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The Next Generation of Diverse Documentary Storytellers

The need for diversity in film and media is not new, but in recent years, calls to address this issue have intensified. The stories being told, and as equally important, the people telling them need to reflect the world we live in.  A program of Youth FX, co-directed by Bhawin Suchak and Darian Henry, NeXt Doc is a year-long Fellowship program on the leading edge of this movement, cultivating and amplifying the voices of bold young non-fiction filmmakers of color ages years old. The Fellowship provides these emerging talents access to mentorship from established documentarians in the field, while providing a safe space for deep conversations about aesthetics, artistry along with critical explorations of power and representation in non-fiction storytelling.

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Equinix LD4
London, UK
,

Equinix NY4
New York, US
,

Equinix SP3
Sau Paulo, Brazil
,

Equinix HK1
Hong Kong
,

eunic-brussels.eu AMS1
Amsterdam, Netherlands
,

eunic-brussels.eu MOW1
Moscow, Russia
,

Falkenstein FSN1
Falkenstein, Germany
,

Interxion FRA3/FRA8
Frankfurt, Germany
,

Aurora 1
Chicago, US
,

Mumbai
Mumbai, India
,

Johannesburg
Johannesburg, South Africa
,

Singapore
Singapore
,

htc
About Forex ……………………………………………………………………………………………………………………………………….. 2
Currency pairs…………………………………………………………………………………………………………………………………
What moves the Forex market? ……………………………………………………………………………………………………….6
Pip…………………………………………………………………………………………………………………………………………………….8
Bid and Ask price ………………………………………………………………………………………………………………………………. 9
Margin Trading and Lot ……………………………………………………………………………………………………………………10
Leverage ………………………………………………………………………………………………………………………………………….. 11
How to calculate? …………………………………………………………………………………………………………………………… 13
How can I start Forex trading? ………………………………………………………………………………………………………….…….. 14
Fundamental vs technical analysis……………………………………………………………………………………………………. 18
How many pairs should you trade?………………………………………………………………………………………………… 19
How much money do I need to start Forex trading? …………………………………………………………………………. 19
Trading plan ……………………………………………………………………………………………………………………………………… 20
How to Place Profit Targets?
Charts and candlesticks …………………………………………………………………………………………………………………….….. 22
Understanding technical analysis 27
Support and Resistance 28
Chart patterns ………………………………………………………………………………………………………………………………….. 31
34
Technical indicators
Trading psychology ………………………………………………………………………………………………………………………………. 42

• Even if you already know all these things, I recommend you to read this. It doesn’t take a long time
and you can find some very useful information about trading.

1
About Forex

Forex is global market that allows the exchange of one currency for another.
Let’s make it simple. You travel from to Germany to USA. Main currency in USA is
dollar (USD - $). Main currency in Germany is euro (EUR - €). You have € in your
wallet. The moment you arrived in USA you need to exchange euros for dollars
because main currency in USA is dollar. How can you do that? Well, you can go to
exchange office and buy dollar. Exchange rate is for example , so you will see
something like this: EUR/USD = That means for € you will get $
It’s simple math: € * $ = $ Imagine you didn’t spend any money and
now it is time to go back in Germany, but now exchange rate is lower! For example
exchange rate now is or EUR/USD = This time you need euros, so let’s
do simple math again: $ / = €. Now you have €, but on the
beginning of the journey you had €. That means you earned 21 €. It’s these
changes in the exchanges rates that allow you to make money in the foreign
exchange market or Forex. This is much harder than it sounds, because you never
know when exchange rate will go up or down.

The foreign exchange market, which is usually known as Forex or FX, is the largest
financial market in the world, with its $5 TRILLION a day trade volume. For people
like you and me this doesn’t mean much. We can’t even imagine how big that is. For
us is important how we can take advantage of that. Here, I will try to explain that and
help you become successful trader.

The Forex market is run by a global network of banks, spread across four major forex
trading centers in different time zones: London, New York, Sydney and Tokyo.
Because there is no central location, you can trade Forex 24 hours a day 5 days a
week. Most traders speculating on forex prices will not plan to take delivery of the
currency itself; instead they make exchange rate predictions to take advantage of
price movements in the market. Simple rule: buy when price is low and sell when
price is high.

2
Currency pairs

I mentioned currency pair in the example above, but what is a base and quote
currency? A base currency is the first currency listed in a forex pair, while the second
currency is called the quote currency. Forex trading always involves selling one
currency in order to buy another, which is why it is quoted in pairs – the price of a
forex pair is how much one unit of the base currency is worth in the quote currency.

Each currency in the pair is listed as a three-letter code, which tends to be formed of
two letters that stand for the region, and one standing for the currency itself. For
example take GBP. GB stands for Great Britain, and P stands for pound.

GBP/USD is a currency pair that involves buying the Great British pound and selling
the US dollar. GBP is the base currency and USD is the quote currency. If GBP/USD is
trading at , then one pound is worth dollars. If the pound rises against
the dollar, then a single pound will be worth more dollars and the pair’s price will
increase. If it drops, the pair’s price will decrease. So if you think that the base
currency in a pair is likely to strengthen against the quote currency, you can buy the
pair (going long). If you think it will weaken, you can sell the pair (going short).

In this table you can see most traded currencies.

Table 1: popular currencies

3
Pairs are split into the following categories:
• Major pairs - seven currencies that make up 80% of global forex trading. Major pairs
include USD, so every pair that includes USD is major pair.

Picture 1: major pairs

• Minor pairs - less frequently traded, these often feature major currencies against
each other instead of the US dollar. Includes: EUR/GBP, EUR/CHF, GBP/JPY.

• Exotics - a major currency against one from a small or emerging economy. Includes:
USD/PLN (US dollar vs Polish zloty), GBP/MXN (Sterling vs Mexican peso).
• Regional pairs - pairs classified by region – such as Scandinavia or Australasia.
Includes: EUR/NOK (Euro vs Norwegian krona), AUD/NZD (Australian dollar vs New
Zealand dollar).
The dollar is the most traded currency, taking up about 85% of all transactions. The
euro’s share is second while that of the yen is third. Significant reasons why the U.S.
dollar plays a central role in the forex market:
- The United States economy is the LARGEST economy in the world,
- The US dollar is the reserve currency of the world,
- The United States has the largest and most liquid financial markets in the world,
- The United States has a stable political system,
- The United States is the world’s sole military superpower.

4
EUR/USD is the most traded currency pair in the world. That is exactly why I don’t
trade this pair. Big Banks and market makers can easily manipulate with price of
this currency. Be aware of this!
One important thing to note about the forex market is that while commercial and
financial transactions are part of the trading volume, most currency trading is based
on speculation. In other words, most of the trading volume comes from traders that
buy and sell based on intraday price movements. The scale of the forex market means
that liquidity – the amount of buying and selling volume happening at any given time
– is extremely high.

5
What moves the Forex market?

The Forex market is made up of currencies from all over the world, which can
make exchange rate predictions difficult as there are many factors that could
contribute to price movements. Forex is primarily driven by the forces of supply and
demand, and it is important to gain an understanding of the influences that drives
price fluctuations here.

Central banks

Supply is controlled by central banks, who can announce measures that will have a
significant effect on their currency’s price. Quantitative easing, for instance, involves
injecting more money into an economy, and can cause its currency’s price to drop.

News reports

Commercial banks and other investors tend to want to put their capital into
economies that have a strong outlook. So, if a positive piece of news hits the markets
about a certain region, it will encourage investment and increase demand for that
region’s currency. Unless there is a parallel increase in supply for the currency, the
disparity between supply and demand will cause its price to increase. Similarly, a
piece of negative news can cause investment to decrease and lower a currency’s price.

Market sentiment

Market sentiment, which is often in reaction to the news, can also play a major role in
driving currency prices. If traders believe that a currency is headed in a certain
direction, they will trade accordingly and may convince others to follow suit,
increasing or decreasing demand.

Economic data

Economic data is integral to the price movements of currencies for two reasons – it
gives an indication of how an economy is performing, and it offers insight into what
its central bank might do next.

6
Credit ratings

Investors will try to maximize the return they can get from a market, while
minimizing their risk. So alongside interest rates and economic data, they might also
look at credit ratings when deciding where to invest. A country’s credit rating is an
independent assessment of its likelihood of repaying its debts. A country with a high
credit rating is seen as a safer area for investment than one with a low credit rating.
This often comes into particular focus when credit ratings are upgraded and
downgraded. A country with an upgraded credit rating can see its currency increase
in price, and vice versa.
Now when we learned about Forex and how it works we need to learn basic terms
like: pip, bid and ask price, spread, lot, leverage and margin.

7
Pip

A pip, short for point in percentage, is a very small measure of change in a

Assume that we have a EUR/USD direct quote of What this quote means is
that for 1 €, you can buy about dollars. If there was a one-pip increase in this
quote (to ), the value of the euro would rise relative to the US dollar, as 1 €
would allow you to buy slightly more dollars.

The effect that a one-pip change has on the dollar amount, or pip value, depends on
the amount of euros purchased. If an investor buys 10, euros with dollar, the price
paid will be $ ( x 10,). If the exchange rate for this pair experiences
a one-pip increase, the price paid would be $ ( x 10,). In that case,
the pip value on a lot of 10, euros will be $ 1 ($ - $ ).

Here’s another example using a currency pair with the Japanese Yen as the counter
currency. Notice that this currency pair only goes to two decimal places to measure a
1 pip change in value (most of the other currencies have four decimal places). In this
case, a one pip move would be JPY. So, in all pairs that include JPY, a pip is second
decimal number.
Take GBP/JPY as example: [( JPY) / ( JPY)] x 1 GBP = GBP.
So, when trading 10, units of GBP/JPY, each pip change in value is worth
approximately GBP.

8
Bid and Ask price

All forex quotes are quoted with two prices: the bid and ask. In general, the bid
is lower than the ask price. The bid is the price at which your broker is willing to buy
the base currency in exchange for the quote currency. This means the bid is the best
available price at which you (the trader) will sell to the market. If you want to sell
something, the broker will buy it from you at the bid price. Ask price is the price at
which your broker will sell the base currency in exchange for the quote currency. This
means the ask price is the best available price at which you will buy from the market.
Another word for ask is the offer price. If you want to buy something, the broker will
sell (or offer) it to you at the ask price. The difference between the bid and the ask
price is known as the SPREAD.
On the EUR/USD quote below, the bid price is and the ask price is If
you want to sell EUR, you click “Sell” and you will sell euros at
If you want to buy EUR, you click “Buy” and you will buy euros at

Picture 2: currency pair

9
Margin Trading and Lot

When you go to the grocery store and want to buy an egg, you can’t just buy a
single egg, they come in dozens or “lots” of 12, so what is a lot in Forex?

