2 - How To Trade Without Indicators - 2

MUHAMMAD SALAU (+2348030882320).
FINANCIAL TRADING 1ST JANUARY, 2020
Trading should be a
high-paying,
high-integrity
self-employment.
-- DR. ALEXANDER ELDER
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MUHAMMAD SALAU (+2348030882320). FINANCIAL TRADING 1ST JANUARY, 2020
The success that a trader

achieves in the markets is
directly correlated to
one’s trading discipline or
lack thereof. Trading
discipline is 90 percent of
the game. The formula is
very simple: Trade with
discipline and you will
succeed; trade without
discipline and you will fail.
-- Douglas E. Zalesky
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We teach that when anybody enters

a market, they should not be
interested in how much money
they’re going to make. They should be
more interested in how much they’re
going to lose. Most of the work we do
in trading is to protect ourselves
against losses.
Loss control essential
The secret to making money in

commodities is to control the size of
your losses. You have no control
over the number of times you have a
loss. But you do have control over
the size of your losses. You can
actually make a good living if you have
more losses than wins, as long as you
control the size of your losses.
-- GEORGE LANE
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Just as a scenario writer

endeavors to mystify his
audience, so pools and
manipulators strive to
confuse and influence the
public into thinking a stock
is moving in a certain
direction when the
ultimate purpose is to
have it move the other way.
-- Richard D. Wyckoff
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Simple Ideas: Standing the Test of Time
Many professional traders make a living by applying

the same simple indicators and the same simple
rules, over and over again, on the same small set of
securities. “It can’t be that easy!” you think. But it
is. Professionals have a superhuman ability to focus
on a single narrow set of circumstances. They know
from experience that the indicator and rule
produce a profit most of the time. If it fails to
produce a profit this time, too bad. They put it
behind them and move on to the next trade.
-- Barbara Rockefeller
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Enter CAUTIOUSLY but exit FAST.

This is the professional approach to
trading. Beginners tend to do the
opposite; jump into trades and then take
forever to exit, hoping for the market to
turn their way.
A swing trader may stay in a trade, even

if one of the timeframes turns blue. What
he should never do is stay in a trade
against the color. If you’re long, and one
of the timeframes turns red, it is time to
sell and go back to the sidelines.
- Dr. Alexander Elder
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Trading Psychology
Culled from DR. ALEXANDER ELDER’s work, The New Trading for a Living
Your success or failure as a trader depends on your emotions. You may have a brilliant trading
system, but if you feel arrogant, frightened, or upset, your account is sure to suffer. If you become
aware of fear, greed, or a gambler’s high, close your trades.
Having a good trading system is not enough. Many traders with good systems wash out because
psychologically they are not prepared to win.
Controlling Self-Destructiveness
Most people go through life making the same mistakes decade after decade. Some structure their
lives to succeed in one area, while acting out their internal conflicts in another.
You need to be aware of your tendency to sabotage yourself. Stop blaming your losses on bad luck
or on others, and take responsibility for your results. Start keeping a diary—a record of all your
trades, with reasons for entering and exiting them. Look for repetitive patterns of success and failure.
Those who don’t learn from the past are condemned to repeat it.
A trader needs a psychological safety net the way a mountain climber needs his survival gear. I
found the principles of Alcoholics Anonymous, outlined below, to be of great help at an early
stage of trader development. Strict money management rules also provide a safety net, while the
diary helps you learn from your mistakes as well as successes.
Alcoholics Anonymous (AA) has a system for changing the way people think and feel about
drinking. AA members use a 12-step program for changing their minds.
AA was founded in the 1930s by two alcoholics—a doctor and a traveling salesman who began
meeting to help each other stay sober. They developed a system that worked so well, others began
to join them. AA has only one goal—to help its members stay sober.
There is a stark parallel between an alcoholic and a trader whose account is being demolished by
losses. As he keeps changing his trading tactics, he acts like an alcoholic who tries to solve his
problem by switching from hard liquor to beer. A loser denies that he’s lost control over his trading
life.
Rock Bottom
A drunk can begin his journey to recovery only after he admits that he is an alcoholic. He must
see that alcohol controls his life and not the other way around. Most drunks cannot accept this
painful truth. They can face it only after they hit rock bottom.
Some alcoholics hit rock bottom when they develop a life-threatening illness. Others hit it after
being rejected by their family or losing a job. An alcoholic needs to sink to a point so low, so deep
down in the gutter, so unbearably painful that it finally penetrates his denial.
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The pain of hitting rock bottom makes an alcoholic see how deep he has sunk. He sees a simple
stark choice—either turn his life around or die. Only then is an alcoholic ready to begin his
journey to recovery.
Losers Anonymous
A social drinker enjoys an occasional drink, but an alcoholic craves alcohol. He denies that alcohol
controls and destroys his life—until he reaches a personal crisis. It may be a life-threatening
illness, unemployment, abandonment by the family, or another unbearably painful event. AA calls
it “hitting rock bottom.”
The pain of hitting rock bottom punctures an alcoholic’s denial. He sees a stark choice—to drown
or to come up for air. His first step to recovery is to admit that he is powerless over
alcohol. A recovering alcoholic can never drink again.
Loss is to a loser what alcohol is to an alcoholic. A small loss is like a single drink. A big loss is like
a bender. A series of losses is like an alcoholic binge. A loser keeps switching between different
markets, gurus, and trading systems. His equity shrinks while he is trying to recreate the
pleasurable sensation of winning.
Alcoholism is a curable disease—and so is losing. Losers can change by using the principles of
Alcoholics Anonymous.
The Urge to Trade

