MODULE 2 TUESDAY JULY 23 6PM-9PM

FOREX TECHNICAL ANALYSIS

PRESENTATION BY ABE COFNAS

Identifying Highly Probable Signals

INTRODUCTION

WHAT IS TECHNICAL ANALYSIS?

¡  ANALYSIS OF CHARTS ¡  ANALYSIS OF PRICE ACTION

WHAT IS GOAL OF TECHNICAL ANALYSIS?

¡  TO ACCURATELY DESCRIBE THE SHAPE OF MARKET PATTERNS

¡  TO PROJECT PRICE DIRECTION ¡  TO IDENTIFY HIGHLY PROBABLE TRADING

OPPORTUNITIES

WHAT ARE TECHNICAL INDICATORS?

¡  TECHNICAL ANALYSIS INDICATORS ARE MATHEMATICAL EQUATIONS THAT SUMMARIZE PRICE ACTION

MOVING AVERAGE OSCILLATORS STOCHASTICS

WHAT TECHNICAL INDICATORS ARE USEFUL?

¡  VERY FEW ¡  MOST ARE LAGGING ¡  THE USE OF INDICATORS MAY IMPAIR THE ABILITY OF

THE TRADER TO UNDERSTAND PRICE ACTION ITSELF.

WHAT IS THE MOST USEFUL TECHNICAL INDICATOR? ¡  BOLLINGER OR VOLATILITY BANDS BECAUSE THEY

MAP A PATTERN BASED ON ¡  VOLATILITY WHICH IS AN IMPORTANT ASPECT OF

PRICE ACTION.

WHAT ABOUT CANDLESTICKS?

¡  CANDLESTICKS ARE WAYS OF VISUALIZING SHAPE AND EMOTION IN THE MARKET.

¡  LEARNING CANDLESTICKS OVER TIME IS A WORTHY GOAL

¡  GETTING STARTED IN TRADING SHOULD BEGIN WITH PRICE PATTERNS.

2: WHAT ARE PRICE PATTERNS?

WHAT ARE PRICE PATTERNS?

¡  PRICE PATTERNS ARE SHAPES THAT PRICES FORM OVER TIME.

¡  THE SCIENCE OF MORPHOMETRICS

Wikipedia

Morphometric refers to the quantitative analysis of form, a concept that encompasses size and shape

WHAT ARE PATTERNS?

¡  A Price Pattern is recognizable shape indicating a persistence in the direction of the underlying currency pair.

¡  A “Deterministic Oscillation”

¡  A Price Pattern can be for any time duration.

¡  The shorter the time duration- the less stable the pattern.

WHAT IS A SHAPE?

¡  IS A FACE IN A CLOUD A SHAPE?

¡  A SHAPE IS A PATTERN THAT STAYS INTACT

¡  WHEN ROTATES IN ANY DIRECTION

¡  THE QUESTION FOR THE TRADER IS: ▪  DO PRICES HAVE SHAPES?

ARE PRICE PATTERNS LEADING OR LAGGING ?

¡  PRICE PATTERNS ARE NEITHER LEADING OR LAGGING. THEY ARE PROJECTIONS THAT SUGGEST BOUNDARIES THAT HAVE BEEN ESTABLISHED.

¡  IF THE PATTERNS ARE ROBUST THEY HAVE IMPLICATIONS FOR SHAPING THE TRADE.

DO PRICE PATTERNS REFLECT MARKET EMOTIONS?

¡  YES-AND THAT IS A CRITICAL COMPONENT OF THEIR VALUE

¡  MARKETS CAN IN FACT BE CONSIDERED EMOTIONAL ENGINES

WHEEL OF EMOTIONS

WHICH MARKET EMOTIONS DO PATTERNS REFLECT OR EXPRESS?

¡  EUPHORIA ¡  REGRET ¡  HOPE-EXPECTATION ¡  OPTIMISM ¡  PANIC ¡  CONFIDENCE ¡  HESITATION ¡  FEAR ¡  GREED ¡  ANXIETY ¡  LOVE ¡  SURPRISE ¡  SORRY ¡  JOY

Charles Darwin. The Expression of the Emotions in Man and Animals. D. Appleton and Company: New York (1872).

