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3TF_RSI_Average
This indicator will create an average RSI from 3 different time frame's RSIs.
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3TF_Stochastic_Average
This indicator will create an average stochastic with its signal line from 3 different time frame's stochastics.
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Trading the European Session with London Breakout Strategy
Joshua Martinez
THE MOVIE (1:14:28 in length)

Finding Big Money Breakouts with Our Favorite Indicator: The Ichimoku Cloud
What is the Ichimoku Cloud?
The Ichimoku Cloud is a technical indicator I first encountered while traveling through Asia in 2006. Talking shop with other traders I had met on my travels, I quickly realized that this ‘Cloud’ they kept referring to was different from any other indicator I had ever used. I was also surprised at how simple and intuitive the Cloud was to use. While it may look confusing at first, the Ichimoku Cloud is actually one of the simplest indicators to use. Before we can approach the actual applications of the Cloud, let’s discuss what the Cloud actually is.
The Ichimoku Cloud is a technical analysis method that uses sets of moving averages to produce key levels in the past, present, and future. The Cloud helps traders identify at a single glance if a security or other financial product is trading in bullish or bearish territory. Ichimoku Kinko Hyo literally translates to ‘One Glance Equilibrium Chart’ because it can be used for analysis using only a glance. For this reason, the Cloud is one of the most efficient technical indicators available.
The Cloud is made up of 6 key components, each of which we will examine individually. When these 6 components are combined, they form the Ichimoku Cloud. Below is an image of the Apple Inc. (AAPL) on a daily chart with the Cloud. We can use the Cloud to identify key levels of support and resistance, determine trend, and determine the strength of the trend.
As can be seen below, the Cloud is actually a forward-looking indicator. The Cloud is projected 26 periods forward, so the levels under the current price were formed 26 days ago. The Cloud is unique in that is uses both past data and forward-looking levels. Since the levels are forward looking they tend to be more reliable than simple moving averages. The lagging indicator component also provides confirmation of breakouts by looking 26 periods back to determine if a stock is likely to break through levels. It is this concept of looking at the past, present and future that makes the Cloud so valuable. In the next section we will look at the individual components of the Cloud and how they are calculated
Calculating the Components of the Cloud
The Tenken-Sen Line: Short term trend line similar to a 10 period moving average. It is known as the turning line and is a signal of a region of minor support or resistance. This component is calculated by taking midpoint between the highest high and the lowest low over the past 9 periods.
The Kinjun-Sen Line: Known as the confirmation line. This component also serves as a signal for support and resistance levels. Many traders use this line as a level for a trailing stop. It also serves as an indicator of trend. If price is above the Kinjun-Sen Line then the stock is in bullish territory, likewise if it is below the line it is in bearish territory. This line is calculated by taking the midpoint between the highest high and the lowest low over the past 26 periods.
Senkou Span A: This line forms one of the boundaries of the ‘Cloud.’ If the stock is trading above the line then the line will serve as a major support level. If price is below this line it will serve as a level of major resistance. This component is calculated by taking the average of the Tenkan-Sen and Kinjun-Sen lines. This line is unique in that the results of this calculation are plotted 26 periods ahead. This means that today’s Senkou Span A line was actually plotted 26 days ago.
Senkou Span B: This line forms the other boundary of the ‘Cloud.’ This line serves as a second level of support or resistance and is calculated by taking the midpoint between the highest high and the lowest low over the past 52 periods. Like the Senkou Span A line, this is also plotted 26 periods ahead. This line is similar to a 50% Fibonacci retracement.
Kumo: This is the shaded area, located between the Senkou Span A and Senkou Span B lines, that is used to form ‘the Cloud’ itself.
Chinkou Span Line: This line is also known as the lagging indicator. This line is the current bar’s closing price plotted 26 periods back. The lagging indicator is often used as confirmation of signals and can also serve as a support and resistance level. The lagging indicator can also assist a trader in confirming the direction and strength of trends.
Why Use the Cloud?
With so many indicators included in charting packages, why should a trader focus on only one indicator? The Cloud is unique in the fact that it has current, past and future components that can be used as key levels, and can project potential future price action. Although this is the main reason I love the Cloud so much, there are other important reasons as well.
