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Technical Analysis & Trading

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1 Technical Analysis & Trading
Shaun van den Berg MarketWorx: Technical Analysis & Trading 11 October 2011

2 Agenda Investor Make WEN Charting Money Day Technical Trading Analysis
Swing Trading Trader Position Trading Equities SSF CFD

3 Share Market Analysis Share Market Analysis Technical Analysis
Fundamental Analysis Volume Macro Fundamentals Micro Fundamentals Price

4 Technical Analysis Fundamentals Volume Price Supply & Demand Trends
Patterns

5 Things are getting better
Market Psychology 1st Stage Things would not always be rosy 3rd Stage Things will get better forever 2nd Stage Things are deteriorating 2nd Stage Improvement Is actually underway 3rd Stage Things can only get worse 1st Stage Things are getting better

6 Technical Analysis Price Charts Breakout Trading
Closing Line Charts Bar Charts Bar Volume Charts Point & Figure Charts Candlestick Charts Breakout Trading Cycle & Trend Analysis Support & Resistance Trend Lines Continuation Patterns Reversal Chart Patterns Swing Trading Strategy Moving Averages 10-day SMA & 30-day EMA 200-day SMA Technical Oscillators OBOS & Momentum RSI & Stochastic MACD Volume Analysis On Balance Volume Volume Price Trend Relative Strength Analysis Relative to Sector Relative to JSE Overall

7 Price Charts: Closing Line Chart

8 Price Charts: Bar Chart
High Close Open Low

9 Price Charts: Bar Volume Chart

10 Price Chart: Point & Figure Chart

11 Point & Figure Charts – Double Top Formation

12 Point & Figure Charts – Double Bottom Formation

13 P & F Charts - Variations of the Double Top & Bottom Formation

14 Point & Figure Charts – Bullish Signal Formation

15 Point & Figure Charts – Triple Bottom Formations

16 Point & Figure Charts– Formations in Combinations

17 Point & Figure Charts – Variations on the Triple Top

18 P & F Charts - Variations on the Triple Bottom Formation

19 Point & Figure Charts – Bearish Signal Formation

20 Point & Figure Charts – Symmetrical Triangles

21 Point & Figure Charts – Triple Top Formations

22 Point & Figure Charts – The Broadening Formation

23 Point & Figure Charts – Bullish & Bearish Catapult Formations

24 P&F Charts– Bullish & Bearish Signal Reversed Formations

25 Point & Figure Charts– Bullish & Bearish Support Lines

26 Point & Figure Charts– Bullish & Bearish Resistance Lines

27 Horizontal Count (Upside)
The upside target in the chart below = (14 x 5 x 3) + 0 = 210c

28 Horizontal Count (Downside)
The downside target in the chart below = (6 x 5 x 3) = 10c

29 Price Chart: Candlesticks

30 Gather Information: Technical Analysis Checklist
Trending (Up/ Down) Cycles Support & Resistance Moving Averages Trend Lines Overbought/ Oversold OB/OS & Momentum RSI & Stochastic / MACD OBV & VPT Outperformance/ Underperformance Relative Strength Analysis

31 Trends & Cycles Bear Bull Corrections Rallies Sideways

32 Trends & Cycles Bearish Trend Bullish Trend Bullish Trend

33 Higher Highs, Higher Lows
Market Cycles - Bull Higher Highs, Higher Lows

34 Market Cycles - Corrections

35 Market Cycles - Bear Lower Highs, Lower Lows

36 Market Cycles - Rallies

37 Support & Resistance Reversals

38 Support & Resistance levels highlight possible “turning points”

39 Support & Resistance The more times a share price has touched these areas, the more valid these levels are & the more important they become. The longer these support & resistance levels have been in play, the better the outcome when the share price finally breaks out.

40 Support & Resistance - Bull
Resistance/ Support

41 Support & Resistance - Bear
Resistance/ Support Support Support Support Resistance Resistance/ Support Support Resistance

42 Trend Lines Resistance Trend Line Support Trend Line Resistance
As long as the price stays above/ below the Support or Resistance lines, the trend is either bullish or bearish Resistance Trend Line Support Trend Line Resistance Trend Line Support Trend Line

43 Trend Lines - Bull Resistance Resistance Support Resistance Trend Line
Support Trend Line Support Trend Line

44 Trend Lines - Bear Support Trend Line Support Trend Line
Resistance Trend Line Support Trend Line Support Trend Line Resistance Trend Line Resistance Trend Line Resistance Trend Line

45 Failed Breakouts

46 Entry Points Once prices are set to close above a resistance level, a trader will establish a bullish position. When prices are set to close below a support level, a trader will take on a bearish position.

