trade what you see not what you think

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Planning the Trade, Trading the Plan23 June 2014

Nabil Mattar

Premium Client Manager

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DISCLAIMER

IG Asia Pte Ltd (Co. Reg. No. 20051002K) holds a capital markets services licence from the MonetaryAuthority of Singapore for dealing in securities and leveraged foreign exchange trading and is an exemptfinancial adviser. It is also licensed by International Enterprise Singapore to trade CFDs on commodities.

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses thatexceed your initial investment, so please ensure that you fully understand the risks and costs involved byreading the Risk Disclosure Statement at www.ig.com.sg. Trading in CFDs may not be suitable for manymembers of the public. You should carefully consider whether such trading is appropriate for you in the lightof your personal circumstances. In considering whether to trade, please be aware of the marginrequirements, commissions, fees and other charges for which you will be liable. These charges will affectyour net profit (if any) or increase your loss.

IG provides an execution-only service. The information in this presentation is intended for general circulation.It does not take into account the specific investment objectives, financial situation or particular needs of anyparticular person. You should take into account your specific investment objectives, financial situation orparticular needs before making a commitment to trade, including seeking advice from an independentfinancial adviser regarding the suitability of the investment, as you deem fit.

IG accepts no responsibility for any use that may be made of this information and for any consequences thatresult. No representation or warranty is given as to the accuracy or completeness of the information.Consequently any person acting on it does so entirely at his or her own risk. This presentation must not bereproduced or further distributed.

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IT IS MORE IMPORTANT TO KNOW WHEN TO BUY/SELLTHAN WHY THE ____________ WENT UP/DOWN

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Good level to BUY? Think again

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TRADING PROCESS

BIASBIAS

• Bullish or Bearish• Fundamental factors

• Interest rates, central bank policies, recent news

Planning the TRADE

Planning the TRADE

• Support and Resistance• Indicators• Multiple time frames• Risk to reward

Trade Management

($$$$$)

Trade Management

($$$$$)

• Managing of psychology when in the market

• Managing stop losses • Managing oneself after a

winning/losing trade

PS

YC

HO

LO

GY

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WHO IS THIS SEMINAR FOR

• Tired of being ping-ponged by the news

• Sick of getting stopped out only for the market to go to the direction you originally predicted

• Desperate on getting it right and gaining consistency

• Frustrated of taking profit too early, only for the market to move in your favour by another 100pips

• Disgusted by the trades that you missed when it is so obvious to you after looking back over the weekend

• Dismayed by the number of trades that you tried chasing only for market to move against you completely

• Totally NEW and lost

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UNDERSTANDING WHAT PRICE IS DOING ON THE CHART

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PRICE ACTION

• Price is simply the purest form of data

• Price Action is historical price data plotted on a chart without any indicators

• Trust what the price is doing, NOT what you hope will happen

• Let price show you, not an indicator

– Use indicators as confirmation tools

– Most indicators are lagging

– Indicators typically wait for price close on a bar or candle before plotting

• Price Action involves these elements

– Support & Resistance

– Chart Structure

– Trends

– Multiple time frame

– Candles

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CHART STRUCTURE

SWINGS IDENTIFICATION

LL

HL

HL

HL

HH

HH

HH

LH

- Swings are formed at major turning points in the markets- Usually around support and resistance levels- Number of candles that form a swing varies

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CHART STRUCTURESWINGS IDENTIFICATION

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Chart Structure

THREE MARKET PHASES

Consolidation

LHLH

HL

LH

HLHL

Up Trend

HL

HH

HL

HH

Down Trend

LH

LH

LL

LL

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CHART STRUCTURE

Price is going up –Looks like it is toppish, I will look to sell

Price is still going higher and I think this is the highest. I will look to sell

Price is still pushing higher, maybe I should have bought?

• Everything you need is being played out on the charts

• Most traders think contrarian

• Trust what the price is doing, NOT what you hope will happen

• Most traders enter late, miss trades, keep losses, because we refuse to follow what the price on the chart is doing

Traders normallydon’t enter the market because they think it’s too high

Market moves higherand your gut feeling tells you that you missed the move

Now traders enter a buy, which is too late

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SELECTING WHICH MARKET TO TRADE

Clearest Direction, Strongest Conviction

Hang Seng

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SELECTING WHICH MARKET TO TRADEClearest Direction, Strongest Conviction

S&P 500

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Pairing the Strongest and Weakest

AUD/NZD 2013

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AUD/USD 2013

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EUR/USD

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EUR/GBP

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Goldman Sachs

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Citibank

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SUPPORT & RESISTANCE

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VISUAL & PSYCHOLOGICAL

• Look for whole numbers

– 00, 20, 50, 80

• Previous failures and bounces

• Pay attention to shadows and body close of candles – ROLE REVERSAL

• Always think of S&R levels as zones

• Look for a candle close above or below S&R levels before considering it broken

– Many times, they are simply market spikes

• Use multiple time-frames to confirm levels

• The higher the time-frame, the more respected the levels are

• A broken support can turn into resistance and vice versa

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Trade Planning – Looking for Confluence

