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Session 3
Price Correction Setups
Session#2Review
TradingBasicsandHighProbability
Trading
TheHigh/LowBaseSetup
Riskvs.Reward
PivotPoints&SupportandResistance
PositionSizing
ThePredictionTrap
Tradingisnot aboutbeingableto
predictthefuture
Propertradingisbestsummedup
bythismaxim:
Probabilitynotprediction
Wewillsimplylooktoputasmany
factorssuggestingthehigh
probabilityofanupside,downside,
orlateralmoveinourfavorpriorto
everriskingourcapital
HighProbabilityTrading
High Probability Trading and Investing means
Astepbystepguideto
placingahighpercentage
trade
Thoroughlyunderstand
eachstepinthestrategyto
masterthetrade
Knowwhattodo(whenyou
seeagreatplay,howyou
canexecuteitthroughyour
Forex brokerage)
Knowwhentodoit(itsOK
tositonthesidelineswhen
nothingjumpsoutatyou)
Playbooksetupsheets
BullPullback
Tactic
Thissetupisdesignedto
purchaseastrongcurrency
demonstratingastrong
uptrendonthedaily,
hourly,andshortterm(15
minutechart)
Thissetuptendstohave
longerlastingtrends,
allowingustolegintothe
positionastheuptrend
continues
Ourpositionmanagement
strategywillbetofollow
thetrendhigherandmove
upatrailingstopasweadd
totheposition.
BullPullbackSetup
ATR=.41
stochastic
Oneentryfoundforstochastic.MainEntry:
stochastic
Pronunciation:stO'kastik
Function:adjective
Etymology:Greekstochastikos skillfulinaiming,from
stochazesthai toaimat,guessat,fromstochos
target,aim,guess
1 :Random;specifically : involvingarandomvariable
<astochastic process>
2 : involvingchanceorprobability:
*MiriamWebsteronlinedictionary.
StochasticOscillator
AnoscillatingindicatordevelopedbyDr.GeorgeC.Lane
Stochasticcanhelpinterpretthependulumlikeswingsinprice.
Measuresthepricerelativetoitsownselfoveraspecifiedperiodoftime.
Usedtoindicateoverboughtoversoldconditionsbycomparingacurrencysprice
totherangeofitsrecentpriceactivity.
ThedefaultStochasticissetto14periods
Theformulacalculates
Thehighesthigh Thelowestlowinthespecifiedperiod
Thedifferencebetweenthetwogivesusthe14periodrange
Todaysclosingpriceiscomparedtothelowestpriceinthe14period
range,andthencomparedtothetotal14periodrange.
HowtoInterpretTheStochastic
Ifpriceistrading
highcomparedto
the14periodrange,
itcanbeconsidered
overbought
Ifpriceistrading
lowcomparedto
the14periodrange
itcanbeconsidered
oversold
The20and80lines
representthetop
andbottom20%of
therange
CorrectChartSettings
Candlesticks
20SMA
50SMA
ATR(50)
CCI(50)
Stochastics (14,5,3)
BullPullbackSetup
ATR=.29
BullPullbackSetup
ATR=.25
BearRally
Tactic
Thissetupisdesignedto
sellaweakcurrency
demonstratingastrong
downtrendonthedaily,
hourly,andshortterm(15
minutechart)
Thissetuptendstohave
longerlastingtrends,
allowingustolegintothe
positionasthe
downtrendcontinues
Ourpositionmanagement
strategywillbetofollow
thetrendlowerandmove
downatrailingstopaswe
addtotheposition.
LeggingInStrategy
ThisStrategywill
allowustominimize
riskattheonsetof
thetradeandallow
ustoaddtowinning
positionsasthey
moveinourfavor.
Badtradesareleft
quicklywitha
smallerlossthan
usual.
BearRallySetup
ATR=.21
BearRallySetup
Homework
Findtwobullpullback/bearrallytradethis
weekandvirtualtradeit
Useactivemanagementononetrade
Usepassivemanagementontheother
Bracketorder