Successful traders treat drawdowns the way social drinkers treat alcohol. They have a little and
stop. If they take several losses in a row, they take that as a signal that something isn’t working:
perhaps their system isn’t in gear with the current market environment. It’s time for a break and
a fresh look at the markets. Losers, on the other hand, cannot stop—they keep trading because
they are addicted to the excitement of the game and keep hoping for a big win.
The key sign of gambling is the inability to resist the urge to bet. If you feel that you are trading too
much and the results are poor, stop trading for a month. This will give you a chance to re-evaluate
your trading. If the urge to trade is so strong that you cannot stay away from the action for a month,
then it is time to visit your local chapter of Gamblers Anonymous or start using the principles of
Alcoholics Anonymous, outlined later in this chapter.
Trader’s First Step

Just as an alcoholic needs to admit that he can’t control his drinking, a trader needs to admit that
he cannot control his losses. The first step of an AA member is to say: “I am an alcoholic, I am
powerless over alcohol.” As a trader, you have to take your first step and say: “I am a loser,
I am powerless over losses.”
Recovering alcoholics struggle to stay sober, one day at a time. A trader can recover, using the
principles of AA. Now you have to struggle to trade without losses, one day at a time.
The answer is to draw a line between a businessman’s risk and a loss. As traders, we always take
businessman’s risks, but we may never take a loss greater than this predetermined risk.
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Risk Management
The Two Main Rules of Risk Control
Markets can snuff out an account with a single horrible loss that effectively takes a person
out of the game, like a shark bite. Markets can also kill with a series of bites, none of them
lethal but combined they strip an account to the bone, like a pack of piranhas. The two pillars
of money management are the 2% and 6% Rules.
1. The 2% Rule prohibits you from risking more than 2% of your account equity on
any single trade.
One disastrous loss can do to an account what a shark does to a hapless swimmer. A poor
beginner who loses a quarter of his equity in a single trade is like a swimmer who just lost
an arm or a leg to a shark and is bleeding into the water. He’d have to generate a 33%
return on the remaining capital simply to come back to even. The chances of him being
able to do that are slim to none.
The typical victim of a “shark bite” loses more money. He loses confidence and becomes
fearful of pulling the trigger. The way to avoid “shark bite” losses is by following the 2%
Rule. It will limit your losses to a manageable size—to a normal businessman’s risk.
The single most important rule is to limit your exposure on any trade to no more
than 2% of your account.
For example, if you have $50,000 in your account, the 2% Rule limits your maximum
risk on any trade to $1,000. This is not the size of your trade—it’s the amount you put
at risk, based on the distance from your entry to your stop.
Construct the Iron Triangle in three steps:
A. Your maximum dollar risk for the trade you’re planning (never
more than 2% of your account).
B. The distance, in dollars, from your planned entry to your stop—

your maximum risk per share.
C. Divide “A” by “B” to find the maximum number of shares you

FIGURE 50.1 The Iron
may trade. You aren’t obligated to trade this many shares, but
Triangle of risk control.
you may not trade more than this number.
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The 2% Rule in the Futures Markets

