Summer School forex

7/24/2019 Summer School forex

http://slidepdf.com/reader/full/summer-school-forex 1/86

OSCILLATORS AND MOMENTUM

INDICATORS

There are two types of charts indicators: leadin and lain! "hich one s#its yo#$etter%

Lessons on Oscillators and Momentum Indicators

Leading vs. Lagging Indicators

Leadin indicators i&e sinals 'E(ORE a new trend or re&ersal occ#rs) while

lain indicators i&e sinals A(TER a trend or re&ersal! '#t that*s not all+

How to Use Oscillators to Warn You of the End of a Trend

,ow do yo# spot a trend% May$e lain indicators can help yo# o#t+

How to Use Momentum Indicators to Conrm a Trend

Is the trend yo#*re in ready to p#sh forward or sp#tter o#t%

!ummar"# Leading and Lagging Indicators

Now that yo# -now the pros and cons of $oth the leadin and lain indicators)

which one do yo# thin- wor-s $etter for yo#%

LE$%I&' (!. L$''I&' I&%IC$TO)!

http://www.babypips.com/school/middle-school/oscillators-and-momentum-indicators/leading-vs-lagging-indicators.html

http://www.babypips.com/school/middle-school/oscillators-and-momentum-indicators/leading-indicators-oscillators.html

http://www.babypips.com/school/middle-school/oscillators-and-momentum-indicators/lagging-indicators-momentum-indicators.html

http://www.babypips.com/school/middle-school/oscillators-and-momentum-indicators/summary-leading-and-lagging-indicators.html

http://www.babypips.com/school/middle-school/oscillators-and-momentum-indicators/leading-indicators-oscillators.html


http://www.babypips.com/school/middle-school/oscillators-and-momentum-indicators/summary-leading-and-lagging-indicators.html

http://www.babypips.com/school/middle-school/oscillators-and-momentum-indicators/leading-vs-lagging-indicators.html



"e.&e already co&ered a lot of tools that can help

yo# analy/e potential trendin and rane $o#nd trade opport#nities! Still doin

reat so far% Aweso0e+ Let.s 0o&e on!

In this lesson) we.re oin to strea0line yo#r #se of these chart indicators!

"e want yo# to f#lly #nderstand the strenths and wea-nesses of each tool) so

yo#.ll $e a$le to deter0ine which ones wor- for yo# and which ones don.t!

Let.s disc#ss so0e concepts 1rst! There are two types of

indicators: leading and lagging!

A leading indicator i&es a sinal *efore the new trend or re&ersal occ#rs!

A lagging indicator i&es a sinal after the trend has started and $asically infor0s

yo# 2,ey $#ddy) pay attention) the trend has started and yo#.re 0issin the $oat!3

4o#.re pro$a$ly thin-in) 2Ooooh) I.0 oin to et rich with leadin indicators+3

since yo# wo#ld $e a$le to pro1t fro0 a new trend riht at the start!



4o#.re riht!

4o# wo#ld 2catch3 the entire trend e&ery sinle ti0e) I( the leadin indicator was

correct e&ery sinle ti0e! '#t it won.t $e!

"hen yo# #se leadin indicators) yo# will e5perience a lot of fa-eo#ts! Leadin

indicators are notorio#s for i&in $o#s sinals which co#ld 20islead3 yo#!

6et it% Leadin indicators that 20islead3 yo#%

,aha! Man we.re so f#nny we e&en crac- o#rsel&es #p!

The other option is to #se lain indicators) which aren.t as prone to $o#s sinals!

Lain indicators only i&e sinals after the price chane is clearly for0in a

trend! The downside is that yo#.d $e a little late in enterin a position!

Often the $iest ains of a trend occ#r in the 1rst few $ars) so $y #sin a lain

indicator yo# co#ld potentially 0iss o#t on 0#ch of the pro1t! And that s#c-s!

It.s -inda li-e wearin $ell7$otto0s in the 89;s and thin-in yo#.re so cool and hip

with fashion<!

(or the p#rpose of this lesson) let.s $roadly cateori/e all of o#r technical indicators

into one of two cateories:

8! Leadin indicators or oscillators

=! Lain) trend7followin) or 0o0ent#0 indicators

"hile the two can $e s#pporti&e of each other) they.re 0ore li-ely to con>ict with

each other! "e.re not sayin that one or the other sho#ld $e #sed e5cl#si&ely) $#t

yo# 0#st #nderstand the potential pitfalls of each!

HOW TO U!E O!CILL$TO)! TO W$)& YOU O+ THE E&% O+ $ T)E&%

An oscillator is any o$?ect or data that 0o&es $ac- and forth $etween two points!

In other words) it.s an ite0 that is oin to always fall so0ewhere $etween point A

and point '! Thin- of when yo# hit the oscillatin switch on yo#r electric fan!

Thin- of o#r technical indicators as either $ein 2on3 or 2o@3! More speci1cally) anoscillator will #s#ally sinal 2$#y3 or 2sell3) with the only e5ception $ein instances

when the oscillator is not clearly at either end of the $#ysell rane!

Does this so#nd fa0iliar% It sho#ld+



The Stochastic) Bara$olic SAR) and Relati&e Strenth Inde5 RSI are all oscillators!

Each of these indicators is desined to sinal a possi$le re&ersal) where the

pre&io#s trend has r#n its co#rse and the price is ready to chane direction!

Let.s ta-e a loo- at a co#ple of e5a0ples!

"e.&e slapped on all three oscillators on 6'BUSD.s daily chart shown $elow!Re0e0$er when we disc#ssed how to wor- the Stochastic) Bara$olic SAR) and RSI%

If yo# don.t) we.re sendin yo# $ac- to 1fth rade+

Anyway) as yo# can see on the chart) all three indicators a&e $#y sinals towards

the end of Dece0$er! Ta-in that trade wo#ld.&e yielded aro#nd ;; pips in ains!

Fa7chin+

Then) d#rin the third wee- of Gan#ary) the Stochastic) Bara$olic SAR) and RSI all

a&e sell sinals! And) ?#din fro0 that lon H70onth drop afterwards) yo#

wo#ld.&e 0ade a whole lot of pips if yo# too- that short trade!

Aro#nd 0id7April) all three oscillators a&e another sell sinal) after which the price

0ade another sharp di&e!

Now let.s ta-e a loo- at the sa0e leadin oscillators 0essin #p) ?#st so yo# -now

these sinals aren.t perfect!

In the chart $elow) yo# can see that the indicators co#ld i&e con>ictin sinals!

(or instance) the Bara$olic SAR a&e a sell sinal in 0id7(e$r#ary while the

Stochastic showed the e5act opposite sinal! "hich one sho#ld yo# follow%

"ell) the RSI see0s to $e ?#st as #ndecided as yo# are since it didn.t i&e any $#y

or sell sinals at that ti0e!



Loo-in at the chart a$o&e) yo# can #ic-ly see that there were a lot of false sinals

poppin #p!

D#rin the second wee- of April) $oth the Stochastic and the RSI a&e sell sinals

while the Bara$olic SAR didn.t i&e one! The price -ept cli0$in fro0 there and yo#

co#ld.&e lost a $#nch of pips if yo# entered a short trade riht away!

4o# wo#ld.&e had another loss aro#nd the 0iddle of May if yo# acted on those $#y

sinals fro0 the Stochastic and RSI and si0ply inored the sell sinal fro0 the

Bara$olic SAR!

"hat happened to s#ch a ood set of indicators%

The answer lies in the 0ethod of calc#lation for each one!

Stochastic is $ased on the hih7to7low rane of the ti0e period in this case) it.s

ho#rly) yet doesn.t acco#nt for chanes fro0 one ho#r to the ne5t!

The Relati&e Strenth Inde5 RSI #ses the chane fro0 one closin price to the

ne5t!

Bara$olic SAR has its own #ni#e calc#lations that can f#rther ca#se con>ict!

That.s the nat#re of oscillators! They ass#0e that a partic#lar price 0o&e0ent

always res#lts in the sa0e re&ersal! Of co#rse) that.s howash!

"hile $ein aware of why a leadin indicator 0ay $e wron) there.s no way to a&oid

the0!

If yo#.re ettin 0i5ed sinals) yo#.re $etter o@ doin nothin than ta-in a 2$est

#ess3! If a chart doesn.t 0eet all yo#r criteria) don.t force the trade+



Mo&e on to the ne5t one that does 0eet yo#r criteria!

HOW TO USE MOMENTUM INDICATORS TO CONFIRM A TREND

So how do we spot a trend?

The indicators that can do so have aread! "een identi#ied as MACD and $ovin% avera%es&

These indicators wi spot trends once the! have "een esta"ished' at the e(pense o# dea!ed entr!&

The "ri%ht side is that there)s ess chance o# "ein% wron%&

On *+,-USD)s dai! chart a"ove' we)ve p.t on the /0 EMA 1".e2' 30 EMA 1red2' and the MACD&

Aro.nd Octo"er /4' the /0 EMA crossed a"ove the 30 EMA' which is a ".ish crossover&

Si$iar!' the MACD $ade an .pward crossover and %ave a ".! si%na&

I# !o. 5.$ped in on a on% trade "ac6 then' !o. wo.d)ve en5o!ed that nice .ptrend that #oowed&

7ater on' "oth the $ovin% avera%es and MACD %ave a co.pe o# se si%nas&

And 5.d%in% #ro$ the stron% downtrends that occ.rred' ta6in% those short trades wo.d)ve %iven h.%e

pro#its&

We can see those doar si%ns #ashin% in !o.r e!es8



Now et)s oo6 at another chart so !o. can see how these crossover si%nas can so$eti$es %ive #ase

si%nas& We i6e to ca the$ 9#a6eo.ts&:

On March /4' the MACD $ade a ".ish crossover whie the $ovin% avera%es %ave no si%na

whatsoever&

I# !o. acted on that ".! si%na #ro$ the MACD' !o. 5.st s.##ered a #a6e o.t' ".dd!&

Si$iar!' the MACD)s ".! si%na "! the end o# Ma! wasn)t acco$panied "! an! $ovin% avera%e

crossover& I# !o. entered a on% trade ri%ht then and there' !o. $i%ht)ve set !o.rse# .p #or a oss

since the price dipped a "it a#ter that&

+.$$er8

SUMMAR;< 7EADIN* AND 7A**IN* INDICATORS



Here)s a =.ic6 recap o# what we disc.ssed in this esson<

There are two t!pes o# indicators< leading and lagging&

/& A leading indicator or an osciator %ives a si%na before the new trend or reversa occ.rs&

3& A lagging indicator or a $o$ent.$ indicator %ives a si%na after the trend has started&

I# !o.)re a"e to identi#! the t!pe o# $ar6et !o. are tradin% in' !o. can pinpoint which indicators co.d

%ive acc.rate si%nas and which ones are worthess at that ti$e&

So' how do !o. #i%.re o.t when to .se osciators or $o$ent.$ indicators' or "oth?

That)s another $iion doar =.estion8 A#ter a' we 6now the! don)t awa!s wor6 in tande$&

We) %ive !o. a $iion doars rea! soon>

Oh wait8 We $eant the $iion doar answer8

For now' 5.st 6now that once !o.)re a"e to identi#! the t!pe o# $ar6et !o. are tradin% in' !o. wi

then 6now which indicators wi %ive acc.rate si%nas' and which ones are worthess at that ti$e&

This is no piece o# ca6e& +.t it)s a s6i !o. wi sow! i$prove .pon as !o.r e(perience %rows&

+esides>

;o.)re not at it aone8



In the #.t.re sections' we)re %oin% to teach !o. how to correct! identi#! the #ore( $ar6et

environ$ent !o. are tradin% in to "etter .se these indicators8

IMBORTANT C,ART BATTERNS

,rice action can $a6e coo pict.res on !o.r chart&&&and the! act.a! %ive a c.e to $ar6et "ehavior

too8

LESSONS ON IMPORTANT CHART PATTERNS

CHART PATTERNS SCHMATTERNS

Chart patterns are like that funny feeling you get in your tummy right before

you let a fart explode. Here's why!

HOW TO TRADE DOUBLE TOPS AND DOUBLE

BOTTOMS

Hey look, doubles isn't just a sports term! Read all about double tops and

double bottoms!

HOW TO TRADE THE HEAD AND SHOULDERS

PATTERN

A head and shoulders pattern is also a trend reversal formation. And you

thought it was something to make your hair silky smooth and flake-free!

HOW TO TRADE WEDGE CHART PATTERNS

If you're thinking shoes or cheese, then you've got another thing coming!

Wedges are in your charts too!

