A Systematic Approach;

Using Volatility to Create

Winning Trades

John Carter
www.tradethemarkets.com
 Background
„ I have traded actively for 17 years
„ Full Time Trader Since 1996
„ Started financial market research firm,
www.tradethemarkets.com in 1999
„ CTA and Principle in Razor Trading, a private
money management firm
„ Started off as stocks and options trader, now
trade mostly futures
A Systematic Approach;
Using Volatility to Create
Winning Trades
ƒ A large part of what dictates my intraday trades
is determined by the action of the key intraday
indicators that I watch. They are as follows:
ƒ TICK (measures net buying/net selling NYSE)
ƒ TIKI (measures net buying/net selling DOW)
ƒ Put/Call (measures the ratio of calls vs. puts)
ƒ TRIN (measures up/down volume on NYSE)
ƒ TRINQ (measure up/down volume on Nasdaq)
ƒ Sector Sorter List (measures sector performance
and overall market strength or weakness)
 TICK 5 Minute Chart

Audio Alerts at +/- 600, 800, 1000 and 1200 Ticks

 TICK TIPS
ƒ + or – 400 is noise and can be ignored
ƒ Pay attention over +600 or -600. If you are on
the opposite side of this close your position
ƒ If you are long and you get a +1000 tick reading,
close out your trade and take your profits
ƒ If you are short and you get a -1000 tick reading,
close out your trade and take your profits
ƒ Use +1000 or -1000 readings to open new trades
in the opposite direction of the tick
ƒ Look for higher highs/lower lows to confirm
trend
TIKI 5 Minute Chart
 TIKI TIPS

ƒ + or – 20 is noise and can be ignored

ƒ Pay attention over +26 or -26. This is indication
of a buy or sell program. Highest are + or – 30.
Only a massive buy or sell program can generate
a plus or minus 30 reading
ƒ TIKI is faster than the TICK. Early indicator.
Put/Call Intraday Chart (over 5 days)
 Put/Call TIPS
ƒ Look for extreme readings: Over 1.0 will put a “floor”
in the market – look to cover shorts and go long.
(Extreme put buying: Too many bears)
ƒ Under .50 will put a “ceiling” on the market. Look to
close longs and go short. (Extreme call buying: Too
many bulls)
ƒ Trend is important: You want the Put Call to move in
the direction of the market in order to confirm it.
ƒ Rising put/call in a rising market confirms the trend
(traders buying puts into a rally, gives fuel for short
covering), while falling put/call in a rising market sets
up a reversal (Vice Versa). TS symbol is $WPCVA
ƒ Wait until 10:00 a.m. to get an accurate reading as the
listed stocks need to all open for trade.
TRIN 15 Minute Chart (5 days)
TRINQ 15 Minute Chart (4 days)
 TRIN & TRINQ TIPS
ƒ $TRIN measures up/down volume (buying/selling
pressure) of NYSE, $TRINQ measures Nasdaq
ƒ General: Over 1.0 is bearish, under 1.0 is bullish
ƒ Not Important! What is important is the trend. Is it
moving higher (increase in selling pressure) or moving
lower (increase in buying pressure) from where it
started the day? The “trend of the trins” is critical.
ƒ $TRIN close over 2.0 results in bounce next day 9
times out of 10. No bounce? Market is in trouble.
ƒ Close under 0.50 results in selling the next day. No
selling? Bears are in trouble.
SECTOR SORTER LIST
 SECTOR SORTER LIST TIPS
ƒ Watch number of sectors that are green vs. red
(up vs. down) at any given time.
ƒ Often times while indexes consolidate, the
number of sectors up or down on the day will
change. This is a heads up as to the direction of
the next move.
ƒ Any move without the Banks (BKX), Brokers
(XBD) and Semiconductors (SOX) most likely
will not last.
ƒ Sort on a Net % change basis
ƒ Very useful when playing gaps (see gap plays)
Intraday Indicator Screen Setup
News & Updates Intraday Setups Swing
Email & Internet Setups

Backup Laptop with fully charged battery and regular phone line
Equipment Set Up Mentor Program
Squeeze Plays
ƒ Squeeze Plays are ways to measure the strength
and direction of the next market move.
ƒ Markets spend the day contracting and
expanding in terms of volatility.
ƒ Squeeze lets you know when the contraction is
ending, when the expansion is about to begin,
and in general which direction that expansion
will take place.
ƒ When I get a Squeeze Play, I will generally stay
in the play until the Squeeze is over – meaning I
will ignore the pivots for exit levels until the
squeeze STARTS TO RUN OUT OF GAS.
ƒ The Squeeze is a measurement of the
relationship between the Bollinger Bands and
the Keltner Channels with their standard
settings.
ƒ It looks for the times when the Bollinger Bands
trade in between the Keltner Channels.
ƒ They work on all time frames. I like the Two
Minute and Five Minute time frames the best.
ƒ Five minute signals are more powerful than two
minute signals, but happen less often.
ƒ On these charts, the red dots are the “heads up”
that the Bollinger Bands are now trading inside
the Keltner Channels.
ƒ The next “blue dot” is the signal that the
Bollinger Bands are now back outside the
Keltner Channels.
ƒ This is the entry signal.
ƒ Go short if the Histogram is negative (red), go
long if it is positive (green).
ƒ Stay in the trade as long as the histograms keep
making lower lows or higher highs.
Mini Sized Dow: Wed, Nov 3, 2004
Mini Sized Dow: Tues, Nov 2, 2004
Mini Sized Dow: 10/22 to 11/3
Mini Sized Dow: Yearly Chart
 Attitude of a Trader
„ Right attitude will make or break a trader
„ Biggest obstacles are Greed and Euphoria
„ Greed Kills: $10,000 account, $500 a day
„ When you then go for $750 or $1000, greed
takes over and mistakes kick in: overtrading, not
sticking to parameters, yelling at screen.
„ All you can eat buffet: no reason to overload
your plate on 1 trip; you can keep going back
 Attitude of a Trader (cont)
„ Euphoria is worse than Greed
„ Things are going great – so double up!
„ This is like being in a fantastic relationship with
a significant other. It’s going really great.
„ So, to make your life even better . . .
„ you start to date someone else as well.
„ This will only end in one way:
„ Badly: Develop a business plan and stick to it!
 •Live Audio Internet
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 Las Vegas Seminar Nov 13-16
„ Learn the same 12 trading setups we use everyday
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CD Rom: 22 Hours of Teaching and Live Trading
Q & A/Contact Information

John Carter
Trade the Markets, Inc.
jcarter@tradethemarkets.com
www.tradethemarkets.com
888-898-8118