A trader recently asked me how he could apply the Iron Triangle of risk
control to trading e-mini futures in his $50,000 account. I replied:
A. If you are trading a $50k account, the 2% Rule would limit your risk on
any trade to $1,000. Let’s say you want to be conservative and risk only
1% of that account, or $500. That will be the first side of “the Iron
Triangle of risk Control.”
B. Suppose you look at your favorite e-minis and want to sell a contract
short at 1810, with a profit target at 1790 and a stop at 1816. You’ll be
risking 6 points, and since one point in e-minis is worth $50, your total
risk will be $300 (plus commissions and possible slippage). That will be
the second side of your Iron Triangle of risk control.
C. Close the triangle by dividing “a” by “b” to find the maximum size you
may trade. If your maximum risk is $500, then one contract, but if
$1,000, then three.
2. The 6% Rule prohibits you from opening any new trades for the rest of the month
when the sum of your losses for the current month and the risks in open trades
reach 6% of your account equity.
We all go through periods when we are in tune with the markets, taking one profit after
another. When everything we touch turns to gold, that’s the time to trade actively.
There are other times when everything we touch turns into a completely different
substance. We go through periods when our systems go out of sync with the market,
delivering one loss after another. It’s important to recognize such dark periods and not
push yourself but rather step back. A professional on a losing streak is likely to take a
break, continue to monitor the market, and wait to get in gear with it again. Amateurs are
more likely to keep pushing until their accounts become crippled. The 6% Rule will make
you pause while your account is still largely intact.
A trader who wants to survive and prosper must control losses. You do that by risking
only a tiny fraction of your equity on any single trade.
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How to Trade Without Indicators – Step by Step Guide to Chart

Analysis
Updated: September 21, 2017 Dale Woods Forex Trading Strategies
Step 1: Read the Market Structure
Market structure is interpreting the arrangement of high and low points of price on the chart,
or to be put more bluntly – it is the technical analysis of the combination of: higher highs (HH)
and higher lows (HL), or lower lows (LL) and lower highs (LH) – which are sometimes referred
to as swing highs or lows.
The order in which new highs or lows occur, can give you a very solid foundation to determine
where the market is moving to, or not moving to…
Step 2: Identify Likely Turning Points
To start building a case for a high quality, high probability trade – find those logical, proven
turning points on the chart. Allow me to demonstrate this with simple, but powerful support
and resistance analysis.
In the chart above, we identify the market structure and use support and resistance level to
highlight potential turning points.
Now, anything can happen in Forex at any time – but there are two highly probable scenarios
here…
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1. Price will retrace into the old support, and use that as new resistance and reverse
there
2. Price will continue to sell into the major range support level, where we will most likely
see price turn around – or at least ‘bounce’ off.
Remember how I said most traders usually get burned by trends, because they trade out
of position? Follow the chart example below for a classic example…
The example above shows how market structure and simple technical analysis can help you
really start to master your chart reading skills.
We identify up-trending conditions and also mark out important support & resistance levels to
pin point likely turning points. We can see that the current position of price is in a bad
position to consider buying into the trend – this is how traders lose their money by trend
trading incorrectly.
They believe “well, the trend is up, so I will start buying”. It’s called chasing price or buying out of
position – learn how to enter a trade correctly.
By following the market structure like I showed you in step 1, we know that price is likely to
retrace soon, and correct into new lows.
This is where the saying “buy low – sell high” comes into play. It means to use the trend’s
retracements to our advantage, and always get into the trend at a smarter price.
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Sometimes support & resistance levels don’t make sense to use – so you have to adopt a trend
line from time to time. I try to be very minimalistic with trend lines – because it’s very easy to
get carried away.
In most cases you only ever need to have one on your chart to do the job…
Notice in the chart above, a declining trend lines was the main turning point – illustrated easily
by the major swing highs printing lower highs each time.
There were a few price action sell signals off the trend line turning point, which did turn out to
be very lucrative trades.
Checkpoint
Your most successful trades are going to stem from technical reversal points on the chart. How
many times have you taken trades in the middle of nowhere and then gotten stopped
out? Instead, focus on the obvious turning points and use your favorite technical tools to mark
the likely place(s) price is expected to bounce or reverse, to give your trades a better chance of
success.
Step 3: Wait for a Trade Signal
The final piece of the puzzle is to actually wait for a buy or sell signal from your trading system.
If you’re trading naked price charts, then this is most likely going to be in the form of a
candlestick reversal signal, or a breakout catalyst pattern.
The most common candlestick signal is the Rejection Candle, and the best trigger signal for
learning to trade without indicators.
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To sum up this guide – I am going to bring all the steps together and use a Rejection candle
as an example for our trade signal.
So we highlight our market structure…
Remember to ‘read the chart’ by following the swing highs and lows. Let the chart
communicate to you what it is trying to do.
We can see this market is currently in consolidation – I am not a big fan of trying to trade
inside consolidation structures, so the best thing to do is to wait for a breakout before taking
further action.
Once a breakout occurs, and the chart provides more promising price action – then move onto
step 2, and identify potential turning points to anticipate market reversals.
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Then you need to patiently wait for your trade idea to come to life. The market isn’t always
going to give up a signal, but when it does – don’t think about it too much, take action.
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After being disciplined and patient enough to wait for all the steps here to align – we finally
get our sell signal that checks the last box.
In this case, a bearish rejection candle forms right where we wanted it to. The key to price
action trading, and trading Forex without indicators is not to think about things too
much. Keep trading simple by following these 3 steps:
Make yourself a check list –
 Step 1: Read the Market Structure The

