FOREX TECHNICAL ANALYSIS

FOREX TECHNICAL ANALYSIS

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LECTURE SERIES

LEARN FOREX LEARN FOREX

LECTURE SERIES
Beginner's Forex

Leverage Types of Charts

Fundamental Analysis Support & Resistance
Technical Analysis #1 Trendlines
Technical Analysis #2 Fibonacci Retracement level
Trading Plan Breakout Patterns
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3 TYPES OF FOREX CHARTS

LINE CHART

BAR CHART

CANDLESTICK CHART
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LINE CHART

A simple line chart connects one closing price to the next closing price by use of a line.

When displayed on a chart connected together by a line, we can view the general price
movement of currency pair over a period of time.
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LINE CHART
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BAR CHART

A bar chart is slightly more complex than a line chart. 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.
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BAR CHART
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CANDLESTICK CHART

Candlestick charts show the same price information as a bar chart, but in a more graphic
format.
Candlestick bars indicate the high-to-low range with a vertical line.

The body of the candlestick found in the middle of the candle, indicates the range between the

opening and closing prices.

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CANDLESTICK CHART
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SUPPORT & RESISTANCE

Support and resistance are the levels a price has difficulty breaking through.

The level the price has difficulty rising above is known as the resistance level.

The level the price has difficulty falling below is known as the support level.
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SUPPORT & RESISTANCE

Resistance Any level above current price.

Support Any level below current price.

In the event of buying we draw a horizontal line above current price.

In the event of selling we draw our horizontal line below current price.
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SUPPORT & RESISTANCE

Both resistance and support must have gone through a breakout candle.

Always look into the past as history repeats itself.

Support and resistance is confirmed when price stalls.

Another way to help identify support and resistance is to plot a 50 exponential moving average.
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SUPPORT

Notice how the shadows of the candles break past

support but end up closing above it

SUPPORT

Notice how the shadows of the candles break past support but end up closing above it
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SUPPORT & RESISTANCE

RESISTANCE LEVELS

SUPPORT ZONES

SUPPORT AND RESISTANCE ZONES

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SUPPORT & RESISTANCE

MAJOR RESISTANCE
Tested many times

MINOR
RESISTANCE

MINOR SUPPRT

MAJOR SUPPORT
Tested many times

SUPPORT AND RESISTANCE ZONES

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SUPPORT & RESISTANCE

One way to help you find support and resistance point is on a line chart rather than a
candlestick.

One last thing to remember is that when price passes through a resistance level, that
resistance could potentially become a support.

The same could also happen with a support level, if a support level is broken it could potentially
become a resistance level.

16
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TREND LINES

THREE TYPES OF TRENDS

UPTREND HIGHER LOWS

DOWNTREND LOWER HIGHS

LAMB TRENDS RANGING (SIDEWAYS)

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SUPPORT AND RESISTANCE

RESISTANCE

RESISTANCE

RESISTANCE

SUPPORT

SUPPORT
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SUPPORT AND RESISTANCE

When you look at the diagram above as you can see the Zigzag pattern is making its way up (bullish).
When the market moves up and then pulls back the highest point reached before it pulled back is now
resistance.

As the market continues down again, the lowest point price reached before it started back is now a
support. In this way resistance and support are continually formed as the Forex market oscillates over
time. The reverse is true for the downtrend.

Often times you will see a support or resistance that appears broken, but soon after find out that the
market was just testing it. With candlestick charts these “tests” of support and resistance are usually
represented by the candlestick shadow or pin.
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TREND LINES

To draw trend lines properly, all you do is locate two major tops or bottoms and connect them.
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TREND LINES
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TREND LINES

Important points to remember when trading trend lines

It takes at least two tops or bottoms to draw a valid trend line but it takes three to confirm a trend line.

Like support and resistance level, trend lines become stronger the more times they are tested.

Most importantly DO NOT EVER draw trend lines by forcing them fit the market. If they do not fit right,
then the trend line isn't valid
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TREND LINES

How to tell if the trend is actually broken.

There is no absolute way to be 100% sure except to just wait and see.

One way that might help is to watch the closing price of each candle, If the closing price is beyond the
trend line for two or more candles then it is a good chance the trend is broken.

You should usually not trade on the first candle price breaks the trend line.

Its best to wait for at least two candles to confirm the trend is broken.
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SUPPPORT & RESISTANCE

Summary: Trading Support and Resistance

Support and resistance are levels where price will potentially stall and sometimes even reverse.

When the market moves up and then pulls back, the highest point reached before it pulls back is now a
resistance.

As the market continues down again, the lowest point reached before it climbs back is now a support.
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FIBONACCI

Fibonacci Retracement explained.

How to use Fibonacci Retracement to enter a trade.

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FIBONACCI

Fibonacci trading is becoming more and more trendy because it works in any markets, including Forex and stock, which react easily to
Fibonacci numbers and levels. Fibonacci trading involves knowing when and where the market reverses in order for it to keep
moving.

