The Only TECHNICAL ANALYSIS COURSE You’ll Ever Need (Be… — Transcript

In this free video course, you will learn everything you need to learn about the basics of technical analysis in a structured, simple-to-follow, step-by-step way. We'll begin with a simple introduction to what technical analysis is and its goals, and then we'll jump right to the main techniques for beginners. By the end of this course, you should be able to combine different basic techniques to produce good trades on your own, and then you'll be ready to continue your trading education with other techniques for intermediate and advanced traders. If you're new to this channel, make sure you click the like button, subscribe to the channel, and activate the notifications button. By doing this, you support the ongoing creation of free videos like this one. Let's begin with the definition of technical analysis. Technical analysis is the use of price charts to identify repeatable patterns in past price information in order to forecast the future of price. That allows traders to identify trade opportunities where they can buy low and sell high, which is the main goal of a trader. Technical analysis only works because the financial markets are made of repeatable patterns. When a trader is able to spot a known pattern developing in real time, he's able to know what's going to happen with the future of price. In other words, technical analysis is all about learning how to spot the many different repeatable patterns of the market. In this course, you'll learn the most basic of these patterns. Keep in mind that there are many more patterns from beginner to advanced level. The main tool of technical analysis is the price chart, so let's quickly explore the main features of the price chart. As a beginner, you must know four elements of price charts: the symbol or instrument, the type, the time frame, and the auxiliary tools you can add to the price chart to enhance your analysis. The symbol, also known as the instrument, is the market that you want to trade. For example, in TradingView, you can choose between stocks, futures, forex, crypto, and so on. These are the different types of symbols. Let's say you want to trade forex. You click on the forex tab, and then a list of forex symbols will open. By clicking on one of them, like the EUR/USD, you will open the EUR/USD price chart. The next element of price charts you must know is the type of price chart. There are many different ways of displaying price information in the chart. The vast majority of traders use the candlestick chart because it's very useful. But as you can see here, there are many other types of price charts. As you progress throughout this course, you'll understand why most traders choose the candlestick chart to trade. It has many useful properties that are also easy to use. Each one of these bars that appear in the chart is a candlestick, and we'll talk a lot about them throughout the course. Notice that the x-axis of the chart represents the passage of time, and the y-axis of the chart represents price fluctuation. The next thing you must know about price charts is the time frame. The time frame of your price chart controls how much time it takes for a candlestick to form. For example, if we are in the one-hour chart of the EUR/USD, that means that each candlestick in this chart takes exactly one hour to form. When one hour passes by, another candlestick begins to form in the chart. As you can see here, there are many time frame options you can choose from, one second all the way up to one month. In a one-second time frame, each candlestick will take one second to form. In a monthly time frame, each candlestick will take one month to form. Notice that you can see the same symbol or instrument in many different time frames. The daily time frame will practically be a different market than the one-minute time frame, even when we are talking about the same symbol. The time frame you will choose depends on how much time you want to wait for opportunities to align, how fast you can analyze the market in real time, and how much time you have at your disposal in order to trade. In a very fast time frame like the one-minute, for example, the market develops very quickly, so you must be very skilled. In a slower time frame like the four-hour, for example, the market develops slowly, so you have a lot of time to think about your analysis and trade decisions. It's important to notice also that the smaller the time frame, the smaller the price movements. So even though a time frame like the one-minute develops quickly, the size of price movements is small. A time frame like the daily, for example, develops slowly, but the price movements are much greater. The last element of price charts you must know is that beyond price itself, which is formed by the candlesticks, traders will often add other tools to enhance their capacity to analyze the market and detect the repeatable patterns I mentioned previously. There are mainly two ways of doing this. We have what are called overlay tools, and we have window oscillators. Overlay tools are any type of technical indicator or a line that is plotted on top of price. For example, I can plot technical indicators, which are mathematical formulas applied to price, like moving averages and Bollinger Bands. You do this by opening the indicators tab and then selecting the technical indicator you want to use. Notice that these indicators are plotted on top of price. That's why they are called overlay tools. There are other types of overlay tools that are not technical indicators. There are different types of lines, like horizontal lines or sloped lines. For example, I can also make use of window oscillators, which are technical indicators that are displayed in a separate window, usually below price. This is the case with indicators like the RSI, the MACD, or the stochastic indicator. For example, you open these in the same way that you open the overlay tools, which is by clicking on the indicators tab and then selecting the window oscillator of your choice. There is another interesting possibility here that I'm going to briefly show you to spark your curiosity. Even though this is not exactly a beginner's thing, you can also use overlay tools on top of window oscillators instead of price. For example, you can draw different types of lines or even apply different types of indicators on top of window oscillators. There are hundreds of possible combinations and techniques here, but that's a subject for another video. For now, I just want you to know that you can apply different tools on top of candlesticks or below them in order to enhance your analysis. In this course, you'll learn a few of the simple ways of doing that effectively. The next step here is to learn more about the fundamental piece of price charts, which is the candlestick. There's a lot of useful information contained in candlesticks, and by understanding how to read this information, you will be able to gain further insight about the market you want to trade. This is the first step in learning how to identify the repeatable patterns of the market. Let's begin with the very basics of candlesticks. Any candlestick is formed by four values, also known as four prices. These are the open, the high, the low, and the close. Remember that I said that the time frame you choose controls how much time it takes to form a candlestick on the chart. For instance, on the one-hour time frame, it takes one hour for one candlestick to form. The four prices will tell a story of what happened with the market within that chosen period. There are mainly two types of candlesticks: the bullish and the bearish candlestick. The bullish candlestick occurs when the closing price is higher than the opening price. The bullish candlestick is usually displayed as a green candle on the chart. The bearish candlestick occurs when the closing price is lower than the opening price. The bearish candlestick is usually displayed as a red candle on the chart. Let's take the example of a bullish candlestick first. Imagine that we are looking at the one-hour time frame once again. The green box represents one.

