21St Century Futures Special Report

21st Century Futures

21st Century Futures Special Report

TRAILBLAZER: Floor Trader's Charting Method Revealed!

By Mohan

In this report, I'm going to share with you a specialized way of reading charts that I use in my own trading. The original idea was passed on to me years ago by a former floor trader who moved "upstairs" because of his success trading with it.

Building on his ideas, I have added some features and rules which I've developed over the years through careful study. Having used this method in real-time for many years, I have a great feel for its nuances, and soon this will be true for you as well.

My Trailblazer method is offered here for use in conjunction with the trading setups from 21st Century Futures Morning Call. This charting method will definitely help you get on the right side of the market at the right time, and it will help you stay there.

This is always our goal at 21st Century Futures. If you can show a trader an effective way to stay on the right side of the market, then the trades will take care of themselves. Don't be surprised at the simplicity of this method, or how it may appear to be "obvious." As those of you who have been following the Morning Calls know, our whole approach is based on simplicity and ease of use.

Because the goal is always Profits! The goal is not to be smart or clever, or to figure out something that nobody ever dreamed of. Right now you possess all the tools you need to go out and nail profitable trades day after day. It's just up to you to actually do it, and not clutter up your mind with lots of extraneous "noise."

Here is what you need to trade with this method:

1) A one-minute S&P 500 e-mini chart, in real time.

2) Two simple moving averages: a 9-period and an 18-period.

3) The ability to tell if a line is going up or going down.

Please don't laugh at this last one, because you will need this ability more than anything else! In trading sometimes the "obvious" thing is actually the hardest to use consistently.

Real time chart setup:

The chart setup for trading the Trailblazer is very simple. Set up a workspace or individual chart (depending on your particular software) to track and display one minute bars or candles of the price action on the active e-mini S&P 500 futures contract.

Then set up two studies: a 9-period simple moving average (SMA), and an 18-period simple moving average. Color the 9-period SMA blue and the 18-period SMA red. This red line is called the Trailblazer. (You may choose any color combination to suit your preferences, background color, etc. In this report we will use blue and red to explain the patterns.)

Once you have this set up, you now want to just start watching, to get used to the movements and the patterns as they unfold.

It's also a good idea to save this workspace or page as "Trailblazer," so you can easily reference it going forward. Consider this page as a new good friend, because combined with the Morning Call you are going to have a lot of fun with this workspace and really make some great trades. When it loads each morning, say hello to Trailblazer and say some positive things, treating it as your valued partner. Even better, you can say our Magic 7 Internal and External Affirmations, found on the 21st Century Futures Web site.

Now the fun begins. As you watch for a few days you will start to notice some frequent patterns that are unmistakable and highly characteristic.

· Channeling: Pay attention when the blue line "crosses over" the red line (the Trailblazer line). When it does, as long as the blue line leads the way and stays above the red Line moving up (bullish), or below the red line leading down (bearish), you can see the market move in that direction as the two lines "channel" in one direction. As long as you see the red Trailblazer line following along with the blue line and trailblazing its way in a certain direction, you can stay on that side of the market without concern.

· Crossover: Be on the lookout for the blue line crossing over the Trailblazer (red) line, starting a new mini trend direction, under specific circumstances.

These are the two basic things to watch for: Channeling and Crossover. Just these two ideas alone are enormously powerful. But if you are also comparing the Trailblazer with the High Five and all of our other setups we provide to keep you on the right side of the market, you will find this overall to be a magnificent way to monitor the action in the S&P 500 futures.

Please do me a favor and just watch this basic setup for a few hours tomorrow. Don't struggle to figure it out or totally understand it all just yet. Just watch and observe with a clear mind, and notice the different things that unfold with these two basic events (Channeling and Crossover). Remember, there's no need to be stressed by any of this, as you will be able to use this every day going forward, and much of this is going to become obvious with just a little familiarity. Imagine the clarity you will achieve even after a few months!

Now we can go over some rules for watching these Trailblazer patterns.

Rule: When the one-minute bars start to spike with an expanded range compared to previous bars -- right at the time of a crossover -- this is usually the start of a new mini-trend. Buy the pullback, if the spikes are upwards, and sell the retracement up, if the spikes are down.

Let's look at an example of a Trailblazer BUY using this rule: Let's say the bars have been mostly trading down and the blue line is meandering down the middle of the current narrow range one-minute bars. This is occurring just BELOW the Trailblazer line. Then suddenly you get 3 expanded bars leaping to the upside, which are longer than the previous 10 or so bars, causing the blue line to cross over the red Trailblazer line.

