FXHUT ACADEMY

1
 WELCOME
TO
FOREX TRADING
BEGINNER CLASS

2
HISTORY
OF FOREX
The barter system is the oldest method of
exchange and began in 6000BC, introduced by
Mesopotamia tribes. Under the barter system
goods were exchanged for other goods. The
system then evolved and goods like salt and
spices became popular mediums of exchange.
Ships would sail to barter for these goods in the
first ever form of foreign exchange. Eventually,
as early as 6th century BC, the first gold coins
were produced, and they acted as a currency
because they had the critical characteristics like
portability, durability, divisibility, uniformity,
limited supply and acceptability.

3
 KEY EVENTS WHICH HAVE SHAPED THE
FOREX MARKET
• The Bretton Woods System
1944 – 1971
The first major transformation of the foreign
exchange market, the Bretton Woods System,
occurred toward the end of World War II. The
United States, Great Britain, and France met at
the United Nations Monetary and Financial
Conference in Bretton Woods, NH to design a
new global economic order. The location was
chosen because at the time, the US was the
only country unscathed by war. Most of the
major European countries were in shambles. In
fact, WWII vaulted the US Dollar from a failed
currency after the stock market crash of 1929
to benchmark currency by which most other
international currencies were compared.
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 WHAT IS
FOREX?
• The foreign exchange market
or currency market or Forex
is the market where one
currency is traded for
another.
• It’s the world largest market,
consisting of almost $7 trillion
daily trading volume and is
growing rapidly.
5
 WHY TRADING FOREX ?

1 24 Hour market 5 Volatility

2 Minimal or no commission
6
Possibilities and
opportunities
Instant execution 7 Regulation
3 of market orders

4 Accessibility 8 Can be traded anywhere

6
What is traded in
FOREX
• CURRENCIES: MAJOR, MINOR AND EXOTIC
1 CURRENCIES

• METALS: GOLD, SILVER, PLATINUM,

2 PALLADIUM ETC.

• INDEXES AUS 200, JAPAN 225, US 500, US 30

3 ETC.

• COMMODITIES: CRUDE OIL, NATURAL GAS,

4 BRENT ETC.

• CRYPTOCURRENCY: BITCOIN, ETHEREUM ETC.

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7
 MAJOR CURRENCIES
• The major currencies are those in which most of the world’s
foreign transactions are denominated. They are also the currencies
that countries most commonly value their own currency against.
They are:
US Dollar Australian Dollar

Pound Sterling (British Pound) Canadian Dollar

Euro New Zealand Dollar

Japanese Yen Swiss Franc

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MAJOR, MINOR AND EXOTIC CURRENCY PAIRS
MAJOR CURRENCY PAIR
• They represent some of the world’s largest economies
and are traded in high volumes. These are the other
seven major currencies pair wit the US dollar
They are:
EUR/USD USD/CAD
USD/JPY
NZD/USD
GBP/USD
USD/CHF AUD/USD
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 MINOR CURRENCY PAIR
• When a currency pair doesn’t include the US dollar, it’s called a
minor currency pair or a cross-currency pair.
Here are a few minor currency pairs:
1 4 CHF/JPY — Swiss franc/Japanese • The most
EUR/GBP — Euro/British pound widely
yen
traded minor
2 5 NZD/JPY — New Zealand dollar/ pairs consist
EUR/AUD — Euro/Australian dollar
Japanese yen of the euro,
yen or British
3 GBP/JPY — British pound/Japanese 6 GBP/CAD — British pound/ pound.
yen Canadian dollar

EXOTIC CURRENCY PAIR

An exotic currency pair includes a major currency and the currency of
a developing economy (such as Brazil or South Africa). You won’t find
exotic pairs as often as you’ll find major or minor pairs, which means
the spreads can be higher when trading Them.
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 MAJOR AND MINOR MARKET
PARTICIPANTS
MAJOR MARKET PARTICIPANTS
They are the ones who make the trade setups,
because over 80% of the forex market
transactions are done by them, they determine
the trend. Some of the biggest stake holders in
forex trade are the central banks, financial
institutions, Government, Hedgers etc. There are
other major market participants like the Central
bank governors etc.