goals and then we'll jump right to the main techniques for beginners by the end of this course you should be able to combine different basic techniques to produce good traits on your own and then you'll be ready to continue

your trading education with other techniques for intermediate and advanced traders if you're new to this channel make sure you click the like button subscribe to the channel and activate the notifications button by doing this you support the ongoing

creation of free videos like this one let's begin with the definition of technical analysis technical analysis is the use of price charts to identify repeatable patterns in past price information in order to forecast the future of price that allows traders to identify trade

opportunities where they can buy low and sell high which is the main goal of a trader technical analysis only works because the financial markets are made of repeatable patterns when a trader is able to spot a known pattern developing in real time he's

able to know what's going to happen with the future of price in other words technical analysis is all about learning how to spot the many different repeatable patterns of the market in this course you'll learn the most basic of these

patterns keep in mind that there are many more patterns from beginner to advanced level the main tool of technical analysis is the price chart so let's quickly explore the main features of the price chart as a beginner you must know four

elements of price charts the symbol or instrument the type the time frame and the auxiliary tools you can add to the price chart to enhance your analysis the symbol also known as the instrument is the market that you want to trade

for example in trading view you can choose between stocks futures forex crypto and so on these are the different types of symbols let's say you want to trade forex you click on the forex tab and then a list

of 4x symbols will open by clicking in one of them like the euro usd you will open the euro usd price chart the next element of price charts you must know is the type of price chart there are many different ways of

displaying price information in the chart the vast majority of traders use the candlestick chart because it's very useful but as you can see here there are many other types of price charts as you progress throughout this course you'll understand why most traders

choose the candlestick chart to trade it has many useful properties that are also easy to use each one of these bars that appear in the chart is a candlestick and we'll talk a lot about them throughout the squares

notice that the x-axis of the chart represents the passage of time and the y-axis of the chart represents price fluctuation the next thing you must know about price charts is the time frame the time frame of your price chart

controls how much time it takes for a candlestick to form for example if we are in the one hour chart of the eur usd that means that each candlestick in this chart takes exactly one hour to form when one an hour passes by another

candlestick begins to form in the chart as you can see here there are many time frame options you can choose from one second all the way up to one month in a one second time frame each candlestick will take one second to form

in a monthly time frame each candlestick will take one month to form notice that you can see the same symbol or instrument in many different time frames the daily timeframe will practically be a different market than the one minute

time frame even when we are talking about the same symbol the time frame you will choose depends on how much time you want to wait for opportunities to align how fast you can analyze the market in real time

and how much time you have at your disposal in order to trade in a very fast time frame like the one minute for example the market develops very quickly so you must be very skilled in a slower time frame like the 4-hour

for example the market develops slowly so you have a lot of time to think about your analysis and trade decisions it's important to notice also that the smaller the time frame the smaller the price movements so even though a time

frame like the one minute develops quickly the size of price movements is small a time frame like the daily for example develops slowly but the price movements are much greater the last element of price charts you must know is that beyond price itself

which is formed by the candlesticks traders will often add other tools to enhance their capacity to analyze the market and detect the repeatable patterns i mentioned previously there are mainly two ways of doing this we have what are called overlay tools

and we have window oscillators overlaid tools are any type of technical indicator or a line that is plotted on top of price for example i can plot technical indicators which are mathematical formulas applied to price like moving averages and bollinger bands

you do this by opening the indicators tab and then selecting the technical indicator you want to use notice that these indicators are plotted on top of price that's why they are called overlay tools there are other types of overlay tools

that are not technical indicators there are different types of lines like horizontal lines or sloped lines for example i can also make use of window oscillators which are technical indicators that are displayed in a separate window usually below price this

is the case with indicators like the rsi the macd or the stochastic indicator for example you open these in the same way that you open the overlay tools which is by clicking on the indicators tab and then selecting the window oscillator of your

choice there is another interesting possibility here that i'm going to briefly show you to spark your curiosity even though this is not exactly a beginner's thing you can also use overlay tools on top of window oscillators instead of price

for example you can draw different types of lines or even apply different types of indicators on top of window oscillators there are hundreds of possible combinations and techniques here but that's a subject for another video for now i just want you to know that you

can apply different tools on top of candlesticks or below them in order to enhance your analysis in this course you'll learn a few of the simple ways of doing that effectively the next step here is to learn more

about the fundamental piece of price charts which is the candlestick there's a lot of useful information contained in candlesticks and by understanding how to read this information you will be able to gain further insight about the market you want to trade

this is the first step in learning how to identify the repeatable patterns of the market let's begin with the very basics of candlesticks any kind of stick is formed by four values also known as four prices these are the open the high the low and

the close remember that i said that the time frame you choose controls how much time it takes to form a candlestick on the chart for instance on the one hour time frame it takes one hour for one candlestick to

form the four prices will tell a story of what happened with the market within that chosen period there are mainly two types of candlesticks the bullish and the bearish candlestick the bullish candlestick occurs when the closing price is higher than the opening

price the bullish candlestick is usually displayed as a green candle on the chart the bearish candlestick occurs when the closing price is lower than the opening price the bearish candlestick is usually displayed as a red candle on the chart

let's take the example of a bullish candlestick first imagine that we are looking at the one hour time frame once again the green box represents one hour the yellow line represents how price fluctuated within that hour the opening price is the price at the

beginning of the hour the closing price is the price at the end of the hour the low is the minimum price that the market reached within the hour and the high is the maximum price that the market reached within the hour

this is where the for prices come from the distance between the open and the close is displayed as a thick bar known as the candle body in the case of a bullish candlestick the distance between the open and the low

and the distance between the close and high are displayed as thin lines also known as kindle wicks or candle shadows the distance between the low and the high is known as range the bearish candlestick works in the exact same way the only difference is

that the close is lower than the open the wicks or shadows are formed by the distance between the open and the high and the close and the low notice also that this is true for all time frames candlesticks can form many different

shapes and each one can have a particular meaning this leads us to the idea of candlestick patterns which are patterns of one or more candlesticks that repeat themselves over and over in the market and they have a particular meaning and a

particular name that helps memorizing them in this video i will not talk about all the candlestick patterns because there are more than 50 of them if you want to get deeper into the study of candlestick patterns i made a video

called the ultimate beginner's guide to candlestick patterns which you can check out in the youtube card in this video that you are watching right now i will give you a few examples only because we have other elements and

techniques to cover as i said i will give you simple and yet powerful examples of candlestick patterns in this video so you can get a feel of how they work candlestick patterns are specific candlestick shapes or combinations of

specific candlestick shapes that indicate what's going to happen with price the first thing to know here is that there are candlestick patterns that indicate a future reversal in price and patterns that indicate a future continuation in price movement

the most useful candlestick patterns are the reversal type these patterns usually have a bullish version and a bearish version the term bullish indicates upside and the term bearish indicates downside so for example when there is a bullish reversal pattern price will be going

down and then a pattern will appear to signal a reversal to the upside by the same token in a bearish reversal pattern price will be going up and then a bearish reversal pattern will appear to signal a reversal

to the downside in a bullish continuation price will be going up and another pattern will appear to indicate a continuation to the upside in a bearish continuation price will be going down and then a pattern will appear to indicate a continuation to the

downside let's begin with an example of a reversal candlestick pattern called harami which is also known as the inside candle this is a candlestick pattern formed by two candles the main thing to look for here is related to the range of one

candle in relation to the range of the previous candle the rule is that the range of the second candle must be completely inside the range of the first candle hence the name inside candlestick an inside candle simply means that price

has stopped advancing meaning that it is now stationary that can indicate a reversal this is the shape of a bearish harami or a bearish inside candle the most recent candlestick will usually be bearish but there can be exceptions

take a look at this daily chart of the british pound versus the us dollar i have marked the range of the last two candles the first one in black and the second one in red notice how the range of the second

