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C$%C reired disclaimer: %rading foreign exchange on margin carries a high level of ris!" and

may not e s#itale for all investors. %he high degree of leverage can wor! against yo# as well

as for yo#. 'efore deciding to invest in foreign exchange yo# sho#ld caref#lly consider yo#r

investment o(ectives" level of experience" and ris! appetite. %he possiility exists that yo#

co#ld s#stain a loss of some or all of yo#r initial investment and therefore yo# sho#ld not invest

money that yo# cannot afford to lose.

C$%C )*+, -.-1 /ypothetical performance res#lts have many inherent limitations. No

representation is eing made that any acco#nt will or is li!ely to achieve profits or losses similar

to those shown. n fact" there are freently sharp differences etween hypothetical

performance res#lts and the act#al res#lts s#seently achieved y any partic#lar trading

program. ne of the limitations of hypothetical performance res#lts is that they are generally

prepared with the enefit of hindsight. n addition" hypothetical trading does not involve

financial ris!. ariales s#ch as the aility to adhere to a partic#lar trading program in spite of

trading losses as well as maintaining adeate liidity are material points which can adversely

affect act#al real trading res#lts.

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Content

Introduction -

Overview 3

Section 1 Trends

%he 4yth f 4ar!et %rend 5

/ow %o ncrease %he Profitaility f Any 6ystem 7

/ow %o 8etermine %he %rend 10

9hat s A %rend 8rawdown 1

Protecting Against olatility 1-

,xercise 15

%he *ltimate 6ol#tion 17

Section 2 Patterns

/ow %o 8raw %rend +ines 1;

,xamples:

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Introduction

%his report was written to ill#minate the top mis#nderstood $orex areas and

help $orex traders s#cceed and stay profitale. %he information is presented in

a readale way for eginners as well as advanced traders that want to t#ne #p

their trading approach and increase their s#ccess rate. @o# will learn y

stressing the common mista!es and often revealing ovio#s #t #nderestimated

trading technies.

4ost traders start y as!ing the correct estion: =9hats the c#rrent mar!et

trendB>" #t then most of them fail to determine the trend correctly and almost

all traders miss the next important estion: =/ow reliale is the c#rrent

trendB>

f yo# dont ta!e the trend into acco#nt" yo# will often e tric!ed into placing

low winningproaility trades. %rend is yo#r friend. 'y following the trend it

can only e etter. '#t yo# have to disting#ish etween the realtrend and very

tempting price action that wants to play with yo#r emotions.

@o# will also #nderstand the asic principles ehind chart patterns" how to draw

strong trend lines" how to recogni?e the patterns and how to trade them. 9e

always !eep trading simple and therefore we foc#s only on the most reliale

chart patterns. 9ith the following !nowledge" yo# will e ale to spot thepatterns leading to explosive price movements and then trade profitaly with it.

,n(oy

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Overview

9e will cover two different #t close areas that all s#ccessf#l traders have

mastered:

Section 1 Trends

%he =#y and hold> strategy is dead today. 8o mar!et trends existB

%he common approach in all trend following systems

%r#e story: a simple trading system that made a fort#ne for one famo#s

trader and his investors

ne =tric!> that will ma!e the difference etween losing Dor rea!ing

evenE and winning

%he common mista!e: seemingly =strong #ptrend> is followed y a hard

fall

/ow to identify the real trend #sing p#re price action

9hich trend is more reliale and how to comp#te the trend reliaility Another common mista!e: 6top +oss not reflecting the c#rrent mar!et

volatility

9hich mar!ets to avoid and how reliale trends increase s#ccess rate

Section 2 Patterns

%he g#idelines to drawing good trend lines. 'rea!ing thro#gh a strong

trend line res#lts in a massive and profitale move.

6everal examples of good and ad trend lines and the common mista!es

=%ime oms> constr#cted y trend lines

%he definite strategy to enter an order" place yo#r 6top +oss and ta!ing a

profit

*sing the =Pro(ection 4ethod> to determine the =%a!e Profit> Point

ntelligent software that can recogni?e strong trend lines and chartpatterns

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Section 1 Trends

The myth of market trend

%rend following has een the est style of trading for the past 0 years. %here

were times when traders made fort#nes (#st y following the trend or following

a simple system ased on two moving averages crossover. %he =#y and hold>

strategy that was so pop#lar y traders ao#t a decade ago is dead today.

