Five Tic Trading

By Matt Sharp
In Association with
TradingAdvisor(Chicago).Com
Five Tic Trading
Preliminary Notice
This course explains how to trade pro!ita"le the stoc# mar#et. It utilises a method that
!or me wor#s on a daily "asis.
$owever trading involves ris# you could lose your entire account or more. I! you%ve opened
a trading account then you are over &' and I will assume you to "e a (grown up). I will treat
you as one and assume that you are responsi"le !or your actions not me.
I! you !ollow the instructions in this course you should en*oy pro!ita"le trading with sa!ety.
But I cannot guarantee it and I will not "e held responsi"le !or any errors omissions or
inaccuracies on my part. I o"viously will not "e held responsi"le !or any mista#es you might
ma#e or losses you incur no matter how they happen.
I personally have made mista#es in the past whilst trading entering incorrect orders and
the li#e and those mista#es have cost me dearly. I! and when the same happens to you then
accept the lesson you have *ust "een taught and move on. +on%t loo# !or someone to "lame.
,verything you do in trading is down to you and no one else.
-ith those comments in mind we%ll move onto the course "ut always remem"er that the
mar#ets can "e vicious . it%s up to you to ensure you have all the sa!eguards in place to
minimise the impacts o! any errors you ma#e.
Copyright/ This manual and it%s contents are the property o! 0iveTicTrading.Com and shall not "e copied resold
or pu"lished in any way "y anyone with the prior express permission o! the owners.
Five Tic Trading
Welcome
-elcome to 0ive Tic Trading. 1ou are a"out to em"ar# on an exciting *ourney where you
will pro"a"ly !or the !irst time "e a"le to trade the mar#ets and ma#e a regular relia"le
consistent pro!it. 2ver the course o! a !ew wee#s you will gain complete con!idence in the
method and "e a"le to increase the si3e o! your trades and the only o"stacle to achieving a
very high level o! income will "e your tolerance to ris#. I say this "ecause we each have a
personal relationship with money that allows some to people to ris# 4%555%s without a
thought whilst others will "aul# at *ust 465.
-ithout "oring you with my history I will *ust say that this method is not my idea. It is
"orrowed !rom someone else who *ust didn%t seem to !ully appreciate the !ull potential o!
this way o! trading. I li#e thousands o! others pro"a"ly including you have "een schooled
in the (trade with the trend) (let your winners run and cut your losses short) (you can%t
pic# tops and "ottoms) ideas that prevail in the pu"lic trading mar#etplace.
7u""ish.
A!ter nearly ten years o! using these methods to consistently achieve stunningly poor
results I came across this method. It is di!!erent you will have to put any previous
assumptions a"out trading to one side try and come to this system with a !resh !eeling.
This method now earns me a very com!orta"le living "ut "eyond that it provides a relia"le
dependa"le source o! income. 1ou simply can%t "uild your li!e on trading i! you only get one
"ig winner every other month that pays !or all the losers then gives you a !ew crum"s le!t
over. 1ou need consistency and that is here.
7ead on apply the lessons in here and change your li!e88
Five Tic Trading
Our Objective
As hinted at our main priority is to ma#e a pro!it every single day we trade.
9ot a !antastic amount "ut a pro!it.
Trading this way gives us con!idence in the methodology that then allows us to increase the
si3e o! our trades and thus increase our income. +oes it matter whether you ma#e 4&555
"y having a mar#et move &55 points at 4&5 per point or move &5 points at 4&55 per point.
The end result is the same and the point is that getting a &5 point move out o! a mar#et is
!ar easier and happens more o!ten than a &55 point move.
That is the whole rationale o! 0ive Tic Trading. Small moves that happen o!ten.
:osers happen. ;n!ortunate !act o! li!e and utterly unavoida"le in trading. -hen they do
!or us we simply lower our sights !or that day and settle !or a "rea#.even day. This is *ust
so important !rom a psychological viewpoint. 1ou cannot #eep losing day a!ter day and #eep