HOW TO USE RECTANGLE CHART PATTERNS TO

TRADE BREAKOUTS

Now aren't you glad you paid attention to your shapes when you were just a

tot? Who would've guessed rectangles are used in trading too?

http://www.babypips.com/school/middle-school/important-chart-patterns/chart-patterns-schmatterns.html

http://www.babypips.com/school/middle-school/important-chart-patterns/doubles.html


http://www.babypips.com/school/middle-school/important-chart-patterns/head-and-shoulders.html


http://www.babypips.com/school/middle-school/important-chart-patterns/wedges.html

http://www.babypips.com/school/middle-school/important-chart-patterns/rectangles.html


http://www.babypips.com/school/middle-school/important-chart-patterns/chart-patterns-schmatterns.html





http://www.babypips.com/school/middle-school/important-chart-patterns/wedges.html





CHART ,ATTERNS SCHMATTERNS

+! now !o. have an arsena o# weapons to .se when !o. "atte the $ar6et& In this esson' !o. wiadd !et another weapon< CHART PATTERNS!

Thin6 o# chart patterns as a and $ine detector "eca.se' once !o. #inish this esson' !o. wi "e a"e

to spot 9e(posions: on the charts "e#ore the! even happen' potentia! $a6in% !o. a ot o# $one! in

the process&

Chart patterns are i6e that #.nn! #eein% !o. %et in !o.r t.$$! ri%ht "e#ore !o. et a #art e(pode&

DON’T YOU WISH YOU HAD A CHART TO DETECT THIS EXPLOSION?

In this esson' we wi teach !o. "asic chart patterns and #or$ations& When correct! identi#ied' it

.s.a! eads to an e(posive "rea6o.t' so watch o.t8

Re$e$"er' o.r %oa is to spot "i% $ove$ents "e#ore the! happen so that we can ride the$ o.t and

ra6e in the cash& A#ter a' who doesn)t want to have a poo o# cash to swi$ in i6e Richie Rich?



Chart #or$ations wi %reat! hep .s spot conditions where the $ar6et is read! to "rea6 o.t& The! can

aso indicate whether the price wi contin.e in its c.rrent direction or reverse so we) aso "e devisin%

so$e ni#t! trade strate%ies #or these patterns&

Don)t worr!' we) %ive !o. a neat itte cheat sheet to hep !o. re$e$"er a these coo patterns and

strate%ies8

Here)s the ist o# chart patterns that we)re %oin% to cover<

Do."e Top and Do."e +otto$

Head and Sho.ders and Inverse Head and Sho.ders

Risin% and Fain% Wed%es

+.ish and +earish Rectan%es

+earish and +.ish ,ennants

Trian%es 1S!$$etrica' Ascendin%' and Descendin%2

HOW TO TRADE DOU+7E TO,S AND DOU+7E +OTTOMS

DOUBLE TOP

A do."e top is a reversa pattern that is #or$ed a#ter there is an e(tended $ove .p& The 9tops: are

pea6s which are #or$ed when the price hits a certain eve that can)t "e "ro6en&

A#ter hittin% this eve' the price wi "o.nce o## it si%ht!' ".t then ret.rn "ac6 to test the eve a%ain&

I# the price "o.nces o## o# that eve a%ain' then !o. have a DOU+7E top8



In the chart a"ove !o. can see that two pea6s or 9tops: were #or$ed a#ter a stron% $ove .p&

Notice how the second top was not a"e to "rea6 the hi%h o# the #irst top& This is a stron% si%n that a

reversa is %oin% to occ.r "eca.se it is tein% .s that the ".!in% press.re is 5.st a"o.t #inished&

With the do."e top' we wo.d pace o.r entr! order "eow the nec6ine "eca.se we are anticipatin% a

reversa o# the .ptrend&



Wow8 We $.st "e ps!chic or so$ethin% "eca.se we awa!s see$ to "e ri%ht8

7oo6in% at the chart !o. can see that the price "rea6s the nec6ine and $a6es a nice $ove down&

Re$e$"er that do."e tops are a trend reversa #or$ation so !o.) want to oo6 #or these a#ter there

is a stron% .ptrend&

;o.) aso notice that the drop is appro(i$ate! the sa$e hei%ht as the do."e top #or$ation& eep

that in $ind "eca.se that) "e .se#. in settin% pro#it tar%ets&

DOUBLE BOTTOM



The do."e "otto$ is aso a trend reversa #or$ation' ".t this ti$e we are oo6in% to %o on% instead

o# short& These #or$ations occ.r a#ter e(tended downtrends when two vae!s or 9"otto$s: have "een

#or$ed&

;o. can see #ro$ the chart a"ove that a#ter the previo.s downtrend' the price #or$ed two vae!s"eca.se it wasn)t a"e to %o "eow a certain eve&

Notice how the second "otto$ wasn)t a"e to si%ni#icant! "rea6 the #irst "otto$& This is a si%n that

the sein% press.re is a"o.t #inished' and that a reversa is a"o.t to occ.r&



Wi !o. oo6 at that8

The price "ro6e the nec6ine and $ade a nice $ove .p&

See how the price 5.$ped "! a$ost the sa$e hei%ht as that o# the do."e "otto$ #or$ation?

Re$e$"er' 5.st i6e do."e tops' do."e "otto$s are aso trend reversa #or$ations& ;o.) want to

oo6 #or these a#ter a stron% downtrend&

HOW TO TRADE THE HEAD AND SHOU7DERS ,ATTERN

HEAD AND SHOULDERS

A head and sho.ders pattern is aso a trend reversa #or$ation&



It is #or$ed "! a pea6 1sho.der2' #oowed "! a hi%her pea6 1head2' and then another ower pea6

1sho.der2& A 9nec6ine: is drawn "! connectin% the owest points o# the two tro.%hs& The sope o# this

ine can either "e .p or down& T!pica!' when the sope is down' it prod.ces a $ore reia"e si%na&

In this e(a$pe' we can easi! see the head and sho.ders pattern&

The head is the second pea6 and is the hi%hest point in the pattern& The two sho.ders aso #or$

pea6s ".t do not e(ceed the hei%ht o# the head&

With this #or$ation' we p.t an entr! order "eow the nec6ine&

We can aso cac.ate a tar%et "! $eas.rin% the hi%h point o# the head to the nec6ine& This distance is

appro(i$ate! how #ar the price wi $ove a#ter it "rea6s the nec6ine&



;o. can see that once the price %oes "eow the nec6ine it $a6es a $ove that is at east the si@e o#

the distance "etween the head and the nec6ine&

We 6now !o.)re thin6in% to !o.rse#' 9the price 6ept $ovin% even a#ter it reached the tar%et&:

And o.r response is' 9DON”T BE GREEDY!:

INVERSE HEAD AND SHOULDERS

The na$e spea6s #or itse#& It is "asica! a head and sho.ders #or$ation' e(cept this ti$e it)s .pside

down&

A vae! is #or$ed 1sho.der2' #oowed "! an even ower vae! 1head2' and then another hi%her vae!

1sho.der2& These #or$ations occ.r a#ter e(tended downward $ove$ents&



Here !o. can see that this is 5.st i6e a head and sho.ders pattern' ".t it)s #ipped .pside down& With

this #or$ation' we wo.d pace a on% entr! order a"ove the nec6ine&

O.r tar%et is cac.ated 5.st i6e the head and sho.ders pattern& Meas.re the distance "etween the

head and the nec6ine' and that is appro(i$ate! the distance that the price wi $ove a#ter it "rea6s

the nec6ine&

;o. can see that the price $oved .p nice! a#ter it "ro6e the nec6ine&

I# !o.r tar%et is hit' then "e happ! with !o.r pro#its& However' there are trade $ana%e$ent

techni=.es where !o. can oc6 in so$e o# !o.r pro#its and sti 6eep !o.r trade open in case the price

contin.es to $ove !o.r wa!&

;o. wi earn a"o.t those ater on in the co.rse



HOW TO TRADE WED*E CHART ,ATTERNS

Wed%es si%na a pa.se in the c.rrent trend& When !o. enco.nter this #or$ation' it si%nas that #ore(

traders are sti decidin% where to ta6e the pair ne(t&

Wed%es co.d serve as either contin.ation or reversa patterns&

RISING WEDGE

A rising wedge is #or$ed when price consoidates "etween .pward sopin% s.pport and resistance

ines&

Here' the sope o# the s.pport ine is steeper than that o# the resistance& This indicates that hi%her

ows are "ein% #or$ed #aster than hi%her hi%hs& This eads to a wed%ei6e #or$ation' which is e(act!

where the chart pattern %ets its na$e #ro$8

With prices consoidatin%' we 6now that a "i% spash is co$in%' so we can e(pect a "rea6o.t to either

the top or "otto$&

I# the risin% wed%e #or$s a#ter an .ptrend' it)s .s.a! a "earish reversa pattern&

On the other hand' i# it #or$s d.rin% a downtrend' it co.d si%na a contin.ation o# the down $ove&

Either wa!' the i$portant thin% is that' when !o. spot this #ore( tradin% chart pattern' !o.)re read!

with !o.r entr! orders8



In this #irst e(a$pe' a risin% wed%e #or$ed at the end o# an .ptrend& Notice how price action is

#or$in% new hi%hs' ".t at a $.ch sower pace than when price $a6es hi%her ows&

See how price "ro6e down to the downside? That $eans there are $ore #ore( traders desperate to "e

short than "e on%8

The! p.shed the price down to "rea6 the trend ine' indicatin% that a downtrend $a! "e in the cards&

B.st i6e in the other #ore( tradin% chart patterns we disc.ssed earier' the price $ove$ent a#ter the

"rea6o.t is appro(i$ate! the sa$e $a%nit.de as the hei%ht o# the #or$ation&

Now et)s ta6e a oo6 at another e(a$pe o# a risin% wed%e #or$ation& On! this ti$e it acts as a

"earish contin.ation si%na&



As !o. can see' the price ca$e #ro$ a downtrend "e#ore consoidatin% and s6etchin% hi%her hi%hs and

even hi%her ows&

In this case' the price "ro6e to the down side and the downtrend contin.ed& That)s wh! it)s caed a

contin.ation si%na !o8

See how the price $ade a nice $ove down that)s the sa$e hei%ht as the wed%e?

What did we earn so #ar these Bapanese candestic6 chart patterns?

A risin% wed%e #or$ed a#ter an .ptrend .s.a! eads to a reversa 1downtrend2 whie a risin% wed%e#or$ed d.rin% a downtrend t!pica! res.ts in a contin.ation 1downtrend2&

Si$p! p.t' a risin% wed%e eads to a downtrend' which $eans that it)s a "earish chart pattern8

FALLING WEDGE

B.st i6e the risin% wed%e' the falling wedge can either "e a reversa or contin.ation si%na&

As a reversa si%na' it is #or$ed at a "otto$ o# a downtrend' indicatin% that an .ptrend wo.d co$e

ne(t&

As a contin.ation si%na' it is #or$ed d.rin% an .ptrend' i$p!in% that the .pward price action wo.d

res.$e& Uni6e the risin% wed%e' the #ain% wed%e is a ".ish chart pattern&



In this e(a$pe' the #ain% wed%e serves as a reversa si%na& A#ter a downtrend' the price $ade owerhi%hs and ower ows&

Notice how the #ain% trend ine connectin% the hi%hs is steeper than the trend ine connectin% the

ows&

Upon "rea6in% a"ove the top o# the wed%e' the pair $ade a nice $ove .pwards that)s appro(i$ate!

e=.a to the hei%ht o# the #or$ation& In this case' the price ra! went a #ew $ore pips "e!ond that

tar%et8

7et)s ta6e a oo6 at an e(a$pe where the #ain% wed%e serves as a contin.ation si%na& 7i6e we

$entioned earier' when the #ain% wed%e #or$s d.rin% an .ptrend' it .s.a! si%nas that the trend

wi res.$e ater on&



In this case' the price consoidated #or a "it a#ter a stron% ra!& This co.d $ean that ".!ers si$p!

pa.sed to catch their "reath and pro"a"! recr.ited $ore peope to 5oin the ". ca$p&

H$$' it oo6s i6e the pair is revvin% .p #or a stron% $ove& Which wa! wo.d it %o?

See how the price "ro6e to the top side and went on to ci$" hi%her?



I# we paced an entr! order a"ove that #ain% trend ine connectin% the pair)s hi%hs' we wo.d)ve "een

a"e to 5.$p in on the stron% .ptrend and ca.%ht so$e pips8 A %ood .pside tar%et wo.d "e the

hei%ht o# the wed%e #or$ation&

I# !o. want to %o #or $ore pips' !o. can oc6 in so$e pro#its at the tar%et "! cosin% down a portion o#

!o.r position' then ettin% the rest o# !o.r position ride&

HOW TO USE RECTAN*7E CHART ,ATTERNS TO TRADE +REAOUTS

A retangle is a chart pattern #or$ed when price is "o.nded "! parae s.pport and resistance eves&

A rectan%e e(hi"its a period o# consoidation or indecision "etween ".!ers and seers as the! ta6e

t.rns throwin% p.nches ".t neither has ta6en over&



The price wi 9test: the s.pport and resistance eves severa ti$es "e#ore event.a! "rea6in% o.t&

Fro$ there' the price co.d trend in the direction o# the "rea6o.t' whether it is to the .pside or

downside&

In the e(a$pe a"ove' we can cear! see that the pair was "o.nded "! two 6e! price eves which are

parae to one another& We 5.st have to wait .nti one o# these eves "rea6s and %o aon% #or the ride8

Re$e$"er' when !o. spot a rectan%e< THN" O#TSDE THE BO$!