MINOR MARKET PARTICIPANTS

ME AND YOU.
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 FOREX SESSIONS
We have three (3) trading sessions
in the forex market.
Now that you
know what forex
is, why you •EasyASIAN SESSION
should trade it, It’s time to 1 to change colors,
photos an Text. You can

learn about
simply impress your
and who makes audience and add a

the different
unique zing and appeal
up the forex
• LONDON SESSION
to your Presentations.
market, it’s about forex trading 2
time you learned
sessions.
when you can
trade. • NEW YORK SESSION
3

12
 LOCAL TIME EST GMT

Sydney Open – 7:00 AM

3:00 PM 12:00 AM 8:00 PM 5:00 AM
Sydney Close – 4:00 PM

Tokyo Open – 9:00 AM

7:00 PM 4:00 AM 12:00 AM 9:00 AM
Tokyo Close – 6:00 PM

London Open – 8:00 AM

3:00 AM 11:00 AM 8:00 AM 4:00 PM
London Close – 4:00 PM

New York Open – 8:00 AM

8:00 AM 5:00 PM 1:00 PM 10:00 PM
New York Close – 5:00 PM

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 BASE AND QUOTE CURRENCY
• The Base currency is the first
currency in the currency pair,
While the Quote currency is the
second currency in the currency
pair

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BUY
BUY AND SELL
This implies that you are predicting that the currency will appreciate in
value.
SELL
This implies that you are predicting that the currency will lose value.

TERMINOLOGIES UNDER BUY AND SELL

BUY SELL
LONG SHORT
BULLS BEARS
BULLISH BEARISH
HAWKISH DOVISH (made
in speeches).

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INTRODUCTION TO BROKERAGE
AND TRADING PLATFORMS
• The brokerage firm gives the
trader access or the platform to
trade the global market.
Choosing a brokerage firm is a
vital issue concerning forex
trading. A reliable broker is
essential.
PLATFORMS FOR TRADING FOREX
• MT4/MT5 (Meta 4 trader / Meta
5 trader).
• CTrader
• Web Trader
>> Site for downloading trading
platforms 16
Some functions in the
trading platform
Bid/ask price, spread, swap, leverage, stop
loss, take profit
• BID PRICE : The BID represents the price
at which the forex broker is willing to
buy (from you) the base currency in
exchange for the counter currency. (BID
= SELL FOR TRADER)
• ASK PRICE : The ASK price is the price at
which the forex broker is willing to
sell (to you) the base currency in
exchange for the counter currency.
(BUY= FOR THE TRADER)
• SPREAD : is the difference
This
between the buy (ASK) and sell
(BID) price.
• SWAP : This is the commission
charged by the broker for leaving a
trade overnight
• LEVERAGE : Leverage in Forex is the
ratio of the trader's funds to the size
of the broker's credit. In other words,
leverage is a borrowed capital to
increase the potential returns.
• STOP LOSS: This is an order that takes
you out of the market in loss or
minimal loss.
• TAKE PROFIT: This is an order that
takes you out of the market in profit.
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Leverage Ratio Margin (%)
• 1:1 1/1 x 100/1 = 100%
• 1:2 1/2 x 100/1 = 50%
• 1:10 1/10 x 100/1 = 10%
• 1:100 1/100 x 100/1 = 1%
• 1:200 1/200 x 100/1 = 0.5%
• 1:500 1/500 x 100/1 = 0.2%
• 1:1000 1/1000 x 100/1 = 0.1%

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OTHER FUNCTIONS IN THE
TRADING PLATFORM

