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بسم اهللا الرحمن الرحيم

Trading The Fork

Trader's Manual 1st Edition - June 2006

Author:- AHMAD TAWFIK

Alias:- Summerset

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INTRODUCTION "If Money is Yr Hope for Independence.

You Will Never Have It. The only real Security a man can have in the World is a Reserve of Knowledge, Experience & Ability"

HENRY FORD.

Good Morning / Evening / & Night

I am sure you will be reading this Book through all of these times over & over again. The aim will be to get you to become a proficient trader within 4 month. A Good one within 6, and -Finally, a confident, consistently profit sustaining professional within a year. The time lapse between the 4 6 month & 1 year, is the minimum time required to create a portfolio of the currencies you will be trading, and to attain confidence, & profitability through daily practice on a demo platform.

Knowledge – Experience - & Ability – stated in the proverbial box above, are the trilogy you will need to become a consistent profit sustaining professional trader.

Knowledge deals with the system you will be using. Which in essence is the very purpose of this manual. Its prerequisites are dealt with from Chapters I III.

Experience accumulates as the trader demo practices. The professional implementation of doing this will lead to building a successful trade behavioral pattern. The system and its implementation are dealt with under Chapter –IV.

Ability is the confidence & steadiness' during execution. This depends

largely on trader's MINDSET. This one element is of paramount importance to successful trading.

It is saddening to see beginners staring at computer screens for hours to no

end, presumably waiting for opportunities. Watching them materialize & go by. But actually paralyzed & doing nothing. Simply because they approach the market with the mindset to trade Everything, And not with a specific focused setting of what they want to catch out of it.

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Chapter-V deals with the trader's mindset required to approach day trading, and position trading alternatively in the focused objective manner desired for each.

This about caps all you need. At the end of your reading & practice. You will have digested and built in a powerful, profits generating discipline.

Please use it Wisely & Well.

Summerset

To Prolonged Health & Wealth

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CH-I

FORK ANALOGY

"What is the Use of Running,

When You are not on the Right Road!!"

German Proverb.

ANDREWS FORK

Exactly, you need to be on the right road, and in the right direction. This is the primary function of the Fork. Andrews pitch fork concepts have been treated by many distinguished traders. Timothy Morge, & Patrick Mikula, are - but to name two.

Fork concepts employed here are almost all derived from the Patrick Mikula hand book; "The Best Trend line Methods of Alan Andrews, and Five New Trend line Techniques." A complete version of which can be purchased at http://www.mikulaforecasting.com/books/aabook.htm

FORK PRICE ANALOGY –FPA

All price/chart action is composed of price bars reverberating between fork medians, and then breaking out, from one fork to another.

Forks are composed of 3 lines containing price action on a chart. One line drawn through the average (Equilibrium price). Another tangent to the former highs (Resistances) & the 3rd tangent to the lows (Supports).

According to Andrews, price reverberates too & fro between the 3 levels, keeping 80% of the time close to the median (Equilibrium) price.

Traders use forks to tune price action, and calculate market entries & exits from them. This way the trader can clearly see the road. But still has to guess the direction. To do that he still needs a signal.

Our system, gives this signal through Wcci patterns. Which are preferably taken at the fork median extremes. And at times taken at the fork's action/reaction lines close to these extremes. Call such signals the traffic lights you see at cross roads or turnabouts if you will. The system also uses moving average oscillation configurations, to verify that price will have enough potential (fuel) to "run" in the signal's direction.

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DRAWING THE FORK – TECHNICALS

To run the correct road. The trader must first be proficient in drawing the correct fork to use. The following technical rules are used in order:-

1- On the daily frame, plot out the modual lines. 2- Modual lines are straight lines separating main support & resistance

platforms that cut across time & space. A modual line is identified by the fact that, it not only separates support from resistance, but also turns support into resistance, & resistance into support from this point onwards.

3- Modual lines need not be running parallel to one another. 4- Chart –A, on page (3). Shows modual lines spanned out on the daily

Euroyen chart. Note that the modual lines chosen are not parallel. The choice of the support and resistance points through which they run, is principally utilized by the trader's visual discretion. And as such, the drawing of modual lines are considered more of an Art, than a rigid science.

5- Chart – B, displayed on page (4). Shows another example. This time for the Eurodollar daily frame. In this specific case, note that the lines are parallel. Again this is a matter of trader's discretion.

6- Chart-B, proceeds further to show, how pivotal candle spike highs or low bars are chosen off the drawn modual lines to act, as the start points, out of which the fork's median line will be constructed.

7- As shown on the chart, it is possible to choose more than one potential pivot bar to draw several fork's median lines from. Again, it is left to trader's discretion to use the bar – he deems most influential. That which would project a median & throw a fork that contains most (if not all) of the current price action, contained by its upper & lower median lines.

8- It is also accepted as future price bars unfold to switch from one pivot bar & median to another one, that could prove more suited for newer price candles to be contained. This is called Fork Rectification.