candle is completely contained inside the range of the first one notice also how price has been rising up to this point this is a bearish harami or a bearish inside candle the signals reversal to the downside in this other image you can see what

happened with price right after the bearish harami pattern it went straight to the downside just like the pattern anticipated let's observe now an example of a bullish harami or a bullish inside candle this illustration shows that the most

recent candlestick in a bullish harami will usually be bullish but there can be exceptions in this chart we have the one hour time frame of the s p futures i have marked the range of the last two candlesticks in the same way i did in

the previous example observe how the range of the current candle is contained within the range of the previous candle therefore creating an inside pattern price was going down so this is a bullish harami pattern we need that price will be going down and then the

pattern will appear to signal a reversal to the upside let's see what happened with price right after the pattern in this chart you can see how price immediately reverses to the upside after the bullish harami or the bullish inside

candle the next candlestick pattern i want to talk about is called shooting star and it's a bearish reversal pattern that is also very common and very reliable since it's a bearish reversal pattern it appears when price is going up in order

to signal a reversal to the downside the shooting star is made of only one candlestick so we have to pay attention to the specific properties of this candlestick the shooting star has a small bearish body a large upper shadow and a

non-existent or very small lower shadow this is a bearish reversal pattern because the candlestick opens then goes to the upside at some point during the formation of the candle as it is shown by the large upper shadow and then price closes lower than the

open all of this means that price went up a little bit and encountered powerful sellers in its upper range in this chart we have the four hour time frame of bitcoin versus the us dollar i marked a clear shooting star pattern

after price has been rising for a while in this next chart you can see that the price went down immediately after the appearance of the shooting star pattern the bullish version of the shooting star is actually called hammer and has a

small bullish body a large lower shadow in a non-existent or small upper shadow the interpretation is the opposite of the shooting star the candlestick opens then goes to the downside at some point during the formation of the candle as it is shown

by the large lower shadow and then price closes higher than the open all of this means that price went down a little bit and encountered powerful buyers in its lower range in this chart you can see the five

minute time frame of the us dollar versus the japanese yen as you can see i marked a classic hammer formation after price has been going down in this next chart you can see how the hammer indicated a reversal to the

upside with good accuracy notice also how i'm giving you different examples in different markets and different time frames so you can get used to the fact that these patterns work in the same way in any price chart you analyze

another powerful candlestick formation i want to show you is called the outside candle also known as the engulfing pattern this is the opposite of the harami or the inside candle in a way this is a pattern formed by two candles

the main characteristic here is that the range of the second candle must engulf the range of the first one the pattern indicates that price will go in the direction of the engulfing candle in this outside formation a bullish

candlestick will engulf the range of the previous candlestick as you can see in this illustration in this image you can see the five minute time frame of the canadian dollar versus the japanese yen notice that the current candle has a

range that completely engulfs the range of the previous candle and also the current candle is bullish implying that there will be a reversal to the upside immediately after the engulfing pattern or the outside candle we can see that

the market started to go up we also have the bearish version of the engulfing pattern in this illustration you can see that a bearish candle completely engulfs the range of the previous candle therefore indicating a reversal to the downside

in this image you can see the 45 minute time frame of the german index notice how the range of the current candlestick completely engulfs the range of the previous candle and how the current candle is bearish indicating a reversal to the downside

in this next chart you can see how the bearish engulfing pattern or the outside candle indicated a reversal successfully as i said previously these are just a few examples of what candlestick patterns can do and if you want to dive deeper into the

subject you can watch the other video i created entirely dedicated to the subject notice that we began analyzing the elements of an individual candlestick then we moved on to patterns formed by one or two candles the logical step here is to learn what

happens when we broaden our view of the price chart and observe the patterns formed by collections of candlesticks this leads us to the idea of highs and lows anytime you open a price chart two things become obvious right away you

notice that there are candlesticks in the chart and that these candlesticks form peaks and valleys or highs and lows your ability to recognize these highs and lows is essential for most good trading strategies out there for example take a look at this chart

there are around 160 visible candlesticks in here and notice how distinctive highs and lows form as new candlesticks are formed it's always useful to mark these highs and lows as you can see in this next chart if we mark the highs and lows and then

erase the candlesticks from the price charts you'll be able to see how there is a certain structure in the market being able to identify highs and lows in the price chart is important for a few different reasons 1. you can establish the overall trend

of the market by looking at the highs and lows 2. you can identify what are called support and resistance lines 3. you can identify chart patterns four you can detect the strength behind price movements by comparing highs and lows in

price with the highs and lows in certain technical indicators don't worry if you don't know what all this means because we'll talk about each one of these four elements right now let's begin the overall idea of market trends

we have basically three types of trends that can happen the bull market or uptrend which is when prices are going up the sideways market which is when prices are moving sideways or in lateral motion in the bear market or downtrend which is

when prices are going to the downside we can detect each one of these types of trends by looking at what highs and lows are doing in the price chart let's first observe what happens in a bull market or uptrend

in an uptrend prices rise because buyers have more power than sellers so the upward price movements are larger than the downward price movements this creates the main characteristic of uptrends which is the presence of higher highs and higher lows in the price chart

higher highs mean that buyers are strong enough to create progressively higher levels in the price chart higher lows mean that buyers are progressively starting the new upward price movement at a higher price in this chart you can see a real example

of a clear uptrend or bull market notice how there are higher highs and higher lows throughout the entire trend the next type of trend will be the sideways market which is characterized by roughly equal upward and downward price movement

this means that buyers and sellers have around the same strength the sideways market is marked by flat highs and flat lows as you can see in this illustration in this chart you can see a real example of sideways market

understanding real charts the flat highs and flat lows are not perfect what matters the most here is the overall aspect of highs and lows in a downtrend or bear market the sellers are more powerful than buyers so the downward price movements are

larger than the upward price movements that generates the characteristic effect of downtrends which is lower highs and lower lows as you can see in this image the downtrend is basically the mirrored image of the uptrend in this chart you can observe a real

example of downtrend or bear market notice once again the lower highs and lower lows as the main characteristic in here this finishes off the overall idea of trends by looking at simple highs and lows in the price chart

we can now move on to a different use of highs and lows which is to help in the identification of support and resistance levels support and resistance levels are horizontal barriers in the price chart these barriers can be useful for

identifying reversal points in the market when price is below a barrier we call it resistance in this chart you can see an example of resistance the first high sets a barrier for price and then when price comes back to this

level it treats it as resistance only to reverse to the downside right after when price is above the barrier we call it support in this price chart you can see an example of a support line notice how price touches the line three

times and then it reverses to the upside in other words the support line acted as a barrier when this barrier is strong enough price reverses direction after hitting it you identify support and resistance lines by connecting highs and lows

together with horizontal lines there are two important properties of support and resistance lines one the greater the number of times that price respects a support or a resistance line the stronger the barrier two support and resistance lines have a