!aith with the system you%re using. At some point you will give up on it.
-ith 0ive Tic we try and avoid that trap "y at worst "rea#ing even. That way we%re !resh
tomorrow to do it again !ull o! con!idence and not having the thought that today we have to
ma#e up !or yesterdays losses. Today we can ma#e a pro!it.
Five Tic Trading
Lets Get Started
I%ll discuss the way we apply the 0ive Tic method <uite <uic#ly then start to go over in
depth the i!s "uts and detail stu!! later.
This method applies to the S=> +ow ?ones and 7ussell. I have also used it on a !ew other
indices with the same success I don%t however have all the details !or other mar#ets
than#s to a computer crash. These @ mar#ets will however give ample opportunities as you
will see.
-e attempt to pic# tops and "ottoms using a simple indicator and then use the price action
to gra" a <uic# correction against the prevailing trend o!ten it turns out to "e a real top or
"ottom and the mar#et ta#es o!! in a new trend. -e however are long gone. This is not a
trend !ollowing method it%s a gra" an opportunity and run !or it method. It wor#s.
The indicator we use is the Commodity Channel Index (CCI) set at A6 periods with the
measurement "eing the $ighB:owCD. This is availa"le on pretty well all charting pac#ages.
-e loo# to Sell when this indicator exceeds D55 and Buy when it !alls "elow
.D55. This indicator is "ased on the statistical variance o! the price now to where it has
"een in the last A6 "ars. But i! you really want to #now more then your charting pac#age will
give you more detailsE you really don%t need to though.
-e use a one minute real.time chart and when we get a "uy or sell signal !rom the CCI we
trail an entry order *ust a"ove or "elow the mar#et so that we <uic#ly catch a mar#et
reversal when it happens. (9ote -hen not I! no mar#et continues in one direction !or very
long and that%s we%re "etting on)
2nce that order i! !illed we try to add another order to o"tain a "etter average price.
Sometimes it gets !illed sometimes not.
2ur pro!it target is *ust a small distance away and an order is placed as soon as our !irst
order is !illed. Sometimes i! the mar#et starts to move against us a stop.loss order would
"e entered "ut o!ten that%s not re<uired. ;sually our pro!it target will "e hit and we have
one o! two winning trades !or the day in the "ag.
7epeat a second time then turn the computer o!! and go playF
-hat%s it loo# li#e in real li!eG
Five Tic Trading
Lets exlain t!is icture"
At &A.@5 (H.@5 est) the mar#et opens and drops a !air amount which causes the
CCI to !all "elow the .D55 line (in pin#)
As soon as this happens we enter a ("uy on a stop) order at & tic a"ove the high o! the
signal "ar. As you see the very next "ar opens then goes up through our "uy.on.stop order.
-e immediately enter a ("uy on a limit) order as shown at the high o! the signal "ar. -e
also enter a (sell mar#et i! touched) order at our pro!it target o! 6 tics a"ove the high o!
the signal "ar.
In this case our "uy.on.limit wasn%t !illed as the mar#et *ust went straight up to the 6 tic
pro!it target and hit our sell.mar#et.i! touched order. (92T, The (D) would apply had the
limit order "een !illed as only the stop order was !illed then o! course it%s *ust (&) MIT).
That%s one pro!ita"le trade . next88.
Five Tic Trading
Immediately the mar#et moves up very sharply and gives us a sell signal "y the CCI going
a"ove D55. As you see the (signal "ar) is a very long up "ar and on its own moves the CCI
!rom "elow .D55 to a"ove D55.
Shown on the chart are the order levels you would used !or a short trade o!! this signal .
as you see this would have "een a losing trade.
#$T % &O$ S'O$L( NOT ')*+ T),+N T'-S T.)(+ /
This will "e dealt with in depth later "ut *ust "rie!ly signals !rom the CCI are ignored i!
they are caused "y a single "ar as this was. -e are loo#ing !or a (trend) lasting a little
while so that the mar#et can react "y a move against the trend or indeed start a trend in
the opposite direction. :arge "ars indicate that something may have (spoo#ed) the mar#et
