UNIQUE TECHNIQUIES OF TECHNICAL ANALYSIS

YOU WILL LEARN

Course Curriculum:

* Type of Stock Market Analysis.

Technical Analysis.
Fundamental Analysis.

* Types of chart

Line Charts
Candlestick Charts

* The Concept of Trend

Most important is TREND (TREND is your friend)

UP TREND.
DOWN TREND.
SIDEWAYS TREND.

Support / Resistance
Horizontal line / Trend line.
LEARN how to recognize Major DEMAND & SUPPLY zone.
Most important Price Formation / Price Action.
VOLUME (volume is used as a secondary indicator to confirm the price
trend)

* Technical Indicators
Moving Average.
Relative Strength Index.
ADX (+DMI & -DMI)

Average Directional Movement Index (ADX).

Positive Directional Movement Indicator (+DMI).
Negative Directional Movement Indicator (-DMI).

o Using ADX to Trade Breakouts, Pullbacks, and Reversal Patterns.

o ADX is an indicator that measures trend strength shows trend
direction.
o ADX tells us whether the bulls or the bears are in control.
o Allows us to see the strength of bulls and bears at the same time.
o Tells when the trend is strong enough to trade.
o Tells us when the trend is weak (stand aside).
o Works on all time frames and products.

* Chart Patterns.

Reversal Pattern

Head & shoulder and Inverse Head & shoulder.

Falling Wedge & Rising Wedge
Double Top & Double Bottom

Continuation Pattern

Symmetrical Triangle
Ascending Triangle & Descending Triangle.
Flag & Pennant.
Cup & handle Pattern.
Rectangle Pattern & Channel.

Candlesticks Patterns.

BREAKOUT/BREAKDOWN.

GAP THEORY.

Learn how to Hedge your PORTFOLIO in Weak/Negative Market

TRADING PSYCHOLOGY AND RISK MANAGEMENT

What is Technical Analysis?

Quite simply, technical analysis is the study of investor behavior and its effect on the
subsequent price action of financial instruments. The main data that we need to perform
our studies are the price histories of the instruments, together with time and volume
information. These enable us to form our views, based on objective facts.

Technical Analysis attempts to use past stock price and volume information to predict
future price movements.

Fundamental analysis typically refers to a method of analyzing and evaluating

equities, though it may also apply to any kind of security. A whole slew of data including,
but not limited to, financial statements, economics, health, management, interest rates,
production, earnings, competitive advantages, competitors and many other qualitative
and quantitative factors are considered.

Types of charts
There are many ways to display price charts. Each has its own benefits, but at the end of
the day it is up to the individual to decide which provides the clearest visual picture and
is likely to be of most in identifying trends at an early stage.

Line Charts

This is the simplest chart format and is generated by using a line to join the data
points. The most common use for line charts is for indicators that only have a single
daily value (rather than high/low) such as momentum or moving averages. The daily
line chart is perhaps the simplest of charts available, showing only the closing price of
each day.
Candlestick Charts

Candlestick charts provide a more sophisticated visual representation of bar charts. The
opening price is included in the chart and a day’s activity would be represented as
follows:
Note: An up day is signified by a white/green (or empty) box.
A down day is represented by a black/red or shaded box.
The "box" shows the open to close range.
The "wick" displays the full day’s range.

The candle chart displays a wealth of price information, with open, high, low and close.

Candlestick charts are generally plotted over a one-day period but technical analysts
also use weekly and monthly candlestick charts to provide a valuable picture of the
longer-term price action.

Candlestick charting is one of the oldest methods of technical analysis, with both
Japanese and Chinese both claiming that rice traders were using candlestick charts over
4000 years ago, although this is not proven. Its appeal lies in its ability to give a clear
visual representation of the price action during a period, leading to easy-to-recognize
pattern recognition.

PRICE ACTION
How to determine a market’s trend
One of the most important aspects of learning to trade with P.A. is to first learn how to
identify a trending market versus a consolidating market. Trading with the trend is
highest-probability way to trade and it’s something you HAVE TO learn how to do if you
want to stand a chance at making serious money as a trader.

We consider a market to be in an uptrend if it is making Higher Highs and Higher Lows

(HH, HL) and a downtrend is Lower Highs and Lower Lows (LH, LL).