switching quality meaning that a support line that is broken becomes a resistance line and a resistance line that is broken becomes a support line in this chart you can see an example of these two main properties in action

notice how price tests the black line as resistance a few times on the left side of the chart in the middle of the chart price breaks the line to the upside and now what was the resistance line turns into a support

line as we can see in the right part of the chart price 10 tests the same line as support 2 times and reverses to the upside right after in this other chart we can see the opposite happening in other words a

support line turning into a resistance line another way that a trader can use candlesticks and highs and lows is by identifying chart patterns fire patterns are collections of highs and lows that form particular shapes in the price chart

these shapes can be used to indicate a reversal or a continuation in the price movement in the same way that candlestick patterns do in this video i will only give you a few examples of chart patterns because like

candlesticks there are many different patterns to learn if you want to go deeper into the study of chart patterns you can watch my ultimate beginner's guide to chart patterns in the youtube card or in the video description fire patterns can be classified into two

main categories just like the candlestick patterns the reversal and the continuation patterns one of the easiest and most reliable chart pattern is called the double bottom which is a bullish reversal pattern meaning that price will be going down and then a double bottom will

appear to indicate a reversal to the upside there's a very simple logic behind the double bottom a double bottom happens when price stops making lower highs and lower lows and all price creates a load that happens at the same level as the previous low

the logical interpretation of this is that now sellers are not able to create a low that is lower than the previous one and therefore sellers are losing strength if sellers are losing strength buyers are gaining strength which might

indicate a reversal to the upside i will show you a classic way of training this pattern and i will show you an alternative way of trading this pattern using what we have learned so far about candlestick patterns take a look at this chart of the four

hour time frame of the us dollar versus the canadian dollar on the left side we can see that price was creating lower highs and lower lows which is typical of a downtrend in the middle of the chart sellers

attempted to create a lower low but they failed observe how this low is in the same level as the previous one that's why it begins to form a double bottom formation observe also that the candlestick that forms the double bottom is a hammer-like

candle that bullish body in the prominent lower shadow mean that there are some buyers in the level of the last low this is typical of a double bottom formation also or advanced chart pattern traders will anticipate that this is a double bottom

right at this point and trade right here without waiting for the classic confirmation that this is indeed a double bottom notice also that price begins to create flat highs by connecting the highs we create a resistance line that will serve

as a confirmation for the double bottom pattern the confirmation for the double bottom formation relies on the fact that when price breaks out a resistance line it starts to treat it as support line this is exactly what happened here

price clearly broke the resistance line and then came back to test it as support this is the moment where classic chart pattern traders will pull the trigger notice how the first time the price tests the support line there's a larger

lower shadow indicating the presence of some buyers right after that we see three consecutive inside candles and finally an outside candle pointing to the upside what i want you to take away from this example at this point is that char

patterns provide some sort of map to traders in the market the double bottom is a bullish reversal pattern the bearish version works in the exact same way but everything is upside down and it's called a double top let me show you a variation of the

double top called triple top which is the same pattern the price attempts to surpass a certain level three times instead of two like in the double bottom or double top in this chart you can see a double top

formation that ends up becoming a triple top formation the first red arrow shows the origin of the resistance line coming from a prominent high in the chart the second red arrow shows the moment where price comes back to the resistance

line notice that when price touches the resistance line it creates a candlestick with a prominent upper shadow in a bearish body this is the shooting star pattern we saw previously which is a bearish reversal pattern in other words price creates a bearish

reversal candlestick pattern at the same time that it hits a resistance line and right after that price goes to the downside star pattern and candlestick pattern traders would see this shooting start happening at a possible double top and

they would open a short trade which would obviously have worked however after price goes down it comes back again to the same resistance line a third time as it is shown in the third red arrow notice that this time it's a little

different instead of creating a shooting star pattern price creates three haramis or three consecutive inside candles only to finally give up and start going to the downside again fire pattern and candlestick pattern traders would also see this as a setup

for a short trade meaning the combination of a triple top and three consecutive inside candles or harami's notice the exception here that these three harami candles indicate a bearish reversal but they are bullish candles the star trade will yield an even

greater profit than the second one as you can see in the chart another interesting chart pattern that is not so famous but it can be very reliable is called v bottom and v top the v top is a bearish reversal pattern

that is characterized by a sharp acceleration to the upside that is immediately followed by a sharp acceleration to the downside in this chart you can see an example of a v-top notice how the sharp acceleration to the upside is immediately followed by an

acceleration to the downside at the v-top it's common to find very clear candlestick patterns that will anticipate the reversal in this case we can see an inside candle indicating the beginning of the down movement the v bottom is the bullish reversal

version of the v top it's characterized by a sharp acceleration to the downside that is immediately followed by a sharp acceleration to the upside in this chart we can see an example of a v bottom the important thing to notice

here is that the anticipation of the movement to the upside can be made by observing candlestick patterns in this case we can observe several candlestick patterns happening consecutively before the reversal to the upside mainly inside candles and hammers

as i said previously there are many different types of chart patterns and each one of them is traded in a specific way in this course i am simply introducing the idea of chart patterns and showing a few of the chart patterns that i find to

be more reliable for beginners if you want to go deeper into the subject watch the ultimate beginner's guide to chart patterns i made in the youtube card we have covered a lot of ground so far in terms of raw price action by talking

about individual candlesticks and their patterns highs and lows trends support and resistance levels and chart patterns now we must move on to a different part of technical analysis there are certain things that raw price action cannot tell us so we need

auxiliary tools to access different information about the market this is where a few technical indicators come into play one of these aspects of the market that price is not able to tell us by itself is called momentum momentum can be defined as the strength

behind the price movement for example when we talked about trends we saw the higher highs and higher lows generally mean an uptrend this uptrend has momentum in other words it has the capacity to sustain itself into the future

however this capacity to sustain itself or the momentum behind the trend cannot last forever it runs out at some point and then the market changes direction the best way of measuring the market momentum is through the technical indicator called rsi which stands for

relative strength index there are many different things you can do with the rsi indicator but the best of the techniques to measure market momentum is called momentum divergence this technique is actually very simple remember that as new candlesticks are

formed in the price chart we begin to see the formation of highs and lows the rsi indicator will mimic the highs and lows formed by candlesticks in a separate window since it's a window oscillator the trick for you to measure market

momentum lies in the comparison between highs and lows in price with the corresponding highs and lows in the rsi we have basically two types of momentum divergence the famous reversal divergence which indicates a reversal in price direction and a continuation divergence also

called hidden divergence which indicates a continuation in price movement for both types of momentum divergences we have the bullish and the bearish versions let's begin by taking a look at the reversal divergence first because it's a little easier to see we'll start with

the bearish version first a bearish reversal divergence indicates that price will be going up and then a reversal divergence will appear to signal a reversal to the downside as we saw earlier when price is going up it produces higher highs and higher lows

