Post on 14-Dec-2015
MarketWorx:MarketWorx:Technical Analysis & TradingTechnical Analysis & Trading
Shaun van den Berg
11 October 2011
Make Money
Investor
Trader
TechnicalAnalysis
WEN Charting
PositionTrading
DayTrading
SSFEquities CFD
AgendaAgenda
Swing Trading
Share Market AnalysisShare Market Analysis
Share MarketAnalysis
FundamentalAnalysis
Technical Analysis
MacroFundamentals
MicroFundamentals
VolumePrice
Technical Analysis
Technical
Analysis
Fundamentals
Trends
Supply & DemandSupply & Demand
PricePrice Volume
Patterns
Market Psychology
1st StageThings are
getting better
2nd StageImprovement
Is actuallyunderway
3rd StageThings will get better
forever
2nd StageThings are
deteriorating
1st StageThings
would not always be
rosy
3rd StageThings
can only get
worse
Technical AnalysisTechnical Analysis• Price Charts
– Closing Line Charts – Bar Charts– Bar Volume Charts– Point & Figure Charts– Candlestick Charts
• Breakout Trading– Cycle & Trend Analysis– Support & Resistance– Trend Lines– Continuation Patterns– Reversal Chart Patterns
• Swing Trading Strategy– Moving Averages
• 10-day SMA & 30-day EMA
• 200-day SMA– Technical Oscillators
• OBOS & Momentum• RSI & Stochastic• MACD
– Volume Analysis• On Balance Volume• Volume Price Trend
– Relative Strength Analysis• Relative to Sector • Relative to JSE Overall
Price Charts: Closing Line ChartPrice Charts: Closing Line Chart
Price Charts: Bar ChartPrice Charts: Bar Chart
High
Close
LowOpen
Price Charts: Bar Volume ChartPrice Charts: Bar Volume Chart
Price Chart: Point & Figure ChartPrice Chart: Point & Figure Chart
Point & Figure Charts – Double Top Formation
Point & Figure Charts – Double Bottom Formation
P & F Charts - Variations of the Double Top & Bottom Formation
Point & Figure Charts – Bullish Signal Formation
Point & Figure Charts – Triple Bottom Formations
Point & Figure Charts– Formations in Combinations
Point & Figure Charts – – Variations on the Triple TopVariations on the Triple Top
P & F Charts - Variations on the Triple Bottom Formation
Point & Figure Charts – Bearish Signal Formation
Point & Figure Charts – Symmetrical Triangles
Point & Figure Charts – Triple Top Formations
Point & Figure Charts – – The Broadening FormationThe Broadening Formation
Point & Figure Charts – Bullish & Bearish Catapult Formations
P&F Charts– Bullish & Bearish Signal Reversed Formations
Point & Figure Charts– Bullish & Bearish Support Lines
Point & Figure Charts– Bullish & Bearish Resistance Lines
Horizontal Count (Upside)
The upside target in the chart below = (14 x 5 x 3) + 0 = 210c
Horizontal Count (Downside)
The downside target in the chart below = 100 - (6 x 5 x 3) = 10c
Price Chart: CandlesticksPrice Chart: Candlesticks
Gather Information: Technical Analysis Checklist
TrendingTrending(Up/ Down)(Up/ Down)
Outperformance/Underperformance
Overbought/Overbought/OversoldOversold
Cycles Cycles Support & Resistance Support & Resistance
Moving AveragesMoving AveragesTrend LinesTrend Lines
OB/OS & MomentumOB/OS & MomentumRSI & Stochastic / MACDRSI & Stochastic / MACD
OBV & VPTOBV & VPT
Relative StrengthRelative StrengthAnalysis Analysis
Trends & Cycles
Bull Bear
Sideways
Corrections Rallies
Trends & CyclesTrends & Cycles
Bullish Trend
Bearish Trend
Bullish Trend
Market Cycles - Bull
Higher Highs, Higher Lows
Market Cycles - CorrectionsMarket Cycles - Corrections
Market Cycles - BearMarket Cycles - Bear
Lower Highs, Lower Lows
Market Cycles - RalliesMarket Cycles - Rallies
Support & Resistance Reversals
Support & Resistance
Resistance
Resistance
Support
Support
Support
Resistance
Resistance
Support
Support
Support
Resistance
Resistance
Support & Resistance levels highlight possible “turning points”
Support
Resistance
Resistance
Support
Support & Resistance
• The more times a share price has touched these areas, the more valid
these levels are & the more important they become.