BEARISH RECTANGLE

A bearis% retangle is #or$ed when the price consoidates #or a whie d.rin% a downtrend& Thishappens "eca.se seers pro"a"! need to pa.se and catch their "reath "e#ore ta6in% the pair an!

ower&

In this e(a$pe' price "ro6e the "otto$ o# the rectan%e chart pattern and contin.ed to shoot down& I#

we had a short order 5.st "eow the s.pport eve' we wo.d have $ade a nice pro#it on this trade&



Here)s a tip< Once the pair #as "eow the s.pport' it tends to $a6e a $ove that is a"o.t the si@e o#

the rectan%e pattern& In the e(a$pe a"ove' the pair $oved "e!ond the tar%et so there wo.d have

"een a chance to catch $ore pips8

BULLISH RECTANGLE

Here)s another e(a$pe o# a rectan%e' this ti$e' a b&llis% retangle chart pattern& A#ter an .ptrend'

the price pa.sed to consoidate #or a "it& Can !o. %.ess where the price is headed ne(t?

I# !o. answered .p' then !o.)re ri%ht8 Chec6 o.t that nice .pside "rea6o.t ri%ht there8



Notice how the price $oved a the wa! .p a#ter "rea6in% a"ove the top o# the rectan%e pattern& I# we

had a on% order on top o# the resistance eve' we wo.d)ve ca.%ht so$e pips on the trade8

B.st i6e in the "earish rectan%e pattern e(a$pe' once the pair "rea6s' it wi .s.a! $a6e a $ove

that)s AT 7EAST the si@e o# its previo.s ran%e&

HOW TO TRADE +EARISH AND +U77ISH ,ENNANTS

BEARISH PENNANTS

Si$iar to rectan%es' pennants are contin.ation chart patterns #or$ed a#ter stron% $oves&

A#ter a "i% .pward or downward $ove' ".!ers or seers .s.a! pa.se to catch their "reath "e#ore

ta6in% the pair #.rther in the sa$e direction& +eca.se o# this' the price .s.a! consoidates and #or$s

a tin! s!$$etrica trian%e' which is caed a pennant&

Whie the price is sti consoidatin%' $ore ".!ers or seers .s.a! decide to 5.$p in on the stron%

$ove' #orcin% the price to ".st o.t o# the pennant #or$ation&

A bearis% 'ennant is #or$ed d.rin% a steep' a$ost vertica' downtrend& A#ter that sharp drop in

price' so$e seers cose their positions whie other seers decide to 5oin the trend' $a6in% the price

consoidate #or a "it&



As soon as eno.%h seers 5.$p in' the price "rea6s "eow the "otto$ o# the pennant and contin.es to

$ove down&

As !o. can see' the drop res.$ed a#ter the price $ade a "rea6o.t to the "otto$& To trade this chart

pattern' we)d p.t a short order at the "otto$ o# the pennant with a stop oss a"ove the pennant& That

wa!' we)d "e o.t o# the trade ri%ht awa! in case the "rea6down was a #a6e o.t&



Uni6e the other chart patterns wherein the si@e o# the ne(t $ove is appro(i$ate! the hei%ht o# the

#or$ation' pennants si%na $.ch stron%er $oves& Us.a!' the HEIGHT o# the earier $ove 1aso

6nown as the $ast2 is .sed to esti$ate the si@e o# the "rea6o.t $ove&

BULLISH PENNANT

B&llis% 'ennants' 5.st i6e its na$e s.%%ests' si%nas that ".s are a"o.t to %o achar%in) a%ain&

This $eans that the sharp ci$" in price wo.d res.$e a#ter that "rie# period o# consoidation' when

".s %ather eno.%h ener%! to ta6e the price hi%her a%ain&

In this e(a$pe' the price $ade a sharp vertica ci$" "e#ore ta6in% a "reather& I can hear the ".s

sto$pin% and revvin% .p #or another r.n8



B.st i6e we predicted' the price $ade another stron% $ove .pwards a#ter the "rea6o.t& To pa! this'

we)d pace o.r on% order a"ove the pennant and o.r stop "eow the "otto$ o# the pennant to avoid

#a6e o.ts&

7i6e we disc.ssed earier' the si@e o# the "rea6o.t $ove is aro.nd the hei%ht o# the $ast 1or the si@e

o# the earier $ove2& ;o. see' pennants $a! "e s$a in si@e ".t the! co.d si%na h.%e price $oves

so don)t .nderesti$ate )e$8

HOW TO TRADE TRIAN*7E CHART ,ATTERNS

SYMMETRICAL TRIANGLE

A s())etrial triangle is a chart #or$ation where the sope o# the price)s hi%hs and the sope o# the

price)s ows conver%e to%ether to a point where it oo6s i6e a trian%e&

What)s happenin% d.rin% this #or$ation is that the $ar6et is $a6in% ower hi%hs and hi%her ows& This$eans that neither the ".!ers nor the seers are p.shin% the price #ar eno.%h to $a6e a cear trend&

I# this were a "atte "etween the ".!ers and seers' then this wo.d "e a draw&

This is aso a t!pe o# consoidation&



In the chart a"ove' we can see that neither the ".!ers nor the seers co.d p.sh the price in their

direction& When this happens we %et ower hi%hs and hi%her ows&

As these two sopes %et coser to each other' it $eans that a "rea6o.t is %ettin% near& We don)t 6now

what direction the "rea6o.t wi "e' ".t we do 6now that the $ar6et wi )ost li*el( "rea6 o.t&

Event.a!' one side o# the $ar6et wi %ive in&

So how can we ta6e advanta%e o# this?

Si$pe&

We can pace entr! orders a"ove the sope o# the ower hi%hs and "eow the sope o# the hi%her ows&

Since we aread! 6now that the price is %oin% to "rea6 o.t' we can 5.st hitch a ride in whatever

direction the $ar6et $oves&



In this e(a$pe' i# we paced an entr! order a"ove the sope o# the ower hi%hs' we wo.d)ve "eenta6en aon% #or a nice ride .p&

I# !o. had paced another entr! order "eow the sope o# the hi%her ows' then !o. wo.d cance it as

soon as the #irst order was hit&

ASCENDING TRIANGLE

This t!pe o# trian%e chart pattern occ.rs when there is a resistance eve and a sope o# hi%her ows&

What happens d.rin% this ti$e is that there is a certain eve that the ".!ers cannot see$ to e(ceed&

However' the! are %rad.a! startin% to p.sh the price .p as evident "! the hi%her ows&

In the chart a"ove' !o. can see that the ".!ers are startin% to %ain stren%th "eca.se the! are $a6in%

hi%her ows& The! 6eep p.ttin% press.re on that resistance eve and as a res.t' a "rea6o.t is "o.nd

to happen&



Now the =.estion is' 9Which direction wi it %o? Wi the ".!ers "e a"e to "rea6 that eve or wi the

resistance "e too stron%?:

Man! chartin% "oo6s wi te !o. that in $ost cases' the ".!ers wi win this "atte and the price wi

"rea6 o.t past the resistance&

However' it has "een o.r e(perience that this is not awa!s the case& So$eti$es the resistance eve is

too stron%' and there is si$p! not eno.%h ".!in% power to p.sh it thro.%h&

Most o# the ti$e' the price wi in #act %o .p& The point we are tr!in% to $a6e is that !o. sho.d not "e

o"sessed with which direction the price %oes' ".t !o. sho.d "e read! #or $ove$ent in EITHER

direction&

In this case' we wo.d set an entr! order a"ove the resistance ine and "eow the sope o# the hi%her

ows&

In this scenario' the ".!ers ost the "atte and the price proceeded to dive8 ;o. can see that the drop

was appro(i$ate! the sa$e distance as the hei%ht o# the trian%e #or$ation&

I# we set o.r short order "eow the "otto$ o# the trian%e' we co.d)ve ca.%ht so$e pips o## that dive&

DESCENDING TRIANGLE

As !o. pro"a"! %.essed' descendin% trian%es are the e(act opposite o# ascendin% trian%es 1we 6new

!o. were s$art82& In descendin% trian%e chart patterns' there is a strin% o# ower hi%hs which #or$sthe .pper ine& The ower ine is a s.pport eve in which the price cannot see$ to "rea6&



In the chart a"ove' !o. can see that the price is %rad.a! $a6in% ower hi%hs which te .s that the

seers are startin% to %ain so$e %ro.nd a%ainst the ".!ers&

Now $ost o# the ti$e' and we do sa! MOST' the price wi event.a! "rea6 the s.pport ine and

contin.e to #a&

However' in so$e cases the s.pport ine wi "e too stron%' and the price wi "o.nce o## o# it and $a6e

a stron% $ove .p&

The %ood news is that we don)t care where the price %oes& We 5.st 6now that it)s a"o.t to %o

so$ewhere& In this case' we wo.d pace entr! orders a"ove the .pper ine 1the ower hi%hs2 and

"eow the s.pport ine&



In this case' the price ended .p "rea6in% a"ove the top o# the trian%e pattern& A#ter the .pside

"rea6o.t' it proceeded to s.r%e hi%her' "! aro.nd the sa$e vertica distance as the hei%ht o# the

trian%e&

,acin% an entr! order a"ove the top o# the trian%e and %oin% #or a tar%et as hi%h as the hei%ht o# the

#or$ation wo.d)ve !ieded nice pro#its&

NOW THE MAIN *ROU,S OF CHART ,ATTERNS

That)s a whoe ot o# chart patterns we 5.st ta.%ht !o. ri%ht there& We)re prett! tired so it)s ti$e #or .s

to ta6e o## and eave it to !o. #ro$ here>

B.st pa!in)8 We ain)t eavin% !o. ti !o.)re read!8

In this section' we) disc.ss a "it $ore how to .se these chart patterns to !o.r advanta%e&

It)s not eno.%h to 5.st 6now how the toos wor6' we)ve %ot to earn how to .se the$& And with a

these new weapons in !o.r arsena' we)d "etter %et those pro#its #ired .p8

7et)s s.$$ari@e the chart patterns we 5.st earned and cate%ori@e the$ accordin% to the si%nas the!

%ive&

REVERSAL CHART PATTERNS

Reversa patterns are those chart #or$ations that si%na that the on%oin% trend is a"o.t to chan%e

co.rse&

I# a reversa chart pattern #or$s d.rin% an .ptrend' it hints that the trend wi reverse and that the

price wi head down soon& Converse!' i# a reversa chart pattern is seen d.rin% a downtrend' it

s.%%ests that the price wi $ove .p ater on&

In this esson' we covered si( chart patterns that %ive reversa si%nas& Can !o. na$e a si( o# the$?

/& Do."e Top

3& Do."e +otto$& Head and Sho.ders

& Inverse Head and Sho.ders

4& Risin% Wed%e

& Fain% Wed%e

I# !o. %ot a si( ri%ht' "rownie points #or !o.8



To trade these chart patterns' si$p! pace an order "e!ond the nec6ine and in the direction o# the

new trend& Then %o #or a tar%et that)s a$ost the sa$e as the hei%ht o# the #or$ation&

For instance' i# !o. see a do."e "otto$' pace a on% order at the top o# the #or$ation)s nec6ine and

%o #or a tar%et that)s 5.st as hi%h as the distance #ro$ the "otto$s to the nec6ine&

In the interest o# proper ris6 $ana%e$ent' don)t #or%et to pace !o.r stops8 A reasona"e stop oss can

"e set aro.nd the $idde o# the chart #or$ation&

For e(a$pe' !o. can $eas.re the distance o# the do."e "otto$s #ro$ the nec6ine' divide that "!two' and .se that as the si@e o# !o.r stop&

CONTINUATION CHART PATTERNS

Contin.ation chart patterns are those chart #or$ations that si%na that the on%oin% trend wi res.$e&

Us.a!' these are aso 6nown as consoidation patterns "eca.se the! show how ".!ers or seers ta6e

a =.ic6 "rea6 "e#ore $ovin% #.rther in the sa$e direction as the prior trend&

We)ve covered severa contin.ation chart patterns' na$e! the wed%es' rectan%es' and pennants&

Note that wed%es can "e considered either reversa or contin.ation patterns dependin% on the trend

on which the! #or$&



To trade these patterns' si$p! pace an order a"ove or "eow the #or$ation 1#oowin% the direction o#

the on%oin% trend' o# co.rse2& Then %o #or a tar%et that)s at east the si@e o# the chart pattern #or

wed%es and rectan%es&

For pennants' !o. can ai$ hi%her and tar%et the hei%ht o# the pennant)s $ast&

For contin.ation patterns' stops are .s.a! paced a"ove or "eow the act.a chart #or$ation&

For e(a$pe' when tradin% a "earish rectan%e' pace !o.r stop a #ew pips a"ove the top or resistance

o# the rectan%e&

BILATERAL CHART PATTERNS

+iatera chart patterns are a "it $ore tric6! "eca.se these si%na that the price can $ove either wa!&

H.h' what 6ind o# a si%na is that?8

This is where trian%e #or$ations #a in& Re$e$"er when we disc.ssed that the price co.d "rea6

either to the topside or downside with trian%es?