UPTREND PRICE ACTION

DOWNTREND PRICE ACTION

SIDEWAYS PRICE ACTION

 TREND
Price moves in trends

“Trade with the trend” is the basic logic behind technical analysis. Once a trend has been
Established, the future price movement is more likely to be in the same direction as the
trend than to be against it. Technical analysts frame strategies based on this assumption
only.

“The Trend is your friend until the end when it bends.” Anonymous

Uptrend Line (UPTREND)

An uptrend line has a positive slope and is formed by connecting two or
more low points. The second low must be higher than the first for the line to have a
positive slope. Note that at least three points must be connected before the line is
considered to be a valid trendline.

Uptrend lines act as support and indicate that net-demand (demand less supply) is
increasing even as the price rises. A rising price combined with increasing demand is
very bullish, and shows a strong determination on the part of the buyers. As long as
prices remain above the trend line, the uptrend is considered solid and intact. A break
below the uptrend line indicates that net-demand has weakened and a change in trend
could be imminent.

Downtrend Line (DOWNTREND)

A downtrend line has a negative slope and is formed by connecting two or
more high points. The second high must be lower than the first for the line to have a
negative slope. Note that at least three points must be connected before the line is
considered to be a valid trendline.

Downtrend lines act as resistance, and indicate that net-supply (supply less demand) is
increasing even as the price declines. A declining price combined with increasing supply
is very bearish, and shows the strong resolve of the sellers. As long as prices remain
below the downtrend line, the downtrend is solid and intact. A break above the
downtrend line indicates that net-supply is decreasing and that a change of trend could
be imminent.

SIDEWAYS TREND
The sideways trend describes the horizontal price movement that occurs when the forces
of supply and demand are nearly equal. A sideways trend is often regarded as a period
of consolidation before the price continues in the direction of the previous move.
A sideways price trend is also commonly known as a "horizontal trend".
Support and Resistance (DEMAND & SUPPLY)
Understanding the concepts of support and resistance is vital in developing a disciplined
trading strategy. Prices are dynamic, reflecting the continuing change in the balance
between supply and demand. By identifying the price levels at which these balances
change we can plan not only the price level at which to purchase but also the level at
which we can subsequently sell (and vice versa for a short trade). Whilst these levels
may be created by the markets subconsciously they represent the collective opinions of
the participants in the markets.
Support represents the level at which buying pressure is strong enough to absorb and
overcome the selling pressure. At price support levels buyers step into the market
mopping up the imbalance between supply (sellers) and demand (buyers) and when this
happens the price will halt its decline and will potentially rise.
The Dow Theory says trend have three phases:
a. Accumulation Phase
b. Participation/Advance Phase
c. Distribution Phase
The Dow Theory says that the accumulation phase is made up of buying by intelligent
investor who thinks stock is undervalued and expects economic recovery and long term
growth. During this phase environment is totally pessimistic and majority of investors
are against equities and above all nobody at this time believes that market could rally
from here. This is because accumulation phase comes after a significant down move in
the market and everything appears at its worst. Practically this is the beginning of the
new bull market.
The participation phase is characterized by improving fundamentals, rising corporate
profits and improving public sentiment. More and more trader participates in the
market, sending prices higher. This is the longest phase of the primary trend during
which largest price movement takes place. This is the best phase for the technical trader.
The distribution phase is characterized by too much optimism, robust fundamental and
above all nobody at this time believes that market could decline. The general public now
feels comfortable buying more and more in the market. It is during this phase that those
investors who bought during accumulation phase begin to sell in anticipation of a
decline in the market.
This is time when Technical Analyst should look for reversal in the trend to initiate sell
side position in the stock market.
Dow Theory is named after Charles H Dow, who is considered as the
father of Technical Analysis. Dow Theory is very basic and more than 100
years old
Importance of VOLUME.
Volume Must Confirm the Trend
Trend should be confirmed by the volume. Volume should increase in the direction of
the trend i.e.
• If trend is down then volume should increase with the market decline.
• If trend is up then volume should increase with the market rally.
Basically volume is used as a secondary indicator to confirm the price trend
and once the Trend is confirmed by volume, one should always remain in the direction
of the trend.
Importance of Volume in Technical Analysis. Volume is simply the total number of
buyers and sellers exchanging shares over a given period of time, usually a day. Higher
the volume, more active the share. The data regarding volume of a share will be readily
available on your online trading screen.

Technical Indicator
Technical indicators are powerful tools that you can use to turn patterns into actionable
trading plans.