+oo! at the ,*)F*68 chart from Gan#ary 2001 #ntil G#ly 200H. %he #ptrend was

pretty strong most of the time. f yo# p#shed the ='#y> #tton" yo# wo#ld win

most of the time even with a poor trading system. %he consistent rise of the

e#ro over the dollar was giving yo# a clear sense of the overall trend.

6ince G#ly 200H" it loo!s li!e everything has changed. %he trend direction is

#nclear" noody !nows what is going to happen next and people are serio#sly

preparing for the coming collapse of the single ,#ropean c#rrency. 'y the way"

for #s D$orex tradersE it wo#ld e nothing #t another opport#nity to ma!e a

profit" so !eep smiling.

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8oes it all mean that mar!ets are not trending todayB f co#rse they are

trending %rends exist and they can e traded #p and down for profit. %here will

always e shortterm trends in any mar!et" the only estion is when 6o" the

ig estion isI>how do we find the est trending mar!et and not miss the

opport#nity of ta!ing trading signals in the direction of a strong trendB> @o# will

find a definite answer soon.

%he elief that trend following is an o#tdated trading technie is only partially

tr#e. t is tr#e that there is hardly any mar!et with clear overall trend direction.

@o# co#ld follow the temporary trend only if you are able to determine the

trend correctly. %his is the point where so many traders fail. A pair moving #p

on a 0min#te time frame can act exactly contrary on an ho#rly timeframe.

,ven if yo# find a rare coincidence a c#rrency pair moving in the same

direction on all time framesyo# still need to !now =how well the market

is trendinto avoid very shortterm trends. %he sol#tion is smart and simple.

!ow to increase the "rofitability of any system

'efore yo# discover the most simple and effective method to determine the

trend" lets see what itJs good for. All the trend following systems are ased on

one common approach:

='#y the dips in an #ptrend and sell the rallies in a downtrend.>

+ets reveal one simple trading system that act#ally made a fort#ne for one

famo#s trader and his investors. %he system =8onchian 3 K 20> is named after

him. /ere is the set#p.

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n the chart aove" yo# see two indicators L the l#e line and the red line. %he

l#e line is the indicator 64A 3 Dstands for simple moving averagewith period

3E and the red line is 64A 20Dsimple moving averagewith period 20E.

8onchians idea was very simple:

1# $uy when the blue line crosses the red line u"wards

2# Sell when the blue line crosses the red line downwards

,ven a 3year old child co#ld do this Act#ally" there is nothing special ao#t

this system. All trend following systems are li!e this. 6ome systems are more

advanced" with more sophisticated indicators" #t the common approach is to

#y the dips and sell the rallies.

If everyone could do this% then what&s the money makin secret'

%he answer is that 8onchian #sed this system in strong #ll mar!ets. @es"

trendingmar!ets %his important note is the !ey to consistent profits as

ill#strated in the chart elow.

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%he first trade was profitale eca#se it was made in the direction of the strong

trend. %he next trades lead to losses as the mar!et was t#rning #p and down

witho#t a clear direction. Profits made in the first trade wo#ld e ta!en ac! in

a series of losses.

/ow 8onchian dealt with it was smart. /e ignored all trading signals when the

red line was not going #p on at least a -3 degree angle. /e wo#ldnt ta!e any

losing trades after the first trade eca#se the red line is not trending at all. t is

in a so called choppy ?one. 6o why was 8onchian ale to ma!e a fort#ne from

s#ch a simple system while others co#ld notB 'eca#se others wo#ld throw this

system away as not profitale %he only =tric!> was to follow a good trend and

not ta!ing any other trades.

(hat is the lesson from this story'

f yo# !now how to determine the mar!et trend correctly" it co#ld ma!e a

difference etween losing or rea!even and winning. 8onchian #sed a simple

moving average to determine the trend and filter trading signals.

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1. 9hen the mar!et was trending" he t#rned his system on.

2. 9hen the mar!et was in choppy ?one" he t#rned his system off and

ignored any trading signals.

9hat yo#can do is (#st the same with any trading system or root.