To pa! these chart patterns' !o. sho.d consider "oth scenarios 1.pside or downside "rea6o.t2 and

pace one order on top o# the #or$ation and another at the "otto$ o# the #or$ation&

I# one order %ets tri%%ered' !o. can cance the other one& Either wa!' !o.)d "e part o# the action&

Do."e the possi"iities' do."e the #.n8

The on! pro"e$ is that !o. co.d catch a #ase "rea6 i# !o. set !o.r entr! orders too cose to the top

or "otto$ o# the #or$ation&

So "e care#. and don)t #or%et to pace !o.r stops too8

FORE CHART ,ATTERNS CHEAT SHEET

7i6e we pro$ised' here)s a neat itte cheat sheet to hep !o. re$e$"er a those #ore( chart patterns

and what the! are si%nain%&

We)ve isted the "asic #ore( chart patterns' when the! are #or$ed' what t!pe o# si%na the! %ive' and

what the ne(t i6e! price $ove $a! "e& Chec6 it o.t8

C%art +or)s T('e of Ne,t



Pattern D&ring Signal -o.e

Do#$le Top Uptrend Re&ersal Down

Do#$le

'otto0 Downtrend Re&ersal Up

,ead and

Sho#lders Uptrend Re&ersal Down

In&erse ,ead

and Sho#lders Downtrend Re&ersal Up

Risin "ede Downtrend Contin#ation Down

Risin "ede Uptrend Re&ersal Down

(allin "ede Uptrend Contin#ation Up

(allin "ede Downtrend Re&ersal Up

'earish

Rectanle Downtrend Contin#ation Down

'#llish

Rectanle Uptrend Contin#ation Up

'earish

Bennant Downtrend Contin#ation Down

'#llish

Bennant Uptrend Contin#ation Up

;o. aso $i%ht want to add this pa%e to !o.r "oo6$ar6s in case !o. need to do."echec6 those chart

patterns) si%nas "e#ore !o. ris6 !o.r hardearned cash on a trade& ;o. never 6now when !o.)re

%onna need to cheat' hah8 +oo6$ar6 this thin% !o8

And as !o. pro"a"! noticed' we didn)t inc.de the trian%e #or$ations 1s!$$etrica' ascendin%' and

descendin%2 in this cheat sheet& That)s "eca.se these chart patterns can #or$ either in an .ptrend or

downtrend' and can si%na either a contin.ation or reversa& Con#.sin% I 6now' ".t that)s where

practice and e(perience co$es in8



7i6e we $entioned' it)s to.%h to te where the #ore( $ar6et wi "rea6o.t or reverse& So what)s

i$portant is that !o. prepare we and have !o.r entr!-e(it orders read! so that !o. can "e part o#

the action either wa!8

BIJOT BOINTSAfter yo#*re done with this section) Beter Bar-er won*t $e the 1rst thin that will

co0e to yo#r 0ind when yo# read the a$$re&iation KBB!K

Lessons on ,ivot ,oints

+ore- ,ivot ,oints

Bi&ot points can $e #sed in identifyin re&ersal or $rea-o#t areas! Read on to 1nd

o#t how to #se these s#pport and resistance le&els!

How to Calculate ,ivot ,oints

"anna #se pi&ot points in yo#r tradin $#t don*t -now how to calc#late the0% Let

#s show yo# how+

How to use ,ivot ,oints for )ange Trading

Chec- o#t these e5a0ples on how to #se pi&ot points in rane tradin! E&en $etter)

we*ll show yo# how to co0$ine candlestic- analysis with pi&ot points+

How to use ,ivot ,oints to Trade rea/outs

As with all s#pport and resistance le&els) pi&ot point le&els won*t hold fore&er! Learn

how to 0a-e pips when pi&ot points fail+

How to Use ,ivot ,oints to Measure Mar/et !entiment

Did yo# -now that pi&ot points can also help yo# deter0ine whether traders are

0ore inclined to $#y or sell a c#rrency pair%

FORE ,IGOT ,OINTS

Are !o. a e(cited? It)s !o.r ast !ear in 5.nior hi%h "e#ore !o. head o## to hi%h schoo8

,ro#essiona #ore( traders and $ar6et $a6ers .se 'i.ot 'oints to identi#! potentia s.pport and

resistance eves& Si$p! p.t' a pivot point and its s.pport-resistance eves are areas at which the

direction o# price $ove$ent can possi"! chan%e&

http://www.babypips.com/school/middle-school/pivot-points/forex-pivot-points.html

http://www.babypips.com/school/middle-school/pivot-points/how-to-calculate-pivot-points.html

http://www.babypips.com/school/middle-school/pivot-points/range-trading-with-pivot-points.html

http://www.babypips.com/school/middle-school/pivot-points/playing-the-breaks-with-pivot-points.html

http://www.babypips.com/school/middle-school/pivot-points/using-pivot-points-to-determine-market-sentiment.html

http://www.babypips.com/school/middle-school/pivot-points/forex-pivot-points.html

http://www.babypips.com/school/middle-school/pivot-points/how-to-calculate-pivot-points.html

http://www.babypips.com/school/middle-school/pivot-points/range-trading-with-pivot-points.html

http://www.babypips.com/school/middle-school/pivot-points/playing-the-breaks-with-pivot-points.html

http://www.babypips.com/school/middle-school/pivot-points/using-pivot-points-to-determine-market-sentiment.html



The reason wh! pivot points are so enticin%?

It)s "eca.se the! are OB/ECT0E&

Uni6e so$e o# the other indicators that we)ve ta.%ht !o. a"o.t aread!' there)s no discretion

invoved&

In $an! wa!s' #ore( pivot points are ver! si$iar to Fi"onacci eves& +eca.se so $an! peope are

oo6in% at those eves' the! a$ost "eco$e se##.#iin%&

The $a5or di##erence "etween the two is that with Fi"onacci' there is sti so$e s."5ectivit! invoved in

pic6in% Swin% Hi%hs and Swin% 7ows& With pivot points' #ore( traders t!pica! .se the sa$e $ethod

#or cac.atin% the$&

Man! traders 6eep an e!e on these eves and !o. sho.d too&

,ivot points are especia! .se#. to shortter$ traders who are oo6in% to ta6e advanta%e o# s$a

price $ove$ents& B.st i6e nor$a s.pport and resistance eves' #ore( traders can choose to trade

the BOUNCE or the BREAK o# these eves&

Range1bo&nd traders &se 'i.ot 'oints to identif( re.ersal 'oints2 The! see pivot points as

areas where the! can pace their ".! or se orders&

Brea*o&t fore, traders &se 'i.ot 'oints to reogni3e *e( le.els t%at need to be bro*en #or a

$ove to "e cassi#ied as a rea dea "rea6o.t&

Here is an e(a$pe o# pivot points potted on a /ho.r EUR-USD chart<

As !o. can see here' hori@onta s.pport and resistance eves are paced on !o.r chart& And oo6

the!)re $ar6ed o.t nice! #or !o.8 How convenient is that?8



PIVOT POINT LINGO

Here)s =.ic6 r.ndown on what those acron!$s $ean<

PP stands #or ,ivot ,oint&

S stands #or S.pport&

R stands #or Resistance&

+.t don)t %et too ca.%ht .p in thin6in% 9S/ has to "e s.pport: or 9R/ has to "e resistance&: We)

e(pain wh! ater&

In the #oowin% essons' !o. wi earn how to cac.ate #ore( pivot points' the di##erent t!pes o# pivot

points and $ost i$portant!' how !o. can add pivot points to !o.r #ore( tradin% too"o(8

HOW TO CA7CU7ATE ,IGOT ,OINTS

The #irst thin% !o.)re %oin% to earn is how to cac.ate pivot point eves&

The pivot point and associated s.pport and resistance eves are cac.ated "! .sin% the ast tradin%

session)s open' hi%h' ow' and cose& Since #ore( is a 3ho.r $ar6et' $ost #ore( traders .se the New

;or6 cosin% ti$e o# <00p$ EST as the previo.s da!)s cose&

The cac.ation #or a pivot point is shown "eow<

Pi.ot 'oint 4PP5 1Hi%h J 7ow J Cose2 -

S.pport and resistance eves are then cac.ated o## the pivot point i6e so<

First eve s.pport and resistance<

+irst resistane 4R65 13 ( ,,2 7ow

+irst s&''ort 4S65 13 ( ,,2 Hi%h

Second eve o# s.pport and resistance<

Seond resistane 4R75 ,, J 1Hi%h 7ow2

Seond s&''ort 4S75 ,, 1Hi%h 7ow2



Third eve o# s.pport and resistance<

T%ird resistane 4R85 Hi%h J 31,, 7ow2

T%ird s&''ort 4S85 7ow 31Hi%h ,,2

eep in $ind that so$e #ore( chartin% so#tware pot inter$ediate eves or $idpoint eves& These are

"asica! MINI LEVELS "etween the $ain pivot point and s.pport and resistance eves&

I# !o. hated a%e"ra' have no #ear "eca.se !o. don)t have to per#or$ these cac.ations !o.rse#& Most

chartin% so#twares wi a.to$atica! do this #or !o.& B.st $a6e s.re !o. con#i%.re !o.r settin%s sothat it .ses the correct cosin% ti$e and price&

We here at +a"!,ips&co$ aso have o.r ver! own ,ivot ,oint Cac.ator8

The aweso$e part is' 5.st i6e ever!thin% on the we"site' it)s FREE8

The #ore( pivot point cac.ator can co$e in hand!' especia! i# !o. want to do a itte "ac6 testin% to

see how pivot point eves have hed .p in the past& Re$e$"er' one o# the advanta%es o# .sin% pivot

points is that it is o"5ective' so it)s ver! eas! to test how price reacted to the$&

Ne(t .p' we) teach !o. the vario.s wa!s in which !o. can incorporate pivot points into !o.r #ore(

tradin% strate%!&

HOW TO USE ,IGOT ,OINTS FOR RAN*E TRADIN*

http://www.babypips.com/tools/forex-calculators/pivotpoint.php

http://www.babypips.com/tools/forex-calculators/pivotpoint.php



The si$pest wa! to .se pivot point eves in !o.r #ore( tradin% is to .se the$ 5.st i6e !o.r re%.ar

s.pport and resistance eves& B.st i6e %ood oe s.pport and resistance' price wi test the eves

repeated!&

The $ore ti$es a c.rrenc! pair to.ches a pivot eve then reverses' the stron%er the eve is& Act.a!'

9pivotin%: si$p! $eans reachin% a s.pport or resistance eve and then reversin%&

I# !o. see that a pivot eve is hodin%' this co.d %ive !o. so$e %ood tradin% opport.nities&

I# price is nearin% the .pper resistance eve' !o. co.d se the pair and pace a stop 5.st a"ove the

resistance&

I# price was nearin% a s.pport eve' !o. wo.d ".! and p.t !o.r stop 5.st "eow the eve&

See? B.st i6e !o.r re%.ar s.pport and resistance8 Nothin% hard a"o.t that8

7et)s ta6e a oo6 at an e(a$pe so !o. can vis.ai@e this& Here)s a /4$in.te chart o# *+,-USD&

In the chart a"ove' !o. see that price is testin% the S/ s.pport eve& I# !o. thin6 it wi hod' what !o.

can do is ".! at $ar6et and then p.t a stop oss order past the ne(t s.pport eve&

I# !o.)re conservative' !o. can set a wide stop 5.st "eow S3& I# price reaches past S3' chances are it

won)t "e co$in% "ac6 .p' as "oth S/ and S3 co.d "eco$e resistance eves&

I# !o.)re a itte $ore a%%ressive and con#ident that s.pport at S/ wo.d hod' !o. can set !o.r stop

5.st "eow S/&

As #or !o.r ta6e pro#it points' !o. co.d tar%et ,, or R/' which co.d aso provide so$e sort o#

resistance& 7et)s see what happened i# !o. "o.%ht at $ar6et&



And "a$8 7oo6s i6e S/ hed as s.pport8 What)s $ore' i# !o. had tar%eted ,, as !o.r ta6e pro#it point'

!o. wo.d have hit !o.r ,T8 Woohoo8 Ice crea$ and pi@@a #or !o.8

O# co.rse' it ain)t awa!s that si$pe& ;o. sho.dn)t re! on! on the pivot point eves& ;o. sho.d note

whether pivot point eves ine .p with #or$er s.pport and resistance eves&

;o. can aso incorporate candestic6 ana!sis and other t!pes o# indicators to hep %ive !o. $ore

con#ir$ation&

For e(a$pe' i# !o. see that a do5i has #or$ed over S/' or that the stochastic is indicatin% oversod

conditions' then the odds are hi%her that S/ wi hod as s.pport&

Aso' $ost o# the ti$e' tradin% nor$a! ta6es pace "etween the #irst s.pport and resistance eves&

Occasiona!' price wi test the second eves and ever! once in a whie' the third eves wi "e tested&

7ast!' !o. sho.d aso #.! .nderstand that so$eti$es' price wi 5.st "rea6 thro.%h a the eves i6e

how Ra#ae Nada "ree@es thro.%h the co$petition at the French Open&

What wi !o. do when that happens? Contin.e to hod onto !o.r trade and "e a s.c6er and watch

!o.r acco.nt dwinde awa!? Or wi !o. ta6e advanta%e and %et "ac6 so$e pips?