This is a buy signal, and you can then use any small pullback to get aboard, provided the signal agrees with the High Five or the Morning Call setup for the day. An example would be when we are looking for the High Five to turn around after our Morning Call says to "fade" the drop in the morning and buy it. If you see this action occurring on the Trailblazer chart as described above, you not only have confirmation that the market is turning around; you also now have an excellent microscope on the price action.

Trailblazer Buy Example

Are you with me so far? Watch the Trailblazer tomorrow and you will see what I mean, because this happens every day. Often it happens 2 or 3 times per day. Remember, just watch and observe at first. You can trade with it later.

The whole key to getting this right is asking yourself 2 basic questions:

1. Which direction is the Trailblazer pointing? You want to get on that side.

2. Is it channeling? Is the blue line leading and staying on the side the Trailblazer is moving? You now have an effective way to monitor your trade tick by tick.

Trailblazer SELL

The opposite is going to happen when a rally fades, and we're looking to sell the rally to catch a top. As you likely know by now, our setups and pivots are extremely accurate. So it's a good idea to simply watch our numbers and be on the lookout for a Trailblazer pattern that matches.

Often the Trailblazer pattern will occur right at our numbers, but sometimes it can occur before they are reached; other times the Trailblazer pattern might reveal itself a little after the numbers are hit. By combining the Trailblazer with our numbers and setups, you are trading with the best possible tools to help you to nail the trades most effectively.

Example for going short or "fading" a rally: Watch for narrow one-minute bars moving above the Trailblazer line, which suddenly elongate in length to the downside.

When you then see the blue line cross over the red Trailblazer line, then you want to go SHORT on any retracement back up, or just go short right away.

Again, just watch these two chart patterns in action before trading them. When you are up to speed, look for them to appear near the 21st Century Futures numbers we give you each day before looking to trade them.

Trailblazer Sell Example

Trailblazer REVERSAL

Here are the rules for catching the very END OF A MOVE, before a reversal.

This is one of my greatest secrets on how to read one minute charts. It works beautifully and I'm happy to share it with you.

Be on the lookout for a widening channel between the blue line and the Trailblazer AFTER the trend has continued for a while. When you notice a fresh spike in the bars with elongation in the same direction as the channel -- with prices moving "too far away" from the blue line -- you can almost always successfully FADE the move right in the middle of that "too far away" price explosion.

But remember, the KEY is: This must occur after the CHANNEL HAS WIDENED SUBSTANTIALLY after a substantial channeling move. Yes, this is subjective and you will need to develop your skills to really get this right. However, you will see it occur tomorrow and you will say "Hey... that's what ol' Mohan was talking about," and you will see exactly what I mean.

Trailblazer Reversal Example

Here's how to apply a stop if you're trading this: When you see this "too far away" elongation spike occurring and you enter a trade, just remember that the trade must fade. You have got to see the reversal occur and the trade start to move in your favor pretty quickly -- usually within 3 to 5 bars -- or something is probably wrong. If this is entered correctly, then the trade will usually immediately go in your favor. If not, then you know something's probably wrong with the trade.

Place a stop just above the top of the last spike-elongated bar. Usually these price explosions involve about 3-4 elongated bars before the move stops and reverses. You ideally want to get your trade executed sometime during the 3rd or 4th bar. You can experiment with stops, but don't go more than 3.50 away from your entry, and ideally keep it closer to 2.50.

So there you have it -- my ultra-cool Floor Trader's charting method called Trailblazer.

The key things are:

· The blue line, which is a 9-period simple moving average.

· The red Trailblazer line, which is an 18-period simple moving average.

· Crossover, when a trend changes and the blue line crosses over the Trailblazer, leading into a new channel.

· Channeling, when the two lines run parallel, but don't move too far away from the blue line.

· And "Too far away," when the bars elongate and run too far ahead of the blue line AFTER there has been a period of channeling and the channel has widened substantially.

As always we urge you to first watch, observe, and see these patterns at work. It won't take long before you are an expert at identifying the patterns discussed here, and able to quickly compare the Trailblazer with the High Five and our other precision setups. With some skill development, soon you will be moving with little doubt or hesitation to nail the trades that harmonize with the Headline Call for the day.

Good luck using this special chart reading method -- and please keep this information to yourself! Let's keep this a secret edge available only to 21st Century Futures subscribers.

As always, I'll see you in the action!

Mohan