market is weak, and trending down because
it’s now making lower highs and lower lows –
so we know that we want to be a seller in this
market.
 Step 2: Identify Likely Turning Points Using simple support and resistance analysis,
we identify that a likely turning point would be the old consolidation
support since it was such a strong level. If it holds as resistance, the market will
most likely reverse here.
 Step 3: Wait for a Trade Signal In this scenario the chart printed a bearish rejection
candle, which is a common price action sell signal. The anatomy of the sell candle looks
good, it’s large in range and the close price was below the open price – giving the
candle a bearish body (this is something I like to see on my rejection candles).
As you can see this trade worked out very well – consolidation breakouts generally do create
explosive moves like this, if the market offers up a signal to catch them.
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If you’re getting frustrated with the markets at the moment, and feel like the situation is
always turning against you – you’re probably skipping one of these 3 vital steps.
Here is what can happen if you skip, or don’t include any of these setups in your
technical analysis…
 Market Structure: If you neglect to read the structure, you could simple enter very
bad markets and get caught up in very undesirable turbulent conditions.
 Identify Turning Points: A lot of traders enter the market ‘out of position’, like selling
low, or buying high. Wait to buy those higher lows, and sell the lower highs – use
turning points such as horizontal levels/trend lines to anticipate these
swing points.
 Trading Signal: Some traders will do something called ‘touch trading’, which is blindly
buying or selling the market without a signal. This can work if you align step 1 & 2
together nicely, but having a trade signal basically confirms the trade idea and gives it
a better chance of working out.
Write these steps on a piece of paper, create a checklist – or even better, include them in your
trading plan. This will help straighten up your trading, and keep you away from those bad
signals, or ‘in the moment’ impulsive decisions.
I hope this guide is going to help your trading – I personally follow this 3-step rule when I
look at charts. Once you apply these 3 steps over and over, eventually it will become second
nature, and you will be able to spot high quality trading opportunities within seconds.
Best of luck on the charts this week 🙂
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Elliott Wave Patterns And The Market Structure

The Elliott Wave principle identifies two basic phases of price movements:
o The Trend – which consists of 5 waves.

 3 Impulse waves (Trending Moves) – Wave 1, Wave 3, Wave 5
 2 Corrective waves (Corrections) – Wave 2, Wave 4
o The Correction – which consists of 3 moves.

 2 waves in the Direction of the Correction – (A), (C)
 1 wave against the Correction – (B)
E-Wave Guidelines
o Impulse Patterns - Also referred to as trends will usually make five sections or waves and these
sections do not overlap.
o Corrective Patterns - Corrective Patterns usually make at least three sections and they will
exhibit overlap. This overlap is the characteristic that tells us that the market is in some sort
of a corrective pattern.
o A correction may make more than three sections. This is referred to as a COMPLEX
CORRECTION
o Wave 2 and wave 4 must display alternation in as many ways as possible. If wave 2 and
wave 4 are too similar and show no alternation, then, the complete wave
sequence is corrective.
E-WAVE RULES
Rule 1: Of wave 1, wave 3 and wave 5, wave 3 must not be the shortest.
Rule 2: Wave 2 can never retrace more than 100 percent of wave 1.
Rule 3: Wave 4 may never end in the price territory of wave 1.
Power Tool:
o Depending on market conditions, wave 1 may break out of a narrowing channel.
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Trader Vic 1-2-3 Reversal Pattern Setup

Excerpted from Vic Sperandeo’s book, Trader Vic: Methods Of A Wall Street Master
2B Reversal (a variation of the Trader Vic 1-2-3 reversal)
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Trendline channels
A channel consists of two parallel lines that contain prices (Figure 21-4). If you draw an up-trendline
across the bottoms of reactions, you can draw a channel line parallel to it across the tops of rallies.
When you draw a down-trendline across the tops of rallies, you can also draw a channel line parallel to
it across the bottoms of declines.
Channel lines, like trendlines, should be drawn across the edges of congestion areas, leaving out the
extreme highs and lows. The presence of a channel line reinforces the validity of the trendline itself.
The validity of channel lines depends on how many times they were touched by prices.
A channel line marks the area of bulls7 maximum power in an uptrend and bears7 maximum power in a
downtrend. The wider the channel, the stronger the trend. It pays to trade in the direction of the channel's
slope, going long in the lower quarter or half of a rising channel and selling short in the upper quarter
or half of a falling channel. Profits should be taken at the opposite channel wall.
A Preliminary Trendline
Normally, a trendline
touches at least two points
on a chart. There is a little-
known technique for
drawing a preliminary
trendline through only one
point (Figure 21-4).
When prices break their