In the ne(t esson' we) teach !o. how to ta6e advanta%e when these eves "rea6 down&

HOW TO USE ,IGOT ,OINTS TO TRADE +REAOUTS

B.st i6e !o.r nor$a s.pport and resistance eves' pivot point eves won)t hod #orever&

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http://en.wikipedia.org/wiki/Rafael_Nadal


http://www.babypips.com/school/elementary/japanese-candle-sticks/what-is-a-japanese-candlestick.html





Usin% pivot points #or ran%e tradin% wi wor6' ".t not a the ti$e& In those ti$es that these eves #ai

to hod' !o. sho.d have so$e toos read! in !o.r #ore( too"o( to ta6e advanta%e o# the sit.ation8

As we showed !o. earier' there are two $ain wa!s to trade "rea6o.ts< the AGGRESSIVE wa! or

the SAFE wa!&

Either $ethod wi wor6 5.st #ine& B.st awa!s re$e$"er that i# !o. ta6e the sa#e wa!' which $eans

waitin% #or a retest o# s.pport or resistance' !o. $a! $iss o.t on the initia $ove&

USING PIVOT POINTS TO TRADE POTENTIAL BREAKOUTS

7et)s ta6e a oo6 at a chart to see potentia "rea6o.t trades .sin% pivot points& +eow is a /4$in.te

chart o# EUR-USD&

Here we see EUR-USD $ade a stron% ra! thro.%ho.t the da!& We see that EUR-USD opened "!

%appin% .p a"ove the pivot point& ,rice $ade a stron% $ove .p' "e#ore pa.sin% si%ht! at R/&

Event.a!' resistance "ro6e and the pair 5.$ped .p "! 40 pips8

I# !o. had ta6en the a%%ressive $ethod' !o. wo.d have ca.%ht the initia $ove and "een cee"ratin%

i6e !o. 5.st won the Word C.p&

On the other hand' i# !o. had ta6en the sa#e wa! and waited #or a retest' !o. wo.d have "een one

sad itte trader& The price did not retest a#ter "rea6in% R/& In #act' the sa$e thin% happened #or "oth

R/ and R38

Notice how EUR-USD ".s tried to $a6e a r.n #or R as we&

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http://www.fifa.com/worldcup/



However' i# !o. had ta6en the a%%ressive $ethod' !o. wo.d have %otten ca.%ht .p in a #a6e o.t as

the price #aied to s.stain the initia "rea6& I# !o.r stop was too ti%ht' then !o. wo.d have %otten

stopped o.t&

7ater on tho.%h' !o.) see that the price event.a! "ro6e thro.%h& Notice how there was aso a retest

o# the "ro6en resistance ine&

Aso' o"serve how when the pair reversed ater in the da! and "ro6e down past R& There was an

opport.nit! to ta6e a short on the retest o# resistancet.rned s.pport t.rned resistance 1read that

a%ain i# !o. have to82&

Re$e$"er that' when s.pport eves "rea6' the! .s.a! t.rn into resistance eves&

This concept o# 9role re.ersal: aso appies #or "ro6en resistance eves which "eco$e s.pport eves&

These wo.d have "een %ood opport.nities to ta6e the 9I thin6 I) pa! it sa#e: $ethod&

WHERE DO YOU PLACE STOPS AND PICK TARGETS WITH BREAKOUTS?

One o# the di##ic.t thin%s a"o.t ta6in% "rea6o.t trades is pic6in% a spot to pace !o.r stop& Uni6e

ran%e tradin% where !o. are oo6in% #or "rea6s o# pivot point s.pport and resistance eves' !o. are

oo6in% #or stron% #ast $oves&

Once a eve "rea6s' in theor!' that eve wi i6e! "eco$e 9s.pportt.rnedresistance: or 9resistance

t.rneds.pport&: A%ain' this is caed a ROLE REVERSAL>since the roes have "een reversed&

I# !o. were %oin% on% and price "ro6e R/' !o. co.d pace !o.r stop 5.st "eow R/&

7et)s %o "ac6 to that EUR-USD chart to see where !o. co.d pace !o.r stops&

As #or settin% tar%ets' !o. wo.d t!pica! ai$ #or the ne(t pivot point s.pport or resistance eve as

!o.r ta6e pro#it point& It)s ver! rare that price wi "rea6 past a the pivot point eves' .ness a "i%

econo$ic event or s.rprise news co$es o.t&

7et)s %o "ac6 to that EUR-USD chart to see where !o. wo.d p.t those stops and ta6e pro#it&



In this e(a$pe' once !o. saw price "rea6 R/' !o. wo.d have set !o.r stop 5.st "eow R/& I# !o.

"eieved that price wo.d contin.e to rise' !o. co.d 6eep !o.r position and $ove !o.r stop $an.a!

to see i# $ove wo.d contin.e& ;o.)d have to watch care#.! and ad5.st accordin%!& ;o.) earn $ore

a"o.t this in ater essons&

As with an! $ethod or indicator' !o. have to "e aware o# the ris6s with ta6in% "rea6o.t trades&

First o# a' !o. have no idea whether or not the $ove wi contin.e& ;o. $i%ht enter thin6in% that

price wi contin.e to rise' ".t instead !o. catch a top or "otto$' which $eans that !o.)ve "een #a6ed

o.t8

Second' !o. won)t "e s.re i# it)s a tr.e "rea6o.t' or 5.st wid $oves ca.sed "! the reease o#

i$portant news& Spi6es in voatiit! are a co$$on occ.rrence d.rin% news events' so "e s.re to 6eep

.p with "rea6in% news and "e aware o# what)s on the #ore( caendar #or the da! or wee6&

7ast!' 5.st i6e in ran%e tradin%' it wo.d "e "est to pop on other 6e! s.pport and resistance eves&

;o. $i%ht "e thin6in% that R/ is "rea6in%' ".t !o. #aied to notice a stron% resistance eve 5.st past

R/& ,rice $a! "rea6 past R/' test the resistance and 5.st #a "ac6 down&

;o. sho.d $a6e .se o# !o.r #ore( 6nowed%e o# s.pport and resistance' candestic6 patterns'

and $o$ent.$ indicators to hep !o. %ive stron%er si%nas as to whether the "rea6 is #or rea or not&

HOW TO USE ,IGOT ,OINTS TO MEASURE MARET SENTIMENT

http://www.babypips.com/tools/forex-calendar/

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http://www.babypips.com/tools/forex-calendar/






There is one other wa! to incorporate pivot points into !o.r #ore( tradin% strate%!' and that)s to .se it

to %a.%e )ar*et senti)ent&

What this $eans is that !o. can te whether traders are $ore incined to ".! or se the pair& A !o.

wo.d need to do is to 6eep an e!e on the pivot point& ;o. co.d treat it i6e the 40 !ard ine o#

a #oot"a #ied& Dependin% on which side the "a 1in this case' price2 is on' !o. can te whether".!ers or seers have the .pper hand&

I# the price "rea6s thro.%h the pivot point to the top' it)s a si%n that traders are ".ish on the pair and

!o. sho.d start ".!in% the pair i6e it)s a risp! re$e don.t& Here)s an e(a$pe o# what happened

when the price sta!ed a"ove the pivot point&

In this e(a$pe' we see that EUR-USD %apped .p and opened a"ove the pivot point& The price then

rose hi%her and hi%her' "rea6in% thro.%h a the resistance eves&

Now' i# price "rea6s thro.%h the pivot point to the "otto$' then !o. sho.d start sein% the pair i6e

it)s Enron stoc6& The price "ein% "eow the pivot point wo.d si%na "earish senti$ent and that seers

co.d have the .pper hand #or the tradin% session&

7et)s ta6e a oo6 at a chart o# *+,-USD&

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http://finance.yahoo.com/q?s=KKD


http://www.investopedia.com/articles/stocks/09/enron-collapse.asp



http://www.investopedia.com/articles/stocks/09/enron-collapse.asp



In the chart a"ove' we see that the price tested the pivot point' which hed as a resistance eve& Ne(t

thin% !o. 6now' the pair 6eeps %oin% ower and ower& I# !o. had ta6en the c.e that price re$ained

"eow the pivot point and sod the pair' !o. wo.d have $ade so$e nice $ooah& *+,-USD dropped

a$ost 00 pips8

O# co.rse' it doesn)t awa!s wor6 o.t i6e this& There are ti$es when !o. thin6 that #ore( traders are

"earish on a pair' on! to see that the pair reverses and "rea6s thro.%h to the top8

In this e(a$pe' i# !o. saw price "rea6in% ower #ro$ the pivot point and sod' !o. wo.d have had a

sad' sad da!& 7ater on d.rin% the E.ropean session' EUR-USD popped hi%her' event.a! "rea6in%

thro.%h the pivot point& What)s $ore' the pair sta!ed a"ove the pivot point' showin% how ".!ers were

roc6in) awa!&



The esson here?

Traders are #ic6e8

How #ore( traders #ee a"o.t a c.rrenc! can shi#t dra$atica! da! to da!' even session to session&

This is wh! !o. cannot si$p! ".! when price is a"ove the pivot point or se when it is "eow it&

Instead' i# !o. choose to .se pivot point ana!sis in this wa!' !o. sho.d co$"ine it with other

indicators to hep !o. deter$ine overa $ar6et senti$ent&

NOW THE OTHER T;,ES OF ,IGOT ,OINTS

Whie we s.%%est that !o. stic6 to the standard $ethod o# cac.atin% pivot points' !o. sho.d 6now

that there are other wa!s to cac.ate #or pivot points& In this esson' we wi ta6 a"o.t these other

$ethods' as we as %ive !o. the #or$.as on how to cac.ate #or these eves&

WOODIE PIVOT POINT

R3 ,, J Hi%h 7ow

R/ 13 ,,2 7ow

,, 1H J 7 J 3C2 -

S/ 13 ,,2 Hi%h

S3 ,, Hi%h J 7ow

C – CLOSING PRICE, H – HIGH, L – LOW

In the #or$.as a"ove' !o.) notice that the pivot point cac.ation is ver! di##erent #ro$ the standard

$ethod&

Aso' in order the cac.ate #or the correspondin% s.pport and resistance eves' !o. wo.d .se thedi##erence "etween the previo.s da!)s hi%h and ow' otherwise 6nown as the ran%e&

Here)s a chart e(a$pe o# the Woodie pivot point cac.ation appied on EURUSD& The Woodie pivot

point' s.pport eves' and resistance eves are the soid ines whie the dotted ines represent the

eves cac.ated thro.%h the standard $ethod&



+eca.se the! have di##erent #or$.as' eves o"tained thro.%h the Woodie cac.ations are ver!

di##erent #ro$ those %otten thro.%h the standard $ethod&

So$e traders pre#er to .se the Woodie #or$.as "eca.se the! %ive $ore wei%ht to the cosin% price o#

the previo.s period& Others pre#er the standard #or$.as "eca.se $an! traders $a6e .se o# those'

which co.d $a6e the$ se##.#iin%&

In an! case' since resistance t.rns into s.pport 1and vice versa2' i# !o. choose to .se the Woodie

#or$.as' !o. sho.d 6eep an e!e on these eves as the! co.d "eco$e areas o# interest& Whatever

#oats !o.r "oat8

CAMARILLA PIVOT POINT

R C J 11H72 ( /&40002

R C J 11H72 ( /&34002

R3 C J 11H72 ( /&/2

R/ C J 11H72 ( /&0K2

,, 1H J 7 J C2 -

S/ C 11H72 ( /&0K2

S3 C 11H72 ( /&/2

S C 11H72 ( /&34002

S C 11H72 ( /&40002




The Ca$aria #or$.as are si$iar to the Woodie #or$.a& The! aso .se the previo.s da!)s cose and

ran%e to cac.ate the s.pport and resistance eves&

The on! di##erence is that !o. sho.d cac.ate #or K $a5or eves 1 resistance and s.pport2' andeach o# these eves sho.d "e $.tipied "! a $.tipier&

The $ain concept o# Ca$aria pivot points is that it is "ased on the idea that price has a nat.ra

tendenc! to revert "ac6 to the $ean 1so.nd #a$iiar?2' or in this case' the previo.s da!)s cose&

The idea is that !o. sho.d ".! or se when price reaches either the third s.pport or resistance eve&

However' i# price were to ".rst thro.%h S or R' it wo.d $ean that the intrada! trend is stron%' and

it)s a"o.t ti$e !o. 5.$p on that "andwa%on8

Chec6 o.t how the Ca$aria cac.ation %ives di##erent eves 1soid ines2 co$pared to the standard

$ethod)s eves 1dotted ines28

As !o. can see #ro$ the chart a"ove' )ore e)'%asis is gi.en to t%e losing 'rie as o''osed to

t%e 'i.ot 'oint& +eca.se o# this' it)s possi"e that resistance eves co.d "e "eow the pivot point or

s.pport eves co.d "e a"ove it&

See how a the s.pport and resistance eves are a"ove the Ca$aria pivot point?