One of the best things about the Cloud is that not very many people know how to use it. Everyone uses Bollinger bands and moving averages but the Cloud is used far less in practice. Why is this good you might ask? In the age of algorithmic trading, many high-frequency trading firms will try and run the stops of weaker traders. They target levels based on where they believe people will have stops in place. Since people tend to put stops in at levels derived from other, more common studies, it is easier for the high-frequency trader to take them out. If a trader uses the Cloud to set stops and targets, it is not likely there are a lot of other traders at those same levels. This means that stops won’t be targeted as much as they would if a trader used more popular studies.
The flexibility of the Ichimoku Cloud is also one of its greatest qualities. The Cloud is applicable to any product on any time frame. This means that any trader can use the Cloud effectively. The Cloud can be used for trading stock, options, futures, and currencies. All of the products will have a time frame that they work best on, but the Cloud can be used to trade any of them. Later on we will discuss what time frames work best for what asset classes.
Trading Options with The Cloud
I have been trading equity options for the past 12 years. While I often trade stock and other products like currencies and futures, I still consider equity options to be my bread and butter. When on the trading floor I didn’t use charts. I would focus all of my attention on order flow and implied volatility. After I left the floor and moved upstairs I realized that my trading plan would benefit from an addition of technical analysis. The Ichimoku Cloud has proven itself to be the most effective technical indicator I can use as an options trader. Here we will discuss how I apply the Cloud to my proprietary trading plans and why it works so well.
As an options trader, I base the vast majority of my trades on what I call ‘unusual option activity.’ Unusual option activity is a large block trade that takes place at a multiple above the average daily option volume in a specific stock. These unusually large trades are placed by large institutional market participants and can represent the flow of the ‘smart’ money in the options market. Simply put if I see big institutional players betting heavily on upside or downside in a specific stock, I try and follow that trade.
The key to trading unusual option activity is being able to infer what, if anything, the institutional trader’s underlying stock position might be. Remember that the majority of options market participants are hedgers. This means that orders cannot always be taken at face value. If I see a large put buyer it’s possible they are hedging a large long stock position rather than trying to get short. Likewise, when I see calls being bought, it is possible the trader is hedging a short stock position rather than trying to get long. Determining if a bet is speculative or a hedge is my number one goal when trading unusual option activity, and the Ichimoku Cloud helps me do this.
The Cloud is an excellent indicator of trend and the strength of the trend, so when I am trying to determine the motives behind a large block trade, I see the Cloud as being extremely helpful. If the Cloud is indicating a strong bullish trend in a stock that I see puts being bought in, it is much more likely the institutional trader is hedging a long stock position. When I’m trying to determine if a trade is speculation or a hedge, I need to perform my analysis very quickly, in a matter of seconds. The Cloud helps with this as well. Thousands of trades hit the tape in any given day so I am constantly looking at charts of stocks I am seeing action in.
Being able to determine if a stock is in bullish or bearish territory at a single glance is essential to being able to analyze stocks very quickly. Using the Cloud for trading unusual options activity really boils down to a single concept: if institutional traders are buying puts in a stock above the Cloud, I do not want to get short. Alternatively, if they are buying calls in a stock below the Cloud, I do not want to get long.
Using the Cloud to weed out all of the false signals and traps has greatly increased the profitability of my trading plan. The Cloud helps guide me into the best possible set ups. While I’ve given only a handful of examples of how I apply the Cloud to my trading plan, I truly believe the Cloud is versatile enough to work for anyone.
Using the Cloud to Trade Stocks: When using the Ichimoku Cloud to trade stock, one of the most important considerations I must make is deciding what time frame I must use. Generally, I believe stock trades best with the Cloud on the daily chart. This is not to say intraday equity traders cannot still use the Cloud successfully. However, it will produce more traps when used on tighter time frames.
The Cloud for the Day Trader: Using the Cloud on an intraday basis can show a trader where intraday levels of support and resistance are. A day trader can also use the Cloud to find the highest probability setups.
The Cloud for the swing trader: Using the Cloud can help the swing trader avoid trading against trends and can help steer them away from stocks that are in neutral territory. Using the Cloud can also point them to stocks that are near breakout points.
The Cloud for the long-term trader: Using Cloud pullbacks can point out opportunities to enter or add to positions. The long-term trader can use the Cloud to determine when it is time to exit a position. Since the Cloud is forward looking, the Cloud can also give a heads up before trend might turn the other way.
