Understand the Rejection and Attraction Zones, and Make Great Trades

Learn How to Use Price Distribution to Identify Good Trades and Avoid Bad Trades.

A strong comprehension of the levels to which the market is lured and/or rejected gives a significant trading advantage. I’ll show you the market research and trading ideas that Wall Street institutions spend thousands of dollars every month for!

John Forman, your instructor

Dr. John Forman is a PhD candidate in Behavioral Finance, with a focus on the performance of individual (retail) traders in financial markets. John has almost 30 years of market experience, both personally and professionally. He worked as a market analyst for Thomson Reuters for many years (pre-merger), covering virtually every market. John is the author of Trading Essentials and Trading FAQs. He’s also written hundreds of articles for trade periodicals and has been on TV and radio appearances.

Here’s a recent example of my S&P 500 futures analysis and trading approach, right from the service for which I write every day.

Squawk Box from Thomson Reuters:

For today, we’ll start with a bracket ranging from 1347 to 1370. The former is the point of control from yesterday. The latter is made up of the high end of last Thursday’s value area and the low end of last Wednesday’s. As such, that is a critical level. As a result, we’ll be sellers against it, with a halt around 1376.

We’ll try to purchase an approach to the 1347 low end of the bracket with a halt at 1342 to start the day.

Take note of how the market instantly rose to the 1370 level following the opening bell and then reversed. It subsequently fell to 1347 around two hours later (30 minute bars) and bounced from there.

Traders would have profited from both of those calls!

After the 1347 eventually gave way later in the day, I suggested that the 1330 was the next significant bottoming region. As you can see, that did happen, not once, but three times.

How many points did that analysis get you? It depends on how you want to exchange it, but it should be at least 20 and perhaps up to 40 or 50. If you trade S&P futures, you realize that’s a profit of at least 20%, if not 50%, on your initial margin need in only one day!

Granted, 40-point ranges in the S&P don’t happen every day. But what if you could merely get 5 points every day? That’s around 10% of your profit margin. Many traders have done incredibly well for themselves by doing exactly that.

Works in every market and in any time period.

Are you not a stock market trader? Or perhaps you don’t trade in the near term. Not to worry. In my personal trading, I cover a wide range of markets, and I can assure you that the approach I’m about to present you…

Here’s an example of a forex trade I executed for myself using the same strategy.

This exchange was actually taking place during my vacation. I put it on before I went, and when I returned, I’d booked almost 500 pips!

Based on how markets actually function.

Most traders seldom pause to consider what is occurring at the most fundamental level when prices fluctuate and deals are executed. That indicates they don’t fully comprehend what true support and resistance entail.

The charting approach I’m talking about is known as Market Profile®. I’ve also seen it called TPO Charting, Volume at Price, and a few other things. For the sake of simplicity, I’ll just name it price distribution analysis. Unfortunately, few individuals have had the opportunity to experience it.

This price distribution methodology is, at its heart, a charting method that, as the name says, concentrates on price dispersion (and volume for markets where that information is available). It employs no indicators. This is not a trading system. Please keep that in mind.

The market strives to optimize transaction flow through pricing, and charts are often the most effective method to display price change over time. We can understand how the markets move prices to meet their demands, and hence the needs of traders and investors like ourselves, by looking at the charts.

And we can see where the market is likely to move next by looking at those charts.

Make the most money from each deal!

It is much easier to trade when you know where the market is likely to go – where the big support and resistance levels are. You can better manage your trades and get the greatest profit from each position. This is one of the simplest ways to profit from the strategies I’ll be sharing.

I started using this process approximately 15 years ago as a market analyst and I enjoy it more and more every day!

What I’m going to show you is what I use every day to identify critical price levels – the ones that the market will always gravitate toward. And every day, I see them get struck. It’s incredible to witness it happen again and time again. My coworkers say I frequently shake my head at how well this thing works!

Find the turning spots!

Have you ever wished to buy low and sell high?

You have, of course! We’ve all done it!

But how frequently can you say that you have? It occurs to me more frequently than you’d think possible when I use this strategy.

Here’s another recent instance:

Squawk Trader on Thomson Squawk Box

To begin the day, we plan to fade the bracket’s margins in anticipation of a somewhat narrow day. That means selling the 1356 approach with a halt at 1364. It also involves purchasing as 1335 approaches, with a stop around 1330.

Do you want to bet on what happened?

That’s correct! Readers would have sold at the top of the market and bought at the bottom. They might have sold at the highest price twice!

Choose excellent trades!

As traders, we are constantly on the lookout for fantastic trading opportunities where the benefits clearly outweigh the dangers. That is the entire objective of the methods I employ and will share with you.

It all comes down to asymmetric risk.

This implies that the risks are obviously skewed in your favor. The majority of that comes from understanding where the market is likely to go and where it is likely to turn. With such information, you may have a good notion of how much you need to risk on a particular transaction and how far it’s likely to go in your favor. You may then only accept deals that provide the most bang for your cash!

Easily determine Support and Resistance Levels!

Many traders are perplexed by the concept of support and resistance. This form of price movement analysis makes it SO MUCH EASIER!

But it goes beyond that.

Some levels are likely to be rejection points, while others will behave as attractors. What I’ll show you will make that plain to you. It will provide you with a far deeper grasp of support and resistance than you ever imagined possible!