Currencies are traded in lots – batches of currency used to standardize Forex trades.
As Forex tends to move in small amounts, lots tend to be very large: a standard lot is
, units of the base currency. So, because individual traders won’t necessarily
have , pounds (or whichever currency they’re trading) to place on every trade,
almost all Forex trading is leveraged.

In Forex, it would be just as foolish to buy or sell 1 euro, so they usually come in “lots”
of 1, units of currency (micro), 10, units (mini), or , units (standard)
depending on your broker and the type of account you have. You probably don’t have
enough money to buy 10, euros. That is no problem, and yes, you still can trade.
The answer is margin trading.

Margin trading is simply the term used for trading with borrowed capital. This is how
you’re able to open $1, or $50, positions with as little as $25 or $1, You
can conduct relatively large transactions, very quickly and cheaply, with a small
amount of initial capital. It is very important to understand this.

Example: You believe that signals in the market are indicating that the British pound
will go up against the US dollar. You open one standard lot (, units GBP/USD),
buying with the British pound at 3% margin and wait for the exchange rate to climb.
When you buy one lot (, units) of GBP/USD at a price of , you are
buying , pounds, which is worth $, (, units of GBP * ).
If the margin requirement was 3%, then $3, would be set aside in your account to
open up the trade ($, * 3%). You now control , pounds with just
$3, Your predictions come true and you decide to sell. You close the position at
You earn about $

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Leverage

Leverage is the ability to use something small to control something big. Specific
to Forex trading, it means you can have a small amount of capital in your account
controlling a larger amount in the market.
This is trading on margin mentioned above. In forex trading, there is no interest
charged on the margin used, and it doesn't matter what kind of trader you are or what
kind of credit you have. If you have an account and the broker offers margin, you can
trade on it.

The apparent advantage of using leverage is that you can make a considerable amount
of money with only a limited amount of capital. The problem is that you can also
lose a considerable amount of money trading with leverage. It all depends on how
wisely you use it and how conservative your risk management is. Money and risk
management are extremely important in trading. Without proper risk and money
management, you will fail as a trader!

Leverage makes a rather boring market incredibly exciting. Unfortunately, when your
money is on the line exciting is not always good, but that is what leverage has brought
to Forex. Without leverage, traders would be surprised to see a 10% move in their
account in one year. However, a trader using too much leverage can easily see a 10%
move in their accounts in one day. While typical amounts of leverage tend to be too
high, some trade with five times leverage; it is important for you to know that much
of the volatility you experience when trading is due more to the leverage on your
trade than the move in the underlying asset.

Leverage Amounts

Leverage is usually given in a fixed amount that can vary with different brokers. Each
broker gives out leverage based on their rules and regulations. The amounts are
typically , , and

→ Fifty to one leverage means that for every $1 you have in your account you
can place a trade worth $ As an example, if you deposited $, you would be able
to trade amounts up to $25, (50*$) on the market using leverage. It's not
that you should be trading the full $25,, but you would have the ability to trade up
to that amount.

11
→ One hundred to one leverage means that for every $1 you have in your
account, you can place a trade worth $ This is a typical amount of leverage offered
on a standard lot account. The typical $ deposit for a standard account would
give you the ability to control $, (*$).

→ Two hundred to one leverage means that for every $1 you have in your
account, you can place a trade worth $ This is a typical amount of leverage offered
on a mini lot account. The typical deposit on such an account is around $ With
$ you would be able to open up trades up to the amount of $60, (*$).

There's no need to be afraid of leverage once you have learned how to manage it. The
only time leverage should never be used is if you take hands-off approach to your
trades. Otherwise, leverage can be used successfully and profitably with proper
management. Leverage must be handled carefully – once you learn to do this, you
have no reason to worry.

12
How to calculate?

So now that you know how to calculate pip value and leverage, let’s look at how you
calculate your profit or loss. Let’s buy US dollars and sell Swiss francs.

The rate you are quoted is / Because you are buying US dollars you
will be working on the “ASK” price of , the rate at which traders are prepared
to sell. So you buy 1 standard lot (, units) at A few hours later, the
price moves to and you decide to close your trade. The new quote for
USD/CHF is / Since you initially bought to open the trade, to close the
trade, you now must sell in order to close the trade so you must take the “BID” price
of The price which traders are prepared to buy at. The difference between
and is or 20 pips. Using our formula from before, we now have
(/) x , = $ per pip x 20 pips = $

I guess you are probably little confused and that is totally normal. No reason to be
worried. When you start practicing all this will be simple.

13
How can I start Forex trading?

You’ve read about pips, leverage, margin, bid and ask price and all other basic
stuff. It is time to start practice. Today it is very easy to start Forex trading. First thing
you need to do is select a Forex Broker. There are many brokers and for new trader
it may be hard to choose the best one. Remember, most of them offer a demo account,
where you can test their trading platform. Usually, registration is quick.
If you look at Forex broker offer, make sure that he allows to trade with lower sizes
such as nano or at least micro.
One of the most important criteria for traders when choosing a Forex Broker is the
regulatory status of the broker and under which regulatory body it is governed.
Brokers who conduct business without regulation do so at their own discretion and
pose a direct risk to the security of their clients’ money.

Here is a list of Forex brokerage regulators for a few select countries:

- Australia - Australian Securities and Investments Commission (ASIC)

This is most important thing when choosing a broker, so before you choose yours,
check their regulation status. It is easy to do that. Just find their license number and
check on the Internet. If you can’t find license number or they don’t want to give it to
you, simply avoid that broker and find new.

Install trading software

With selected broker you need to install trading software. This will be Meta Trader 4
platform or other custom platform from broker. Some brokers use their own trading
platform. The big advantage of Meta Trader 4 is that you have many custom
indicators, expert advisors. It is a good platform overall and I recommend brokers
who offer MT4.

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When you have registered an account, you can add funds. It is very easy. You can start
with few hundred dollars on mini account. Minimum amount is different for each
broker.

Test platform on demo

This is the most important thing for new traders. Opening a demo account is the best
thing that you can do at the beginning of your trading career. Before you decide to
open real account, test a platform on demo.

You will have some virtual 10k or k to play with on demo. Test how order placing
works, how to place stop loss, take profit etc. You do not want to learn these things
with your real cash.

The main advantages of Forex demo trading:

- You do not put at risk real money – yours loses and gains are virtual, so there is
no risk that you will lose all you trading capital;
- You can test your trading system and different trading strategies;
- You can see how to use leverage;
- If you are using mechanical system, you can test it in practice.

The main disadvantages of demo trading:

- You do not put at risk real money – you react different when it is real money
you are losing;
- You make trades that you normally wouldn’t make with real money.

When you are on demo and you switch to real money trading, you will notice
difference. Now you care. When you are losing money, you feel fear. You hesitate to
close losing position because it may turn around. When your trade is in profit, you are
greedy. You hesitate to close position, because it may go even higher. This kind of
emotions occurs only when you are trading with real money. You will learn over time
that most of yours loses come from not following trading plan and allowing emotions
to play too big role in your decision making process. You are not able to switch off
your emotions. On the other hand, you must be aware of them and not allow to take
control. That is why you need to have your trading plan on paper. Write down as
many things you can in your trading plan – that way you will minimize impact of
emotions in your trading.

15
Demo trading in trader learning process:

1. Open demo account;

Find a Mentor

It is not an easy task to find mentor, especially these days. Most trading pages on
Instagram and social media platforms are scam. They will tell how you can get rich
quick, how they have best strategy that works around 90% of the time and will show
you pictures like this:

Picture 3: scam I Picture 4: scam II

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That is NONSENSE. Don’t believe them! First of all, good trader will never open more
than 3 (max 4) positions. Opening too many positions is the worst thing that you can
do. You need to focus, and you cannot do that when you open more than 3 positions.
Not just that, if you are wrong, you will blow your account very fast. But why
scammers do this? Answer is simple. They have two demo accounts. On one account
they buy and on another one they sell.

They will open as many positions as they can so they can win more. And guess what.
When positions are closed they will show pictures of winning account.

Finding an honest mentor is the fastest way to learn to trade Forex. With mentor, you
will avoid many mistakes and sometimes save many years of trial and errors.

17
Fundamental vs technical analysis

Technical analysis relies on past price movement data to predict currencies’

Fundamental analysis relies on current factors affecting countries’ economies. These

What you will focus more is personal choice, but do not ignore the other side. If
someone says that he is technical trader and do not look at fundamentals and news,
then he is not someone you want to follow. There are so many evidences that news
can move the market. Many big players simply close all trades before important news,
because market can be unpredictable.

Technical and Fundamental analysis are base of Forex trading.

18
How many pairs should you trade?

As a new trader, you should start with one or two pairs. Why? Three or more
pairs are hard to follow. Remember that you should check situation on few time
frames to take a trade. With two or more pairs you will struggle to follow price
actions. Select two pairs. It is enough. Every pair has its own characteristic. If you
jump between pairs, you won’t notice this. Also, it is important to check situation on
higher time frames. When you do that on many trading pairs, it is hard to follow price
action for new traders.

How much money do I need to start Forex trading?

This is one of most popular questions about Forex trading. You can open trading
account with as little as $ (or even less in some cases). Is it enough to trade?
Technically, yes. With that money, you can place trades if broker has nano or micro
lots in his offer. If you want to trade for living, you will need much more. But you need
to start from somewhere like everyone else.

When you learn how to trade, use money you can afford to lose. That is very
important. Never trade with money you can’t lose. This is brutal game. Save some
money for your trading account. People see all that adverts, read about leverage and
think that they do not need much capital. That is a huge mistake.

19
Trading plan

You must have a trading plan. Of course, there is a whole learning process and
you will be testing different Forex trading strategies. Eventually you should decide
what works best for you and explore that part. Your goal is to create trading plan.
You should write down things like:

- Which currency pair you trade;

If you do not have things like this written down, then you will be changing lot of things
at once. That way you will never find out what you are doing wrong. When you start
to learn how to trade Forex, it is normal that you will be testing different systems and
strategies. In the end, you should choose one and take your time to master it.