and could result as this did in a longer move that would give us a loser.
So we pass on this trade.
-e want the CCI to !all "elow D55 then either go "ac# a"ove D55 or down "elow .D55.
-e%ll re!er to this as (resetting).
Five Tic Trading
9ow the CCI has (reset) and gone "ac# over D55 so we place a sell.stop & tic "elow the low
o! the highest low until it%s !illed. -e then put a sell limit order in and the ta#e pro!it
orders.
A !ew minutes pass and we have our pro!it and done !or the day with two winning trades.
Five Tic Trading
Getting (eeer8..all o! this is covered in the videos that accompany this course.
This system is simple "ut does have <uite a num"er o! (rules) to !ollow to ensure it%s
success. -e%ll get started on them "ut as we progress I will when appropriate introduce
even more. So do read the whole o! this course "e!ore you even "egin to thin# you%ve (got
it).
A ("ar) must "e more than & tic i! not *ust ignore it.
>rior to entering the initial stop order to open a new trade *ust chec# that i! you were to
get !illed and start the trade where would the stop.loss "eG It must "e "eyond the recent
highest high (i! starting a short trade) or "eyond the lowest low (i! going long). I! not then
ad*ust the entry to a limit order that allows the distance re<uired !or sa!ety.
Trading commences at H.@5am ,st when the mar#et o!!icially opens "ut do chec# the news
releases !or the day at www.Brie!ing.com to see i! there%s anything at '.@5. I! there is
then start trading at '.@5. 7emem"er . i! the mar#et opens with a huge "ar that causes a
CCI signal then don%t ta#e it. -e don%t trade o!! a single "ar signal.
(The limit order entered a!ter the stop entry order is !illed(. It%s a "it more complex88
2nce the stop order is !illed . wait !or that "ar to !inish. I! it has only exactly touched
our stop price then place the limit order D tics away instead o! &. This improves our overall
average price in a situation where we will more than li#ely get a !ill. :et%s loo# at an
example8..
Five Tic Trading
Continuing on the :imit order rules i! the limit order is not !illed within @ "ars then cancel
and replace with another order & tic !urther away still. Then wait 6 more "ars and i! still
not !illed then cancel completely and *ust manage the stop order that%s !illed. This is a very
rare situation and don%t get too hung up a"out it.
Trade management88to help us with this aspect let%s introduce the moving average. This is
a D& period average "ased on the mid.price ($B:CD) . -hen the price touches the D& period
moving average then move the stop.loss order to the recent pivot high or low plus or minus
one tic.
This may coincide with the price achieving a A tic pro!it (o! the 6 we are loo#ing !or)
regardless we move the stop.loss to "rea#.even once we have A tics o! pro!it as measured
!rom the price o! the :imit 2rder (whether it was !illed or not).
Five Tic Trading
Pre%Oen Set $
As already explained we only trade the normal mar#et hours H.@5est onwards unless there
is a new release at '.@5 in which case we start then with normal trading.
$owever the mar#ets do occasionally give us a set up "e!ore the normal mar#et that allows
us to get a trade very early in the day . this is what to loo# !or and how to trade it.
& At a"out H.D5 as you%re preparing !or the trading day loo# "ac# !rom the last &
minute "ar and see when the CCI last crossed the 3ero line.
D 9ow loo# to see i! the CCI has crossed a"ove or "elow D55 to give us a signal . we
won%t have traded this o! course as it%s "e!ore the normal trading day.
@ I! it has then (assuming it%s crossed "elow.D55 and we%re loo#ing to "uy) !ollow the
lowest highs down until an entry would have "een achieved.
A >lace a Buy stop order in the mar#et at the lowest high price !or action only during
normal hours (a!ter H.@5 . most trading plat!orms allow you to speci!y whether the order is
!or execution immediately or during normal hours)
6 -hen H.@5 arrives the order may or may not "e !illed . I! it is then treat as you
would any normal trade. I! the order is not !illed a!ter a !ew minutes then cancel it and
await a normal trade set up.
Five Tic Trading
W!en 0e !ave a loser

