L. Williams is a trading champion of the world (in 1987 he has won Robbins Cup). Being the author of the book “Long-term secrets of short-term trading”, he has introduced the term “trap of experts (professionals)”. In its essence, it is the false breaking through the previous maximum in the trend. After this, the currency turns towards the opposite direction – at least by a heavy correction. The maximum result is the trend reversal. L. Williams subdivides the “ trap of experts” into two groups – in accordance with the trend direction.

• The “selling trap” is a good trend market, continuously moving upwards at the same direction during 5-10 days. Then the upward-directed breakdown occurs. It is accompanied by the bare closing above the total trading range. After this, the true minimum on the day of breakdown becomes the critical point. The latter can be broken downwards (or cleared (overcome, taken)) during the next 1-3 days. In these cases, most probably, the upward-directed breakdown was false. That is, traders have made deals on “buy” to no purpose (vainly). In fact, they purchased on the surge of emotions. Probably, distributors of stocks or goods futures got rid of their items due to this agiotage (stock-jobbing) at the expense of common traders.
• Being the exact antithesis to the “selling trap”, the “buying trap” comes into existence in the lower trend. Further this market stabilizes in the lateral movement for 5-10 days. Then the downward-directed breakdown occurs. It is accompanied by the bare closing below all minimums in the trading range on that day. In theory, the reader can suppose that the prices will fall much lower. Actually, this pattern develops most often. On the other hand, a sudden improvement can also occur – i.e., the price can rise higher than the true maximum on the breakdown day. Hence, the market has reversed almost for sure. All “selling” stops below the market have snapped into action. Being afraid of opening long-term deals at the trend reversal, “buyers” have scattered.

Below there are the examples that illustrate these theoretical theses. The last diagram relates to Exxon stocks .

In this connection, L. Williams has advanced an important remark. According to this author, the described mechanism also works within shorter timeframes. He witnessed numbers of profitable deals, where the use was made of the crucial days and “traps” at 5- and 30-minutes and 1-hour timeframes. To “very short-term” traders, L. Williams recommends to use this technique in their intraday activities. Such patterns permit “short-term” traders to detect appropriate points of entering into the market. However, to be firmly confident in one’s dealings, one needs a certain additional proof that they are justified. Otherwise, the price becomes predictable just with the help of the price itself. The best deals can be made with the help of several indicative instruments (gauges) of the technical analysis but not by making use just of the price structure.

Giving analysis to L. Williams’s “trap of experts”

The situation depicted in L. Williams’s charts can be unequivocally characterized as the false breaking through the levels. The pattern develops according to the following scheme :

1. the ascending trend ;
2. the false breaking through the trading range (the ascending trend resistance); a large number of trading traders open their deals along the trend;
3. the market abrupt reversal towards the opposite direction; the specialists sustain damages.

Maybe, this situation is too familiar to all traders. One can find numbers of the analogous examples at Forex.

 To avoid the “trap of experts”, one must

1.  see the essence of the “trap of experts” and the reasons for its formation;

2.  be able beforehand to faultlessly determine where and when such trap can come into existence and snap into action;

3.  accurately detect the trend reversal points (at least for the correction) – in case of the trap formation.

L. Williams’s “traps”. The general conclusions developed in Masterforex-V Trading System

1. L. Williams indirectly acknowledges that he cannot in advance notify when “trap of experts” becomes detectable. Besides, he is incapable of predetermining when the “trap of experts” can snap into action – i.e., when it will “swallow” orders postponed (put) by so many traders.
2. L. Williams doesn’t in detail explain his technique of detecting the “trap of experts”. As it is already mentioned above, this author just refers to the fact that, in addition to the price structure, he makes use of “something else”.
3. L. Williams gives a hint that these “know-how” secrets should be added to the trader’s instruments of the intraday trading techniques, which could indicate excellent points of entering the market.
4. L. Williams acknowledges that for this purpose he makes use of small (minor, minute) timeframes (M5-30).
5. L. Williams prompts that the true minimum on the breakdown day makes the critical point. The latter can be broken downwards (or cleared (overcome, taken)) in the next 1-3 days. In this case, most probably, the upward-directed breakdown was false. That is, traders have made deals on “buy” to no purpose (vainly). There L. Williams opens his deals towards the direction, opposite to the previous trend. He regards the breaking through the previous trend technical level as false. This pattern is labeled as the “ trap of experts ”.

Prompts submitted by Masterforex-V Trading System

The “trap of experts” is a pattern, beforehand predictable for any currency pair at Forex market.

Educational materials from Masterforex-V Trading Academy can be used as an example. As regards the trading on February 2, 2007, it had been predicted the “trap of experts” formation in the course of GBP/USD pair movement the previous night (1.9737-47 (50)). Further this trap was confirmed several hours prior to the false breaking through the previous maximum (1.9737).

Masterforex-V Trading Academy recommends the following. Examining this chart, the reader should understand on his own why the level 1.9737-47 (50) was predetermined as the “trap of experts”. It was beforehand found out that at this level the reversal towards the opposite direction became possible – see positions '1.2.2007, 21:40' and '2.2.2007, 13:38'. 

One should look at the chart on February 1, 2007 at 21:40

The principal event on Friday is well-known to every trader.

At 16:30 in USA Non-farm Payrolls = January + 167 thousands + 160 thousands = 1.9737-50 traps for the professionals.

Before American Session on February 2, 2007 at 13:38

Now, issuing from the above-presented technique of counting the resistance- and support levels, let us study the working plan for American Session:

The 2^nd resistance: 1.9739 (1.9737 is the wave previous apex; H4).

The 3^rd resistance: 1.9750 can become a trap for the professionals.

The 4th resistance: 1.9795 (the corresponding explanations are attached).
The 5th resistance: 1.9814.

The 6^th resistance: 1.9838.

The 7^th resistance: 1.9895.

The 8th resistance: 1.9916.

The next supports are *1.9638 (the corresponding explanations are attached); *19608; *19578; *19540; *1.9481.

The reader should apply the same criteria of determining “traps for the specialists” to each of the working currency pairs at Forex before the beginning of every trading session. In this case, any false breakdown will not start unexpectedly. On the contrary, the trader will perfectly see the following:

·   The points, after breaking through which the trend gets intensive acceleration.

·   Otherwise , after recoil from such points the trend can turn at least by a heavy correction – even if the breaking through the previous peak is false (as in the “trap for the specialists” pattern).

It is recommended to understand

·   Why the fall in GBP was equal to the 1^st support (the error made several points). Why this down-ward directed wave was short, after which the indispensable heavy recoil followed.

·   How the correction maximum 1.9694 was faultlessly determined after the recoil from 1.9838.

See Charts M5 and M15

Thus, the reader should try to fulfill the following tasks on his own:

·   To learn how to predetermine the “trap of experts”.

·   To find out the reversal points in this pattern in several minutes, but not after 1-3 days as L. Williams does.

·  To understand when it is preferable to open ”long-term”- or “short-term” deals. Besides, one must be able to approximately predict points of closing the corresponding deals in the session trend on that day.

· To determine the targets of the heavy recoil after the ” long-term”- and “short-term” deals.

Such tasks must be fulfilled every day before every trading session. In the course of the session, one must try to better understand the movement targets - as well as to get more specific information about points, prospective for the beginning of the correction and its end.

This procedure is carried out by students of Masterforex-V Trading Academy before the trading session. The movement targets are being specified during the on-line trading.