Lesson 2: Market Rhythm

Now that you have learned what to look out for. BUT you are not advisable to trade every signal you see on the chart because it is going to hurt your account. Before you could do anything with the 4 Hour MACd system, you need to know the heart of the system by hard.

To increase your profits, you need to learn to pick up high probability trades. To do that, you will have to understand how does the whole market rhythm works, because you need to filter out the signals when the market is not in rhythm.

Market Rhythm (The heart of the system)

1. Yellow line: 200 SMA
2. Blue line: 89 SMA
2. Green line: 21 EMA
3. Red dotted line: 8 EMA

Refer to the chart attached above. On the extreme left hand side of the chart, the price (At point No.1) came down below the 200SMA (Yellow line) and 89 SMA (Blue Line). It pulled back to 8 EMA (Red dotted line) and continued its way down before going back up to the 21 EMA (Green Line) between point No. 2 and 3.

Now, whenever there is a up trend or a down trend move, the price will cross the 89 SMA and will either pull back to the 89 SMA OR it will pull back to the 21 EMA before moving off from the 89 SMA. As shown on the chart above, the price crossed 89 SMA after point No.4 and pulled back to the 21 EMA, touched the 200 SMA before pulling back to 89 SMA again. The rectangle that was drawn on the chart illustrates a consolidation period. The price was confined between two moving averages, the 200 SMA and 89 SMA. As such, we either have to trade from the edges, taking 89 SMA as support and 200 SMA as resistance, or you have to wait for it to show direction.

At point No.5, price broke the 200 SMA (Resistance), pulled back to the 21 EMA (This is the time to look for TC pattern) then it went up, pulled back to the 21 EMA, went up, pulled back to the 21 EMA again. You can literally count the number of times the price pulled back to the 21 EMA. Whenever the price crosses the 89 SMA, we ANTICIPATE that the price will either pull back to the 21 EMA or the 89 SMA before continue its direction or trend. Therefore, we will be looking to place a trade whenever the price pull back to the moving average when we have anticipated.

Fast forward, at point No.8, the up trend ended there and price crossed 21 EMA to point no.9 and pulled back to 21 EMA at point no.10 before moving to the 89 SMA at point no.11 (This is the market rhythm).

To cut the story short, whenever the price crosses the 89 SMA, it tends to pull back to the 21 EMA before continuing its direction. (Traders would be looking for TC pattern at this point of time)