8etermining the trend #sing a simple moving average can e replaced with a

more sophisticated" versatile technie that yo# will learn in the next pages.

!ow to determine the trend

6ome people learn from their mista!es" #t smart people learn from other

peoples mista!es. 6o lets start with examples of a wrong #t very common

approach to mar!et trend analysis.

9hat yo# see in this chart is explosive price movement that is #s#ally the res#lt

of a news release. All ro!ers" platforms and vario#s c#rrency tools are

indicating a =strong #ptrend>" tempting people to (#mp in and ma!e a profit.

9hat happens next is" at est" a choppy ?one" or a hard fall.

9hat is act#ally in the chart are a few consec#tive long green candlestic!s. %his

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is not a real trend" #t immediate price action" tempting traders to initiate

trades and experience a costly and painf#l exercise. %o avoid falling into this

trap" yo# need to foc#s on longer trends. %his is what a real trend loo!s li!e:

%he price is consistently rising with no s#dden changes or explosive

movements. @o# can expect that this trend will contin#e and yo# sho#ld ta!e

only #llish signals. vio#sly the trend wont last forever and yo# can even

have ad l#c! y entering the mar!et at the end of the trend" #t the odds

work for you. t simply cannot e etter. %here are 100s of free or proprietary

indicators to identify the trend #t elieve or not" no indicator is etter than the

h#man eye. As Alert ,instein said:

=4a!e things as simple as possile" #t not simpler.>

Now lets reveal the easy #t the most effective method to identify the trend.

1. Moom the chart inFo#t to show ao#t 200 ars. Notice that 200 ars on

daily chart Dor 200 trading daysE correspond to 1 year.

2. Connect the lower left corner with the #pper right corner. f the line

overlaps with the price ars several times Dthe more times" the etterE"

yo# have fo#nd a reliale #ptrend. 6ee the example elow.

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. Connect the #pper left corner with the lower right corner. f the line

overlaps with the price ars" yo# have fo#nd a reliale downtrend.

As yo# see" the mar!et is li!e a sea wave and it !eeps on going #p and down.

6ometimes the dips are too deep to consider it a reliale #ptrend" or the rallies

are too high to consider it a reliale downtrend. nowing the =trend reliaility>

is the !ey to discover the realandreliable trend. 6o" how do we determine if

the trend is reliale" or whether it is etter to stay offB %he est way is to forget

any lagging indicators" #t to #se p#re price action.

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(hat is a trend drawdown

%rend drawdown is comp#ted from p#re price action and so is the est way to

determine the trend reliaility. t simply tells yo# how deep the price went

against the c#rrent trend. @o# will appreciate this method in the next paragraph

=Protecting against volatility>.

Now" ta!e a loo! at the chart elow.

%he l#e line indicates the deepest move against the c#rrent trend. n this

example it is 2 pips. %he whole move in this chart is HH2 pips.

%he trend drawdown is:

2 F HH2 O cca 25

Not ad. Conservative traders wo#ld prefer the trend drawdown to e elow

20 as it is more reliale. %he Qig dogsJ prefer trends with drawdown even

elow 13. 6#ch trends exist almost every day in at least one $orex chart.

%rends with drawdown elow 10 are very rare" #t when they appear" they

are gold mines L yo# can easily achieve a winning percentage aove ;0.

%he lower trend drawdown O the more reliale trend O the greater s#ccess rateO the more consistent profit

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One more im"ortant note)

/ow many ars sho#ld we #se to define the trendB 9e have #sed 200 ars in

the examples aove. t is a compromise L not too m#ch" not too little. f yo#

were to #se only 20 ars" yo# wo#ld ris! entering the shortterm explosive

mar!et movements which are not real trends as we have explained aove. f

yo# were to #se 300 ars" yo# wo#ld hardly find any c#rrency chart with trend

drawdown elow 20. 'efore we show yo# how to systematically pic! the est

trending pairs and time frames every day" lets loo! at how to #se the trend

drawdown in the most important aspect of trading L #sing a 6top +oss

Protectin aainst volatility

+oo! at the chart aove. %he trader who placed the 6top +oss right after

entering the mar!et deserves great appla#se #t the prolem is" the 6top +oss

is too tight

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=when did the price go as deep as my 6top +ossB> f it has happened several

