Hey hey: what's up my friends, so in today's training you will learn a simple moving average trading strategy right that allows you to profit in bull and bear markets. The best part you can apply it across the u.s stock market is forex futures. You can. You know trade it across different time frames like the four hour eight hour or even the daily time frame sounds good.

Then let's get started okay. So before we get to the trading strategy, i think it's very important right to understand what the moving average indicator is about, because this is the core tool that we'll be using in the strategy. So moving average is in essence, right. A trading indicator that follows the price, so if the price is moving up higher, the moving average will be pointing higher if the price is hitting lower moving average will be pointing down lower as well.

So in essence right, let me just show you right. So if you look at this chart over here, this is the chart of the euro against the japanese yen. You can see that this price on this chart is heading higher. So if you overlay with let's say a 50 period moving average, you can see that the 50 period moving average is also heating up in the same direction as the price same for a dollar against the south african rent.

You can see that the price is overall. You know heading lower, so, as you can see over here on the 50 period moving average, which is this blue line, it's pointing down is moving lower as well. So this is what i mean by you know. Moving average is an indicator.

It follows the price. So now, what's the logic behind moving average, you know, why does it follow the price? So let me break it down to you step by step right there. It's pretty simple that even a 10 year old can explain can understand so what it does is. It calculates the average price over x number of period.

So let's say we use a five period moving average. So let's say a five period, moving average to look something like this on the chart right: one bar one, candle, two, three four and perhaps five okay. So what it does is that it calculates the average price over this last five candles. So, let's make things simple: let's say the price of the first candle the market closed at one dollar.

This one closes at two dollars. This one closes at three dollars this one four dollars and the recent candle closed at five dollars. So what the moving average indicator does is that it calculates already ends up the total value and divide by five, because it's a five period moving average, and that will give you the answer of three dollars. Okay, that's how your moving average will appear as the number three so what's gon na happen is that you will appear, as let's say, one dot on the chart and let's say i draw the dot somewhere here.

Right appear like one dot here on the chart. Now, what if a new candle forms up - let's see another the sixth candle comes out. What happens next so in this case, if we are still using the five period moving average, it will take into account the most recent five candles which is from here all the way to here. So in this case, let's say, the most recent number is six dollars.

Okay, the price the market closed at six dollars, so how the moving average is going to work. You will take two plus three plus four plus five and plus six divide by five and you'll, get four dollars, and what's gon na happen to these four dollars, it will, let's say, appear as one dot over here. Okay. So when you do this, you know consistently right as the bar progresses right.

Your moving average will start to. You know show up as one line that you see on your chart that tends to follow the price, so this is how a moving average works. So this is kind of like the math behind it, so that i've just explained. So this is how moving average works.

So in essence right it calculates the average price over x, number of periods and x number of period can be defined by you. Whether is it five period, ten period or even fifty period as what i've said earlier and one pro tip to share with you - is that there are many types of moving average earlier. This is the simple moving average you've got exponential, moving average weighted moving average yada yada and the concept is pretty much the same. It pretty much calculates the average price over x number of period, but the calculation for each different type of moving average is slightly different.

Some give more weightage to the recent price period and stuff like that. So whatever the case is right, the concept for moving average is pretty much what i've just shared with you. So now that you've understood moving average. You know what are the benefits of moving average.

So moving average has many purposes it can help you define the trend, manage your trade entry and stuff like that, but for this particular video, the benefit that i want to share with you is that moving average can serve as an area of value in trending markets. So what do i mean by this? So let's say market is trending higher. Okay and sometimes when market is trending higher as a trader, you might find difficulty. You know: hey rayna man.

The trend is moving so fast man. How do i know when to enter a trade? I have no idea, so this is where a moving average can help you find right. Where is the area of value in the trending market? If you overlay with a moving average, it will look something like this. Okay, so this way you know that hey, you know, this trending market has bounced off the moving average a number of times once twice almost a third time, and if it comes back for a fourth time over here, you can say that hey.

This is an area of value where you can look for buying opportunities, so this is how a moving average can act as an area of value, and this means right. You can actually buy low and sell high in the trending market and, of course, you might be wondering hey, we know which moving average do. I use hey rayna, you know. When should i enter a trade and stuff like that? Don't worry i'll cover all this and more in the later section, but for now let's do a quick recap.

