Stock Market Basics Intro

Guide

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When trading and investing in the stock market, you are looking to buy the shares
of a company at a low price and make a profit by selling them at a higher price.

While trading stocks on an exchange, you have to be registered; you can easily buy
and sell shares through a licensed broker who will charge you a fee. The vast
majority of share trading in today's world is carried out through online trading
platforms.

In this in-depth guide, we go through all of the stock market basics and how you
can get started trading in stocks.

The Stock Market for Beginners

If a company is looking to raise capital, it can offer its shares to the public and list
on a stock exchange. This is known as an IPO or initial public offering.

At the start, the company will choose the price point that the shares are listed at.
Once the shares have been floated on the stock exchange, the price is open to the
public and can move higher and lower depending on supply and demand.

While a company can issue more shares, there is always a limited supply, which
allows you to know the number of shares in circulation.

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When buying shares in a company, you are becoming a part-owner of that company
and gain any rights that come with those shares, for example, voting and dividend
rights.

Stock Market Basics

When you own stock in a company, you own a slice of that company equal to the
number of shares you own. For example, if you own 10 shares of stock XYZ and
there are 100 shares in total, you own 10% of that company.

This part-ownership gives you voting rights and any potential dividend payments.

As we discuss below, physically buying stocks is different from trading and

speculating in stocks with products such as CFDs. With CFD's, you do not actually

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own any part of the company and are only speculating on if the price will move
higher or lower.

It is important to note that when buying and selling your shares, you are not buying
or selling them directly from the company. You will normally make your trades
through a registered broker, and you will be buying or selling your shares to
another stock investor.

What Determines Share Prices

The price of a companies stock can move higher for several different reasons, but in
the end, it all comes down to supply and demand. If more people want to buy the

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shares, then the price will rise. If more people are trying to sell, then the price will
fall.

Supply and Demand

Some of the most common reasons supply and demand are affected include;

● Company Earnings: The financial welfare of a company plays a huge role in

the share price. Not only how much money the company is making but also
how much money they could make in the future is o en factored into a
stock's price.
● State of the Economy: Whether the economy is booming or trending lower
will o en have a large role in how well stock prices are going. When we are in
strong bull markets, it can be easy to find strong winning stocks. When things
turn around and the economy takes a dive, finding stocks that remain
positive becomes much harder.
● Interest rates: When interest rates move higher, investors can get easy
money from other investments. This takes money out of the stock market
and will o en see the markets stagnate or lose ground.
● Technical Analysis: Many investors are using technical analysis and chart
patterns for both finding and managing their stock trades.

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Buyers Fighting Sellers

A er everything is taken into account, the price of a companies stock comes down
to the laws of supply and demand.

There are millions of transactions from both buyers and sellers taking place in the
market every day. The price of a company's stock will move higher if more buyers
are willing to pay higher and higher prices.

However, on the flip side, when the sellers move in and overwhelm the buyers, we
can see price sell-off quickly and aggressively lower.

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Understanding the Stock Market

It has been proven repeatedly that over long periods of time, the stock market can
generate substantial returns that are hard to beat.

As we discuss in more depth below, not only can you make money from buying low
and selling for a profit, but as a shareholder, you can also make money from
dividends.

When many investors think of the stock market, they either think of day trading or
what it would be like to find the next Facebook or Google before it takes off.
However, to make solid profits over long periods of time, you do not need to take
such large risks looking for the next big player.

Investing in companies that have proven long-term track records of profits can give
you long-term capital gains while giving you an income every year from the
company dividend.

Stock Market Indexes

Whilst there are many thousands of stocks on many different stock exchanges
worldwide, there are also what are known as stock market indexes.

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Stock market indexes show you the price of a basket of stocks for certain indices.
For example, when people talk about the Dow Jone, they are talking about the
stock market index formed with the 30 largest US publicly traded companies.

There are many different stock market indexes all around the world. Whilst you may
not be interested in trading them directly, they are o en a good idea to keep an eye
on if you are a stock trade because they can give you a quick idea of how an overall
market or sector is doing.

Some of the biggest and most well know stock market indexes around the world
include;

● S&P 500
● Nasdaq Composite
● Russell 2000
● FTSE Index
● Nikkei 225
● Dax Index
● CAC 40 Index
● CSI 300 Index
● Sensex

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What is a Dividend?

Whilst making profits through capital gain is a popular way to make money in the
stock market, profiting from dividends can also be very lucrative.

A dividend is a payment to shareholders from the companies profit. This is

normally made once or twice a year, depending on the company. Some large
companies also pay out quarterly dividends.

Normally only the biggest and most profitable companies will pay out dividends,
and they will publicly declare the amount that each dividend is going to be.

To be eligible for a dividend payment, you must be a fully paid stock owner by the
ex-dividend date.

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Whilst profitable companies will regularly pay out their normal dividend when
making profits; they can also pay out special dividends. This is o en the case if the
company has made a larger than expected profit for its shareholders.

How to Invest in Stocks for Beginners With Little Money

There are two common ways traders and investors take part in the stock market.
Whilst at first glance they seem very similar, they have very different pros and cons.

Buying and Owning Shares

The most common form of share investing is buying the shares outright. This
means you own a slice of that company and all the rights that come with those
shares, including potential dividends.

This type of trading normally involves no margin. That means if you buy $10,000
worth of stock, then you will need to front up the whole $10,000 at the time of
settlement.

With this type of investing, you are looking to buy as cheap as possible and profit as
the price rises.

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Speculating on Shares With CFD's

The other popular way to trade the share market is with products such as CFD's.

With CFD's, you do not actually own a part of the companies stock; you are only
speculating and profiting from the price movements.

This type of trading does have its advantages and disadvantages.

With CFD's, you will gain access to leverage. This means that you can take a trade
and only have to front up part of the capital. For example, you could gain access to
30:1 leverage or, in some cases, more.

CFD trading will also be cheaper and allow you to start trading with a lot less capital
because you do not have to front up the full investment.

With CFD trading, you can also profit from price moving both higher and lower. If
you think the price of a certain stock or stock index is going to fall, then you can
make a short trade and make a profit from the price moving lower.

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Choosing an Online Stock Broker

The type of stockbroker you choose to use will largely be dependent on the style of
trading or investing you want to do.

If you want to own the shares physically, you will need a stockbroker like IG
markets or CMC markets. These types of brokers allow you to buy the shares
physically.

If you want to trade with leverage using products such as CFD's and profit from
price moving both higher and lower, you will need a CFD broker such as
Pepperstone.

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 TRADING CHECKLIST
TRADING ROUTINE
Is this trade formed on my time frame?
Is this trade during my trading session? Example; US/UK session.
Is this trade formed in one of my markets / Forex pairs?

TRADING STRATEGY
Does this trade meet my trade setup rules? Example: is the 50 EMA above
200 for a long trade?
Is there a valid trade entry. For example a candlestick pattern entry?

MONEY MANAGEMENT

Am I risking the correct amount of my account?

Stop loss method correct?

Profit target method corect?

Is the minimum risk reward achieved?

Stock Market Terminology
Intro Guide

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If you want to become a profitable trader in the stock market, you must know the
terminology that traders and brokers commonly use.

This post goes through the most common stock market terminology you will need
to know to start trading stocks.

The Most Common Stock Market Terminology

Buy

To buy shares in a company.

Sell

To sell your shares that you own a er making a profit or to try and minimize a loss.

Bid

The price you are willing to pay for a certain stock.

Ask

The ask price is the price people are looking to sell their stocks for.

Spread

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The spread is the difference between the bid and ask price and o en what you will
be paying to your broker to make your trade.

Stock Symbol

The stock symbol represents the shortened symbol for the larger stock name.

Annual Report

Each publicly listed company will prepare an annual report for the market. This is a
wide-ranging report showing cash holding, account management, and the
company's overall financials.

Bull

A bull is someone who is expecting prices to move higher. A bullish market is a

market moving higher.

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Bear

A bear is someone expecting the market to move lower. A bearish market is a

market that is moving lower.

Blue Chip Stocks

Blue-chip stocks are the largest and most significant companies listed on the stock
exchanges. These companies o en make the largest profits and pay the biggest
dividends. They are also normally the leaders of their industries.

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Limit Order

When placing a buy limit order, you are placing an order below where the price
currently is and then looking for the price to bounce higher once you have been
entered.

Market Order

A market order is a type of order that will enter you into a trade or exit you from
your position as quickly as possible at the best available price on offer.

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Volatility

Volatility is the amount prices are moving higher and lower. A highly volatile market
is a market that sees large and fast swings higher and lower.

Averaging Down

Averaging down is a common strategy in the stock market where you continually
buy more of a stock as the price moves lower. This makes your overall average
entry price lower.

Capitalization

Capitalization is how much all of the company's shares are worth overall.

Float

Float is the number of shares overall that can be publicly traded.

IPO

When a private company gets listed on the stock exchange and becomes a public
company, it has an initial public offering or IPO.

Secondary Offering

When a company is looking to raise more money from the public, it can have a
secondary offering.

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Day Trading

Day trading refers to a certain style of trading where a trader is looking to enter and
exit their trades before the market closes each day. A day trader is not holding their
trades past the markets open.

Broker

When looking to trade the stock market, you will need to use a registered
stockbroker who will buy and sell the stocks for you.

Portfolio

A er you start to build up a few investments, it becomes known as a portfolio.

Index

An index is a benchmark normally designed to show you a certain sector or part of

the economy. An example of a stock index is the Dow Jones formed with the 30
largest public companies listed on the US stock exchange. There are many stock
indexes around the world, and there are indexes that show different parts of the
economy. You can also trade on stock indexes.

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Margin

When using margin, you borrow money to make larger investments.

Dividend

Companies that make large and regular profits will o en pay out a portion of this as
a dividend to their stockholders.

Execution

Execution refers to entering or exiting the market. For example, exiting your order
to buy a certain stock.

Sector

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A sector is a certain part of the economy or a group of related stocks.

Volume

How many shares get traded or a given time period is referred to as volume. When
volume is large, then more shares are being trades compared to lower volume
periods.

Yield

Yield is the measurement of what return you are receiving on your investment. This
typically refers to the amount of dividend your stock is paying you each year and
what percentage of profit you are collecting each year.

Lastly on Stock Market Terminology

Whilst this list goes through the most commonly used terms that you will run into in
your stock trading, it is not exhaustive, and there are other terms you will come
across.

These include less commonly used terms such as 'dead cat bounce' and 'golden
cross.'

This list, however, is a good starting point and will ensure you have the basics terms
you need to start buying and selling in the stock market.

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Trading Psychology: How to
Master Your Trading Mind

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Trading psychology is one of the most commonly overlooked and underrated
aspects of​ ​successful trading​.

Whilst every trader needs a great trading strategy that will make them winning
trades, if you are making the same mistakes over and over again, then you will
continue to lose money.

If you risk too much, over-trade, revenge trade to get back your losses or make
other psychological mistakes like not cutting your losses small when you should,
then it does not matter how good your strategy is, you will lose money.

In this post we go through exactly why trading psychology is so important and how
you can start using the best trading mindset.

What is Trading Psychology?

Trading psychology is a broad term that takes into account everything that
involves your emotions when trading.

When traders refer to trading psychology they are normally referring to the
mistakes and mental errors that they continually repeat that cost them money.

These errors normally fall into two categories; errors from being greedy and errors
from being fearful.

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As we discuss below; if you don't understand and work on these errors, then you
will find it extremely hard to be a successful trader.

Why Does Forex Trading Psychology Matter?

The psychological mistakes that traders make are common amongst almost all
traders and they can hold you back from being successful.

The reason these errors are so common is because when trading we are all dealing
with either making or losing money. This brings on feelings of greed and fear.

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When we are being greedy we can have a tendency to make the same mistakes
over and over again that will hurt our results. These mistakes are not taking profit
when we should, making far too many trades than we should or risking a lot more
than we should.

We do these things because we kick into greed mode thinking we are going to
make a lot of money.

When we move into fear mode another set of mistakes creep in. These errors are
normally​ ​holding onto losses for far too​ long instead of quickly cutting them short
or not entering the next good trade we have found because the last trade just lost.

We start doing these things because we are fearful of losing money.

These psychological errors will continue to hold you back and stop you making
money no matter how great your trading strategy is.

How to Get the Best Trading Mindset

Whilst many traders will try to pretend that they don't have any trading emotions,
this is actually the wrong way to get the optimum trading mindset.

All traders deal with emotions that making and losing money throw up.

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If you don't have any emotion around making and losing money whilst you are
trading, then you simply are not yet risking enough money.

To get the best trading mindset you need to first acknowledge all of the feelings
that come with both winning and losing.

Once you begin to understand these feelings and the full range of emotions you
experience when you are trading you can begin to deal with them.

When you start to understand how you feel when you lose you can deal with it.
Instead of pretending you feel nothing, you can actually work on it and learn to
overcome it to become a much better trader.

Day Trading Psychology Tips

There are many, many different psychology tips that you could use in your trading,
but I have turned the list below into a short set of dot points that you can
remember and that will help you the most.

● Don't risk too much on any one trade.

● Don't chase your losses with revenge trades.
● Don't over-trade and make too many trades.
● Don't let the last trade stop you making your next trade.
● Always cut your losses short at your stop loss point.

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 ● Always​ ​take profit​ ​at your designated profit target level. Don't get greedy
and hold for more.

Trading Psychology Books

There are many trading psychology books you can read to improve your trading.
Whilst a lot of them are good reads, a lot of them are also incredibly boring.

The following three books are not boring and they will help you in your trading
immensely.

Trading In The Zone by Mark Douglas

This is one of the most famous and popular trading books by the late Mark Douglas.

The great thing about this book is that it breaks down what can be an incredibly
complicated subject and makes it easy to understand.

Douglas goes through all the mental habits and mistakes that are constantly
costing you money in your trading.

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The Disciplined Trader by Mark Douglas

This is another book by Mark Douglas and is now also known as another one of his
classics.

This book looks closely at why traders tend to make the same mistakes over and
over again.

You get taken through a step-by-step walkthrough and will begin to understand
why it is you have been making the mistakes you have been.

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Trading Psychology 2.0 : Brett N. Steenbarger

This is an extremely comprehensive trading psychology book by Brett Steenbarger.

This is not a book you are going to finish in one sitting and it can often take some
time to go over things a few times to fully understand there meaning.

This book includes full academic research and you will come away after having
read it with a lot of practical tips you can start using in your own trading.

Trading Mindset Quotes

Need help with some trading psychology quotes? Here a few of the best.

Learn to take losses. The most important thing in making money is not
letting your losses get out of hand.

● Marty Schwartz

If you cannot control your emotions, you can’t control your money.

● Warren Buffet

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 Do more of what works and less of what doesn’t.

● Steve Clark

Risk comes from not knowing what you are doing.

● Warren Buffet

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How to Read Stock Charts
Guide

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Learning how to trade the stock market successfully can come with a lot of
challenges. There are many different strategies and stock market terms to learn,
and you will need to create an edge over the market.

Something that can help you create an edge over the market is reading and
accurately analyzing stock charts.

In this post, we go through everything you need to know about stock charts and
how you can start reading them to find high-probability trades.

What Exactly is a Stock Chart?

A stock chart shows you a visual representation of what price has done over a
certain period of time. For example, you could be looking at a 15 minute stock chart
that shows what the price is doing every 15 minutes, or you could be looking at a
longer-term chart such as the weekly chart.

Stock charts are used to quickly get an idea of what price has done in history and
what it could do in the future.

Many technical analysis and price action traders will use these sorts of charts to
find patterns and trends to help them find their trades. As we discuss below, you
can find many high-probability price patterns on your stock charts that can help
you make trades.

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The example chart below is the daily chart of Coca Cola showing you the different
price movements, higher and lower.

Choosing the Best Stock Chart

There are different charts that you can use in your stock trading that will show you
different information. They each have their pros and cons.

Line Chart

This is the simplest of all the stock market charts. This chart also has the least
amount of information and is just one long line moving higher and lower.

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As price moves higher or lower, the line chart will be updated and form a line.

This type of chart is good for quickly spotting potential trends and also marking
support and resistance.

Bar Charts

The bar chart and candlestick chart are similar.

The bar chart shows you more information than a line chart as it also shows you the
open, close, high, and low that price made for each session.

The example below is a bar chart. The left tip or wing shows where the price
opened. The bar high and low show how far the price moved, and the tip on the
right is where the price closed.

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Japanese Candlestick Charts

By far the most popular of all charts is the candlestick chart.

Whilst the candlestick chart shows you the same information as the bar chart, it
also includes a body. You can normally change the color of the candle body to suit
your own needs.