Moving averages
The moving average (often shortened to "MA" in our research) is one of the most
popular indicators and is used by technical analysts for a variety of tasks:
• to identify areas of short term support/resistance

• to determine the current trend

The main advantages of moving averages is firstly that they smooth the data and thus
provide a clearer visual picture of the current trend and secondly, that m.a. signals can
give a precise answer as to what the trend is. The main disadvantage is that they are
lagging rather than leading indicators but this should not be a problem to longer term
investors.

There are two main forms of moving average:

The simple moving average (as the name suggests) calculates the average price over
a specified moving time period. For example, a 20 day simple moving average will
calculate the average mean price from the last twenty days closing prices and so on.
The exponential moving average ("EMA") also averages the last x days closes but
assigns a greater weight to the more recent prices making it more sensitive to current
price action and thus reducing the lag effect.
RECOMMEND:

ON EOD CHART: 20-50-100-200 EMA

ON WEEKLY CHART: 20-260 EMA
ON MONTHLY: 20 EMA

ON EOD CHART

ABOVE 20 EMA SHORT TERM TREND BULLISH

ABOVE 50 EMA SHORT TERM TO MID TERM TREND BULLISH
ABOVE 100 EMA MID TERM TO LONG TERM TREND BULISH
ABOVE 200 EMA LONG TERM TREND BULLISH

ON WEEKLY CHART

ABOVE 20 EMA SHORT TERM TO MID TERM TREND BULLISH

ABOVE 260 EMA LONG TERM TO VERY LONG TERM TREND BULLISH

ON MONTHLY CHART

20 EMA LONG TERM TREND BULLISH

ADX (+DMI & -DMI)

What is ADX?
(with DMI)

ADX is an indicator that measures

Trend strength shows trend
Direction.

ADX tells us whether the bulls or

the bears are in control.

Using ADX to Trade Breakouts,

Pullbacks, and Reversal Patterns
Benefits of Using ADX
� Quantifies trend strength
� Allows us to see the strength of bulls and bears at the same time
� Tells when the trend is strong enough to trade
� Tells us when the trend is weak (stand aside)
� Works on all timeframes and products
� Can be combined with other indicators

ADX and DMI

� Average Directional Movement Index (ADX) was developed by J. Welles
Wilder and presented in his book, New Concepts in Technical Trading
Systems (1978).
� ADX is derived from two indicators (developed by Wilder) known as the
Positive Directional Movement Indicator (+DMI) and the Negative
Directional Movement Indicator (-DMI).

Directional Movement (DM)

DM is the largest part of today’s range that is outside of yesterday’s range.
When the largest part of today’s range is above yesterday’s range, we get
positive DM (+DM).
When the largest part of today’s range is below yesterday’s range, we get
negative DM (-DM).
� The primary use of ADX is to measure trend strength.
� DMI CONFIRMS trend direction and CONFIRMS price
entry/exit signals.
� When ADX > 25
� If +DMI is above –DMI, prices are trending up.
� If –DMI is above +DMI, prices are trending down.

� ADX measures the strength of a trend, but doesn’t distinguish between

uptrends and downtrends.
� When there is a strong uptrend, ADX rises.
� When there is a strong downtrend, ADX rises.

ADX Basic Signals

� Short Mode
ADX > 25
-DMI above +DMI
� Scalp Mode
ADX < 25
DMI spikes above 25

� Long Mode
ADX > 25
+DMI above –DMI

#1
Low ADX Periods—No Trend Trading
� ADX Trend Strength Rule
� When ADX is above 25, trend strength is strong enough for trend trading
strategies
� When ADX is below 25, avoid trend trading strategies (optional: scalp
trades)

25 Horse Power
� The magic ADX number for a trend to be designated ―strong‖ is 25.
� When ADX falls below 25, price is usually in a consolidation period and
trend trading strategies will normally fail.
� Once ADX rises above 25, the trader can use trend trading strategies.

#2
Best Trades Begin From Low ADX Periods

ADX Trendline Rule

� When ADX is below 25 for an extended period (20-25
Days/Weeks/Months), draw trend lines on price and wait for a breakout.

