Part 1: Identifying ‘Magnetic’ Ranges
Discover the hidden magnetic force driving price action in stocks,
and how it helped some members make gains like 78%…66%…and 278% — even when the market was tanking.
Hello, and welcome to The Magnetic Trader Workshop.
My name is Murray Dawes.
Over the next four days, I’m going to show you a price action trading strategy that could change the way you buy and sell stocks forever.
Since the coronavirus crash in March last year, I have led my readers to relatively ‘safe’ returns such as…78%…66%…one of our trades is even sitting on a 278% gain within the last eight months.
The core of the strategy relies on finding ‘tradeable ranges’ in the price action of stocks that are listed right here in Australia.
And most importantly, it doesn’t matter if those stocks are going up or down.
When stocks enter one of these ranges, well, you’ll see for yourself. The price tends to be drawn to the central point of this range like a magnet.
And that means you can predict — and then trade — stock moves before most other investors realise what’s going on.
Over these four sessions, I’m going to show you lots of examples of this. I’ll also reveal:
- Why stock prices often move in these predictable, ‘tradeable ranges’,
- How, within those ranges, there’s a central point that acts like a magnet for prices,
- Why prices are continually drawn UP and DOWN towards this ‘magnetic’ centre point before eventually breaking out, and
- How my system can anticipate and map out those moves BEFORE they happen, allowing you to make much more profitable trades by catching the move early.
Why is this such a game-changer for private traders like you?
Well, over the last 12 months, even while COVID was pushing the market off a cliff, some of my members were busy making…
- 56% on McPherson’s Ltd
- 52% on Red 5
- 160% on West African Resources
- 32% on Newcrest Mining
- 123% on Paladin Energy
- 66% on SciDev
- 66% on Nine Entertainment Co
- 278% on Redbubble
In fact, since I first launched this system to private investors, back in November 2018, we’ve made a total of 47 trades.
21 were wins, 14 were losses and 12 were breakeven trades.
Excluding breakeven trades, where we neither made nor lost money, that’s a 60% strike rate of wins over losses.
The average win has been 67% while the average loss is just 19%. That means, on average, we’ve been making 3.5 times more on our wins than what we lost on our losses.
That’s a compelling track record for any trader — especially when it includes the coronavirus panic when markets crashed 36% between February and March 2020.
Even during one of the roughest markets of the past century, my system was able to help members make returns like those above — consistently — all while managing risk super tightly.
How would you feel seeing your trades making double- and triple-digit gains while the rest of the market was panicking?
Pretty good, I’d assume.
Now, I have to be clear: Past performance is not a guide to the future.
So, a similar success rate can never be guaranteed, but this is all verifiable. I’ll go into details of this track record later in this series.
But before we begin, let me give you a little background.
I’ve been a professional trader for more than 20 years.
I cut my teeth working in the pits of the Sydney Futures Exchange.
That’s where my passion for the markets began…watching the tickers every day for nearly six years, surrounded by people in multicoloured jackets screaming at the top of their lungs.
It was a pretty amazing experience.
There’s nothing like standing in the pits day after day to get a feel for the impact that human psychology has on share prices.
And it taught me an important lesson…
Prices move in predictable patterns — allowing
you to trade big moves before they happen
I spotted these patterns over and over again, in all kinds of stocks, and in rising and falling markets.
And once I understood what was happening, I built a system that takes advantage of this predictable behaviour.
This is the same system I subsequently used to successfully trade a hedge fund for one of the richest families in Australia, the Smorgon family who started Smorgon Steel.
It went pretty well, too. I recorded a 15% outperformance of the ASX at the time.
But you don’t need to be a billionaire to start using this system. I’m going to teach it to you over the next few days.
It all starts with something I’ve mentioned, called tradeable ranges.
Take a stock that’s trending to the upside, like in the example below, and then experiences a big sell-off — like you can see with the red line here:
That big sell-off gives me an indication that one of these ranges is about to form, with the top of the range being the previous high, and the bottom of the range the recent low.
What often happens in this situation is the price will now hover in this range for a while, occasionally making what I call ‘false breakouts’, but then returning back to the centre, the ‘point of control’ for that range — that’s the horizontal red line on the chart above.
The reason is simple.
You’ve got a flurry of people all betting on the price when it’s in this range.
Bullish investors are betting the stock is going to break above the previous high. Bearish investors are betting it’s going to break below the low.
When the price does break out of this range, even temporarily, it shakes people out of their positions.
Bullish investors’ stop-losses get triggered when the price breaks to the downside.
And bearish investors’ stop-losses get triggered when it breaks to the upside.
Once all the stop-losses have been hit and new traders have entered their positions, the price will often get pulled back — magnetically — to where it came from…
‘point of control’
This is a key point to remember.
Because the point of control — that central point in the trading range — helps you predict where the stock price is likely to head next.
