and a Professor in New-York Financial Institute. In spring, 1981 the leadership of this institute ask him to organize a course of the technical analysis. As far as I'm concerned, I made no secret of my attitude towards "analysts". Really, to what the latter can teach a beginner or an experienced trader if such "analyst" cannot work at the stock exchange himself? As it is evident, an author of detective stories (even the most gifted individual but not a lawyer) will never be invited to lecture in a department of law. At the same time, the analogous situation at Forex is almost a rule. For instance, training courses at Forex Brokers are mainly based on the books by J. Murphy and E. Neiman. I have already exposed mistakes, inaccuracies and drawbacks, inherent in just one chapter (#9) of the book "Technical analysis of future markets" by Murphy. As regards the whole book, the number of incorrectnesses of various types is about several hundreds. All courses of training attached to various Forex Brokers contain those very mistakes. As the result, at least 19 of 20 traders lose their deposits. As regards E. Neiman's recommendations concerning the order of sequence of MA numbers, the situation is not better. Giving analysis to the 6-day chart of prices, this author uses 1-8; 8-13; 8-21; 1-21. He states that contradictions in the signal can happen at the intersections between 55-144 and 89-144. Giving analysis to the daily chart of prices, this author uses 8-13; 8-21; 1-55; 1-89. No contradictions are observed. Giving analysis to the 3-hour chart of prices, this author uses 34-55; 1-89; 1-144; 8-89. The contradictions in the signal can happen at the intersections between 13-144 and 21-144. Giving analysis to the hourly chart, this author uses 1-34; 34-55; 1-144; 8-89. The contradictions in the signal can happen at the intersection between 55 and 89. Giving analysis to the 15-min chart of prices, this author uses 34-144; 1-144; 1-55. And now let us scrutinize these statements.

What kind of MA must be chosen when a chart D1 is displayed at the trader's terminal? Among 8-13, 8-21, 1-55, 1-89 what pairs would be preferable? Probably, independently of the chosen MA, the result of such "recommendations" by E. Neiman will be the same. I would like once more to emphasize that 19 of 20 traders all over the world regularly lose their deposits. By te way, what a combination does E. Neiman use by himself in tradings? Any working trader will submit his own combinations of MA numbers. After this, he will add other MA numbers that can be used. However either E. Neiman or J. Murphy and other "analysts" don't do this. Probably, E. Neiman, a leading employee of "UkrSocBank", has no MA working combination of his own. Maybe, he just writes "financial bestsellers". According to Alpina public house, in his books the basic notions and techniques, necessary for the successful trading, are submitted in the form easy of access. This is a point to be considered. Problem #7. There exists a general rule, correct for the business of any kind: to buy cheaply and to sell expensively. How this rule can be correlated with the principles of work with MA? One must clearly detect circumstances when it is possible to work against the rules of MA - i.e., in contradiction to the classicists' viewpoints. For instance, one can work against the principal tendency of Ch. Dow. In one's work, one may work against the rules of MA and contradict ideas of J. Murphy, E. Neiman, or Ch. Lebo and D. Lucas. These rules are not submitted in any manual of Forex. There is an example of the real work against MA rules. It is taken from Masterforex-V Trading Academy in the on-lineregime (see April 19, 2006). One should pay attention to the following chart.

Chart 14.9.