47 Exit Points How long am I planning on being in this trade? (Depends on what type of trader you are: Position, Swing or Day Trader) How much risk am I willing to take? Setting near-term profit targets that execute at opportune times to maximize profits. Here are some common execution points: Retracement levels. Trend line breaks (Support & Resistance). Any other technical points. Developing solid stop-loss points that immediately get rid of holdings that do not perform. Creating exit strategies based on technical factors affecting the short-term.

48 Exit Points Where do I want to get out?
Many people become irrationally attached to their holdings & hold these equities when the underlying fundamentals of the trade have changed Traders sometimes worry & sell their holdings even when there has been no change in underlying fundamentals. Both of these situations can lead to losses & missed profit opportunities. Set a point at which you will sell takes the emotion out of trading. The exit point itself should be set at a critical price level, i.e. technical points e.g. Retracement levels

49 Rectangle Formation 24 to 30 = 6

50 Triangles

51 Ascending Triangles TP

52 Descending Triangles TP

53 Flags

54 Pennants = 37 27 to 33 = 6

55 Triangles

56 Triangles

57 Triangles TP TP

58 Breakout Trading: The Steps
Identify the candidate Wait for the breakout Set a reasonable price objective Allow the share to retest Know when your trade has failed Exit at your price target (TP) Be patient •Identify the candidate - Find shares that have built strong support or resistance levels and watch them. Remember, the stronger the support or resistance, the better the outcome. Make sure that you understand this when you shop for shares to watch. •Wait for the breakout - Finding a good candidate does not mean a trade should be taken prematurely. Wait patiently for the share price to make its move. To be sure the breakout will hold, on the day the share price trades outside its support or resistance level, wait until near the end of the trading day to make your move. Be patient. •Set a reasonable price objective - If you are going to take a trade, set an expectation of where it is going. If you do not, you would not know where to exit the trade. This can be done by calculating an average move that the share makes or measuring the distance between support and resistance (especially when trading price patterns). •Allow the share to retest - This is the most critical step. When a share price breaks a resistance level, old resistance becomes new support. When a share breaks a support level, old support becomes new resistance. In the majority of your trades, the share will test the level it has broken after the first couple of days. Prepare for it. •Know when your trade/ pattern has failed - When the share attempts to retest a prior support or resistance level and it breaks back through it, this is where a pattern or breakout has failed. It is imperative you take the loss at this point. Do not gamble with your losses. •Exit trades toward the market close - You cannot discern at the open whether prices will hold at a particular level. This is why you might consider waiting until near the market close to exit a losing trade. If a share has remained outside a predetermined support or resistance level toward the market close, it is time to close the position and move on to the next. •Be patient - This strategy requires plenty of patience. By following these steps, you will reduce emotion and be more objective about a trade. •Exit at your target - If you are not exiting the trade with a loss, then you are in the trade. You should remain in the trade until the share price reaches its objective, or you reach your time target without hitting your target price. Conclusion - Breakout trading welcomes volatility. The volatility experienced after a breakout is likely to generate emotion because prices are moving quickly and in a volatile fashion. Using the steps and information covered in this tutorial will help you define a trading plan that, when executed properly, can offer great returns and manageable risk.

59 Breakout Trading: The Steps
= 156 Resistance 118 to 137 = 19 Support

60 Breakout Trading: The Steps
Resistance Support Resistance / Support Support

61 Breakout Trading: The Steps
Resistance Support Resistance / Support Support

62 Double Tops

63 Double Bottoms

64 Triple Tops

65 Triple Bottoms

66 Double Tops & Bottoms Triple Top Double Bottom Double Bottom

67 Double Tops & Bottoms Double Top Triple Top Double Bottom

68 Head & Shoulders

69 Head & Shoulders Target Price

70 Head & Shoulders Head & Shoulders Head RS LS Neckline Target Price

71 Inverse Head & Shoulders
TP = 11.5 8.5 to 10.0 = 1.5

72 Inverse Head & Shoulders
Target Price Neckline RS LS Head

73 Inverse Head & Shoulders
Neckline RS LS Head

74 Inverse Head & Shoulders
Target Price Neckline Neckline RS LS RS LS Head Head

75 Falling Wedge

76 Rising Wedge

77 Falling Wedge 19.55% in 5-days

78 Falling Wedge 10.19% in 3-days Breakout & confirmation
Increased volume

79 Rising Wedge - 8.38% in 13-days

80 Breakout Trading: Conclusion
Breakout trading welcomes volatility. The volatility experienced after a breakout is likely to generate emotion because prices are moving quickly & in a volatile fashion. Using the steps & information covered will help you define a trading plan that, when executed properly, can offer great returns & manageable risk.

