fxVolatility | Forex | VWAP | TWAP | Truth Behind Orderflow | Understand Institutional Trading| Volatility Illuminated

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why superman wears his underpants on the outside

e B o o k | US$61.80

includes custom indicators

Chapter One

WHY SUPERMAN WEARS HIS UNDERPANTS ON THE OUTSIDE

"Believe nothing, no matter where you read it, or who said it, no matter if I have said it, unless it agrees with your own reason and your own common sense."

~ Hindu Prince Gautama Siddharta

Just possibly, a significant portion of the information

we've been traditionally taught to think of as 'accurate' in trading, investing and life, might be flawed...especially what we perceive as the best possible order for our underpants.

I hate to say it, but it's true. After ten years of research, trading, analysis, writing six books and over 1,500 articles about various aspects of markets, I am convinced the mass public - and most of the experts - are snowed.

The present epidemic of misinformed masses is precisely why over the following pages, I will present multiple cases showing how the majority's perception of information and markets is drastically flawed.

In addition, while many believe 21st century technology has created a more productive, 'progressive' and intelligent society, in reality (at least, as seen from the trading floor) the greater public seems to actually be regressing in ability to accurately perceive major market moving events significantly beforehand.

Underlying causes are both complicated and numerous; however, our contemporary light speed of information, increasingly 'factory setting' dependant mindset and growing naive trust of 'fast-mass media' all stand out as bold culprits behind humanity's swelling herd behavior.

On the outset, retail traders often complain of increased volatility in today's market, seemingly from nowhere.

The retail trader is correct about one thing; volatility is becoming fiercer in markets, especially Forex.

While we personally have zero ability to halt market volatility completely (a larger market paradigm than we are, of course), we can attempt to see today's erratic Volatility Illuminated. To do so though, we will need to find new flashlights capable of cutting through the thick fog that has now settled upon markets.

Unfortunately, in today's trading environment – even with all of our high-tech everything - most simply cannot see three feet beyond their nose, let alone light a reliable path into the distance

Fact is, analysts, retail traders, media and even many professionals feel empowered with their 50,000 watt technical analysis and 'reliable information' fog lights.

We're really talking about the blind and oblivious mass acceptance of filthy, soiled, tampered, booby trapped, credulous and opinionated information, simply because it is the accepted standard.

The problem is- the big shiny lights do nothing more than actually create a 'blinding screen' on the face of the brume.

The media, analysts and masses don't even have a clue the tool they're depending on for guidance- is really the problem.

Even if you are aware of the situation, don't bother attempting to mention the problem; you'll just hear something like:

"It's commonly known this thing can light up a cliff 1,000 miles away. Besides, I'm 'certified' to use it; didn't you see my credentials in the capital letters after my last name? And I wasn't trained to use the big light- just anywhere; my school was ivy."

You might reply, "Don't you mean 1,000 miles- on a clear night?"

"This bulb is the best money can buy...and I've got credentials," the financial professional replies.

Just to be nice- you offer, "I know the bulb is expensive, but I have an extra one here in my pocket- it's designed for fog... You're welcome to borrow it."

The troop leader turns away with an abase chuckle- while rolling his eyes in the vision of his witless 'mega-fog-light' followers.

You can't be angry though; you just feel bad for the whole group.

Sadly, the generally public is attracted to the same media/analyst 'big light' too, all believing there's no way mainstream media and Wall Street professionals could be so stupid as to not truly know what they're doing…and off into the night they march.

Making matters worse, brokers and financial news portals have generously given all of their customers the exact same 'wide beam lights' to use during their little expedition into the darkness.

But the identical wide beam spots only make the crowd more dim-sighted by adding another layer of glare to the front side of the fog. Really, the mega-light fanatics are creating a sort of floating - though radiant - tarp only a few feet into their speculated direction. And because they do in fact all have their own little lights- and the 50,000 watt media monkeys prodding from behind, they all start running into the fog.

Absolutely clueless of the cliff only a few feet away...

Over the following pages, I will attempt to give you a very, very special flashlight. Not only does it work well, but it works in rain, snow, fog and of course, on a clear night.

Moreover, I think once you switch it on, you're going just stand there - speechless and shocked - as you begin to see the terrain (beyond the fog), for the first time- in a long time.

You will also likely look over at the larger media/analyst/retail troop marching credulously into the night…and say nothing.