According to Masterforex-V, "sells" of EUR have been closed at 1.2286. The corresponding reasoning one can find in the chargeable enclosures. In particular, there the problems of calculating a local peak, of getting into a lock at this peak, etc. are examined. Participants of Masterforex-V closed forum made the following remarks about the chart on April 19, 2006. The maximal point of GBP course is 1.7938-46, the local peak being at 1.7938. That is, opening a deal in vicinity to 1.7853, a participant ("rich") has correctly calculated GBP stock reserve - i.e., 85-93 points per the trading session. On April 20, 2006, at 22.16, another participant ("hawt") opened a branch, called "the death of EUR". I must emphasize that here we deal just with the trading on April 20, 2006. During that day EUR fell more than by 112 points - from 1.2396 down to 1.2284 under the condition of the ascending intra-week trend. That very day GBP, the currency allied to EUR, fell by 186 points (from 1.7938 down to 1.7752). Now we scrutinize the above-given chart. We are interested in detecting the signs that can permit us to predict EUR and GBP reversal with respect to USD -several hours earlier than the reversal can actually happen. One must also take into account that the chart depicts the situation the half of the day before the MA #10 crossing MA#40 downwards. Accurately dealing with these details, one can understand a series of rules of working against MA reversal. One can regard the conclusions made by Ch. Dow and J. Murphy a new. According to these authors, the tendency can be seen just from the inside (in the middle of it). J. Murphy states the following. No system that follows a tendency can capture (absorb, usurp) either the summit of the market or its foundation - i.e., the origins of the ascending or descending tendencies. The corresponding attempts are not prospective. This problem is in detail discussed in "Technical analysis of future markets" (Part 2) by J. Murphy. In brief, one can make the following conclusions. MA is an important parameter from the viewpoint of giving analysis to Forex market and gaining regular profits there. At present, the MA problem presentation technique by "classicists" of Forex has clearly appeared in deadlock. This is why the overwhelming majority of traders lose their money. I would like to emphasize the following. Either the numbers of MA, or their modifications (the simple-, exponential-, or linear weighted MA) do not matter. One must clearly distinguish when the work either along - or against MA reversal would be preferable. The reader must open a real account not earlier clearly understanding of the following factors. One must know when to work on the MA reversal and when against it. One must see with which other systems of analysis the technique of MA should be combined - in order to detect long and super-short deals. One must learn the signs of reversal and the trend continuation - as well as correlation between the trends themselves. You see, your chances to get into the company of 19 traders-losers from 20 are considerably prevail the opportunity of being 1 of 20 traders who regularly gains profit at Forex.

CHAPTER 13 Work on News. Specificities in Traders Work at American Stock Exchange on Fraiday.
For Bank Consortium, news of Forex gives a perfect opportunity to drive currency by 50, 100, 150 points (and more) upward-downward. As it is described in Part 2, Bank Consortium prescribes quotations for currencies to traders. The reader should keep in mind that the number of currency pairs substantially exceeds the number of two. Besides, its important that all currency pairs can be conditionally subdivided into the two types (see Part 4). That is, if the rate of exchange of a half of the pairs is sharply falling down, the second half is rising steeply for sure. Under these conditions, the profit becomes multiplied by a number of the deals that a given trader is in time to open. This opportunity is so attractive isnt it? It is especially important when one works at the American Stock Exchange on Friday. In this case, after the issue of the news (bulletin) concerning USA economics, currency pairs pass over 100 points and more.

Chart 29. There is M15 chart of the GBP/USD pair movement on 1.04.2005.
The dollar rate has changed more than by 200 points at American Stock Exchange. This example is far from being unique. In order not to upload the site with numerous charts, the author prefers just to depict the statistical data within April, 2005. Here the movement in several principal currency pairs is depicted. It is just pointed out by what number of points the rate of exchange has changed in American Stock Exchange.

One can earn several thousands of $ by working just with 1 lot (at least with several currency pairs). The problem consists in the following. Whether the $ rate would rise or fall after the issue of news. This is the key point. Working just during a half of the day on Friday a trader can make his money at the speed of rise in the currency rate. Making the wrong decision, one lose all money as well quickly. Everything depends on this. That is, knowing the data concerning American economics,