Having a candlestick body is so handy because you can quickly and easily see if the
price has moved higher or lower.

In the chart below, the red candles are bearish candles where the price has moved
lower. The green candles are bullish candles where the price has moved higher.

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How to Read Stock Charts

After choosing the type of chart you will use, you will then want to start analyzing
these charts to find and manage trades.

Some of the most popular strategies for reading stock charts include;

Look for the Obvious Trend

Trading with the obvious trend can often reward you with long-running winning
trades that can be minimal risk.

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Obvious trends will tend to run for long periods. Whilst every trend has pullbacks
where price makes a move against the trend until the trend fails, it can offer high
probability trades.

In the example chart below price is on a trend higher. Price makes regular moves
and swings lower against the trend, but the trend overall continues moving higher.

These swings lower against the trend can often be the best spots to look for trend
trading entries.

Using Support and Resistance

Support and resistance are some of the most common forms of trading across all
different markets and time frames.

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When using support and resistance in your trading, you can either look for the
support or resistance to bounce or for a breakout.

In the example below, price moves into an important area of support. This could be
a high probability area to look for long trades before the price rejects the support
level and then moves back higher.

Adding Important Indicators

Stock traders will often use indicators in their chart analysis to get an idea of what
price could potentially do in the future.

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One of the most popular indicators in the stock market is the moving average and,
in particular, the longer-term 200 period simple moving average.

The 200 period moving average can give you a quick indication of the overall price
trend, and it can also be used as dynamic support and resistance.

In the example chart below, we can see that price continually stays below the 200
period moving average. We can also see that each time price moves higher to test
this moving average, it rejects it as resistance and moves lower.

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Following the Volume Information

Volume in the stock market is the amount of shares that are being traded.

Volume can be a key indicator in the stock market, and you can use it to find
potential trades. You can also use it to confirm a potential trade idea you had.

When the price is moving higher with increased volume, it is normally seen as a
good sign that the stock is strong and healthy. The opposite is also true when the
price starts falling, and the volume is increasing. This can mean the stock is gaining
momentum lower.

If the volume starts to become less and less after a large move higher or lower, it
could be a sign that a potential reversal in the opposite direction could be on the
cards.

Platforms That Offer the Best Stock Trading Charts and Tools

To correctly analyze stock charts and their price action, you will need a platform
that has all of the tools for you to use.

When choosing your stock chart platform, you will also need to consider the type of
trading you are going to be doing and the type of broker you want.

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If you are looking to trade stocks as CFDs, then Metatrader offers the best charts
with all the inbuilt tools you need for free.

If you are looking to physically buy and sell your shares and not use CFDs, then you
will want a broker such as IG markets that offers a huge range of shares on their
own platform.

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Supply and Demand Forex
Trading Guide

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Supply and demand when Forex trading is no different to supply and demand with
any other real world trade.

Whilst many trading websites will try and make this subject overly complicated, the
truth is that it is not.

The trick however when it comes to using supply and demand levels when trading
is being able to quickly and easily spot these levels to find and then manage your
trades.

In this post we go through exactly what supply and demand is and how you can use
it in your trading.

What is Supply and Demand?

Supply and demand is simply how much something is wanted and how much there
is to offer.

Supply is the amount on offer for a certain product, asset or in the case of trading
Forex, a currency.

Demand is the amount that is wanted for a certain asset, product or currency.

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For a simple real world example think of the price of petrol / gas. When there is a lot
of gas around and there is a large amount of supply, then the price will fall and be
cheaper.

However, on the flip side, if the demand increases and there is less supply
available, then people will start to pay higher prices.

Supply and demand can be seen on everything from house prices through to the
amount you pay for your food.

What is Supply and Demand in Forex Trading?

Supply and demand works the same way in Forex trading.

If there is a large amount of demand for a certain currency, then it will rise. If
however, the demand falls away and there becomes an imbalance where there is
too much supply, then just like in the real world the price will start to fall.

The easiest way to think about this is what happens when price starts rising rapidly
in a rising market. As price begins to surge higher more and more traders are trying
to enter (an increase in demand). Because there is not enough supply to keep up
with this rising demand the price rises higher.

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There are many ways to spot supply and demand levels on your Forex charts.
Common ways are​ ​trendlines​, support and resistance and even using dynamic
support and resistance with moving averages.

However, the easiest ways for you to spot supply and demand levels on your charts
is with major support and resistance levels. These levels where price continually
bounces from show a consistent level where price is finding an oversupply and a
level where demand grows.

How to Identify Supply and Demand in the Forex Market?

Price is in a constant tug of war between the buyers and sellers. This tug of war is to
figure out the supply and demand levels and ultimately who is in control of the
next move.

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As the example chart shows below, as price moves lower there is an oversupply
and a lack of demand. This sends prices lower. Price moves into a demand level
(support) where the market dynamics shift. At this level that amount of demand
picks up and because demand is now higher, the supply starts to get lower. This
sends prices back higher.

As price moves back higher traders start to cash out of their profitable trades.
Because traders are leaving their positions and selling out, all of a sudden there is
more supply around. What happens when there is more supply and not as much
demand? Price starts to fall back lower again.

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Supply Demand Price Action Trading

Whilst there are many complicated ways you can start to use supply and demand
levels in your trading, the easiest and often the best is with a clean​ ​price action
chart.

What does a clean price action chart mean? No indicators or any other distractions.
Just raw price action.

See the example chart below. First you notice that price is in a trend higher. You
then want to find long trades inline with the current trend. As this example chart
shows, you get two potential trading signals to make a long entry.

Price first pulls back into a clear demand (support) area where you could enter
long. Price then makes a second pulback into the same demand zone before
making another large move higher.

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Finding Supply and Demand Trading Signals

Once you have learned how to spot obvious supply and demand zones on your
charts, you can then start using them to find both high probability trades and also
manage your trades.

You can use these levels to make very high reward trades and also to set your stop
loss and profit targets.

You can also use these same levels on all time frames.

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Simple Supply and Demand Trading Strategies

The next two examples of supply and demand trades are setups you will see and be
able to use in your trading over and over again. They form on all time frames and
repeat themselves time and again.

In the first example you identify a clear demand level. Price has clearly found
demand at this level multiple times. If you are very aggressive you could just enter
a long trade right from this level.

If you are more conservative you could look to increase the odds of your trade by
using a bullish​ ​Japanese candlestick​ to confirm your trade. In this example price
forms a bullish engulfing bar at the demand level to confirm a long trade higher.

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In the second example you notice that price is starting to make a move and trend
lower. You also notice price break through a clear support level. When price moves
back into this supply level you could start looking for short trades. Short trades
here would be at an obvious supply level and inline with the trend lower.

Just like the first example you could also use a candlestick pattern to confirm the
bearish move lower. In this example price forms a​ ​shooting star pattern​ to signal a
move back lower.

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10
Lastly

Being able to accurately identify and use supply and demand levels can take some
time and practice.

It is not as easy as downloading and using an indicator that tells you what to do
and what direction to trade.

However, there are many benefits to supply and demand trading once you have
mastered it. You can use it to find trades on all time frames and it will also help you
with your stops and profit targets.

Make sure you test out any new strategies on​ ​free demo charts​ before you ever risk
any real money so you know that they work for you and you are completely
comfortable with them.

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GUIDE TO PRICE ACTION
ENTRY SIGNALS

How to find, enter & place price action trades

LearnPriceAction.com
 TABLE OF CONTENTS

WHY ARE ENTRY SIGNALS SO IMPORTANT?

1

HOW CAN CANDLESTICK CHARTS HELP YOU?

2

PIN BAR REVERSAL = PIN BARS

3

ENTRY EXAMPLES
5

WHY ARE ENTRY

ENTRY
ENGULFING
WHY ARE SIGNALS SO
BARS SIGNALS SO IMPORTANT?
IMPORTANT?
8
WHY ARE ENTRY SIGNALS SO IMPORTANT?

INSIDE BARS = IB'S

11

HOW TO USE AS PRICE ACTION TRIGGERS

14

STOP LOSS STRATEGIES

16
 SIMPLE SETUPS

Using simple and repeatable price action triggers that form time
and again in the markets can be a great way to find entries into
the market.

These triggers will often get you in at the best time and just as
the market is about to reverse, giving you the optimum entry
price.

Why Are Entry Signals so Important?

Buying and selling a currency pair in order for you to gain profit
from the differences between the entry and exit price is your
main objective in Forex trading.

Buying low and selling high is universal. Some traders spend

more time thinking profoundly on entry points, whilst others
believe that success sometimes relies on how a trader exits
their trades.

Knowing the value of a currency pair that will appreciate in the

future isn’t enough unless you have a clear conception of when
the appreciation will occur.

01
 CANDLESTICKS

Remember the saying; “Give a man a fish, and you feed him for
a day. Teach a man to fish, and you feed him for a lifetime”.

Just like in trading, you don’t need to get the signals, but learn
how to find them and teach yourself how to actually get profits
for a lifetime.

Without the mastery of trade timing and good trigger points you
will never make any profits. That’s why a trader uses charts in
their daily trading.

You can use charts to determine everything that is happening in

the Forex market. One of the most useful and common types of
charts is the candlestick chart.

How Can Candlestick Charts Help You?

It is a type of financial chart that is more visually appealing than
the common bar chart, thus making price action easier to
interpret and analyze.

It can also help an investor make wiser buy and sell decisions
because of its recognizable patterns.

02
 PIN BAR REVERSAL

Patterns play a very crucial role in trading, so here’s to a

breakdown of the most helpful patterns for your daily trading
needs.

Pin Bar Reversal = Pin Bars

Pin bars are one of the most powerful price action patterns in
Forex trading as they are easy to recognize which means both
professionals and retail traders use them.

03
 HOW TO FIND

What is a Pin Bar?

The pin bar (also known as Pinocchio Bar) formation is a
reversal setup. It is a one candle / bar formation that has an
obvious large tail or shadow either up or down.

A pin bar is a single candlestick setup that clues price action

into potential reversals in the market.

It also has an elongated wick that sticks out.

There is also a Fake Pin Bar that is different than the normal pin
bars.

Because of the price action, you can now determine the

difference between the two. If a long wick sticks out from recent
prices then it’s a pin bar, if the long wick does not stick out then
it’s not a genuine pin bar, but rather a ‘FAKE PIN BAR’.

How to Spot the Pin Bar?

Bearish pin bars form after several bullish candles and have a
nose that is higher than the top of the previous candle.

The nose must be at least 75% of the candle size and the candle
body must be less than 16%. (Vice Versa for a Bullish Pin Bar).

04
 ENTRIES

Pin Bar Entries

The best way to trade any market is to trade inline with the
trend.

In a trending market, a pin bar entry signal can offer a better

risk reward with lower risk.

If the pin bar shows a rejection to lower prices, it’s a bullish pin
bar since the rejection shows the bulls or buyers are pushing
price higher.

05
 RISK LEVELS

Aggressive - High Potential Reward and Risk: 50% Retrace

This entry involves taking a 50% retrace of the pin bar or other
reversal candles wick.

For this entry you would be setting a trade entry and waiting for
price to move higher or lower 50% in the opposite direction of
where you actually want price to go for your trade.

You do this to get a much tighter stop loss and potentially

higher reward pay off.

Medium Reward / Risk Entry: Entry on Close

This entry on reversal trade signals involves entering as soon as
price has closed. When the reversal candle such as the pin bar
has closed and it meets your criteria, you simply enter the
trade.

Lower Reward / Risk: Entry on Confirmation / Break Higher

or Lower
With this entry type you are creating a trade entry and waiting
for price to break higher or lower, above or below the pin bars
high or low.

06
 EXAMPLES

Price is then breaking in the direction that you are looking for
price to move.

This is lower risk, but can create bigger stops that will give you
lower reward.

Each entry has it payoffs for potential risk and reward.

07
 ENGULFING BAR

Engulfing Bar
Engulfing Bars = EB’s, also known as Outside Bars = OB’s are
one of the most widely used strategies in Forex trading. EB’s can
generate very accurate and reliable signals if identified and
understood correctly.

What is the Engulfing Bar?

There are two types of engulfing bars:

(1) Bullish Engulfing Bar.

(2) Bearish Engulfing Bar.

08
 HOW TO FIND

Bullish Engulfing Bar (BUEB)

The bullish candle fully engulfs the previous candle. It can even
engulf more than one candle, but to be a valid bullish engulfing
bar, it must engulf at least one of the previous candles.

Bearish Engulfing Bar (BEEB)

The bearish candle fully engulfs the previous candle.

Both Bullish and Bearish Engulfing Bars have a “lower low” and
“higher high” like the preceding candle.

How to Spot Engulfing Bars?

Looking for the engulfing bar is pretty simple. The candle
should completely cover the previous candles range, taking out
the previous high and low.

09
EXAMPLES

10
 INSIDE BAR

Inside Bar = IB
One of the most familiar candlestick patterns is the inside bar. It
forms when price trades within the high and low ranges of a
previous day.

You can call an inside bar a ‘breakout play’.

The best IB’s are made in trending markets with the direction of
the trend.

What is an Inside Bar?

The inside bar is formed when the second bar or candlestick is
engulfed within the previous bar or candlestick high and low.

It is a two-bar price action trading strategy in which the inside

bar is smaller and within high to low range of the prior bar. It
can be at the top, middle or bottom of the bar.

How to Spot the Inside Bar?

You can see what it looks like in-line with a trending market
below. As you can see below it is a down-trending market so the
inside bar pattern would be called the inside bar sell signal.

11
EXAMPLES

12
 TRENDS

Here’s another example; this time it’s an inside bar pattern with
a trending market.

In this example, the market was trending higher so the inside

bar would be referred to as the inside bar buy signal.

13
 ENTRIES

Inside Bar Entry

Inside bars can be traded both as reversals and market trend
continuations.

The most commonly used entry with the inside bar is to place a
buy stop or sell stop at the high or low of the mother bar. This
way your entry order is filled when price breaks out above or
below the mother bar to confirm you move and to miss as many
false inside bar moves as possible.

How to Use These Reversals Price Action Triggers?

Support and Resistance

In technical analysis, support and resistance levels are the most
important concepts to determine long and short trading
opportunities.

Support is a price level where due to a concentration of

demand, price will often turn around and be ‘supported’.

Resistance zones are the opposite to support zones and are

levels in the market where price is finding more sellers and less
demand; in other words, price is finding resistance.

14
 TREND LINES

Resistance zones can be great spots to target bearish reversal

trades or to use with your exits.

If you can recognize the zones of support or resistance on your

charts, it will provide both valuable entry and exit points.

Trend lines
There are 3 different types of markets. These are the uptrend
(higher highs and lows), downtrend (lower highs and lows), and
sideways trends (ranging).

Uptrend trendlines (valleys) are drawn along the bottom of

identifiable support areas. And in a downtrend, lines (peaks) are
drawn along the top of identifiable resistance areas.

15
 STOP LOSS

You should not try and make the line fit the market.

So how can you draw them? It's easy! Locate a minimum three
major points that align higher or lower.

What are Some of the Stop Loss Strategies Used?

Market volatility is never-ending. As a trader, the hardest part is
to mitigate against losses.

NOTE: Set your own stop losses depending on your individual

preferences.

Below are some of the most popular and commonly used stop
loss strategies.

Pin Bar Stop Loss Strategy

You can place a stop loss behind the tail of the pin bar whether
it’s bearish or bullish.

As a result, when price hits your stop loss, the pin bar setup will
turn out to be invalid.

Remember that the market is just notifying you that your pin
bar setup was not strong enough, don’t ever think that it’s a bad
thing when price hits the stop loss.

16
 STRATEGY

Inside Bar Stop Loss Strategy

The inside bar stop-loss strategy gives you two options on
where you can place a stop-loss.

It can either be behind the inside bars high or low or even

behind the mother bars high or low.

If you want a lower risk inside bar stop loss strategy, then it’s
behind the mother bars high or low. Just like the pin bar stop
loss strategy, the inside bar setup becomes invalid once hit.

Confluence Stop Loss Strategy

Traders often use this kind of setup.

With this strategy you will use support and resistance levels,
previous highs and lows, moving averages, trend lines, and
channels to find an appropriate stop level.

The good thing about confluence stops is that they are often
used at obvious price levels in the market.

Note: If price repeatedly takes out your stops by just a few

points, add more confluence levels or add a little padding to
place your stops outside the stop hunting zone.

17
 LASTLY ...

Volatility Stop Loss Strategy

Professional traders often use this strategy because it has the ability
to adapt to changing market conditions.

If the volatility is high, you can use a larger stop loss for greater
swings and you can shorten when the market calms down.