FIBONACCI PIVOT POINT

R ,, J 11Hi%h 7ow2 ( /&0002

R3 ,, J 11Hi%h 7ow2 ( &/K2



R/ ,, J 11Hi%h 7ow2 ( &K32

,, 1H J 7 J C2 -

S/ ,, 11Hi%h 7ow2 ( &K32

S3 ,, 11Hi%h 7ow2 ( &/K2

S ,, 11Hi%h 7ow2 ( /&0002


Fi"onacci pivot point eves are deter$ined "! #irst cac.atin% the pivot point i6e !o. wo.d the

standard $ethod&

Ne(t' $.tip! the previo.s da!)s ran%e with its correspondin% Fi"onacci eve& Most traders .se the

K&3L' /&KL and /00L retrace$ents in their cac.ations&

Fina!' add or s."tract the #i%.res !o. %et to the pivot point and voia' !o.)ve %ot !o.r Fi"onacci pivot

point eves8

7oo6 at the chart "eow to see how the eves cac.ated thro.%h the Fi"onacci $ethod 1soid ines2

di##er #ro$ those cac.ated thro.%h the standard $ethod 1dotted ines2&

The o%ic "ehind this is that $an! traders i6e .sin% the Fi"onacci ratios& ,eope .se it #or retrace$ent

eves' $ovin% avera%es' etc&

Wh! not .se it #or pivot points as we?



Re$e$"er that "oth Fi"onacci and pivot points eves are .sed to #ind s.pport and resistance& With so

$an! traders oo6in% at these eves' the! can act.a! "eco$e se##.#iin%&

WHICH PIVOT POINT METHOD IS BEST?

The tr.th is' 5.st i6e a the variations o# a the other indicators that !o.)ve earned so #ar' there is no

sin%e "est $ethod& It rea! a depends on how !o. co$"ine !o.r 6nowed%e o# pivot points with a

the other toos in !o.r #ore( tradin% too"o(&

B.st 6now that $ost chartin% so#tware that do a.to$atic cac.ations nor$a! .se the standard

$ethod in cac.atin% #or the pivot point eves&

+.t now that !o. 6now how to cac.ate #or these eves on !o.r own' !o. can %ive the$ a a swin%

and see which one wor6s "est #or !o.& ,ivot awa!8

SUMMAR;< ,IGOT ,OINTS

Here are so$e eas!to$e$ori@e tips that wi hep !o. to $a6e s$art pivot point tradin% decisions<



,ivot points are a techni=.e .sed "! #ore( traders to hep deter$ine potentia s.pport and

resistance areas&

There are #o.r $ain wa!s to cac.ate #or pivot points< Standard' Woodie' Ca$aria' and

Fi"onacci&

,ivots can "e e(tre$e! .se#. in #ore( since $an! c.rrenc! pairs .s.a! #.ct.ate "etween

these eves& Most o# the ti$e' price ran%es "etween R/ and S/& ,ivot points can "e .sed "! ran%e' "rea6o.t' and trend traders&

Ran%e"o.nd #ore( traders wi enter a ".! order near identi#ied eves o# s.pport and a se

order when the pair nears resistance&

,ivot points aso aow "rea6o.t #ore( traders to identi#! 6e! eves that need to "e "ro6en #or

a $ove to =.ai#! as a stron% $o$ent.$ $ove&

Senti$ent 1or trend2 #ore( traders .se pivot points to hep deter$ine the ".ishness or

"earishness o# a c.rrenc! pair&

The si$picit! o# pivot points de#inite! $a6es the$ a .se#. too to add to !o.r tradin%

too"o(& It aows !o. to see possi"e areas that are i6e! to ca.se price $ove$ent& ;o.) "eco$e

$ore in s!nc to $ar6et $ove$ents and $a6e "etter tradin% decisions&

Usin% pivot point ana!sis aone is not awa!s eno.%h& 7earn to .se pivot points aon% with

other technica ana!sis toos s.ch as candestic6 patterns' MACD crossover' $ovin% avera%es

crossovers' the stochastic' RSI' etc& The %reater the con#ir$ation' the %reater !o.r pro"a"iit! o# a

s.ccess#. trade8

ELLIOTT "AJE T,EOR4

Have !o. ever heard o# a chartin% techni=.e that act.a! ta6es into acco.nt $ar6et ps!choo%!? I#

!o. havent' its ti$e #or !o. to %et to 6now Mr& Raph Neison Eiott&

LESSONS ON ELLIOTT WAVE THEORY

ELLIOTT WAVE THEORY

Amidst all the chaos in the market, Mr. Elliott found order. The Elliot Wave

Theory gives us a way to identify highly probable points where price is most

likely to reverse.

IMPULSE WAVES

According to Elliot, a trending market moves in a 5-3 pattern. Find out whatthat means here.

CORRECTIVE WAVES

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http://www.babypips.com/school/elementary/common-chart-indicators/macd.html

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http://www.babypips.com/school/elementary/common-chart-indicators/stochastic.html

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http://www.babypips.com/school/summer-school/elliott-wave-theory/the-5-3-wave-patterns.html

http://www.babypips.com/school/summer-school/elliott-wave-theory/abc-correction.html

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http://www.babypips.com/school/elementary/common-chart-indicators/macd.html



http://www.babypips.com/school/elementary/common-chart-indicators/stochastic.html

http://www.babypips.com/school/elementary/common-chart-indicators/relative-strength-index.html

http://www.babypips.com/school/summer-school/elliott-wave-theory/elliott-wave-theory.html

http://www.babypips.com/school/summer-school/elliott-wave-theory/the-5-3-wave-patterns.html

http://www.babypips.com/school/summer-school/elliott-wave-theory/abc-correction.html



The Zig-Zag, the Flat, and the Triangle are all types of ABC correction wave

formations.

ELLIOTT WAVES WITHIN AN ELLIOTT WAVE

Always remember that each wave is comprised of smaller wave patterns and

that this pattern tends to repeat itself FOREVER.

3 CARDINAL RULES OF THE ELLIOTT WAVE

THEORY

Before you jump right into applying the Elliott Wave Theory to your trading,

you must take note of the following three cardinal rules. AND

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E77IOTT WAGE THEOR;

+ac6 in the od schoo da!s o# the /300s' there was this $ad %eni.s and pro#essiona acco.ntant

na$ed Raph Neson Eiott&

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+! ana!@in% cose! 4 !ears worth o# stoc6 data' Eiott discovered that stoc6 $ar6ets' tho.%ht to

"ehave in a so$ewhat chaotic $anner' act.a! didn)t&

When he hit !ears od' he #ina! %athered eno.%h evidence 1and con#idence2 to share his discover!

with the word&

He p."ished his theor! in the "oo6 entited THE WAVE PRINCIPLE &

Accordin% to hi$' the $ar6et traded in repetitive c!ces' which he pointed o.t were the e$otions o#

investors ca.sed "! o.tside in#.ences 1ahe$' CN+C' +oo$"er%' ES,N2 or the predo$inant

ps!choo%! o# the $asses at the ti$e&

Eiott e(pained that the .pward and downward swin%s in price ca.sed "! the coective ps!choo%!

awa!s showed .p in the sa$e repetitive patterns&

He caed these .pward and downward swin%s 9waves:&

He "eieves that' i# !o. can correct! identi#! the repeatin% patterns in prices' !o. can predict where

price wi %o 1or not %o2 ne(t&

This is what $a6es Eiott waves so appeain% to traders& It %ives the$ a wa! to identi#! precise points

where price is $ost i6e! to reverse& In other words' Eiott ca$e .p with a s!ste$ that ena"es

traders to catch tops and "otto$s&

So' a$idst a the chaos in prices' Eiott #o.nd order& Aweso$e' h.h?

O# co.rse' i6e a $ad %eni.ses' he needed to cai$ this o"servation and so he ca$e .p with a s.per

ori%ina na$e< T%e Elliott 9a.e T%eor(&

+.t "e#ore we deve into the Eiott waves' !o. need to #irst .nderstand what fratals are&

FRACTALS

+asica!' #ractas are str.ct.res that can "e spit into parts' each o# which is a ver! si$iar cop! o# the

whoe& Mathe$aticians i6e to ca this propert! 9se#si$iarit!:&

;o. don)t need to %o #ar to #ind e(a$pes o# #ractas& The! can #o.nd a over nat.re8

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A sea she is a #racta& A snow #a6e is a #racta& A co.d is a #racta& Hec6' a i%htnin% "ot is a #racta&

So wh! are #ractas i$portant?

One i$portant =.ait! o# Eiott waves is that the! are #ractas& M.ch i6e sea shes and snow #a6es'

Eiott waves co.d "e #.rther s."divided into s$aer Eiot waves&

Read! to "e an Eiottician now? Read on8

IM,U7SE WAGES

Mr& Eiott showed that a trendin% $ar6et $oves in what he cas a 4 wave pattern&

The #irst 4wave pattern is caed i)'&lse wa.es&

The ast wave pattern is caed orreti.e wa.es&

In this pattern' Waves /' ' 4 are )oti.e' $eanin% the! %o aon% with the overa trend' whie Waves

3 and are orreti.e&

Do not con#.se Waves 3 and with the A+C corrective pattern 1disc.ssed in the ne(t section2 tho.%h8

7et)s #irst ta6e a oo6 at the 4wave i$p.se pattern& It)s easier i# !o. see it as a pict.re<



That sti oo6s 6ind o# con#.sin%& 7et)s spash so$e coor on this "ad "o!&



Ah $a%ni#ico8 It)s so prett!8 We i6e coors' so we)ve coorcoded each wave aon% with its wave co.nt&

Here is a short description o# what happens d.rin% each wave&

We)re %oin% to .se stoc6s #or o.r e(a$pe since stoc6s are what Mr& Eiott .sed ".t it rea! doesn)t

$atter what it is& It can easi! "e c.rrencies' "onds' %od' oi' or Tic6e Me E$o dos& The i$portant

thin% is the Eiott Wave Theor! can aso "e appied to the #orei%n e(chan%e $ar6et&

WAVE 1

The stoc6 $a6es its initia $ove .pwards& This is .s.a! ca.sed "! a reative! s$a n.$"er o#

peope that a o# the s.dden 1#or a variet! o# reasons' rea or i$a%ined2 #ee that the price o# the stoc6

is cheap so it)s a per#ect ti$e to ".!& This ca.ses the price to rise&

WAVE 2

At this point' eno.%h peope who were in the ori%ina wave consider the stoc6 overva.ed and ta6e

pro#its& This ca.ses the stoc6 to %o down& However' the stoc6 wi not $a6e it to its previo.s ows

"e#ore the stoc6 is considered a "ar%ain a%ain&

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WAVE 3

This is .s.a! the on%est and stron%est wave& The stoc6 has ca.%ht the attention o# the $ass p."ic&

More peope #ind o.t a"o.t the stoc6 and want to ".! it& This ca.ses the stoc6)s price to %o hi%her and

hi%her& This wave .s.a! e(ceeds the hi%h created at the end o# wave /&

WAVE 4

Traders ta6e pro#its "eca.se the stoc6 is considered e(pensive a%ain& This wave tends to "e wea6

"eca.se there are .s.a! $ore peope that are sti ".ish on the stoc6 and are waitin% to 9".! on the

dips&:

WAVE 5

This is the point that $ost peope %et on the stoc6 and is $ost driven "! h!steria& ;o. .s.a! start

seein% the CEO o# the co$pan! on the #ront pa%e o# $a5or $a%a@ines as the ,erson o# the ;ear&

Traders and investors start co$in% .p with ridic.o.s reasons to ".! the stoc6 and tr! to cho6e !o.

when !o. disa%ree with the$& This is when the stoc6 "eco$es the $ost overpriced& Contrarians start

shortin% the stoc6 which starts the A+C pattern&

EXTENDED IMPULSE WAVES

One thin% that !o. aso need to 6now a"o.t the Eiott Wave Theor! is that one o# the three i$p.se

waves 1/' ' or 42 wi awa!s "e 9e(tended:& Si$p! p.t' there wi awa!s "e one wave that is on%er

than the other two' re%ardess o# de%ree&

Accordin% to Eiott' it is .s.a! the #i#th wave which is e(tended& As ti$e went "!' this od schoo st!eo# wave a"ein% has chan%ed "eca.se $ore and $ore peope started a"ein% the third wave as the

e(tended one&

Chec6 o.t this #or.$ thread #or $ore Eiott Wave dia%ra$s&

CORRECTIGE WAGES

The 4wave trends are then corrected and reversed "! wave co.ntertrends& 7etters are .sed instead

o# n.$"ers to trac6 the correction& Chec6 o.t this e(a$pe o# a s$o6in) hot corrective wave pattern8

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B.st "eca.se we)ve "een .sin% a ". $ar6et as $! pri$ar! e(a$pe doesn)t $ean the Eiott Wave