~ ~ ~
Instant
Execution/ Pending
Navigator
Market Orders
Execution

Market Trading
Terminal
Watch Tools

Auto Trading
Timeframes (E.g PAMM,
MAMM etc. 19
 TYPES OF ORDERS
• MARKET/ INSTANT EXECUTION
• PENDING ORDERS
MARKET/ INSTANT EXECUTION
• These are orders placed to be executed at once at
the prevailing or current market price.
PENDING ORDERS
• A pending order is an order that has not yet been
executed, thus its not yet a trade. For example it
can be an order that states that you do not want to
buy/ sell a security, until it reaches a specific price.
TYPES OF PENDING ORDERS
• Stop Orders (Buy Stop and Sell Stop)
• Limit Orders (Buy Limit and Sell Limit)
• Stop Limit Orders (Buy Stop Limit and Sell Stop
Limit) 20
 STOP ORDERS
A stop order is an order to buy or sell a security once
the price of the security reaches a specified price
known as STOP PRICE. When a stop order is reached a
stop order becomes a market order. A stop order is not
guaranteed to execute.

BUY STOP ORDER A SELL STOP ORDER

A buy stop order is an order
to buy a security, which is
entered at a price above the
current market price (CMP)
for a buy, and it is triggered
when the market touches or
goes through the buy stop
price.
A sell stop order is an order
to sell a security, which is
entered below the current
market price (CMP) for a sell,
and it is triggered when the
market touches or goes
through the sell stop price.

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 LIMIT ORDERS
A Limit order is an order to buy or sell a security once the
price of the security reaches a specified price or at a
better price known as LIMIT PRICE. When a limit order is
reached a limit order becomes a market order. A limit
order is not guaranteed to execute.

BUY LIMIT ORDER SELL LIMIT ORDER

A buy limit order is an
order to buy a security,
which is entered at a price
below the current market
price (CMP) for a buy, and
it is triggered when the
market touches or goes
through the buy limit
price.
A sell limit order is an
order to sell a security,
which is entered above
the current market price
(CMP) for a sell, and it is
triggered when the
market touches or goes
through the sell limit
price.

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WHAT IS PIP
AND PIPETTE?
PIP = PERCENTAGE
IN PRICE
A pip is the unit of measurement
that expresses the change in
value of the market.
A pipette is the last digit of a
given parameter

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QUOTE FORMAT
There are three types of format for quoting pips
1 Five Decimal Quote 2 Three Decimal Quote 3 Two Decimal Quote

FIVE DECIMAL QUOTE

• In five decimal quote, the pip is the fourth digit after the
decimal. E.g EURUSD = 1.12153
THREE DECIMAL QUOTE
• In the four decimal quote, the pip is the second digit after the
decimal. E.g USDJPY = 173.374
TWO DECIMAL QUOTE
• In the two decimal quote, the pip is the first digit after the
decimal. E.g XAUUSD = 1753.24

NOTE: PIP IN RED, PIPETTE IN BLUE 24

= In a five decimal = In a three decimal = In a two decimal

CALCULATE A PIP
quote, firstly you quote, you make it a quote, you make it a
make it a whole whole number by whole number by
number, by multiplying it by 100 multiplying it by 10
multiplying it by
10,000.

E.g EURUSD E.g USDJPY

E.g XAUUSD

HOW TO
= 1.25350 – 1.24950 = 115.455 – 114.945
= 1540.33 – 1480.21
x 10000 x 100
x 10
= 0.004 x 10000 = 0.51 x 100
= 60.12 x 10
= 40 = 51
= 601.2
WHAT IS LOT SIZE
A lot is simply the contract used to
describe the size of your trading
position in forex with reference to the
unit of the currency.