I have my own strategy that I developed after years of learning on demo account. You
will find more about my strategy in my lessons. I wait for the setup and I go in. No
emotions, no pressure. Is it perfect? NO. You will never find perfect strategy. Even
80% or more win rate is impossible. When you find strategy with win rate over 50%
you are on the right path. In Forex even with 50% win rate you can be profitable at
the end of the month. How? Answer is good trading plan. Imagine that every time you
are wrong, you lose $ 2, and every time you are right, you win $5. This month you
traded 10 times. Simple math again: 5 (trades you won) * $5 =$25; 5 (trades you lost)
* $2 = $ Balance: $25 - $10 = +$

This is why Forex is not gambling and why Forex is much better than gambling. It’s
not about luck, it’s about your decisions!

20
How to Place Profit Targets?

Frankly speaking, the most feasible approach of how to use stop-loss and take-
profit in Forex is perhaps the most emotionally and technically complicated aspect of
Forex trading. The trick is to exit a trade when you have a respectable profit, rather
than waiting for the market to come crashing back against you, and then exiting out
of fear. The difficulty here is that you will not to want to exit a trade when it is in profit
and moving in your favor, as it feels like the trade will continue in that direction.

The irony is that not exiting the moment the trade is significantly in your favor usually
means that you will make an emotional exit, as the trade comes crashing back against
your current position. Therefore, your focus when using the stop-loss and the take-
profit in Forex should be to take respectable profits, or a risk/reward ratio or
greater when they are available - unless you have predefined prior to entering, that
you will try to let the trade run further.

What is a Take-Profit order?

A take-profit order (T/P) is a type of limit order that specifies the exact price at which
to close out an open position for a profit.

What is a Stop-Loss order?

A stop-loss order is an order placed with a broker to sell a security when it reaches a
certain price. Stop-loss orders are designed to limit an investor’s loss on a position in
a security. Although most investors associate a stop-loss order with a long position, it
can also protect a short position, in which case the security gets bought if it trades
above a defined price. Some traders don’t use stop loss order. It takes a lot of guts and
knowledge. For new traders it is recommended to use stop loss. You can put it little
above previous high or little below previous low.

21
Charts and candlesticks

Let’s take a look at the three most popular types of forex charts:
1 - Line chart
2 - Bar chart
3 - Candlestick chart

Line Charts

A simple line chart draws a line from one closing price to the next closing price. When
strung together with a line, we can see the general price movement of a currency pair
over a period of time.
Here is an example of a line chart for EUR/USD:

Picture 5: line chart

22
Bar Charts

A bar chart is a little more complex. It shows the opening and closing prices, as well
as the highs and lows. The bottom of the vertical bar indicates the lowest traded price
for that time period, while the top of the bar indicates the highest price paid. The
vertical bar itself indicates the currency pair’s trading range as a whole. The
horizontal hash on the left side of the bar is the opening price, and the right-side
horizontal hash is the closing price.

Here is an example of a bar chart for USD/CAD:

Picture 6: bar chart

You will see the word “bar” in reference to a single piece of data on a chart. A bar is
simply one segment of time, whether it is one day, one week, or one hour. When you
see the word ‘bar’, be sure to understand what time frame it is referencing.

23
Here’s an example of a price bar:

Picture 7: price bar

Traditionally, if the block in the middle is filled or colored in, then the currency pair
closed lower than it opened. In the following example, the ‘filled color’ is black. For
our ‘filled’ blocks, the top of the block is the opening price, and the bottom of the block
is the closing price. If the closing price is higher than the opening price, then the block
in the middle will be “white” or hollow or unfilled. You can change the colors.

24
Picture 8: candlesticks
The advantages of candlestick charting

Candlesticks are easy to interpret, and are a good place for beginners to start figuring
out Forex chart analysis. Candlesticks are easy to use. Your eyes adapt almost
immediately to the information in the bar notation. Candlesticks and candlestick
patterns have cool names, which helps you to remember what the pattern means.
Candlesticks are good at identifying market turning points – reversals from an
uptrend to a downtrend or a downtrend to an uptrend.
Here is an example of a candlestick chart for EUR/USD

Picture 9: candlestick chart

As you can see I like to use red clolor for bearish candle and blue for bullish candle.

25
Here you can find some useful information about candles, but remember – trading
just candles is bad idea, but combining them with your trading strategy can be
very useful, and try to trade only when candle closes.

Picture candlestick patterns

26
Understanding technical analysis

Technical analysis is the study of historical price action in order to identify

Markets can only do three things: move up, down, or sideways.

Prices typically move in a zigzag fashion, and as a result, price action has only two
states:

1. Range – when prices zigzag sideways;

27

Picture trend

Support and resistance is one of the most widely used concepts in Forex
trading. Let’s take a look at the basics first.

Picture support and resistance I

As you can see, this zigzag pattern is making its way up (bull market). When the Forex
market moves up and then pulls back, the highest point reached before it pulled back
is now resistance. As the market continues up again, the lowest point reached before
it started back is now support. In this way, resistance and support are continually
formed as the Forex market oscillates over time. The reverse is true for the
downtrend.

Support and resistance are one of the most important and fundamental parts of
technical analysis.

Support: Typically expected that prices should rise after touching support.
Resistance: Generally expected that prices should fall after hitting resistance.

28
An example of price respecting support and resistance lines is given at the chart
below.

Picture support and resistance II

Potential Buy Signal → It is a general expectation that when prices touch a historical
level of support, prices will cease the negative momentum downward and reverse
course; hence a potential buy signal could be triggered when price touches the
support line.

Potential Sell Signal → If prices reach a historical price ceiling (resistance), typically
it is expected that prices will stop at that level, unless some other external impetus
like great earnings can send prices past historical resistance; therefore, a potential
sell signal is triggered when price touches the historical resistance line.

Breaking Support and Resistance → Another fundamental concept of support and

29
Picture support and resistance III

Support and resistance are basic yet vitally important technical analysis tools. On
every time frame, intra-day, daily, weekly, and monthly, Support and resistance levels
are focused in by traders. Knowledge of these levels could keep a trader on the correct
side of the market.

30
Chart patterns

If you have been around the Forex market for any length of time, then you
definitely have heard about chart patterns and their importance in technical analysis.
I will go through the most important chart figures in.

What are Forex chart patterns?

Forex chart patterns are on-chart price action patterns that have a higher than
average probability of follow-through in a particular direction. These trading patterns
offer significant clues to price action traders that use technical chart analysis in their
Forex trading decision process. Each chart pattern has the potential to push the price
toward a new move. Thus, Forex traders tend to identify chart patterns in order to
take advantage of upcoming price swings.

Type of chart patterns

Forex trading patterns are divided in groups based on the potential price direction of
the pattern. There are three main types of chart patterns classified in Forex technical
charting.

Continuation chart patterns

The trend continuation chart pattern appears when the price is trending. If you spot
a continuation chart pattern during a trend, this means the price is correcting. In this
manner, continuation patterns indicate that a new move in the same direction is likely
to occur. Some of the most popular continuation chart formations are: pennants, flags
and corrective wedges.

31
Picture continuation chart patterns

Reversal chart patterns

The trend reversal chart patterns appear at the end of a trend. If you see a reversal
chart formation when the price is trending, in most of the cases the price move will
reverse with the confirmation of the formation. In other words, reversal chart
patterns indicate that the current trend is about to end and a new contrary move is
on its way! The most popular reversal chart patterns are: double (or triple)
top/bottom, head and shoulders, reversal wedges, ascending/ descending triangle.

32

Picture reversal chart patterns

These are the chart formations which are likely to push the price toward a new move,
but the direction is unknown. Neutral chart patterns may appear during trends or
non-trending periods. You may wonder what value there may be in neutral chart
formations, since we are unable to know the likely direction. But actually, spotting a
neutral chart pattern is still quite valuable as you can still trade an upcoming move.
When the price confirms a neutral chart pattern, you can open a position in the
direction of the breakout.

Picture neutral chart patterns

33
Technical indicators

Success comes from knowledge – this is true for most things in life and especially
Forex trading. To become successful, a trader needs to learn technical analysis.
Technical indicators are a big part of technical analysis. I will provide you with a fair
and simple explanation of the most popular technical indicators. There are many
indicators that you can use. It is impossible to know and master every single one of
them. Here you can find few popular indicators that you can combine with other
things to create trading strategy.

Do technical indicators actually work?

We trade to get a positive result or, in other words, profit. Many beginner traders are
eager to know whether technical indicators are able to give them good trading signals.

The truth is that technical indicators won’t automatically lead you to profit, but they
will do a lot of work for you. There are no doubts that a skillful and experienced trader
can achieve profit without indicators, but they can still help a lot.

In fact, technical indicators can do a few wonderful things:

1 - Show something that is not obvious;

Every technical indicator is based on a mathematical formula. These formulas make

At the same time, technical indicators make their calculations only on the basis of a
price – the currency quotes, which are reordered in the trading software. As a result,
indicators do have weak spots. They can give signals which lag behind the price (for
example, the price has already fallen when the indicator finally gives a signal to sell).

34
Popular technical indicators for Forex traders

Technical indicators are divided into several groups depending on their purpose. As
purposes of the indicators are different, a trader needs not one, but a combination of
several indicators to open a trade.

• Moving Average – an indicator to identify the trend

Moving Average (MA) is a trend indicator. It helps to identify and follow the trend.
MA shows an average value of a price over a chosen time period. In simple terms:
Moving Average follows the price. This line helps to smooth the price volatility and
get rid of the unwanted price “noise”, so that you focus on the main trend and not on
corrections. It is necessary to understand that this indicator does not predict the
future price, but outlines the current direction of the market.

Advantages of Moving Average

1 - Identifies a direction of a trend;

Disadvantages of Moving Average

1 - Lags behind the current price (will change more slowly than the price chart
because the indicator is based on the past prices).

There are 4 types of the Moving Averages – simple, exponential, linear weighted and
smoothed. The difference between them is merely technical (how much weight is
assigned to the latest data). Most traders use Simple Moving Average.

The most popular time periods for MA are , , 50 and period MA may
help to analyze a long-term “historical” trend, while the period MA – to follow a
short-term trend.

Moving Average shows whether to buy or sell a currency pair (buy in an uptrend, sell
in a downtrend). MA won’t tell you at what level to open your trade (for that you’ll
need other indicators). As a result, applying a trend indicator should be among the
first steps of your technical analysis.
On the picture below you can see 2 MAs on one chart. You can add multiple MAs, but
it doesn’t have much sense to go with more than 3.