• The longer these support & resistance levels have been in play, the
better the outcome when the share price finally breaks out.
Support & Resistance - Bull
ResistanceResistance
Support
Resistance/Resistance/ Support Support
SupportSupport
SupportResistanceResistance
Support & Resistance - BearSupport & Resistance - Bear
Resistance/ Support
SupportSupportSupport
Support
SupportSupport
ResistanceResistance/ / Support Support
ResistanceResistance
ResistanceResistance
Trend Lines
SupportTrend Line
ResistanceTrend Line
SupportTrend Line
ResistanceTrend Line
As long as the price stays above/ below the Support or Resistance lines, the trend is either bullish or
bearish
Trend Lines - BullTrend Lines - Bull
Support Trend Line
Resistance Trend Line
SupportResistance Resistance
ResistanceResistance
Support Trend Line
Trend Lines - BearTrend Lines - Bear
Support Trend Line
Support Trend Line
SupportTrend Line
SupportTrend Line
ResistanceTrendLine
ResistanceTrendLine
ResistanceTrendLine
ResistanceTrendLine
Failed Breakouts
Entry Points
•Once prices are set to close above a resistance level, a trader will establish a bullish position.
•When prices are set to close below a support level, a trader will take on a bearish position.
Exit Points• How long am I planning on being in this trade?
(Depends on what type of trader you are: Position, Swing or Day Trader)
• How much risk am I willing to take?– Setting near-term profit targets that execute at opportune times to
maximize profits. – Here are some common execution points:
• Retracement levels. • Trend line breaks (Support & Resistance). • Any other technical points.
– Developing solid stop-loss points that immediately get rid of holdings that
do not perform.
– Creating exit strategies based on technical factors affecting the short-term.
Exit Points• Where do I want to get out?
– Many people become irrationally attached to their holdings & hold these
equities when the underlying fundamentals of the trade have changed
– Traders sometimes worry & sell their holdings even when there has been no
change in underlying fundamentals.
• Both of these situations can lead to losses & missed profit opportunities.
– Set a point at which you will sell takes the emotion out of trading.
– The exit point itself should be set at a critical price level, i.e. technical
points e.g. Retracement levels
Rectangle Formation
24 to 30 = 6
Triangles
Ascending TrianglesTP
Descending Triangles
TP
Flags
Pennants
27 to 33 = 6
31 + 6 = 37
TrianglesTriangles
TrianglesTriangles
Triangles Triangles
TP
TP
Breakout Trading: The Steps
1. Identify the candidate
2. Wait for the breakout
3. Set a reasonable price objective
4. Allow the share to retest
5. Know when your trade has failed
6. Exit at your price target (TP)
7. Be patient
Breakout Trading: The Steps
Resistance
Support118 to 137 = 19
137 + 19 = 156
Breakout Trading: The Steps
Resistance
Support
Support
Resistance / Support
Breakout Trading: The Steps
Resistance / Support
Support
Support
Resistance
Double Tops
Double Bottoms
Triple Tops
Triple Bottoms
Double Tops & BottomsDouble Tops & Bottoms
Double BottomDouble Bottom Double BottomDouble Bottom
Triple TopTriple Top
Double Tops & BottomsDouble Tops & Bottoms
Double Bottom
Double Top
Triple Top
Head & Shoulders
Head & Shoulders Target Price
Head & Shoulders
LS
Head
RS
Neckline
Head & Shoulders
Target Price
Inverse Head & Shoulders
8.5 to 10.0 = 1.5
10.0 + 1.5 = 11.5 TP
Inverse Head & ShouldersInverse Head & Shoulders
LSLS
Neckline Neckline
Head Head
RSRS
Target Price
Inverse Head & ShouldersInverse Head & Shoulders
LSLS
Neckline Neckline
RSRS
Head Head
Inverse Head & ShouldersInverse Head & Shoulders
LS
Head
RSRS
Neckline
LSLS
Head
RS
Neckline
Target Price
Falling Wedge
Rising Wedge
Falling WedgeFalling Wedge
19.55% in 5-days
Falling WedgeFalling Wedge
Breakout & confirmation
10.19% in 3-days
Increased volume
Rising WedgeRising Wedge
- 8.38% in 13-days
Breakout Trading: Conclusion
• Breakout trading welcomes volatility.
