When the Marker Breaks TheoTrade Summer School with Tony Rago © Copyright 2018 TheoTrade, LLC. All Rights Reserved When the Marker Breaks TheoTrade Summer School with Tony Rago

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When the Marker Breaks What is a marker? Using the “no hard stop” methodology When the marker breaks – how to plan an exit Risk Management in a losing trade The disaster stop – how and when to make the decision to take it

What is a Marker? Price > Everything © Copyright 2017 TheoTrade, LLC. All Rights Reserved What is a Marker? Price > Everything What is a marker? Risk Markers are areas identified on the chart that provide guidance and clues to the overall direction of the tape. They represent the entire handle. They are used to identify risk from an entry on a SPOT. You can ALWAYS identify risk in ANY trade using the markers. We “lean” against the marker respective to our entry. Once a 2min bar closes below/above the SPOT you are coming from, it “OPENS” the corresponding SPOT above/below. They are the price level that you are using to support the trade you are in. If you are long you are using the marker BELOW the SPOT as support. If you are short you are using the marker ABOVE the SPOT as resistance. Risk markers are NOT used entries.

Risk Markers are on the 2’s © Copyright 2017 TheoTrade, LLC. All Rights Reserved Risk Markers are on the 2’s

Using the “no hard stop” on Entry Methodology © Copyright 2017 TheoTrade, LLC. All Rights Reserved Using the “no hard stop” on Entry Methodology Why NOT using hard stops on entry works. I have found that hard stops at entry lose more handles than they protect Reading price action is key to success using this methodology SPOTS are where we expect a reaction Markers OWE us support or resistance Markers will get tested The sweet spot for risk on any NQ trade is 4-6 handles The sweet spot for risk on any ES trade is 2-3 handles It is imperative that you allow the 2min bar to close on a marker test If the marker holds the trade remains “good” Homework establishes trust Your nightly homework is an exercise to review RTH to see exactly how price reacts to SPOTS and Markers The more you do this the more you will trust the levels The NQ repeats itself over and over again Find the patterns and trust the levels

© Copyright 2017 TheoTrade, LLC. All Rights Reserved

© Copyright 2017 TheoTrade, LLC. All Rights Reserved

When the marker breaks – planning your exit © Copyright 2017 TheoTrade, LLC. All Rights Reserved When the marker breaks – planning your exit The trade setup is: You identify risk and are willing to risk 4-6 to make 10 You are committing to that risk – that is the potential loss in any setup You are signing a proverbial contract upon entering the trade You must be willing to take a loss Once you are in an active setup You have identified risk and the setup is valid Price continues to go against the setup You must remain patient and let the 2min bar close The marker can get a full test and then reverse in your favor The Marker breaks and opens the SPOT above/below Once the marker breaks you have options You can let it go right at the marker that you are leaning on You can wait for the next bar to see if it gets back into your risk zone. You can let price resolve to the open SPOT and watch the reaction to see if it bounces/fails to the marker you were leaning on You can wait for the marker to get tested to see if it opens the SPOT from which you are long/short

© Copyright 2017 TheoTrade, LLC. All Rights Reserved Broken Marker Price relaxes back into the risk zone Price now back inside the marker Broken Marker Price bounces back into the risk zone

© Copyright 2017 TheoTrade, LLC. All Rights Reserved The Disaster Stop Once our marker has broken We are at the mercy of price We must let price test the open SPOT The marker below that SPOT becomes the marker for the disaster stop If that marker breaks you must consider the disaster You are simply fighting the trend Check your bias – price action is key Look around are you on the wrong side of a strong trend? Is a -14 to -16 better than a -50? Take the hit and go with price High volatility markets provide more opportunities to mitigate disaster Risk is a very personal thing YOU must determine your threshold for risk Just because I or someone else is willing to hold it doesn’t mean you should Determine what your threshold is and stick to it

© Copyright 2017 TheoTrade, LLC. All Rights Reserved 52 Becomes the Marker for disaster Disaster stop to be taken here No reaction Marker breaks and opens the 46 SHORT 36 AGAINST THE 42