downtrend and rally above
it, you can assume that the
downtrend has ended and a
new uptrend may begin.
Connect the two latest The down-trendline 1, drawn across rally peaks, identifies a bear market
peaks - this is the channel in corn. A channel line 2 is drawn across the lows, parallel to the
line of the new uptrend. trendline. The channel line helps track the maximum power of bears in a
Draw a line parallel to it downtrend. The best shorting opportunities are in the upper half of a
through the latest low. This falling channel, while the best buying opportunities are in the lower half
preliminary up-trendline, of a rising channel.
drawn parallel to a channel When prices break out above their down-trendline, channels can help you
line, tells you where to draw a preliminary up-trendline. First, draw a new channel line 3 to
expect the next bottom. It connect the last two rally tops. Then draw line 4 parallel to it, touching
often points to excellent the latest bottom. This is the new preliminary up-trendline.
buying opportunities. This
procedure tends to work At the right edge of the chart, corn is trending higher. It is expensive-near
better at bottoms than at the its upper channel line. If you want to go long, place an order to buy in the
tops. vicinity of the new up-trendline 4.
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Combining Channels and MACD Signals - Trading Rules

Amateurs like to bet on long shots—they tend to buy upside breakouts and short (if they ever sell
short) downside breakouts. When an amateur sees a breakout, he expects riches from a major
new trend.
Professionals, on the other hand, tend to trade against deviations and for a return to normalcy.
The pros know that most breakouts are exhaustion moves that are soon aborted. That’s why they
like to fade breakouts—trade against them, selling short as soon as an upside breakout stalls and
buying when a downside breakout starts returning into the range.
Breakouts can produce spectacular gains when a major new trend blows out of a channel, but in
the long run it pays to trade with the pros. Most breakouts fail and are followed by reversals,
which is why channel lines mark attractive zones for entering trades against breakouts , with profit
targets in the value zone.
You can use moving-average channels as a stand-alone trading method or combine it with other
techniques. Gerald Appel, a prominent market researcher and money manager in New York,
recommended these rules for trading with channels:
1. Draw a moving average and build a channel around it. When a channel is relatively flat,
the market is almost always a good buy near the bottom of its trading channel and a good
sell near the top.
2. When the trend turns up and a channel rises sharply, an upside penetration of the upper
channel line shows very strong bullish momentum. It indicates that you will probably
have one more chance to sell in the area of the highs that are being made. It is normal for
the market to return to its moving average after an upside penetration, offering an
excellent buying opportunity. Sell your long position when the market returns to the top
of the channel.
This also works in reverse during sharp downtrends. A breakout below the lower channel line
indicates that a pullback to the moving average is likely to occur, offering another opportunity to
sell short. When prices return to the lower channel line, it is time to cover shorts.
The best trading signals are given by a combination of channels and other technical indicators
(Figure 41.3). Indicators give some of their strongest signals when they diverge from prices. A
method for combining channels and divergences was described to me by the late Manning Stoller.
1. A sell signal is given when prices reach the upper channel line while an indicator, such as
MACD-Histogram, traces a bearish divergence. It shows that bulls are becoming weak
when prices are overextended.
2. A buy signal is given when prices reach the lower channel line while an indicator traces a
bullish divergence. It shows that bears are becoming weak when prices are already low.
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We must analyze markets in multiple timeframes. Look for buys on the daily charts when
prices are rising on the weeklies. Look for shorting opportunities on the dailies when
prices are sinking on the weekly charts.
3. Go long near the moving average when the channel is rising, and take profits at the upper
channel line. Go short near the MA when the channel is falling, and take profits at the
lower channel line.
When a channel rises, it pays to trade only from the long side, buying in the value zone
which lies between the fast and slow moving averages, and then selling at the upper
channel line. When a channel declines, it pays to short in the value zone and cover at the
lower channel line.
Combining Channels and MACD Signals