KEY PATTERNS YOU SHOULD KNOW

¡  TREND LINE ¡  RESISTANCE AND SUPPORT LINES ¡  CHANNEL ¡  TRIANGLE ¡  PARABOLA ¡  FIBONACCI ¡  BOLLINGER BANDS ¡  CORRELATION DIVERGENCES

TREND LINES

! !

THE POWER OF TREND LINES

¡  Trend lines are boundary mapping direction ¡  They are not an indicator ¡  They help identify buy and sell zones.

RESISTANCE AND SUPPORT LINES

SUPPORT AND RESISTANCE LINES ARE BOUNDARIES WHERE THE PRICE STOPS GOING UP OR DOWN. EVERY PATTERN IS IN A SENSE A SUPPORT OR RESISTANCE LINE DEPENDING ON THE PERSPECTIVE OF THE TRADER.

CHANNEL PATTERNS

Very Stable “envelopes” of performance Sideways, Upward, and Downward Channels, and Expanding Channels

TRIANGLES

CLASSIC HESITATION TRIANGLE

PARABOLIC CURVES

PARABOLIC CURVES HAVE PREDICTIVE POWER

REVERSALS: PARABOLIC CURVES

¡  WHAT ARE THE BEST PATTERNS THAT PREDICT REVERSALS

BOLLINGER BANDS

REVERSALS: DOUBLE BOLLINGER BAND

¡  AN EXCELLENT MODIFICATION OF BOLLINGER BANDS IS TO ADD ANOTHER BAND.

¡  STANDARD BAND SETTINGS IS: (20,2)

¡  ADDITIONAL BAND SETTING IS: (13,2.618)

EXAMPLE OF DOUBLE BOLLINGER BAND

CORRELATION AND DIVERGENCES

KEEP TRACK OF CORRELATIONS AND DIVERGENCES FROM CORRELATIONS BETWEEN MARKETS TO HELP DECIDE DIRECTION. CORRELATION ANALYSIS ALSO HELPS CREATE A DIVERSIFIED PORTOLIO BY CHOOSING LEAST CORRELATED CURRENCIES.

CHALLENGE: FIND LEAST CORRELATED CURRENCIES

LATEST CORRELATIONS

AUSSIE AND COPPER

CAD AND WTI

USDJPY AND EURJPY

NIKKEI AND YEN

SHANGHI COMPOSITE INDEX AND AUDUSD

ADVANCED: RISK REVERSALS AND SPOT CORRELATIONS

FEAR AS A REVERSAL INDICATOR

¡  WHEN MARKETS REACH EXCESSIVE LEVELS OF FEAR (LOW OR HIGH) IT IS AN INDICATOR OF REVERSAL OF DIRECTION

FIBONACCI PATTERNS

FIB REACTION TO GREEK VOTE

3: PRICE SIGNALS

¡  A PRICE SIGNAL IS A PROBE, BREAK, OR FAILURE TO BREAK A PATTERN.

THEREFORE

THERE ARE ALWAYS TWO LOCATIONS FOR YOUR NEXT TRADE!

PART 2- PRICE SIGNALS

¡  ONCE A PATTERN IS IDENTIFIED A PRICE SIGNAL BECOMES DETECTABLE.

¡  A PRICE SIGNAL IS A CHANGE IN THE PATTERN.

¡  A PRICE SIGNAL IS A FAILURE TO CHANGE THE PATTERN.

PRICE SIGNAL EXAMPLE

PART 3- SHAPING YOUR NEXT TRADE

¡  THERE IS ALWAYS A NEXT TRADE.

KEY STEPS IN SHAPING YOUR NEXT TRADE

1. SELECT UNDERLYING MARKET 2. SELECT DIRECTION 3. FIND ROBUST PATTERN 4. LOCATE BUY ZONE AND SELL ZONE

PART 4: OPTIMAL ENTRY AND EXITS

¡  NOW WE CONSIDER WHEN DO WE GET IN AND WHEN DO WE GET OUT OF A POSITION?

¡  THE BEST CRITERIA TO GET IN IS?