Shall we number one moving average is an indicator that follows the price because it simply calculates right. The uh, the uh historical price and kind of give you like an average value of it, and then it can act as an area of value in trending markets. Okay, now, let's move on into the moving average trading strategy that works, so you can profit in bull and bear markets so for this strategy to work right, it needs a few things. So thing number one: is this a trending market and that's because moving average indicator works best in trending market, not range market? So what is a trending market so number one? You have an uptrend when the market is said to be in uptrend.

You will see a series of higher highs and higher lows on the chart, so it looks something like this. So if you look at this kind of like take a step back, you will notice that the swing points right. The swing low, which is this is heading high over time. Likewise, the swing high, which is this, is heading higher over time.

So this is what we mean by a series of higher highs and higher lows. So if you want to look at the chart, it will look something like this, so this is the chart of the s p. 500. The daily time frame i just zoom out a little bit.

You can see that the swing points the swing high and swing low. They are heading high over time. Look at the swing, low swing, low swing, low swing, low swing, low swing, low heading, higher, look at the swing high, the swing high, the swing high swing, high swing, high swing high heading higher, so this is where we conclude. This is it up trend, so really, if you're in doubt just take a step back right and usually just reset your chart, maybe just you know zoom out a little bit.

You will see that it should be clear to you whether the market is trending or not. If you have to screen your eyes, if you have to wonder, maybe it doesn't look like an uptrend, maybe it's a range and stuff like that, then clearly, you know those are probably trends. You'd want to trade and move on to something else. Don't you know force it if you can't see it? Okay, next one downtrend, so downtrend is just the opposite.

It forms a series of lower highs and lower lows. So it looks like this. So again, if you look at it, you have a lower high, lower high, lower high and lower low lower low lower low, and if you look at you know how it looks like on the chart, it looks something like this okay, so you can see over here. This market euro against the aussie dollar, the lower high lower high lower high and lower high and lower low lower low lower low lower low.

So if you look at it from left to right, you can see that you can say that this market is in a downtrend, pretty simple stuff right. Okay, so now we know what's a trending market and here's the thing just because a market is trending doesn't mean we want to immediately hit the buy button because it could be, you know, getting ready to make a pullback or a reversal. So this is where we look at number two area of value, so you might be wondering hey right now. What's an area of value, my man, so, to put it simply right, an area of value is an area on your chart where buying pressure could step in and push the price higher.

On the other hand, an area of value can also be an area on your chart where selling pressure could come in to push the price lower. So if you want me to uh to show you, it will look something like this. So if you overlay with let's say a moving average, you can see that this is an area of value where the price will bounce off once twice and possibly a third time over here as well right, okay. So this is what we mean by an area of value, an area on your chart here here and here, where buying pressure could come in to push the price higher and the way to define our aerial value.

Right for for me for this strategy, i like to use a 50 period moving average, why 50 period moving average and there's nothing magical about it really. But the reason why i go with it is because it gives you enough time to time your entry. So, for example, if you use a 50 period moving average chances, are your charts will look something like this and if you overlay with a 50ma like this right, you can see it when it makes a pullback. You have enough time to prepare right for an entry trigger near the 50 period, moving average to look for a buying opportunity compared to let's say, use a a shorter term moving average like let's say the 20 period moving average.

That kind of trading setup will look like this and if you overlay for 20ma you'll notice that the the pullback is very short-lived right and if you're not quick enough to react right, you will probably miss the entry and the price is already heading up higher. So this is why i said that you know i prefer to go with the 50ma, because it gives you a comfortable amount of time right to time your entry properly and i'll share with you later on how to do it and to know when exactly to enter A trip so now some of you might be thinking but rain. You know the market doesn't always work this way, man, sometimes it bounces off the 20. Sometimes it bounces down to 50.

I mean how do i know you know whether the market, you know really. You know respects the moving average. I get it so this is why we don't just blindly you know: slap on top of 50 period moving average on the chart. We want to make sure that the market respects the moving average.

Only then right, we use the moving average in this case, the 50 period moving average s and area of value. So how do we know whether the market respects it or not? So this is what uh we will use right. We will use a two test to confirm so what i mean by two tests. So it's like you know.