A Fibonacci retracement is a term used in technical analysis that refers to areas of support or resistance.

When the price goes up, they act as the resistance and vice versa. Also like conventional supports and resistances, when a Fibonacci
level is broken as a resistance, it can act as a support and can be retested. It works the same way when a Fibonacci support level
becomes broken; it can then act as a resistance.
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FIBONACCI

Fibonacci retracement levels use horizontal lines to indicate where possible support and resistance
levels are. Each level is associated with a percentage. The percentage is how much of a prior move the
price has retraced.

The Fibonacci retracement levels are 23.6%, 38.2%, 61.8% and 78.6%. While not officially a Fibonacci ratio,
50% is also used.

The indicator is useful because it can be drawn between any two significant price points, such as a high
and a low, and then the indicator will create the levels between those two points.
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FIBONACCI

TO ENTER A TRADE

Fibonacci retracement levels are considered a predictive technical indicator since they attempt to identify where
price may be in the future.

The idea is to go long (or buy) on a retracement at a Fibonacci support level when the market is trending up, and
to go short (or sell) on a retracement at a Fibonacci resistance level when the market is trending down.

The theory is that after price begins a new trend direction, the price will retrace or return part way back to a
previous price level before resuming in the direction of its trend.
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FIBONACCI

TO ENTER A TRADE

SWING HIGH

SWING LOW

In order to find these Fibonacci retracement levels, you have to find the recent significant swing highs and swings lows.
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FIBONACCI

TO ENTER A TRADE

SWING HIGH

38.2 fib level held!

SWING LOW

The expectation is that if AUD/USD retraces from the recent high, it will find support at one of those Fibonacci retracement levels
because traders will be placing buy orders at these levels as price pulls back.
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FIBONACCI

TO ENTER A TRADE

The idea is to go long (or buy) on a retracement at a Fibonacci support level when the market
is trending up, and to go short (or sell) on a retracement at a Fibonacci resistance level when
the market is trending down.

Fibonacci retracement levels are considered a predictive technical indicator since they
attempt to identify where price may be in the future.

The theory is that after price begins a new trend direction, the price will retrace or return part
way back to a previous price level before resuming in the direction of its trend.
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TREND LINES

Trend lines are probably the most common of technical analysis in Forex.

If drawn correctly they can be as accurate as any other method.

In their most basic form an uptrend line is drawn along the bottom of an easily identifiable
support area (valley).

In a downtrend, the trend line is drawn along the top of an easily identifiable resistance areas
(peaks).
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BREAKOUTS

Two ways to play breaks in Forex trading````

THE AGGRESSIVE WAY

The simplest way to play breakouts is to buy or sell whenever price passes convincingly
through a support or resistance zone.````````

The keyword here is convincingly because we only want to enter when prices passes through
a significant support or resistance level with ease.
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BREAKOUTS

STOP LOSS

SUPPORT

ENTRY ORDER
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BREAKOUTS

THE CONSERVATIVE WAY

With the conservative way is all about being patient and not rushing to enter trades after a
breakout.

You wait for the price to make a ‘pullback’ to the broken support or resistance level and enter
after the price bounces.
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BREAKOUTS

STOP LOSS

PULL BACK

SUPPORT
ENTRY ORDER
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BREAKOUTS

What are breakouts and how can we take advantage of them?

A breakout occurs when the price “breaks out” of some kind of consolidation or trading range.

With breakout trades, the goal is to enter the market right when the price makes a breakout
and then continue to ride the trade until volatility dies down.
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BREAKOUTS

Different types of patterns and breakouts

Rectangles Ascending Triangle

Double Top/Bottom Descending Triangle

Head and Shoulder Symmetrical Triangle

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BREAKOUT PATTERNS

Rectangles

Rectangles in the market are generally known as lambs where buyers and sellers are both
undecided in as to who is in control or who has the power to push the market in their
direction.

In that case we as traders wait patiently for the price to breakout before entering a lamb
market.
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BREAKOUT PATTERNS

Consolidation

Sellers took a breather

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BREAKOUT PATTERNS

Consolidation
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BREAKOUT PATTERNS

DOWNTREND

CONSOLIDATION

In reversal breakouts, traders feel that the initial trend was wrong and begin to push the price in the opposite direction
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BREAKOUT PATTERNS

Ascending Triangle

Ascending triangle forms when there is a resistance level and the market price conditions to
make higher lows.

This is a sign that bulls are slowly starting to gain momentum over the bears.
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BREAKOUT PATTERNS

Asscending triangle

Support Continuation
Breakout
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BREAKOUT PATTERNS

Descending Triangle

Descending triangle are basically the opposite of Ascending triangles.

Sellers are continuing to put pressure on the buyers, and as a result we start seeing lower highs
met by a strong support level
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BREAKOUT PATTERNS

Descending triangle

Continuation
Breakouit
Support
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BREAKOUT PATTERNS

BREAKOUT PATTERNS
Symmetrical Triangle

The third type of triangle is a symmetrical triangle.