when there is no momentum divergence the rsi will also produce higher highs and higher lows however as the trend begins to lose momentum price will continue to make higher highs but the rsi will fail to create higher highs

that's why we say that the rsi is diverging from price action another way of seeing this is that even though the movements created by candlesticks in the price chart might appear to be strong the rsi will warn that there is not

enough momentum to sustain these price movements and then there is a higher chance that price will reverse direction in other words when price is rising and we are looking for a possible reversal divergence we look at the highs of price

in the rsi and ignore the lows when price tries to create higher highs while the rsi is producing lower highs we have a bearish reversal divergence signal take a look at this price chart notice that in the blue lines price is

creating a higher high while the rsi is creating a lower high therefore creating a bearish reversal divergence signal right after that price reversed to the downside as you can see by the large red arrow in the bullish reversal divergence price

will be going down and then a reversal diverging signal will appear to indicate a reversal to the upside in the bullish reversal divergence we look at the lows of price in rsi and ignore the highs the opposite of what we did in the

bearish version of the reversal divergence in other words a bullish reversal divergence appears when price creates lower lows while the rsi is creating higher lows in this price chart we can see a very clear example of bullish reversal

divergence notice how price creates a lower low while the rsi creates a higher low right after that price reverses direction to the upside the reversal divergence is the most common type of momentum divergence but as i mentioned earlier there is

another type called continuation divergence like the name suggests the continuation divergence indicates a continuation in the current price movement unlike the reversal divergence which indicates a change in the current price direction let's begin with the bullish continuation divergence first in a

bullish continuation divergence price will be going up then a continuation divergence will appear to signal continuation in the upward price movement for the continuation signal we look at the lows and ignore the highs a continuation divergence will appear

when price creates a higher low while the rsi is creating a lower low in this chart we can see an example of a bullish continuation divergence notice how price is going up and generating higher highs and higher lows

while price is generating a higher low the rsi is generating a lower low that signals a continuation in the upward price movement as it is marked by the green arrow in the bearish continuation divergence price will be going down

meaning you will be creating lower highs and lower lows and then a continuation signal will indicate that this movement will continue in a bearish continuation we look at the highs and ignore the lows when price creates a lower high while

the rsi is creating a higher high we have a bearish continuation divergence signal in this price chart we can see an example of a bearish continuation divergence in the blue lines you can see price creating a lower high while the rsi

creates a higher high therefore indicating a continuation in the trend as it is highlighted by the red arrow the reversal and the continuation divergence signals are among the most reliable ideas in technical analysis they are surprisingly simple and

effective another way of measuring the implicit force behind price is through market volume volume is similar to momentum in a way it measures the level of market activity i say that is similar to momentum because sometimes a price movement will

appear to be strong but there is not enough volume behind it to sustain the price movement like momentum divergence that is an indication that price reversal might be underway in the same way that we have momentum divergence we also have volume

divergence several ways of analyzing volume but the most common of these ways is through what's called the volume histogram the histogram shows vertical bars corresponding to each candlestick the green bars indicate the volume in a bullish candle and the red bars indicate

volume in a bearish candle the higher the bar the higher the volume in that particular candle the most important thing about volume comes from one of the tenants of the famous dow theory it's a universal rule about the relationship between price and

volume the rule is that volume confirms price movement that means for example that if price is creating higher highs and higher lows in an uptrend volume should also be increasing in the same way when prices create lower highs and lower lows in a downtrend

volume should also be increasing let's summarize that before moving on to the idea of volume divergence in an uptrend as price generates higher highs and higher lows the relative peaks in volume should also increase in order for a trend to be

sustained in a downtrend as price generates lower highs and lower lows volume should increase in order for a trend to be sustained volume divergence happens when volume doesn't confirm the relative highs and lows in price in an uptrend volume divergence happens

when price creates higher highs but the volume histogram creates lower highs in a downtrend volume divergence happens when price creates lower lows but the volume histogram creates lower highs in this chart you can see an example of a volume divergence happening in an

uptrend notice how price creates a higher high but the volume histogram fails to create a higher volume even though the two price movements look similar in terms of strength if we just look at raw price in terms of volume the

second price movement is a lot weaker that is one of the things that led to a reversal to the downside right after as we can see with the red arrow this other chart we can see an example of volume divergence in a downtrend

notice how price is creating a lower low but the relative peaks in the volume are creating a lower high that means that the second price movement down has a lower activity than the first one which makes it weaker we

can see that price reversed to the upside right after the volume divergence so far we only talked about trading techniques but a good technical analysis course cannot fail to mention money management as it is a crucial part of trading

it's impossible to survive the market in the long term without the proper knowledge of money management no matter how well you understand and apply trading techniques before we move on to more specific aspects of money management it should be

clear to you that a trade has three types of orders the entry the stop and the target the entry order is the price that you in fact get in the market the stop loss order is a price level

that you wish to get out of the market in the case of a loss and the target is the price level you wish to get out of the market in the case of a profit in the case of a long trade the stop

loss is below the entry and the target is above the entry in the case of a short trade the stop loss is above the entry and the target is below the entry we begin the study of basic money

management with the six money management parameters you need to keep in mind they are the initial capital the percentage risk which is also known as the f the dollar risk the stop size the trade size and the risk reward ratio

the trader must define these parameters in this order let's begin with the initial capital initial capital is simply the amount of money you have to trade so if your trading account has ten thousand dollars that's your initial capital that's all

there is to it the second parameter is the percentage risk or the f this is the percentage of capital or the fraction of capital that you are going to risk in every trade for example the trader can decide to risk one percent of

his initial capital in every trade the third parameter is the dollar risk which is simply the percentage risk or the f in terms of capital the formula for the dollar risk is capital times f for example if the capital is 10 000

and the trader sets the f at one percent then the dollar risk will be equal to ten thousand dollars times one percent which equals one hundred dollars that means the amount of money you can lose in each trade is equal to one

hundred dollars the next parameter is the stop size which is the distance between the entry and the stop loss order in equities this is measured in terms of capital for example if you open a trade at twenty dollars and the stop loss is at