If a girl right texts, you once right, hey reyna, what are you doing? I'm doing nothing. So if she texts you once it might be a considers, maybe she's bought. But if she takes you twice three times, you know that hey this girl, you know it's probably interested in you. So it's the same concept over here.

If the market bounces off a moving average, it tested it once twice three times right, there's a good chance that hey that market respects the moving average and we can use it as an area of value. So let me just show you how to do it. So, let's say market is trending up higher okay over here right and you overlay with, let's say the 50 period moving average. This is what i consider one test: the market bounce off the 50 period moving average once and then it breaks above this high and it comes back down a second time and then it breaks above this recent swing high.

At this point, we have two tests. One test and then two tests. So at this point i would conclude that say: hey this market respects the 50 period moving average, and if it were to come back here for a third test over here, i would look for buying opportunity. I wouldn't buy it.

I would look for another thing which i'll share with you later, but this is where i know that this market respects the area value the 50 period, moving average and i'll be alerted right to potential buying opportunity, so we are looking for two tests to confirm it. Okay, let me share with you a few charts, so you know what i mean, so this is the euro against the aussie. Okay, let me just reset this okay and i overlay with the 50 period moving average. So we can see over here market here, tested once hit down lower.

Almost a second time price broke down below this swing. Low, almost tested a second time head down, lower. Consider this one test by the way. Since we remember, we are dealing with an area of value, not a line of value.

So, even though this current uh high of the candle didn't touch the moving average, remember it's an area, so you should treat it something like that, like kind of like a box, if you want to call it okay, treat it as an area of value. So i would say that this is one test one test over here then price heads down lower breaking below this swing low test. At the second time, heads down lower breaking this swing low, all the way down, lower and re-test at third time he's down lower it broke below the swing low test at the fourth time, hits down lower and he approaches higher now. Do i consider this a fifth test and the answer is no? Why do i say that it's because the price didn't break below this swing low, the price must break below the swing low for me to consider it a test.

So if the is, if it's in the invert inverse right, if let's say the market is in an uptrend, the price must breaks above must break above the swing high for me to consider a test. Okay. So in this case we have about one two. Three four tests on this chart: another example dollar against the uh u.s dollar against canadian dollar, so same concept over here, i i won't consider this a test because it just whip up and down.

So, let's get started first, one over here, one test price break below this swing. Look good! Second, test price break below this swing; low third test price hit down lower. Now? What about this is this? A fourth test answer is: no, because the price didn't break below this swing low. The price must break below this swing low and come back to the 50 period moving average.

For me to consider it a fourth test, and this is how we design right, or rather how we tell whether the market respects the area of value right or rather how the market, whether the market respects the 50 period moving average as the area of value or Not now one thing to share with you is that also moving average? Isn't the only way to define an area of value? You can use tools like support resistance trend line and stuff like that, but because, for this video, the key focus is on moving average. So is something that i won't be talking much in this video moving on right. The third thing that we are looking for is an entry trigger, because here's the thing, the area of value simply tells you right. Where right we are looking for a trading opportunity.

It doesn't tell us when to enter a trade, so entry trigger tells you when exactly to enter a trade, and to do that right we will use a a tool right called candlestick patterns. If you're not sure about this right, don't worry i'll. Give you a quick crash course on this right now. So how do you read a candlestick pattern? So it's very simple: you will likely see two types of candlestick pattern on your charts: a green candle and a red candle.

So for the green candle, it simply means right. Let's say you see this on a daily time frame. Let's call it d daily time frame. It simply means right that the price has closed higher for the day.

That's why the candle is green. So this is the opening price. This is the closing price, and this is the highest price point of the day, and this is the lowest price point of the day right. It's the highest price point of the day.

So likewise, if you see a rate candle like this, it simply tells you that hey this market has closed lower for the day, so to close lower for the day. The opening price here is at the top. The closing price has to be at the bottom here because it has closed lower for the day. Likewise, this is the lowest price point for the day, and this is the highest price point of the day and really to kind of sum up what i just said over the last 30 seconds.