And we will then our target !or the day is simply to "rea#.even. ;sually this will mean
continuing until we%ve had two winners and the loser. Then <uit !or the day pro"a"ly *ust
slightly ahead.
There are <uite a num"er o! rules that govern what to do !ollowing a loser these are
critical !or your success.
It%s a!ter a loser that emotions ta#e over and the previously disciplined mechanical
approach gets thrown out in !avour o! (getting "ac#) at the mar#et. +on%t
Stic# exactly to the rules here and you don%t need to thin#. 1ou can maintain the mechanical
approach which will always "eat an emotional response.
-e are only re!erring to a !ull loss here partial losers simply mean you continue trading
until you have reached your pro!it target !or the day.
-hat you do depends on the circumstances which caused the loser.
) I! the CCI indicator stays a"ove (or "elow) the signal line throughout the
trade until you are stopped then you must now switch to a longer time period than & minute
. with ,signal this will "e a @ minute chart . with others it may "e a D minute chart. 1ou
must then wait !or a completely new CCI signal !rom that chart. It must also "e at a "etter
price than the original trade. Additionally the pro!it targets are now "igger (as
mathematically the "ars will "e "igger due to longer duration). This also helps recover our
loss !aster. -e now loo# !or a I tic pro!it (!rom the stop order price) and use a &5 tic stop.
loss again !rom the stop entry order price.
# I! the CCI indicator !ell "elow the signal line (or a"ove) and doesn%t give a
new signal "e!ore "eing stopped then simply ta#e the next signalled trade as usual.
In either case "oth the stop order and the limit order are entered at the stop price ie. Buy
(or sell) D contracts on a stop order.
1 I! however the CCI does 92T give a second trade in the same direction
"ut crosses the 3ero line and signals a trade opposite to the !irst then simply apply all the
rules as normal.
It was mentioned that this method can "e applied to @ mar#ets S=> +ow and 7ussell. -e
can use this to also assist in achieving a "rea#.even day as each o! these mar#ets trade a
di!!erent si3e contract. I! you loo# at the (Appendix) you%ll see that the +ow is smallest
!ollowed "y the S=> then largest is the 7ussell.
Five Tic Trading
So i! our loss occurred on the S=> say we could then switch our trades to the 7ussell
#nowing that in dollar terms we will "rea#.even with less price movement than staying on
the S=>. $owever the same could also "e achieved "y trading twice the num"er o!
contracts on the +owE again a smaller price movement would return dollars to us.
I really don%t have hard and !ast rules a"out this.
0or me I trade the +ow initially loo#ing !or my two winners there. I! a loser happens then
I%ll switch to the S=> where & winner will recover my losses. I! that is also a loser I%ll switch
to the 7ussell where again & winner will recover the S=> loser.
In my experience it is very unusual to have "ac# to "ac# losers . "ut . i! you want a more
relia"le "ut slower way o! getting to "rea#.even then !ollowing a loser wait !or the CCI
indicator to go "ac# through the 3ero line and ta#e a trade in the opposite direction. ?ust
occasionally you might not get "ac# to "rea#.even "ut you will avoid ta#ing two losers in a
row (even though this is pretty unli#ely) and having a really "ad day.
:osers tend to happen most when the mar#et is in a strong trend and the (pressure) won%t
allow the mar#et to retrace even the small amount we%re loo#ing !or . so as this method is
not a"out (trading with the trend) *ust may"e we have to admit the mar#et is not going to
"e #ind today. +on%t !ight the mar#et . you won%t winFF
7emem"er mar#ets typically (trend) less than @5J o! the time (which is why trend
!ollowing systems are such ru""ish) so don%t lose sight o! the "igger picture.
,xample o! trade si3es helping recovery88(assuming only & contract . o"viously the logic
applies to multiple contracts also)
:oser on the +ow is &D tics at 46 per tic K 4L5 lost.
Switch to the S=> where a winner gives us 6 tics at 4&D.D6 K 4L5 recovered. +one !or the
day.
I! S=> a loser then we%ve lost I tics at 4&D.D6 K 4'L lost
Switch to the 7ussell where & winner gives us &5 tics at 4&5 K 4&55 recovered.
+one !or the day.
Five Tic Trading
1!arting and Trading Plat2orm
+ou"tless there are many solutions to this "ut I%ll let you #now what I do. I! you wish to
!ind an alternative solution !eel !ree it may even "e "etter than I doF