15 the stop size is equal to 5 other instruments like forex and futures are measured in points or pips for example the euro ust the pip is measured from the fourth decimal case if your entry is at 1.45852

and the stop is at 1.45802 then you have a 50 pip stop loss this is important for the calculation of the trade size which is the next parameter the trade size is the number of shares lots or contracts to trade so that the

stop size represents the chosen dollar risk this is actually simpler than what it sounds you can know the trade size following very simple formulas for equities the trade size is equal to the dollar risk divided by the stop size

in forex the trade size is equal to the dollar risk divided by the stop size times the pip value notice that you cannot calculate the trade size properly without knowing the stop size which implies that you cannot trade properly

without a stop loss after calculating the trade size you can move on to the final parameter which is the risk reward ratio if you want to survive the market in the long term you need to choose a risk

reward ratio where the target is a few times larger than the stop as a standard you can choose a 1 to 3 ratio meaning that the target will always be three times as large as the stop for example

if you are trading forex and the trade you want to trigger has a stop equal to 20 pips your target must be three times that which equals 60 pips for more advanced traders the risk reward ratio can vary according to what

happens in the market but since this is a course for beginners you must choose a good risk reward ratio and stick to it one of the main reasons why a risk reward ratio like this is important is because you can make money being wrong

most of the time to understand this you simply need to think about what happens if you make a series of trades respecting a certain risk reward ratio imagine that you use a 1 to 3 ratio and the first trade you make is

profitable that means you can lose the next three trades and still break even meaning that you can lose the next three trades without damaging your initial capital when we look at a set of trades we immediately start to look at how many of

the trades were profitable in relation to the total number of trades this is the idea of win rate in this example we have a total of four trades one is profitable and the other three are not the win rate is simply the number of

profitable trades divided by the total number of trades in this case we have one profit divided by a total of four trades which equals 25 notice that this one profit is capable of neutralizing three losses that means a break even which is when

you don't win or lose any money what i want you to take away from this is that you can break even with a 25 win rate by using a one two three risk reward ratio in other words even a win rate slightly

higher than that will already produce profits for example if you use a risk reward ratio of 1 to 3 and produce 30 win rate in your trades you will generate profits that means you can make money being wrong most of the time if you use a good

risk reward ratio for example let's say that your dollar risk is one hundred dollars and you use a risk reward ratio of one two three so your targets are three hundred dollars let's also imagine that you make 200

trades and you have a win rate of 30 percent which is the same as saying that you were wrong 70 of the time in your decisions 200 trades times 30 win rate means you won 60 trades 200 trades times 70 means you lost 140

trades notice how much larger the number of losing trades is in comparison to the number of winning trades the winning trades however represent a 300 dollar profit each so the total profit is 60 times 300 which equals 18 thousand dollars

the total loss is equal to the 140 losing trades times 100 which is the predefined dollar risk which equals 14 000 if you have 18 000 of profit minus 14 000 of loss you still have four thousand dollars of profit even after losing

seventy percent of your trades this is the reasonable mathematics behind using good risk reward ratios given the simple ideas about money management we can reach a few conclusions and raise a couple of questions number one you cannot properly calculate

the trade size without knowing the stop size first that means you cannot trade without a stop loss number two you cannot calculate your risk reward ratio properly without establishing a target that means you cannot trade without a take profit target

number three once the trade is open you cannot change the stop loss and take profit orders because that will alter your predefined dollar risk in your risk reward ratio you can only do that if you are more advanced trader that means you must let

the trade either hit the stop or the target no matter what happens in simpler terms always use a stop always use a target use a good risk reward ratio once you set the stop in the target don't change them and finally let the

market hit either the stop or the target no matter what happens there are two main questions that emerge here number one how much you should risk in every trade or what is the optimal f and number two what is the best risk

reward ratio there are advanced ways of calculating the optimal f but since this is a course for beginners we need to keep things simple the most important thing about risk is that you must keep it low do not risk more than one percent of

your capital in one trade ideally you should risk between 0.5 and 1 in each trade just think that if you risk 0.5 percent of your capital in each trade you have 200 consecutive chances of making mistakes before you exhaust your entire

capital you will understand why that's important in the next section when we talk about trading psychology there are more advanced ideas in order to maximize the risk reward ratio but as a rule of thumb using one two three will

solve most of the problems with money management we must now move on to another topic that cannot be neglected in a technical analysis course which is the so-called trading psychology beyond trading techniques and money management traders must also know basic

trading psychology principles the moment you start trading it becomes obvious that there are many different types of emotions that emerge in trading especially when you risk real money some of the emotions you will face in real trading are hope optimism anxiety

fear of losing greed fear of missing out anger frustration denial overconfidence underconfidence hesitation and the list goes on from this idea that good and bad emotions appear in trading we can conclude that traders must be able to learn how to manage such emotions

efficiently what a few traders fail to realize is that there are emotions that are possible to manage and others that are unmanageable the manageable emotions are those you can control with willpower and discipline unmanageable emotions are those you

cannot control with willpower and discipline in other words these are the emotions that take over you and force you to make bad decisions in the market what differentiates between manageable and unmanageable emotions is not the type of emotion is the emotional

intensity emotional intensity is simply the degree to which you feel an emotion for example you can be mildly angry or you can be uncontrollably angry you can be a little anxious or you can be overwhelmingly anxious what some traders don't realize about

emotional intensity is that there is a certain threshold for it if you keep the emotional intensity below a certain threshold any emotion positive or negative is manageable by using a reasonable amount of willpower and discipline however if the emotional intensity

surpasses a certain level any emotion will become unmanageable in other words after a certain degree of emotional intensity it doesn't matter how much willpower or discipline you have whatever emotion you are feeling will become overwhelming that's where things

go wrong in trading the good news is that traders can control emotional intensity by controlling how much risk they take in trading emotional intensity is proportional to f the greater the f the greater the emotional intensity for example if you risk 50 of what you

have in a trade your emotions during and after that trade will be extremely amplified and too hard to manage if not impossible however if you risk 0.5 percent of what you have in a trade your emotions will be easy to manage

the conclusion here is that you don't try to manage amplified emotions you avoid amplifying them in the first place by risking less in fact if you notice that your emotions are getting in the way it's a sign that

you are risking too much when training is done in the right way emotions are actually very easy to manage with minimal willpower and discipline the bottom line here is that if you want to have control of your emotions in trading you should use small

risk another extremely important aspect of training psychology is the concept of immediate and delayed gratification and punishment our perception of risk changes depending on whether the trade variant is in profit or loss for example when you open a trade and it

begins to generate a profit you will immediately feel the urge of closing the trade with that small profit even if that means losing the chance of making a greater profit by waiting in other words you want the immediate

gratification however if you open a trade and it begins to generate a loss you feel the need to keep the trade open in the hope that it will reverse and generate a profit in other words you want to delay the

punishment of realizing the loss the natural mode of every trader is to realize small and immediate gratifications and to delay punishments in this way the problem is that this is exactly the opposite of what a trader should do if

the goal is to survive in the market in the long term the correct mode of behavior is to delay gratification and to realize punishments quickly which is the built-in quality of the money management principles you learned in the previous section

another way of seeing this is that when we are winning we are risk averse when we are losing we seek more risk this is why having clear rules about stop loss and targets is important the correct mode of trading is delayed

gratification and immediate punishment but as you see this is counterintuitive by following the rules of respecting the stop and target where the target is a few times larger than the stop you are forced to delay gratification and to realize punishment quickly which

is the right way to go you can only bypass the urge to realize gratification earlier than you should if you use small risk though remember that the greater the f the greater the emotional intensity realizing a loss is also not that big of