This graph is actually a summary of it, so you can see over here the highs over here. This is the lows opening price closing price. So when you study candlestick patterns, you would realize that man there's a lot to you - know, study out there so which patterns right. Should i focus on so, in my opinion, right there's only a handful of patterns, which i feel that you know you will likely use again and again right.

So the first one to share with you is: what is this one over here? The bullish reversal candlestick patterns now the first pattern to share with you is what we call the hammer. Let me explain, or you know, walk you through the story behind this candlestick pattern. So if you see this one over here, the opening price is here. Closing price is here: this is the high of the day, and this is the low of the day, assuming this is a daily time frame, so the story behind it is that the market opened and then the the buyers right they got overwhelmed right.

The sellers came in and crushed them lower, so the sellers came in pushed the price all the way down lower right near the lows. You know you can see that you know it's like when you're watching a movie are the good guys. You know getting hammered getting smashed in the ring or bleeding and stuff like that and then suddenly right. They think a story of their loved ones.

Oh, my son, my wife, and then you know they gain some super power, super saiyan and then they come back and beat the bad guys up and they reverse all their earlier pain, defeating the bad guys you know and become victorious. So it's the same thing for this pattern right. The market eventually reverse all the earlier losses and then close near the highs of the day of the day. So this is kind of like the story behind it right.

Just imagine you know good guys getting bitten, beaten up getting trashed, you know, then they, you know kind of you know, think of all those cheesy. You know wife, husband, kids and whatsoever, and then he reversed their pain and they end up victorious. So the hammer is in essence right, uh, what's going on, so of course the hammer isn't the only pattern to kind of illustrate this story. You have another one called the bullish engulfing pattern and the concept is the same.

Sellers were victorious right. Look at this. This bullish engulfing pattern is a two pattern right candlestick pattern. So this one is just a one pattern: individual one pattern, but this one needs two pattern to form.

So the first one is where the price you can see it closed near the lows of the days. This is the opening price just to refresh your memory, then, the next day, all right, the sellers thought they were already victorious, but the next day the buyers step in right and they got you know in they got crazy right. Maybe they pump. You know a lot of steroids in their body and then they overwhelm right the sellers before closing near the highest of the day and they close or even above the above, the opening price of the previous day.

So the way we define this as a engulfing pattern is that the body right, if you are, if you are looking at forex or stocks right, the definition might be a bit different, but to be consistent right. The body of the green candle has to overcome right. The body of this earlier candle - so you can see over here the body of this candle or the entire range of this body, is bigger than the body of the previous candle. You can see close right, much bullishly closing near the highs of the day.

This is what we call a bullish engulfing pattern, because this body over here has engulfed has covered the body of the previous day candle okay, so this again is another sign of strength from the bias right emerging victorious right after getting you know, smashed by the sellers. So the other, on the other hand, right, we have what we call a bearish reversal, candlestick patterns, all right. So again, let me walk you through. First one is what we call a shooting star so again to walk you through the story behind it.

This is the opening price. This is the closing price. This is the high of the day and low of the day, assuming that you're looking at this on the daily time frame. So if you are looking at this on the one hour time frame the four hour time frame, then you just you know, interpret it accordingly, so the story behind this is that when the market opened right, the sellers were in control.

You know yeah, i'm victorious, you know, you know cloud nine right. Maybe you know you just uh receive an exam report. Man, you got a why? Why did i expect to get a when i didn't? You know turn up for the paper for the exam. How did i get a whoa? It's a miracle, then only then you realize a for epson you're actually absent.

So you came crashing down and you got depressed and you know pretty much end up on the really set note so same thing for this shooting star buyers are really happy at one point in time, near the highest of the day before the sellers come in and Trample on them and squash them and they close right near the lows of the days so just kind of remember right, getting a right, not a for really good marks, but a for absent and you get depressed after that. So same thing for this one here the bearish engulfing pattern: you can see that for this first candle over here the buyers were in control. They managed to close right near the heist of the day, but the second day the sellers came in right. Uh, really, you know strong, exert a lot of selling pressure on this market, all right and close near the lows of the day, and why is this an engulfing pattern? Why is it a bearish engulfing pattern? Because if you look at the body of this candle, it has you know, engulfed the body of this earlier candle right, look at the range of this candle.