35
Picture moving average

• Bollinger Bands – an indicator to measure volatility

36
the bands widen when the market becomes more volatile. I like to use BB as they can
tell what to expect in the near future.

Advantage of Bollinger Bands

1 - The indicator is actually great in a sideways market (when a currency pair is

Disadvantage of Bollinger Bands

1 - During a strong trend, the price can spend a long time at one Bollinger line and not
go to the opposite one.

The outer bands automatically widen when volatility increases and narrow when
volatility decreases. High and low volatility periods usually follow each other, so the
narrowing of the bands often means that the volatility is about to increase sharply.

I don’t recommend you to use Bollinger Bands without confirmation from other
indicators/technical tools. Bollinger bands go well with candlestick patterns,
trendlines, and other price actions signals. Bollinger Bands work best when the
market is not trending. This indicator can be a great basis for a trading system, but it
takes a lot of time to become good with it.

Picture Bollinger Bands 37

MACD (Moving Average Convergence/Divergence) measures the driving force behind

Sell when histogram bars start declining after a big advance. Buy when histogram
bars start growing after a big decline. Crossovers between the histogram and the
signal line can make market entries more precise. Buy when the MACD-histogram
rises above the signal line. Sell when the MACD-histogram falls below the signal line.
Zero line as additional confirmation. When MACD crosses the zero line, it also shows
the strength of bulls or bears. Buy when the MACD-histogram rises above 0. Sell when
the MACD-histogram falls below 0. Note though, that such signals are weaker than the
previous ones.
Divergence → If a price rises and a MACD falls, it means that the advance of the price
is not confirmed by the indicator and the rally is about to end. On the contrary, if a
price falls and MACD rises, a bullish turn in the near-term.

Advantages of MACD

1 - MACD can be used both trending or ranging markets;

Disadvantage of MACD

1 - The indicator lags behind the price chart, so some signals come late and are not
followed by the strong move of the market.

It’s good to have MACD on your chart as it measures both trend and momentum. It
can be a strong part of a trading system, although I don’t recommend to make trading
decisions based only on this indicator.

38
Picture MACD

39
• RSI – an indicator to measure momentum

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed
and change of price movements. The RSI oscillates between zero and
Traditionally the RSI is considered overbought when above 70 and oversold when
below Signals can be generated by looking for divergences and failure swings. RSI
can also be used to identify the general trend.

RSI is considered overbought when above 70 and oversold when below These
traditional levels can also be adjusted if necessary to better fit the security. For
example, if a security is repeatedly reaching the overbought level of 70 you may want
to adjust this level to During strong trends, the RSI may remain in overbought or
oversold for extended periods.

In an uptrend or bull market, the RSI tends to remain in the 40 to 90 range with the
zone acting as support. During a downtrend or bear market the RSI tends to
stay between the 10 to 60 range with the zone acting as resistance. These
ranges will vary depending on the RSI settings and the strength of the security’s or
market’s underlying trend. If underlying prices make a new high or low that isn't
confirmed by the RSI, this divergence can signal a price reversal.

40
Picture RSI
Advantages of RSI

1 - Effective way to predict potential trends;

Disadvantages of RSI
1 - True reversal signals are rare and can be difficult to separate from false alarms;
2 - RSI can stay long time in overbought or oversold zone;
3 - When a market features a strong trend, the RSI loses its usefulness.

There is no magic indicator than can predict with certainty when to enter or when
to exit a trade. If there was, everyone would use it, and there would be no dynamic
market as everyone would buy, and everyone would sell at the same time.

41
Trading psychology

As you progress as a trader you will become involved in thinking and probably
reading about trading psychology. Trading psychology is a broad term that
encompasses the study of traders and their emotional issues about trading. Trading-
psychology literature takes its cues from scientific study of psychology, common
sense, and the experience of traders and trading gurus. If you are interested in trading
psychology, it probably means that you are further along in your trading education. If
you are one of the traders with an interest in trading psychology, you have moved
beyond looking for the perfect trading system. You now understand the important
role emotions play in trading results. One thing that many traders fail to recognize is
the intricate relationship between what you risk and the emotions you experience
during trading. In fact, risk and trading psychology are two sides of the same coin.

Markets change, new opportunities will always come. Don’t rush, be patient and
always have a trading plan. Good traders are successful but humble people. Being a
trader is a lifelong challenge.

I hope this helps you to grow as a trader. Continue to learn and be smarter tomorrow
than you are today.
Now, when we went through basics, we can start with more advanced knowledge. In
the upcoming lessons you will find out more about technical and fundamental
analysis.

42
LESSONS

- I recommend you to read 1 to maximum 3 lessons a day, so you can process the
information you find there. You will learn basic and advanced things about Forex trading,
so take your time and don’t try to learn everything in short amount of time. Trading is not
easy and it takes time to become good, confident and even more time to become profitable
trader. But the good thing is – it is possible!

Lesson 1 - About Forex

Lesson 2 - Technical and Fundamental analysis

Lesson 3 - Support and resistance

Lesson 4 - Trendlines
Trendlines are very important when it comes to technical analysis. They give you valuable
information about current trend and we use them to spot chart patterns.

Lesson 5 - Trading trendlines

Lesson 6 - Forex Patterns

Lesson 7 - Continuation Chart Patterns

Lesson 8 - Reversal Chart Patterns

Lesson 10 - Market Behavior

Lesson 11 - Relative Strength Index

Lesson 12 - MACD
This is little more complex indicator, but if you understand this indicator, you will not have
any difficulties with others.

Lesson 13 - Bollinger Bands

Lesson 14 - Moving Average

Lesson 15 - Stochastic Oscillator and CCI

Lesson 16 - Fundamental analysis

Lesson 17 - Backtesting
Backtesting is very important. It is crucial to test your strategy before you actually start to
trade it. This something that you just have to do!

Examples
Here you will find some ideas and examples of how to make a trading strategy.
Lesson 18 - Problems with trading
There are many problems that you will face when trading. One of the biggest problems is
controlling your emotions. You have to be completely objective, because if you are not, you
are just fooling yourself.

Lesson 19 - Trading psychology

Lesson 20 - How much money do I need to start trading?

Lesson 21 - When not to trade?

Lesson 22 - Risk Reward Ratio

Lesson 23 - Money Management

Lesson 24 - Fibonacci tools

Lesson 25 - Trading Fibonacci

Lesson 26 - Advanced (Harmonic) patterns

Lesson 27 - Elliott Wave

Lesson 29 - Types of traders

Lesson 30 - Focus on learning

Lesson 31 - Trading journal

Lesson 32 - Importance of having a proper strategy and money management

TECHNICAL ANALYSIS
Here you will find many real chart examples.

Lesson 33 - Key takeaways pt.1

Lesson 34 - Key takeaways pt.2

Lesson 35 - Never give up

About Forex

Welcome to the world of forex trading. Forex is a portmanteau of foreign currency and exchange. Foreign
exchange is the process of changing one currency into another currency for a variety of reasons. The foreign
exchange market is where currencies are traded. For example, a German tourist in Egypt can't pay in euros
to see the pyramids because it's not the locally accepted currency. Because of that, the tourist has to
exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.
The market is open 24 hours a day, five days a week, and currencies are traded worldwide in the major
financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney
- across almost every time zone. This means that when the trading day in the U.S. ends, the forex market
begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active any time of the
day, with price quotes changing constantly.
Forex is the largest market in the world. Forex traders exchange $5 (and more) trillion each day. Forex
market never sleeps, you have the opportunity to trade at any time of the day and make money any time.
But you need to be careful, because you can easily lose everything!
Traders with very little money can begin trading forex. In forex, you may take relatively large trades with
small amounts of money because of the favorable leverage requirements. There are many reasons to
become a forex trader, but if your only reason is to get rich quick, then you are at the wrong place. It takes
time, effort, a lot of practice and patience. Once you gain necessary knowledge and learn how to control
your emotions, trading forex will become easy.
You often hear people claim that because the forex market is so large, it is relatively easy for forex traders
to jump in and ride the trends in this gigantic market. To be exact, the world’s largest market. However,
most forex traders trade what is called the retail forex market; this is a different market to the “real” forex
market in which $5 trillion is exchanged each day. Basically, we can say there are two markets in forex.
There is the interbank market, where big banks, governments, hedge funds, and corporations exchange
currencies, and there is the retail market. Most forex traders trade in the retail forex market, an entirely
different market to the “real” interbank market. Basically, you trade against big banks, governments and
corporations that have enormous amounts of money and because of that, they can manipulate the market.
Everything you know, they know too and they will use that against you. Make no mistake about it, when
you step into any market, including the forex market, and decide that you want to make money, you have
decided you will outwit and outperform some of the most determined, intelligent, and well-resourced
people in the world! All these people have one goal. They want to take your money. How can you make
money in the markets, knowing whom you are up against? You must practice. Practice your trading. This
is the simple way to become an expert. Simple does not mean easy, because many traders expect to become
experts without practice, and sadly they never achieve expertise. Consistently profitable trading is yours if
you practice trading and become an expert!

1
So how can you win? The answer is mathematics. Here is what I mean by that. You need to find trading
strategy that works 50% of time. A forex trading strategy is a technique used by a forex trader to determine
whether to buy or sell a currency pair at any given time (we will talk about this more later). All the stories
that you hear about 90+% win ratio {forex robots} are simply not true.
So out of trades, you win That is good. Now, every time you win, you win $4 and every time you
lose, you lose $2. That is why I love forex market. I choose how much I win, and I choose how much I lose.
So, 50(won trades)·$4 = $; 50(lost trades)·$2=$ Now; $(that you won) - $(that you lost) =
$ (in profit).
The biggest problem with this is that is not easy to stick to your strategy every time. Sometimes you will
have (for example) 7 consistent losses. After that, you will start to question your strategy and you will try
to find new one again. Again, and again and again That is very big mistake that leads to nowhere! So your
biggest enemies are your emotions and lack of self-discipline. You need to realize that consistency is the
key, and the only way to be consistent is to control your emotions. After 7 losses you will get 7 or 8 or 9
wins, but you never got to see that because you changed your strategy. The cycle of winning and losing is
endless. That is just how life works!
The question is how to form trading strategy?
To do that, you need to know everything about technical and fundamental analysis and that it takes time
to form one. Right from the start you should know that market is never wrong in what it does! Therefore,
you as an individual trader interacting with the market (first as an observer to perceive opportunity, then
as a participant executing a trade, contributing to the overall market behavior) have to confront an
environment where only you can be wrong, and it's never the other way around. I want you to read this
carefully more than once. It is very important to understand this! Everything we learn after this can be for
nothing, if you don’t understand this part.