In times of high volatility, you should widen your targets to counter

the reduced effect on reward: risk ratio.

If the volatility is low then you should set closer targets because price
won’t travel as far.

Final Thoughts
Use price action patterns for entry according to your own risk
tolerance and how aggressive you are as a trader.

Always remember to use a stop loss and test and always test new
strategies on a good demo trading platform first.

I will leave you with this;

“Letting losses run is the most serious mistake made by most

investors.”

– William O’Neil

18
Breakout Trading Strategies
Quick Guide

1
Breakout trading can offer you the opportunity to find and make very high reward
trades that can be highly profitable.

Some of the most explosive and also profitable trades are breakout trades. The
reason for this is because just before price breaks out of an area it is often tightly
contained. When price eventually does breakout it can often then explode in a
large move.

In this lesson we go through exactly what breakout trading is and how you can
make high probability breakout trades.

What is Breakout Trading?

When you are making a breakout trade you are looking for price to 'break' through
a key level in the market.

The two most common levels traders will look for breakout trades are through
support and resistance levels and through​ ​trendlines​.

As a breakout trader you are looking to enter a trade when price breaks a key level
and make a profit as price continues on with the break.

See the example breakout trade below. Price at first is contained and rejects the
resistance level. The breakout trade comes when price breaks through the

2
resistance level. This allows for long trades to be placed and profits to be made as
price moves higher.

What are the Advantages of Breakout Trading?

Breakout trading can be done on all time frames and on nearly every market.

3
The best markets to make breakout trades are where there is a lot of market
movement and volatility. This will give you a better chance of seeing price explode
through a key market level.

When breakout trading you have uncapped profit potential. This means that unlike
a strategy such as​ ​range trading​ where you are trading back into a support or
resistance level, you are trading out of a support and resistance level. This allows
you to make a trade that could run into a very large winning trade.

Whilst there are a lot of advantages to breakout trading, there are also some very
real risks.

The example below shows exactly what happens when a breakout trade quickly
turns into a fakeout. This happens when price attempts to breakout of a key level,
but quickly snaps back and stops all of the breakout traders out.

4
The Basics of Finding a Breakout Trade

The most important thing to breakout trading and what new breakout traders
often struggle with is first finding a major level.

You need to be able to first identify that the potential breakout level has been
respected as a support or resistance level on multiple occasions.

5
This goes the same for trendlines.

See the example below. Before breaking out higher price had respected the
obvious resistance level twice. This sets up a clear breakout trade when price
moves up higher and looks to re-test the same level on a third occasion.

Simple Breakout Trades

Some of the best breakout trades are also the simplest.

6
Once you have found an obvious level that price has been contained within such as
a key support or resistance level, then you can start looking for your breakout
setups.

Intraday Breakout Trading Strategy

One of the most​ ​popular trading strategies​ is finding and making intraday breakout
trades.

Intraday breakout trades can be both explosive and highly profitable.

The main thing you want to keep in mind when looking for intraday breakout
trades is that you want to trade with the momentum on your side.

For example see the chart example below. Once you notice price has rejected an
obvious support level on multiple occasions, then you can start looking for
breakout trades lower.

The first chance to make a short breakout trade is when price makes a clean
breakout.

If you missed this first trade you could take the second chance entry when price
retests the old breakout area and it holds as a role reversal and new resistance
level.

7
Example Breakout Trading Strategy

The same strategy used to find intraday breakouts can be used to trade breakouts
on higher time frames.

These higher time frames can be as long term as you like, for example; daily,
weekly or even the monthly time frame.

In the example below, price breaks and importantly closes out of the key support
level. This is the first chance to take a short breakout trade.

After selling off lower price then makes a move back higher and retests the same
old support level that price previously broke out of. This is a high probability level

8
to look for new short trades as these levels will often hold as role reversal levels
just like this level held as a new resistance level.

Lastly

Breakout trading can be fast paced, exciting and it can also offer you very high
reward winning trades.

With that said, it can also come with a lot of risks if you have not practiced your
chosen breakout strategy and mastered it.

There is a very real risk of making breakout trades that quickly turn into 'fakeouts'
with you quickly being stopped out.

9
If you want to add breakout trading into your trading toolbox, then the best thing
you can do is​ ​get a set of free demo trading charts​ and test out different breakout
trading strategies to see what suits you the best.

10
Profitable Chart Patterns
Trading Guide

1
Chart patterns are incredibly popular in many different markets because they allow
you to not only find profitable trades, but also manage them.

Whilst there are many charting patterns you can use, some of the most popular
repeat over and over again. They form on all time frames and you can use them in
many different markets from Forex to stocks.

In this post we go through exactly what chart patterns are and how you can start
using them in your own trading.

What are Chart Patterns?

Chart patterns are different to candlestick patterns.

Whilst many traders will be using Japanese candlesticks to find their trading
patterns, there is a difference between a chart pattern and a candlestick pattern.

A candlestick pattern is normally a one or two candlestick pattern only. For

example, a candlestick pattern may be an inside bar or a​ ​dragonfly doji​.

Chart patterns are not formed with just one or two candlesticks and are created
over longer periods of time. They will normally show you a bigger reversal that is
being formed or a larger trend that is being shaped.

Just because they are formed with more sessions and candlesticks does not mean
that you have to use them for longer forms of trading only. There are many

2
patterns you can use for short term trading and patterns that can also be used to
make intraday or scalp trades.

How to Use Chart Patterns

You can use chart patterns in different ways in your trading, but the most popular is
to find and then make high probability trade entries.

Chart patterns repeat time and time again. The reason they continue to form and
continue to repeat is because each pattern is price showing you what traders are
doing through the price action.

Given similar sorts of circumstances traders will tend to behave in the same ways
over and over again. Think about how traders get greedy when looking to make
money or fearful when they start losing it. These emotions don't change.

This is the same reason why the same patterns continue to form over and over
again. Traders do the same things over and over again in the markets which creates
the same patterns.

You can use this knowledge to your advantage by finding and then trading these
patterns to make profitable trades.

3
Trading Classic Chart Patterns

There are endless amounts of chart patterns you can learn to use in your own
trading. Just like the endless amount of​ ​indicators​ you can find and use, you don't
need to know them all to be profitable.

Often the best way is to find one or two classic chart patterns and then mastering
them so you know them back to the front. This is far better than finding and trading
20 x different patterns, but being very average at them all.

Head and Shoulders

The head and shoulders is quite possibly the most popular of all the chart patterns.

Once you know how to identify it you will start to see it on all your charts and time
frames and you will see how profitable it can be. When done correctly this pattern
can be incredibly reliable.

The head and shoulders pattern is formed with three peaks and a neckline. The
first peak is shoulder one or the 'left shoulder'. The second peak is the head and
the third peak is the right shoulder.

You can read more about​ ​how to find and trade the head and shoulders pattern
here​.

4
Double Top and Double Bottom

This is a very easy pattern to identify, but a very reliable reversal pattern.

This pattern is formed with two peaks and a neckline. For example; with a double
top we need to see price form two peaks rejecting the same resistance level.

For a double bottom we need to see price forming two swing lows rejecting the
same support level.

5
Entry is normally taken when price breaks higher or lower through the neckline.

You can read more about​ ​how to find and trade the double top and bottom here​.

6
Day Trading Chart Patterns

Charting patterns are not just for the higher time frames and you can use them for
both day trading and intraday trading.

The most commonly used pattern that is used by everyone from the big banks right
down to the smallest retail trader is​ ​support and resistance​.

When using support and resistance you are either looking to buy / sell the bounce,
or buy / sell the breakout.

When buying or selling the bounce you are looking for the support or resistance
level to hold and for price to make a reversal.

When buying or selling the breakout you are looking for a key support or resistance
area to break.

7
Intraday Chart Patterns

Another very popular pattern that can be used on all time frames and in many
different markets is role reversal trading.

With role reversal trading you are using support and resistance levels, but you are
looking for these levels to change their roles.

See the example chart below. At first price finds this level as a support level. Price
then breaks lower. When price makes a new move back higher you are watching to

8
see if the old support level will hold as a role reversal and new resistance level. If it
does you can look for short trades.

You can use these role reversals as old support / new resistance and vice versa, old
resistance and new support levels.

9
Lastly

We have only gone through a few of the popular chart patterns in this post. There
are many you can learn and use in your trading.

Keep in mind you don't need to know them all and finding one or two that you like
the best and then mastering them will often be the best way.

Make sure you test out these patterns and any other new strategies on​ ​free demo /
virtual trading charts​ first before you ever risk any real money in the live market.

10
Channel Trading Strategies
Quick Guide

1
Channel trading can be a great way to find support and resistance areas and
potential breakout trades.

When channel trading, we are trading a channel as it forms and bounces or breaks
through the previous channels levels.

In this post, we discuss exactly what channel trading is and the best strategies to
use it.

What is Channel Trading?

When trading a channel, you use parallel lines connecting the swing highs and
swing lows of a market's support and resistance.

The most common method to mark a channel is by using trendlines.

The swing highs that are marked by the trendline are known as the channel's
resistance levels. The swing lows that are connected to create the channel become
the support level.

As discussed below, these levels can then be used to find ‘bounce’ trades and
breakouts.

Trading the price channel is a very popular method of technical analysis because
you can use it on all time frames and in many markets, including stocks and Forex.

2
You can use a channel to find support and resistance as the price continues to move
higher or lower, and you can use it to find potential breakout trades.

Channel Trading Strategies

Whilst there are other strategies that are used with channels such as the break and
retest and the horizontal strategy, four popular strategies are;

● Ascending Channel Trading Strategy

● Descending Channel Strategy
● Channel Breakout Strategy

3
 ● False Breakout Channel Strategy

Ascending Channel Trading

An ascending channel is where the price is moving higher.

With this channel, price is making higher highs and higher lows.

4
The easiest way to take advantage of this type of channel is by first identifying the
trend higher and the channel.

Once you have done this, you can begin to look for both long and short trades
depending on how aggressive you are.

The higher probability trades are always with the trend. This means looking to take
long trades from the support of the channel when the price moves into the low.

Aggressive traders may look to trade against the trend when the price moves into
the resistance of the channel and for the price to move back lower.

5
Descending Channel Trading

A descending channel is when the price is moving lower.

With this type of channel, price is making a series of lower highs and lower lows
that you will be able to connect with your trendlines.

The two ways you could look to trade the descending channel depend on how
aggressive you are.

6
If you are a trend trader looking to put the odds in your favor, you may look to go
short when the price moves higher and back into the resistance of the channel. This
would then be trading in line with the trend lower.

If you are more aggressive, you may consider looking to trade against the trend and
look for long bullish trades when the price moves into the channel's support level.

Channel Breakout Strategy

This is a very popular channel trading strategy.

With this strategy, you are looking for the channel to break and take advantage of
the possible explosive momentum.

As the example shows below, the price holds the ascending breakout before finally
making a strong breakout higher.

Importantly price also made a strong close above the upper trendline area.

When the price moved back lower, you will also note that this old channel level held
as a new support level.

One other thing to note is that the longer the channel holds, the stronger the
breakout will be when it occurs.

7
False Breakout Channel Trading

Channel levels will regularly false break.

You will o en see price pop above or below the channel support or resistance
before snapping back in the opposite direction right back into the channel.

This gives you an opportunity if you are a false break trader.

As the example shows below, the price was in a channel moving lower.

8
The price tested the resistance of the channel before popping out just higher. It
then snapped back lower, forming a bearish engulfing bar to signal a potential false
break and lower prices.

Just like in this example, you can use your Japanese candlesticks when looking for
potential channel trade entries.

Price Action Channel Indicators in MT4 & MT5

To start channel trading in your MT4 and MT5 charts is very straightforward.

9
Simply follow these steps;

● Open your MT4 or MT5 charts.

● Select ‘insert’ > ‘indicators’ > ‘lines’ > ‘trendlines’.
● Select the first high or low you would like to mark your trendline with your
computer mouse. Drag the trendline until you are happy with how it is
positioned on your chart.
● Repeat this last step to create the second part of the channel.

10
Trendline Trading Strategies
Guide

1
Trendlines are one of the most widely used technical analysis tools in the Forex
market to help find support and resistance.

If you understand and can draw your trendlines correctly, then they can be an
incredibly accurate technical analysis weapon.

There are some key rules to marking your trendlines correctly and a lot of traders
struggle at times with forcing the markets and placing their trendlines in the wrong
areas.

What Are Trendlines Really Used For in Forex Trading?

When marking a trendline you are trying to highlight a support or resistance level
and a possible area to find great trades.

You are looking at where price may stop and respect the trendline as a support or
resistance.

Before explaining how you can use your trendlines, we need to know the three
types of markets;

1. Uptrend (usually noted with higher lows and higher highs)

2. Downtrend (usually noted with lower highs and lower lows)
3. Sideways ranging markets with no clear trend

2
You can use trendlines to find support and resistance in each of these three
markets.

For example; if price is in an up-trend you will quite often see a trendline form with
price creating a series of higher lows that match as a support level.

How to Correctly Draw Forex Trendlines

In most of the major lessons you will find discussing trendlines and how to mark
them, people discuss using only two swing points.

There is a pretty large flaw in this way of marking trendlines. If you use only two
swing points, then you could find a trendline anywhere on the chart at any time.
This does not make it a reliable support or resistance level and somewhere you
should look to find trades, it just makes it two random points connecting.

If you flip to your own chart now you will see what I mean. I have added an example
below; see how we could make any number of trendlines?

3
To have a confirmed trendline and a support or resistance we could look to find
trades at, we need a minimum of three swing points to line up.

This shows that price has continually respected a level and is not just a random
point.

4
The easiest way for you to mark your trendlines in all three market types is to find
the recent swing highs and lows.

Using your charts trendline tools, see if these highs and lows match.

Price is Not Always Perfect

Price will not always create perfect trendlines.

To find the best trendline trading opportunities don’t be tricked by the candle
wicks and false breaks that the markets create.

5
Just like a normal horizontal support and resistance level, the market will false
break a trend line.

Also keep in mind when marking your trendlines that they are not perfect exact
lines. Trendlines are zones of support and resistance and zones where you are
going to look for trades.

Match Your Forex Trendlines With Other Price Action Clues

Whilst trendlines are a great technical analysis tool, you should be using them with
other price action analysis to create even better trade setups.

You can increase your chances of making winning trades by lining up trendlines
with horizontal support and resistance areas to find sweet spots.

You can also use other technical trading indicators like the Moving Average.

Forex Trendline Trading Opportunities

There are three major trading opportunities that you can keep an eye out for when
using a trendline in your trading;

6
Trendline Reversal Trading

This is the most popular trendline trading strategy and involves marking your
trendine and then looking for the market to reverse when it is touched.

Price action traders will increase their odds of making winning trades by using
other strategies such as Japanese candlesticks to confirm that price is looking to
indeed reverse.

Below is an example of price forming a bullish pin bar reversal when it hits the
trendline;

7
Channel Trading

Trendline channel trading is very similar to range trading, but price is normally
making a move either higher or lower.

In this move higher or lower you have both a trendline for support and resistance
that you can use to trade the ‘channel’.

When channel trading you could trade both long and short for as long as the
channel holds.

See the example below on how to trade channels with trendlines;

8
9
Trendline Breakouts

There are two major ways you can look to play a trendline breakout.

The first is the most aggressive and involves watching and waiting for the trendline
to break. When you see price has broken and closed outside the trendline support
or resistance you enter a breakout trade.

The other method and less aggressive trendline breakout strategy is to watch for a
breakout and when you see a break occurring look for price to make a new test of
the old trendline support or resistance area.

With this strategy you are looking to see if the trendline support or resistance that
has been broken holds as a new support / resistance for you to enter a trade. See
example below;

10
Lastly on Trendlines

It is very easy to mark trendlines where they shouldn’t belong.

Be careful you don’t begin marking trendlines on every single chart just for the sake
of marking a trendline. Only mark them when they are obvious and don’t over
analyze them.

11
Make sure you find three clear points of reference and to increase your odds use
other strategies like Japanese candlesticks and your favorite indicators.

12
Moving Average: How to Use
in Stock and Forex Markets

Technical Indicators are a fundamental part of ​technical analysis.

These indicators are the best way for you to forecast financial market direction
based on its historic price, volume, and even future contracts. As a trader, you
probably want the most effective and common indicator that you can use on your
trading basis.

One of the best indicators out there is called the “Moving Average”.

What is a Moving Average?

Moving Averages are used widely by traders on their price action charts because
they can track and identify trends by smoothing the markets fluctuations.

A moving average is a ​technical indicator​ that helps you smooth out price action
and it can also identify the predominant trend in a market. They can also be used
to provide dynamic support and resistance levels as the markets moves higher or
lower.