TYPES OF LOT SIZE

There are three major lot sizes.
• MICRO LOT : This lot size rages from
0.01 – 0.09, these controls (1000 –
9000) unit of a currency.
• MINI LOT : This lot size ranges from
0.1 – 0.9, these controls (10,000 –
90,000) unit of a currency.
• STANDARD LOT : This lot size ranges
from 1 to infinity, these controls
(100,000 – infinity) unit of a
currency.
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CALCULATION OF PIPS IN LOT
= For a micro lot, using a 0.01 lot size
1 pip is valued at 0.1 USD
= For a mini lot, using a 0.1 lot size
1 pip is valued at 1 USD
= For a standard lot, using a 1 lot size
1 pip is valued at 10 USD
Using a lot size of 0.38, USDJPY at 117.432
= 117.432 – 117.236
= 0.196 x 100
= 19.6
0.38 x 10 = 3.8
= 3.8 x 19.6
= 74.48
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 TRENDING AND RANGING MARKET
TRENDING MARKET
A trending market is a market moving in one direction
TYPES OF TRENDING MARKETS
1 Uptrend/Bullish/Buyers 2 Downtrend/ Bearish/ Sellers
Market Market

CHARACTERISTICS OF AN UPTREND MARKET

• Higher High and Higher Lows
CHARACTERISTICS OF DOWNTREND MARKET
• Lower highs and Lower Lows
RANGING/SIDEWAYS/CONSOLIDATING MARKET
• Here the buyers and sellers have equal buying and selling
strength 28
 PULLBACK AND RETRACEMENT
A pullback is a pause or moderate drop in a stock or commodities
pricing chart from recent peaks that occur within a continuing trend.
A pullback can also be called price Correction.
.A pullback is very similar to retracement​ or consolidation, and the
terms are sometimes used interchangeably. The term pullback is
usually applied to pricing drops that are relatively short in duration -
for example, a few consecutive sessions - before the trend resumes.
KEY TAKE AWAY
• A Pullback is a temporary reversal in the price action of an asset or
security’
• The duration of a pullback is usually only a consecutive sessions. A
Longer pause before the trend continues is generally referred to as
Consolidation. 29
 SUPPORT AND RESISTANCE
• Support is a price level where a downtrend can
be expected to pause due to a concentration of
demand or buying interest. As the price of
assets or securities drops, demand for the
shares increases, thus forming the support line.
Meanwhile, resistance zones arise due to selling
interest when prices have increased.
• NOTE= Once an area or "zone" of support or
resistance has been identified, those price levels
can serve as potential entry or exit points
because, as a price reaches a point of support or
resistance, it will do one of two things—bounce
back away from the support or resistance level,
or violate the price level and continue in its
direction—until it hits the next support or
resistance level.
• NOTE= Always buy at support and sell at
resistance
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TYPES OF ANALYSIS Fundamental

01
There are four types of analysis
Sentimental

02
FUNDAMENTAL ANALYSIS
Technical

03
Fundamental Analysis is a type of analysis
that deals with analyzing the wellbeing of Breaking News

04
the economy, of that currency.
Examples of economic data. GDP, Interest
Rate, CPI (consumer price index), Trade
Balance, Consumer Confluence, PMI, PPI,
NFP.
Where to economic news:
www.Forexfactory.com ,
www.Investing.com,www.DailyFx.com
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TECHNICAL SENTIMENTAL BREAKING
ANALYSIS ANALYSIS NEWS

A Technical This talks This talks

analyst is about about
only analyzing the sudden
concerned market announcem
with the based on the ents,
price chart. views of
various
concerning
traders, major
around the disasters,
world or war etc.
close to you.