2
Lesson II

Technical and fundamental analysis

There are basically two schools of traders, and you must decide which school fits your trading
personality. You will most likely focus on one, but be sure to never completely forget about other one. The
first school is the school of fundamental analysis. Fundamental traders use economic reports and news
reports as the basis for their trading decisions. Forex traders who have a fundamental approach will closely
examine world events, interest-rate decisions, and political news. Fundamental traders are concerned with
properly interpreting news. The focus for the technical forex trader is different. The technical forex trader
uses technical indicators, candlesticks and patterns to properly interpret price movement on a chart. The
forex trader who adopts a technical approach will examine the price charts. So, while the fundamental forex
trader is concerned with interpreting news and world events, the technical trader is concerned with
interpreting price on a chart.
Technical analysts believe that history tends to repeat itself! The repetitive nature of price movements is
often attributed to market psychology, which tends to be very predictable based on emotions like fear or
excitement. Technical analysis uses chart patterns to analyze these emotions and subsequent market
movements to understand trends. While many form of technical analysis have been used for more than
years, they are still believed to be relevant because they illustrate patterns in price movements that
often repeat themselves. The problem with technical analysis is that ignores fundamental factors. So
combining fundamental and technical analysis is much better than focusing on just one. For example, every
morning I check news that will be released that day (economic calendar). If very important information for
Euro zone (that can move price) will be released in 4PM, I simply won’t open any trade around 4PM that
includes EUR.
Everything about technical analysis is relative. By that I mean there is no perfect indicator or pattern! This
is very important to know. Don’t ever think that you will find indicator or pattern that works every time.
Now when we know that, let’s start with candlesticks.
The candlestick chart is a popular chart that displays the opening price, the closing price, the high price
and the low price for a market during a given time period. Each candlestick clearly represents the
important market activity for the given time period. You can choose specific time period and it is called
time frame. If you choose one hour time frame (H1), every candle will represent price movement in one
hour. Look at the picture 9 (previous chapter) to see how candlestick looks.
- Open price: The open price depicts the first traded price during the formation of a new candle;
- High price: The top of the upper wick. If there is no upper wick, then the high price is the open price of a
bearish candle or the closing price of a bullish candle;
- Low price: The bottom of the lower wick. If there is no lower wick, then the low price is the open price of
a bullish candle or the closing price of a bearish candle;
- Close price: The close price is the last price traded during the formation of the candle.

3
On the picture 10 (previous chapter - page 26) you can see most popular candlestick patterns. Bearish
patterns indicate that after pattern is formed, lowering of price is expected. Bullish patterns indicate that
after pattern is formed, rising of price is expected. Neutral patterns indicate that after pattern is formed,
price can go either way, up or down. This will not work every time. Candlestick charts are the most popular
charts among forex traders because they are more visual. Candlestick charts highlight the open and the
close of different time periods more distinctly than other charts, like the bar chart or line chart.
Candlestick charts have certain advantages:
- Forex price movements are perceived more easily on candlestick charts compared to others;
- It is easier to recognize price patterns and price action on candlestick charts;
- Candlestick charts offer more information in terms of price (open, close, high and low) than line charts.
However, there are some disadvantages of candlestick charts:
- Candles that close green or red may mislead amateur forex traders into thinking that the market will keep
moving in the direction of the previous closing candle;
- Candlestick charts may clutter a page because they are not a simple as line charts or bar charts.
One thing I recommend is to open the trade only when candle closes (when candle is formed).
The reason why is that candle like on picture 1 can easily transform into candle that looks like candle on
picture 2.

Picture 1 Picture 2

When people see massive bearish candle like in the first picture they will sell. They believe that price will
go down, so they sell and place stop loss just above the wick (or somewhere around). Market makers
(people that trade for big banks with enormous amounts of money) know that. Remember the previous
lesson. They buy and because they operate with large amounts of money price will strengthen, go up and
trigger all the stop loses. And just because you were not patience enough to wait for candle to fully form,
you lost money!

The reasons for price movement like this can be different, not just one I described. Of course this will not
happen every time, but by being patience and waiting for the candle to close you drastically lower the
chances to lose money!
4
Be sure to always combine candlestick patterns with other things like trend, chart patterns and indicators
(we will talk about that in this course). Never open the trade just because you see bullish or bearish candle!
Example that I explained above happens often. Look at picture 3:

Picture 3
See that large wick. People who didn’t wait for candle to close and sold, lost their money. This is typical
price manipulation at the support zone.

Picture

Make sure to always go back at previous chapter where I shared more pictures of different candlestick
patterns that can be useful. And AGAIN: don’t just enter the trade based on candlestick pattern signal!
Combine them with support/resistance zones, trendlines, indicators and other tools.
5
Lesson III

Support and resistance

Support and resistance levels are significant reference points because many traders recognize support
and resistance on charts and believe in their significance. The concepts of support and resistance are
undoubtedly two of the most highly discussed attributes of technical analysis. Part of analyzing chart
patterns, these terms are used by traders to refer to price levels on charts that tend to act as barriers,
preventing the price from getting pushed in a certain direction. The explanation and idea behind
identifying these levels seem easy, but as you'll find out, support and resistance can come in various forms.
Somehow, everyone seems to have their own idea on how you should draw and measure forex support and
resistance.
First, let’s see how support looks like in theory (picture 4):

Support occurs when falling prices stop, change direction,

Picture 4
This is how resistance looks like in theory (picture 5):

Resistance is a price level where raising prices stop,

Picture 5

If price breaks support or resistance, the price often continues to the next level of support or resistance.
Support and resistance levels are not always exact. They are usually a zone covering a small range of prices
so levels can be breached, or pierced, without necessarily being broken. As a result, support/resistance
levels help identify possible points where price may change directions.
It sounds logic but the only right way to spot support and resistance is by looking at the chart!
6
Can you spot a resistance on picture 6? Just look at the chart, don’t scroll down.

Picture 6

Here it is:

Picture 7

You can see at the cahrt that price failed to break level 4 times. This level represented resistance
zone, because price failed to break it.

7
The way I like to draw support and resistance levels is like this:

Picture 8

I use zones, not lines. As you can see here, price touched resistance zone 4 times, and after 4th time price
went down. The zones can be bigger, but I prefer thinner zones, as price is more likely to reject or penetrate
thinner zones. When we have big zones, price also can move up and down inside that zone.
On picture 9 you can see support level.

Picture 9

8
Far right in the red circle is massive wick. So, is this a breakout (breakout means that price penetrated
through the zone)? In this case is not. We call this false breakout (it is usually price manipulation).

In one moment price penetrated zone, but when candle closed, body of the candle wasn’t penetrating the
zone. That is why I say, always trade when candle closes!
Many traders have misconceptions concerning zones. Traders may be familiar with the concept of support
and resistance but unfortunately, many misapply this concept to technical trading. You should understand
that zones are an area on the chart. This is a different concept to a support and resistance line. A support
and resistance line indicates a specific price on the chart, but zones indicate a specific area from where
price can possibly reverse.
Once an area or "zone" of support or resistance has been identified, it provides valuable potential trade
entry or exit points. This is 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.
Most forms of trades are based on the belief that support and resistance zones will not be broken. Whether
the price is halted by the support or resistance level, or it breaks through, traders can "bet" on the direction
and can quickly determine if they are correct. If the price moves in the wrong direction, the position can be
closed at a small loss. If the price moves in the right direction, however, the move may be substantial.
Facts:
- When the price passes through resistance, that resistance could potentially become support;
- The more often price tests a level of resistance or support without breaking it, the stronger the area of
resistance or support is;
- When a support or resistance level breaks, the strength of the follow-through move depends on how
strongly the broken support or resistance had been holding.
Many traders have read or heard that old support becomes resistance and old resistance becomes support.
This bit of market insight is valid for some very sound psychological reasons. One of the most interesting
phenomena regarding support and resistance occurs when the price is finally able to break out and go
beyond an identified support or resistance level. When this happens, it is not uncommon to see a previous
level of support change its role and become a new area of short-term resistance. Picture 10 is a good
example.

Picture 10 9
These two pictures (picture 11 and 12) are great example of support and resistance.

Picture 11 Picture 12

10
Lesson IV

Trendlines

A trend or a tendency is a price behavior, which involves overall price increase or decrease. A currency
pair is trending when it is increasing or decreasing for a longer period of time. There are two types of trend
tendencies in Forex – a bullish and bearish trend.
We have a bullish trend when the price accounts for higher bottoms and higher tops on the chart. In this
manner, the trend line during a bullish trend should connect the price bottoms on the chart. So the bullish
trend line acts as a support.
Bearish trends have opposite functions to bullish trends. The trend is bearish when the price action creates
lower tops and lower bottoms on the forex chart. In this case the bearish trend line should be drawn
through the swing tops on the chart and the resulting trendline acts as a resistance for the price.
Trends, a series of higher highs and higher lows, or lower highs and lower lows over a period of time, work
because there aren't enough sellers to absorb the number of buyers competing with each other to get into
the market during that period of time. Here you can see what trend looks like (picture 13).

Picture 13

11
Adding to this buying force will be old sellers at lower levels who finally lose faith and bail out of their
positions. They will do this in significant numbers when the prices penetrate what they believe to be
significant reference points.
Trendline analysis in forex is a crucial price action method that helps us first and foremost in trend
detection. Trendlines measure the price move of a forex pair when the price is increasing or decreasing. In
this manner, there are two types of trendlines:
1) Bullish Trendlines
We have a bullish trend when the Forex pair is increasing. In this manner, the price of the pair records
higher bottoms (lows) and higher tops (highs). The bullish trend line should be located below the price
action and it should connect the bottoms of the currency pair. This way the bullish trend line acts as a
support for the price action. Obvious uptrend looks like this (pictures 14 and 15):

Picture 14

Picture 15
12
Picture 16

Sometimes you will not be able to draw perfect trendline that connects all the lows or highs, but trend
would still be active. That is why spotting price structure is very important.
The structure of trend is not that complicated. You can see on the picture above (16) that price formed
higher highs and higher lows and that uptrend is still active even though you can’t connect the lows with
perfect trendline.
The structure of the downtrend is same, just different direction. Instead of higher highs and higher lows,
price forms lower highs and lower lows.
The price structure is important to understand, but I will leave this for later. By the end of this ebook you
will find many examples that will help you understand this.