• The volatility experienced after a breakout is likely to generate emotion because prices are moving quickly & in a volatile fashion.
• Using the steps & information covered will help you define a trading plan that, when executed properly, can offer great returns & manageable risk.
“A good (trading) plan today is better than a perfect (trading) plan tomorrow”
General George S. Patton
The Trading Plan
“Trading provides one of the last great frontiers of opportunity in our economy. It is one of the very few
ways in which an individual can start with a relatively small bankroll and
actually become a multi-millionaire” Jack D Schwager
The Trading Plan
1. Know Yourself, Know Your Purpose
2. Trading Goals
3. Markets, Instruments & Timeframes
4. Tools of the Trade
5. Before the Market Opens …
6. Risk & Money Management
7. Exit Strategy
8. Trade Strategies, Setups & Entries
9. After the market closes …
10. Discipline
11. Golden Trading Rules …
The Trading Plan
Who needs a Trading Plan?Who needs a Trading Plan?
• Unless you are consistently profitable trader over a sufficient length of time to encompass a number of different market conditions – then YOU need a trading plan!
• If you have achieved this:
• – Refresher course– Open your eyes to
new aspects of trading that can improve your profitability
• Consistently profitableConsistently profitable
What will the Trading Plan Do?What will the Trading Plan Do?
• Makes the act of trading simpler• Limits your opportunity to make bad trades• It will prevent psychological issues• Act like a roadmap / Personal GPS
– Either something in the plan is not working– You are not adhering to the trading plan
• Take away much of the decision making– Emotional & irrational decisions
• Enable you to trade outside comfort zone– Prevent letting losses run & cutting profits short
• Instill a large measure of discipline
1.1. Know Yourself, Know Your Know Yourself, Know Your PurposePurpose
• Understand your psyche & sentiment• Decide what you want to achieve, ask why &
how trading is going to provide it?• Why do you want to be a trader?• What sort of trader are you?• What are your strengths & weaknesses? • Are you in the right frame of mind to trade?• What are your income targets?
2.2. Trading GoalsTrading Goals• Setting goals are essential
– Beacon to work towards – Track progress – Motivation required
• Define goals in terms of your development as a proficient trader
– Annual Trading Goals– Monthly Trading Goals– Weekly Trading Goals– Daily Trading Goals
3. Markets, Instruments & Timeframes
• Decide which markets will you trade?• Which instruments will you trade?
– Basket of shares / whole market?– SSFs / CFDs – Top 40 / Mid Caps?– Currency Futures – Currency pairs?
• Which timeframes will you trade?– Day Trader – Minutes & Hours?– Swing Trader – Days & Weeks?– Position Trader – Months & Years?
4. Tools of the Trade• What financial vehicle will you use to trade?
– Equities, Warrants, CFDs & SSFs? • What broker & trading platform will you use?• What Live Prices are you going to use?• Which charting software will you use?
5. Before the Market Opens …
• What is your daily pre-market routine?– Have you analysed yesterday’s trades?– Do you have any positions open?
• What are the general market conditions?– What will you do today – hour by hour?
• Which instruments are on your watch list?
6.6. Risk ManagementRisk Management
General Risk ManagementGeneral Risk Management
• What is your attitude towards risk?
• What is the overall market risk?
• What is the sector risk?
• What is the broker & hardware risk?
• What is the strategy risk?
Specific Risk ManagementSpecific Risk Management
• What is the probability of a successful trade?
• What is the Risk-Reward ratio?
• What is your risk per trade?
• Where will you place your stop loss order?
• When will stop trading?
6. Money Management
General Money ManagementGeneral Money Management
• Large draw downs & profits
• What will you do?
• Which money management approaches will you utilise?
Specific Money ManagementSpecific Money Management
• Will you lock in profits?
• How will you determine your position size?
7.7. Exit StrategyExit Strategy• Losing trades
– Will you exit before your stop is hit?– Which signals will see you exit early?
• Winning trades – Which signals will see you exit completely?– Which signals will see you close half?– Which signals will see you close the
remainder?
8.8. Trade Strategies, Setups & EntriesTrade Strategies, Setups & Entries
• Which strategies will you trade?
• What are your trade setups?
• How will you find your setups?
• Which signals will trigger your entry?
9.9. After the market closes …After the market closes …
• Have you recorded today’s trades?
• Did you execute your trades according to your trading plan?
• Have you completed your trading journal?