So if we know that the point of control acts like a magnet, and there’s a high probability that prices will be pulled towards it, then we can put our trades on before prices even break out of the range.
When I stumbled across this phenomenon, and started testing it, I realised I was on to something seriously powerful.
Let me show you an example…
Below is a stock chart for Redbubble, an up-and-coming internet retailer I recommended as a ‘buy’ to my clients in May last year.
You can see it had a very large retracement in price — a fall — over the course of a year, indicated by the red arrow pointing down…
My system makes a calculation based on that initial range to find the all-important point of control (the red centre line).
That’s where I expect prices to return to many times before finally breaking out of the range.
As you can see, over the next three years, prices repeatedly went up and down within that range, shaking traders out of their positions over and over.
Once you identify where the point of control is, you can predict where prices are going next
Knowing that there’s a high probability that prices are going to return towards the point of control allows you to set up trades with a higher degree of confidence.
What I’m doing when I trade is taking the highest probability outcome — that a price is going to move back to the point of control — then using that to lower my risk quickly.
Risk is something I’m going to cover in depth in part three of this workshop.
But for now, all you need to know is this system isn’t a crystal ball.
Did I know which rally is going to be a breakout?
I’m simply using this trading method to get me into a strong position, quickly, which I’ll explain below.
I instructed my clients to buy Redbubble at 95 cents, which was below the point of control.
Why did we get in there?
Well, part of the reason is because there’s a high probability that the price is going to be pulled back towards the point of control.
As you can see below, that’s exactly what happened.
Within a few weeks, the price had shot up to $1.40 and I recommended readers sell a third of their position for a 47% profit.
The reason for this is because there’s a good chance that the price is going to turn back down towards the point of control once it hits the top of that range — so I want to take part profits early before prices have a chance to do that.
Just imagine if you knew — with a good degree of confidence — when prices were likely to change direction. Wouldn’t you be happy to bank some profits at that point?
Now imagine knowing this on every trade you make.
What would that do for your trading account…and your peace of mind while your money is in the markets?
That’s the benefit of having a trading system like this one.
Now, as Redbubble continued to climb, I recommended clients sell another third of their positions up at around $3.15 for a 231% profit.
By this point, there was a lot of uncertainty in the markets due to the coronavirus.
And when uncertainty is rising, I want to be ringing the cash register because I don’t know what the outcome is going to be.
At the time of writing, the remainder of our position is still open and up 278% in about eight months.
But — and here’s the really good bit about my system…
Because we took profits along the way, it means that Redbubble could now turn around and go to zero, and we wouldn’t lose a CENT on this trade.
The best bit?
You can see this ‘magnetic’
point of control in virtually ANY stock
That means it doesn’t matter what the greater market is doing…if you see a stock price move into one of these ranges, you’ll be better able to predict where that price is headed next.
This can help bring a lot more clarity and confidence to your trading decisions, even if the rest of the market looks unpredictable.
You can see one forming on this trade I recommended to my readers, McPherson’s Ltd, which we sold for a 56% gain.
Here it is again, on West African Resources, which we’re currently up 160% on.
And here it is again, on Wisr, which we ended up closing out for a quick 28% gain.
With each and every trade, my system identified the same range forming.
And inside each range, we know that there’s a centre point that acts like a magnet, pulling prices UP and DOWN towards it.
All I’m doing is mapping price action within that range, and understanding that prices are always likely to be pulled back to the point of control.
Imagine you weren’t reacting to market volatility anymore, but profiting from it.
No more jumping on a trend too late or cutting your losses when you’re well in the red.
You simply get a notification that a trade is setting up in a predictable manner…and you know, with a great deal of confidence, where the price is headed. You know what to buy, when to buy, how much to pay, and where to take profits before you even enter the trade.
That’s the beauty of having a trading system like this.
It can’t offer certainty. Nothing can in the markets.
But it can offer you predictability.
And that predictability can help you make better decisions.
I hope you’re starting to get an idea of what my system is about, how it’s able to find these ranges in any market, why prices are compelled to head back to the centre point like a magnet, and how it maps out these moves ahead of time.
Now, not all trades are winners. But the system has a built-in risk management strategy designed to help members limit any losses. I’ll explain how this works on day three.
There’s a lot more to come.
In the next lesson, I’m going to show you what generates the entry and exit points in my system: My unique buy and sell pivots.
And as you’ll find out in tomorrow’s lesson, they can help you get into a trade much earlier and potentially capture much more of a move, either to the upside or the down.
Every single trend you’ve seen begins with one of these pivots.
I’ll show you several examples in our next lesson, called The Magic Pivot.
And remember, on day four, you’ll learn how you can get access to all the trading signals generated by my system, with absolutely no ongoing commitment required.
Thanks for reading and I’ll see you at the next lesson.
Host, The Magnetic Trader Workshop