No matter which of the above categories you might fall into, you will be able to benefit from using the Cloud. As a trader I mostly fall mostly into the first two categories. Most of my stock trades are either day trades or swing trades. Using a shorter time frame may change the way I use the Cloud but the basic concepts stay the same. I use the support and resistance levels the Cloud provides as levels for stops or profit targets. The Cloud also tells me when I should enter or exit a trade. Look at the image below and take note how the Cloud provides me with my entry and a level to place a trailing stop.
Look at this older setup in AAPL:
These same levels can be used on any time frame. The chart above is showing AAPL stock on a daily chart, but I would be looking for the same things on a 15, 5, or even 1-minute chart. The time frame I’m using can also depend on the product I am trading. Some securities trade much faster than others and require a shorter time period chart. Likewise, some securities are slower and produce too many traps on a lower time frame chart. In the next section, we will discuss how to determine the best ways to use the Cloud no matter what product you are trading.
The Best Way to Use the Cloud
The setup described above can be used to trade breakouts in any product on any time frame but a trader must understand which time frames they should be using for each individual product type. As we have explained previously, the Cloud is one of the most versatile technical indicators available. Its applications are wide and as long as a trader realizes what the best uses are for the Cloud they can easily apply it to their trading plan. Even though the Cloud can be used for trading any security it is not a ‘one size fits all,’ indicator. If used on a less than optimal time frame for a specific product, the Cloud can produce many traps. A trader must always consider what they are trading and how fast that security tends to trade. Below we will explain the use of the Cloud in several of the more popular products traders trade.
Stocks- The best signals come from the daily chart. Using the daily chart will provide the best setups for swing traders and longer-term players. Stocks can still be day traded using the Cloud, but on an intraday time frame, using anything faster than a 15-minute chart will produce many traps.
Currencies and Currency Futures - Trade best on a 4-hour bar. Currencies trade very well on the Cloud but as with equities, the Cloud produces the best signals on a longer time frame. The Cloud can be used for intraday trading of currencies but using anything faster than a 15-minute chart will have the potential to produce many traps.
Crude Oil Futures- Trade very fast. When trading crude oil futures or any other fast moving product we can still use the Cloud on shorter time frames. A trader can use a chart as fast as the 5-minute bar and still be effective with the Cloud.
Treasury Futures- Treasury Futures often trend well intraday. A trader can use the Cloud very well when trading these. Time frame depends on the specific product being traded. In general, products that tend to trend rather than sit in a range are the best products to trade on the Cloud.
There are several considerations a trader must make when using the Cloud. The Cloud can be used on any product, but in general we want to focus on trending products. Keep in mind that one security might trade differently on a different time frame, and we must always consider this when using the Cloud.
Look at the short side breakout example below:
SUMMARY
We always say that there are no shortcuts in this game. There is no such thing as a sure thing. All we hope for is a way to increase our chances of success. After more than a decade of trading experience I have learned exactly what tools I am able to make the most of and which strategies and resources don’t work for me. When I say the Ichimoku Cloud is my hands-down, most favorite technical indicator I am not joking. I’ve been using it for years and regret having not discovered it earlier in my career. It is one of the most versatile tools a trader can have access to and its ease of use and overall accessibility make it a great resource for traders of all skill levels.

Predicting Major Market Moves By Detecting the Smart Money
In today’s economic climate, investors are faced with a multitude of different sources of information, from Facebook, stock twits, business news, stock newsletters and anyone who is willing to give you their opinion – which is everyone.
Unfortunately, statistics show that over 85% of investors generally lose money. In fact, in a recent documentary I watched discussing the value of ‘experts’, it was reported “economists have studied the wrongness rate in economic journals and have concluded it’s very close to 100%”. In conclusion, “virtually all the studies published in economic journals are wrong”.
Therefore, how does an investor know how to find the true story of what is going on? More importantly how can you find good investment ideas knowing that the likelihood is that 85% of them will be wrong?
The most valuable method I have found to predict major market moves and capture significant profits is by tracking the smart money, how it moves and the key indicators signaling which way the money is flowing. In this e-Book we will discuss the ways in which we do this and key elements and checkpoints.