a deal when you use small risk we can summarize this section about basic trading psychology in a few statements one use small risk that will ensure that you will be able to manage your emotions effectively with minimal willpower and discipline

two if you follow the risk reward ratio proposed in this course and if you follow the rule of letting the market either hit the stop or the target of your trades no matter what happens you will solve this problem of delayed

gratification and immediate to put it even more clearly small risk and clear rules require minimal discipline high risk and unclear rules are unsustainable and dangerous now it's time to put all of these ideas together in this section you have an

idea of how to combine technical analysis money management and training psychology with a few practical examples the most powerful concept in technical analysis is the concept of combining trading techniques together also known as trading at the intersection or the integration of

techniques trading techniques by themselves are not very powerful but when you combine them together they become a lot more reliable that is an extremely simple idea but as i said is the most powerful principle in all technical analysis

it's a lot more powerful than any single technique you can imagine most people who begin to trade believe that it's all about finding the perfect technique this is the wrong way of looking at it traders from beginners to advanced ones

should strive to combine different types of techniques together that is as close as you ever going to get to the holy grail of trading which does not exist by the way so it's not about how great a technique

is it's about integrating the power of different techniques together it's important to realize that you don't have to combine all the techniques all the time but the more techniques you combine the more reliable the trade tends to be

given the importance of this principle i want to show you several different examples of trades combining the simple trading techniques you have learned in this course in combination with the money management and trading psychology principles we have seen too

we'll begin with a simple example where we combine two different techniques together the reversal momentum divergence and the candlestick patterns take a look at this price chart right from the start we can see that price is creating lower highs and lower

lows so we can say it's in a downtrend however we can also spot a bullish reversal divergence by looking at the lows as it is highlighted by the blue lines is creating a lower low while the rsi is

creating a higher load as i said before relying on only one technique is not a good idea so you must analyze the market through the other techniques as well the other technique that is clear in this case is the candlestick pattern

observe that price has been advancing down for a while at each candle but in the current candle we have an inside formation or a harami pattern meaning that price has stopped advancing by advancing two more candles into the

future we can see two more inside candles now the current candle beyond being an inside candle or a harami it's also a hammer this would be a place where you could think about opening a long trade based on the momentum divergence and the

cluster of candlestick patterns indicating a reversal before you open any trade however you always have to think about the stop loss and the take profit order stop loss orders must always be placed in a logical price level and take profit

target should be many times the size of the stop loss in this situation the logical stop loss order is below the lowest point in the chart notice that if price is going to reverse from here it's probably not going to

break that low even though it's certainly possible that it does notice that none of the candlestick patterns broke that level given this situation you can open a long trade at the open of the next scandal with a stop below the lowest low in the

chart in a take profit target that is three times as large as the stop loss order let's advance price to see what happens as you can see here the trade is successful there are a couple of important lessons to learn here about

managing the trade while it's open notice that in the beginning price goes down a little bit and it goes closer to the stop level if you see that happening in real time you will be tempted to change the stop

loss to a lower price level so that the market doesn't trigger the stop you cannot do that under any circumstances you can never increase the size of your stop-loss order in the middle of the trade because that defeats the purpose

of having a stop-loss in the first place you must have the discipline to leave the market hit to stop or not that's difficult to do but it's certainly not impossible it just requires a little discipline remember also that it's a lot easier to

have this discipline if you use low risk right after that price begins to go in the desired direction which is up at this point your mind will shift 180 degrees and you will be tempted to close the trade with a small profit you must also

resist this urge that happens because we prefer a small profit right now rather than a bigger profit later on even though you will feel like closing the trade at this point is the right thing to do you must resist this urge

and learn how to delay the gratification by sticking to the original plan which is to close the trade at the predefined take profit target this decision of delaying the gratification right here has a massive impact on your ability to be

consistently profitable in the long term we can also see that the trade eventually hits the target and then another problem will happen even though it hits the predefined target you see that your target could have been larger because price continued

going up the lesson here is that we can never know if price will overshoot the target or not in other words we cannot control that what we can control is whether or not we let the market hit our target or stop

if you made a trade where the target was three times as large as a stop that's a perfect trade it doesn't matter if the target could have been 4 5 or 10 times the size of the stop there is always another trade you can

take it's more important to make trades like this on a consistent basis rather than producing trades with a disproportional ratio between target and stop once again the name of this game is consistency and balance not hyper performance let's now move on to another example

where we combine three different techniques beyond candlestick patterns and momentum divergence we're also going to add support and resistance lines now let's begin with the support and resistance line in this chart in the green arrows we can see price

respecting the line as support then price breaks the line to the downside and transforms it into resistance as a resistance line price touches it three times once again and breaks it to the upside turning the line into support again

this is the characteristic switching quality of these lines as we saw earlier in terms of trend we can see that price is creating higher highs and higher lows so we have an uptrend at the current candlestick we have an

interesting situation price is testing the support line once again remembering that this line has been successfully tested numerous times in the recent past which makes it stronger beyond this the candlestick that tests the support line is a hammer

notice the pronounced lower shadow touching and respecting the support line at the same time have a bullish continuation divergence happening in the rsi observe the higher low in price and the flat low in the rsi a lower low in the rsi would be a

stronger continuation divergence but when we have a higher low in price and a flat low in the rsi there is still divergence notice that in this current candlestick we have three distinct techniques happening at the same time in other words we are integrating three

different techniques this would be enough to open a long trait but before that we need to decide the logical stop loss and take profit targets this particular trade notice how we are relying on the buyers that are apparently sitting at the support line

the prominent lower shadow of the current candlestick suggests that we can therefore place a stop loss order below the low of this candlestick if we are correct about the buyers at the support line price should not go lower than the scandal stick's lower

shadow even though that is possible with higher market noise we can enter a trade with a stop just below the lower shadow with a target three times as large as the stop remember that moving the stop loss order

while the trade is open is a terrible idea you cannot pass decrease the size of the stop that's a more advanced technique you can never under any circumstances increase the size of the stop let's advance price to see what happens

as you can see the trade will be successful the reward would be three times as large as the risk which is a critical thing for long-term sustainability in trading notice that in the second half of the trade the market started to go sideways

just shy of hitting the target this is another of those instances where you would have to exercise your discipline in delaying the gratification this is the 30 minute time frame so you would have to delay the gratification of

an already profitable trade for about 12 hours which is not an exactly easy thing to do let's now move on to another example this time we'll be looking at a short trade using a combination of chart patterns support and resistance candlestick

patterns and momentum divergence in terms of chart patterns we can see a triple top formation the triple top implies a resistance line as you can see in the horizontal black line right at this moment we are at the third

top this is where the other techniques come into play in terms of momentum divergence we have a clear bearish reversal divergence happening as it is highlighted by the blue lines the current moment there is also a clear shooting star