Why Confluence Works

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TREND LINES

• Not a random drawing on the chart

• There are rules to follow when drawing a trend line

• Trend lines provide guidelines for price

• Can be a support/resistance

• Most of the time, trend lines are sloping

• The degree of the slope indicates trend strength

• Applicable to any chart time-frame

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TREND LINE - UPTREND

• Look out for swing lows on the chart

• Connect the lows of the swings to form a straight line

– Lows and not the period close

• Trend Line must have at least 3 points of contact of the swing low

• Indicates bullish momentum, more buyers than sellers

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TREND LINE - DOWNTREND

• Look out for swing highs on the charts

• Connect the highs of the swings to form a straight line

– Highs and not the period close

• Trend Line must have at least 3 points of contact of the swing high

• Indicates bearish momentum, more sellers than buyers

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CHART PATTERNS

• Used to measure sentiment

– period of consolidation

– provides parameters to the market

• Detect continuation or reversal of trends

• Same rules on how we draw trend lines

• Most common ones:

– wedge, triangle, pennants, flags

• Applicable to any chart time-frame

– adjust trade plan base on time frame

– i.e. a consolidation on a daily chart might be a new trend on a H1 chart

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Chart Patterns and Trend lines

• Autochartist

• Trading Central

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Ascending Triangle

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TRADING WITH THE TREND

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CHART STRUCTURE - TRENDS

TWO PHASES

Up Trend

HL

HH

HL

HH

Down Trend

LH

LH

LL

LL

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• Cliché – The Trend is Your Friend

The market can stay irrational longer than you can stay solvent” – John Maynard Keynes

• Trends

– Highest Probability

– Highest Potential Rewards

• It can’t go any higher/lower”

– We tend to use fundamental analysis to “support” our “prediction” even if chart does not show it

– “Homerun” mindset

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CHART STRUCTURE - TRENDS• Examples of Trending Charts

HLHL

HL

HLHH HHHH

HH

HH

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LL

LL

LL

LL

LH

LHLH

LH

LH

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HL

HL

HL

HL

HL

HLHH

HH

HH

HH

S&P 500

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• Examples of Non Trending Charts

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• Examples of Charts to Avoid

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Long Term TrendShort Term Trend

Medium Term Trend

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• Trends are subjective

• Based on timeframes

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ALWAYS TRUST THE HIGHER TIMEFRAMES

5 min

1 Hour

Daily

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TRADING PRICE ACTIONLong Short

Uptrend Bullish

• Higher Low to BUY• Support to BUY• Resistance to EXIT

Downtrend Bearish

• Lower High to SELL• Resistance to SELL• Support to EXIT

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TRADING PRICE ACTIONLong Short

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LET THE CHART TELL A STORY

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LET THE CHART TELL A STORY

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ABullish Flag Breakout

Consolidation

B

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HL

HLHL

LH

LH

Facebook DailyA

B

C

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UOB Weekly

HL

HL

HL

LH

HH

HL

A

B

C

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TRADE PLANNING

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TRADE PLANNING

Be a PROACTIVE trader not REACTIVE trader

FEAR

GREED

EXPECTATIONS

DISCIPLINE

MANAGING EMOTIONS

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TRADE PLANNING

BE A DETECTIVE, STACK THE ODDS

Crime Scene Investigation

• Thumbprints

• Physical Evidence

• DNA

• Vehicle Number

• Autopsy

Source: www.gograph.com

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TRADE PLANNING

BE A DETECTIVE, STACK THE ODDS

Trade Planning 1) Establishing a BIAS

2) Finding out where the Buyers and Sellers are

Primary• Visual S&R

• Psychological Levels

• Trend Lines

• Chart Patterns

• CLOCK

• Multiple Time-Frame Analysis

• Price Action

Secondary• Pivot Points

• Fibonacci Levels

• Candlestick Patterns

• Divergence

• Moving Average

• Oscillators

CONFLUENCE

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PLAN THE TRADE, TRADE THE PLAN

1) The chosen market

1) Familiarity

2) Technical setups – ie. pairing strongest and weakest

3) Fundamentals, news driven

2) Which timeframes to execute and manage

• Analyze at least two time-frames above your execution chart

• Match time-frame to the type of trader you are

– Scalper – 1min, 5min, 10min– Intra-day – 15min, 1h, 4h– Swing – 1h, 4h, Daily– Position – 4h, Daily, Weekly

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3) The chosen strategy

• Scalping, swing, position

• Trend, countertrend, range

Type of Trader Strategy

ScalperMomentum Trades using Bollinger Bands

Day-TraderInside Day Breakout

Swing-TraderDaily Chart Trend Bullish Engulfing

Position TraderThe Carry Trade /US Dollar Hedge Trade

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4) Entry and Exit Rules

• Pull backs, open/close of candles, breakout

• Stop loss, Take Profit

• EXPECTATIONS

– Timeframe to plan exits

– Estimate time needed for trades to materialize

5) Money Management

• Risk to reward

• % of capital risk per trade

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SUMMARY

• Understand what the chart is doing, be a master of leading indicators

• Price Action

• Support and Resistance

– Visual, Psychological

– Trend lines

– Support and Resistance

• Know your timeframes and make sure it suits your trading style

• Plan the trade, trade the plan

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Nabil Mattar

Premium Client Manager

6390 5105

[email protected]

trade what you see not what you think

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