I mean the body right. The size of this body has covered right or angle of the body of the previous candle, so this is what we call a bearish engulfing pattern and it's a sign of weakness. So at this point, you've learned how you can use candlestick patterns to help you time your entry to know when exactly to enter a trade. So now the next question is you know: when do you exit the trade? What if the market moves against? You know where do you set your stop loss where, if the market moves in your favor, where you set your target, that's what we'll cover in the next moving on right.

The fourth component is exit so for exits. There are two parts to it. Part one is exit when you're wrong, so in essence right this one is: let's say you enter a trade and the market continues to move against you at what point? Do you exit your trade to cut your losses? So this is also known as your stop-loss exit when you're wrong and the other part is exit when you're right. So let's say you enter a trade and the market quickly moves in your favor.

So at what point do you take profits? So let's cover this two in more details, so exit when you're wrong. So this is a very simple concept, so your exits or your stop-loss right should be at a place right, a level which invalidates your trading setup. So let's say our this particular trading strategy is in essence, right buying the dips in an uptrend. So let's say market is in an uptrend and we are buying the dips right towards the 50 period moving average somewhere here.

So we know right that we are wrong. If the price breaks right below our area of value, if it continues to break below the 50 period moving average at this point, we know we are wrong. So how do we kind of like know, set an objective, stop loss for this, so this is how we do it. So if the market is in an uptrend right, we will set our stop loss, one atr below the swing low and likewise, if the market is in and up downtrend, we will set one atr above the swing high for our stop loss.

I know it sounds confusing. Don't worry i'll, you know, show you how to do this step by step right now. So look at this chart over here. This is brand crude oil and you can see that the area value is over here.

Okay, let's say for whatever reason: we enter a long trade we buy, and so how do we set a proper stop-loss? So you know that intuitively your stop-loss should be. You know below this moving average somewhere about here. But how do we, you know, have a concrete, definite level right where we can, you know, do this same particular uh, proper stop-loss over and over again, instead of just eyeballing the chart. So what you want to do is to pull out an indicator called average to range over here.

So again, if you don't know where to find it go indicator, tab which is here search, atr click on this and i like to use the 20 period atr. That's my preference and i'd like to go with sma to keep things simple. Press. Ok, so, what's going to happen, is that you will be shown a value over here 1.195.

So what this tells you is that, on this time frame for this market brand crude oil, eight hour time frame over the last 20 candles on average, this particular market has moved about one dollar or 1.195 right on average over the last 20 candles for this market And for this time frame, so in essence right it tells you, you know how much this market moves on average right over. You know the last 20 candles, that's in essence right what the average true range indicator tells you, the average volatility of a particular market, and, of course, you can use this on a daily, the weekly timeframe. It's up to you. So, whichever time frame that you're trading on pull out the atr indicator for that time frame, so since we are on the eight hour time frame, we are let's say trading on an eight hour time frame.

We pull out the atr indicator on the eight hour time frame. So if you recall the slides right, we said 180 are below the swing low. So where is the swing low? So when we enter the trade right, the swing low is at this point over here. So just hover your mouse cursor over it over it and find out what's the swing low.

So at this point you can see over here look at the l portion here which, which is here this number look at that number. Now you realize that the low is 63.176 and your atr value is 1.195, so you just take 63.176 minus 1.195 and if you have a trusty calculator like i have over here, just plug in numbers, 63.176 minus 1.195 and you get 61 dot. So again, some of you might be thinking: hey reyna. How do you get 63.176, but hover your mouse cursor this mouse cursor over to this one over here, find out the lowest price point: you'll see 63.176 minus one atr, which is this value here, and you get this one here.

So what this means is that you will just put your stop loss at this level: okay, i'll just change this to red color. So you know it represents your stop. Loss change this to red and the coordinates. Let's be precise here: 981, okay, so tada.

When you enter this trade, let's say for a bullish setup. Your stop loss will be at this level over here. 69. 61.981.

This right from this low to this red line over here this portion here is in essence one atr this number over here. Okay, that's how we do it! That's the buffer! We give right below the 50 period, moving average right, the buffer right, that we allow the trade right room to breathe right if the price hits one atr below the swing low. We are out of the trade simple as it is another example right dollar against the chinese union. So if you look at this one, let's say again for whatever reason you went short near the 50 period, moving average on this candle here.