You would normally laugh at the current situation, but you can't – it's devastating.

You're standing there with your light – you can see – and because you can, you know the herd…the retail traders and investors, all with their identical broker issued spots and the media with their analyst fueled 50,000-watt mega-mouth beams…are all swaggering into the foggy night, totally clueless they're just a few feet from a massive ravine.

Even if you try to help, almost none will believe your little light works better than the larger lightshow of the collectively credulous circus.

Let me ask you a question…

Is it possible – even remotely possible– that perhaps our perception and digestion of, and action upon much of the information we have been taught to believe as accurate and reliable…may have been flawed from the start?

Let me tell you about a guy I know; he's perhaps not the brightest of the bunch… He is a trader though, and he has never done anything else his entire career. When I asked him why he trades for a living, his reply was:

"To make $40 billion dollars beating markets."

In reality, 'not so bright guy' is me.

I'm still a long, long, way from my goal of $40 billion, but with the information in this book (and years of experience and disciplined money management) I believe I will someday make my $40 billion goal real. Why do I yearn for $40 billion dollars? Because I've always had another dream:

Buy a black jet; paint a 'skull and crossbones' on the tailfin and fly around the world giving $39 billion away to help people - all people.

Perhaps I'm crazy...

Regardless of sanity, in pursuit of turning the previously mentioned dreams into reality, I have chosen trading as my genie of action.

Over the years, one major heartache I've found - trading for a living - is when one rubs markets three times, the only thing that comes out of the 'wishful thinking market lamp' is a margin call… Not a dude in tights joyfully granting three wishes. In my time, I've seen more grown men cry on trading floors than I care to remember. I've also seen one make hundreds of millions of dollars. I am not the 'one' yet, but I intend to be.

With all of this in mind, the information you are about to read in the following pages was derived from countless hours grinding it out with the market, in an effort to create my own magic lamp. What I'm talking about is the culling of thousands of hours of research, real-time trading (I do not back test, or trade demo to prove a strategy), breakouts, blowouts, headaches, elation and in the end, insights that I would have never found without having taken the rocky, unstable, non-traditional route that I have.

After just short of 4,500 days of eating, sleeping and breathing markets; after endless research, writing, analysis and of course trading – at the ripe old age of 35 – I posses something more than a head full of gray hair…

I have a hidden treasure.

– A very special light, really.

As hidden treasure goes, often very few know it exists, when it does exist, which is why it was so hard to find...

Because I had to find it myself...

If there were others I crossed along the way - who already knew - they didn't let on.

And I understand why one would want to protect knowledge of the treasure's existence- and location.

Not many people seek to give their money away, just to give it away.

For those who do know of the treasure's existence though, sometimes they even intentionally burn their maps to keep others from coming into possession of information containing the whereabouts.

Without a map, the chances of finding the treasure are virtually zero, especially when one doesn't even know to look for it in the first place. What's more, even for those who are seeking the treasure, sometimes even when they're standing directly over it, they still won't be able to see it.

That's how it was when I began looking…

Every once in a while over the years though, I would unexpectedly catch glimpse of an amazing shimmer within markets; something so bold, luminescent and brilliant, I would stop everything to investigate it.

But it was always gone in a brief second

By the time I located what I thought was the source, no evidence of the glow remained.

The light was so brilliantly overwhelming though, I simply couldn't get it out of my mind's eye. I began looking for the magnificent illumination each day - and night - sometimes not sleeping for two, and even three- days at a time.

Many of those around me wondered if I might be going slightly nuts...

A few times, I think I might have wondered too.

I even spent the entire month of November in 2008 at the World Trade Center in Guangzhou, China working with several programmers and traders on the trading floor of ECTrader- to develop and code the information I'd uncovered to that point...

This fall, I'll travel half way around the world to work the Chinese traders and programmers again... Not only are they some of the nicest guys in the entire world, but I've never met better programmers....ever.

Even after China, I was still missing few critical pieces though... But over this past winter and spring...

I finally compiled enough information to clearly see Volatility Illuminated in a way the masses have yet to.

I can tell you this... Towards the end, it was almost as if daylight were growing from the horizon- after a long dark night... Before I had completely realized it- there was light everywhere.

In my arduous search over the years, there were moments so difficult, I almost gave up many, many times. Honestly, the search to see Volatility Illuminated was so grueling; I sometimes wonder how I made it through, without quitting.

