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THE TRADERS’ MAGAZINE SINCE 1982 www.traders.

com AUGUST 2015


NOVEMBER

Vote Now!

SIMPLIFY IT
By using this simple,
logical trading system 8
SEE PAGE 2 FOR DETAILS

ENERGY PATTERNS
Finding the strong energy
areas in price charts 12

BREAKOUT TRADES
Techniques to maximize
proits 16

INTERVIEW
Howard Bandy 28

10 PRINCIPLES
OF SUCCESSFUL
TRADING
What to have in place 60

REVIEW
n Little Big View
NOVEMBER 2015
12 • November 2015 • Technical Analysis of StockS & commoditieS
CHARTING

The Reality Of It

Detecting Energy Patterns


It’s all about identifying strong energy in support reality. It’s something you can see. For example, you
& resistance levels on a price chart. Here’s one tool can watch moving averages or wiggly lines going
that helps uncover the strong energy of support & up and down in an oscillator. These things exist
resistance, giving a trader more clarity when it comes because someone created them. My thinking is that
to making trading decisions. these creations are based on an idea that stems from
energy.
has been over 30 years since I authored my Everything is a form of energy and as we watch charts
It book How To Make Money In The Futures unfold, we may be watching energy express itself.
Market & Lots Of It! I wrote it to keep myself In the chart in Figure 1 you see a technical analysis
from iddling with a longer-term trade in silver at chart. Price is not contained within an expression of
the time. It is with great enthusiasm that I offer this itself or immediately within a form of actual energy.
article containing the irst look at my new form of This sort of chart is typical of what you’d see when
technical analysis. viewing technical analysis journals or other technical
analysis sources. But a simple chart should express
What is reality? energy within itself, and the mind thereafter uses that
Reality, presumably, is something you perceive. You energy as an expression of itself. Words are not needed,
can imagine any number of things. You think what since they are merely an expression of ideas.
you think, not knowing why you think the way you For example, when you see a bar chart of housing
think. You do what you do without knowing reality, starts, it’s an expression of energy based on yearly
what creates you, not knowing that there may be a ield data. Housing starts are not traded. They merely exist.
out there, some moving point like a lightning strike. Similarly, when you look at a sunspot cycle chart, each
All these create the reality you
perceive. You create reality.
Say you have a seed in your
hand. You put it in the ground.
Water arrives and the seed
grows. What made the seed
grow? Was it the seed itself,
was it your hand, was it the
earth, or the water? The point
is that something did.
Similarly, a human mind
came up with the idea of
technical analysis. A reality
was formed. You get used to
tying your own shoelaces, or
INGA POSLITUR

wearing a particular hat on


your head. You create this FIGURE 1: A TYPICAL CHART. It’s difficult to identify where the energy is on this chart.

by Charles Drummond
November 2015 • Technical Analysis of StockS & commoditieS • 13
NINJATRADER
FIGURE 2: ENERGY IN MOODS. Here you see a chart that expresses
moods on a scale of 1 to 10, where 1 represents “feeling awful” and 10
represents “feeling great.”
FIGURE 3: CONTAINING ENERGY WITHIN ITSELF. Here you see a simple flex
renko bar. Each bar is an expression of energy.