formation notice that a shooting star also occurred at the moment that this triple top was only a double top formation starting from the combination of these four techniques the triple top chart pattern the resistance line the bearish reversal

divergence in the shooting star formation we can open a short trade at the open of the next candle the logical stop-loss order is above the upper shadow of the shooting star remember to establish a target that is three times as large as the stop as you

can see in this chart in this next chart you can see that the trade would be successful notice that in the middle of the trade you probably would feel the urge to close with half of the profit since the

market started to oscillate sideways this is once again the urge you need to learn how to bypass sometimes the trade will go into profit territory and then it will come back and hit the stop loss when that happens you will be persuaded

to close the trade when you feel like it in the next time you try do not fall for this temptation no matter what happens you need to learn how to let the trade hit the stop or the target

let's move on to another example in this one you will be able to see how we can nest chart patterns in the same way that we can nest candlestick patterns in this example we can see a triple bottom formation and consequently a

strong support line in this example we can also observe a v bottom formation notice how the last movement down is a sharp acceleration to the downside which is characteristic of a v bottom in other words we have two chart

patterns happening simultaneously in terms of candlestick patterns we have a couple of things going on the first candlestick that touches the support line that originates from the triple bottom formation is called a spinning bottom formation which in this

context can be defined as a bullish reversal pattern the stronger indication comes right after when an inside candle or harami appears notice how the lower shadow of the inside candle also respects the support line originated from the triple bottom

formation the logical stop loss order will be below the lower shadow of the spinning bottom formation which is the lowest point in the third bottom the target must be three times as large as the stop in this next chart you can see how this

is one of those trades where price simply sets off into profit territory and quickly hits the pre-established target in this case you might be tempted to increase the size of your target but in most cases the best solution is to stick

to the original plan let's now observe another example this time using volume divergence as one of the techniques in this chart we can see well-defined lower highs and lower lows meaning that we have a downtrend in place however as i said previously there are

certain kinds of information that raw price action is not able to tell by itself momentum and volume are two examples of that in other words just by looking at the raw price we cannot tell exactly the strength behind

the price movement and the level of activity behind the price movement since price is creating lower highs and lower lows in normal situations we would expect higher highs in the volume histogram in order to confirm the trend however this is now what we observe in

this price chart the volume histogram is creating lower highs instead of higher highs this is what is known as volume divergence as price is creating lower highs and lower lows giving the impression that price is trending with strength to the

downside the level of activity behind the trends is decreasing which is a sign that the trend might reverse another indication that price might reverse and that cannot be extracted directly from price action itself is related to momentum the rsi we can see a bullish reversal

divergence happening which is another indication that the downtrend is weak and about to change direction this is in agreement with the volume divergence found previously if we analyze this in terms of candlestick patterns we can see that there is a hammer formation in the

current candle remembering that the hammer formation is a bullish reversal pattern this will be a third technique telling us that price is about to reverse a long trade with a stop below the lowest point in the chart could be

opened based on the integration of these three techniques the target must be three times as large as the stop as we can see in this image let's fast forward price to see what happens in this chart we can see how price

starts to rise after the hammer going directly to the predefined target notice that this is not just about the hammer pattern it's about the context around the hammer pattern which is created by the volume divergence and the momentum divergence in combination

if you try to trade just the hammer pattern for example you will make more mistakes than you should no technique by itself is strong enough in order for you to trade above the minimum win rate in the long term

this is why the principle of integration and at least basic knowledge of money management and training psychology are so important for long-term survival in the markets it's time now to make some conclusions about everything we saw in this course

number one you don't necessarily have to be an advanced trader to make high quality trades you can trade very effectively using the techniques you learn in this course however learning more advanced techniques will allow you to see more trade

opportunities and also higher quality trade opportunities that very few people are able to see in the market number two good trading regardless of being a beginner intermediate or advanced trader is about combining a good understanding of technique money management and

trading psychology all of these three elements must be present if you want to survive the market in the long term there is no reason for you not to seek long-term survival in the markets number three the most important principle of

technical analysis when we talk about technique is the principle of integration instead of looking for the perfect trading technique which doesn't exist you should strive to combine the power of several good techniques and there are many good techniques out there

number four as far as money management goes you should be able to recognize the importance of the stop loss take profit target risk reward ratio in optimal f always use low risk and good risk reward ratios that way you will have a much

better chance of becoming a consistently profitable trader number five you should also be able to understand that your f directly influences your ability to manage the emotions that will inevitably appear when you trade real money this is yet another reason why you

should use low risk to keep your emotions under a certain threshold that allows them to be manageable using minimal willpower and discipline number six before risking real money make sure you test your abilities in a demo account first

this will allow you to test your technical skills without the influence of emotions that occur in live trading it will also prevent you from losing money unnecessarily number seven you should be able to develop your skill of delaying

gratification and realizing punishments quickly while they are small this is critical if you want to become consistently profitable in the long term most traders have a hard time doing this so if you can manage to do it you'll be

ahead of most traders already once again this is a lot easier to do when you use small risk number eight high quality trading is about patience the techniques you learn in this course are very simple but you must be able to

wait for the right moment to use them meaning that you must be able to wait for them to align together otherwise your traits will fail more than they should number nine realize that if you trade failed it doesn't necessarily mean that you made

something wrong sometimes you will do everything right and the trade will fail because technical analysis is not an exact science you have to focus on things that work most of the time instead of all the time the important thing is to win more money

than what you lose it's impossible to not produce losing trades it will happen number 10 you can make money being wrong most of the time if you use the correct risk reward ratios that will give you peace of mind because

you will not feel the pressure of having to win every single trade you get into when you have that mentality the outcome of your trades will matter of course but not that much you're not looking to have the highest win rate possible you're

looking to have a win rate that is above the minimum green rate determined by your risk reward ratio number 11 do not try to trade for a living especially if you have small capital if you try to trade for a living you

will only depend on your performance to pay for your bills the problem with that is that performance is variable while bills and expenses are fixed if you look at funds you will see that they have two sources of income

the performance fee which is variable and the administration fee which is fixed if the administration fee did not exist most funds will go bankrupt in times of crisis because that's what will guarantee the payment of bills and expenses during

times where the performance is poor which will inevitably happen the problem with retail traders is that they can only rely on their performance they don't have a way to charge administration fees because they trade their own money in summary you cannot

rely on retail trading alone for a living you must have a parallel source of steady income number 12 do not treat trading as a business you must understand the difference between earned income and capital gain a business is a form of earned income

which makes money when value is provided to a customer in the form of a product or a service trading is a form of capital gain which is a matter of having information at the right place at the right time

even though the ultimate goal of these two forms is to make money the way they work is completely different that's it for this video i hope this is useful to you in some way if you wish to take your training to the

next level please check out my premium courses and ebooks in the video description you can also send me an email at support fractalflowpro.com if you have any questions if you wish to support the channel please don't forget to click the

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care you