13
2) Bearish Trendlines
The bearish trend has the opposite character of the bullish trend. We use a bearish trendline in order to
measure the price action during a price decrease. In this manner, the bearish trend requires the price to
record lower tops and lower bottoms. This indicates that the price is dropping. The bearish trend line
should be located above the price action during a price decrease. The bearish trendline plays the role of
resistance for the price. Obvious downtrend looks like this (pictures 17 and 18):

Picture 17

Picture 18

14
Picture 19

In order to draw a trendline (bearish or bullish), you first need to identify a trend. Look at this chart:

Picture 20

Can you find a trend on the chart? Answer honestly, we are here to learn!
15
You can see that there are at least three minor trends here. Let’s look at picture below:

Picture

There are three trendlines here. Two of them are bearish (red), and one of them is bullish (green). Basically,
drawing trendlines is not hard, but it can be tricky at times.
In order to confirm a trend, you need at least three points lying on the same line! This is very important.
When drawing trendlines, you must have a minimum of two points. In order to confirm a sloping support
or resistance tendency, you need a third confirmation point, lying on the same line as the two previous
points.
You can see that on picture

Picture 21

16
So, our bullish trend starts with the first and a second bottom. The third bottom is the trend confirmation
signal. The arrows after the confirmation point out subsequent tests of support, which lay in the area of
our trendline. Never think of the trend as contained within of a single line. The trend is not a line, but an
area. Remember previous topic. I said to always look at support and resistance as zones (areas), not just
lines. Same applies here. Trendlines are basically support and resistance but not straight.
When you build a bullish trendline you should take into consideration the lower candle wicks and the body
bottoms. Very often the lower wicks of the candlesticks might go outside the scope of the trendline.
However, we know to think of the trendline as an area and not as a single line written in stone. In this
manner, if the price action breaks the trendline with its candle wick, this doesn’t mean that the trend is
broken. An important point also to keep in mind is that as trendlines mature, there will be more of a
tendency for price reactions at the trendline levels, and many times you will see false breakouts around
these areas, like on picture

Picture 22

We recognize from the price action at this test that most of the price action closed within the trendline
area, and there were quite a few wicks around this zone, indicating that price was being rejected as it was
trying to break thru. As a result, price records another drop before it eventually breaks the trend on the
final attempt.

17
You are might wondering, but how can I find the trend?
There are three ways to do it. First one is connecting the three higher lows (uptrend) or three lower highs
(downtrend) with the trendline.
Second is to follow market structure that I mentioned before. If you spot higher highs and higher lows, that
means price is trending up. If you spot lower highs and lower lows that means price is trending down.
Third way is to use Moving Averages. I mentioned them in the first chapter of this ebook. You can plot two
or three MAs and if price is above them, we have the uptrend. If price is below them, we have the
downtrend.

Picture 23

18
Lesson V

Trading trendlines

There are three basic occurrences on the trendline, which could be traded – trending move, correction,
and breakout. We will now go through each of these. When we confirm a trendline, we can prepare to trade
with the trending move. With the trendline confirmation we have a clear area for our position entry point.
In this manner, if we confirm a bullish trend, we can trade the next bounce from that trendline, assuming
that price action confirms our setup. Take a look at picture

Picture 24

The blue line is a trend line of the bearish price move you see. The three arrows are the three base points,
which form the trend. Notice that the third arrow is green. This is so, because it indicates an area of trend
confirmation. We see a strong bearish candle after price approaches the trendline. This provided a good
entry signal to sell. After the trend gets confirmed (green arrow) the forex pair creates a trending move
downwards. Then we see a new lower bottom and a new correction to the trend. The price interacts with
the blue trendline and then bounces downwards again. Price breaks its previous low, creating a lower
bottom.
The next move to the trendline is considered the last one, although there is a tiny 1-period bounce from it.
The price breaks the trend afterwards with a strong bullish closing candle. This is a signal that the trend
may be over or very likely to stall. Of course, not every bullish candle above trendline means that trend is
over but it is something you need to pay attention to.
Now I will show you how to spot and trade corrections of trending moves. However, I would like to tell you
that counter trend trading is for advanced traders. The reason for this is that it is a risky initiative to trade
corrections. I trade only in trend. There is no reason to complicate your life. When I identify bullish trend
(uptrend) I look only for buying opportunities. When I identify bearish trend (downtrend) I look only for
selling opportunities.

19
What is a trend correction?
A correction (corrective move) is a move, which comes after an impulsive trending leg and brings the price
back to the trendline area. A corrective move should be smaller than the trending move. Also, in most cases,
corrections tend to take more time to complete than the trending leg phase. As a result, corrections are
definitely riskier and less attractive to trade. In order to demonstrate how to trade corrections in the
content of trendlines, we will use a channel for our example. Look at picture

Picture 25

Take note of the two bullish parallel trendlines (blue). The black circles with the numbers show you the
respective Trend phases. The green arrows show you the trending moves in the channel, while the red lines
point out the corrective moves.
When we have a channel, we usually confirm the pattern with the third price move. In other words, we
need only two bottoms in case of a bullish trend and not three as described above. The reason for this is
that after the third price move we have two bottoms on a bullish line and two tops on another bullish line,
which is parallel to the first line. In this manner the pattern gets confirmed.
Notice that the corrections are smaller in terms of price change, as they are contrary to the general trend.
A countertrend trader would sell at the tops of the upper trendline with targets near the bottom of the
channel. As you can see this strategy is much less desirable than the potential that we have in trading with
the trend to the upside.
Let’s talk about trendline breakouts. Being able to spot breakouts is very important for trend traders. For
example, if the price is moving along in a directional manner and it demonstrates the tendency of higher
highs and high lows we have a bullish trending situation. But as we know, this pattern is likely to stop and
reverse at some point. When this happens, the price changes its direction and starts moving in the opposite
direction.

20
Traders should be on the lookout for potential trendline breaks, as this is an attractive way to get in the
beginning of a new price move. However, every breach in price through the trendline is not enough to
confirm a reversal pattern.
As I already said, it is common for the price to go a bit beyond the scope of the trendline, and the trendline
should never be treated as an exact line (I hope you learned that already). The image below will show you
the four phases to recognize when trying to confirm a trend reversal using trendlines. Let’s go thru this
using a bullish trendline example:
A break in the trend occurs. We have a break
when the price closes a candle below the
trendline. The price decreases further and
creates a bottom, which is lower than the
previous price data inside the trendline. We
draw a horizontal support line at the swing
low, which will be the trigger of our reversal
confirmation. The price then increases and
tests the already broken trend as a resistance.
The retest does not have to touch the broken
line. The reason for this is that the trendline
must be viewed as an area and not as a single
Picture 26 line. Furthermore, the price could even
increase beyond the already broken trendline area. The price decreases again and breaks the already
established support level (red line). This is the reversal confirmation signal. When you get this fourth
signal, you have a strong reason to believe that the price will reverse direction. You could short (sell) the
currency pair based on strong reversal belief. It is also important to point out that aggressive traders may
look to sell at the retest of the trendline. This provides higher profit potential, and experienced price action
traders typically prefer this type of entry.
On picture 27 we can see this example.

Picture 27
21
Look at the numerated dots indicating the four phases of the reversal process:
1 - Points to the moment when the price breaks the bullish trend line. Notice the strong red candle that
closes outside the upward sloping trendline. This is considered a high momentum breakout to the
downside;
2 - Shows the price decrease below its previous bottom and the swing low that was created;
3 - Shows the retest of the broken trendline which is now considered resistance. Aggressive traders will
look to enter in this area. A good entry point would be after the close of the strong red candle that follows
the doji bar at new trendline resistance;
4 - Shows the strong breakdown below the swing low;
Notice the strong red bar which closes sharply below the support swing line. This would be a confirmed
short opportunity (sell opportunity). After that, price drops significantly over the next period. This type of
trendline trading system gives you a clear picture of what is currently happening with the trend of a
currency pair.
Recap:
- Uptrends occur where prices are making higher highs and higher lows. Up trendlines connect at least two
of the lows and show support levels below price;
- Downtrends occur where prices are making lower highs and lower lows. Down trendlines connect at least
two of the highs and indicate resistance levels above the price;
- Consolidation, or a sideways market, occurs where price is oscillating between an upper and lower range,
between two parallel and often horizontal trendlines.

22
Lesson VI

Forex Patterns

Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and
form on the basis of underlying buying and selling pressure. Traders use them to identify continuation or
reversal signals, to open positions and identify price targets. Pattern is a specific price action which has
been formed before repeated times. In technical analysis, patterns are used to predict future price
movements. Today we will go through the most important chart figures in forex and we will discuss their
potential. Patterns offer significant clues to price action traders that use technical chart analysis in their
forex trading decision process. Each chart pattern has the potential to push the price toward a new move.
That is why traders tend to identify chart patterns in order to take advantage of upcoming price
movements. Technical analysts have long used price patterns to examine current movements and forecast
future market movements. Before we even begin be sure that these patterns are not perfect. Many
times patterns will provide you with false signals. But that is OK. I hope you already learned this! There is
no perfect pattern, indicator and strategy. I said this and I will say it again many times.
In general, all patterns trigger a long (buy) or short (sell) entry when horizontal or diagonal support or
resistance is broken.