You don't have to go through what I did though... And I hope you don't. And won't. It is my hope - that with the information in this book - you will be able to clearly see Volatility Illuminated, without having to endure all that I did.

While compiling this book, I've asked myself - at least a dozen times - why I'm giving up any of the information I've found? My search was arduous and at times – literally – painful...

Strangely, every moment along the way - both good and bad, was the precise event required to dislodge (sometimes in the most unexpected of places too!) a little piece of information that I desperately needed to take another step forward with Volatility Illuminated...

Even an understanding of why Superman wears his underpants on the outside...

Again though, I have asked myself repeatedly why I'm giving up what I worked so hard to find?

1. I am presenting the information here because I believe I can say with a confident voice, most have never seen Volatility Illuminated before, at least, as I will present here. And I believe retail traders sorely need the information right now.

2. I'm a trader. I trade for a living. Writing this book is a trade too. You get information- I get money. If I blow up doing something stupid five years from now, thankfully I will have hedged my position with a few bucks from these words.

I think it's a good trade... I've put my money where my mouth is and laid size out at the offer. Obviously with all of my years of sacrifice, research and hard work, I'm long Volatility Illuminated; now, I 'm offering out of some of my position into strength - precisely at the 38.2 Fib retracement. If the demand the tape has shown over the past month is real, I may later regret not lifting my offer higher - now - but for the time being, I think it's fair. Yup, everything is a trade.

I can't say I'm putting absolutely everything I've discovered in these pages…but it's enough…

Likely, more than enough to finally give the little guy...

The retail trader...

author | volatility illuminated

matters– Something of value to help level the playing field in today's media-mania, monster truck institutional orderflow markets.

On another note, I am almost certain those in the financial media do not know about the treasure you're to going learn about here… Otherwise, they would have already brought it to the market's attention. I've heard a few pundits lightly brush on one aspect of the treasure or another – almost as if they'd sensed it was there– but never found it (or even heard of it) completely.

Moreover, I believe there are a few great investors and market minds 'in the know' about the concepts to follow…though likely keeping quiet.

What's more, in my research, I've come across various pieces of the treasure - here and there - but I never found much compiled all in one place…in an easily understandable format. What little of the treasure I have heard mentioned in conversations and radio, caught glimpse of on television, spied in a magazines or newspapers, or found on the Internet – was not (I do not believe) geared for, or meant to grab the attention of retail traders.

Before we go too far, I need to give you a few warnings and comments about the treasure in this book…

· It won't make you instantly rich this hour, but it could over time.

· You can't sell it on eBay today, but you can try.

· You cannot take the treasure all for yourself, though many people would.

· You cannot horde it in your upstairs closet at home; it won't fit in a shoebox.

· The treasure (by itself) likely won't even buy you a hotdog on the corner, but someone might offer to give you all the hotdogs in the world just to know what it is.

I would like to mention something else… You will not be able to see the treasure at all, if you only want a 'gimmick' to make money quickly. The treasure is not a 'gimmick' - it is real – but to see it, you must have the desire to truly understand markets and trading.

While writing this book, I often handed the manuscript to a small handful of 'test readers' for feedback. One of the test readers made a comment similar to:

"You may want to remove, or change the bullets about it won't make you rich and you can't sell it on eBay, because some people might think 'well what good is it then?' or 'I don't want to waste my time then' and then you might lose some readers."

I really appreciated the comment, because my friend was truly attempting to step into the shoes of most potential readers… I thought about removing the seemingly self-defeating bullets, but then concluded that I would not.

Why?

Because my friend's perception of many potential reader's likely fickleness was spot on. However, the reason the treasure remains buried day-after-day, month-after-month and year-after-year to media, retail traders, analysts, and the public is precisely in the comment itself.

The treasure has remained hidden because one will not be able see it if they are only seeking an easy, automated, 'no effort', instant gratification solution to markets.

The treasure is mostly invisible to the retail eye because upon first glance, it appears worthless, though really, it holds immense potential riches and value.

The treasure is not simple; yet it's also not so complicated that almost anyone can't understand, or use it.

The only people who will not be able to see or use the treasure are those who never wanted to see it in the first place. The desire to see Volatility Illuminated - means you must have already – somehow - wanted to know markets better. Those who have never truly desired to see markets and trading clearly (are not and were not willing to put in some good old fashioned hard work) just wouldn't know to even look for Volatility Illuminated at all.