it is worthwhile to stake on buy or sell for USD rate. The corresponding literature submits the following rules: 1. If the news issued are negative (even worth than the prognostication), the currency rate will do fall down for sure. One must stake for sell. 2. Otherwise, if the news issued are positive (even better than the prognostication), one must stake for buy. 3. If, in general, the news does confirm the prognostication, the currency rate will remain within the price corridor. It is so simple and clear, is not it? However, why do 90% of traders-beginners keep on losing their money? Just 10% of traders earn considerable sums. You guess, who follows those clever advises and who works according to his own technique. There is one more aspect to be emphasized. The currency movement in the American Stock Exchange on Friday is of the purely speculative type. Consequently, The amount of loses is equal to the amount of winnings + spread. That is, the number of losers overwhelms the number of winners during the same period. So, how the reader can keep on believing that the currency will move according to the all famous text books. So, who is the loser? The matter is that the currency movement can develop in 4 directions, but not in one. 1. As it is submitted in the classical books, in the case of the positive news, one must stake on buy. 2. It is recommended to rush towards the news direction for a short while and then to work in the opposite direction. 3. After breaking through levels of resistance, one must go through 100 points. Thus, the trader makes other ones to stake on buy. After this, it is recommended to make U-turn, going through 200 points downwards. It is depicted in the chart on April 1, 2005 (Friday). 4. Briefly to say, our trader should follow the news and then start to change the movement direction, thus involving more and more traders into the backward course (reciprocal heading). Then the abrupt U-turn will return the initial direction of the news line. So, all how run ahead of the hare (the news in our case) suffer immense damages. The author hopes that readers see why 90% of traders-beginners always lose their game. According to the classical text books, the movement is possible just in the only direction. Consequently, beginners keep on examining sites. They try to get the news ahead of others at least in a minute- and make their stakes beforehand - as quick as possible. Our apprentices have learned to get 150 points (and much more), working with several currency pairs at American Stock Exchange. Such traders have understood the mechanism for finding the correct solution before other traders. How can they gain such a number of points? By the way, if somebody cares, in the authors dispatches the reader can find out the news earlier than this news will appear in Russian site. There are two ways of solving this problem. The trader can start studying the Friday news at the American Stoke Exchange on ones own. The author can even suggest what it would be worthwhile to do. One must get to know what criteria are inherent in each of four variants of the currency movement. In this way, the reader can see how to work with all the news the kind of currency does not matter. On Friday, everything is much more demonstrative. In other days the general idea remains the same. However, the currency movement is slower and a number of points in the currency rate change is smaller. I can send you the corresponding technique of work it is included into the general packet of documents. Besides, other problems are elucidated (see the part What I give to my subscribers). The price of this packet makes $100. Surely, the author is not interested in training students for nothing why for? The author supposes that it is enough that he gratis exposes such problems, not at all elucidated in the classical literature. The classicists just ignore these problems. On the contrary, the author free of charge suggests the ways of solving such problems. The author hopes that a trader-beginner can solve these problems by himself. Probably, a successful beginner, being

grateful for the information presented, can write a word or two to the author. Those who are incapable of finding a proper solution can lose much more than these &100. You see, one can just game-play with the life, not working seriously. Maybe, they just have no time for the all-day-long studies (other engagements, works, lecturing, private life, etc). Such people must not try to work at Forex at all. After colossal loses, for people it will be too late to buy the complete and truthful course of lectures written by the author. Really, the bitter truth is better than the sweet lie. One can run into such lies in numerous courses of Forex. The authors assistant lectures the corresponding total course. The author himself just organizes trainings for graduating students in the on-line regime. The author recommends when the graduators must stake on sell or buy. Besides, he explains how long his apprentices (disciples) should stay in their deals. He also advices under which condition it would be preferable to quit or to make the deals, etc. My students will clearly understand their problems. The mistakes will be analyzed and explained. When opening their real accounts, each of the students knows that he can obtain qualified consultations every night (one can compare this technique with the totally alternative approaches, discussed in Part 7). As a rule, on Friday in the American Session currency pairs make drastic changes in their movement. Due to this, a trader can earn lots of money during a short time interval. At the same time, the trader can lose his money as well the trader just must see the tendencies in the currency movement in the American Session on Friday. In its essence, there are the two reasons that initiate this drive. 1. It is the issue of news concerning USA economics (It is the common knowledge that $ is the basic currency in the world). 2. All brokers, dealers and traders do want to earn some money before the Stock Exchange Close for the weekend. Consequently, the author makes the following conclusions. 1. The author always tries to work within a given session. Being a trader, the author cannot understand the alternative recommendations by those analysts who advise not to work in the given session. 2. It is recommended to close all deals before the issue of this news. 3. One should not open any deal directly before the news issue (about 16.30, Moscow time). It does not matter how much such deals can be teasing for a trader. Studying the work with the movement of the currency pairs GBP/USD and EUR/USD, one can detect the following. 1. Before the issue of news, nobody knows the session trend direction. Nobody can predict this. Any way, an organizer of Forex game gets his profit. 2. The trickery kind and its issue become clear and evident at the beginning of the news issue and during the further development of the currency pair movement.