32
 Scalpers
TYPES OF TRADERS

01
There are four types of traders in the forex
Day Traders

02
market
1 2
Swing Traders

03
SCALPERS DAY TRADERS
Position Trader

04
This type of traders This type of traders 3
don’t hold their position holds a position to close 4
for a long period of it at the end of the day. SWING TRADERS
time. The scalper uses The day trader analyze
the 15 minutes time
POSITION TRADER
the market using D1
frame to analyze the time frame, and steps This type of trader holds
market, and uses the 1 down to the H1 time This type of trader holds a
a position for weeks. trade for weeks and months
or 5 minutes time frame frame to place an order. The swing trader and even years. These
to place an order. The
analyze the market with trader uses the Monthly
scalper targets small
the W1 time frame, and (MN) time frame to analyze
amount of pips.
steps down to H4 time the market, and uses the D1
frame to place an order. time frame to place an
order. 33
 RISK MANAGEMENT
RULES OF PROPER RISK MANAGEMENT
PROTECT YOUR CAPITAL: You must not risk
more than 1-3% of your capital per trade.

Formula for capital

protection
=

HOW TO PLACE PROPER STOP LOSS

Stop loss should be placed based on market
structure, it should be placed 10 pips below
or above the previous resistance or support
zone.

34
 RULES OF PROPER RISK MANAGEMENT

AVOID EMOTIONS : Not risking Always have an exit plan ( Take

2 3
more than 1-3% of your capital profit and Stop loss), do not
per trade, will stabilize and finger your stop loss and take
control your emotions. profit levels unnecessarily.
5 6
4 AVOID GREED : Always AVOID OVERTRADING : AVOID REVENGE
keep it in check Always have a target, TRADING :
daily or weekly target. Always follow
your trading
8 strategy.
7 Never allow a winning trade turn Always trade with Use atleast 1:2 RR 9
to a losing trade. a proper stop (risk to reward)
loss. ratio.

35
WELCOME TO
ADVANCED
CLASS

36
 BROKER
A broker is an intermediary that stands between us and the
market. They provide the platform where we trade the forex
market.
TYPES OF BROKER

Non Dealing Desk (NDD) 02

Dealing Desk (DD) : 01 : (DD) :
Dealing Desk

They are called the market

makers, because they provide th They make use of STP ( Straight
e market price. Through Process) . Here they
= they are characterized by connect you directly to the
high spread. liquidity provider.

37
 Things to consider when choosing a broker

SECURITY Prompt
if they are verified Deposit/Withdrawal
by cysec). process

Transaction User friendly

cost platform

Prompt customer Fast execution of

service order

38
 PRICE ACTION ANALYSIS
To really understand price action means you need to study what
happened in the past. Then observe what is happening in the
present and then predict where the market will go next. When
traders make trading decisions based on repeated price patterns
that once formed, they indicate to the trader what direction the
market is most likely to move.
Price action trading uses tools like:
1
01 Support and resistance levels 4
01 Chart Patterns

2
01 Trendlines 5
01 Fibonacci retracement levels

3
01 Candlestick patterns 6
01 Pivots etc.
39
SUPPORT AND RESISTANCE
• Support is a price level where a downtrend can
be expected to pause due to a concentration of
demand or buying interest. As the price of assets
or securities drops, demand for the shares
increases, thus forming the support line.
Meanwhile, resistance zones arise due to selling
interest when prices have increased.

• NOTE= Once an area or "zone" of support or

resistance has been identified, those price levels
can serve as potential entry or exit points
because, as a price reaches a point of support or
resistance, it will do one of two things—bounce
back away from the support or resistance level,
or violate the price level and continue in its
direction—until it hits the next support or
resistance level.

• NOTE= Always buy at support and sell at

resistance
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 HOW TO SPOT SUPPORT AND RESISTANCE
There are two types of support and resistance;

Major Support and Resistance Minor Support and Resistance

• This types is • This type is

spotted on higher spotted on lower
time frames. time frames.

CRITERIAS FOR IDENTIFYING SUPPORT AND RESISTANCE ZONES

• Where there have been more than two or three price

rejections.
• Where the market makes a sharp rejection of the price,
either upward or downward.