81 General George S. Patton
The Trading Plan “A good (trading) plan today is better than a perfect (trading) plan tomorrow” General George S. Patton

82 The Trading Plan “Trading provides one of the last great frontiers of opportunity in our economy. It is one of the very few ways in which an individual can start with a relatively small bankroll and actually become a multi-millionaire” Jack D Schwager

83 The Trading Plan Know Yourself, Know Your Purpose Trading Goals
Markets, Instruments & Timeframes Tools of the Trade Before the Market Opens … Risk & Money Management Exit Strategy Trade Strategies, Setups & Entries After the market closes … Discipline Golden Trading Rules …

84 Who needs a Trading Plan?
Unless you are consistently profitable trader over a sufficient length of time to encompass a number of different market conditions – then YOU need a trading plan! If you have achieved this: – Refresher course Open your eyes to new aspects of trading that can improve your profitability Consistently profitable

85 What will the Trading Plan Do?
Makes the act of trading simpler Limits your opportunity to make bad trades It will prevent psychological issues Act like a roadmap / Personal GPS Either something in the plan is not working You are not adhering to the trading plan Take away much of the decision making Emotional & irrational decisions Enable you to trade outside comfort zone Prevent letting losses run & cutting profits short Instill a large measure of discipline

86 Know Yourself, Know Your Purpose
Understand your psyche & sentiment Decide what you want to achieve, ask why & how trading is going to provide it? Why do you want to be a trader? What sort of trader are you? What are your strengths & weaknesses? Are you in the right frame of mind to trade? What are your income targets?

87 Trading Goals Setting goals are essential Beacon to work towards
Track progress Motivation required Define goals in terms of your development as a proficient trader Annual Trading Goals Monthly Trading Goals Weekly Trading Goals Daily Trading Goals

88 Markets, Instruments & Timeframes
Decide which markets will you trade? Which instruments will you trade? Basket of shares / whole market? SSFs / CFDs – Top 40 / Mid Caps? Currency Futures – Currency pairs? Which timeframes will you trade? Day Trader – Minutes & Hours? Swing Trader – Days & Weeks? Position Trader – Months & Years?

89 Tools of the Trade What financial vehicle will you use to trade?
Equities, Warrants, CFDs & SSFs? What broker & trading platform will you use? What Live Prices are you going to use? Which charting software will you use?

90 Before the Market Opens …
What is your daily pre-market routine? Have you analysed yesterday’s trades? Do you have any positions open? What are the general market conditions? What will you do today – hour by hour? Which instruments are on your watch list?

91 Risk Management General Risk Management Specific Risk Management
What is your attitude towards risk? What is the overall market risk? What is the sector risk? What is the broker & hardware risk? What is the strategy risk? What is the probability of a successful trade? What is the Risk-Reward ratio? What is your risk per trade? Where will you place your stop loss order? When will stop trading?

92 General Money Management Specific Money Management
Will you lock in profits? How will you determine your position size? Large draw downs & profits What will you do? Which money management approaches will you utilise?

93 Exit Strategy Losing trades Will you exit before your stop is hit?
Which signals will see you exit early? Winning trades Which signals will see you exit completely? Which signals will see you close half? Which signals will see you close the remainder?

94 Trade Strategies, Setups & Entries
Which strategies will you trade? What are your trade setups? How will you find your setups? Which signals will trigger your entry?

95 After the market closes …
Have you recorded today’s trades? Did you execute your trades according to your trading plan? Have you completed your trading journal?

96 Discipline Back test or forward test?
What are your promises to yourself? What questions do you ask after a winning trade? What questions do you ask after a losing trade? What steps do you take to learn more about trading?