3. At the beginning of the news issue the currency hurries movement, then an abrupt (brusque, sudden) jerk follows either upward or downward. After this, the reversal to the previous direction happens.
The trader must do the following. 1). After currencies make candles (upwards/downwards), one should draw levels of resistance and support, connecting previous local extremes (minimums/maximums). Such fractals are zigzagging in the charts M5-M15. The true breakdown towards one of the directions (upwards/downwards) indicates the beginning of the session trend. As an example, one see GBP/USD pair movement on February 10, 2006 to the levels 1.7485-1.7508 http://forum.masterforex-v.org/viewtopic.php?t=1427. 2). When the candle steeply rushes upward/downward, the recoil from the initial movement is important for a trader (see the candles in the charts M5-M15). a) if the recoil is smaller than 50%, there is a high probability that the further movement will preserve the same direction (a new breaking through a local maximum/minimum + there will be a strengthening (attaching) above this level (not less than for several seconds). Then a new breaking through happens again. A deal must be opened towards the given direction (+ 2

points from the fractal). b). If the recoil is up to 100%, a flat happens between the starting point and a local maximum/minimum. c). If the recoil exceeds 100%, and the breaking through the starting level is true, a drastic movement is rushing from the initial candle in the backward direction. See GBP/USD pair movement on February 3, 2006. The chart M1 serves as the corresponding example http://forum.masterforex-v.org/viewtopic.php?t=1427. The candle is directed upwards. There several variants are possible. a). The recoil smaller than 50% is accompanied by the drastic start and breaking through the local maximum (buy + 2 points from the fractal upwards). b). The flat happens between the starting point and a local maximum/minimum outside the market (the dark red line in the chart). Here one can expect a true breaking through, directed upwards/downwards. c). If the recoil from 1 candle exceeds 100%, there will be a strengthening (attaching) below the candle (the candle on the right from the fractal cannot break through the level 1.7750 upwards + breaking through the fractal is downwards. The conditions for the heavy starting movement are the following: a) the simultaneous breaking through a level by all currency pairs of Forex; b) the trend-like movement. Besides, in TS of Masterforex-V Trading Academy other elements are described. After the first wave, currency pairs form a mini-flat. Within its framework, the prospect for the development of currency pair further movement on Friday in American session is determined (becomes silhouetted). Let us return to GBP/USD movement on. The true breaking through the 1st flat within the interval (1.7693-1.7723) indicates the further direction of the currency pair movement on this day in American session. Here the pair goes downwards (February 3, 2006). On January 27 and February 10, there were the currency pair U-turns in the directions, opposite to those of the initial movement. After the session heavy trend, the initial and further directions of the currency pair movement can coincide in American session on Friday. As a rule, substantial recoils dont happen under such conditions. Then the position is added towards the trend direction from the recoil. Otherwise, the position is added upwards from the recoil e.g., upwards from the fractal if the trend is directed downwards. The deals are closed in the end of the day within the mini-flat at hand. Other important specificities are described in TS of Masterforex-V Trading Academy. Deals are always closed on the Friday night. This is conditioned by the following reasons. a). Force-majeur news can appear during the weekend. b). A new weekly trend starts on Monday. On January 27, 2006 there was U-turn breaking through the mini-flat level upwards. An intensive movement downwards is accompanied by breaking through the levels of support. Now the theme of the work in American session on Friday is displayed in the open site of Masterforex-V Trading Academy see . http://forum.masterforex-v.org/viewtopic.php?t=1427. At the insistence of traders of Forex Club, this problem was arisen at the forum of this Forex Brokers (http://forum.fxclub.org/showthread.php?t=29061). To help the traders, our management decided to discuss these problems openly. Traders from other Forex Brokers keep on telling about losing their deposits. At the same time, traders from the closed forum Masterforex-V Trading Academy can avoid such situations. One should see Chronics of American session on Friday, February 10, 2006 (http://forum.masterforexv.org/viewtopic.php?t=1390&start=30). Much to our surprise, this announcement was removed by moderators from Forex Club. I dont see any reason why the leading Forex Brokers of Russia saves their traders from the discussion of this topic. One must remember that as the result, traders do not gain any profit. On the contrary, they lose their money via their Forex Brokers. Therefore, all traders of Forex are invited to discuss these problems at the open forum http://forum.masterforex-

v.org/viewtopic.php?t=1427.

CHAPTER 14

The chapter a in the process of translating.

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