times in the c#rrent chart" why wo#ld yo# thin! yo#r 6top +oss will not e hit

nowB

The ideal Sto" *oss should be reater than the trend drawdown#

+isten to the mar!et" not to the pips. n the example aove" the 6top +oss

sho#ld e at least 2 pips. %oo m#chB 9ell" #se a smaller lot si?e. f yo# trade

1 minilot and R2 is aove yo#r ris! tolerance" then #se microlots. r dont

ta!e the trade. %he worst thing yo# can do is #se a small pip val#e (#st eca#se

yo# want a small ris!. Act#ally" yo# wo#ld ris! more eca#se if yo# dont give

the mar!et eno#gh space to reath" the 6top +oss wo#ld li!ely e hit regardless

of how good yo#r trading system Dor reliale the trendE is.

@o# wo#ld do well if yo# wo#ld #se the trend drawdown S 1 pip as the pip

val#e for the 6top loss D2 S 1 O 2- pips in the exampleE. f yo# want to

increase the s#ccess rate #t on the other side" increase the ris! when

compared to the profit potential" yo#r 6top +oss sho#ld e set at a m#ch safer

1.3 x trend drawdown.

Sto" *oss + 1#, - trend drawdown + 1#, - 2.. "i"s + cca .,/ "i"s

6ome traders wo#ld prefer even 2 x trend drawdown O -55 pips. 6#ch 6top

+oss wo#ld e safe eno#gh from the wild mar!et. ts all ao#t statistics.

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0-ercise

Now its time for a little exercise. /ere are two charts with ovio#s #p anddown trends.

%he maxim#m drawdown indicated y the l#e line starts from the high at7H.55 and ends at the low at 7H.1H. %he trend drawdown in pips is:

#33 #1 + /#4 54 "i"s6

Now lets calc#late the percentage drawdown. %he visile #ptrend starts from

the low at 75.05 and the maxim#m high is at 7;.30.

%he overall move in the c#rrent chart is:

7#,/ 3#/3 + .#44 5.44 "i"s6

%he percentage drawdown is:

4 8 .44 + cca 149

No do#t" the trend with drawdown elow 13 is solid. Place the 6top +oss at

least -; pips elow the initial entry point.

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n the next chart" there is a downtrend.

%he trend drawdown in pips is:

1#./3, 1#27,, + /#/11/ 511/ "i"s6

Now lets calc#late the percentage drawdown. %he visile downtrend starts

from the high at 1.2H and the maxim#m low is at 1.25H2. %he overall movein the c#rrent chart is:

1#.2. 1#232 + /#/3/1 53/1 "i"s6

%he percentage drawdown is:

110 F 501 O cca 1H

%he trend reliaility is moderate. Place the 6top +oss at least 111 pips aove

the entry point.

The ultimate solution

8iscipline and patience are the two !ey points to s#cceed in the $orex mar!et.

6top h#nting the mar!et for every potential trade. Prepare efore trading.

6canning a few c#rrency pairs on all time frames can ta!e yo# ao#t 13

min#tes" #t the conseences are inval#ale. Pic! only the est trending

c#rrency pairs and time frames and ignore all other #npredictale movements.

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%rade less" profit more. A few g#idelines:

1. Trade only if the trend drawdown is below 2/9"

Dpreferaly elow 13E.

2. If the trend drawdown is below 1,9" yo# can e consistently

profitale even with a simple trading system s#ch as =8onchian 3 K 20>

Dpage 5E.

3. If the trend drawdown is below 1/9" yo# have fo#nd a gold mine

@o# can simply enter the mar!et in the trend direction with a ;0

s#ccess rate.

%he :ore- Trendy#ltimate sol#tion scans - $orex pairs on all time frames for

yo# every second. t calc#lates the trend drawdown for each chart and shows

the most reliale trends sorted y reliaility ased on yo#r preferences.

Clic! here to watch a video how it wor!s

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Section 2 Patterns

!ow to draw trend lines

4ost traders thin! that drawing trend lines is all ao#t connecting vario#s highs

and lows. 9itho#t proper !nowledge K experience" yo# wo#ld see them

everywhere" however not all trend lines sho#ld e considered. f yo# follow the

g#idelines to drawing good trend lines" there is a high chance that the price will

respect yo#r trend line and get repelled y it" or it will rea! thro#gh the trend

line res#lting in a massive and profitale move. +ets start with some asics.