10.10.DisciplineDiscipline
• Back test or forward test?• What are your promises to yourself?
– What questions do you ask after a winning trade?– What questions do you ask after a losing trade?
• What steps do you take to learn more about trading?
11.11.Golden Trading Rules Golden Trading Rules • Protect & preserve capital!• Always set a stop loss, always!• Cut your losses short – Let your profits run!• Trade what you see – Not what you think!• Never chase your losses, ever!• Never average down, ever!• Keep excellent records!• Maintain discipline!• Keep it simple! • Plan the Trade – Trade the Plan!
The 3 M’s
““While a trading plan cannot predict the future, it can lay down how you react to
the possible outcomes. This is why a trading plan is essential. It is a list of strategic responses to events beyond
your control. You control the only thing you can control – YOURSELF!”
Alpesh B. Patel [Author of the book “Trading Online”] Alpesh B. Patel [Author of the book “Trading Online”]
The 3 M’s - Mindset
The 3 M’s - Mindset
• Attitude - How you react
• Self Confidence - Belief in yourself
• Objectivity - Increase impartiality
• Patience - Watching & waiting
• Discipline - Stick to your plan
"The longer I live the more convinced
I become that life is 10% what happens to us
and 90% how we respond to it.”
…Charles Swindoll
The 3 M’s - Mindset
“Successful trading requires us to be aware of our emotions.
It often requires us to go against our natural inclinations or emotional
responses in order to see profits.”
The 3 M’s - Mindset
Greed
The 3 M’s – Mindset
Greed
Fear
Caution
Moderation
Fear
Make Money
Investor
Trader
TechnicalAnalysis
WEN Charting
PositionTrading
DayTrading
SSFEquities CFD
TradingTrading
Swing Trading
Make Money
Investor
Trader
TechnicalAnalysis
WEN Charting
Swing Trading
Break-outTrading
Equities
AgendaAgenda
SSF CFD
CFD Product Description
Go ‘Long’ & ‘Short’ with CFD’s on Top 100 JSE listed shares
Margin deposit requirements15% Top 40 shares / 17.5% on next 60 shares
Variation margin required for adverse share price movement.
Brokerage = 0.4% per transaction Breakeven = 0.92% (VAT included)
Zero UST Financing at competitive rates: Financing at competitive rates:
Current borrowing rate 6.50% (Current borrowing rate 6.50% (± P± Prime – 2%)rime – 2%)
Minimum Exposure per trade of R25 000 (R4 500 margin)
Derivative - A contract whose value depends on (or derives from) the value of an underlying share e.g. share – ANG, BIL, SOL
Top 100 Shares: CFD Margin
List reset after each Quarterly futures Close out
15% Top 4017.5% Next 60
Important notes onImportant notes on CFD Long & Short Positions CFD Long & Short Positions
• Pay interest at SAFEX + 2 % p.a. (± Prime -2%)
• The holder will receive a synthetic dividend– Dividend is not earned tax
free as a CFD is a derivative contract
– In the case of a Long CFD, a holder of a long contract will be paid an amount equal to the dividend by issuer.
– This is seen as an income and is subject to tax
• You pay a script lending fee of 1.5% p.a. (Min R456)
• Receive interest at SAFEX -2 % p.a.
• The holder is liable for the dividend– Dividend is not earned tax
free as a CFD is a derivative contract
– In the case of a short CFD, a holder of a short contract will have to pay the dividend to the issuer
Pro’s & Con’s of CFD Trading
Advantages
• Low trading costsLow trading costs• No expiry dateNo expiry date• Hedge your current Hedge your current
portfolioportfolio• All the benefitsAll the benefits
Disadvantages
• Gearing & Risk Gearing & Risk • No voting rightsNo voting rights
Comparison with traditional shares
CFD Traditional Equity No physical equity holding
Do not pay UST
No voting rights
Earn synthetic dividends
Physically hold equity
Pay UST of 0.25%
Voting rights
Earn real dividends
Leveraged trading
Settle only collateral (15% - 17.5%) plus top-up if required
Gearing provided at cheap rates (Safex +2% or roughly Prime -2%)
Not leveraged
Must settle full exposure amount
Expensive to borrow against shares
Settlement Period
Settled T+1
Settlement Period
Settled T+5
Taxation
Considered a Trader
Added to personal income
(Trading Instrument)
Taxation
Capital Gains Tax (CGT)
(Investment Instrument)
Easy to short
Suitable for both hedging & trading opportunities
Typically long only
What are SSFs?What are SSFs?A standardised contract.