97 Golden Trading Rules Protect & preserve capital!
Always set a stop loss, always! Cut your losses short – Let your profits run! Trade what you see – Not what you think! Never chase your losses, ever! Never average down, ever! Keep excellent records! Maintain discipline! Keep it simple! Plan the Trade – Trade the Plan!

98 The 3 M’s Trading boils down to three main areas:
Your Mindset (or psychology), Your Money management (how you manage your risk), and The Method you use to buy and sell (your trading system). The three Ms! Of those three areas, your mindset and your ability to control it are by far the most important! The key is that your mind drives everything you do in your life and trading is no exception. What is it that separates the successful from those who fail? Why are most people who start trading unsuccessful yet there is this small group of people who are successful? The answer your psychology Essentially, your mental ability to manage losses and profits and the good and the bad times in trading, manage risk, to not become too greedy and many others are all encapsulated under the heading of ‘trading psychology’.

99 Alpesh B. Patel [Author of the book “Trading Online”]
The 3 M’s - Mindset “While a trading plan cannot predict the future, it can lay down how you react to the possible outcomes. This is why a trading plan is essential. It is a list of strategic responses to events beyond your control. You control the only thing you can control – YOURSELF!” Alpesh B. Patel [Author of the book “Trading Online”]

100 The 3 M’s - Mindset Attitude - How you react
Self Confidence - Belief in yourself Objectivity - Increase impartiality Patience - Watching & waiting Discipline - Stick to your plan There is one overriding influence on your trading success and that is your attitude. Your attitude will determine whether or not you are profitable with your trading. Your attitude is more important than any of the character attributes required for successful trading; it is more important than your market knowledge and your degree of skill. One of the most important attributes (in anything in life really) is self-confidence. Self-confidence is a measure of your belief in yourself, and has a number of consequences in trading should you lack it. Being a successful trader requires that you to trust & follow your trading plan. Confident traders rely on their own methodology and not what others are saying. Have realistic expectations - people can take trading too seriously. Feel the weight of the world on their shoulders and crumble under the pressure Always maintain a clear mind and perhaps consider trading like any other game or sport. Emotions are probably the single biggest problem we face when trading (along with a lack of discipline). Emotions should have little place in your decision making. Be decisive and disciplined with your decision making Winning traders focus on the right things - things that matter. Occasionally schedule a break from your trading.

101 The 3 M’s - Mindset "The longer I live the more convinced I become that life is 10% what happens to us and 90% how we respond to it.” …Charles Swindoll

102 The 3 M’s - Mindset “Successful trading requires us to be aware of our emotions. It often requires us to go against our natural inclinations or emotional responses in order to see profits.”

103 The 3 M’s – Mindset Greed Fear Caution Moderation Greed Fear
Greed – driving emotion at market tops. It is desire to make quick profits - typical “get-rich-quick scheme” It is overconfidence – string of winning trades leads to feeling of invincibility. Results in more risk taking & inevitable losses. Many traders fall into the leverage trap – CFDs & SSFs for this reason Leverage can be highly beneficial if risk is managed. It is “irrational exuberance” that pushes markets beyond their true value. Its extreme form results in a “bubble” Fear – driving emotion at market bottoms Its extreme form becomes panic during market crashes. Moderation Greed Fear

104 Trading Investor Make WEN Charting Money Day Technical Trading
Analysis Swing Trading Trader Position Trading Equities SSF CFD

105 Agenda Equities Investor Make WEN Charting Money Break-out Technical
Analysis Break-out Trading Trader Equities Swing Trading SSF CFD

106 CFD Product Description
Derivative - A contract whose value depends on (or derives from) the value of an underlying share e.g. share – ANG, BIL, SOL Go ‘Long’ & ‘Short’ with CFD’s on Top 100 JSE listed shares Margin deposit requirements 15% Top 40 shares / 17.5% on next 60 shares Variation margin required for adverse share price movement. Brokerage = 0.4% per transaction Breakeven = 0.92% (VAT included) Zero UST Financing at competitive rates: Current borrowing rate 6.50% (± Prime – 2%) Minimum Exposure per trade of R (R4 500 margin)

107 Top 100 Shares: CFD Margin 15% Top 40 17.5% Next 60
List reset after each Quarterly futures Close out

108 Important notes on CFD Long & Short Positions
Pay interest at SAFEX % p.a. (± Prime -2%) The holder will receive a synthetic dividend Dividend is not earned tax free as a CFD is a derivative contract In the case of a Long CFD, a holder of a long contract will be paid an amount equal to the dividend by issuer. This is seen as an income and is subject to tax You pay a script lending fee of 1.5% p.a. (Min R456) Receive interest at SAFEX % p.a. The holder is liable for the dividend Dividend is not earned tax free as a CFD is a derivative contract In the case of a short CFD, a holder of a short contract will have to pay the dividend to the issuer