A complimentary workshop discussing the concepts and patterns discussed in this e-Book will be provided at the end.
MARKET STRUCTURE AND DYNAMICS
Firstly, to set the premise of the ideas set out in this article, we must first look at the nature of how money moves through the stock market in today’s modern age. It is currently estimated that as much as 80% of volume in the stock market is accounted for by buy and sell decisions made my computerized trading. These powerful systems of algorithms make investment and trade decisions almost entirely based on certain patterns. These patterns occur in the charts of a stock and follow extremely precise pre-determined buy and sell targets based on the relative rules for the algorithm being used. Often fundamentals won’t be factored into the decision making at all.
Love it or hate it, we therefore feel that regardless of what opinions we may have of the fundamentals of the market, or what we feel ‘SHOULD’ happen next, it is far more important to track what the patterns are saying. Once we know the pattern we can then utilize quantifiable indicators to look at what the’ smart money’ is doing. Based on this approach, we can observe how some of these techniques predicted the market crash of 2008 long before so called ‘experts’ even started talking about it.
We will break down the reasons into several categories.
1. THE POWERFUL PATTERNS
Upward Channel Break
The most easily identifiable pattern on the S&P 500 is that of the longer term upward channel which can be observed by looking at a monthly chart dating back to the lows of 2011. While this is an upward moving pattern the rules almost always dictate that after three touches of the support line there is a very high probability of a breakdown correction to occur. As indicated in the chart below (fig 1) it can be seen that we have indeed touched three times and on the fourth touch on the week ending Friday Aug 21st , we broke through support and have confirmed this bearish move by rallying back to this line and being unable to break above it.
This ‘Rule of Three’ not only applies to upward channels but also to other highly traded patterns such as ascending and descending triangles, head and shoulders, rising and falling wedges and almost all other oscillating patterns.
Often investors are sucked into buying support they have seen touch multiple times feeling the more times support has been respected the better, however, it is quite the opposite. By understanding this rule, we can anticipate when big money is about to step in and short the stock and avoid getting sucked into buying into perceived support at the worst time.

Predicting Major Market Moves By Detecting the Smart Money
Head and Shoulders
While this pattern is harder to recognize for many beginner traders, this pattern is one of the most highly probable and profitable bearish patterns to occur in a bull market. Normally signaling the top of the market is what makes it so effective. This is a pattern designed to fool investors and traders into thinking the stock is making new highs resulting in investors being lured into buying the stock right before it begins its downward decent.
A head and shoulders pattern is characterized by a stock creating a symmetrical triangle up and down forming the left shoulder. This is followed by a larger symmetrical triangle representing the head and then a final right shoulder triangle usually of equal size and shape as the first. When this forms, it is assumed the stock/index will then breakdown to the amount of at least what the measurement of how large the head was. Also note that the breakdown occurs after three touches of the support line.
In the market meltdown of 2007-2008 the top of the market was characterized by a series of this exact head and shoulders setup. (see fig 3 below)
In other words, experts and news aside, the ‘chaotic’ breakdown of 2008 was in fact a drop that was highly predictable and in fact where it dropped to and where it reversed from were levels that were almost exactly what the pattern of the head and shoulders had predicted. This illustrates how vital it is to understand the role such a powerful pattern plays in predicting big money moves.
An example of how this pattern can be applied in current markets we can use it to observe the way the S&P 500 has been currently moving in recent times. As you can see in the chart it appears to be forming the beginning of yet another head and shoulders pattern and is perfectly timed with the other factors we will discuss later. If this were to continue, we have projected out what this would look like over the months to come. This would mean a likely 1600 target level on the S&P 500 at some time during the first or second quarter of 2016. These are rough measurements used but a prediction of what a head and shoulders would look like if this pattern were to confirm by breaking down from the area displayed in the chart.
A break much above the 2000 level would indicate a failed head and shoulders and that smart money is going a different direction. This would indicate us to go long and could see a test of the 2,100 level or a retest of the upward channel at 2,250 as it extends upwards to the right.
Understanding the Patterns of the chart is one of the most vital aspects of trading in being able to determine where the money is moving and also tells us the key levels at which the pattern dictates us to buy and sell with highest probabilities.