Of a standard quantity (100) of a specific underlying listed share
Requires a fixed margin deposit to open a position Requires a fixed margin deposit to open a position (around 15% of the total value).(around 15% of the total value).
Expiring on a predetermined future date: Third Thursday of every March, June, September & December.
Gives the owner the right to close the contract at a price agreed Gives the owner the right to close the contract at a price agreed when entering the contract, including all relevant dividends & interest.when entering the contract, including all relevant dividends & interest.
SSFs are listed on the South African Futures Exchange (SAFEX), SSFs are listed on the South African Futures Exchange (SAFEX), a subsidiary of the JSE.a subsidiary of the JSE.
SSF contracts equate to100 shares of the underlying instrument.SSFs are created at the close of trading.
All unmatched SSF orders expire at the end of the trading day.All partially matched orders will be cancelled at the end of the day.
Comparable to EquitiesComparable to EquitiesINVESTOR A (Share Trader) INVESTOR B (SSFs Trader)
Confident that Sasol shares will increase.
Confident that Sasol shares will increase.
She has R35 000 which she can invest.
Sasol’s share price is R350,Sasol’s share price is R350,therefore she buys 100 shares.therefore she buys 100 shares.
3 months later the price has increased by 10%
so she sells her shares to make a R3 500 profit.
Her return on her investment is 10%.
The initial margin set by the broker is R6 000 which
is paid by the buyer.
Sasol’s share price is R350,therefore she buys 1 contract.
After 3 months the price has increased by 10% & the investor
closes out his position & sells out of the
Sasol SSF contract.
His profit is R3 500 but his return on his investment is 58%.
Comparison between SSFs &CFDsComparison between SSFs &CFDs
Single Stock Future Contracts for Difference• Regulated by JSE/FSB• Exchanged traded product• Expiry Date= Rollover costs• Set principle amount• Interest agreed upfront• Wholesale interest rates• Best execution• Free markets• Transparent• Guaranteed by SAFCOM• No dividend paid/received• Fungible financial instrument• Can take physical delivery
• Unregulated
• Trades OTC
• No Expiry Date
• Principle amount could change daily
• Interest fluctuates daily
• Retail interest rates
• No best execution obligation
• Captive markets
• Opaque
• Not guaranteed by SAFCOM
• Manufactured dividends
• Never physical delivered
SSF MarginSSF Margin
Initial margin
percontract
Top 40 –
Central
Next 60 –
Traditiona
l
(Central) SSF Order Book
Top 40 SharesALSI & ALMI
Copper, Gold, Platinum & Silver
WTI Crude Oil
(Central) SSF Order Book
Margin = R27 000Exposure = R270 000 Cost R25 per contract
100 points move = R1000
(Central) SSF Order Book
Future Price = Spot Price X 1 + (IR x t)
SSF Order - Short
(Traditional) SSF Order Book
Swing Trading Strategy• Step #1: What Market Stage?
– Stage 2 or Stage 4
• Step # 2: Elliott Wave Cycle– Wave 2 or Wave B
• Step #3: Trading Trends– Uptrend = Higher Highs & Higher Lows– Downtrend = Lower Highs & Lower Lows
• Step #4: Trader’s Action Zone (TAZ)– Buy Pullbacks & Short Rallies
• Step # 5: Swing Points – Entry – Swing Points Low (SPL) – Bullish Candlesticks– Exits - Swing Points High (SPH) – Bearish Candlesticks
Swing Trading Strategy (Cont.)• Step #6: What Candle Stick Pattern?
– Bullish Candle Stick Patterns– Bearish Candle Stick Patterns– Neutral Candle Stick Patterns
• Step # 7: Money Management– Position Size
• Step # 8: Risk Management– Technical Stop Loss level
Step #1: What Market Stage?
Long Long ShortShort
Step #1: What Market Stage?Anglo (AGL)
Stage 2 or Stage 4?
Stage 1
Stage 3
Stage 4
Stage 2
Stage 1
Stage 2
Step # 2: Elliott Wave CycleStep # 2: Elliott Wave Cycle
Step # 2: Elliott Wave Cycle Step # 2: Elliott Wave Cycle Anglo (AGL)
Wave 2 or Wave B?
Wave 1
Wave 3
Wave 4
Wave 2
Wave A
Wave B
Wave 5
Wave C?