109 Pro’s & Con’s of CFD Trading
Advantages Disadvantages Low trading costs No expiry date Hedge your current portfolio All the benefits Gearing & Risk No voting rights

110 Comparison with traditional shares
CFD Traditional Equity No physical equity holding Do not pay UST No voting rights Earn synthetic dividends Physically hold equity Pay UST of 0.25% Voting rights Earn real dividends Leveraged trading Settle only collateral (15% %) plus top-up if required Gearing provided at cheap rates (Safex +2% or roughly Prime -2%) Not leveraged Must settle full exposure amount Expensive to borrow against shares Settlement Period Settled T+1 Settled T+5 Taxation Considered a Trader Added to personal income (Trading Instrument) Capital Gains Tax (CGT) (Investment Instrument) Easy to short Suitable for both hedging & trading opportunities Typically long only

111 What are SSFs? A standardised contract.
Of a standard quantity (100) of a specific underlying listed share Requires a fixed margin deposit to open a position (around 15% of the total value). Expiring on a predetermined future date: Third Thursday of every March, June, September & December. Gives the owner the right to close the contract at a price agreed when entering the contract, including all relevant dividends & interest. SSFs are listed on the South African Futures Exchange (SAFEX), a subsidiary of the JSE. SSF contracts equate to100 shares of the underlying instrument. SSFs are created at the close of trading. All unmatched SSF orders expire at the end of the trading day. All partially matched orders will be cancelled at the end of the day.

112 Comparable to Equities
INVESTOR B (SSFs Trader) INVESTOR A (Share Trader) Confident that Sasol shares will increase. Confident that Sasol shares will increase. Sasol’s share price is R350, therefore she buys 1 contract. She has R which she can invest. The initial margin set by the broker is R6 000 which is paid by the buyer. Sasol’s share price is R350, therefore she buys 100 shares. After 3 months the price has increased by 10% & the investor closes out his position & sells out of the Sasol SSF contract. 3 months later the price has increased by 10% so she sells her shares to make a R3 500 profit. His profit is R but his return on his investment is 58%. Her return on her investment is 10%.

113 Comparison between SSFs &CFDs
Single Stock Future Contracts for Difference Regulated by JSE/FSB Exchanged traded product Expiry Date= Rollover costs Set principle amount Interest agreed upfront Wholesale interest rates Best execution Free markets Transparent Guaranteed by SAFCOM No dividend paid/received Fungible financial instrument Can take physical delivery Unregulated Trades OTC No Expiry Date Principle amount could change daily Interest fluctuates daily Retail interest rates No best execution obligation Captive markets Opaque Not guaranteed by SAFCOM Manufactured dividends Never physical delivered

114 SSF Margin Initial margin Top 40 – Central per contract
Next 60 – Traditional Initial margin per contract

115 (Central) SSF Order Book
Top 40 Shares ALSI & ALMI Copper, Gold, Platinum & Silver WTI Crude Oil

116 (Central) SSF Order Book
Margin = R27 000 Exposure = R Cost R25 per contract 100 points move = R1000

117 (Central) SSF Order Book
Future Price = Spot Price X 1 + (IR x t)

118 SSF Order - Short

119 (Traditional) SSF Order Book

120 Swing Trading Strategy
Step #1: What Market Stage? Stage 2 or Stage 4 Step # 2: Elliott Wave Cycle Wave 2 or Wave B Step #3: Trading Trends Uptrend = Higher Highs & Higher Lows Downtrend = Lower Highs & Lower Lows Step #4: Trader’s Action Zone (TAZ) Buy Pullbacks & Short Rallies Step # 5: Swing Points Entry – Swing Points Low (SPL) – Bullish Candlesticks Exits - Swing Points High (SPH) – Bearish Candlesticks

121 Swing Trading Strategy (Cont.)
Step #6: What Candle Stick Pattern? Bullish Candle Stick Patterns Bearish Candle Stick Patterns Neutral Candle Stick Patterns Step # 7: Money Management Position Size Step # 8: Risk Management Technical Stop Loss level