DMI Breakout Rule

� A valid breakout up requires a new high in price and a new high in +DMI
(and +DMI > 25)
� A valid breakout down requires a new low in price and a new high in –DMI
(and -DMI > 25)
LONG SETUP
� Price has a consolidation period for at least 20-25 bars (any time frame) with
a price pattern.
� ADX is less than 25 during the consolidation (preferably less than 15).
� Both DMI lines are above ADX prior to the breakout.
� The +DMI makes a crossover high as price breaks the top trendline.
� Price retraces to the 20 EMA and holds (first retracement) while the +DMI
makes a pivot low at or near 25.
� Enter long on a price pivot low reversal (up)

SHORT SETUP
� Price has a consolidation period for at least 20-25 bars (any time frame) with
a price pattern.
� ADX is less than 25 during the consolidation (preferably less than 15).
� Both DMI lines are above ADX prior to the breakout.
� The –DMI makes a crossover high as price breaks below the bottom
trendline.
� Price retraces to the 20 EMA and holds (first retracement) while –DMI
makes a pivot low at or near 25.
� Enter short on a price pivot high reversal (down).
#3
Following ADX Peak >25, the Trend is More Likely to Continue
Than Reverse

� DMI Continuation High Rule

� During a retracement, when DMI dominance is maintained, a new high in
the dominant DMI confirms continuation of the trend
� New high –DMI and new low in price, or new high in +DMI and a new high
in price

For LONG
Price makes a new high and ADX rises above 25.
� Price retraces down near the 20 EMA.
� ADX turns down during the price retracement.
� The –DMI does not cross +DMI on the retracement.
� Enter long when price makes a new high and +DMI makes new high.
For SHORT
� Price makes a new low and ADX rises above 25.
� Price retraces up near the 20 EMA.
� ADX turns down during the price retracement.
� The +DMI does not cross –DMI (or crosses slightly without a change of
dominance).
� Enter short when price makes a new low and -DMI
makes new high.

#4
Get Out of a Trend Trade With ADX Divergence
� ADX Divergence Rule: When ADX is divergent with price, exit part or full
position
� Most trading education focuses on making the perfect entry
� Exits are harder and more important for profit consistency
�Divergence =Decision
� Sell partial position (half) or full exit
#5
ADX Warns a Trend is About to End/Reverse
� Declining ADX peaks suggests trend is nearing completion
� An ADX peak of 25 or less often precedes trend reversals
� The end of a trend is an exit, but not necessarily a reversal entry

Review of Today’s Points (in ADX)

� Point #1: Low ADX Periods—No Trend Trading
� Point # 2: Best Trades Begin From Low ADX Periods
� Point #3: Following ADX Peak >25, the Trend is More Likely to Continue
Than Reverse
� Point #4: Exit a Trend Trade When There Is ADX Divergence
� Point #5: ADX Warns a Trend is About to End/Reverse.
 Understanding Chart Patterns
Identifying chart patterns is simply a system for predicting stock market trends and
turns. A trend is merely an indicator of an imbalance in the supply and demand. These
changes can usually be seen by market action through changes in price. These price
changes often form meaningful chart patterns that can act as signals in trying to
determine possible future trend developments. Research has proven that some patterns
have high forecasting probabilities. These patterns include: The Cup & Handle,
Ascending and Descending Triangles, Symmetrical Triangles, Wedges, Flags and
Pennants, Channels, Double Bottom/Top and the Head and Shoulders Patterns. In my
opinion, these are some of the best patterns to trade.
This section is designed to introduce you to some of these chart patterns, as well as
teach you to identify repetitions in the market qualities, to make timely and more
accurate decisions when predicting market trends.

Chart Patterns Reversal Pattern

Head & shoulder and Inverse Head & shoulder.
Falling Wedge & Rising Wedge
Double Top & Double Bottom

Continuation Pattern
Symmetrical Triangle
Ascending Triangle & Descending Triangle.
Flag & Pennant.
Cup & handle Pattern.
Channel.

