Eliminating Five Basic Eliminating Five Basic Mistakes from your Analysis Mistakes from your Analysis Simple rules to avoid loss making trades Simple rules to avoid loss making trades Ian Copsey – FX-Strategy
1. Eliminating Five Basic Mistakes from your Analysis Simple
rules to avoid loss making trades Ian Copsey FX-Strategy
2. Trend lines
3. Trend lines Even professional traders have the habit of
drawing as many lines as they can on their charts So how many do
they have to draw and how do they decide which ones will work?
4. Trend lines
5. Trend lines The main error is that they do not identify
trends and work on a hit and miss basis Look at what happened
next:
6. Trend lines
7. Trend lines Q. What is the definition of a trend? A.
Uptrend: A sequence of higher highs and higher lows Downtrend A
sequence of lower lows and lower highs
8. Trend lines
9. Trend lines Three Touch Guideline Anyone (and generally
everyone including my dog) can draw a line between two highs or two
lows This is my dog By waiting for three touches the trend line
becomes stronger and more reliable
10. Trend lines
11. Trend lines
12. Trend lines
13. Trend lines
14. Trend lines
15. Trend lines IF YOU CANT DRAW A TREND LINE THEN DONT FORCE
YOURSELF Actually they happen infrequently!
16. Double Tops and Bottoms Double Top Double Bottom
17. Double Tops and Bottoms Are associated with bullish or
bearish sentiment that fails to be fulfilled The period of sideways
consolidation between extremes and peak/trough will generally cause
confusion
18. Double Tops and Bottoms Target Measurement Minimum Target
Establishing a minimum target for the pattern
19. Double Tops and Bottoms
20. Double Tops and Bottoms
21. Double Tops and Bottoms
22. Double Tops and Bottoms
23. Double Tops and Bottoms Q. Why didnt these Double Tops
work??? A. Because they werent Double Tops Double Tops and Bottoms
require confirmation
24. Double Tops and Bottoms Break confirmation Confirmation
comes on break of the trough/peak
25. Double Tops and Bottoms
26. Double Tops and Bottoms
27. Double Tops and Bottoms
28. Double Tops and Bottoms
29. Double Tops and Bottoms
30. Heads and Shoulders Head Shoulder Shoulder Retest of
neckline Neckline Neckline Retest of neckline Shoulder Shoulder
Head
31. Heads and Shoulders Head & Shoulders represent a
slowing of momentum after a trending move They should develop with
a broad trending sentiment (uptrend or downtrend) which should be
sustained during development of the pattern
32. Heads and Shoulders Extend from point of break Measure peak
to neckline Minimum target Establishing a minimum target for the
pattern
33. Heads and Shoulders
34. Heads and Shoulders
35. Heads and Shoulders
36. Heads and Shoulders Failures do occur and positions need to
be managed closely Generally the neckline should act as
support/resistance after penetration though occasionally there can
be slight penetration
37. Heads and Shoulders
38. Heads and Shoulders
39. Heads and Shoulders
40. Momentum A favorite indicator type is momentum in one form
or another. These are often utilized as overbought/oversold signals
but quite often are misunderstood. If they are misused losses can
result.
41. Momentum
42. Momentum
43. Momentum Why did RSI & Stochastics fail in USDJPY for
so long? Basically there was a strong uptrend and momentum studies
are not intended to be used in trending markets
44. Momentum How can we protect ourselves against entering
against the trend? Use another indicator that identifies
trends
45. Momentum
46. Momentum As ADX/ADXR are rising, generally above 30 a trend
is indicated at which point momentum indicators should not be
used
47. Momentum Sometimes popular indicators such as RSI do not
move to extremes There are two methods that can be used to
determine better trading opportunities:
48. Momentum More sensitive version of RSI
49. Momentum Breaks of momentum trend lines
50. Momentum After a trend when should momentum indicators be
used? When there is a divergence
51. Momentum Bullish Divergence Price is making new lows
Momentum is making higher lows Bearish Divergence Price is making
new highs Momentum is making lower highs The underlying momentum of
price is slowing beware of a reversal!
52. Momentum
53. Momentum Wealth Warning!! A divergence is not a reversal
signal and trades should not be based only on the fact that a
divergence has occurred Look for other signals: A break of a trend
line Break of a pattern Break of the sequence of highs/lows
54. Momentum
55. Momentum
56. Confirm your analysis! Technical analysis is a broad
subject with many different techniques. However, it is often risky
to rely on one indicator/technique alone. Stronger profitability
will come from utilizing complimentary analytical techniques
57. Confirm your analysis! What kind of complimentary
techniques are there? Momentum used in consolidation and divergence
after trends Trend lines breaks Fibonacci projections from Elliott
Wave Pattern breaks Time cycles