bar on the chart is an expression of energy. You can say the


same thing about charts based on astrology. Those price bars The objective of the Drummond Energy Bands that you
are created based on price occurring at speciic times when see displayed on the charts is to uncover this strong energy
certain planets are aligned. of support or resistance ahead of time. Knowing these strong
One day, I decided to rate how I felt in terms of mood based leans (or walls) of support or resistance in advance allows you
on a scale of 1 to 10. If I felt awful, I would assign my mood a to have clarity in knowing where the energy is coming from.
1, and if I felt great I would give it a 10. You can see a display In this way you can be proactive in your approach by reducing
of this in Figure 2. Each bar represents one hour of time and confusion and stress. Your only job then is to be aware of the
is an expression of energy. lean, wait, and choose to join the market participants as they
I am beginning to understand how external energy reshapes react to the lean’s strong energy.
the brain. It’s still a relatively new topic that falls within the
realm of neuroplasticity. Thus, I consider my approach to here are some examples
technical analysis—that all is based on energy—to be fresh out Let’s look at some examples of how all of this plays out in the
of the gate, so to speak. And given that it is new, I also expect same way for trading stocks or futures. This type of visual
some challenges. analysis (what I call Visual Energy Analysis or VEA) works
on exchange traded funds (ETFs), forex, and options in an
it’s all about energy identical, simple, and powerful way.
I realized that all technical analysis can be contained within The daily chart of Walt Disney Co. (DIS) in Figure 4 shows
energy itself and simply expressed this concept to the mind in a that on June 10, 2015 there is an expression of energy generating
simple, unchanging way. Think of the “pretty colors” you see on a buy trade setup (we call it a “Powermid”). The weekly lower
the charts in Figures 3 to 5 as energy contained within itself at energy band (drawn in small, dashed magenta lines) is energized
all times. For example, in Figure 3 you see a simple lex renko up with the white dotted line we call the midline. The rather
intraday bar, which is an expression of energy. A vertical green large dashed purple lines are the monthly upper energy band
or red bar is contained within the energy that creates it. providing temporary resistance, causing DIS to return back
down to the weekly Powermid for a refresh up via the buy
setup, as this stock is very bullish.
A chart is an expression of The daily chart in Figure 5 of the S&P 500 September futures
contract (ES) is currently experiencing congestion action
energy. Your job is to uncover about its weekly energy bands. If prices were to move down
that energy of support or to approximately 2,000, there will be a trade setup waiting
resistance ahead of time to and ready on the monthly time frame at approximately where
reduce confusion and stress. the white up arrow is. The weekly white, dotted midline is

Continued on page 45
14 • November 2015 • Technical Analysis of StockS & commoditieS
FIGURE 4: BUY TRADE SETUP. Here you see that the upper energy band provides FIGURE 5: CONGESTION ACTION. Currently, price is weak and unable to even
resistance to the bullish price movement. reach the monthly upper energy band of resistance. Because of this, the buy trade
should be on your radar.

DRUMMOND / ENERGY PATTERNS horizontal lines are the lines of resistance. These lines are a
Continued from page 14 simple, precise, and powerful technique to visually spot strong
support & resistance energy in the market in real time.
not currently showing strong energy up, and the rather large
dashed purple lines above price are the monthly upper energy IdentIfyIng expressIons of energy
band. Currently, price is weak and unable to even reach this These patterns of energy and several others are found on all
monthly upper energy band of resistance. Because of this, the instruments and chart frames, such as lex renko bars, tick charts,
buy trade is on our radar. and even up to the yearly bars and beyond. Can technical analysis
To identify signiicant support & resistance levels, we use move toward a new direction—one that contains energy within
what we call crests and valleys. These crests and valleys are itself such as one simple graph, with price contained within
when the dotted midline either hooks up (for support) or down it, and clearly expressed? I sincerely hope so, since this is the
(for resistance) and then we patiently wait for price to return future of technical analysis and the frontier that we can now
to them. For an example of these crests and valleys, see Figure cross. We can observe energy, but the trick is to make it easy
6. The green horizontal line shows the valleys and the pink on the mind so it can be easily observed and interpreted.
Technical analysis needs to move
toward a graphical representation
of energy that is simply expressed.
Patterns exist within the energy
expressing itself. These patterns
can be observed and successfully
traded for proit.

Charles Drummond is a veteran


futures trader who has self-pro-
grammed the simpliication of his
life’s work on market geometry
into what he feels is a technical
analysis breakthrough, which he
named Visual Energy Analysis
(VEA). He may be reached via his
website at www.DrummondEner-
FIGURE 6: CRESTS AND VALLEYS. The green horizontal line shows the valleys and the pink horizontal lines are the gyBands.com.
lines of resistance. These lines are a simple, precise, and powerful technique to visually spot strong support & resistance
energy in the market in real time.

November 2015 • Technical Analysis of StockS & commoditieS • 45