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Candlesticks Patterns.
INTRODUCTION:
https://www.candlesticker.com/Introduction.aspx
BASIC CANDLESTICKS:
https://www.candlesticker.com/BasicCandlesticks.aspx
BULLISH PATTERNS:
https://www.candlesticker.com/BullishPatterns.aspx
BEARISH PATTERNS:
https://www.candlesticker.com/BearishPatterns.aspx
MOST IMPORTANT CANDLESTICKS PATTERNS

BULLISH :

BULLISH HAMMER
BULLISH ENGULFING
BULLISH HARAMI
BULLISH INVERTED HAMMER
BULLISH PIERCING LINE
BULLISH MORNING STAR
BULLISH MORNING DOJI STAR

BEARISH :

BEARISH HANGING MAN

BEARISH ENGULFING
BEARISH HARAMI
BEARISH DARK CLOUD COVER
BEARISH EVENING STAR
BEARISH EVENING DOJI STAR

'Breakout'
A breakout is a price movement of a security through an identified level of resistance,
which is usually followed by heavy volume and an increased amount of volatility.
Traders buy the underlying asset when the price breaks above a level of resistance or
when it breaks below a level of support.
'Breakdown'
A price movement through an identified level of support, which is usually followed by
heavy volume and sharp declines. Technical traders will short sell the underlying
asset when the price of the security breaks below a support level because it is a clear
indication that the bears are in control and that additional selling pressure is likely to
follow.

GAP THEORY.
Price charts often have blank spaces known as gaps. They represent times when no
shares were traded within a particular price range. Normally this occurs between the
close of the market on one day and the next day's open.
For an up gap to form, the low price after the market closes must be higher than the
high price of the previous day. Up gaps are generally considered bullish.
A down gap is just the opposite of an up gap; the high price after the market closes must
be lower than the low price of the previous day. Down gaps are usually considered
bearish.
.
TRADING PSYCHOLOGY AND RISK MANAGEMENT.

Risk Management
Risk is there in every business and proper risk management is road to success for any
business. Equity trading is a lucrative business which is very rewarding but this reward
is not risk free, as theoretically and practically risk free trade does not exist. Because
risk is associated with the reward, it becomes essential to manage risk in order to
protect one’s capital.
Risk management is very essential for trading as markets have potential to take back all
life Time profits in just few bad trades. Risk managements help in preserving initial
capital and accumulated profits so that one can stay alive long enough in financial
markets for wealth creation, thus it provides biggest edge in trading.

Components of risk management

Stop loss
Stop loss is an integral part of risk management. Stop loss is an order placed to buy or
sell security once certain price is reached. It is basically designed to limit the amount of
loss on buy/sell position. In fact by placing the stop loss one is just closing the losing
position and limiting the amount of loss which can increase beyond imagination.
Analyze reward risk ratio
Before initiating a trade, the trade should analyze reward risk ratio. On a conservative
basis if the said ratio is less than 1.5 then one should not initiate the trade.
Trail stop loss
Initially stop loss is placed to protect one’s capital on a losing trade, but once the trade
is in profit stop loss should be so moved that trade is at zero risk even if trailed stop loss
gets triggered.
Booking profit
Profit is the only goal for which we all trade. But at the same time profit is profit only
when it is realized otherwise its notional profit. Hence one should book profit at
predefined target levels and one should not be carried away by one’s emotions specially
greed when prices are near to predefined target levels.
Use of stop loss
A trader should always put Stop Loss and trade a fraction of his capital. It is very
important for the trader to have sound knowledge in the area concerned and should be
comfortable with the trading system. He should be aware that it is possible and
inevitable to have a losing streak of five losses in a row. This is called drawdown. This
awareness will help the traders prepare as to how to control risk and choose their
trading system.

Trading / Investing is a Race for Profits

Myth: To make money in the stock market you must know
what the market is going to do.
Truth: You must know what you’re going to do before the
market does what it does.
Traders often confuse their ability to read technical analysis with
their ability to properly execute and manage trades.

Trading/Investing is NOT a get-rich-quick scheme or ATM.

“The only thing to do when a person is wrong is to be right, by

ceasing to be wrong. Cut your losses quickly, without hesitation.
Don’t waste time. When a stock moves below a mental-stop, sell it
immediately.” - Jesse Livermore

“Do not use the words “Bullish” or “Bearish.” These words fix a
firm market-direction in the mind for an extended period of time.
Instead, use “Upward Trend” and “Downward Trend”. - Jesse
Livermore

Trading mastery is a state of complete acceptance of whatever

happens, not a state of fighting or resisting.
Good trading isn't about how much you make. It's whether you
followed your plan, limit losses, and seek continuous
improvement.

“Emotional control is the most essential factor in playing the

market. Never lose control of your emotions when the market
moves against you. Don’t get too confident over your wins or too
despondent over your losses.” - Jesse Livermore

THANK YOU
ALL THE BEST
@Rishikesh_ADX