Presentation - I

NEW PERSPECTIVE ON TRADITIONAL TECHNICAL ANALYSIS PROBLEMS AND

SOLUTIONS 

By Deanwww.getthatradingedge.in

Disclaimer• Information shared here is not a trading recommendation, and we are

not a business of providing any. • All information shared here is strictly for educational purposes only.• Please use your discretion while acting on the information shared

here.• We will not be responsible for any resulting profits or losses.• Please consult your registered financial advisor before you make any

trading and investment decision.

Note• In case of technical problems the webinar will be rescheduled at a

later date.• Please post your questions in the chat window, I would cover them at

the end of the presentation if time permits, else they will be covered in a separate QnA sessions for all the Slack Group Members.• This webinar is being recorded and will be available on

www.BellTPO.com for a limited period of time.

Objective• To review different Traditional Technical Analysis (TTA) tools.• To look into the pros and cons of these tools.• To look into common pitfalls that these techniques have.• Get introduced to Market Profile (MP) and Order Flow Analysis (OFA).• See how MP and OFA can help you avoid some of the pitfalls of TTA,

examples. • Set the stage for building a deeper understanding of MP and OFA

concepts in upcoming webinars.

Common TTA Tools• Pattern Recognition• Classical Technical Analysis• Books – Edwards and Magee

• Trend Lines and Channels• Indicators• RSI, STS, MACD, etc• Books – Martin Pring

• Moving Averages• Elliott Waves – Robert Prechter and/or Glen Neely• Support and Resistances, etc…..

Common Trading Techniques• Break Out (BO) / Break Down (BD) Trades• Fading BO/BD• MA Crossovers• Indicators

• RSI – Overbought/Oversold Levels, Divergences• MACD – Crossovers, Divergences

• Classical Patterns• Head and Shoulders• Pennants• Flags• Double Tops/Bottoms

• Advanced Pattern Recognition• Elliott Waves• Harmonic Patterns

BO / BD Trades• We will use Trend Lines, Support/Resistances.• A support once broken becomes a resistance and vice versa.• Common Problems• A TL has to be redrawn many times due to False BO/BD• Support/Resistances are not followed to the tick,

• Sometimes they are not reached.• Another times they are broken and then price reverses.

• Unclear levels of execution – Entry/Exit/SL.

Moving Average Cross Overs• 13 and 21 Day Exponential Moving Averages are chosen.• Signals generated when Moving Averages cross one another.• Fast Crossing Slow from Below – Buy• Fast Crossing Slow from Above – Sell

• Common Problems• Late Signals • False Signals• Whipsaws• Curve Fitting

Indicators• Chosen RSI and MACD for illustrations.• RSI (Relative Strength Index)• Overbought / Oversold Levels• Divergences

• MACD• Crossovers

• Zero Line Xover• Fast – Slow Line Xover

• Divergences

Indicators• Common Problems

• Late Signals • False Signals• Whipsaws• Persistent OB/OS states• Curve Fitting

• Not all markets are alike• Indicators suited to a particular market condition will work during that condition and

fail during others.• Different indicators are suited to different market conditions,

• RSI – Sideways Markets• MACD – Trending Markets

Classical Chart Patterns• Flags, Pennants, Head and Shoulders (HnS) example shown on chart.• Flags and Pennants are continuation patterns.• HnS is a reversal pattern.• Common Problems• Unclear levels of execution• Whipsaws• False Signals• Very difficult to standardize

Recap - Common Pitfalls for TTA• False Signals / Whipsaws• Persistent OB/OS states• Unclear Entry Levels• Unclear Exit Levels• Unclear Invalidation Levels• Prone to Curve Fitting• Incomplete Information

Welcome The SolutionMarket Profile (MP)

And Order Flow Analysis (OFA)

Market Profile

Order Flow

What do the letters mean?

How is data organized in MP?

MP Core Concepts• Price is an Advertising Mechanism.• Time is the Regulator.• Volume measures Degree of Success of an auction.• 3 Basic Principles• Balance vs Imbalance• Acceptance vs Rejection• Change vs Continuation

Order Flow Core Concepts• Every Buyer is matched by a Seller and Vice Versa.• OFA Basic Principles• Aggression vs Intention• Active vs Passive Activity• Stop Hunts

• Incorporating Context from TTA or MP.

MP Examples• Early May 2016 in Nifty• BREXIT Low on 24th June 2016 in Nifty• Sharp rally after US Elections and Note Ban on 10th Nov 2016 on Bank

Nifty

Nifty – Early May 2016 Lows

Nifty – Early May 2016 Lows

Nifty – BREXIT Lows

Bank Nifty – US Elections and Note Ban Day

How does MP helps in trading?• Helps in providing context for current market development.• Adds a dimension to bar charts.• Helps in identifying advantageous trade locations for better risk

management.• Reduces the stress in trading.

How does OF helps in trading?• First it tells us who is being more aggressive at a given price level.• Next it tells us whether higher or lower prices are bringing in more

traders in the market or are higher and lower prices are discouraging activity.• Also it tells us when opposing activity is becoming stronger and

overpowering the current trend.• Lets see an example on the charts.

Objective• To review different Traditional Technical Analysis (TTA) tools - Done• To look into the pros and cons of these tools - Done• To look into common pitfalls that these techniques have - Done• Get introduced to Market Profile (MP) and Order Flow Analysis (OFA).• See how MP and OFA can help you avoid some of the pitfalls of TTA,

examples – Glanced over Core Concepts of MP and OFA• Set the stage for building a deeper understanding of MP and OFA

concepts in upcoming webinars – Discussed how MP and OFA helps us in Trading

The Sole Objective of any Market Analysis

Where is the market trying to go?

Is it doing a good job of getting there?

Thank You