· Media only cares about being in the middle of a 'hot story' and most pundits and analysts never really trade their own money…

· The bulk of retail traders hardly ever really 'think' about information they use, or receive and rarely truly attempt to learn fundamentals of markets...

· Many investors seek something, or someone to do the work for them…

· Often, if retail traders, professionals and/or media can't see value in something instantly, they throw it away…

Thus, the treasure is most often invisible to the common eye.

I bet many readers have personally walked by it a dozen times and never even sensed something amazing might be nearby.

I know I did. On a rare occasion, I still do.

The treasure is so obvious though- once you see it, you might ask how you missed it all this time?

It is possible; however, that even after reading this book, some still will not be able to see it, even if I directly point it out, as best I possibly can...

How could it even be feasible for an 'obvious' trading treasure to exist, as I am mentioning here (something of great potential value) right infront of all of our eyes, and yet invisible to the masses?

My conclusion is the treasure remains invisible to the masses, because to see it - and to use it – means one must first not only have the desire to see it, but also acknowledge that the common perception of the information we receive as even 'mostly valid' could be flawed...

· Wrong about the information we accept daily.

· Wrong believing what we've been taught is accurate.

· Possibly wrong about some of the things we think and feel at this exact moment.

· Maybe even wrong about our own memories right now.

How many are now thinking, "Really? That's sounds fascinating, please show me."

And how many are really thinking, "Are you crazy? Whatever, this is hocus pocus. My memories have nothing to do with markets."

Like the masses were historically wrong about the world being flat, the sun revolving around the earth and wrong about slavery - as being even remotely acceptable or moral, before the final Emancipation Proclamation and 13th Amendment came to life in 1865.[i]

(By the way, the 1860 United States consensus showed 393,975 individuals owned 3,950,528 slaves. The 1860 document also shows that there were just over 31 million people in the population. Only 8% of the population owned slaves.[ii] What it means is that - as always – a small percentage of wealthy corrupt – sway the opinions of the masses and hold the majority of power in politics.)

Much like the masses thought the world economy was absolutely doomed after the crash in October 1973, especially as major indices skidded south into the end of 1974. But in January of 1975, markets rocketed higher.[iii]

Much why Warren Buffet, the brilliant and amazing investor often says 'buy when others are fearful and sell when others are greedy.'[iv]

Much why many will happily repeat Buffet's words but then never act on the advice personally.

To step apart from the masses, one needs to take action.

Almost everyone tells children to follow their dreams, but so few truly do as adults.

Even after I show you the treasure, it will take time and effort to unlock the power within. It will not work instantly for those who want nothing more than a lotto-ticket, or 'plug-and-pay indicator' - so they can mindlessly know when to buy and sell, without really adding any effort.

However, if you truly desire to see Volatility Illuminated and you're willing to put considerable effort into understanding the 'philosophy' behind such, the greater your chances of using the treasure to pull millions out of markets.

To see Volatility Illuminated though (and then utilize the information effectively) a paradigm shift will likely be required in your mind. No matter how hard I try – I can't make you see it if you simply refuse to believe what you you've been taught as 'right and proper' in terms of fundamentals, technical analysis and information, may not be at all.

Just know this, if you're willing to open you mind, please don't fear Volatility Illuminated may be too complicated to comprehend. I am proof of the pudding that you don't have to be a rocket scientist to get it. I'm also virtually certain you don't need to be a seasoned Wall Street pro, or even college educated, for that matter, to see it as well.

All you need is the ability and willingness to challenge the traditional paradigms of what you have been taught about investing, markets and trading in today's high-tech, light-speed information world.

Again, in Volatility Illuminated, I hope to completely change the way you look at trading and markets and I seek to give you the tools you need to trade perceptively and profitably.

I have put thousands of hours into the theories, concepts and strategies you are about to read. Moreover, I've spent nearly as much time tactically planning and organizing how to convey the information to you in this book. I did not write this book to write a book. This book was written to deliver concepts to the masses that have been missed, overlooked, held back, or simply not discovered - to date.

With this in mind, every word, every sentence, paragraph and chapter has a specific reason for its placement within the larger work.

In Part One, we will cover some basis ground work behind Volatility Illuminated, flushing out why some of what we accept as truth is not, while also seeing how instances of fundamental and technical analysis can be helpful to our trading, but really require 'something more.'