Step #3: Trading Trends
Trade Trade TrendingTrendingMarketsMarkets
Step #3: Trading TrendsMoving Averages (Long & Short) Moving Averages (Long & Short)
Step #4: Buying Pullbacks (TAZ)
Step #4: Shorting Rallies (TAZ)
Step #4: Buying Pullbacks (TAZ)
Step # 5: Swing Points (Entry & Exits)
Step # 5: Swing Points (Entry & Exits)
Swing Point Low (SPL) Swing Point High (SPH)
Step # 5: Swing Points Lows (Entry)
Secondary Technical Indicators
• Secondary Technical Indicators– OB/OS– Momentum– MACD– RSI– Stochastic
• Volume Analysis• Relative Strength Analysis
It must be remembered that no indicator should be used alone.
Overbought / Oversold (OB/OS)Overbought / Oversold (OB/OS)
OB/OS = Price - MA x 100% MA
Oversold – Buy Zone
Overbought – Sell Zone Overbought – Sell Zone
Momentum IndicatorMomentum Indicator
Momentum = Price A - Price B x 100% Price A
OversoldOversold
OverboughtOverbought
OB/OS & Momentum Indicators
RSI IndicatorRSI Indicator
Overbought
Oversold
Bearish Divergence
RSI =100- {100/ 1 + (U/D)}
14 = UP = 10014
14 = Down = 014
Stochastic IndicatorStochastic Indicator
Sell ZoneSell Zone
Buy Zone
Stochastic = Close - Low x 100% High - Low
BuyBuy
SellSellSellSell SellSell
14 = Hi = 10014
14 = Lo = 014
RSI & Stochastic IndicatorsRSI & Stochastic Indicators
Bearish Divergence
MACD Indicator (OB/OS)MACD Indicator (OB/OS)
Overbought
OversoldOversold
MACD – Crossovers (Trigger Line)MACD – Crossovers (Trigger Line)
MACD – Crossovers (Zero Line)MACD – Crossovers (Zero Line)
MACD – DivergenceMACD – Divergence
Early Warning: Change in
trend
Bullish Divergence
Volume AnalysisVolume Analysis
???
Volume AnalysisVolume Analysis
Low volumes volumes
Indecisive
ConsolidationMarket Bottoms
Low volumes
High volumes
New Trend
High volumes
Market Tops
OBV IndicatorOBV Indicator
VPT IndicatorVPT Indicator
OBV & VPT Indicators OBV & VPT Indicators
Volume Distribution
Neutral Volume
Volume Accumulation
Relative Strength Indicator
Under-perform
Data 1 = AngloData 2 = Top 40 Index
Market Perform
Out-performUnder-perform
Relative Strength IndicatorRelative Strength Indicator
Data 1 = AngloData 2 = BHP Billiton
Under-perform
Outperform
Outperform
Technical Check ListTechnical Check List• What is the direction of the JSE Overall Index?• What is the direction of the Sector Index?• What are the weekly/ monthly sector /share charts showing?• Are the primary, secondary & minor trends up, down or sideways? • What are the important support & resistance levels? • Where are the important trend lines & channels?• Where are the 33%, 50% & 66% retracement levels? • Are there any price gaps, and what type are they? • Are there any major reversal patterns visible?• Are there any continuation patterns visible? • What are the price objectives from these patterns? • Which way are the moving averages pointing?• Are the oscillators overbought or oversold? • Are there any divergences apparent on the oscillators?
Make Quick DecisionsMake Quick Decisions
BUYBUY
HOLDHOLD
WATCHWATCH
SELL
Make Quick DecisionsMake Quick Decisions
WatchWatch
Creating a Watch List of WinnersCreating a Watch List of Winners
Fundamentals = PSG Online website
Technicals = Wen Charting*
Hi-Liter Scanner (Step 1:Criteria)Hi-Liter Scanner (Step 1:Criteria)
Hi-LiterCriteria
Hi-Liter Scanner (Step 2: Results)Hi-Liter Scanner (Step 2: Results)
Hi-LiterResults
Hi-Liter Scanner (Step 3: Confirm)Hi-Liter Scanner (Step 3: Confirm)
ViewChart
Summary: Technical AnalysisSummary: Technical Analysis• Price Charts
– Closing Line Charts – Bar Charts– Bar Volume Charts– Point & Figure Charts– Candlestick Charts
• Cycle & Trend Analysis– Support & Resistance– Trend Lines
• Breakout Trading– Continuation Patterns– Reversal Chart Patterns
• Swing Trading Strategy– Market Stage – Elliott Wave Cycle– Trading Trends– TAZ– Swing Points
• Technical Oscillators– OBOS & Momentum– RSI & Stochastic– MACD
• Volume Analysis– On Balance Volume– Volume Price Trend
• Relative Strength
"The most important thing is
money management,
money management,
money management.