41
 Another type of support and
resistance (psychological zone/
Round numbers)
• Plotting support and resistance levels is often a
challenging and subjective task. It is also commonly one
of the first areas of price action new traders attempt to
tackle.
• Support and resistance can be established in numerous
ways, such as: trendlines, moving averages, pivot point
levels, Fibonacci levels, key high/low points etc. A
common complaint with a lot of these methods though
is subjectivity.

42
What are psychological levels?
Say that you’re the proud
owner of new car, and a buddy
down the pub asks how much
it cost. Assuming it set you
back $10,999, it’s unlikely that
you would tell him that exact
figure. Instead, to keep things
simple, you’d probably round
the number to the nearest
thousand i.e. $11,000. And this
is exactly what happens in the
financial markets! It is far more
likely that a trader will select
1.2500 over 1.2493, for
example. 43
Psychological zones are also called Round Numbers

44
Psychological zones the Double Zeros

45
 JAPANESE CANDLESTICK PATTERN

The Japanese has been using the candlestick Candlesticks Anatomy

pattern to trade rice. It was invented by Homma
Munehisa. The father of candlestick chart
patterns. Japanese candlesticks are the language
of financial markets, if you get the skill of reading
charts, you will understand what the market is
telling you, and you will be able to make the right
decision in the right time.
Candlesticks Anatomy
Just as humans, candlesticks have different body
sizes, and when it comes to trading, it’s important
to check out the bodies of candlesticks and
understand the psychology behind it. A bearish
candlestick opens from the top and closes below.
A bullish candlestick opens below and closes at
the top, the shadows are called wicks.
46
47
 TYPES OF CANDLE STICK
There are several types of candle
stick formations:
•Doji family
•Engulfing family
•Harami family
•Star family
•Piercing Line
•Marabuzo etc.
48
 DOJI
Doji form when a security's open and close
are virtually equal. The length of the upper
and lower shadows can vary, and the
resulting candlestick looks like, either, a cross,
inverted cross, or plus sign. Doji convey a
sense of indecision or tug-of-war between
buyers and sellers. Prices move above and
below the opening level during the session,
but close at or near the opening level.

49
 Types of Doji Candles

1 2 3 4
Long- Dragon Grave
Neutral stone
legged fly Doji Doji
Doji Doji

50
Engulfing Pattern
A reversal pattern that
can be bearish or bullish,
depending upon whether
it appears at the end of
an uptrend (bearish
engulfing pattern) or a
downtrend (bullish
engulfing pattern).
51
The first day is characterized by a small body,
followed by a day whose body completely engulfs
the previous day's body and closes in the
opposite direction of the trend.
This pattern is similar to the outside reversal chart
pattern, but does not require the entire range
(high and low) to be engulfed, just the open and
close.
TYPES OF ENGULFING CANDLES
• Bullish Engulfing
1 Candle

• Bearish Engulfing
2 Candle
52
HARAMI
A two-day pattern that has a
small body day completely
contained within the range of
the previous body, and is the
opposite color. Harami Cross
A two-day pattern similar to
the Harami. The difference is
that the last day is a Doji.

53
Types of Harami

Bullish Bearish
Harami Harami

54
 Hammer

The Hammer candlestick is

created when the open high
and close are roughly the same
price; it is also characterized by
a long lower shadow that
indicates a bullish rejection
from buyers and their intention
to push the market higher. See
the illustration below to see
how it looks like: The hammer
is a reversal candlestick
pattern when it occurs at the
bottom of a downtrend. 55
 Morning Star
A three-day bullish reversal
pattern consisting of three
candlesticks - a long-bodied
black candle extending the
current downtrend, a short
middle candle that gapped
down on the open, and a
long-bodied white candle
that gapped up on the open
and closed above the
midpoint of the body of the
first day
56
 Evening Star
A bearish reversal pattern that
continues an uptrend with a long
white body day followed by a
gapped up small body day, then a
down close with the close below the
midpoint of the first day. Falling
Three Methods A bearish
continuation pattern. A long black
body is followed by three small
body days, each fully contained
within the range of the high and low
of the first day. The fifth day closes
at a new low. Gravestone Doji A doji
line that develops when the Doji is
at, or very near, the low of the day.
57
Inverted Hammer A one-day bullish
reversal pattern. In a downtrend, the
open is lower, then it trades higher, but
closes near its open, therefore looking
like an inverted lollipop. Long Body /
Long Day A long day represents a large
price move from open to close, where
the length of the candle body is long