Okay, you can see that the 50 period moving average - let's say it's the area of value, this blue line. So at what point right? Should we get out of the trade if the price breaks above the area of value? So intuitively? You know you know it should be above the blue line - maybe here here or here, so how do we set an objective? Stop loss for this so find out? What's the swing high and add on one atr to it, so we can see the current. The atr value here is 0.03177, so find out. What's the swing high over here? What's the highest price point over here, i'm going to take my cursor.

The highest price point right now, as you can see, is 6.5151 okay. 6.5151. So i'm going to take one five 6.5151 and i add, on one atr, zero point: zero. Three one, seven seven and the number is six point: five, four: six: nine! Okay! I just did some rounding, so my stop loss right will be over here.

Just pull out over here in red there you have it so this is my stop loss at this rate line over here. So if the price heads up higher and hit the red line, i can conclude and say: hey, you know. I think this area of value isn't working out anymore and i want to bail out and exit the trade, so i use one atr as like the buffer right to give this trade breathing room right to breathe. So it's 180 above the swing high.

Since this is a downtrend and if the market is in an uptrend, it will be one atr below the swing low as what i've shared earlier here. Okay, so that is where you will set your stop loss for this particular trading strategy. Now, what if the market moves in your favor? So where do you exit your trade so exit when you're right? So in an uptrend right? You can exit your trade before the swing high. So a quick recap right.

Your trading strategy you're looking to buy the dip in an uptrend, so let's say you buy the dip this year. Market moves in your favor sweet right, so your exits right should be before this swing high over here. So, let's say as a price, you know approaches this swing high. You want to bail out of your trade and just capture one swing.

Of course. This isn't the only way to exit your trade, because, if you're a trend follower, you can your trailer your stop-loss and ride trains, but for this training for this strategy, let's go with something simple and look to capture a swing in the market, so we're just looking To capture that one move right from here all the way up to here, just before the swing high before the swing high and to capture that uh potential profits. So likewise for a downtrend we will exit before the swing low, so market hits down lower. We time our entry at this pullback market heads down lower, we exit right before the price reaches this swing low.

So now you might be wondering hey right now. Why do you exit before the swing low or before the swing high? And it's simple really because these are levels or areas on your chart right in this case right areas on your chart where potential buying pressure could come in some some traders might say hey. This looks like an area of support. Now it's time to buy and push the price up higher and if the price comes in and start pushing up the price higher.

You might see your position reverse against you. If this becomes an area of support. So remember we are dealing with an area on your chart, not a line so as much as possible. I wan na say you know, hey, you know, uh try to aim here for your target or here, but you have to understand.

This is an area on your chart. The price might not get to that level before it starts to rebound higher so play on the conservative side, look to take profits before the swing highs and lows, and don't worry later on i'll share with you uh chatting examples of this particular trading strategy. So you can, you know, see on the charts right what i mean by that okay, now, let's do a quick recap right to the trading strategy, components that you've just learned and also you can also use this as a trading checklist if you wish so first thing. First, remember: we need a trending market because moving average works best in a trending market and i explained to you how to actually define the trend number two.

Once we have a trending market, we want to identify the area of value, and this is where the 50 period moving average can come into play. I shared with you how to actually look for two tests right to confirm that the market or the trend right is respecting the 50 period moving average. Then the third thing is the entry trigger. I share with you candlestick patterns that you can use to time.

Your entry for bullish market - you can use, you know the hammer pattern, the bullish engulfing pattern in a downtrend, you can use things like the shooting star pattern or the bearish engulfing pattern. And finally, we spoke about exits right. You know where to set your stop-loss, and you know where to set your target if the market moves in your favor. So as of right now, i'm going to share with you a few trading examples right to see how this trading strategy works.

Right. When you are, you know, trading the markets, so have a look at this chart over here. You can see over here. First thing: first, what is the first thing that we are looking for? Can you remember, number one a trend, and in this case we have a downtrend notice, the price making a series of lower highs, lower highs, lower highs, lower highs and lower lows.

Self-Explanatory number two, the area of value. So in this case, if you overlay with the 50 period moving average, you will see a few things number one price at once: hit down lower second test over here hit down lower, and then we have a third test over here great the 50 period. Moving average is acting as an area of value. Third thing: do we have a valid entry trigger and if you recap to the candlestick pattern, lessons that we were on, you will be familiar right with this pattern.