122 Step #1: What Market Stage?
Long Short

123 Step #1: What Market Stage? Anglo (AGL)
Stage 2 or Stage 4? Stage 4 Stage 2 Stage 2 Stage 1 Stage 1

124 Step # 2: Elliott Wave Cycle

125 Step # 2: Elliott Wave Cycle Anglo (AGL)
Wave B Wave 2 or Wave B? Wave 1 Wave 4 Wave 2 Wave A Wave C?

126 Trade Trending Markets
Step #3: Trading Trends Trade Trending Markets

127 Step #3: Trading Trends Moving Averages (Long & Short)

128 Step #4: Buying Pullbacks (TAZ)

129 Step #4: Shorting Rallies (TAZ)

130 Step #4: Buying Pullbacks (TAZ)

131 Step # 5: Swing Points (Entry & Exits)

132 Step # 5: Swing Points (Entry & Exits)
Swing Point Low (SPL) Swing Point High (SPH)

133 Step # 5: Swing Points Lows (Entry)

134 Bullish Candlestick Patterns

135 Bullish Candlestick Patterns

136 Bullish Candlestick Patterns

137 Bearish Candlestick Patterns

138 Bearish Candlestick Patterns

139 Bearish Candlestick Patterns

140 Reversal Candlestick Patterns

141 Neutral Candlestick Patterns

142 Secondary Technical Indicators
It must be remembered that no indicator should be used alone. Secondary Technical Indicators OB/OS Momentum MACD RSI Stochastic Volume Analysis Relative Strength Analysis

143 Overbought / Oversold (OB/OS)
OB/OS = Price - MA x 100% MA Overbought – Sell Zone Oversold – Buy Zone

144 Momentum = Price A - Price B x 100%
Momentum Indicator Momentum = Price A - Price B x 100% Price A Overbought Oversold

145 OB/OS & Momentum Indicators

146 RSI Indicator Bearish Divergence Overbought Oversold
14 = Down = 0 14 14 = UP = RSI =100- {100/ 1 + (U/D)} Overbought Oversold

147 Stochastic = Close - Low x 100%
Stochastic Indicator Stochastic = Close - Low x 100% High - Low 14 = Hi = 14 = Lo = 0 14 Sell Zone Sell Sell Sell Buy Zone Buy

148 RSI & Stochastic Indicators
Bearish Divergence

149 MACD Indicator (OB/OS)
Overbought Oversold

150 MACD – Crossovers (Trigger Line)

151 MACD – Crossovers (Zero Line)

152 Early Warning: Change in trend
MACD – Divergence Bullish Divergence Early Warning: Change in trend

153 Volume Analysis ???

154 Volume Analysis Indecisive Market Bottoms Consolidation Low volumes
Market Tops New Trend High volumes High volumes

155 OBV Indicator

156 VPT Indicator

157 OBV & VPT Indicators Volume Accumulation Volume Distribution
Neutral Volume

158 Relative Strength Indicator Data 1 = Anglo Data 2 = Top 40 Index
Under-perform Out-perform Under-perform Market Perform

159 Relative Strength Indicator
Data 1 = Anglo Data 2 = BHP Billiton Under-perform Outperform Outperform

160 Technical Check List What is the direction of the JSE Overall Index?
What is the direction of the Sector Index? What are the weekly/ monthly sector /share charts showing? Are the primary, secondary & minor trends up, down or sideways? What are the important support & resistance levels? Where are the important trend lines & channels? Where are the 33%, 50% & 66% retracement levels? Are there any price gaps, and what type are they? Are there any major reversal patterns visible? Are there any continuation patterns visible? What are the price objectives from these patterns? Which way are the moving averages pointing? Are the oscillators overbought or oversold? Are there any divergences apparent on the oscillators?