A moving average is simply showing the average price over a certain period of time.
As the price changes, its moving average either increases or decreases.

The common application of moving averages is to identify the trend direction.

It may also be calculated for any sequential data sets, opening and closing prices,
high and low price, trading volume, or any other indicators.

There are two commonly used moving averages:

(1) Simple Moving Average (SMA)

(2) Exponential Moving Average (EMA)

Simple Moving Average (SMA)

As the name implies, it is the simplest form of moving average.

It is very easy to understand and is calculated by adding prices over a given

number of periods, then dividing the sum by the number of periods.

For example; a 10-day SMA would add together the closing prices for the last 10
days and then divide the total number by 10; a simple arithmetic mean. Each time
a new period occurs, the moving average moves forward dropping its first data
point and adding the newest one.

Here is another example of a 6-day SMA:

Last Closing Prices for Apple

43.41, 43.52, 43.21, 43.77, 43.58, 43.63 = 261.12

To calculate SMA, divide the total of closing prices by the number of periods

6-day SMA= 261.12/6 = 43.52

Exponential Moving Average (EMA)

Exponential Moving Average is the 2nd most widely used technical indicator.

It gives greater weight to more recent prices and are calculated by applying a
percentage of today’s closing price to the recent(yesterday) moving average.

The difference between the SMA and EMA is that SMAs look at all data equally while
EMAs will factor recent market moves higher in weight. EMAs also react faster to
recent price changes than SMAs.
An EMA has to start somewhere, so an SMA is used as the previous periods EMA in
its first calculation. After that, calculate the weighting multiplier. Lastly, calculate
the EMA for each day between the initial EMA value and today.

Formula for a 10-day EMA:

Initial SMA: 10-period sum/10

Multiplier: (2 / (Time Periods + 1)) = (2 / (10 + 1)) = 0.1818 (18.18%)

EMA: {Close — EMA (Previous Day)} x Multiplier + EMA (Previous Day)

What Markets is a Moving Average Used in?

Forex Markets are extraordinarily liquid because of the vast number of participants.
Stocks can also be liquid, but will be less liquid once you have moved away from
the blue chips.

Moving Averages allows you to look at the data smoothly rather than focusing on
daily price fluctuations from all financial markets. The time frame plays a
significant role on how effective your moving average will be.
This moving average length can be applied to any of your chart time frames
depending on your time horizon. Additionally, the time frame or length that you
chose for the “look back period” can also play a big role on how effective it is.

EMAs may work better than the SMA’s in stock or financial markets because of the
weight given to recent prices, whilst there are other times that SMAs may work
better.

What are the Most Popular Moving Average

Combinations?

200-Day Moving Average

The 200-Day Moving Average is one of the most popular technical indicators used
by traders.

This indicator can be found on the charts of investment banks, hedge funds, and
market makers. It is considered as a key indicator for determining the overall
long-term trend.

Investors use it to analyze price trends. As the name implies, it is a security’s

average closing price over the last 200 days.

You can get the 200 moving average by taking the securities closing price over the
last 200 days.

[(Day 1 + Day 2 + Day 3 + Day 4 + Day 5 + …. + Day 198 + Day 199 + Day 200) /
200]

= 200-day moving average

50 Day Moving Average

Just like the 200-Day moving average, the 50-Day moving average is one of the
most popular technical indicators that investors use for predicting and tracking
price trends.

50-Day moving averages are widely used because they work so well. It is calculated
with a security’s average closing price over the last 50 days.

[(Day 1 + Day 2 + Day 3 + Day 4 + Day 5 + … + Day 48 + Day 49 + Day 50) / 50]

=50-day moving average

200 EMA Multi-Timeframe

200 EMA is a very popular forex indicator because it can tell you what the trend is
before entering a trade.

There are things you need to know about the 200 EMA. It is used to separate bull
territory from bear territory. To help you start you need to know that;

● Seeing price below your 200 EMA is often seen as downtrend.

● Seeing price above your 200 EMA is often seen as uptrend.
● The best way to enter it is to use price action by the help of ​price action
charts​ as it tells you where to place a stop order and use previous swings to
take profit.

Possible example of how it works:

● Place a 200 EMA on your daily chart and determine if it’s an uptrend or a
downtrend.
● After that, switch to the 4 hour chart. You need to see where the 200 EMA is
relative to the price action or if it is the same trend as your daily chart.
● If yes, switch to the 1 hour chart and check to see if it is the same trend as
your daily and 4 hour charts.
 ● You could then potentially execute your trade entries on the 1 hour chart
when the trend on your 1 hour chart is the same as your 4 hour and daily
charts.

Moving Average Crossover

Known as the most basic type of signal, crossovers are the most favored among
traders as they remove all emotions.

They are used to identify shifts in momentum and can be used to determine entry
and exit strategy. A moving average crossover occurs when the traces of two
moving averages cross. Crossovers shows trends but does not predict future
direction.
In general, this indicator combination uses two or more moving averages, a
slow-moving average and a faster moving average. Additionally, the faster moving
average is a short term moving average.

Short term moving averages are more reactive to daily price changes because they
only considers a short period of time.

How to Use the Moving Average in Your

Trading?

The main function of Moving Average is to identify trends and reversals, find
support and resistance, and measure an asset’s momentum. Moving Averages help
to define the trend and recognize changes in the trend. Many traders, however,
make some fatal mistakes when it comes using moving averages.

Trend Analysis

Moving Averages do not predict new trends because of its lagging indicator nature,
but they can track and confirm trends once they been established.
The moving average crossover as discussed above is also a great tool for searching
for potential newer trends taking place.

Support & Resistance

MA’s can also be used to determine dynamic support and resistance.

It is easy to notice that the falling asset of a price will stop and reverse its direction
like the same level as an average. Stocks will often reverse either up or down at
price levels that are close in proximity to popular MA’s as these levels are acting as
confirmation levels.

Recap

Moving Averages are a valuable analytical tool. Before it can become effective, you
must first understand its functions, when and where to use it and practice with it
through a demo account.

All the success!

Learn Price Action

Bollinger Bands Explained Tutorial
PDF

Bollinger Bands were created by John Bollinger in the 1980s and are one of the
most popular and widely used technical analysis indicators in the markets today.

1
Not only can Bollinger Bands be used in a large number of markets from Forex,
Cryptocurrencies​ and stocks, they can also be used on all time frames.

Bollinger Bands are most often used as a trend following indicator as well as
gauging if a market is overbought or oversold.

In this post we go through how you can set them up on your charts and three easy
strategies you can use to trade with them.

Bollinger Bands Settings

Bollinger Bands are created by three ‘bands’; the upper, middle and lower band.

The common standard setting is to have the middle band set to a 20 period ​simple
moving average​.

The upper band is created by taking the middle band and adding twice the
standard deviation.

The lower band is created by taking the middle band minus twice the standard
deviation.

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Standard Bollinger Band Settings

Middle band: Created with 20 period simple moving average.

Upper band: Created from middle band plus two standard deviations.

Lower band: Created from middle band minus two standard deviations.

3
Three Bollinger Bands Strategies

Overbought and Oversold Bollinger Bands Strategy

One of the most common Bollinger Band strategies is using them to gauge if a
market is overbought or oversold.

A lot of traders will use these bands and look for price to revert back the middle
band or to the mean.

When using a mean reversion strategy we are assuming that if price deviates or
moves too far away from the mean it will eventually have to come back.

This is often looked at as price moving back from an overbought or oversold

market into more true value.

As the chart shows below; price tags the upper band before rotating back lower. It
also moves lower before tagging the lower band and moving back higher. Each
time it ‘tags’ the upper and lower bands it reverts back to the mean middle band.

When combining these ‘tags’ of the band with other technical analysis such as
support and resistance and trendlines​ they can provide solid trade entry points.

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This strategy can work well in ranging and sideways conditions.

However, if price goes on a long trending run, then we can see long periods where
price does not move back to the mean and middle band.

This is where using Bollinger Bands in trending markets can be used.

Trend Trading With Bollinger Bands

In strong trending markets where the move has a lot of momentum price will
spend a lot of time away from the mean.

5
If you are trying to trade looking for price to reverse back into the mean and middle
band in these market conditions it can lead to endless stop-outs.

Bollinger Bands react to price as it is being created in live time. They will constrict
and expand as price moves depending on what the price action is doing.

Using other technical analysis and indicators with Bollinger Bands can help you
more clearly identify the trend and also confirm potential trades.

One strategy is to use another moving average such as the 50 EMA.

When all the bands are clearly under the 50 EMA you could look for short trades.
The opposite would be true if price was trending higher and all the bands were
above the 50 EMA.

See the example below of the clear trend lower with all the bands below the 50
EMA.

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Scalping With Bollinger Bands

Because Bollinger Bands can be used on many markets and on all time frames they
can make a great tool for scalping.

They can also be a good indicator to find scalp trades because if done right they
will help you find fast moving markets where there could be potential for high
reward trades.

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There are a lot of potential strategies you could test in your own trading, but one
scalping strategy is to combine Bollinger Bands with another moving average such
as the 50 EMA.

Often when a market is moving in a ​strong trend​ above or below the 50 EMA price
can make sharp moves. When price is making these sharp moves it will often not
revert to the mean and middle band for some time.

An example of this is on the chart below; price is below the 50 EMA in a down trend.
A potential entry could be when price closes below the lower band.

The trade could have the profit taken when price eventually does revert to the
mean and price closes back above the middle band.

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To add confirmation to this strategy you could use both the 200 and 50 EMA’s
looking for the ​golden cross​.

An example of this could be if looking to go long; the 50 EMA crosses above the 200
EMA indicating an uptrend.

The Bollinger Bands are above both EMA’s.

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When price closes above the upper band entry is taken. When price closes back
below the middle band the trade is closed.

NOTE:​ Make sure you use a news calendar like the ​DailyFx Economics and news
calendar​ when scalping to make sure you don’t open any trades directly into major
news announcements.

Using Bollinger Indicator in MT4 and MT5

Using Bollinger Bands inside your MT4 and MT5 charts is very easy.

First make sure you have the ​correct and best charts​ to use Bollinger Bands.

Once you have your charts open click “Insert” > “Indicators” > “Bollinger Bands”.

A box will open on your charts with the standard settings.

You can change these settings as well as the colors you would like the bands to
show on your chart.

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Lastly

Whilst Bollinger bands can be excellent for gauging the strength of the market, the
trend and if a market is overbought or oversold, they should not be used alone.

Other technical analysis and indicators will help you confirm your trade entries
such as support and resistance, trendlines, moving averages and the MACD.

When making trades with Bollinger Bands you always want to take into account
the overall market conditions. Using ‘tags’ of the upper and lower bands for entries

11
may work well in ranging markets, but during strong trends it could see you take a
lot of losses.

Lastly, always test new indicators, analysis techniques and strategies on a ​demo
trading account​ to make sure you are profitable with them before ever risking real
money.

12
MACD – Moving Average
Convergence Divergence Trading Guide

Oscillating indicators are to show securities when they are overbought or oversold
allowing a trader to enter at the best possible price.

There are different types of ​momentum oscillators​ a trader can use, and the MACD
is one of the most popular. In this guide we are going to concentrate on the MACD
and how to combine with other strategies to enhance a trading strategy.
Not including the moving average, the MACD is the ​most popular trading indicator.
What is MACD?

The Moving Average Convergence Divergence (MACD) is a ​technical indicator​ used

to identify new trends or momentum and show the connection between the price
of two moving averages.

Whilst there are different types of indicators you can use in your trading including
‘​Lagging, Leading and Confirming​‘ the MACD uses the difference between
short-term price and long-term price action trends to anticipate future
movements.

MACD fluctuates above and below zero lines, highlighting both momentum and
trend direction as the moving averages converge and diverge.

The MACD has three major components that are used to give signals;

○ MACD line – is a result of taking a longer-term EMA and subtracting it

from a shorter term EMA
○ Signal line – EMA of the MACD line described into 1 component
● Histogram – measures the distance between MACD and its signal line. The
difference between the two oscillates around ​Zero Line

Read: ​How To Use Moving Averages in Stock & Forex Market

How to Use the Moving Average
Convergence Divergence (MACD) in Your
Trading?

In the MACD chart, there are three numbers for its settings;

● Faster-moving average – the number of periods that are used to calculate

● Slower-moving average – the number of periods that are used
● Difference between the faster and slower moving average – the number of
bars that are used to calculate
Examples;

The most commonly used MACD parameters are “12, 26, 9”, here’s how to interpret
it.

Faster-moving average:

● 12 represents the previous 12 days

Slower-moving average:
 ● 26 represents the previous 26 days

Difference between the faster and slower moving average:

● 9 represents the previous 9 days ​moving average​ or the variation between

the fast and slow (plotted by vertical lines called histogram – red lines in the
chart above)

Calculation

MACD Line:

(12-day EMA – 26 day EMA)

SignalLine:

9-day EMA of MACD Line

MACD Histogram:

MACD line – Signal line

Your MACD line is the 12-day exponential moving average (EMA) less the 26-day
exponential moving average (EMA). You can use closing price for this moving
average. The 9-day EMA acts as a signal line and identifies turns because it is
plotted with the indicator.
For the histogram, it represents the difference between MACD and its 9-day EMA
(Signal Line). If the MACD line is above its Signal Line then its positive and if the
MACD line is below its Signal Line, then it is negative.

Remember

The typical settings used as MACD parameters are “12, 26, 9”. You can substitute
other values depending on your preference and goals.

How to Trade Using MACD

MACD has two moving averages with different speeds. In other words, one will be
quicker to react to ​price swing movements​ than the other one.

If a new trend occurs, the fast line will start to cross the slower line. For this reason,
the fast line will diverge or move away from the slower line, often indicating a new
trend.
You can see in the image above that when the lines cross, the histogram
temporarily disappears because the difference between the lines at that time is 0.

Terminology

The Convergence and Divergence of two moving averages are what MACD implies.

If moving averages move towards each other, it means that a Convergence is

occurring. On the other hand, a divergence occurs when the moving averages move
away from each other.

There are three different methods to interpret Moving Average Convergence

Divergence (MACD).
Crossovers

Signal-line Crossovers

A “signal-line crossover” is a 9-day EMA of the MACD line.

It trails average line and helps determine the turns in the MACD. It shows bullish
crossover when the MACD crosses above the signal line, and a bearish crossover if it
turns below the signal line.
As shown above, the chart clearly shows how a buy entered after the bullish
crossover can be profitable. This strategy can also be used to manage or close a
short entry.

On the other hand, you can use bearish crossovers for short entries or
manage/close a long entry.

Center-line Crossover
When the MACD line moves above the zero line to turn positive, then a bullish
center-line crossover occurs. This occurs when the 12-day EMA moves above the
26-day EMA.

If the MACD line moves below the zero line to turn negative, then it is a bearish
center-line. This occurs when the 12-day EMA moves below the 26-day EMA.

Divergence

If the security price diverges from the MACD, it is a signal of a potential new trend.

This shows a point where the MACD does not follow price action and deviates.
When the price action makes a new low, but the MACD does not confirm with a new
low, then it is a “positive divergence” or “bullish divergence”.

When the price of a security makes a new low, but the MACD does not confirm with
a new high, then it is a “negative divergence” or “bearish divergence”.
A “Bullish Divergence” or “Positive Divergence” forms when a lower low was
recorded by a security and a higher high is created on the MACD.
A “Bearish Divergence” or “Negative Divergence” takes place when the security
records a higher high and a lower low on the MACD.

What is the Most Popular MACD

Combination?

Moving Average Convergence Divergence + Relative

Vigor Index (RVI)
The use of Relative Vigor Index is to measure the strength of a trend by comparing
the closing price of a security to its price range and smoothing the results with
EMA.

In fact, the basic point of combining these tools is to match crossovers.​ T

​ o put it
differently, if one of the indicators has a cross, you wait for a cross in the same
direction as the other one. If it occurs, you buy or sell the equity and hold your
position until the MACD gives you a signal to close the position. See image below;
The chart above is the 60-minute chart of Citigroup from December 4-18, 2015. It
illustrates that there are two short and one long setups that occur after a crossover
between the MACD and the RVI.

The green circles are crossovers and the red circles are where the position should
have been closed.

In the final analysis, you would have gained a profit of $3.86 per share with those
three positions.

Moving Average Convergence Divergence +

Money Flow Index (MFI)

The ​Money Flow Index ​– MFI is a type of oscillator that uses both price and volume
on measuring buy and sell pressure. It generates less buy and sell signals
compared to other oscillators, for the reason that the money flow index requires
both price movements and surge to make extreme readings.