58
Long-Legged Doji This candlestick has long upper
and lower shadows with the Doji in the middle of
the day's trading range, clearly reflecting the
indecision of traders. Long Shadows Candlesticks
with a long upper shadow and short lower shadow
indicate that buyers dominated during the first part
of the session, bidding prices higher. Conversely,
candlesticks with long lower shadows and short
upper shadows indicate that sellers dominated
during the first part of the session, driving prices
lower.
59
Marubozu A candlestick with no
shadow extending from the body at
either the open, the close or at both.
The name means closecropped or
close-cut in Japanese, though other
interpretations refer to it as Bald or
Shaven Head.

60
Piercing Line A bullish two-day reversal pattern. The first day, in a
downtrend, is a long black day. The next day opens at a new low,
then closes above the midpoint of the body of the first day. Rising
Three Methods A bullish continuation pattern in which a long
white body is followed by three small body days, each fully
contained within the range of the high and low of the first day.
The fifth day closes at a new high. Shooting Star A single day
pattern that can appear in an uptrend. It opens higher, trades
much higher, then closes near its open. It looks just like the
Inverted Hammer except that it is bearish. Short Body / Short Day
A short day represents a small price move from open to close,
where the length of the candle body is short. 61
Spinning Top Candlestick lines that have
small bodies with upper and lower
shadows that exceed the length of the
body. Spinning tops signal indecision. Stars
A candlestick that gaps away from the
previous candlestick is said to be in star
position. Depending on the previous
candlestick, the star position candlestick
gaps up or down and appears isolated from
previous price action. Stick Sandwich A
bullish reversal pattern with two black
bodies surrounding a white body. The
closing prices of the two black bodies must
be equal. A support price is apparent and
the opportunity for prices to reverse is
quite good. 62
 Three Black Crows A bearish
reversal pattern consisting
of three consecutive long
black bodies where each
day closes at or near its low
and opens within the body
of the previous day.

Three White Soldiers A bullish reversal

pattern consisting of three consecutive
long white bodies. Each should open
within the previous body and the close
should be near the high of the day. 63
 TRENDLINE ANALYSIS
WHAT IS
TRENDLINE

These are diagonal support and resistance. Its another way we can represent
support and resistance levels on the price chart.
Market prices move in zig zag fashion. Peaks represent the price where
more people sell than buy so market couldn’t overcome this price. These
prices are called resistance levels. The troughs on the other hand represent
the price where buying pressure was higher than selling. These troughs are
called support levels. Connecting consecutive peaks a trader has a
resistance line and connecting resistance levels a trader has support line.
To draw a resistance line pick up two peaks and draw the line connecting
these peaks.
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RULES TO SEE WHETHER YOUR TRENDLINE IS SIGNIFICANT

1
01 At least two peaks are connected. More connecting peaks
confirm the trend line.

2
01 Most significant trend lines occur around the angle of 45
degrees. Trendline at sharper angles are indicating that
trend is strong. Lower level trendlines indicate that trend is
close to reversal.

3
01 Longer period trendlines should be given increased weight.
Day charts trendlines are more significant that 1 hour charts.