Picture 28 23
On the picture above you can see the most popular chart patterns. Through my trading experience I can
say that these patterns can be very useful and helpful in order to find good entry point. Every trader will
have their own opinion on every pattern. So far, I can say that Double Top/Bottom, Ascending, Descending
and Symmetrical Triangles are the best. The ones that I don’t trade are Diamond, Cup and Handle and
Broadening Triangle. Depending on your style you might find some other patterns useful and this is just
my experience.
There are three main types of chart patterns.
1) Continuation Chart Patterns
The trend continuation chart pattern appears when the price is trending. If you spot a continuation chart
pattern during a trend, this means the price is correcting. In this manner, continuation patterns indicate
that a new move in the same direction is likely to occur. I told you that trading in the trend is better than
trading against the trend. That is why I recommend you to learn continuation chart patterns first.
On these pictures you can see most traded continuation chart patterns:

Picture 29
24
Picture 30

25
2) Reversal Chart Patterns
The trend reversal chart patterns appear at the end of a trend. If you see a reversal chart formation when
the price is trending, in most of the cases the price move will reverse with the confirmation of the
formation. In other words, reversal chart patterns indicate that the current trend is about to end and a new
contrary move is on its way! The most popular reversal chart patterns are double top/bottom, head and
shoulders, reversal wedges.
On these pictures you can see most traded reversal chart patterns:

Picture 31

26
Picture 32

27
3) Neutral Chart Patterns
These are the chart formations which are likely to push the price toward a new move, but the direction is
unknown. Neutral chart patterns may appear during trends or non-trending periods. You may wonder
what value there may be in neutral chart formations, since we are unable to know the likely direction.
Spotting a neutral chart pattern is still quite valuable as you can still trade an upcoming move. When the
price confirms a neutral chart pattern, you can open a position in the direction of the breakout or you can
wait for the retest. What I recommend you to do when you spot neutral chart pattern is this: enter the trade
after breakout, but only if breakout is in the trend direction. If the breakout is in the opposite direction,
wait for the retest (I will explain this later and show you pictures).
On the picture 33 you can see most traded neutral chart patterns:

Picture 33

28
Lesson VII

Continuation chart patterns

A price pattern that denotes a temporary interruption of an existing trend is known as a continuation
pattern. A continuation pattern can be thought of as a pause during a prevailing trend – a time during which
the bulls catch their breath during an uptrend, or when the bears relax for a moment during a downtrend.
While a price pattern is forming, there is no way to tell if the trend will continue or reverse. As such, careful
attention must be placed on the trendlines used to draw the price pattern and whether price breaks above
or below the continuation zone. Technical analysts typically recommend assuming a trend will continue
until it is confirmed that it has reversed. In general, the longer the price pattern takes to develop, and the
larger the price movement within the pattern, the more significant the move once price breaks above or
below the area of continuation.
Wedges
They are constructed with two converging trendlines, where both are angled either up or down. A wedge
is characterized by the fact that both trendlines are moving in the same direction, either up or down. A
wedge that is angled down represents a pause during uptrend; a wedge that is angled up shows a
temporary interruption during a falling market. As with pennants and flags, volume typically tapers off
during the formation of the pattern, only to increase once price breaks above or below the wedge pattern.
You can see how wedges look on picture

Picture 34
29
Wedges are hard to understand at the beginning because they can represent both continuation and
reversal patterns. On the picture 34 you can see blue wedges and red wedges. I did that on purpose so its
easier for you to understand. For now, we will focus on blue ones. They represent continuation chart
patterns.
When the falling wedge (bottom left blue on picture 34) forms during an uptrend, it usually signals that the
trend will resume later on (picture 35). In this case, the price consolidated for a bit after a strong rally. This
could mean that buyers simply paused to catch their breath and probably recruited more people to join the
bull camp. A good upside target would be the height of the wedge formation. You can enter the trade after
the breakout and aim for the same level as some of the previous highs. On the picture below you can see
that price even retested the trendline after breakout.

Picture 35

Remember when I told you that you don’t have to wait for the retest after breakout in this case. Breakout
is in the trend direction. If you want to wait for the retest that is perfectly fine too. That is why I used
example with retest on picture Many times in this case retest will not occur, but if you don’t want to be
aggressive, that is fine. You will find out what fits your style. Trade on demo platform and after some time
you will find out. Some traders are very aggressive and they never wait for the retest, or even the pattern
to complete. Some of them won’t open the position if the retest doesn’t occur. In this case you can put your
stop loos below the bearish (red) candles wick.
30
Now let’s take a look at another example, but this time of a rising wedge formation (top right blue on picture
34). As you can see, the price came from a downtrend before consolidating and sketching higher highs and
even higher lows (pictures 36 and 37). Price then broke the down trendline and continued to go down. This
is an example without the retest. That’s why it’s called a continuation signal. Price continued to go at the
same direction before pattern occurred (downtrend on this example).

Picture 36 Picture 37

Flag
The continuation is often equal distance to the flag pole. This provides a way to set an objective once the
flag pattern breaks. This provides a way to set an objective once the flag pattern breaks.
Take a look how flag looks:

The picture 38 shows a bullish flag pattern.

Picture 38

31
The flag pole
This is the initial move in price. It can be represented by either an uptrend or a downtrend. Uptrend in this
case. The angle of this move is irrelevant in terms of the validity of the flag pattern. The distance of the
move should be measured by calculating the previous swing high or low to the current swing high or low.
As an example, I would measure from the bottom of the red line to the top of the red line in the illustration
above.
The flag
The flag formation is the key to this pattern. This is the point at which, after a strong move in price, the
market consolidates for a period of time. The length of time is irrelevant, however do note that longer
consolidation periods tend to lead to more aggressive breakouts.
The continuation
At this point the market has finished consolidating and is now trending in the original direction. Using the
distance, we calculated above for the flag pole, we now have a measured objective for a possible target. If
this is a little unclear right now, don’t worry, it will all make sense once you see the illustrations below.
Notice in this example (picture 39) how the continuation is the exact same length as the flag pole. The
distance for the flag pole is measured from the swing low to the swing high of the flag pattern. Note that
this will not happen every time!

Picture 39 32
Picture 40
Pennant
The pennant patterns are similar to flags, with the main difference being that the patterns are formed as
converging trend lines into a triangle. The bullish and bearish pennant chart patterns work on the same
principles of the flag patterns. After a big upward or downward move, buyers or sellers usually pause to
catch their breath before taking the pair further in the same direction. Because of this, the price usually
consolidates and forms a tiny symmetrical triangle, which is called a pennant.
You can see how it looks on picture

Picture 41

33
While the price is still consolidating, more buyers or sellers usually decide to jump in on the strong move,
forcing the price to bust out of the pennant formation.

A bearish pennant like on pictures 42 and 43 is formed during a steep, almost vertical, downtrend. After
that sharp drop in price, some sellers close their positions while other sellers decide to join the trend,
making the price consolidate for a bit. As soon as enough sellers jump in, the price breaks below the bottom
of the pennant and continues to move down.

Picture 42

Picture 43
As you can see, the drop resumed after the price made a breakout to the bottom. To trade this chart pattern,
I’d put a sell order at the bottom of the pennant with a stop loss above the pennant. That way, I’d be out of
the trade right away in case the breakdown was a fake out. Unlike the other chart patterns wherein the size
of the next move is approximately the height of the formation, pennants signal much stronger moves.
Usually, the height of the earlier move (also known as the mast) is used to estimate the size of the breakout
move.

34
Let’s see now an example of pennant formed after uptrend. The sharp climb in price will resume after that
brief period of consolidation, when bulls gather enough energy to take the price higher again. In the
example below the price made a sharp vertical climb before taking a breather.

Picture 44

Picture 45
Just like we predicted, the price made another strong move upwards after the breakout. To play this, I’d
place our long order (buy order) above the pennant and our stop below the bottom of the pennant to avoid
fake-outs. Like we discussed earlier, the size of the breakout move is around the height of the mast (or the
size of the earlier move).

35
Lesson VIII

Reversal chart patterns

A price pattern that signals a change in the prevailing trend is known as a reversal pattern. These
patterns signify periods where either the bulls or the bears have run out of steam. The established trend
will pause and then head in a new direction as new energy emerges from the other side. Reversals that
occur at market tops are known as distribution patterns, where the trading instrument becomes more
enthusiastically sold than bought. Conversely, reversals that occur at market bottoms are known as
accumulation patterns, where the trading instrument becomes more actively bought than sold. As with
continuation patterns, the longer the pattern takes to develop and the larger the price movement within
the pattern, the larger the expected move once price breaks out.
Double Top
The double top is a bearish trend reversal pattern that often marks the end of an uptrend and the start of
a downtrend. It consists of two consecutive peaks that reach a resistance level at more or less the same
high value, with a valley separating the two peaks. The low of the valley is important for price projection
purposes.
The “tops” are peaks which are formed when the price hits a certain level that can’t be broken. After hitting
this level, the price will bounce off it slightly, but then return back to test the level again. If the price bounces
off of that level again, then you have a double top.

Picture 46 36
You can see on picture 46 above that two peaks or “tops” were formed after a strong move up. Notice how
the second top was not able to break the high of the first top. This is a strong sign that a reversal is going
to occur because it is telling us that the buying pressure is just about finished. With the double top, I would
place our entry order below the neckline because I am anticipating a reversal of the uptrend. If you look
closely you can see how price broke neckline with very strong bearish candle. That was good reason to sell.
I used here example with retest as that is always patient move, but you can also enter after the break of
neckline (especially when breakout is strong like on picture 46). Looking at the picture 46 you can see that
the price breaks the neckline and makes a nice move down. Remember that double tops are a trend reversal
formation so you’ll want to look for these after there is a strong uptrend. The drop can be approximately
the same height as the double top formation. That will not be the case every time but you should be aware
of that, so you know where to put your take profit offer.
On the picture 47 you can see two double top patterns formed one after another. Very cool. First one is
little more advanced. As you can see we had nice trendline and price broke it too and gave us another
reason to sell. Combining the knowledge is very important and on this example you can see one way how
to combine trendline and pattern.

Picture 47 37
On the picture 48 you can see another great example of combining different tools. After price formed
double top it retested neckline with another double top formation. Very interesting. There was also a
chance to sell after the first double top breakout. And another chance to sell, after price retested first
neckline with another smaller double top pattern.

Picture 48

38
Double Bottom
The double bottom is also a trend reversal formation, but this time we are looking to go long (to buy)
instead of short (to sell). These formations occur after extended downtrends when two valleys or
“bottoms” have been formed.
You can see on the picture 49 that after the previous downtrend price formed two valleys and it wasn’t
able to go below a certain level. Notice how the second bottom wasn’t able to significantly break the first
bottom. This is a sign that the selling pressure is about finished, and that a reversal is about to occur. The
price broke the neckline and made a nice move up. Remember, just like double tops, double bottoms are
also trend reversal formations.

Picture 49

Same rules that apply on double top, also apply here with double bottom, so I will not repeat them.

Sometimes double tops (and double bottoms) are not so easy to spot like on picture This is still valid
double top formation. This massive bullish candle didn’t break previous high.

39
Picture 50

On the picture 51 you can see great example why these patterns are consider reversal patterns. After
uptrend, price formed double top. Price reversed and started to go down. Then, double bottom occurred,
price reversed and started to go up again.