9- After choosing the median line's pivot bar. Two other pivot bars regarding the fork to be constructed are chosen. These are usually the latest high exhausted bar, & latest low exhausted bar made, by the price action, that will be "fork" contained. – See Chart-B.

10- Having chosen the necessary pivots. The fork's median is projected from the median pivot, and runs perpendicular on to a line joining the pivot bar high & pivot bar low of the fork to be constructed. The median must pass through the mid point of this line, and extend further out into space.

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11- Next the upper & lower fork lines are drawn parallel to the constructed median, and tangent to the extreme high & low pivot bars chosen above in (9). These lines too are to be extended out in space.

12- This way a fork is born. – See Chart-B, on pp/4, above. This process is usually auto drawn, by using the fork projection icon on the MT4, or other charting software.

13- The same scenario is repeated, to plot out the Euroyen forks, running off the modual lines shown on Chart –A. See Chart –C, page/6 detailing this.

14- Chart-D shown on page/7, shows the modual lines for the Aud/Jpy pair (dotted light blue lines). The pivot (P), just prior to the modual lines central formation is chosen to draw the red fork show. Its is clear that buy opportunities arising at the fork's lower median must be seized (Green arrow). These are fine tuned by picking Wcci entry signals of a shorter time frame, but consistent with the CCi graph shown on daily frame. Wcci signals will be treated in depth under Chapter – III.

15- Chart-E shown on page/8, shows modual lines for the Chf/Jpy pair (dotted lines). Controlling forks are drawn as shown in black & blue lines. Here however, there is a potential H&S formation showing above the red modual line. Entries at the Black lower median must be taken cautiously because of the H&S formation. The trader would here by stand down Wcci signals, that run counter to the formation. And amplify his magnitude for positions taken on Wcci signals that run confirming with the formation. The forks & their action/reaction lines in this case will be establishing the coming trade entry, confirmation, & exit potentials. These are the roads the trade will run, once a Wcci direction signal evolves.

FORK TYPES

Having finished with the technicality of fork drawing. We now move on to the types of forks drawn to maneuver price action.

Two fork types are principally drawn on any time frame.

A- The longitudinal controlling fork B- The traversal fork

1- The longitudinal fork (upwards or downwards) must contain all current short /mid term price bars. As explained earlier, the longer the time action absorbed by the fork, the stronger & more reliable it is.

2- The Traversal fork is projected from high/low pivotal bars, of the latest or most significant, macro price fluctuation that would yield a fork perpendicular to the current short / mid term action longitudinal fork.

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3- For the analysis to give a correct and comprehensive indication of the bull / bear possibilities regarding price action. Each of the two forks must be running in reverse direction to one another. (i.e.:- if the longitudinal fork is sloping downwards, the traversal one must be upwards, & vise versa).

4- When price breaks out of one fork, into another. It’s a strong signal that there is a Fundamental change in the trend. –See Chart-F (pp/10).

5- In the example shown on Chart-F (pp/10), price is running in the Upper segment of the Upwards Longitudinal fork in dark blue. This controls price's uptrend. While the red traversal fork controls its downtrend.

6- When price breaks out of the dark blue fork median, unto the lower segment of the dark blue fork. It’s a signal of weakening prices, and a bearish sign. Which is further confirmed when price breaks out of the lower dark blue fork median too.

7- The red downward fork is now controlling price. 8- This is however short lived as price breaks out of its upper median, &

supports on it. The bull trend is back in earnest. And a new light blue up trending fork is drawn & rectified, as price keeps making newer pivots. A new red down trending fork also comes into play, once price breaks lower out of the light blue fork's median, making new pivot lows.

9- Woodies CCi signals would be vital in determining direction during such out breaks from forks.

ACTION/ REACTION LINES– AR

Price will not reverberate straight up or down between the upper / lower medians of a fork. It will stall, (take breath & gather momentum), or retract at midway 38%& 61% Fib levels drawn in between the fork's medians. Such lines are called action/reaction (AR) lines.-See Chart/G – pp/11

RULES oF ENGAGEMENT - AR LINES

1- Note divergences on 4hr & 30-min frames & give them precedence. 2- Note if price had been keeping in the past action to the higher or lower

zone of the fork. (Above or below the central median line). And keep directional bias to staying with this zone.

3- An AR line that has been acting as a resistance to price in the past will continue to act as a resistance in future, until its broken. Then it will reverse from a resistance to a support. Similarly, an AR line that has been acting as a support to price in the past will continue to act as a support in future, until its broken. Then it will reverse from a resistance to a support. This is a VERY IMPORTANT & BINDING RULE.

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4- (Chart/G) above (p/11), for Eurodollar daily, shows implementation of this rule in particular.

5- This is the principal prerequisite for the trader to take into account when regarding an approached 38%-61% AR line as a support or resistance. However, the trader will only enter trades at such lines with the Wcci signals given.