This chart reflects several months of action in Six Flags Entertainment Corporation (SIX).
Area A—while prices have

reached the lower channel
line, a new record low of
MACD-Histogram
suggests that this low will
be retested or exceeded.
Area B—channel line

rejected, rally is likely
ahead.
Area C—prices reached

their upper channel line
FIGURE 41.3 SIX daily with 26- and 13-day EMAs, 6% channel, MACD- and recoiled—reversal is
Histogram 12-26-9, and the Impulse system. (Chart by Stockcharts.com) likely.
Area D—buy. Prices have reached the lower channel line, while MACD-Histogram has traced out
a bullish divergence between bottoms A and D, with a break at C.
Area E—while prices have reached their upper channel line, a new record high of MACD-
Histogram suggests that this high is likely to be retested or exceeded.
Area F—pullback to value completed; MACD-Histogram breaks below zero, creating a setup for a
possible bearish divergence. Still may buy to ride back to the prior high.
Area G—sell and sell short. Prices have reached the upper channel line, while MACD-Histogram
has traced out a bearish divergence between tops E and G, with a break at F.
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SWING TRADING
Culled from Alan S. Farley’s book, THE MASTER SWING TRADER
Execution must synchronize with momentum action-reaction or it will yield frustrating results. Every
player knows the pain of executing a low-risk entry, riding a profitable trend but then losing everything
on a subsequent reaction. Clearly defined swing exit tactics will avoid this unpleasant
experience. Multi-trend technical analysis and cross-verification techniques identify
probable reversal points well in advance of the price action. Unfortunately, most market
participants do not visualize their exit when they enter a new position and allow greed to overpower
analysis as soon as it moves into a profit. The master swing trader always locates natural escape routes
and major profit levels before new execution.
CANDLESTICKS
Candlesticks work well in conjunction with Bollinger Bands and other central tendency tools. Look for
reversal patterns when price pushes outside of the top or bottom band.
Trade Mechanics
Combine candlestick analysis with technical indicators to reduce whipsaws and improve profitability.
Use short-term Stochastics to verify that a stock sits at an extreme overbought/oversold level when
an apparent reversal prints. Look for the MACD Histogram to change direction at the same time. Find
support through MA ribbons that confirm the changing patterns. But above all else, combine candles
with Bollinger Bands to confirm or refute trading signals.
Enter fade positions when price strikes horizontal top or bottom bands that hold firm after the
collision.
BOLLINGER BANDS
Major finger reversals should strike through Bollinger Band extremes or the center band itself. Price
action at the outer bands often rings a louder signal than the center plot. Shadows should pierce the
band sharply while the real body stays within the boundary. Look for the band to remain perpendicular
to the candle after the immediate crossover. This reveals strong resistance to further movement in
that direction. Sometimes candles will align on band edges through several time frames. This predicts
an immediate and significant reversal opportunity.
Bollinger Bands identify subphases within the current trend. Price enters a bull phase when it rises
above the center band. That central axis now supports price on pullbacks. When crossed, price tends to
move all the way to the top band before any major reversal takes place. This pattern supports long
swing entry when confirmed by other landscape features. The center band becomes resistance when
price breaks below it. Odds favor price falling all the way to the bottom band when the central pivot
breaks. This pattern supports short swing entry when confirmed by other landscape features.
Bollinger Bands combine the sophistication of complex mathematics with the simplicity of pattern
recognition. A strong trend in either direction prints bar patterns that appear to cling to the top or
bottom band like curtain rungs. Often, they display a series of small pullbacks that never reach the
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center band before resuming the trend. These sharp moves may climax when more than 50% of the
price bar reaches outside the end of a band. This signals an overbought or oversold state that triggers
sharp resistance and pulls price back within its limits. But trade timing with this phenomenon can be
tricky. Very strong issues may overcome this strong central tendency for a number of price bars before
fading back into the boundaries.
Someday another Charles Dow or Edwards and Magee will come along to categorize the great variety of
band/price patterns and assign effective trading rules for them. Until then, apply these simple band
concepts to daily market preparation:
1. Location and direction determine trading phase:
o Upper vs. lower action: Location of price bars determines the strength of the current phase.