In Chapter Two, we will discuss why technical indicators are built for failure, are indeed currently failing, and how you can overcome the destructive reality at hand by taking time to step back from markets with clear eyes. We will also touch on why and how technology is really creating a larger 'blind mass' rather than helping.

Next, in Chapter Three we will cover why the much of what we think we know- is an illusion. I'm talking about our own memories even. I hope to challenge our unquestioning acceptance of our understanding and perception not only of our own minds, but the reasoning and sensibility behind much of the information we take in daily.

In the remainder of Part One, we will walk through two technical strategies (Fibonacci Pitchforks and Quad-CCI Momentum) that I've found work reasonably well, throughout the years. However, I'm not going to just present just the positive aspects of Fibonacci Pitchforks and Quad CCI, but hope to show how at times, almost all pure technical analysis breaks down. It is here that we will open the door to volatility, probability and the movement of distributions (statistics).

We will not touch on WVAV, VWAP, or TWAP in Part One, but please know everything in the first half of this book was designed to set the stage for the information coming in Part Two.

By the end of Part One, you should have moments of excitement, coupled with questions about whether anything 'really works' in this book, markets and in attempting to predict, and/or trade volatility.

Then, in Part Two, we will dive into descriptive statistics (in terms of distributions) while tackling volatility and probability right away.

In Part Two, I seek to not only present Volatility Illuminated - in an easy-to-understand format to those who do not have hordes of experience, but I also hope to show why tenured traders may want to rethink some of what they've been taught to believe as truths of information, markets, trading and volatility.

I will also present some theoretical ideas combining physics and markets...

Don't worry though, no calculus or math will be required.

As you will see though, through Einstein's Theory of Special Relativity, I will prove that the entire paradigm of information colliding with markets has changed, because of the acceleration of information witnessed over the past 100 years.

As we move through the first chapters in Part Two, you will also begin to learn why and how mass, acceleration, force and energy all 'critically' apply to trading today.

Again, you won't need to understand the math, but you absolutely must take the time to understand the philosophy and theoretical modeling. I have done my best to explain the entire paradigm in plain, everyday language.

In addition, mass, acceleration, force and energy will later be combined with volatility, probability, subset distributions, and institutional benchmarking to form WVAV.

Have I mentioned yet - that the information here is not a regurgitation of old ideas, like most books on trading?

The information presented in Volatility Illuminated is fresh, groundbreaking, and innovative and is really my life's work. This is not chump change - It's real.

I just thought you should know.

Moving on in Part Two, our discussions will move from physics to volatility/probability, and distributions...to then open the door to institutional benchmarking and VWAP.

The following information on VWAP – delivered in a humorous format, will hopefully be game changing for readers.

After many, many hours of thought on 'how' to bring the information to you, I finally came up with the story of Captain BIOVAP and Doctor Watermelon Stuffer as the relay. (Trust me, if I explained it from a technical market professional perspective, not only would 90% of readers not get it, but the other 10% would be asleep by the time I was finished...)

However, do not take the information lightly.

Really, 'the theory of stuffing watermelons into mufflers' is why most retail traders lose.

Fact is, they never understood the game from the start.

With the aforementioned in mind, we will then break into WVAV.

Following VWAP and the theory of stuffing watermelons into mufflers, I will unveil Whistler Volume Adjusted Volatility (WVAV).

My intent with WVAV is to show that we can not only integrate the mass/energy concept into VWAP, but also begin to locate levels of volatility and probability as well.

I also hope to show how powerful this tool is to all traders...meaning both institutional and retail.

I will also show how and why WVAV allows one to see when markets are about to trend, when trending has ended and when to expect consolidation.

Through WVAV, readers will understand probability trading, perceiving volatility and orderflow – ahead of the game - and perhaps most important: how to use the information within - real - day-to-day trading.

By the end of Volatility Illuminated, you will posses information about indicator and information failure, volatility and probability, institutional orderflow, mass, energy and force in markets and distributions – all pulled together in a simple, understandable format and methodology...

You will understand what Whistler Volume Adjusted Volatility (WVAV) is and why the totality of the entire paradigm; the strategy, methodology, theory, philosophy and signals are like nothing else markets have ever seen...

You are about to set eyes on the critical underpinnings of market movements and trading – which virtually all media, retail investors and professionals never, ever see.