1').TS
I used to use Mcharts. I now use Tradestation. This is a real.time charting pac#age that I
have used on a couple o! occasions in the past and now use !or 0ive Tic Trading.
It is availa"le at www.tradestation.com
Tradestation costs around 4'5 per month unless you do more than &5 trades per month in
which case itNs !ree. There is a monthly charge o! a"out 4'5 to receive the data !or the
three mar#ets we trade.
1ou do not need to sign up !or (news) as we don%t need real time news stories chec#ing
www."rie!ing.com prior to the mar#et open is su!!icient.
T.)(-NG PL)TFO.3
I used to use www.Interactive"ro#ers.com .
I now use Tradestation as a"ove
2pening an account is long winded due to the disclaimers and so on "ut they do provide a
straight !orward trading plat!orm with good execution times.
The minimum account si3e is I "elieve 46555 to trade !utures.
1ou most de!initely want to paper.trade !or some days i! not wee#s . *ust to "e completely
con!ident with the trading process.
$onestly the order entry process is one o! the most di!!icult parts o! 0iveTicTrading.
,ven with Tradestations great 2rder Matrix you need to "e on the "allF +on%t
underestimate how di!!icult it is to enter the correct orders under pressureF
2nce you%re trading you need to "e a"le to enter amend and cancel orders without
thin#ing and they need to "e the right ordersFF
SO (O P.)1T-S+ % until its second nature"
Five Tic Trading
Putting it all toget!er
:et%s go through a typical day . that%s o! course a day where we have two winners then pac#
up.
5'.&6 am :og onto www."rie!ing.com and chec# i! any news out at
5'.@5am. I! yes then start trading then else start at 5H.@5am est.
5H.D6am :oo# !or a >re.mar#et set up and get ready to place the orders i!
there is one.
5H.@5am 9ormal trading "egins.
CCI crosses D55 signal line (a"ove or "elow) :et%s assume it%s "elow so we%re loo#ing to Buy.
-as the signal generated "y a single unusually "ig "arG I! yes then s#ip this signal.
Chec# to see i! the Stop.loss order will "e outside the recent lowest low i! the Buy stop
order gets !illed. I! 1es8..
>ut a stop order in & tic a"ove the high o! the "ar giving a CCI signal.
As the "ars complete trail this stop order down until we are !illed.
2nce !illed wait !or that "ar to complete.
+id the "ar go through the order level or stop exactly on itG
I! it went through then now place a "uy limit order & tic "elow the stop order that%s *ust
"een !illed . that%s at the lowest high.
I! the price did not go through the order price then place the limit "uy at D tics "elow the
stop order . that%s now & tic "elow the highest low.
>lace the pro!it ta#ing order 6 tics a"ove the lowest high . the order is sell D on a stop.
I! the mar#et starts to go against us then place a stop.loss at I tics "elow the lowest high
. the order is sell D on a stop again.
-aitFF
-hen C i! the price touches the D&ma line then move the stop.loss order to & tic "elow the
recent lowest low.
-hen the price gets to A tics a"ove the lowest high so that%s *ust & tic !rom our pro!it
target then move the stop.loss to the limit entry price.
Be patientFF
>ro!it target gets hit. Cancel the stop.loss order and await the next CCI signal.
That concludes this explanation o! 0ive Tic Trading. I wish you every success with it and
urge you to *oin the mem"ers we" site where you will have access to all the training videos
all the daily video updates and email access to as# any <ueries that might arise.
Best 7egards
Matt Sharp
Five Tic Trading
*ideo Tutorials )vailable
& Setting ;p a Chart
D The Basic Trade
@ >re 2pen Set ;p
A A :oser . Then 7ecovery
6 A 9ormal +ays Trades
T'+.+ ).+ )((-T-ON)L *-(+O T$TO.-)LS )*)-L)#L+ '+.+
0inally there are &5 +aily ;pdates you can watch. This will ena"le you to get a good idea o!
how 0iveTic is actually applied.
?uly H
th

?uly &5
th

?uly &&
th

?uly &D
th

?uly &@
th

?uly &L
th

?uly &I
th

?uly &'
th

?uly &H
th

?uly D5
th

Five Tic Trading
)endix
1ontract details4%
S=> mini ,S 5.D6points K & tic K 4&D.D6 per contract
+ow ?ones mini 1M & point K & tic K 46 per contract
7ussell mini AB 5.& point K & tic K 4&5 per contract
Pro2it Targets 4%
S=> 6 tics !rom the limit order price (same as lowest high . i! going long)
+ow ?ones I tics
7ussell &5 tics
Sto +ntry Orders
S=> & tic a"ove lowest high (i! going long)
+ow ?ones D tics
7ussell D tics
Sto%Loss Orders
S=> I tics "elow lowest high (i! going long)
+ow ?ones &D tics
7ussell &D tics