1. %he u""er trend lineDl#eE connects at least two lower highs" so it is

sloping down.

2. %he lower trend lineDl#eE connects at least two higher lows" so it is

sloping #p.

3. %he red trend line in the chart is a little controversial when it comes to

disc#ssion. t is ovio#sly an #ppertrend line Dconnecting two highsE"

#t it is sloping #pC6#ch a trend line alone is notvalid #nless we deal

with =9edges> and =$lags> as yo# will see in the next pages.

)ememer: an #pper trend line is sloping down" while a lower trend line is

sloping #p.

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0-am"les) ;ood Trend *ines vs# $ad Trend *ines

9hen the price rea!s thro#gh a strong trend line" it goes f#rther" offering yo#

a great profit potential. @o# can draw many trend lines in one single chart" #t

there are several g#idelines to choose only the strongest trend lines:

1. Prefer trend lines with more than two touchin "oints#

D%rend lines ecome stronger the more times they are testedE.

2# The touchin "oints should not be too close toether#

. *oner trend lines are stroner than shorter trend lines#+onger

trend lines are also seen on the #pper time frames" so more traders are

aware of them.

n the example aove the to#ching points are very close together forming an

#nreliale trend line. %here is no other to#ching point on the rest of the trend

line.

n the next example elow" the two to#ching points are not so close together"

#t the trend lines are too short.< ood trend line should be at least ,/

bars lon. %here exist m#ch etter #pper and lower trend lines in this chart asshown in the previo#s page.

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=ow let&s see some ood trend lines>

%he trend line aove has to#ching points and can e considered as m#ch

stronger than trend lines in the previo#s examples. %he points are evenly

distri#ted and the trend line is long eno#gh. All three g#idelines are met

perfectly.

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Now this trend line is a monster t is long eno#gh with 3 to#ching points. @o#

may notice that there are two gro#ps of two points that are too close together"

#t this is not a prolem as long as the other points meet the g#ideline. Treat

a rou" of close "oints as one ?bi "oint#

?Trianles% :las% (edes###

Now that yo# !now how to draw trend lines" yo# are one step away from

discovering the oldest mar!et phenomenon: chart patterns. @o# are ao#t to

learn incredily reliale price formations that have time and time again provided

#s with consistent profits.

%he #pper and lower trend lines are forming a trianleas seen in the next

chart. As the price is oscillating etween the two o#nding lines" the #yers and

sellers are in t#g of war" and event#ally the price will rea! thro#gh one of the

lines L noody !nows which one n the next pages yo# will learn how to

participate in this explosive move.

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:allin wedeis li!e triangle" #t oth trend lines slope down. )ecall that the

ottom line alone wo#ld not e a valid trend line. @o# egin y drawing the

#pper trend line and then yo# complete the wedge or triangle Dit depends on

which line has more to#ching pointsE.

ne important note:the u""er and bottom trend lines must convere so

that the "rice is bein s@ueeAed#

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%he flag pattern is encompassed y two parallel lines. %he price is not see?ed

y the trend lines" #t it is moving inside the channel formed y the trend lines.

:las are usually seen as the market "auses after a bi move before

continuin its main trend#

All the presented patterns aove are in an #ptrend. %he #ptrend does not need

to e perfect" the price efore the pattern is (#st rising. Chart patterns after a

downtrend are similar. 9e will foc#s only on contin#ation patterns" that is"

#ying in an #ptrend and selling in a downtrend. @o# may hear ao#t reversal

patterns" #t trading against the trend reires a lotof experience. 4any an!s

have crashed and many fort#nes were lost eca#se of st#orn traders trying

to pic! the tops and ottoms. %rend is yo#r friend" so !eep it simple

!ow to trade chart "atterns

Now its time to reveal the definite strategy to enter an order" place yo#r 6top

+oss and ta!e a profit" so yo# dont need to watch the mar!et and yo# dont let

yo#r emotions control yo#r trading.

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The best way to enter the market is by

usin ?Sto" Orders and ?*imit Orders#

9hen the orders are placed" they are located on the ro!ers server" so yo# can

safely leave yo#r trading platform. %his rings yo# freedom from trying to spot

the est entry point.