This strategy is a combination of the MACD with overbought/oversold stocks or

Forex signals produced by money flow index.
If the MFI gives you a signal of a bearish cross over the MACD lines, there is a
potential short trade. This strategy is the same way in the opposite direction for
long trades.

The chart above is the 10-minute chart of Bank of America (BAC). The green circle is
the moment when the MFI is signaling that BAC is oversold. After 30 minutes, the
MACD has a bullish signal and is now open for a potential long position at the green
circle highlighted on the MACD.

You hold your position until the MACD lines cross in a bearish direction as shown in
the highlighted red circle on the MACD.
To sum up, this position lets you profit an amount of 60 cents per share for about 6
hours.

Moving Average Convergence Divergence +

Triple Exponential Moving Average (TEMA)

The use of Triple Exponential Moving Average – TEMA is to filter out volatility from
conventional moving averages.

It is made up of a single exponential moving average, a double exponential moving

average, and a triple exponential moving average.

It can generate a trade signal when the fast line crosses the MACD and the price of a
security breaks through the TEMA. You will exit positions whenever you receive
contrary signals from both indicators.

The image below is the 10-minute chart of Twitter. In its first highlighted green
circle you can clearly see that you have the moment when the prices switch above
the 50-period TEMA. The MACD confirms a bullish TEMA signal on the second
highlighted circle. This is when you open your long position.
As shown above, the price increases and you get your first closing signal from the
MACD in about 5 hours. The price of twitter breaks the 50-period TEMA in a bearish
direction after 20 minutes and you close your position. As can be seen, it generated
a profit of 75 cents per share.

Moving Average Convergence Divergence +

Triple Exponential Average (TRIX)

The use of a Triple Exponential Average – TRIX is to be a momentum indicator. It is

an oscillator used to identify oversold and overbought markets.
This strategy offers two options for exiting the market.

● If the MACD makes a cross in the opposite direction, exit the market.

This gives you the tighter and more secure exit strategy. You exit the market right
after the trigger line breaks.

● If the MACD makes a cross that is followed by the TRIX breaking the zero line,
exit the market.

This strategy is riskier because if there is a significant change in trend, you are in
your position until the zero line of the TRIX is broken. It could take a while for that
to happen.
The image above shows the 30-minute chart of eBay. As shown above, the first
green circle is a long signal that comes from the MACD. The second highlighted
green circle is when the TRIX breaks zero and you enter a long position. On the
other hand, the two red circles show contrary signals from each indicator.

In the first case, the MACD gives you the option for an early exit, while in the second
case, TRIX keeps you in position. By using the first exit strategy, you would have
gained a profit of 50 cents per share, while the alternative approach will generate a
profit of 75 cents per share.
Moving Average Convergence Divergence +
Awesome Oscillator (AO)

The use of this indicator is to measure market momentum. The Awesome Oscillator
calculates the difference of the 34 and 5-period Simple Moving Averages.

You will enter and exit the market only when you receive a signal from the MACD,
confirmed by the awesome oscillator.

Below is the 60-minute chart of Boeing. The two highlighted green circles are
signals that indicate to open a long position. The Awesome Oscillator gives you a
contrary signal after going long.

Yet, the MACD does not produce a bearish crossover, so you stay with your long
position. The first red circle highlights when the MACD has a bearish signal. The
second red circle highlights the bearish signal generated by the AO and you close
your long position. Altogether, this long position generated a profit of $6.18 per
share.
Recap

The best thing about the MACD indicator is that it brings together momentum and
trends into one indicator.

As has been noted, you can calculate it by using the difference between two
moving averages.
For this reason, the MACD values are dependent on the price action of the
underlying security and knowledge of other strategies like ​technical analysis​ will
improve its effectiveness.

All the success!

Learn Price Action

Fibonacci Retracement Trading
Strategies

The Fibonacci sequence (simply called Fibonacci) is the term used when referring to a mathematical
sequence of numbers

1
According to the rule of the sequence, all subsequent numbers will be the sum of the two numbers
that preceded it (the sum of the two previous numbers).

Fibonacci has become a powerful tool in Forex and other CFD trading.

Fibonacci levels are used in trading financial assets such as Forex, cryptocurrencies, stocks, futures,
commodities and more.

The Fibonacci levels, with the help of its retracements, targets, and extensions, are one of the best
tools to use in technical analysis.

The strong support and resistance levels (​swing points​) on the Fibonacci are exact and easy to find. In
general, Fibonacci offers clearly defined entry and exit points.

As we go through in this post, the Fibonacci tool can be used to help you both find high probability
trades and also where you can take profit from the market.

What is Fibonacci Retracement Trading?

Fibonacci retracements are famous among technical traders. This tool is based on the Fibonacci
sequence invented by mathematician Leonardo Fibonacci in the 13th century.

2
The most important thing in the sequence is the mathematical relationships between the numbers,
expressed as ratios.

In Forex and other​ ​technical analysis trading​, a Fibonacci retracement is obtained by taking two
extreme points (usually a swing high and a swing low) on a currency, stock, or commodity chart and
dividing the vertical distance by the crucial Fibonacci ratios.

3
The key Fibonacci ratios used in the division are 23.6%, 38.2%, 50%, 61.8%, and 100%.

After identifying these levels, you can draw horizontal lines and uses them to identify possible support
and resistance levels. This makes it easier to identify possible entry and exit points on a chart.

Fibonacci retracements allow traders to take a more calculated entry and exit in the market.

Have a look at the example below. Price is in a move higher before it makes a retracement back into
the 50% 'Fibo' level for a possible long trade entry.

4
How to Use the Fibonacci Retracement Tool in Metatrader

To use the Fibonacci retracement indicator in your​ ​MetaTrader​ ​charts, open your MT4 or MT5 platform
and follow these steps;

● Open the MetaTrader trading platform.

● Click on Insert -> Objects -> Fibonacci.
● Select the Fibonacci indicator.
● Select Fibonacci Retracement and go to your chart. The chart allows you to customize your
Fibonacci levels on the MetaTrader.
● Once on your chart click and hold with your mouse to plot your Fibonacci levels.
● NOTE:​ The Fibonacci levels and descriptions can be added and customized to what you need.

5
What are the Fibonacci Retracement Settings?

The Fibonacci retracement levels or settings are horizontal lines on a chart that indicate the positions
that support and resistance are most likely to take place.

The settings are based on Fibonacci numbers. Each level of the settings is associated with a
percentage, and the percentage indicates how much the price has retraced from the previous move.

The Fibonacci retracement levels most commonly used in trading are 23.6%, 38.2%, 61.8%, and
78.6%.

Unofficially, a lot of traders also use 50% as a Fibonacci ratio.

The Fibonacci retracement settings are crucial because they can be drawn between two significant
price points, like a low and a high. This helps you know the entry and exit points in a trade.

How to Use Fibonacci Extensions

Fibonacci extensions are tools that traders use to establish profit targets or how far the price of an
asset might move after a retracement or pullback has ended.

The extension levels are also likely areas where the price of an asset might reverse.

In Forex and other financial markets, the Fibonacci extension levels help traders to provide price
levels of support and resistance.

However, they are mostly used to calculate how far the price of an underlying asset can travel after a
retracement is done. This means that Fibonacci retracement levels are used to know when to enter a
trend, while the Fibonacci extension levels are used to identify the end of that trend.

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The number 1.618 is a key number in the Fibonacci sequence as it is called the Golden Ratio. This
number forms the basis of the most important Fibonacci extension level, which is the 161.8% level.

In an uptrend, traders always attempt to enter the bounce point, and they measure the retracement
to find out how far the trend will go before reaching its peak, which is the 161.8% level.

Meanwhile, in a downtrend, the traders will attempt to enter the market at a correction point and then
measure the last retracement. This allows a trader to find out how far the trend could go before
reaching the bottom, the 161.8% level.

Traders looking for reversals might also use the 161.8% extension level to enter a counter-trend trade.
However, this technique is most suited to advanced traders with years of experience under their belt.

There is no special formula for Fibonacci extensions. When the indicator is inserted into a chart, the
trader selects three points.

After choosing the three points, the traders draw lines at the percentages of that move. The first point
indicates the start of a move, the second point shows the end of the move, while the third point is the
end of the retracement against the move.

Simple Fibonacci Retracement Strategy

Fibonacci retracements are usually used as a​ ​trend trading strategy​.

In this case, traders take note of a retracement taking place within a trend and use Fibonacci levels to
try to make low-risk entries in the direction of the trend.

Traders that use the Fibonacci retracement strategy expect that the price of an asset has a high
chance of bouncing from the Fibonacci levels back in the direction of the earlier set trend.

7
See the example below. Price is in a trend higher and so trend traders are looking for long trades.
Using the Fibonacci tool they see that price has moved back lower into the 50% retracement point.
This offers potential long trading opportunities to get long with the trend.

8
Practical Elliott Wave Patterns
Trading Strategies

1
The Elliott wave theory is based on the theory that the price of a certain asset tends
to move with similar patterns.

Ralph Nelson Elliott created the theory a er observing that price tends to move in
repetitive patterns and waves. He would then use these patterns to predict the
future of where prices could move.

In this post, we go through exactly what Elliott wave trading is and how you can use
it in your own trading.

Elliott Wave Principle

The Elliott wave principle believes that trending markets will normally move in five
waves and then against the trend with three waves.

The five movements with the trend are referred to as motive waves, and the moves
against the trend are called corrective waves.

You can use these waves on many different markets and time frames to find key
areas in the market and find high probability trade entries.

2
Elliott Wave Trading System

The Elliott wave trading system has set rules that must be met.

These include;

● The second wave does not retrace 100% of the first wave. Normally this
retracement will not move past the 61.8% Fibonacci level.
● The fourth wave does not retrace past100% of the third wave.
● The third wave has to move beyond the high or low of the first wave.

Elliott Wave Patterns

The two main patterns that the Elliott wave follows are the motive phase and the
corrective phase.

3
Motive Waves

When using Elliott wave in your trading, you are looking for a five-way motive
phase.

The chart above shows that when the price makes this motive phase, it has three
waves higher, with two short pullbacks lower.

These short pullbacks are crucial for the trend to gain momentum, but the rules
must be met for the motive phase to be accurate.

Corrective Waves

The corrective phase moves into action with three moves. Instead of being
numbers, these moves are referred to as A, B and C moves.

The tricky thing about the corrective phase is that it can be tough to know if the
market is going through a corrective phase until it has played out and the price has
made its movements.

How to Use Elliott Wave Patterns

Because the Elliott wave theory is that price moves in certain patterns, you can
combine them with many other strategies and indicators.

4
The basic principle of the Elliott wave is that over any set time frame, the price will
tend to trend in the same ways.

You can use these movements and patterns to find high probability trades and look
for a trend to make its next move.

As we go through below, you can look to make and manage your trades using these
Elliott wave movements.

Elliott Wave Oscillators

Whilst you will o en have to manually plot and mark your Elliott wave movements,
you can also use an Elliott wave oscillator.

The Elliott wave oscillator uses the difference between the faster moving 5-period
moving average and the slower moving 35-period moving average.

A er applying the oscillator to your chart, you can use it to find trends and market
movements.

When the price is trending higher, then the oscillator will show as green. This is
because the faster moving 5 period moving average has been stronger than the
slow-moving 35 period moving average.

5
When the price turns bearish, the oscillator will flip lower because the 5 moving
average is moving lower compared to the 35 moving average.

See the example of this oscillator below.

Practical Elliott Wave Trading Strategies

While you can use many different strategies to find and manage your trades with
Elliott wave, the simplest is to follow the patterns.

Step #1: Look For the First Three Moves

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The first step to this Elliott wave trading strategy is to wait until the price has
formed the first three legs of the motive phase.

A er we notice these legs have successfully been formed in line with the rules, we
are looking for a new trade with the trend.

Step #2: Look for Potential Long Entries A er Move Four

As price is making the fourth wave of the Elliott wave, we are looking for a new
entry. In the example below, we can see that we start to look for long trades as the
price is making its fourth wave lower.

As the price moves into the 50% Fibonacci level, we could start to look for long
trades.

You could also fine-tune your entry with other confirmation, such as bullish
candlestick patterns.

Step #3: Take Profit A er Wave Five

As the price moves above the high of wave three, we could look to take our profit.

Because the Elliott wave will be invalidated if the price moves below the high of
wave one, we could look to put our stop loss below this level.

7
Using an Elliott Wave Indicator in MT4

NOTE: If you do not yet have the best MT4 charts to use these pip counter
indicators, you can read about how to get the best free trading charts and the
broker to use these indicators with here.

Marking the Elliott wave moves on your charts can be a time-consuming process.

With this free MT4 indicator, you can quickly add all of the waves from the motive
phase and the corrective phase.

8
This is a very easy-to-use indicator that will then let you see exactly where these
waves are.

Note that this indicator does not mark the Elliott waves for you. It is designed so
you can quickly market the number and letters of each phase.

You can get the free Elliott wave indicator for MT4 here.

Note: Don’t know how to install and use these indicators? Read How to Download,
Install and Use MT4 and MT5 Indicators.

9
 How to Trade the ABCD
Pattern

As the prices of securities fluctuate, past price data is recorded and can be
observed on what we call price charts.

1
If you have ever had any interest in the financial markets, you have no doubt seen a
price chart before.

Occasionally, the data recorded onto these price charts form patterns. A pattern is
simply a recognizable configuration of price movement. These distinctive
formations form the basis of what we call technical analysis.

Technical analysts interpret these patterns in an attempt to predict future price

movements. The basis of this belief is largely founded in human psychology and
herd behavior.

This post will analyze a specific chart pattern known as the ABCD pattern. We
examine how to use this pattern, its variations, and a couple of useful indicators
that you can use when trading this pattern on the markets.

What is the ABCD Pattern?

Of all the various price patterns that exist, the ABCD pattern is among the easiest to
identify. As you might have deduced from the name, the pattern consists of four
separate parts: A, B, C, and D.

The patterns indicate when the price of a security is about to change and begin
trending in the opposite direction. For example, if a stock has been trending

2
upward, the ABCD pattern can help you predict when this trend will reverse and
begin moving downward.

The ABCD pattern can indicate either bullish or bearish reversals depending on the
configuration of the pattern. You can see an example of an ABCD pattern below.

How to Use the ABCD Pattern

If you can predict when a trend reversal will occur, you can use that information to
your advantage by entering either long or short positions before the reversal. Let’s
examine some possible entry and exit points using the ABCD pattern.

3
Assume that you believe a reversal is imminent on a stock that has been trending
upward. You correctly identify a bearish ABCD pattern and are seeking an entry
point to open a short position.

In a bearish ABCD pattern, you would be looking for the price to rise initially from
(A) to a new high of the day (B). After the price reaches (B), you would be waiting for
a dip back down to support (C). The support (C) should be higher than the initial
point (A). Once support has been established at (C), you are almost ready to enter a
short position. The price should begin to rise from its support at (C) up to a new
high. This new high is (D). Once the price reaches (D), this is the optimal point to
enter a short position.

If the pattern holds, the trend should reverse at (D), and your short position should
become possible.

Once you have located an entry position, you should begin to consider when to exit
the trade.

As a general rule, your exit target should be twice as much as your risk. Therefore, if
you enter a $100 position and have a stop-loss order at $90, your take-profit order
should be at $120, double the amount you stand to lose.

When attempting to trade a bullish reversal on a stock that has been trending
downward, you would oppositely approach the trade. You can see an example of a
bullish reversal pattern in the section below.

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XABCD Pattern

The XABCD patterns are similar trend reversals to the original ABCD pattern. There
are numerous XABCD patterns, but the four most popular patterns are:

1. Gartley.
2. Butterfly.
3. Crab.
4. Bat.

These patterns can either be bearish or bullish, depending on their configuration.

They are made up of five-point chart patterns and can be more difficult to locate
because they consist of various measurements and ratios. Thankfully, there are
some online tools available to help you identify these patterns more easily.

Bullish ABCD Pattern

Ironically, the bullish ABCD pattern begins with a sharp move downwards.

Intense selling pressure leads to a sharp decrease in the security price (A), after
which the price rises back up as more and more people begin to buy the dip (B).
After this rise, selling volume will again increase, sending the security price back
down to a support level lower than (A); we can call this support level (C). After this

5
last fall in price, the trend should reverse, and the security price should begin its
uptrend (D).

Bearish ABCD Pattern

As with the bullish ABCD pattern, the bearish pattern begins with a sharp move to
the upside. The pattern is essentially the opposite of the bullish pattern, rising
where the bull pattern falls and falling where the bull pattern rises. At (D), the
uptrend should reverse and begin to turn into a downtrend.