Theor! doesn)t wor6 on "ear $ar6ets& The sa$e 4 wave pattern can oo6 i6e this<

TYPES OF CORRECTIVE WAVE PATTERNS

Accordin% to Eiott' there are 3/ corrective A+C patterns ran%in% #ro$ si$pe to co$pe(&

9Uh 3/? I can)t $e$ori@e a o# that8 The "asics o# the Eiott Wave Theor! are aread! $ind"owin%8:



Ta6e it eas!' !o.n% padawan& The %reat thin% a"o.t Eiott Wave is !o. don)t have to "e a"ove the

e%a drin6in% a%e to trade it8 ;o. don)t have to %et a #a6e ID or $e$ori@e a 3/ t!pes o# corrective

A+C patterns "eca.se the! are 5.st $ade .p o# three ver! si$pe eas!to.nderstand #or$ations&

7et)s ta6e a oo6 at these three #or$ations& The e(a$pes "eow app! to .ptrends' ".t !o. can 5.st

invert the$ i# !o.)re deain% with a downtrend&

THE ZIGZAG FORMATION

Pi%@a% #or$ations are ver! steep $oves in price that %oes a%ainst the predo$inant trend& Wave + is

t!pica! shortest in en%th co$pared to Waves A and C& These @i%@a% patterns can happen twice or

even thrice in a correction 13 to @i%@a% patterns in6ed to%ether2& 7i6e with a waves' each o# the

waves in @i%@a% patterns co.d "e "ro6en .p into 4wave patterns&

THE FLAT FORMATION



Fat #or$ations are si$pe sidewa!s corrective waves& In #ats' the en%ths o# the waves

are GENERA::Y e=.a in en%th' with wave + reversin% wave A)s $ove and wave C .ndoin% wave +)s

$ove& We sa! %enera! "eca.se wave + can so$eti$es %o "e!ond the "e%innin% o# wave A&

THE TRIANGLE FORMATION

Trian%e #or$ations are corrective patterns that are "o.nd "! either conver%in% or diver%in% trend

ines& Trian%es are $ade .p o# 4waves that $ove a%ainst the trend in a sidewa!s #ashion& These

trian%es can "e s!$$etrica' descendin%' ascendin%' or e(pandin%&

Drop "! o.r #or.$s i# !o. want to see the ".ish and "earish versions o# these Eiott Wave patterns&

E77IOTT WAGES WITHIN AN E77IOTT WAGE

7i6e we $entioned earier' Eiott waves are #ractas& Each wave is $ade o# s."waves& H.h? 7et $e

show !o. another pict.re& ,ict.res are %reat' aren)t the!? ;eehaw8

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Do !o. see how Waves /' ' and 4 are $ade .p o# a s$aer 4wave i$p.se pattern whie Waves 3

and are $ade .p o# s$aer wave corrective pattern?

Awa!s re$e$"er that each wave is co$prised o# s$aer wave patterns& This pattern repeats itse#>

FOREGER8

To $a6e it eas! to a"e these waves' the Eiott Wave Theor! has assi%ned a series o# cate%ories to

the waves in order o# the ar%est to the s$aest& The! are<

Grand S&'er(le 1$.ticent.r!2

S&'er(le 1a"o.t 00 !ears2

C(le 1one !ear to severa !ears2

Pri)ar( 1a #ew $onths to a co.pe o# !ears2

nter)ediate 1wee6s to $onths2

-inor 1wee6s2

-in&te 1da!s2

-in&ette 1ho.rs2

S&b1-in&ette 1$in.tes2

A *rand S.perc!ce is $ade .p o# S.perc!ce waves which is $ade .p o# C!ce waves which is $ade

.p ,ri$ar! waves' which is $ade .p o# Inter$ediate waves which is $ade .p o# Minor waves which is$ade .p o# Min.te waves which is $ade .p o# Min.ette waves which is $ade .p o# S."Min.ette

waves& Did !o. %et a that?

O6a!' to $a6e thin%s $.ch cearer' et)s see how an Eiott Wave oo6s in rea i#e&



As !o. can see' waves aren)t shaped per#ect! in rea i#e& ;o.) aso earn it)s so$eti$es di##ic.t to

a"e waves& +.t the $ore !o. stare at charts the "etter !o.) %et&

+esides' we)re not %oin% to et !o. %o at it aone8 In the #oowin% sections' we) %ive !o. so$e tips on

how to correct! and easi! identi#! waves as we as teach !o. how to trade .sin% Eiott Waves& S.r#)s

.p8

CARDINA7 RU7ES OF THE E77IOTT WAGE THEOR;



As !o. $a! have %.essed' the 6e! in .sin% the Eiott Wave Theor! in tradin% is a a"o.t "ein% a"e to

correct! identi#! waves&

+! deveopin% the ri%ht e!e in reco%ni@in% what wave the $ar6et is in' !o. wi "e a"e to #ind o.t

which side o# the $ar6et to trade on' on% or short&

There are three cardina 9cannot"e"ro6en: r.es in a"ein% waves& So' "e#ore !o. 5.$p ri%ht in to

app!in% the Eiott Wave Theor! to !o.r tradin%' !o. $.st ta6e note o# the r.es "eow&

Faiin% to a"e waves correct! can prove disastro.s to !o.r acco.nt&

3 CARDINAL RULES OF THE ELLIOTT WAVE THEORY

R.e N.$"er /< Wave can NEGER "e the shortest i$p.se wave

R.e N.$"er 3< Wave 3 can NEGER %o "e!ond the start o# Wave /

R.e N.$"er < Wave can NEGER cross in the sa$e price area as Wave /

Then' there are the %.ideines that hep !o. in correct! a"ein% waves& Uni6e the three cardina

r.es' these %.ideines can "e "ro6en& Here the! are<

Converse!' so$eti$es' Wave 4 does not $ove "e!ond the end o# wave & This is caed

tr.ncation&

Wave 4' $ore o#ten than not' %oes "e!ond or 9"rea6s thro.%h: the trend ine drawn o## Wave

parae to a trend ine connectin% the start o# Waves and 4&

Wave tends to "e ver! on%' sharp' and e(tended&

Waves 3 and #re=.ent! "o.nce o## Fi"onacci retrace$ent eves&

HOW TO TRADE FORE USIN* E77IOTT WAGES

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This is pro"a"! what !o. a have "een waitin% #or dr.$ro pease .sin% the Eiott Wave Theor!

in #ore( tradin%8 In this section' we wi oo6 at so$e set.ps and app! o.r 6nowed%e o# Eiott Wave

to deter$ine entr!' stop oss' and e(it points& 7et)s %et it on8

HYPOTHETICAL! WILLMOSTPROBABLYBERIGHT SCENARIO"

7et)s sa! !o. wanted to "e%in !o.r wave co.nt& ;o. see that price see$s to have "otto$ed o.t and

has "e%an a new $ove .pwards& Usin% !o.r 6nowed%e o# Eiott Wave' !o. a"e this $ove .p as

Wave / and the retrace$ent as Wave 3&



In order to #ind a %ood entr! point' !o. head "ac6 to the Schoo o# ,ipsoo%! to #ind o.t which o# the

three cardina r.es and %.ideines !o. co.d app!& Here)s what !o. #o.nd o.t<


Waves 3 and #re=.ent! "o.nce o## Fi"onacci retrace$ent eves

So' .sin% !o.r s.perior Eiott Wavin% tradin% s6i@' !o. decide to pop the Fi"onacci too to see i# price

is at a Fi" eve& Ho! $a$a8 ,rice is 5.st chiin) i6e ice crea$ #iin) aro.nd the 40L eve& H$$' this

co.d "e the start o# Wave ' which is a ver! stron% ".! si%na&

Since !o.)re a s$art #ore( trader' !o. aso ta6e !o.r stop into consideration&



Cardina r.e n.$"er 3 states that Wave 3 can never %o "e!ond the start o# Wave / so !o. set !o.r

stop "eow the #or$er ows&

I# price retraces $ore than /00L o# Wave /' then !o.r wave co.nt is wron%&

7et)s see what happens ne(t>

;o.r Eiott Wave ana!sis paid o## and !o. ca.%ht a h.%e .pward $ove8 ;o. %o to Ge%as 1or Maca.2'

"ow a !o.r #ore( pro#its on ro.ette' and end ri%ht "ac6 where !o. started& 7.c6! #or !o. we have

another h!pothetica scenario where !o. can earn i$a%inar! $one! a%ain>

SCENARIO 2"

This ti$e' et)s .se !o.r 6nowed%e on corrective waves patterns to %ra" those pips&



;o. "e%in co.ntin% the waves on a downtrend and !o. notice that the A+C corrective waves are

$ovin% sidewa!s& H$$' is this a #at #or$ation in the wor6s? This $eans that price $a! 5.st "e%in a

new i$p.se wave once Wave C ends&

Tr.stin% !o.r Eiott Wave s6is' !o. %o ahead and se at $ar6et in hopes o# catchin% a new i$p.se

wave&

;o. pace !o.r stop 5.st a co.pe o# pips a"ove the start o# Wave 5.st in case !o.r wave co.nt is

wron%&



+eca.se we i6e happ! endin%s' !o.r trade idea wor6s o.t and nets !o. a co.pe tho.sand pips on this

da!' which is not awa!s the case&

;o. have aso earned !o.r esson this ti$e aro.nd so !o. s6ip Ge%as and decide to .se !o.r pro#its to

%row !o.r #ore( tradin% capita instead&

7earn #ro$ !o.r #eow #ore( traders and disc.ss Eiott Waves&

SUMMAR;< E77IOTT WAGE THEOR;

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Eiott Waves are fratals& Each wave can "e spit into parts' each o# which is a ver! si$iar

cop! o# the whoe& Mathe$aticians i6e to ca this propert! 9se#si$iarit!:&

A trendin% $ar6et $oves in a 4 wave pattern&

The #irst 4wave pattern is caed i)'&lse wave&

One o# the three i$p.se waves 1/' ' or 42 wi awa!s "e e(tended& Wave is .s.a! the

e(tended one&

The second wave pattern is caed orreti.e wave& 7etters A' +' and C are .sed instead o#

n.$"ers to trac6 the correction&

Waves /' and 4' are $ade .p o# a s$aer 4wave i$p.se pattern whie Waves 3 and are

$ade .p o# s$aer wave corrective pattern&

There are 3/ t!pes o# corrective patterns ".t the! are 5.st $ade .p o# three ver! si$pe'

eas!to.nderstand #or$ations&

The three #.nda$enta corrective wave patterns are 3ig13ags' flats' and triangles&

There are three cardina r.es in Eiott Wave Theor! when a"ein% waves<

R.e N.$"er /< Wave can NEGER "e the shortest i$p.se wave


R.e N.$"er < Wave can NEGER cross in the sa$e price area as Wave /

I# !o. oo6 hard eno.%h at a chart' !o.) see that the $ar6et rea! does $ove in waves&

+eca.se the #ore( $ar6et never $oves in te(t "oo6 per#ect #ashion' it wi ta6e $an!' $an! ho.rs o#

practice ana!@in% waves "e#ore !o. start to %et co$#orta"e with Eiott waves& Sta! dii%ent and

never %ive .p8



HARMONIC PRICE PATTERNS

I# !o. sti thin6 that A+CD and *arte! and the Ani$as are parts o# a n.rser! rh!$e' then !o. need a

esson on Har$onic ,rice ,atterns8

LESSONS ON HARMONIC PRICE PATTERNS

HARMONIC PRICE PATTERNS IN THE FOREX

MARKET

Harmonic price patterns are all about retracements. Let's jump back into some

trends!

THE ABCD AND THE THREEDRIVE

With the Fibonacci retracement tool, making pips can be as easy as A-B-C.

Seriously!

TRADING THE GARTLEY PATTERN

Learn about a super smart dude's solution to two of the biggest problems of

traders: what and when to buy.

3 STEPS IN TRADING HARMONIC PRICE

PATTERNS

Trading Harmonic Price Patterns is as easy as 1-2-3! Locate the potential

price pattern, measure it, and then buy or sell upon its completion!

SUMMARY" HARMONIC PRICE PATTERNS

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http://www.babypips.com/school/summer-school/harmonic-price-patterns/the-abcd-and-the-three-drive.html

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Harmonic price patterns are all about retracements. Let's jump back into some

trends!

