Trading Lessons Basic

BROKER

First and foremost, have a good reputable large broker – you get what you pay for (you get good quality broker for a slightly higher price but with a lot of peace of mind). I recommend IG.

TRADING STYLE

Trading and investing are my something I enjoy – an outlet for my analytical side. So, I did not take it too seriously. Nor, do I rely on it for primary living.

I am a trend trader – following fundamental and primary trend. I also use momentum to gauge trend early.

I trade:

  • indices
  • forex
  • stocks (US and Australian)

I trade very conservatively – I am in it to profit.

I trade rarely – once a week at most, as I still work full time.

I trade only when market give me perfect signals.

I trade mostly in UK time, as I still work full time.

I used multiple timeframes. I used the bigger ones to decide on the trend and I used smaller ones (4H to tick) to decide on entry.

I developed my strategy based on my understanding of the market.

TRADING BASICS


Trend

  1. Ranging (70%  80% of the time)
  2. Trending upwards
  3. Trending downwards

Identifying Trend

  • Overlapping Bollinger Bands with standard deviation 1 and standard deviation 2

The ones overlapped are indicators to buy or sell or do nothing.

  • MAs
  • ATR (below 25, no trend, above 25, there is a trend)
  • Leading indicator: Divergence

Continuation = Hidden divergence

Reversals = Regular divergence

Lagging: test strength using ADX

If above 25, trend is strong


Trading in a ranging trend

Note to self: my favourite.

Identifying the ranging trend:

  1. ADX below 25
  2. BB sd 1 n sd 2 overlapping
  3. MAs
  4. ATR
  • Low ATR is below 20 = ranging
  • Increasing ATR = increasing volatility
  • Decreasing ATR = decreasing volatility

Indicators for trading

  • Oscillators: RSI and stochastic  overbought and oversold
  • Support and resistance line

Trading in a ranging trend – be wary of reversals and retracement

Reversals

  1. Fundamentally supported
  2. Broke through strong support or resistance levels
  3. Broke through trend line

Retracement

  1. Fibonnacci won’t go past 50%
  2. Won’t break strong support

Trading in a ranging trend  be wary of breakout

Note to self: I look for safe and secure profits, I have incomes from elsewhere, I don’t trade on breakouts.

How to gauge the volatility

  • BB

Contract or tight = low volatility

Big band = high volatility

Low ATR is below 20 = ranging

Increasing ATR = increasing volatility

Decreasing ATR = decreasing volatility

  • As simple as body of the candle (1day completed, at min)
  • Economic data
  • Business calendar
  • Most importantly, the fundamental *and* the sentiment supporting the price change
  • I won’t cover the rest.
  • I won’t trade breakout.

Indicators

Oscillators:RSI & Stochastic

……

Divergences

  1. Regular
  2. Hidden

What to use

  • Trend line
  • Candlesticks  double bottom or double top
  • Support or resistance lines
  • RSI or MACS lines only

Regular divergence

If trend line of the candles are going up (remember how to draw trend line properly) and,

the peaks or troughs of the momentum indicators forms the opposite direction trend line,

Indicator = reversal.

Hidden divergence

If price trend changed direction recently, and

momentum indicator is still on the old trend,

Indicator = price will continue on the new trend.


Exit point –

when HH is being established

Key points used:

  1. Fibonacci extension
  2. Dates (company (results hearings/div announcements/etc), economic data calendars, and global eg key election dates, key public holiday (of US, EU, AU), trade wars, IMF, G20, etc.)
  3. Software:
    1. Tradingview
    2. Yahoo Finance
    3. Note: check only at end of day is sufficient