Reading Charts 3 “IT’S TIME TO GET MORE OUT OF LIFE”
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Copyright © 2007 Forex Education Ltd
The Forex Codes Moving Averages
– Shows the trend in a smoothed fashion – Used as moving levels of Support and Resistance – No good in sideways, tight-ranging markets – It is a “lagging” indicator. It follows price action
Copyright © 2007 Forex Education Ltd
The Forex Codes Moving Averages
Copyright Š 2007 Forex Education Ltd
The Forex Codes Moving Averages
•
On all our charts we use:
1. 2. 3. 4.
10 DAY EMA 200 period EMA/SMA 5 WMA One or more other EMAs depending upon timeframe used Copyright © 2007 Forex Education Ltd
The Forex Codes Moving Averages
Copyright Š 2007 Forex Education Ltd
The Forex Codes Moving Averages
Copyright Š 2007 Forex Education Ltd
The Forex Codes – Chart Pattern • Chart Pattern is one KEY to trading success • It is a Market “Fingerprint” or “CODE” • Use only the most basic and obvious chart patterns just like the Pros do! • Others will have spotted them hence more probability of success Copyright © 2007 Forex Education Ltd
The Forex Codes
Continuation Patterns
• These occur when the prevailing trend pauses • The next move usually in the same direction as the Trend • Higher the timeframe the more powerful the pattern • There are always exceptions Copyright © 2007 Forex Education Ltd
The Forex Codes Flags and Pennants
• Very powerful patterns to trade. Very reliable. • Brief pauses in a dynamic market move • Must be preceded with a sharp and almost straight line move • After the pause the trend resumes on a burst of trading activity Copyright © 2007 Forex Education Ltd
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The Forex Codes Flags and Pennants
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The Forex Codes Flags and Pennants
Copyright Š 2007 Forex Education Ltd
The Forex Codes Flags and Pennants
Copyright Š 2007 Forex Education Ltd
The Forex Codes Reversal Patterns
• Higher the timeframe the more powerful the pattern • Can be more risky because you are going against the trend • Must have a prior trend • It may only be a short-term reversal of trend • First sign may be the breaking of an important trendline Copyright © 2007 Forex Education Ltd
The Forex Codes
Reversal Patterns - Double Tops
• Very frequent and easily recognised • Top is often referred to as an “M” • Ideal DT has two prominent peaks at about the same price level • It is a bearish pattern at the top of an uptrend • Good for bounce trading off a high Copyright © 2007 Forex Education Ltd
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The Forex Codes
Reversal Patterns - Double Tops
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The Forex Codes
Reversal Patterns - Double Tops
Copyright Š 2007 Forex Education Ltd
The Forex Codes
Reversal Patterns - Double Tops
Copyright Š 2007 Forex Education Ltd
The Forex Codes
Reversal Patterns - Double Bottoms
• Very frequent and easily recognised • Top is often referred to as an “W” • Ideal DB has two prominent troughs at about the same price level • It is a bullish pattern • Good for bounce trading off a low Copyright © 2007 Forex Education Ltd
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The Forex Codes
Reversal Patterns - Double Bottoms
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The Forex Codes
Reversal Patterns - Double Bottoms
Copyright Š 2007 Forex Education Ltd
The Forex Codes
Reversal Patterns – Where Could a Reversal Occur
• At a Key “Cluster” Level • At a Pivot Level • At a break of solid Trendline • At a Fibonacci level • At strong Support or Resistance • With MACD Divergence Copyright © 2007 Forex Education Ltd
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The Forex Codes
Reversal Patterns – MACD
• MACD is a simple momentum indicator • Can help us spot trend reversals • I use it for spotting “Divergence” only • Must be used in combination with other tools and never on its own Copyright © 2007 Forex Education Ltd
The Forex Codes
Reversal Patterns – MACD
Copyright © 2007 Forex Education Ltd
The Forex Codes
Reversal Patterns – MACD
Copyright © 2007 Forex Education Ltd
The Forex Codes
Reversal Patterns – MACD
Copyright © 2007 Forex Education Ltd
The Forex Codes
Reversal Patterns – MACD
Copyright © 2007 Forex Education Ltd
The Forex Codes
Copyright © 2007 Forex Education Ltd
Reading Charts 3 “IT’S TIME TO GET MORE OUT OF LIFE”
www.sm-forex.com
Copyright © 2007 Forex Education Ltd