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THE COMPLETE GUIDE TO BECOMING A
£
€ BY EAMON PHILLIPS
£
€ €
A Trading Bible
TABLE OF CONTENTS Chart………………………………………………………………………. 3 Time Frames..……………………………………………………........... 4 Bars and Candle Sticks…………………………………………..........8 Technical Analysis..……………………………………………………. 20 Support and Resistance……………………………………................20 Trends……………………………………………………....................... 27 Reversal Patterns ……………………………………………………….35 Continuation of Patterns……………………………………………….46 Moving Averages…………………….................................................57 Volume……………..……………………………………………………...62 The Stochastic……………………………….......................................68 Risk Management………………………………………....................... 70 Trading plans……………………………............................................ 79 Rules for trading the DAX………………………………………………81 Veritas Traders Setup……………………………………………......... 82 Big Number Break Outs………………………………………………...84 Using Flags with the Stochastic………………………………..…….88 Targets………………………………………….....................................91 Trading Plan……………………………………………………………... 92 Shares Trading…………………………………………………………...94 Summary…………………………………………………………………. 105 Copyright ©2009 Veritas Traders All rights reserved worldwide Page 2 www.veritastraders.com
A Trading Bible
What is a chart? You have likely seen charts many times before. They come in many different styles, but all have the same underlying function. Let's take a look at what at chart does
A trading chart measures: x
Time
x
Price
This is the basis of most trading charts. They measure the “PRICE” and a certain point in “TIME” The chart below measures " PRICE " and " TIME " by using a simple line chart. This chart looks at the closing price of the FTSE 100.
Figure 1: FTSE 100 Monthly Line Chart
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 3 www.veritastraders.com
A Trading Bible
We create a line graph of the price over a given period of time. Therefore, this chart represents the closing price of the FTSE 100 at the end of each month. The chart shows the price at the end of the trading month, however this could be the closing price at the end of each week, day, hour or minutes.
Time Frames We use different time frames to obtain more information about the price on the chart over a period of time. As you saw in figure 1, each plot represented the closing price at the end of the month. If you want to examine the closing price at the end of every week, this will give you four times as much information. If you want to examine the closing price at the end of every day then you have 20 times more information. Therefore the smaller the intervals the more information you can obtain.
Here are the most common intervals used in trading: Monthly 15 minutes
Weekly 5 minutes
Hourly 1 minute
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 4 www.veritastraders.com
A Trading Bible
Figure 2 : Weekly Line Chart
Figure 3 : Daily Line Chart
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 5 www.veritastraders.com
A Trading Bible
Figure 4 : 15 Minute Line Chart
Figure 5 : 5 Minute Line Chart
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 6 www.veritastraders.com
A Trading Bible
Figure 6 : 1 Minute Line Chart
The charts above show the most basic form of price representation.
Bars and Candle Sticks The need for more information. As traders, we need more information. In addition to knowing the opening price, we also need to know: 1. Range (highs and lows) 2. Closing price
This is called the OHLC, Open High Low Close.
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 7 www.veritastraders.com
A Trading Bible
Figure 7 : Open, High, Low and Close Bars
Figure 8 : Candle Stick Version
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 8 www.veritastraders.com
A Trading Bible When OPEN HIGH LOW CLOSE (OHLC) are applied to our charts, they give us the information we need to look at trading charts to trade from them successfully. The reason is simple: now we have 3 times more information compared to before.
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 9 www.veritastraders.com
£
€ BY EAMON PHILLIPS
£
€ €
A Trading Bible
TABLE OF CONTENTS Chart………………………………………………………………………. 3 Time Frames..……………………………………………………........... 4 Bars and Candle Sticks…………………………………………..........8 Technical Analysis..……………………………………………………. 20 Support and Resistance……………………………………................20 Trends……………………………………………………....................... 27 Reversal Patterns ……………………………………………………….35 Continuation of Patterns……………………………………………….46 Moving Averages…………………….................................................57 Volume……………..……………………………………………………...62 The Stochastic……………………………….......................................68 Risk Management………………………………………....................... 70 Trading plans……………………………............................................ 79 Rules for trading the DAX………………………………………………81 Veritas Traders Setup……………………………………………......... 82 Big Number Break Outs………………………………………………...84 Using Flags with the Stochastic………………………………..…….88 Targets………………………………………….....................................91 Trading Plan……………………………………………………………... 92 Shares Trading…………………………………………………………...94 Summary…………………………………………………………………. 105 Copyright ©2009 Veritas Traders All rights reserved worldwide Page 2 www.veritastraders.com
A Trading Bible
What is a chart? You have likely seen charts many times before. They come in many different styles, but all have the same underlying function. Let's take a look at what at chart does
A trading chart measures: x
Time
x
Price
This is the basis of most trading charts. They measure the “PRICE” and a certain point in “TIME” The chart below measures " PRICE " and " TIME " by using a simple line chart. This chart looks at the closing price of the FTSE 100.
Figure 1: FTSE 100 Monthly Line Chart
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 3 www.veritastraders.com
A Trading Bible
We create a line graph of the price over a given period of time. Therefore, this chart represents the closing price of the FTSE 100 at the end of each month. The chart shows the price at the end of the trading month, however this could be the closing price at the end of each week, day, hour or minutes.
Time Frames We use different time frames to obtain more information about the price on the chart over a period of time. As you saw in figure 1, each plot represented the closing price at the end of the month. If you want to examine the closing price at the end of every week, this will give you four times as much information. If you want to examine the closing price at the end of every day then you have 20 times more information. Therefore the smaller the intervals the more information you can obtain.
Here are the most common intervals used in trading: Monthly 15 minutes
Weekly 5 minutes
Hourly 1 minute
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 4 www.veritastraders.com
A Trading Bible
Figure 2 : Weekly Line Chart
Figure 3 : Daily Line Chart
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 5 www.veritastraders.com
A Trading Bible
Figure 4 : 15 Minute Line Chart
Figure 5 : 5 Minute Line Chart
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 6 www.veritastraders.com
A Trading Bible
Figure 6 : 1 Minute Line Chart
The charts above show the most basic form of price representation.
Bars and Candle Sticks The need for more information. As traders, we need more information. In addition to knowing the opening price, we also need to know: 1. Range (highs and lows) 2. Closing price
This is called the OHLC, Open High Low Close.
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 7 www.veritastraders.com
A Trading Bible
Figure 7 : Open, High, Low and Close Bars
Figure 8 : Candle Stick Version
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 8 www.veritastraders.com
A Trading Bible When OPEN HIGH LOW CLOSE (OHLC) are applied to our charts, they give us the information we need to look at trading charts to trade from them successfully. The reason is simple: now we have 3 times more information compared to before.
Copyright ©2009 Veritas Traders All rights reserved worldwide Page 9 www.veritastraders.com
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