HARMONIC ,RICE ,ATTERNS IN THE FORE MARET

Now that !o.)ve %ot the "asic chart patterns down' it)s ti$e to $ove on and add so$e $ore advanced

toos to !o.r #ore( tradin% arsena&

In this esson' we) "e oo6in% at har$onic price patterns& These "ad "o!s $a! "e a itte harder to

%rasp ".t once !o. spot these set.ps' it can ead to so$e ver! nice pro#its8

The whoe idea o# these patterns is that the! hep peope spot possi"e retrace$ents o# recent trends&In #act' we) $a6e .se o# other toos we)ve aread! covered the Fi"onacci

retrace$ent and e(tensions8

Co$"inin% these wonder#. toos to spot these har$onic price patterns' we) "e a"e to distin%.ish

possi"e areas #or a contin.ation o# the overa trend&

In this esson' we)re %oin% to disc.ss the #oowin% Har$onic ,rice ,atterns<

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A+CD ,attern

ThreeDrive ,attern

*arte! ,attern

Cra" ,attern

+at ,attern

+.tter#! ,attern

,hew8 That)s =.ite a ot to cover8

+.t don)t !o. worr!> Once !o. %et the han% o# thin%s' it) "e as eas! as /38

We) start o## with the $ore "asic A+CD and threedrive patterns "e#ore $ovin% on to *arte! and the

ani$as&

A#ter earnin% a"o.t the$' we) ta6e a oo6 at the toos !o. need in order to trade these patterns

s.ccess#.! in the #ore( $ar6et&

For a these har$onic price patterns' the point is to wait #or the entire pattern to co$pete "e#ore

ta6in% an! short or on% trades& ;o.) see what we)re ta6in% a"o.t ater on so et)s %et started8

THE A+CD AND THE THREEDRIGE

THE ABCD

7et)s start this esson with the si$pest har$onic pattern& So what co.d "e $ore "asic than the %ood

od A+C)s? We) 5.st pop in another etter at the end 1"eca.se we)re coo i6e that2' and we)ve %ot the

A+CD chart pattern8 That was eas!8

To spot this chart pattern' a !o. need are .trasharp haw6 e!es and the hand!dand! Fi"onacci too&

For "oth the ".ish and "earish versions o# the A+CD chart pattern' the ines A+ and CD are 6nown as

the legs whie +C is caed the orretion or retrae)ent& I# !o. .se the Fi"onacci retrace$ent too

on e% A+' the retrace$ent +C sho.d reach .nti the 0&/K eve& Ne(t' the ine CD sho.d "e the

/&33 Fi"onacci e(tension o# +C&

Si$pe' ri%ht? A !o. have to do is wait #or the entire pattern to co$pete 1reach point D2 "e#oreta6in% an! short or on% positions&

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Oh' ".t i# !o. want to "e e(tra strict a"o.t it' here are a co.pe $ore r.es #or a vaid A+CD pattern<

The en%th o# ine A+ sho.d "e e=.a to the en%th o# ine CD&

The ti$e it ta6es #or the price to %o #ro$ A to + sho.d "e e=.a to the ti$e it ta6es #or the

price to $ove #ro$ C to D&

THREEDRIVE

The threedrive pattern is a ot i6e the A+CD pattern e(cept that it has three e%s 1now 6nown as

drives2 and two corrections or retrace$ents& Eas! as pie8 In #act' this threedrive pattern is the

ancestor o# the Eiott Wave pattern&

As .s.a' !o.) need !o.r haw6 e!es' the Fi"onacci too' and a s$id%e o# patience on this one&

As !o. can see #ro$ the charts a"ove' point A sho.d "e the /&KL retrace$ent o# drive /& Si$iar!'

point + sho.d "e the 0&/K retrace$ent o# drive 3& Then' drive 3 sho.d "e the /&33 e(tension o#

correction A and drive sho.d "e the /&33 e(tension o# correction +&

+! the ti$e the whoe threedrive pattern is co$pete' that)s when !o. can p. the tri%%er on !o.r

on% or short trade& T!pica!' when the price reaches point +' !o. can aread! set !o.r short or on%

orders at the /&33 e(tension so that !o. won)t $iss o.t8

+.t #irst' it)d "e "etter to chec6 i# these r.es aso hod tr.e<



The ti$e it ta6es the price to co$pete drive 3 sho.d "e e=.a to the ti$e it ta6es to co$pete

drive &

Aso' the ti$e to co$pete retrace$ents A and + sho.d "e e=.a&

Here)s a #or.$ thread disc.ssin% the A+CD pattern and a trade set.p with the threedrive pattern&

TRADIN* THE *ART7E; ,ATTERN

Once .pon a ti$e' there was this insane! s$art trader d.de na$ed Harod Mcine! *arte!&

He had a stoc6 $ar6et advisor! service in the $id/0s with a h.%e #oowin%& This service was one

o# the #irst to app! scienti#ic and statistica $ethods to ana!@e the stoc6 $ar6et "ehavior&

Accordin% to *arte!' he was #ina! a"e to sove two o# the "i%%est pro"e$s o# traders< what andwhen to ".!&

Soon eno.%h' traders reai@ed that these patterns co.d aso "e appied to other $ar6ets& Since then'

vario.s "oo6s' tradin% so#tware' and other patterns 1disc.ssed "eow2 have "een $ade "ased on the

*arte!s&

GARTLEY A#K#A# $222% PATTERN

The *arte! 9333: pattern is na$ed #or the pa%e n.$"er it is #o.nd on in H&M& *arte!s

"oo6' PROFITS IN THE STOCK MARKET & *arte!s are patterns that inc.de the "asic A+CD pattern

we)ve aread! ta6ed a"o.t' ".t are preceded "! a si%ni#icant hi%h or ow&

Now' these patterns nor$a! #or$ when a correction o# the overa trend is ta6in% pace and oo6 i6e

QM) 1or QW) #or "earish patterns2& These patterns are .sed to hep traders #ind %ood entr! points to

5.$p in on the overa trend&

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A *arte! #or$s when the price action has "een %oin% on a recent .ptrend 1or downtrend2 ".t has

started to show si%ns o# a correction&

What $a6es the *arte! s.ch a nice set.p when it #or$s is the reversa points are a Fi"onacci

retrace$ent and Fi"onacci e(tension eve& This %ives a stron%er indication that the pair $a! act.a!

reverse&

This pattern can "e hard to spot and once !o. do' it can %et con#.sin% when !o. pop .p a those

Fi"onacci toos& The 6e! to avoidin% a the con#.sion is to ta6e thin%s one step at a ti$e&

In an! case' the pattern contains a ".ish or "earish A+CD pattern' ".t is preceded "! a point 12

that is "e!ond point D& The 9per#ect: *arte! pattern has the #oowin% characteristics<

/& Move A+ sho.d "e the &/K retrace$ent o# $ove A&

3& Move +C sho.d "e either &K3 or &KK retrace$ent o# $ove A+&

& I# the retrace$ent o# $ove +C is &K3 o# $ove A+' then CD sho.d "e /&33 o# $ove +C&

Cons=.ent!' i# $ove +C is &KK o# $ove A+' then CD sho.d e(tend /&/K o# $ove +C&

& Move CD sho.d "e &K retrace$ent o# $ove A

GARTLEY MUTANTS" THE ANIMALS

As ti$e went "!' the pop.arit! o# the *arte! pattern %rew and peope event.a! ca$e .p with their

own variations&

For so$e odd reason' the discoverers o# these variations decided to na$e the$ a#ter ani$as 1Ma!"e

the! were part o# ,ETA?2&Witho.t #.rther ado' here co$es the ani$a pac6>

THE CRAB

In 3000' Scott Carne!' a #ir$ "eiever in har$onic price patterns' discovered the 9Cra":&

Accordin% to hi$' this is the $ost acc.rate a$on% a the har$onic patterns "eca.se o# how e(tre$e

the ,otentia Reversa Pone 1so$eti$es caed 9price "etter reverse or i$$a %onna ose $! shirt:

point2 #ro$ $ove A&






http://www.peta.org/









This pattern has a hi%h rewardtoris6 ratio "eca.se !o. can p.t a ver! ti%ht stop oss& The 9per#ect:

cra" pattern $.st have the #oowin% aspects<

/& Move A+ sho.d "e the &K3 or &/K retrace$ent o# $ove A&

3& Move +C can "e either &K3 or &KK retrace$ent o# $ove A+&

& I# the retrace$ent o# $ove +C is &K3 o# $ove A+' then CD sho.d "e 3&3 o# $ove +C&Cons=.ent!' i# $ove +C is &KK o# $ove A+' then CD sho.d "e &/K e(tension o# $ove +C&

& CD sho.d "e /&/K e(tension o# $ove A&

THE BAT

Co$e 300/' Scott Carne! #o.nded another Har$onic ,rice ,attern caed the 9+at&: The +at is de#ined

"! the &KK retrace$ent o# $ove A as ,otentia Reversa Pone& The +at pattern has the #oowin%

=.aities<

/& Move A+ sho.d "e the &K3 or &400 retrace$ent o# $ove A&


& I# the retrace$ent o# $ove +C is &K3 o# $ove A+' then CD sho.d "e /&/K e(tension o#

$ove +C& Cons=.ent!' i# $ove +C is &KK o# $ove A+' then CD sho.d "e 3&/K e(tension o#

$ove +C&

& CD sho.d "e &KK retrace$ent o# $ove A&

THE BUTTERFLY



Then' there is the +.tter#! pattern& 7i6e M.ha$$ad Ai' i# !o. spot this set.p' !o.) s.re! "e

swin%in% #or so$e 6noc6o.tsi@ed pips8

Created "! +r!ce *i$ore' the per#ect +.tter#! pattern is de#ined "! the &K retrace$ent o# $ove A+

with respect to $ove A& The +.tter#! contains these speci#ic characteristics<

/& Move A+ sho.d "e the &K retrace$ent o# $ove A&


& I# the retrace$ent o# $ove +C is &K3 o# $ove A+' then CD sho.d "e /&/K e(tension o#

$ove +C& Cons=.ent!' i# $ove +C is &KK o# $ove A+' then CD sho.d e(tend 3&/K o# $ove +C&

& CD sho.d "e /&3 or /&/K e(tension o# $ove A&

STE,S IN TRADIN* HARMONIC ,RICE ,ATTERNS

As !o. $a! have %.essed' pro#itin% o## Har)oni Prie Patterns is a a"o.t "ein% a"e to spot

those 9per#ect: patterns and ".!in% or sein% on their co$petion&

There are three "asic steps in spottin% Har$onic ,rice ,atterns<

Step /< 7ocate a potentia Har$onic ,rice ,attern

Step 3< Meas.re the potentia Har$onic ,rice ,attern

Step < +.! or se on the co$petion o# the Har$onic ,rice ,attern

+! #oowin% these three "asic steps' !o. can #ind hi%h pro"a"iit! set.ps that wi hep !o. %ra" those

ohsoove! pips&

7et)s see this process in action8

Ste' 6; :oate a 'otential Har)oni Prie Pattern



Oh wow' that oo6s i6e a potentia Har$onic ,rice ,attern8 At this point in ti$e' we)re not e(act! s.re

what 6ind o# pattern that is& It 7OOS i6e a threedrive' ".t it co.d "e a +at or a Cra">

Hec6' it co.d even "e a Moose8 In an! case' et)s a"e those reversa points&

Ste' 7; -eas&re t%e 'otential Har)oni Prie Pattern

Usin% the Fi"onacci too' a pen' and a piece o# paper' et)s ist down o.r o"servations&



/& Move +C is &/K retrace$ent o# $ove A+&

3& Move CD is /&33 e(tension o# $ove +C&

& The en%th o# A+ is ro.%h! e=.a to the en%th o# CD&

This pattern =.ai#ies #or a ".ish A+CD pattern' which is a stron% ".! si%na&

Ste' 8; B&( or sell on t%e o)'letion of t%e Har)oni Prie Pattern



Once the pattern is co$pete' a !o. have to do is respond appropriate! with a ".! or se order&

In this case' !o. sho.d ".! at point D' which is the /&33 Fi"onacci e(tension o# $ove C+' and p.t

!o.r stop oss a co.pe o# pips "eow !o.r entr! price&

Is it rea! that eas!?

Not e(act!&

The pro"e$ with har$onic price patterns is that the! are so per#ect that the! are so di##ic.t to spot'

6ind o# i6e a dia$ond in the ro.%h&

Chec6 o.t this e(ceent #or.$ thread disc.ssin% *arte! set.ps&

More than 6nowin% the steps' !o. need to have haw6i6e e!es to spot potentia har$onic price

patterns and a ot o# patience to avoid 5.$pin% the %.n and enterin% "e#ore the pattern is co$peted&

SUMMAR;< HARMONIC ,RICE ,ATTERNS

Har$onic price patterns ena"e .s to distin%.ish possi"e areas #or a contin.ation o# the overa trend&

There are si( har$onic price patterns<

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The A+CD ,attern

The ThreeDrive ,attern

The *arte! ,attern

The Cra" ,attern

The +at ,attern

The +.tter#! ,attern

The three "asic steps in spottin% har$onic price patterns are the #oowin%

Step /< 7ocate a potentia har$onic price pattern

Step 3< Meas.re the potentia har$onic price pattern

Step < +.! or se on the co$petion o# the har$onic price pattern

A%ain' har$onic price patterns are so per#ect that the! are ver! di##ic.t to spot&

More than 6nowin% the steps' !o. need to have haw6i6e e!es to spot potentia har$onic price

patterns and a ot o# patience to avoid 5.$pin% the %.n and enterin% "e#ore the pattern is co$peted&

With eno.%h practice and e(perience' tradin% .sin% har$onic price patterns can !ied a ot o# pips8

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