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ZoneTraderTM Brief Description

For 5 years, beginning in 2007, I have been trading with Matt Reynolds. A couple years before, he created ZoneTraderTM to identify high probability setups in auction markets. We have successfully used ZoneTraderTM Methodology in FuturesTalk, WorldWideTraders’ Live Trade Radio to pinpoint high probability trade setups in the Russell 2000 and S&P 500 eMini Futures.

We also used ZoneTraderTM as the primary tool to identify 366 setups for the COSMIC Speculator over a 36 month period between mid 2008 and mid 2010. Of those 366 standing order setups identified, 193 triggered in about 20 commodity markets. One hundred of the 193 were winners producing a 474% cumulative gain. So, these active trading tests of the methodology are convincing evidence that ZoneTraderTM works effectively.

Below is a brief description of ZoneTraderTM methodology:

ZoneTrader™ is a predefined market arena for trading auction based markets that seeks to capture the current psychology of underlying market on multiple time frames in order to determine or predict future market direction.  ZoneTrader™ employs three distributions per profile and currently five profiles.  The profiles are Yearly, Quarterly, Monthly, Weekly and Daily.

Each Distribution contains the same seven predefined and specifically labeled zones. These are: (Neutral Zone, Bullish Breakout Zone, Bullish Confirmation Zone, Bullish Trend Extension Zone, Bearish Breakout Zone, Bearish Confirmation Zone and Bearish Trend Extension Zone) we use these to order, profile and interpret condition of market to provide traders a specific description of where the market is and what it is trying to do.

Zone-Trader™ is a newly created, intuitive form of auction market theory by Matthew D. Reynolds.  Mr. Reynolds understood that auction markets primarily move within three conditions: balanced, trending or transitioning.  ZoneTrader™ uses these three conditions to incorporate focus into its predefined market arena through the definition and labeling of its trading zones.

Auction based markets all do the same thing.  For example, they breakout, they establish trend or they extend trend. If they cannot breakout, they reverse to point of control.  If they cannot establish a trend, they reverse to the point of control.  If they cannot extend the trend, they reverse to the point of control.

Through his auction market trading knowledge, wisdom and intuition, Matt uses these conditions and normal market movement to create the ability to capture the current psychology of the market by defining the zones and labeling them either Bullish or Bearish. The midpoint of the Neutral Zone is the ZoneTrader™ Pivot -- point of control.

Zones above the Neutral Zone are Bullish Zones.  Zones below the Neutral Zone are Bearish Zones.  The order of the Bullish and Bearish Zones are identical and specifically labeled in this manner to capture the specific condition or movement of the current market trend (Breakout, Trend Confirmation or Trend Extension).

Each zone contains a specific rule that is used to determine or predict future underlying market direction.  Whether specific condition as described by each zone rule is achieved or not creates the ability to capture market psychology upon that profile or time frame and generates buy or sell signals accordingly.

There are a total of 36 rules, 12 rules per distribution.  Our separate Rules Document pictorially describes each specific rule with specific detail aligned with description to enhance clarity and understanding for the trader.

The combination of 5 profiles looking at long-term to short-term perspective and understanding that Long-Term always overpowers Short-Term provides the ability to create strategies.

The 36 rules provide traders with what ZoneTrader™ defines as Directional Bias -- whether to expect prices to decrease and sell or to expect prices to increase and buy. The ZoneTrader™ also employs a Control Bias which is derived from the Persistence Zone.  So, not only does ZoneTrader™ provide the trader with specific future direction of price; it also provides traders the ability to identify who has control of the market -- whether it is the bulls or bears.

Again, Long-Term overpowers short-term, so, it’s important to identify who has control of the market on each profile or time frame. It is also important to understand that the longer the time frame, the stronger the Directional and Control Bias. The Persistence Zone Document goes into complete detail upon description, use of, and theory as it applies to the Persistence Zone or PZ for short

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