ABCD Pattern Indicator MT4

NOTE: If you do not yet have the best MT4 / MT5 charts to use these indicators, you
can read about how to get the best free trading charts and the broker to use these
indicators with here.

For those of you who are trading using the MT4 platform, custom ABCD pattern
indicators built into the platform can help you identify these patterns more easily.
You can find a link to download the ABCD pattern indicator below.

Please note that this indicator is a premium indicator and, at the time of writing, it
is priced at $99.

6
Read more about the ABCD indicator for MT4 here.

ABCD Pattern Indicator MT5

Like the MT4 platform, MT5 also has its own custom ABCD indicator available to
download.

This is a premium indicator and you can download it from the link below for $99.

7
Read more about the ABCD indicator for MT5 here.

Note: Don’t know how to install and use these indicators? Read How to Download,
Install and Use MT4 and MT5 Indicators.

Lastly

A common saying among members of the financial community is that past

performance is not indicative of future results.

Active traders would be well advised to commit this phrase to memory. Whilst chart
patterns certainly provide traders with a statistical advantage, they in no way
guarantee a successful trade.

Price movements regularly deviate from potential trading patterns, and the security
price may behave differently than the pattern may suggest. Traders should always
remember to effectively manage their risk with stop-loss orders and proper capital
allocation.

8
How to Use the Average True Range
Free PDF

1
The average true range is an indicator that highlights market volatility. It does this
by showing you how much a Forex pair or asset has moved on average over a set
time period.

You can use the average true range (ATR) in multiple scenarios in your trading
including helping you find appropriate profit targets and where to set your stop
loss to suit the market conditions.

What is the Average True Range

The average true range was created by​ ​J. Welles Wilder​ to measure volatility.

As price makes larger or smaller moves higher or lower the ATR becomes bigger or
smaller indicating the asset volatility.

The ATR is shown in pip amounts for Forex or dollar amounts for other markets. For
example; a reading of 0.50 would mean 50 pips in the Forex market.

The standard setting for the ATR range is 14 and can be used on any time frame you
choose.

As each new time frame closes the ATR is calculated. For example; on a daily chart
the ATR is calculated at the close of the next daily time period.

2
These 14 time readings are then added together to show you a continuous line that
will give you a quick indication of overall asset volatility.

The average true range cannot be compared from one market to another or one
Forex pair​ to another. If an asset has a higher price, then it will have a larger ATR
compared to a market or stock with a smaller price.

How to Calculate the ATR

To calculate the ATR range over a certain time period, the 'true range' is first
calculated.

The true range is calculated by finding the greatest value of;

1. Current high minus the current low.

2. Current high minus the previous close.
3. Current low minus the previous close.

After the true range is found over 14 periods, it is averaged to find the ‘average true
range’.

If you are using the standard 14 day time period you can then use this information
to calculate the ATR on a monthly, weekly, daily or intraday time frame.

3
How to Use the Average True Range on MT4 and MT5

Setting up and using the ATR in your Metatrader charts is quick and simple.

To do this open your MT4 or MT5 charts.

Click; “Insert” >> “Indicators” >> “Average True Range”.

A box will then open with the standard settings that you can change to suit your
needs. These include the color that the ATR will show in and the time period that
the true range will average over.

4
5
How to use the ATR

Whilst the ATR is not an indicator you're going to use to find new​ ​trade signals​, it is
an indicator that you can use to find better profit targets and stop loss areas.

The ATR will highlight the different market conditions and help you identify when
they are changing allowing you to set larger stops or look for bigger profits.

6
Using the Average True Range for Profit Targets

A lot of traders are using a form of​ ​risk reward​ with their stop loss and profit
targets. For example; risking 1 and looking for 2 reward.

The ATR can be used to help you identify potential profit targets and also work out
if a trade entry is suitable.

If you find a potential trade that has a very large ATR, then you know price is more
likely to make a large move. If you get your trade call correct you can use this
information to set a larger target.

You can also use the ATR to spot trades that you should stay clear of because they
have a small ATR and do not have a high chance of meeting your risk reward
criteria.

Using the Average True Range for Stop Loss

The average true range is commonly used for setting a stop loss and also trailing a
stop loss.

7
One strategy for using the ATR to set your stop loss is using a multiple of the
average true range. For example; you may set your stop 2 x the ATR away from the
current price.

You could also use this strategy for trailing your stop. If price moved in your favor
and you were looking to lock in profits you could use a multiple of the ATR to trail
your stop higher or lower behind the current price.

Conclusion

Whilst the ATR is not an indicator that will help you find trades or spot the​ ​market
trend​ like a moving average, it can help you identify the recent volatility or lack
thereof.

You can then use this information to your advantage by either passing on trades, or
when a suitable trade is found, setting appropriate stops and targets.

The ATR is best used with your other tools and trading strategies including your
price action trading systems.

Using the average true range this way you can identify the volatility and then read
the charts to find high quality trade entries.

8
Mean Reversion Trading Strategies

Have you ever noticed that even in the strongest of trends price will always make rotations? This is
known as mean reversion or price reverting back to the mean.

In this trading guide we look at exactly what mean reversion trading is and how you can use it to find
high probability trades.

1
What is Mean Reversion Trading?

When mean reversion trading you are making trades on the assumption that price will revert to the
‘mean’.

Price never moves higher or lower in a straight line.

Even in the very strongest of​ ​trends​ either higher or lower price will make rotations. For example; in a
strong trend higher price will still make rotations lower before then continuing with the trend higher.

In the example below price is in a strong trend higher. Attached to the chart is a 200 period​ ​moving
average​. Even as price continually moves higher it is still rotating back lower before then making the
next leg higher.

2
Mean Reversion Trading vs Momentum Trading

As a momentum trader you are looking for price to continue in the same direction. For example; if
price is in a trend higher you are looking to make a long trade and for price to continue with the trend.

There are many different strategies you may use to momentum trade, but you are looking for price to
continue with the current momentum.

When mean reversion trading you are looking for price to revert back to the mean. This means that if
price has made an extended leg higher you would be looking for a rotation back lower and a pullback
into value.

Mean Reversion Trading in the Forex Market

One of the most popular markets to use mean reversion strategies is in the​ ​Forex market​. This is
because Forex pairs can often make very large moves that will see regular rotations back towards the
mean.

The chart example below shows price continually moving back lower and into the mean level of the
moving average even after some incredibly powerful moves higher.

Mean reversion trading will often be higher risk because you will be making trades against the current
momentum.

You will often be looking to pick a market top or bottom and you will also be looking for price to
reverse its current direction.

3
The Best Mean Reversion Indicator

One of the simplest and easiest indicators to use for mean reversion trading is the exponential moving
average.

4
When you combine two moving averages and look for the ‘cross’ you can begin to look for very simple
and high probability mean reversion trading setups.

Keep in mind when using the moving average cross you are not looking to trade with the momentum,
but instead are looking for a rotation back into the mean. This strategy is discussed more below.

You can read about​ ​how to use the moving average crossover here​.

Basic Mean Reversion Strategy

Whilst a lot of traders use moving average crossovers to find trend and momentum trades, they can
also be used to find mean reversion trades.

The easiest way to do this is to use the 200 and 50 period moving average.

5
As the chart shows below; when the 50 period moving average crosses below the 200 period moving
average we are looking to take long trades.

When the 50 period moving average crosses back above the 200 period moving average we are looking
to take profit.

This strategy can be added to further by making sure you don’t trade directly into key market support
or resistance levels and that you avoid markets that are very choppy or sideways.

The best markets are the markets making strong moves either higher or lower and that are not stuck
in ranges.

Short-Term Intraday Mean Reversion Strategy

This is a higher risk mean reversion trading strategy that comes with higher potential rewards.

6
With this short-term​ ​intraday strategy​ you are using small time frames like the 5 minute and 15 minute
time frame.

The key is finding markets or Forex pairs that have made a strong trend or move higher or lower.

Once you have found a market that has made this large move you are looking to use a simple
Japanese reversal candlestick patterns such as the hammer candlestick pattern to time your entry
and make quick profits as price reverts to the mean.

As the example shows below; price made a large move lower before forming the​ ​hammer candlestick​.
Price then moves back higher and rotates back into the mean.

Note how this hammer is formed at a support level. You can increase the odds of your trades with this
trading strategy by making your trades at key market levels.

7
What is Heikin Ashi and How You
Use it

Bar charts, candlestick charts, and​ ​line charts​ are the three most commonly used
charts in the markets for trading.

1
But, did you know there are other less popular techniques like the Heikin Ashi
which has proven to be one of the best strategies to use to gain a deeper view of
the market.

In this post we look at exactly what the Heikin Ashi is and how you can use it.

What is Heikin Ashi?

Heikin-Ashi, also called Heiken-Ashi, is translated as an "average bar" in Japanese.

The Heikin Ashi strategy is a useful tool used in identifying market trends and
predicting the future prices of assets.

The Heikin Ashi can be used alone or in conjunction with candlestick charts.

These charts can be very useful as they make it easier to read candlestick charts
and analyze market trends.

Traders use the Heikin Ashi to get information such as when to stay in a trend trade
or if it's time to get out because the trend has reversed.

Traders make money when markets are trending. This makes predicting a markets
trend correctly super important.

2
Heikin Ashi vs Candlestick

The Heikin Ashi has a few differences with the traditional candlestick chart.

The candles on​ ​traditional candlesticks​ usually change from green to red (up or
down), making it difficult for some traders to interpret.

3
However, the candles on a Heikin Ashi chart display more consecutive colored
candles, making it easy for traders to identify past price movements and current
trends.

With Heikin Ashi, charts usually stay green in an uptrend and red in a downtrend.

This isn't the case with the traditional candlestick charts where colors are different
even if the price is moving strongly in one direction, but price just moves slightly
lower for one session.

Another major difference between Heikin Ashi and traditional candlesticks is how
the prices are displayed. When using the Heikin Ashi chart, the candles begin from
the middle of the candlestick.

This is different from the traditional candlestick chart where it starts from the level
where the previous candlestick closed.

4
Heikin Ashi Calculation

Heikin Ashi shares some features with the normal candlestick charts.

The open-high-low-close (OHLC) candles of regular candlesticks are also present in

Heikin Ashi techniques. However, Heikin Ashi uses an altered formula of
close-open-high-low (COHL), which is;

Close = ¼ (Open + Close + Low + Close)

(The average price of the current bar)

Open = ½ (Open of Previous Bar + Close of Previous Bar)

(The midpoint of the previous bar)

High = Max [High, Open, Close]

Low = Min [Low, Open, Close]

How to Use Heikin Ashi to Identify Trends and Trend Strength

Because Heikin Ashi candlesticks are calculated using averages, the candlesticks
have smaller shadows or wicks compared to the regular candlesticks. However,
similar to the regular candlesticks, the smaller or shorter the shadow or wick in
Heikin Ashi, the stronger the trend.

5
Heiken Ashi is designed to show you the direction of a trend with the help of its
color-coded candles. A green candle indicates that the trend is up, while a red
candle is a sign that the trend is down.

Green candles without upper shadows show a​ ​strong uptrend​, while red candles
without lower shadows indicate a strong downtrend.

A Heikin Ashi chart shows you the strength of the trend using the shadows or wicks
and the amount of red or green candles that form in a row.

6
The major thing to keep an eye on when using a Heikin Ashi chart to determine the
trend strength is wickless or shadowless candlesticks.

The candlesticks that don't have a wick or shadow on one end are referred to as
"shaved candles." Depending on the end that lacks the shadow, there is a name for
each type of a shaved candlestick.

Heikin Ashi Trading Strategy

The Heiken Ashi is an excellent​ ​trading strategy​ for reading the price action of
assets and predicting future prices.

Whilst it is similar to the traditional candlestick charts, it differs in certain ways.

Heikin Ashi helps eliminate unnecessary information to allow you to better identify
market trends.

Below is an example of a simple strategy you could use to trade with the Heikin
Ashi.

In the first chart example you find a trade to get long. This is using normal
candlesticks and you enter with the trend higher when you find a bullish hammer
pattern.

7
After you have entered you begin to monitor the Heikin Ashi charts for the trend
and for your trade management. The chart below is the same pair and time frame,
but instead of normal candlesticks it is the Heikin Ashi chart.

8
Heikin Ashi MT4 Indicator

This is a free indicator from MetaQuotes. The Heikin Ashi MT4 indicator comes with
chart settings that allow you to choose how the chart should be displayed.

The charts support both colors and line graphs. You will get to set the time frame
you wish to view along with being able to use it on any market or Forex pair.

The best way to understand this Heikin Ashi MT4 indicator is to take a hands on
approach and play around with it.

9
You can​ ​read more about the MT4 Heikin Ashi indicator and download it here.

Heikin Ashi MT5 Indicator

MetaQuotes also has a free Heikin Ashi indicator for MT5 platform users.

The Heikin Ashi MT5 indicator looks like a candlestick chart. However, it has some
differences. On the Heikin Ashi MT5 indicator, the color of the candlesticks depends
on shadows.

Just like the MT4 indicator, the best way to familiarize yourself with this indicator is
to play around with it on your demo charts.

You can​ ​read more about the Heikin Ashi MT5 Indicator and download it here.

10
Harmonic Pattern Trading
Strategies

1
Forex trading has evolved massively over the past few decades with the creation of
trading tools designed to make it easier for virtually anyone to trade currencies.
Chart pattern recognition​ has become an essential aspect of Forex trading because
it can quickly help you find profitable trades.

There are many chart patterns that you can use for technical analysis, and some of
the most popular are harmonic patterns.

Harmonic patterns use Fibonacci numbers to define precise turning points. Whilst
most of the other common trading methods focus on analyzing the current price
action of a currency pair, harmonic trading attempts to predict future movements.

This more complex nature makes it harder for some traders to understand.
However, in this post we break harmonic patterns down so you can understand
them and use them in your own trading.

What are Harmonic Patterns?

Harmonic patterns were first introduced into the trading scene in 1932 by Harold
McKinley Gartley.

Harmonic patterns are a type of advanced trading pattern that take place naturally
in financial charts.

These patterns follow geometric price action and​ ​Fibonacci levels​.

2
Harmonic patterns can be defined as trend reversal patterns based on retracement
levels, geometric structures and Fibonacci extensions.

These patterns offer a way for you to establish where the key market turning points
will occur. They also provide you with levels that may act as new potential reversal
zones, allowing you to enter reversal trades. When you have correctly identified a
high probability harmonic pattern you will be able to enter your trade in a highly
profitable reversal zone with little risk.

3
How do Harmonic Patterns Work?

Harmonic patterns work by combining patterns and mathematics. This trading

method is precise and based on the assumption that patterns repeat themselves.

The primary theory behind harmonic patterns is centered on price/time

movements, which complies with the Fibonacci ratio relationships.

The Fibonacci ratio analysis works exceptionally well in the forex market and you
can use it on any timeframe chart. The main idea of Fibonacci is using the key
ratios (0.618 or 1.618) to identify the main turning points, retracements, and
extensions on a chart. These can also help you identify the​ ​swing high and swing
low points​.

The projection and retracement levels that are derived using the high and low
swing points will give you key price levels that you can place both your stops and
targets.

Harmonic patterns can indicator potential price movements and key reversal or
turning points. This can give you a major advantage because these patterns can
give you very accurate entry, stop loss and target levels.

4
Types of Harmonic Patterns

There are many types of harmonic patterns that include;

Gartley Pattern

This is a simple harmonic pattern that was developed by Harold McKinley Gartley.
The Gartley Pattern, also known as the 222 pattern is a harmonic pattern usually
preceded by a significant low or high. The Gartley pattern is usually formed when
there is a correction of the overall trend. The bearish Gartley Pattern is W-shaped,
while the bullish Gartley looks like M.

5
Butterfly Pattern

The Butterfly pattern was first created by Bryce Gilmore and it is similar to the
Gartley pattern. The bullish butterfly indicates that traders should buy an asset.
The bearish butterfly indicated a new potential sell trade. Butterfly patterns are
important because they help you identify the end of the current move.

Crab pattern

The crab pattern was created by Scott Carney. This particular pattern is considered
one of the most precise harmonic patterns. The crab pattern provides reversals in
very close proximity to what the Fibonacci numbers show. This pattern is similar to
the Butterfly pattern, but differs in its measurement.

Bat Pattern

Scott Carney also invented the Bat Pattern in the early 2000s. This pattern is similar
to the Gartley pattern because it is a continuation and retracement pattern that is
usually formed when a trend temporarily reverses its direction, but stays on its
original course.