¡  THE BEST CRITERIA TO GET OUT IS?

BEST ENTRY CONDITIONS

¡  THE BEST ENTRY IS WHEN A NEW TREND IS BEGINNING

¡  THE BEST ENTRY IS WHEN A BREAK HAS OCCURRED

¡  THE BEST ENTRY IS WHEN A FAILURE TO BREAK HAS OCCURRED.

IDENTIFYING TREND CONDITIONS

¡  TRENDS GET STARTED ¡  TRENDS GET TIRED ¡  TRENDS REVERSE ¡  HOW DO WE KNOW HOW TO SPOT THESE CONDITIONS?

PRICE BREAK FOR OPTIMAL ENTRY

PRICE BREAK DOWNTREND REVERSALS

PRICE BREAK UP-TREND REVERSAL

MULTIPLE TIME FRAMES AND PRICE BREAK

PRICE BREAK FATIGUE IS A KEY INDICATOR

FLIP FLOP

FIBS AND PRICE BREAK

EXIT CONDITIONS

¡  WHEN YOUR IN A POSITION, WHEN DO YOU GET OUT?

¡  WHEN YOU HAVE REACHED YOUR GOALS?

¡  WHEN THERE IS EVIDENCE THAT THERE IS SENTIMENT AGAINST YOU!

RENKO IS A GREAT TOOL TO GET OUT ¡  RENKO BLOCKS MEASURE CONSECUTIVE CLOSES OF

A PRE-DETERMINED SIZE.

¡  1 PIP SIZE FOR CURRENCIES IS RECOMMENDED

RENKO PROVIDES A MICRO-DETECTION OF SENTIMENT

¡  EVEN AT 1 PIP LEVELS, PATTERNS EMERGE.

¡  IF THE PATTERN IS FAVORABLE -IT IS CONFIRMING EVIDENCE TO STAY IN.

¡  IF THE PATTERN IS NOT FAVORABLE –IT IS CONFIRMING EVIDENCE TO GET OUT.

RENKO DETECTS PERSISTANCE OF BULLISH OR BEARISH SENTIMENT

SOME RENKO EXITING STRATEGIES

WHEN SHOULD THE TRADER GET OUT?

USING RENKO TO GET OUT

RENKO CHALLENGE

RENKO RULE OF THREE

RENKO AND A 61.8 FIB

USE RENKO FOR CONFIRMING CANDLES

PART 6: RISK CONTROL

¡  WHERE DO WE PUT STOPS?

¡  WHERE DO WE PUT LIMITS?

¡  HOW MUCH LEVERAGE IS TOO MUCH?

STOP LOCATION

1. WHERE YOUR RISK TARGET TOLERANCE IS REACHED

2. WHERE THERE IS A CONFIRMED CHANGE IN THE PATTERN

3. OR USE WIDE STOPS AND APPLY BINARIES INSTEAD OF STOPS

PROFIT TARGET LOCATION

1. WHERE YOUR GOAL IS MET

2. WHERE TECHNICAL RESISTANCE OR SUPPORT IS OCCURING

PART 7: TRADER EVOLUTION THE TRADER SCORECARD

¡  EVOLUTION OF TRADER REQUIRES EXPERIENCIAL LEARNING

¡  EVERY 10 TRADES CREATES A SIGNATURE OF PERFORMANCE.

TRADER TOOLS

¡  TRADER SCORECARD ¡  TRADER COACHING ¡  TRADER SIGNALS

TRADER SCORECARD

¡  PROVIDES NUMEROUS VISUALIZATIONS OF YOUR TRADING PATTERNS

¡  IDENTIFIES KEY AREAS OF STRENGTHS AND WEAKNESSES

¡  LEADS TO QUICK PERFORMANCE IMPROVEMENT

TRADER SCORECARD

THE PROFITABILITY CURVE

FOREX COACHING

¡  PERSONAL CUSTOMIZED SKYPE BASED COURSE.

FOREX ALERTS

¡  UNIQUE SIGNALS IDENTIFYING TREND REVERSALS!

ABE COFNAS abecofnas@gmail.com skype: binarytrader1

Thank you