Price within the upper band signifies power while price within the lower band signals
weakness.
o Price direction: Direction of price within the band identifies convergence-divergence with the
current trend. Divergence prints when price rises within the lower band or falls within the
upper band. Convergence prints when price rises within the upper band or falls within the
lower band.
o Trend testing: The lower, center, and upper bands represent S/R for the trend. Reversal off
any band increases odds that price will expand in the reversed direction and return to the last
band crossed or touched.
2. Penetration through the center band increases directional momentum:
o Crossing from below center to above: Uptrend increase in strength. Observe directional
movement of the upper band as price approaches.
o Crossing from above center to below: Downtrend increase in weakness. Observe directional
movement of the lower band as price approaches.
3. Bands open in response to awakening trend:
o Climbing the ladder: If the angle of the upper band rises in response to approaching price,
expect a series of upward price bars, each riding higher along the top band. This is an uptrend
in progress.
o The slippery slope: If the angle of the lower band falls in response to approaching price, expect
a series of downward price bars, each pushing lower along the bottom band. This is a
downtrend in progress.
4. Bands flatten in response to awakening trend:
o Head in ceiling: If the angle of the upper band flattens in response to approaching price, expect
price bars to pierce the band and reverse. This will likely end an upward swing and start a
Page 24 of 27
downward one. But watch if price pulls back slowly while the band then opens . This will signal an
impending breakout.
o Foot in floor: If the angle of the lower band flattens in response to approaching price, expect
price bars to pierce the band and reverse. This will likely end a downward swing and start an
upward one. But watch if price pulls back slowly while the band then opens. This will signal an
impending breakdown.
Bollinger Bands define natural extremes in trend development. As bands are hit, price often bounces
backward until sufficient strength can push the band out of the way. Congestion will likely develop
just below the top band or above the bottom band if the overall pattern supports increasing
momentum. This will continue until the band turns and opens away from price, indicating that
resistance has been overcome. Price may then eject into a sustainable trend and cling to the band’s
edge. But keep in mind that ultimate movement will depend on all S/R boundaries and not just those
associated with BBs.
Reduce momentum risk through 3D charting. Identify reward for the time frame of interest. Confirm
that the stock shows no important divergences that may signal the end of the move
or an impending reversal. Then guide execution and position management through the chart in
the next lower dimension. When a strong trend explodes on the daily chart, use the 60-minute
bar to pick out lower-risk entry and define natural exit points. For intraday positions, control
the 5-minute bar breakout by using a 1-minute chart to locate swing levels.
Discontinuous information requires that different features exist independently of each other. Many
types of S/R data actually derive from other calculations. For example, MACD Histograms arise from
moving average data. Therefore, a setup does not cross-verify when MACD and MAs say the same
thing. On the other hand, a hammer candle that strikes an old double top at the bottom of a horizontal
Bollinger Band constitutes three unrelated elements that converge at a single point and suggest a major
reversal. Take great care before accepting each CV point. Accidental combination of derivative
measurements may carry substantial risk. The trade will inaccurately cross-verify and give false
confidence to the position.
Cross-verification supports standard price convergence-divergence analysis. This method parallels the
momentum cycle and confirms new trends. Multiple convergence improves the odds that the trend
will continue. For example, when the Stochastics indicator moves sharply off a bottom, try to verify
that observation with trendlines and pattern breakouts. Or when MA ribbons spread out, analyze
the recent price bars to locate narrow range or wide range signals such as the NR7.
Fibonacci ratios offer excellent CV analysis. Stocks faithfully retrace certain percentages of prior
movement before finally reversing or continuing the prevailing trend. These stair step levels identify
significant setups when bottom pane indicators and landscape features converge to offer support.
Apply a Fib grid to trend extremes and look for activity at the 38%, 50%, and 62% retracement levels.
Price often bounces like a pool ball back and forth across this marvel of crowd mathematics.
Page 25 of 27
Many changes in trend originate within the time frame below the primary view of the swing
trader.
TRADER vs. THE CROWD