Picture 51

40
Head and Shoulders
The Head and Shoulders pattern is one of the most popular trend reversal patterns and is usually seen in
uptrends, where it is also referred to as Head and Shoulders Top, though they can appear in downtrends
as well, where they are also referred to as Head and Shoulders Bottom or Inverse Head and Shoulders. As
they are trend reversal patterns, the Head and Shoulders patterns requires the presence of an existing
trend.
Head and Shoulders is formed when a higher high in an uptrend is followed by a lower high. The result is
a series of three peaks where the center peak, the head, is higher than the two peaks, the shoulders, on
either side of it. The two shoulders do not need to be the exact same size or the same height, but they must
be lower than the head. A “neckline” is drawn by connecting the lowest points of the two troughs. The slope
of this line (or zone) can either be up or down. Typically, when the slope is down, it produces a more
reliable signal.

Picture 52

In this example, we can easily see the head and shoulders pattern. The head is the second peak and is the
highest point in the pattern. The two shoulders also form peaks but do not exceed the height of the head.
With this formation, we can put an entry order below the neckline. We can also calculate a target by
measuring the high point of the head to the neckline. This distance is approximately how far the price will
move after it breaks the neckline.

41
You can see on the picture 52 that once the price goes below the neckline it makes a move that is at least
the size of the distance between the head and the neckline. But never be greedy! Don’t always put your take
profit order at that point.

Picture 53
Head and Shoulders with straight neckline are easier to spot, but sometimes neckline can be angled up or
down. Also, you can trade this pattern by waiting for the retest like on picture That is always a smart
move, but since head and shoulders are one of the best patterns you can be little more aggressive and open
the trade right before price breaks neckline.

Picture 54 42
Inverse Head and Shoulders
It is basically a head and shoulders formation, except this time it’s upside down. A valley is formed
(shoulder), followed by an even lower valley (head), and then another higher valley (shoulder). These
formations occur after extended downward movements (picture 54).
Here you can see that this is just like a head and shoulders pattern, but it’s flipped upside down. With this
formation, we would place a long entry order above the neckline. Target is calculated just like the head and
shoulders pattern. Measure the distance between the head and the neckline, and that is approximately the
distance that the price will move after it breaks the neckline.

Picture 55

43
Now when you learned about double top and head and shoulders, lets combine these two patterns. On the
picture 56 below you can see combination. Price formed head and shoulders and broke the neckline. Then
retest occurred in a form of double top chart pattern.

Picture 56

44
Rising Wedge
A rising wedge is formed when price consolidates between upward sloping support and resistance lines.
Here, the slope of the support line is steeper than that of the resistance. This indicates that higher lows are
being formed faster than higher highs. This leads to a wedge-like formation, which is exactly where the
chart pattern gets its name from! With prices consolidating, we know that a big splash is coming, so we can
expect a breakout to either the top or bottom. If the rising wedge forms after an uptrend, it’s usually a
bearish reversal pattern. On the other hand, if it forms during a downtrend, it could signal a continuation
of the down move.
Do you remember picture 34? Last time we talked about blue wedges as they represent continuation
patterns. This time we will focus on red ones. Red wedges on this picture represent reversal chart patterns.

Picture 34

45
Picture 57

On this example (picture 57), a rising wedge formed at the end of an uptrend. Notice how price action is
forming new highs, but at a much slower pace than when price makes higher lows. See how price broke
down to the downside? That means there are more forex traders desperate to be short than be long! They
pushed the price down to break the trend line, indicating that a downtrend may be in the cards. Just like in
the other forex trading chart patterns we discussed earlier, the price movement after the breakout is
approximately the same magnitude as the height of the formation.

46
On the picture 58 below, you can see another example of this chart pattern.

Picture 58

47
Falling Wedge
Just like the rising wedge, the falling wedge can either be a reversal or continuation signal. As a reversal
signal, it is formed at a bottom of the downtrend, indicating that an uptrend would come next. We talked
about this pattern as a continuation signal. This time we will look at falling wedge as reversal sign:

On this example, the falling wedge serves as a

Picture 59

Upon breaking above the top of the wedge,

Picture 60

48
Lesson IX

Neutral chart patterns

These are the chart formations which are likely to push the price toward a new move, but the direction
is unknown. Neutral chart patterns may appear during trends or non-trending periods. When the price
confirms a neutral chart pattern, you can open a position in the direction of the breakout! These chart
patterns are a bit trickier because these signal that the price can move either way. To play these chart
patterns, you should consider both scenarios (upside or downside breakout). First I will present you all
three types and then, I will try to explain the best way to trade them. These neutral chart patterns are
Ascending, Descending and Symmetrical Triangles.

Picture 61

Triangles are among the most popular chart patterns used in technical analysis since they occur frequently
compared to other patterns. These chart patterns occur on every timeframe!

Symmetrical Triangle
Symmetrical triangles occur when two trend lines converge toward each other and signal only that a
breakout is likely to occur – not the direction. Ascending triangles are characterized by a flat upper trend
line and a rising lower trend line and suggest a breakout higher is likely, while descending triangles have a
flat lower trend line and a descending upper trend line that suggests a breakdown is likely to occur.
A symmetrical triangle is a chart formation where the
slope of the price’s highs and the slope of the price’s
lows converge together to a point where it looks like
a triangle. What’s happening during this formation is
that the market is making lower highs and higher
lows. This means that neither the buyers nor the
sellers are pushing the price far enough to make a
clear trend. If this were a battle between the buyers
and sellers, then this would be a draw. This is also a
type of consolidation.

Picture 62

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On the picture 62, we can see that neither the buyers nor the sellers could push the price in their direction.
When this happens we get lower highs and higher lows. As these two slopes get closer to each other, it
means that a breakout is getting near. We don’t know what direction the breakout will be, but we do know
that the market will most likely break out. Eventually, one side of the market will give in.

Picture 63

On picture 63 you can see example where price broke upper trendline. After the breakout it continued to
go up. With the patterns that we previously learned (double top/bottom, head and shoulders) you can take
riskier approach sometimes and take a trade before price breaks neckline (before pattern is fully formed).
With triangles (especially symmetrical) that is not the case. You just have to wait for the breakout like on
example above.

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On the picture 64 you can see my recommendation on how to trade triangles. I will try to explain as simple
as I can.
When pattern is formed after the uptrend and price breaks
1) upper trendline: enter the trade;
2) down trendline: wait for the retest.
When pattern is formed after the downtrend and price breaks
1) down trendline: enter the trade;
2) upper trendline: wait for the retest.
Hopefully next picture will make it easier for you to understand.

Picture 64 51
Ascending Triangle
This type of triangle chart pattern occurs when there is a resistance level and a slope of higher lows. What
happens during this time is that there is a certain level that the buyers cannot seem to exceed. However,
they are gradually starting to push the price up as evident by the higher lows.

Picture 65

On the picture 65, you can see that the buyers are starting to gain strength because they are making higher
lows. They keep putting pressure on that resistance level and as a result, a breakout is bound to happen.
Now the question is, “Which direction will it go?” Many charting books will tell you that in most cases, the
buyers will win this battle and the price will break out past the resistance. However, it has been my
experience that this is not always the case. Sometimes the resistance level is too strong, and there is simply
not enough buying power to push it through. Most of the time, the price will, in fact, go up. The point I am
trying to make is that you should not be obsessed with which direction the price goes, but you should be
ready for movement in either direction.
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Picture 66

As you can see on picture above, pattern formed after the uptrend. It then broke resistance level (upper
trendline), so there is no need to wait for the retest.

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Descending Triangle
As you probably guessed, descending triangles are the exact opposite of ascending triangles. In descending
triangle chart patterns, there is a string of lower highs which forms the upper line. The lower line is a
support level in which the price cannot seem to break.

Picture 62

Picture 67

On the picture 67, you can see that the price is gradually making lower highs which tell us that the sellers
are starting to gain some ground against the buyers. Now most of the time the price will eventually break
the support line and continue to fall.
However, in some cases, the support line will be too strong, and the price will bounce off of it and make a
strong move up. We just know that it’s about to go somewhere.

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Picture 68

On picture 68 you can see different variations of descending triangles formed one after another. Price was
trending up and in both cases it broke upper trendline and there was no need to wait for the breakout.

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Picture 69

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Picture 70

Analyzing the chart above I noticed that price formed descending triangle after previous strong uptrend.
Remember when I told you to wait for the retest if price breaks down trendline (support) after the uptrend.
We can see that retest occurred and price went down.
But what if retest doesn’t occur? Can I enter the trade? Sure, lets see the next example.

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Picture 71

You can enter the trade without waiting for the retest, but you need to understand that is riskier approach.
In this case definitely make sure that your lot size and stop loss size are reasonable!

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Lets take a look at few more examples:

Here the major trend is downtrend. We see the breakout

Picture 72

Same explanation applies here. We have massive bearish

Picture 73

This time we have symmetrucal triangle, but explanation

Picture 74

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Picture 75 Picture 76

Picture 77
In these cases, we have triangle patterns formed after impulsive move (quick large price move up or down).
After impulsive move you want to look for these patterns. We can see here that breakout was in the
previous trend direction and then price went up.

Now when we learned all important patterns I need to say that they are not perfect. Nothing is! I said this
and I will say it more times. For example, many times price will go down, then up, trigger your stop
loss and then go down again. That is just how Forex works. The point of these patterns is to include them
in your trading strategy. In this course we will learn how to create strategy and how to test your strategy.
We will do that after we learn indicators.

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Lesson X

Market behavior

Now when we learned patterns I want to tell you to understand why they occur and what moves the
price the most (except price manipulation).
The market's behavior can be defined as the collective action of individuals acting in their own self-interest
to profit from future price movement while simultaneously creating that movement as an expression of
their beliefs about the future. Behavior patterns result from the collective actions of individual traders
doing one of three things: initiating positions, holding positions, and liquidating positions. What will cause
a trader to enter the market? A belief that he can make money and that the current state of the market
offers an opportunity to enter into a trade at a price level that is higher or lower than the price at which it
can be liquidated. What will cause a trader to hold a position? A sustained belief that there is still potential
for profit in the trade. What will cause a trader to liquidate a trade? A belief that the market no longer
provides an opportunity to make money. This would mean in a winning trade that the market no longer
has the potential to move in a direction that will allow the trader to accumulate additional profits or that
the risk of staying in the trade is too great in relation to the potential for additional profit. In a losing trade,
the trader believes that the market no longer has the potential to move in a direction that will allow him to
recover his losses or the trade was a calculated risk in which a predetermined loss level was set in advance.
If you look at any price chart, you notice that over a period of time, prices will form patterns in a very
symmetrical fashion. These kinds of symmetrical-looking price patterns are not an accident. They are a