6
Shark pattern

This is one of the newer harmonic patterns and was founded in 2011. This pattern
gets its name because of its steep outside lines and shallow dip in the middle that
when formed on a chart resemble a dorsal fin.

Cypher pattern

The Cypher pattern uses Fibonacci ratios lesser than one. When this pattern is
formed it creates a steeper visual appearance compared to the other harmonic
patterns. This pattern has five touch points and four waves or legs between them.
The touch points on this pattern are reversal levels.

7
Harmonic Patterns Indicator MT4

Metatrader 4 or MT4 is the most popular and widely used trading platform in the
Forex trading world. Being able to easily and quickly find harmonic patterns on
MT4 can make your job as a trader far easier. There are several harmonic pattern
indicators that you can use on your MT4 trading platform, but one of the best free
ones can be found at​ ​Perfect Trend System​.

This harmonic pattern indicator can be used on many different time frames and
markets and you get to use it for free.

Harmonic Patterns Indicator MT5

Metatrader 5 or MT5 is the newer version of MT4. Some traders like to use this
platform over MT4 because it was designed to offer different markets to MT4 such
as stock index CFD's.

This​ ​MT5 Harmonic Pattern indicator is by Perfect Trend System​. It can be used to
find many different harmonic patterns and in many markets and time frames. It is
also free to download and use.

8
Harmonic Patterns Scanner

There are many different harmonic pattern scanners available that you can use and
that will automatically find all the harmonic patterns, however the easiest to use is
by​ ​TradingView​.

Whilst TradingView charts don't have as many features as Metatrader charts and
are not as advanced, if you want to use harmonic patterns, then they offer the best
and easiest solution that is also free.

To use the harmonic pattern scanner with TradingView all you have to do is open
their charts, select indicators, search for 'harmonic patterns' and add it to your
chart. All of the different patterns will now start to be scanned for and added as
they are formed.

9
Momentum Trading Strategies Quick
Guide

The goal of momentum trading is to find markets and time frames that are making
strong moves and use that to your advantage to capture profits.

1
That can be done with a number of different strategies to find the highest
probability setups.

In this post we look at exactly what momentum trading is and how you can use it to
find high probability trades.

What is Momentum Trading?

When momentum trading you are looking to find markets that have already made
a clearly defined move either higher or lower.

For a momentum trade to buy or ​go long​ you would be looking to first identify
when price has made a strong push higher.

You would then be looking to make a profit by using this momentum in your favor
by buying within the momentum and selling as price rises higher.

See the chart example below; price is making a strong move higher. In this example
we could have looked to buy with the strong momentum and make a profit as
prices continue to rise.

2
The best momentum strategies involve finding the markets and time frames where
there is a clear short-term trend in place.

Whilst there is always the risk that the trend will bend and reverse, looking to trade
with the trend and momentum will often add confluence to your trading setup.

3
How to Trade Momentum in the Forex
Market

One of the best markets to momentum trade is the Forex market. The reason for
this is because it is a 24 hour market and can make some large moves on the back
of explosive volatility.

Volatility offers a lot of trading opportunities and the potential to find momentum
trades.

Another large bonus is that you can be in and out of your positions quickly with
very low costs.

When momentum trading in the Forex market you have an abundance of Forex
pairs to trade from. Because you want to find the strongest moving markets and
time frames you don’t want to be stuck watching just one pair or one time frame.

The Forex market allows you to scan and monitor many different pairs and many
different time frames from the monthly to the one minute charts.

When using momentum ​trading strategies​ in the Forex markets remember moves
can be explosive. You need to practice strict money management controls. Use
tight stop loss levels and always make sure you have worked out how much you
are prepared to lose before entering each trade.

4
Short-Term Momentum Trading

Many traders will use momentum trading to find short-term ​intraday day trades​.

This involves looking for trades on smaller time frames such as the five minute or
15 minute time frames.

The reason this can be an incredibly popular way to find momentum trades is
because you can enter and exit trades quickly and have your trades closed before
you log off your computer.

If trading higher time frames such as the 4 hour or daily charts you will often be
holding trades for days on end and then also be faced with costs such as rollover.

Trading the smaller time frames such as the 15 minute charts will also present you
with far more trading opportunities over many different markets because the
trends are changing far quicker.

Momentum Breakout Strategy

Two of the simplest ways to find momentum trading setups are to look for
momentum ​breakout trades​ or use an indicator.

5
Momentum breakouts occur when price has already formed a strong move either
higher or lower. Price will then consolidate and often move into a box formation.
When this box breaks out the momentum trader will look to trade in the direction
of the momentum and the breakout.

An example chart below shows how this works. Price moved higher before pausing
and moving into a box. It then broke out higher and continued on with the
momentum.

6
What is the Best Momentum Indicator?

One of the most popular indicators to find momentum trades is the moving
average.

7
The reason the moving average is so popular is because it can show you when a
trend is forming and also when strong momentum is building.

This can be done when using two moving averages together.

Below is a chart that has the 50 EMA (exponential moving average) and 200 EMA
attached to it. As the 50 EMA crosses below the 200 EMA we can see price moves
into a downtrend.

8
As the EMA’s begin to widen we can see that the trend and momentum get stronger
and it becomes a potential market to start looking for momentum trades.

Momentum Trading Setups Examples

Most traders want to get into the market at the best price. This is no different with
momentum trading.

A common strategy used to do this is to wait and watch for price to pullback into a
supply or demand zone within the momentum.

The first step to doing this is identifying when price is making a strong momentum
move. The chart example below highlights this with a strong move lower.

After this, we are looking for a pullback higher so we can find a potential entry. As
the example shows below price pulls back into the recent resistance level. This
could be a possible entry level to go short with the momentum lower.

9
Lastly

Momentum trading can be highly profitable when done correctly. Many traders will
use the strategies discussed in this post and add their other favorite tools and
techniques to find high probability entry points.

These include strategies such as using Japanese Candlesticks, using price action
clues to confirm breakouts or their other favorite indicators.

10
Very lastly, always test any new strategies, systems or indicators on ​free demo /
virtual charts​ to make sure you are successful with them before ever risking real
money.

11
 Divergence Cheat Sheet PDF

One of the basic tenets of technical analysis is that momentum precedes price.
However, prices never move in a smooth line, and momentum will o en be out of
sync with the price.

1
In technical analysis, when there is a mismatch between momentum and the actual
price, it’s referred to as a divergence. Traders can exploit these price discrepancies
for profit.

Divergences are concepts that allow investors to spot trend reversal signals in
bullish and bearish markets.

This trading guide takes an in-depth look at what divergence is, the different types
of divergences, and how to trade divergence in the most efficient way.

What is Divergence?

In trading, divergence happens when the price of an asset and the indicator you’re
looking at are moving in opposite directions. In other words, when the price of an
asset is out of sync with the corresponding indicator’s readings, a divergence signal
occurs.

In normal market conditions, the price action of an asset and the technical
indicator moves in the same direction. In other words, when the price prints a new
high, the technical indicator should print a new high as well.

Similarly, when the price prints a new low, the technical indicator should print a
new low. However, when this type of convergence gets out of sync, we get a
divergence.

2
For example, we have a divergence signal if the price moves up, but the indicator
moves down or vice-versa.

As you have noticed, divergence is not a technical indicator per se, but it’s a trading
concept. There is no mathematical formula to calculate divergence, but they are
visual tools on the price chart.

3
The main purpose of divergences is to signal momentum building up into a trend
and give early reversal signals when there is a slowdown in the momentum
readings.

Divergence doesn’t say when the reversal will happen, but it’s an early warning sign
that the price might actually reverse soon.

The opposite of divergence is convergence.

Convergence happens when the price of an asset and the indicator you’re looking
at is moving in sync in the same direction. For example, if the price of an asset is
making a new higher low, the indicator should follow the price and print a
corresponding higher low.

How Does Divergence Work?

To really dig deeper into the market, traders need to understand the foundation of
how price in any market moves.

At the core, asset prices move in a series of higher highs and higher lows when
we’re developing an uptrend. Conversely, when we're developing a downtrend,
asset prices move in a series of lower lows and lower highs.

4
The concept of successful trading is to buy low and sell high. In other words, you
have to buy when the price is making a new low and sell when the price makes a
new high.

The concept of divergence can help traders distinguish when it’s a good idea to buy
at a new low and sell at a new high. This is done by studying the divergence signals
– the mismatch between the price and the technical indicator.

The only limitation of divergence is that it doesn’t provide timely trade signals. The
divergence signal can persist longer without price changing direction.

Broadly speaking, there are two types of divergence signals:

● Regular divergence is also known as the classic divergence.

● Hidden divergence.

The divergence cheat sheet table below outlines the different types of divergence
and the signals they generate.

5
Regular Divergence

Regular divergences can be further classified into regular bullish divergence and
regular bearish divergence:

Regular bullish divergence happens when we have a disagreement between prices

that are falling (making lower lows) and a technical indicator that is rising (making
higher lows).

6
Regular bearish divergence happens when we have a disagreement between prices
that are rising (making higher highs) and a technical indicator that is falling
(making lower highs).

The regular bullish divergence is an early sign that the prevailing downtrend will
change direction and turn to the upside. In this regard, the regular bullish
divergence is a buy signal.

Conversely, the regular bearish divergence is an early sign that the prevailing
uptrend is about to change direction and turn to the downside. In this regard, the
regular bearish divergence is a sell signal.

The image below outlines side-by-side the difference between the regular bullish
divergence and regular bearish divergence.

7
The ideal place where a regular bullish divergence can develop is at the end of a
downtrend. This type of divergence then naturally leads to an uptrend.

Conversely, the ideal place where a regular bearish divergence can develop is at the
end of an uptrend. This type of divergence then naturally leads to a downtrend.

Hidden Bullish Divergence

The hidden divergence doesn’t differ that much from the regular divergence. For a
hidden divergence to happen, we need to see a mismatch between the price and
the technical indicator similar to regular divergence.

8
However, while regular divergence signals a possible trend reversal, the hidden
divergence signals the possibility of trend continuation. Hidden divergences tend to
develop within an existing trend.

Usually, hidden divergences indicate that the prevailing trend is still strong enough
to resume itself.

Just like the regular divergence, we can distinguish two different types of hidden
divergence:

1. Hidden bullish divergence.

2. Hidden bearish divergence.

Hidden bullish divergence happens when the price is making a higher low, while at
the same time, the indicator is making a corresponding lower low.

The hidden bullish divergence is an early sign that the prevailing uptrend is ready to
resume.

Usually, the hidden bullish divergence signal develops a er prices have pulled
back, and now the bulls are ready to control the market again. In this regard, the
hidden bullish divergence is a buy signal.

The image below outlines side-by-side the difference between the hidden bullish
divergence and hidden bearish divergence.

9
Usually, the hidden bullish divergence can be observed in uptrends.

Hidden Bearish Divergence

Hidden bearish divergence happens when the price is making a lower high, while at
the same time, the indicator is making a corresponding higher high.

The hidden bearish divergence is an early sign that the prevailing downtrend is
ready to resume. Usually, the hidden bearish divergence signal develops a er

10
prices have pulled back, and now the bears are ready to control the market again.
In this regard, the hidden bearish divergence is a sell signal.

Usually, the hidden bearish divergence can be observed in downtrends.

Finding hidden divergences is more difficult because they don’t occur as o en as

the regular divergence. However, hidden divergences can tell traders in advance
when the prevailing trend is ready to resume.

In a nutshell, the hidden divergence occurs simultaneously with short-term

retracements in the price. In other words, the hidden divergence signals the
potential end of a pullback.

● Hidden bearish divergence – the end of a pullback in a downtrend.

● Hidden bullish divergence – the end of a pullback in an uptrend.

Divergence Indicator

Before recognizing regular divergence and hidden divergence and the possible
trend reversal or trend continuation signals, traders need to pick a technical
indicator.

Usually, momentum oscillators like the RSI, Stochastic, MACD, etc., are o en used
by retail traders to spot those instances where the price of an asset and the
indicator fails to converge.

11
The same way the price of an asset moves up and down, establishing peaks and
valleys, technical indicators converge or diverge from the price making equivalent
peaks and valleys.

Some technical indicators can be applied directly on the price chart or in a separate
window, usually below. Traders can use any oscillator to identify divergence.

The MACD, stochastic, and RSI indicators work best to identify regular divergence.

In contrast, the money flow index (MFI) is a better alternative to identify hidden
divergence. This is true because the money flow index is a trend following indicator.

One of the most popular technical indicators to spot regular divergence and hidden
divergence is the Relative Strength Index (RSI) indicator.

Divergence RSI

The Relative Strength Index (RSI) is a leading technical indicator which means it can
precede the price movements. This means that the RSI divergence is a leading
indicator of price action.

An image of the RSI indicator is presented below.

12
With the RSI indicator, traders can identify both regular divergences and hidden
divergences.

However, the RSI divergences can’t be used as a timing tool. In this case,
candlestick chart patterns can act as a great confirmation signal for the resumption
of the prevailing trend (in the case of RSI hidden divergence) or the trend reversal
(in the case of RSI regular divergence).

Traders can look for long positions if they spot regular RSI bullish divergence or
hidden RSI bullish divergence. Conversely, traders can look for sell positions if they
can identify regular RSI bearish divergence or hidden RSI bearish divergence.

Bullish Divergence RSI

The chart below outlines the regular bullish RSI divergence.

13
In this example, traders can see that the price is making a new lower low compared
to the previous swing low point on the price chart. At the same time, the RSI
indicator prints a higher low relative to the previous low printed on the RSI
oscillator.

A er forming the lower low on the price chart, the prevailing trend reversed from
bearish to bullish.

The RSI indicator can also help traders spot bullish hidden divergences. The
example below shows price trading in an uptrend. Comparing the swing lows in the
price with the swing lows printed on the RSI oscillator, hidden bullish divergence is
developing on the price chart.

14
A er forming the higher low on the price chart, the prevailing trend resumes and
moves to new highs.

It’s crucial to understand that the bullish hidden divergence can develop in any
place within the uptrend as long as all the technical conditions are satisfied.

Bearish Divergence RSI

The price makes higher highs in a regular bearish RSI divergence, but the RSI
oscillator prints lower highs.

In the example below, traders can see that the price is making a new higher high
compared to the previous swing high point on the price chart.

15
At the same time, the RSI indicator prints a lower high relative to the previous high
printed on the RSI oscillator. Following the RSI bearish divergence, the price started
reversing quickly, and a new trend emerged.

The RSI indicator can also help traders spot bearish hidden divergences.

The example below shows price trading in a downtrend. Comparing the swing
highs in the price with the swing highs printed on the RSI oscillator, a hidden
bearish divergence is developing on the price chart.

Following the hidden bearish divergence, the prevailing bearish trend continued to
the downside.

16
Lastly

In summary, traders need to know that regular divergence signals a trend reversal,
while at the same time, the hidden divergence signals a trend continuation.

Trend following traders are better off focusing on identifying hidden divergence as

this will help them ride the overall market trend. Because the hidden divergence is
a trend continuation signal, out of the two types of divergence, the hidden
divergence carries a higher rate of success.

Last but not least, trading divergence works across all time frames; however, the
higher the time frame is, the more reliable the divergence signal tends to be.

17
Multiple Time Frame Trading
Analysis

1
Multiple time frame trading involves using more than one time frame to analyze
and then carry out your trades.

The reason that using multiple time frames is so popular when using technical
analysis and price action trading is that it gives you a clearer overall picture of what
price is doing. It also helps you drill down to a smaller time frame to make a better
entry with a smaller stop loss.

This post goes through exactly what multiple time frame trading is and how you
can start using it in your own trading.

What is Multiple Time Frame Trading?

When multiple time frame trading, you are using more than one time frame to
analyze an asset's price. For example, if trading the EURUSD, you may be looking at
the daily chart, the 4 hour chart, and also the 30 minute chart.

You would use multiple time frames to analyze a trade because it can give you an
excellent idea of what price is doing overall. Each time frame has its own trends and
movements.

The higher the time frame, the stronger the price action and signals area. However,
also the slower price is moving. The shorter the time frame, the more noise and
false moves you will encounter.

2
If you can combine multiple time frames, then you can start to gain a very clear
picture of exactly what the price action is doing.

Multiple Time Frame Trading Methodology

The methodology behind using multiple time frames is that you can start to build a
clearer picture of the price action and technical analysis story.

For example, you may find that the higher time frames, such as the daily chart, are
trending higher, so you begin looking for long trades. Whilst you could stay on the
daily time frame to make your trade, your entry will not be ideal, and your stop loss
will be wide.

You could use the information you have from the daily chart and start to move
lower through the time frames. You could use a smaller time frame such as the 30
minute chart to find the ideal long trade entry that gives you a tight stop loss and a
much bigger potential risk to reward ratio.