%he entry r#le is simple:

1. f yo# trade a pattern in an #ptrend" "lace a $uy Sto" Bust above the

u""er trend line#9here exactlyB @o# may want to place it 3 pips

aove the trend line to spot the real rea!o#t. %he advanced approach is

to reflect the mar!et volatility as we will disc#ss it later.

2# Place a Sto" *oss Bust below the lower trend line#

. f yo# trade a pattern in a downtrend" yo# do (#st the opposite L place a

6ell 6top order elow the lower trend line and a 6top +oss aove the

#pper trend line. 4ore in the ,xercise.

%he interesting part is when to %a!e A Profit. 4any traders enter the trade

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lindly witho#t any idea where to exit Notice that the 6top +oss elow the

trend line reflects the c#rrent mar!et volatility. t is not Dand never sho#ld eE a

fixed n#mer of pips. %he same sho#ld hold for the %a!e Profit. @o# cannot (#st

decide that 30 pips is eno#gh and yo# wo#ld exit the position. 30 pips is very

different on min#te time frame and daily time frame.

There are two reat methods to find the Take Profit level)

1. ProBection methodL easy

2. :ibonacci methodL #sing several %a!e Profit levels" a little complex"

#t etter

+ets foc#s on the first oneTThe ProBection ethod.

1. 4eas#re the greatest width of the pattern.

2. %his pip val#e will e #sed for the %a!e Profit.

*se the same method for triangles" wedges" flags or single trend lines. As the

mar!et rea!s from the choppy ?one" it normally travels at least the pro(ected

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distance.

ne note ao#t the flas and wedesD

As the price travels etween the o#ndary lines" it happens that the trend line

is not ro!en and the pattern ecomes deeper" or even no more valid. n s#ch a

case cancel the order and place a new one to reflect the c#rrent sit#ation.

6ometimes the sit#ation is not going as yo# had planned and the price rea!s

thro#gh the other trend line. %hen simply cancel the order and forget the

pattern. )ather not ta!ing the trade than ta!ing a ad trade is the !ey of

s#ccessf#l trading. %here will e plenty of other opport#nities

eep in mind that chart patterns can appear and disappear" or morph into

another patterns. An emerging patternis not confirmed #ntil the relevant trend

line is ro!en.

0-ercise

$irst" lets loo! at the clean chart elow. %here are several significant highs and

lows that can e connected with a trend line. 'efore the choppy ?one we see a

minor #ptrend" so we are going to complete the pattern and place a #y order.

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%here is (#st one way to draw the two trend lines that meet the g#idelines.

%hese trend lines are forming a triangle pattern.

1. Place a $uy Sto" order Bust above the u""er trend line.

2# Place a Sto" *oss Order Bust below the lower trend line#

. %he distance of the highest high and the lowest low of the pattern is ;

pips" so this is the pip val#e for the %a!e Profit.

As the pattern contin#es to grow" yo# can replace the '#y 6top order a it

lower to the trend line" #t its not necessary. $inally" the #pper trend line isro!en" the '#y 6top order is exec#ted and the %a!e Profit is hit

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Now the well!nown technies are made in the opposite direction:

1. 6ell 6top order elow the lower trend line"

2. 6top +oss aove the #pper trend line"

. Pro(ected %a!e Profit.

%he trend line is ro!en" the 6ell 6top order is exec#ted and we ma!e money in

a downtrend #ntil the %a!e Profit is hit. As we #se a single %a!e Profit level" the

downtrend contin#es witho#t #s... let it o>

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EeconiAin chart "atterns

Professional traders #sed to analy?e chart after chart to find reliale patterns on

daily and even intraday time frames. %oday" comp#ting power comes into play.

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charts every second

.4 :ore- "airs - 7 time frames + ./3 charts>

t has an intelligent algorithm to recogni?e strong trend lines and discover the

most reliale chart patterns at the c#rrent time. @o# will learn more technies

ao#t chart patterns in the memership s#scription:

*sing $ionacci technie for m#ltiple %a!e Profit levels

%rading =p#llac!s> y #sing +imit rders for a etter entry point

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And more s#pertips

Clic! here to watch a video ao#t a#tomated chart pattern recognition
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112175292 Chart Patterns