161 Make Quick Decisions BUY WATCH SELL HOLD

162 Make Quick Decisions Watch

163 Creating a Watch List of Winners
Fundamentals = PSG Online website Technicals = Wen Charting*

164 Hi-Liter Scanner (Step 1:Criteria)

165 Hi-Liter Scanner (Step 2: Results)

166 Hi-Liter Scanner (Step 3: Confirm)
View Chart

167 Summary: Technical Analysis
Price Charts Closing Line Charts Bar Charts Bar Volume Charts Point & Figure Charts Candlestick Charts Cycle & Trend Analysis Support & Resistance Trend Lines Breakout Trading Continuation Patterns Reversal Chart Patterns Swing Trading Strategy Market Stage Elliott Wave Cycle Trading Trends TAZ Swing Points Technical Oscillators OBOS & Momentum RSI & Stochastic MACD Volume Analysis On Balance Volume Volume Price Trend Relative Strength

168 The 3 M’s - Money Management
"The most important thing is money management, money management, money management. Anybody who is successful will tell you the same thing." Money Management is one of the foundations of trading well. Remember - if you lose your trading money: no more trading. Of all the mindset problems we face, most of them come back to this area, managing our money. As people, money tears at our emotions . To manage your money well, you need to be disciplined. Marty Schwartz

169 "Do not focus on making money; focus on protecting what you have.”
The 3 M’s - Money Management "Do not focus on making money; focus on protecting what you have.” …Paul Tudor Jones

170 The 3 M’s - Money Management
Capital allocation (Position sizing) For each trade, how much of our capital do we commit? Trade with 50% of total capital (Earn interest & Variation Margin) Position Size - Number of Contracts/ Shares Setting stop losses For each trade, where do we place our stops? Initial Technical Stop (Support & Resistance)

171 Money Management Position Size & Margin (Harmony)
You decide to buy Harmony Gold at R80.10 You set a 3% stop loss (R80.10 x 3% = R2.40 ) R80.10 – R2.40 = R77.70 You are willing to risk 2% of your capital = R2000. Take R2000 & divide it by the R2.40 per share that you are risking Your position size = you can buy shares (R2000 / R2.40). The SSF initial margin required is R 833 shares = 8 contracts = R x 8 = R11 100 Exposure = 8 x 100 x R80.10 = R

172 Money Management Position Size & Margin (Anglo)
Assume you have a R CFD trading account You decide to buy Anglo’s at R339.05 You set a 3% stop loss at R328.88 R x 3% = R10.17 (R – R10.17) You are willing to risk 2% of your capital if the trade goes wrong = R2000. Take R2000 and divide it by the R10.17 per share that you are risking. That gives your position size. In this example, you can buy shares (R2000 / R10.17). Margin = 197 x R = R x 15% = R For SSFs, the initial margin will be R5700 x 2 contracts = R11 400

173 CFD Order Book Buy 100 Anglo shares @ R339.05
Exposure = R 15% Margin = R 100 Anglo shares = R 0.4% Brokerage = R135.62 14% VAT = R18.99 Total = R154.61 R x 6.5% = R /365 = R6.04

174 Risk Management The Stop-Loss Strategy
The spot that represents maximum loss that you will take on a trade. Original trade idea was incorrect. The market tells you when it reaches the stop loss point. Cut your losses & move on.

175 Risk Management Technical Stop-Loss Strategy
The stop-loss comes from the chart. It is the first thing one needs to know about any particular trade. Can decide how many contracts to trade so as not to exceed the maximum loss per trade he has determined in the trading plan. First step to following your stop. Have a contract size you can live with.

176 Risk Management Technical Stop-Loss Strategy
Placed at a logical point on the chart Breaking of a support or resistance level Breaking of a trend line Highly recommended because the chart “tells” you where to place the stop.

177 Risk Management Technical Stop-Loss Strategy

178 Step 1: Setup Price (Trigger)
Select Price Watch Enter Technical Price Select “Below” for Longs

179 Setup the Stop Order (Bullet)
Enter Worse-case scenario price Select Stop Order Enter Quantity Select “Close” Click Submit Price Watch & Stop Order button

180 Summary: Trading Step 1: Financial objectives
Step 2: Watch List of potential winners Step 3: Mindset Step 4: Method of Trading Step 5: Money & Risk Management

181 “Many know, few do” Justin Cohen Commitment to Action!
You have attended two presentations over two days and you may think that you have done the work. That is why I am making sure that after every presentation that I do, each member of the audience makes a commitment to taking some action to improve their investment or trading performance. You have spent 6 hours attending this course, make it worth the time, what one thing are you going to do to raise your game?

182 Conclusion Have you learnt how to “Make Money?” Feedback Forms
Link to MarketWorx presentations Will be available soon! Open a Trading Account with PSG Online Online Trading Course Equity & SSF Simulator Research Tools DataShare p/m Software is FREE! Good Luck & Happy Trading!

183 shaunvdb@psgonline.co.za (011) 996 5200
Thank You (011)


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