Multiple Time Frame Confluence

The main reason that so many traders use multiple time frames in their trading is
because it gives their trades a level of confluence.

3
When trading with one time frame only, that is all the information you have. When
using multiple time frames, you start to build a really clear picture of the overall
price action story.

In the example below, we can see that the daily chart price is in a trend higher. We
can also see that price has pulled back lower into an important support level.

The second chart below shows the same pair; however, this is the 1 hour time
frame. We could use this smaller time frame to look for a better entry signal to go
long that would give us a tighter stop loss. In this example, the price has formed a
bullish engulfing bar at the daily support level inline with the daily chart trend.

4
Trading 3 Time Frames

Most traders when analyzing their trades over multiple time frames will use three
time frames.

The reason for this is because you normally want a higher time frame, such as the
daily or weekly time frame that shows you the overall price action picture. You then
want an intraday time frame such as the 4 hour or 1 hour time frame that shows
you what has been happening on the intraday charts. And lastly, you want a smaller
time frame that will help you find the best trade entries. These time frames are
normally smaller time frames like the 30 minute and 15 minute time frames.

The higher time frame, such as the daily chart, will show you a clear picture if the
price is in a trend or ranging and will have fewer false signals. As you start to move

5
to lower time frames, there will be more noise on your charts and many more false
signals.

If you can combine the higher time frames with the lower time frames, you can start
to get a really good idea of where the market is looking to head next. You can also
start to make tight entries.

Multi Time Frame Indicators

One of the letdowns of most trading platforms is that they do not allow for
indicators to be easily used across multiple platforms. For example, if you want to
see what a moving average is doing on the 1 hour chart, then you have to move to
the 1 hour chart.

When multiple time frame trading, it can be convenient to see what is going on with
other time frames without moving to them. For example, if analyzing a Forex pair
on the daily chart, it can be convenient to know what a certain moving average is
doing on the 1 hour chart without moving off the daily chart.

Whilst it is not built directly into their charts, MetaTrader allows you to install and
use some free custom indicators that will let you do exactly this. Some of the
popular ones are moving averages, RSI, and stochastic that can all be used when
multiple time frame trading.

6
You can checkout some popular multiple time frame trading indicators here.

Strategy for Multiple Time Frame Trading

One of the best strategies when multiple time frame trading is to trade with the
higher time frame momentum and use the smaller time frames to pinpoint your
entries.

As an example, there are three charts of the same Forex pair below, the daily, 4
hour, and 30 minute chart.

In the first daily chart, we can see the price starting to break higher with the trend
and through an important resistance level.

7
On the second chart that is the 4 hour time frame, we can see that price has
confirmed this breakout with two large bullish candles. This lets us know that we
should be looking for long trades with this new momentum.

On the smaller 30 minute chart, we are now looking for our trade entry. This
smaller time frame gives us a better entry with a smaller stop loss and a bigger
potential risk to reward level.

When price pulls back into a clear support level, we can make a long entry and
profit from the next move higher that is in line with the higher time frames trends.

8
9
Day Trading Strategies for Stock and
Forex Markets - Free PDF

As a day trader, price action volatility and the average daily range are critical to your success or failure.

1
A day trader is concerned with the price action characteristics of the security or particular​ ​Forex pair
they are trading.

Investors are holding their position for far longer periods of time and are often looking at making sure
the fundamentals of their trade are aligned.

In this post we look at day trading strategies you can use in the Forex and stock markets to get in out
of trades quickly.

Day Trading for Beginners

Day trading is the buying and selling of a security within the Forex or stock markets designated hours.

Positions are closed before the market closes to secure your profits.

Day traders may also enter and exit multiple trades during a day trading session.

Day traders use high amounts of leverage using​ ​trading strategies​ ​to capitalize on small price
movements in highly liquid stocks or currencies.

This means that even small movements in price can lead to big wins (and losses)

Stocks, currencies / Forex, options, and futures are the most commonly day traded financial
instruments.

What are the Benefits of Being a Day Trader?

This is a question often asked by traders looking at different systems.

Will it benefit me? In what way?

Day trading can be a home-based business.

Day trading does not require any major infrastructure. There are no bosses or workers.

There are no special skills required and there are no tests that need to be passed.

You do however need a strategy and a solid level of knowledge if you want to be successful.

2
A major reason a lot of traders look at day trading is because the market can fall overnight. A lot of the
risks of making large losses can be avoided if you are not holding your trades overnight or when away
from your trading charts.

In day trading, you close your trade before the markets close to avoid a lot of the headaches.

Another major benefit is the amount of trading opportunities you get.

Because you are day trading you will be trading on smaller time frames. This will give you more trades
and more chances to make potential profitable trades.

Forex Day Trading Strategies

Scalping Day Trading Strategy

Scalping the markets​ involves looking for very quick profits from small moves in the price action.

As a scalper volatility is your friend. The more volatile the markets are, the more price is moving and
the more trades you can find to potentially make more profits.

When using scalping strategies you are trading in a similar way to other day trading strategies. You are
looking to get in and out before the market closes or before you finish your trading session.

There are many different strategies you can use to ‘scalp’ the markets, but below we go through one in
detail.

Example Scalping Day Trading Strategy

The best time frames to scalp the markets are the one minute to the 15 minute charts.

With this strategy you are looking for price action that has formed a clearly defined range.

As the chart example shows below; price has formed clear support and resistance areas and has been
bouncing between both of these levels.

When price makes a new test of one of these levels we are then looking for a​ ​Japanese Candlestick
entry signal.

3
In this example below; price forms a bearish pin bar and an inside bar at the resistance. Both of these
could be used as potential candlestick entry signals to enter short.

Breakout Day Trading Strategy

Day trading breakouts is a riskier trading strategy that also comes with the potential for higher
rewards.

When looking to make breakout trades on the smaller time frames like the one minute to 15 minute
charts you run the risk that you will enter a lot of false breaks.

The flip side to this is that when you do find a trade that breaks out in your direction the breakout can
be explosive and offer large rewards.

When looking for day trading breakout trades you could be using a number of different strategies.
These include looking for trendlines, support or resistance levels or even moving averages to break.

4
Example of Intraday Breakout Trading Strategy

Below is an example of a breakout trade.

Price had repeatedly held at the support level bouncing back higher each time price tried to move
lower.

Finally price broke below this level signalling a potential short trade.

Once the breakout was confirmed price rapidly moved lower as is often the case with confirmed
breakout trades.

5
​Day Trading Stocks
Moving Average Day Trading Strategy

Using moving averages is particularly popular when day trading the stock and indices markets.

Often moving averages will be used to define a trends strength or to find dynamic support or
resistance.

Moving averages can also assist in finding high quality day trades.

To find trades using moving averages traders will often use what is termed the​ ​‘Golden Cross’ strategy​.

This is where one moving average crosses above or below another moving average.

Example Moving Average Day Trading Strategy

Using the golden cross we can find when the market is moving into a strong trending period. We can
also see when the two moving averages become separated to gauge the strength of the trend.

The example chart below has a 50 EMA (exponential moving average) and 200 EMA plotted on its
chart.

The 50 EMA reacts a lot faster than the 200 EMA and stays a lot closer to the current price action.

When we see the golden cross and widening of the two moving averages we can see the trend lower is
strong and can begin looking for short trades inline with the trend.

Trades can then be found in conjunction with these moving averages. For example; we can use
candlesticks, support and resistance or a number of other entry signals.

6
Trend Day Trading Strategy

One of the most popular day trading strategies for all markets is trend trading.

The reason for this is because when making trades inline with the current trend the potential rewards
can be large as the trend continues in the trades favor.

Two common strategies to finding trends are the moving average as just discussed and​ ​plotting
trendlines​.

Using trendlines involves finding a series of swing points that match up either in a trend higher or
lower.

7
Example Day Trading Trends

As the chart example shows below; price is making a solid trend higher.

As price moves higher it is also rotating lower before once again moving back inline with the trend
higher.

These moves higher all line up to form a trendline.

This trendline could be plotted and used to find high quality long trades.

As with the other strategies, you can find entries using Japanese candlesticks, supply and demand or
your other favorite indicators.

8
Lastly
As a day trader the market conditions you are trading in are crucial.

If you are trying to use a trend trading strategy when price is stuck in a tight range, then you will
continually get stopped out.

It is important that you tailor each of your strategies to how the markets are currently moving.

It is also important you test any new strategies on​ demo charts with virtual money​ so you know they
work, before you ever risk any real money.

9
Volume Trading Strategy to
Make Successful Trades

1
All markets such as Forex, crypto, and stocks need trading volume to move higher
or lower.

Being able to read and analyze volume in your trading accurately can help you find
high probability trades.

This post looks at exactly what volume is and how you can use it in your trading
with different strategies.

What is Volume When Trading?

At its simplest, volume is the amount that has been traded for a certain market over
a certain time frame.

Volume can be handy when looking to find and manage your trades because
knowing when the volume is spiking or backing off can help you analyze what the
market is doing.

Volume information can help you find new potential moves, breakouts, and even
when to look for a potential fakeout.

Markets like stocks have a centralized system that can help you accurately read the
different volume levels.

2
Markets such as Forex, however, are now centralized. The volume information you
get will be slightly different for each broker. This is because each broker is using
different liquidity providers to fill their orders.

With that said, you can still get a pretty good idea of volume and in particular,
volume spikes when using a few main indicators.

List of Volume Indicators

There are a range of different indicators that will help you analyze volume levels,
but four of the most popular volume indicators include;

#1: VWAP

3
#2: On Balance Volume

#3: Chaikin Money Flow (CMF)

#4: Volume Price Trend Indicator (VPT)

On Balance Volume

The on balance volume indicator is designed to show you when a certain market
has been seeing an increase in volume, but the price action has not been moving
that much.

The on balance volume indicator, which is o en referred to as the OBV, can give you
a clue of what the larger market players are doing and if they are increasing their
positions.

When larger market players like institutions start to move into a position, they aim
not to see a huge move in price, making their trade less profitable.

This indicator can show you when large amounts of volume are taking place, but
the price is not following.

4
Chaikin Money Flow (CMF)

The Chaikin money flow indicator is one of the more popular indicators for volume
analysis. This indicator was created by Marc Chaikin and is used to measure the
flow of volume over a certain time period.

With this indicator, you can start to see the buying and selling pressure for any
given time frame you have set.

5
Volume Price Trend Indicator (VPT)

The VPT or volume price trend indicator is a technical analysis tool that can help
you determine the strength of a move in price.

This indicator can give you an idea of the supply and demand levels.

The volume price trend indicator will move higher or lower to give you a positive or
negative value. It does this by multiplying the volume levels with the change in
price for a certain time period.

Buy and Sell MT4 Volume Indicator

While many indicators give you a different idea of volume levels in the market, this
indicator will give you buy and sell signals using volume analysis.

When you have added this MT4 volume indicator to your chart, you will be given
red, green, and yellow levels to show you whether it a potential buy, sell, or hold
market.

This MT4 buy and sell volume indicator.

6
Volume Trading Strategy

One of the most common trading strategies is looking for price to breakout through
a key level such as an important support or resistance level.

Volume information can help you find these breakouts and also add confirmation.

7
Higher Volume with Breakout

In the example below price is trying to breakout higher and through a resistance
level.

When analyzing the volume, we are looking to see that the volume increases and
ticks higher before and during the breakout.

On the flip side, if we saw the price was breaking out with a small amount of
volume, we should be cautious and potentially look for the breakout to turn into a
false breakout.

8
Volume Spike in a Trend

As price trends through the day or session, you should keep an eye out for the
volume levels.

In a strong trend, we will continually see a spike in the volume as the trend gains
strength. This can be for both higher and lower trends.

In the example below price is in a trend higher. When looking at the volume levels,
we can see that prices continually spikes as the trend continues higher.

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Volume Trading Strategy for Intraday

A lot of volume indicators are used on the daily charts. However, some indicators
can be great at showing you if the volume is spiking or decreasing on an intraday
basis.

Best Volume Indicator for Intraday

The on balance volume indicator was created in the 1960s by Joseph Granville.

This indicator tallies the higher and lower volume levels to help you accurately look
for breakout or fakeouts.

You can use this indicator to try and get a better idea of what the bigger market
players are doing during each session.

These indicators add an oscillator that moves higher and lower to your chart. It is
natively installed in MetaTrader charts, and you just have to select it from the
indicators section.

The idea behind this indicator is that price will normally follow the volume
information.

The on balance volume is mainly used to find when large spikes in the volume
occur, but the price is not making the same large movements. This can give you a
clue to where the price could head next. The bigger players in the market will

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normally try to move in when volume levels are minimal to get the best prices. If
you notice that volume is increased, then a new move could be about to occur.

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 Swing Trading Strategies
Quick Guide

There is one rule the market always follows. No matter how strong a​ ​trend higher
or lower is, price will always have swings.

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For example; if price is in a strong trend higher, price will still make swings back
lower before continuing on with the trend.

As a swing trader you can take advantage of these swings by making entries at the
best areas and profiting from the next swing in the market.

In this post we go through exactly what swing trading is and how you can use it to
find profitable trades.

What is Swing Trading?

When swing trading you are looking to profit from the next swing higher or lower in
the market.

Whilst a lot of swing traders will be using higher time frames such as the 4 hour
time frame and above, you don't have to be using higher time frames to be a swing
trader.

Swing trading is trading the 'swings' and you can do this on any time frame.

The other misconception is that swing trading can only be done in trending
markets.

Whilst a trending market is a lot more favorable to swing trading, you can still use a
range to swing trade from the range highs and lows.

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As a swing trader your goal is to​ ​find profitable trades​ and ride the next swing or
wave in the market.

See the example chart below. Price is in a clear uptrend. You don't want to enter at
the top of the trend so you wait for price to make a swing lower where you can then
enter a long trade.

You can then profit as price swings back higher inline with the strong trend.

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What are the Advantages of Swing Trading?

Swing trading is definitely not for everyone.

Unlike​ ​scalping​ or breakout trading you will have to have more patience and you
will not have as many trading opportunities.

Swing trading however can offer you the ability to find very high probability trade
setups.

It can also offer you the chance to enter large reward trades.

These trades will often be with the trend. Because the trend can at times continue
running for long periods of time you can be making swing trades that run in your
favor for long periods giving you very large risk reward winning trades.

Swing trading can also be carried out on many different time frames and as long as
the market or Forex pairs is liquid, then it is suitable for swing trading.

Swing Trading Basics

Swing trading is one of the most simple and basic forms of trading.

At its simplest you are looking to make a trade from one swing point and ride the
wave higher or lower for a profit.

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For an example see the chart below. Price is in a trend lower. As a swing trader you
are looking for price to make a swing high within this trend to give you a chance to
make a short trade.

When price makes a swing high you can enter this short trade and start riding the
wave back lower.

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Swing Trading Simplified

The two most common questions with swing trading are;

#1:​ How to identify a trend?

#2:​ How to identify a swing point?

Whilst there are many different methods and strategies to do both of these things,
the simplest is using a​ ​moving average crossover​.

Using a moving average crossover such as the 50 EMA and 200 EMA crossover will
show you when a trend has begun and also how strong the trend is.

You can also use the 200 EMA (exponential moving average) as a dynamic support
or resistance level to find swing highs and swing lows.

The chart below is an example of how you might do this.

First the shorter period 50 EMA crosses above the longer term 200 period EMA
showing us there is a new trend higher.

The EMA's also begin to widen showing us that the trend higher is getting stronger.

Using the 200 EMA we can then look for the times that price pulls back lower to test
the longer term moving average and makes a swing low to get long inline with this

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trend higher.

Profitable Swing Trading Strategies

The other simple swing trading strategy that involves no indicators and uses only
raw price action is looking for swing highs or lows at key support and resistance
levels.

This is an extremely popular strategy because of how often this pattern continues
to repeat itself time and time again.

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The chart below shows how this pattern works.

First you see that price is in a trend lower and has found a support level. You then
see​ ​price breakout​ lower and through this level.

When price makes a swing higher you are looking to see if this old support level will
act as a new role reversal and swing high resistance level. This is the level you will
look for potential short trades.

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How to Master Swing Trading

Swing trading is not suited to all traders and it is definitely not going to be
mastered in a weekend of back testing.

This strategy will take a lot more work than using indicators or a strategy that is
more automated.

With that said, if you want to trade higher time frames, find high probability trades
and make trades that have the chance to be very high reward, then swing trading is
for you.

If you want to start testing out swing trading strategies, then the best thing to do is
download some free demo trading charts​ and test out different methods, markets
and time frames to see what works best for you.