6- The region between the 38% 61% AR lines is regarded as were most of the intraday noise is expected to occur. The trader will stand down, if not already engaged. Or only engage the extreme external fringes of the 38% & 61% AR line.

7- The 38% & 61% Fib parallels are considered entry & target lines for recurring fluctuation / retraction trades to & from the central median line. And also to & from the upper /lower median lines.

8- Chart/H- pp/13- shows implementation of these rules (3,5,6 & 7) on the shorter 4hr frame for Eurodollar. Note the red crosses marking areas were an AR line was broken as a resistance & turned into a support from this point onward. Such areas are usually marked by a strong ghost, famir or vegas Wcci signal. At times such AR line breaks are marked by compound (more than one), Wcci signals in the same direction on a shorter time frame. This will be detailed in Chapter IV.

9- In Chart/H,- pp/13- note the subsidiary (secondary) longitudinal & traversal forks drawn to cover intraday price highs & lows. Many traders will be tempted, to run such forks, believing they will give them clearer vision regarding the intraday action. This complicates the analysis and usually leads to confusion. As such, the system applied here advocates the use of 1-2 Master forks with multiple AR lines running to take the Wcci signals off them.

10- If subsidiary forks are drawn however, the same technicalities of fork drawing & AR lines apply.

TAKING CANDLE SIGNS AT FORK MEDIANS

Other than taking Wcci signals at fork medians & A/R lines. Certain candle signs typically form at medians & AR lines. These should be taken as confirming signals of direction, when occurring or compounding at medians or A/R lines.Charts I & J, pages 16&17, show how candle signs are applied to aid the trader regarding direction.

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A- FULL STOP CANDLES

Candles with small real body & little or zero shadow. They signal the stalling of price action from continuing in the original direction. This stalling can be followed by continuation in the same direction or reversal to the opposite direction. Full stop candles occur typically at A/R lines. And take the forms of spinning tops, morning stars, evening stars, and doji stars. They ideally recurr running for (8-10) candles, before price breaks out in a specific direction.

Wether, full stops will be followed by continuation or reversal, is not the issue to

focus on. The important thing to do is to buy / sell the 1st fully formed candle that breaks out of a row of full stops.This is a very strong indicator, signaling which way the price has decided to continue after stalling. The trader however, must wait until this breakout candle is fully formed, and then buy / sell its mid point or 1/3, 2/3 fib, in the next forming candle pending its completion. This implementation procedure is of supreme importance.

The examples below show typically what is meant by a full stop candle. And how it can take the form of a spinning top, a doji, morning or evening star.

Bear momentum killed Bull momentum killed

Reverse outbreak Bear

Doji Star (Bul) Doji Star (Bear) Evening Star

Reverse outbreak to Bull Reverse outbreak to Bear

Reverse outbreak to Bull

Morning Doji Evening Doji Morning Star

B- SPIKE LOWS &HIGHS

Candles that are defined by a small real body + long shadow or wick. These can be Dojis, hammers, hangmen and shooting stars. Appearances of which are displayed on page 15.

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Shooting starsInverted

Shooting Star Shooting stars & Inverted Shooting Stars, mean that Market is unable to attain

new highs, (up shooting), and unable to push lower (down shooting). Spike highs & lows including shooting stars are strongest as signals, when

occurring at the median high / low. Or the 23%AR low, or 76%AR high of the fork. In such instances they should be immediately bought into. At such times even were they may not be accompanied by Wcci signals.

Again in this case, wait until the spike candle is fully formed, and then buy

/ sell its mid point or 1/3, 2/3 fib, in the next forming candle pending its completion. This implementation procedure is important.

Cases were spikes form at other AR lines, must be treated with caution.

Specifically between the 38% & 61% AR(s), were most of the intraday noise & broker stop hunting is likely to occur.

C- ENGULFING CANDLES & TWEEZERS Usually when there is consolidatory candle action upon an AR. Or partially

above / partially below it. And all such consolidatory candle action (several candles) lie within the highs & lows of one flag mast candle ( called the Engulfing candle) And resting on the AR.

When such consolidatory action shows signs of ending with a full stop candle, or

a spike candle. Then the direction has been set in the original direction of the flag mast (Engulfing) candle. In this case, buy / sell the close of the engulfing candle +/- spread & 1pip. Use a limit order. Examples are shown on Charts (I & J)- Pages 16&17.

Tweezers are two consecutive candles with equal or close to equal size &

opposite directions. The same rules of engagement apply as for engulfing candles. They are considered a super strong signal if occurring at a median.

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FORK FORMATS

By switching his charts to a smaller time frame after drawing the daily forks. The trader is able to automatically superimpose the daily forks on to the 4hr chart. Or any other lesser frame for that matter.

This unifies all Median & AR lines containing the price action, regardless

of the time frame the trader is looking at. The technical guidelines to drawing forks & their practical applications

have been covered. We now move on to means of determining exact trade entry points below/above fork medians & AR lines.

SECTION END

To Prolonged Health & Wealth