Use the crowd’s excitement to exit trades on wide price bars before deep countertrends reduce
profits. Reversals occur at peaks of crowd agitation. Sharp pullbacks trap players when they get greedy
or wait too long for confirmation of a rollover. Safe exit requires that swing traders step in front of the
crowd and close a position into its waiting hands. Get out quickly on bar expansion into major
barriers such as prior highs or lows and Bollinger Band extremes.
When a promising setup appears on a 5-minute chart, the swing trader checks the 60-minute chart for
support-resistance but uses the 1-minute chart to time execution to the short-term flow of the market.
This multidimensional approach works through all time levels. Even mutual fund holders can benefit
when they locate a potential investment on a weekly chart but use the daily and monthly to time entry
to the highest probability for success.
BUILDING THE ROAD MAP

Toggle time frames to uncover tool convergence that cross-verifies promising setups. This confluence
often locates major multi-point profit events. For example, when both daily and weekly Bollinger
Bands converge at a single breakout number, odds increase that price will reverse right
at that level.
Price gaps mark powerful single-point signposts. They expose hidden S/R barriers when properly
placed within a trend. Gaps come in many varieties, and swing traders must drill themselves in their
various incarnations to avoid bad decision-making when it matters most. For example, intraday
traders use opening breakout gaps to pinpoint momentum entry and exhaustion gaps to sell short
when price retraces to test them. Mixing the two leads to unfortunate results.
Bear Strategies
Choose short sale entry that manages risk. Always try to sell at resistance where a small
move against the position will confirm that the trade has failed. These well-defined
execution points require a strong stomach. They print just as a rally suggests that a new uptrend has
begun. Less aggressive traders can sit back and wait for a price rollover rather than trying to catch a
rocket ship. Alternatively, watch for whipsaw violations of key resistance with price that falls quickly
back below the barrier. These will form shooting stars or doji candles that signal a top within the lower
time frame.
Learn to see less obvious resistance that allows safer entry due to the crowd’s absence. Execution at
these quieter levels greatly reduces short squeeze risk. While the crowd concentrates on horizontal
ceilings or moving averages, focus attention on secondary barriers. Declining parallel price
channels or Bollinger Band extremes offer high-reward short sales with fewer
whipsaws. Or apply Fib grids but overlay several trend lengths to reveal small turning points that few
others will notice.
Use small reversal patterns in the chart below the holding period to fade entry near S/R extremes.
Page 26 of 27
Support: Areas of congestion or previous lows below the current price

mark support levels. A break below support would be considered bearish.
Resistance: Areas of congestion and previous highs above the current price
mark the resistance levels. A break above resistance would be considered
bullish.
Support/Resistance
Simple chart analysis can help identify support and resistance levels. These
are usually marked by periods of congestion (trading range) where the
prices move within a confined range for an extended period, telling us that
the forces of supply and demand are deadlocked. When prices move out of
the trading range, it signals that either supply or demand has started to get
the upper hand. If prices move above the upper band of the trading range,
then demand is winning. If prices move below the lower band, then supply
is winning.
Tools to help identify Support/Resistance zones
congestion areas, BB extremes, horizontal lines, trend lines, previous highs and
lows, gaps, etc.
Ok, you probably already knew all that but here is something that most traders do
not know. There are varying degrees of support and resistance.
On the long side: When a stock falls down to a prior low it is

more significant than when a stock falls down to a prior high.
On the short side: When a stock rises up to a prior high it is

more significant that when a stocks rises up to a prior low.
Or,
For a buy, look for the possibility of a retest of support or a breakout of resistance.
For a sell, look for the possibility of a retest of resistance or a breakdown of

support.
Page 27 of 27

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MUHAMMAD SALAU (+2348030882320).

FINANCIAL TRADING 1ST JANUARY, 2020

The success that a trader

We teach that when anybody enters

Loss control essential

The secret to making money in

Just as a scenario writer

Simple Ideas: Standing the Test of Time

Many professional traders make a living by applying

Enter CAUTIOUSLY but exit FAST.

A swing trader may stay in a trade, even

The Urge to Trade

Trader’s First Step

The Two Main Rules of Risk Control

Construct the Iron Triangle in three steps:

B. The distance, in dollars, from your planned entry to your stop—

C. Divide “A” by “B” to find the maximum number of shares you

The 2% Rule in the Futures Markets

How to Trade Without Indicators – Step by Step Guide to Chart

Updated: September 21, 2017 Dale Woods Forex Trading Strategies

Step 1: Read the Market Structure

Step 2: Identify Likely Turning Points

Step 3: Wait for a Trade Signal

So we highlight our market structure…

Make yourself a check list –

 Step 1: Read the Market Structure The

Best of luck on the charts this week 🙂

Elliott Wave Patterns And The Market Structure

o The Trend – which consists of 5 waves.

o The Correction – which consists of 3 moves.

Rule 3: Wave 4 may never end in the price territory of wave 1.

o Depending on market conditions, wave 1 may break out of a narrowing channel.

Trader Vic 1-2-3 Reversal Pattern Setup

2B Reversal (a variation of the Trader Vic 1-2-3 reversal)

When prices break their

Combining Channels and MACD Signals - Trading Rules

Combining Channels and MACD Signals

Area A—while prices have

Area B—channel line

Area C—prices reached

1. Location and direction determine trading phase:

2. Penetration through the center band increases directional momentum:

3. Bands open in response to awakening trend:

4. Bands flatten in response to awakening trend:

TRADER vs. THE CROWD

BUILDING THE ROAD MAP

Support: Areas of congestion or previous lows below the current price

Tools to help identify Support/Resistance zones

On the long side: When a stock falls down to a prior low it is

On the short side: When a stock rises up to a prior high it is

For a sell, look for the possibility of a retest of resistance or a breakdown of

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