4
01 Minor trendline penetrations (as long as 1%) should and may
be disregarded. When connecting two peaks never mind
about a peak penetrating a bit the trendline.
5
01 When you draw a trendline in candlestick or bar charts and
connect two peaks or troughs and there is an intermediate
shadow over the trendline this is not considered a break as
long as the closing price is below the trendline

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 COMMON MISTAKES IN DRAWING TRENDLINES
1
2 3
Drawing trendline through
an obstruction :
Drawing Through Wick Not drawing a New
and Body of Candlesticks : Trendline and Keeping
• There should not be any A Breached Trendline :
price obstruction
between point a & b.
• If the trend line is drawn and • This is the case where there
crosses a lot of wicks and is a FALSE break or breach
4 body of candlesticks, it does of a trendline and then
not give you any market continues in the
Drawing Trendlines that information regarding original trend direction it
are NOT touching the where the support or was heading previously.
peaks or troughs : resistance level is located.
This is a wrong way to draw
• The trendline MUST touch a trendline.
these two points that you
use to draw the trendline.
If you fail to do this
properly, you will have THE TREND IS YOUR FRIEND
situations, where you will
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lose good entry points,
 STRONG AND WEAK TRENDLINES

The more times Additionally, there The steepness of

price comes, is something else the trendline or
touches and then which I also use to the slope of the
is made to obey a give me an trendline : You will
trendline indication of how notice on charts
determines the strong a trendline that the most
strength of the will be: reliable or strong
trendline. If price trendlines are
is made to obey a gently sloping
trendline more trendlines. The
than once, steeply sloping
consider that as a trendlines are
strong trendline. generally, very
unreliable.

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 Chart Patterns
In this topic, we will cover the classical chart
patterns which are to split into two categories:
Trend 1
continuation
patterns

Trend 2
reversal
patterns
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 Continuation Patterns
They are considered as a
pause in the prevailing trend
which implies that during an
uptrend, the bulls are
preparing for another push
higher whereas during a
downtrend, the bears are
preparing for another push
lower.
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• Usually these patterns take more time to form and they
are followed by significant price movements.
Triangles fall under the category of continuation
patterns and are of three types:

1 2 3

Symmetrical Ascending Descending

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 Symmetrical Triangles
A symmetrical triangle is formed of higher lows
and lower highs which usually signals that the
market is balanced and ready to move either way.
As the triangle is being formed, the volume
shrinks, and the breakout would be accompanied
with great volume which leads the market to the
next move.

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 Ascending Triangles
• An ascending triangle is a slight consolidation to
usually considered as a prepare for an upcoming
bullish pattern which forms price move within the
in an existing uptrend. It same direction of the
consists of a horizontal line prevailing trend.
combining the highs or
resistance points, and a
line combining a series of
higher lows. Traders
usually await a break to the
upside as the triangle is a
continuation pattern which
means that the market had
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 Descending Triangles
• A descending triangle is resume when we breakout
considered as a bearish from this consolidation
structure which forms in an pattern.
existing downtrend. It
consists of a horizontal line
combining the lows or
support level and a line
combining a series of lower
highs. Traders will be
waiting for a break to the
downside as they believe
that the market took a
pause from the prevailing
trend and the trend will 73
 Reversal Patterns
• Reversal patterns are patterns that occur at the
end of a prevailing trend to give a signal to the
trader that there could be a possibility of a
change in direction. In other words, these
patterns will help us indicate that the current
price movement has topped or bottomed.
• Among the most recognized classical reversal
patterns are
• The head and shoulders formations
• The double top & bottom
• And the triple top & bottom.
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 Head and Shoulders patterns
• Head and Shoulders patterns consist of three peaks
with the middle peak being the highest, the left and
right peaks holding similar or close price levels. The
volume will be the largest in the first shoulder and starts
to decrease until we break out from this formation.
• A Head and Shoulders pattern will appear at the top of
an uptrend, while an inverted head and shoulders
pattern will form at the bottom of a downtrend.

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 Double/Triple Tops And Bottoms
Double/Triple tops and bottoms are among the most
reliable reversal chart patterns and can be found easily on
charts. Usually, they are formed when the price of a
financial asset retests a resistance or support zone without
being able to break above or below respectively.

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