Predicting Major Market Moves By Detecting the Smart Money
2. THE SMART MONEY
A) Money Flow
There are two critical factors that we as technical analysts observe to track where the smart money is going. The first is an indicator called Twiggs Money Flow and is similar to Chaikin Money flow with a few adaptations to account for gapping and some other factors.
Developed by Collin Twiggs, it is a method of tracking if a stock has the key factors that define a true uptrend.
These qualities include:
· price making higher highs and higher lows
· higher amounts of money or volume trading in the stock each day
· closing higher and higher in its daily trading range
· whether the range is expanding or contracting
If all of these qualities are in play traders agree this confirms an uptrend is truly in place and therefore the smart money is likely accumulating a position in the stock/index the indicator is applied to. If this is taking place the indicator will rise in value and continue to make new highs along with the stocks movement.
However, if we see that the levels of the market or a stock is increasing and this indicator is in fact going the opposite way, it could quite likely indicate that a bubble is building. This is called the distribution zone and means the rally that the stock or index is enjoying is likely the smart money off loading their positions to the public before a big drop takes place.
Inversely, if we see that the price levels of a stock or the market are dropping but the Twiggs Money flow is moving opposite this, in the upwards direction, than this indicates accumulation is going on an a possible strong reversal could be coming in the stock.
So let’s apply this indicator to the previous scenario discussed regarding the Head and Shoulder pattern during the market crash of 2007-2008 . See below a chart of the S&P 500 with the Twiggs Money Flow indicator charted underneath the stock. Note, that as the market climbed higher and higher, eventually going into a sideways movement and then the head and shoulders pattern, the Twiggs Money Flow indicator was actually making substantially lower highs and lower lows and diverging (moving the opposite way).
Now if we compare that to a weekly chart of the S&P 500 you will notice a strikingly similar image.
Of course we do not only apply this to the market but also for also for finding highly potentially powerful moves in stocks.
We will discuss some recent trade setups we alerted our students to recently where the Twiggs Money Flow played a key role in being able to predict the major move in the market.
In the below example you can see a chart of BBOX where you will notice a strong downtrend in place from the 21st of October 2015 onwards and you will notice that the money flow was dropping along with it. However as of the 17th of December all of sudden the Money Flow takes a sharp change to the upside and continues to make higher highs and higher lows as the stock continues to decline.
This divergence tells us that accumulation is going on and that the smart money is starting to shift in the bullish direction. Now of course the trick is to pick the right timing for entering this trade. This perfect entry point occurred on the 2nd of February. Not only did the Money flow continue to diverge, but it also crossed above 0 making it an even stronger signal. At the same time we also had perfect pattern confirmation with the stock breaking its downtrend line as well as the 9 day exponential moving average and the 20 day simple moving averages that were previously holding this stock down. The resulting move produced almost a 50% profit for anyone entering the trade.
This divergence can also occur over a shorter period of time. For example below is a trade we took on BCRX. After a massive drop the stock was going sideways yet the money flow was going up sharply. We therefore took advantage of getting into the trade on the 2nd of March. If you were a stock trader and entered in at the open this would of a resulted in a 20% intraday profit. Instead we opted to go for the June $2.00 calls which had a 60% intra-day move.
Now let’s take a look at a short setup. In the chart below we see a similar type of setup on LGF but with the opposite occurring. As you can see from the 23rd of June 2015, LGF continues to climb higher and higher in an upward channel. Now of course as we discussed earlier in this book we have already identified that an upward channel while it movies in an upward trend actually warns us of an impending break to the downside making it in fact a bearish pattern.
Notice as the stock climbs higher and higher in its channel the smart money is in fact moving completely the opposite way. Once again the key is timing the trade and what you will notice in the chart below is that LGF touches the bottom trend line a total of three times (re-enforcing the value of the rule of three) before breaking below it strongly along with the Twiggs Money Flow breaking below 0.
This was not only a great potential stock trade but a trade where we alerted our students to the value of purchasing long dated put options on the stock that have since moved over 1000% as the stock dropped from $38.00 to its recent low of $18.00.

Ichimoku Kinko Hyo crosser EA
Final
Dec 04, 2016
USDJPY H1 - kumo threshold 120, failsafe 0, orderstoplossrisk .02, atr multiplier 2, risk 2
Profit margin on H1 of USD/JPY: 2.17, GBP/JPY: 1.96, EUR/JPY: 1.77