Anybody who is successful will tell you the same thing."
Marty Schwartz
The 3 M’s - Money Management
"Do not focus on making money;
focus on protecting what you have.”
…Paul Tudor Jones
The 3 M’s - Money Management
Capital allocation (Position sizing)
For each trade, how much of our capital do we commit?
– Trade with 50% of total capital (Earn interest & Variation Margin)
– Position Size - Number of Contracts/ Shares
Setting stop losses
For each trade, where do we place our stops?
– Initial Technical Stop (Support & Resistance)
The 3 M’s - The 3 M’s - MMoney oney MManagementanagement
MMoney oney MManagement anagement Position Size & Margin (Harmony)
• You decide to buy Harmony Gold at R80.10• You set a 3% stop loss (R80.10 x 3% = R2.40 )
– R80.10 – R2.40 = R77.70• You are willing to risk 2% of your capital = R2000. • Take R2000 & divide it by the R2.40 per share that you
are risking • Your position size = you can buy 833.33 shares
– (R2000 / R2.40).• The SSF initial margin required is R1387.50
– 833 shares = 8 contracts = R1387.50 x 8 = R11 100– Exposure = 8 x 100 x R80.10 = R64 080.00
MMoney oney MManagement anagement Position Size & Margin (Anglo)
• Assume you have a R100 000 CFD trading account• You decide to buy Anglo’s at R339.05• You set a 3% stop loss at R328.88
– R339.05 x 3% = R10.17 (R339.05 – R10.17)
• You are willing to risk 2% of your capital if the trade goes wrong = R2000.
• Take R2000 and divide it by the R10.17 per share that you are risking.
• That gives your position size. – In this example, you can buy 196.66 shares (R2000 / R10.17).– Margin = 197 x R339.05 = R66 792.85 x 15% = R10 018.93– For SSFs, the initial margin will be R5700 x 2 contracts
= R11 400
CFD Order Book
Buy 100 Anglo shares @ R339.05
Exposure = R33 905.0015% Margin = R5 085.75
100 Anglo shares = R33 905.000.4% Brokerage = R135.62
14% VAT = R18.99Total = R154.61
R305.15
R33 905 x 6.5% = R2203.83/365 = R6.04
RiskRisk MManagement anagement The Stop-Loss StrategyThe Stop-Loss Strategy
• The spot that represents maximum loss that you will take on a trade.
• Original trade idea was incorrect. • The market tells you when it reaches the stop
loss point. • Cut your losses & move on.
RiskRisk MManagement anagement Technical Stop-Loss Strategy
• The stop-loss comes from the chart.
• It is the first thing one needs to know about any particular
trade.
• Can decide how many contracts to trade so as not to exceed
the maximum loss per trade he has determined in the trading
plan.
• First step to following your stop.
– Have a contract size you can live with.
• Placed at a logical point on the chart
– Breaking of a support or resistance level
– Breaking of a trend line
• Highly recommended because the chart “tells”
you where to place the stop.
RiskRisk MManagement anagement Technical Stop-Loss Strategy
RiskRisk MManagement anagement Technical Stop-Loss Strategy
Step 1: Setup Price (Trigger)
Select “Below”
for Longs
EnterTechnical
Price
Select Price Watch
Setup the Stop Order (Bullet)
Select “Close”
EnterQuantity
EnterWorse-case
scenario price
Select StopOrder
Click Submit Price Watch & Stop Order
button
Summary: TradingSummary: Trading
• Step 1: Financial objectives
• Step 2: Watch List of potential winners
• Step 3: Mindset
• Step 4: Method of Trading
• Step 5: Money & Risk Management
“Many know, few do”
Justin Cohen Justin Cohen
ConclusionConclusion• Have you learnt how to “Make Money?”Have you learnt how to “Make Money?”• Feedback FormsFeedback Forms• Link to MarketWorx presentations Link to MarketWorx presentations
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• Good Luck & Happy Trading!Good Luck & Happy Trading!