Rather than having a horizontal support and resistance level, both the bulls and the bears create higher
lows and lower highs and form an apex somewhere in the middle.
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BREAKOUT PATTERNS

BREAKOUT PATTERNS

Price could
break out
to either side

Symmetrical triangle
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BREAKOUT PATTERNS

In this case you want to position yourself to be ready for both an uptrend and downtrend
breakout.

When trading breakouts we must also bare in mind that they are fake or false breakouts.

They could easily mislead you into loosing your money so wait for at least the third candle to
develop from your breakout before entering a trade.
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BREAKOUT PATTERNS

Double Top

A Double Top is a reversal pattern that is formed after there is extended move up.

The “Tops” are peaks which are formed when price hits a certain level that cant be broken, after
hitting this level, the price will bounce off it slightly but then return back to test the level again,
it creates what’s known as a Double Top.
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BREAKOUT PATTERNS

DOUBLE TOPS

DOUBLE TOPS
Usual stop loss

Neckline
Usual entry
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BREAKOUT PATTERNS

DOUBLE BOTTOMS

Breakout

DOUBLE BOTTOMS
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BREAKOUT PATTERNS

Double Bottoms

Double bottoms are also trend reversal formations, but this time we are looking to go long
instead of short.

These formations occur after extended downtrends when two valleys or “bottoms” have been.
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BREAKOUT PATTERNS

As you can see that after the previous downtrend, the price formed two valleys or lows as the price wasn’t
able to go below a certain level.

The price breaks the neckline and makes a nice move up, remember just like double tops and bottoms are
trend reversal formations.
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BREAKOUT PATTERNS

Head and Shoulder

Head and Shoulder pattern is also a trend reversal formation, it is formed by peak (shoulder),
followed by a higher peak (head) and another lower peak (shoulder).

A neckline is drawn by connecting the lowest points of the two points.

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BREAKOUT PATTERNS

Head and shoulders

Head

Shoulder Shoulder

PRICE BREAKS THE

NECKLINE AND MAKES A
MOVE DOWNWARD

Price breaks the neckline and makes a move downward

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BREAKOUT PATTERNS

In this example we can see the head and shoulder formations.

The head is the second peak and is the highest point in the pattern of three distinctive highs.

The two shoulders also form peaks but do not exceed the height of the head.

With this formation we look to make an entry 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 out.
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BREAKOUT PATTERNS

Inverted Head and Shoulders

Neckline
PRICE BREAKS THE
NECKLINE AND CONTINUES
TO MOVE UPWARDS

Shoulder
Shoulder

Head
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TRADING FOREX
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TRADING FOREX

Price - Buy
Oscillator

If the price is making a higher high (HH), but the oscillator is at a lower high (LH), then you have
a regular bearish divergence.
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TRADING FOREX
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TRADING FOREX

Price - Sell
Oscillator

Hidden Divergence:
A hidden divergence is used as a possible sign for a trend continuation.
If price is making a higher low (HL), but the oscillator is making a lower low (LL) this is
considered a hidden Bullish divergence.
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TRADING FOREX
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TRADING FOREX

Price - Buy
Oscillator

If price is making lower lows (LL), but the oscillator is making higher highs (HH), then you have a
hidden bearish divergence.
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TRADING FOREX
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TRADING FOREX

ELLIOT WAVES

The market trades in repetitive cycles and if you can correctly identify the repeating patterns in
prices. You can predict where price will go or not go next.

This is what makes Elliot Waves so appealing to traders.

It gives them a way to identify precise points where price is most likely to reverse.
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TRADING FOREX

ELLIOT WAVES
ELLIOT WAVES
Elliot Wave showed that a trending market moves in what we call a 5-3 wave pattern.

The first 5-wave pattern is called impulse waves.

The last 3-wave pattern is called corrective waves.

In this pattern, Waves 1, 3, 5 are motive, meaning they go along with the overall trend, while
Waves 2 and 4 are corrective.

Do not confuse Waves 2 and 4 with the ABC corrective pattern (discussed in the next section)
though!
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TRADING FOREX

ELLIOT WAVE

3 4

2
1
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TRADING FOREX

ELLIOT WAVES

Bullish Wave

Enter and exit at number 3.

Wave 3 is the longest and strongest wave, more people see the bullish trend and buy at this
point.

Wave 3 is the best entry point for Elliot wave trading.

We use our Zigzag to be able to identify Elliot Wave, if you still aren’t sure switch to your line
chart.
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TRADING FOREX

ELLIOT WAVES

a
3
4 b
c
1 2
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TRADING FOREX

ELLIOT WAVES

1 c
2 3

5 b
4 a
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TRADING FOREX

ELLIOT WAVES
ELLIOT WAVES

Then on the ABC correction C is the most strongest and longest leg and are your entry
and exit points.

Not to forget that we still use our support and resistance to clearly identify where our exit
points are.
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TRADING FOREX

ELLIOT WAVES

a
5 b

4
3