This is what we call a bearish engulfing pattern, so we have the three components here: the trend we have the area of value, one with the trend number two: we have the area of value, which is the 50 period moving average and then number three. We have our bearish engulfing pattern. Let's call it be number four: what is it the exits? Where do you set your stop loss? What if the market moves against you, so i shared with you the atr technique just find out. What's the current atr value add on to this swing high over here and i'm guessing it's probably somewhere here.

This is where your stop loss should be right. It's based on some rough estimation. What about targets right remember? We said that when we look for targets in a downtrend, we want to set our take profit level just before the swing low, because this is where potential buying pressure could come in and push the price higher. So we would probably you know, have our target somewhere about this level over here right.

So this we can call this tp ktp and if you want to look what happens next, all right. If you look at the next kendall price, you know uh, we would have you know entered on this. Candle open, stop-loss target can be set ahead of time and then watch what happens right in this case uh. Of course, this is a cherry pick chart in this market.

Pretty much went in our favor, and one thing to point out is that any trading strategy that you trade there will be winners and losers right. There is no such thing as 100 winning rate and stuff. Like that right, there will be winners and losers in it's the same for this particular trading strategy, and i can share with you one loser right now. As you can see the market, you know eventually did re-test back this area of value that we have over here.

Okay, so notice here at this point, market came back into this area of value and we have this re-bearish reversal pattern over here. I wouldn't consider this a bearish engulfing pattern as it didn't cover the body of the previous candle, but some traders will look at this entry trigger as a valid trading setup and they will go short right since, after all the sellers, you know, reverse back the uh. More than half of the previous day gains right, closing near the lows over here, so some traders will go short on the next day open and their stop loss again will be the same. One atr above this highs somewhere about here target, could be before the recent swing low, possibly somewhere here see about here right somewhere about here is their target, and in this case right i can just let you know that this trade is probably a losing trade, as The market you know break out higher so again, this is to let you know that no trading strategy works all the time and to kind of manage your expectations right in the real world of trading.

Okay, so moving on right, let's have a look at another trading example and by the way, if you're wondering the previous example is actually the uh us 30-year bond futures market, and that was the four hour time frame so moving on this is the dollar against the Chinese un: this is a forex market and this time around, we are on the eight hour time frame. So this is kind of like to show you that this trading strategy, the concepts that i'm sharing with you right, can be applied across different markets and time frame. So first thing: first again, first question right: number: one: the trend: do we have a valid trend over here and, as you can see, right, the price forming a series of lower lows and lower highs, lower high, lower high, lower high and lower lows, as you can See trend is towards the downside, great. We have a downtrend number two area of value, so this is where uh things is a little bit more interesting.

You can see that number one. It's this area of value, it's not as ideal as i would like, because when you overlay with the 50 period moving average, it's not really respecting it to the exact level. Yes, it's an area, and you can see that the area got breached right a little bit by quite a number of times right over here bounce off the 50ma another one second time, and at that time this one by really quite a bit. Okay, then, fourth time over here and then fifth time we are here again.

So another thing to point out is that when you are using this area of value concept right, sometimes you might get multiple areas of value stacking on one another. So in this case, you can see that the 50 period moving average. I would say yes, it's an area of value, not exactly the cleanest one, where it bounces off near the exact level, but rather you know it whips all around that area quite a bit, but still our trick is as an area of value and if you recall The earlier lesson i said that you know when it comes to area of value, you can use different tools, for you can use support resistance trend line and moving average and even trend channels and much more if you wish to - and in this case right you can See that this market actually came into this area of resistance as well notice, which i'm going to highlight this level out previous support support, support which became resistance right when the price broke below it becomes resistance and then right now it's at this previous area of resistance. As well so we have two areas of value coming together: the 50 period moving average and this area of resistance, so now area of value.

Clearly right has met our criteria, the third thing: what about entry trigger? So if you look into this right, we you'll see right that there is some kind of you know. Bearish price rejection over here we didn't get any great candle. This is what our traders would call a dragonfly doji, but in essence, you can see that the price are rejecting these higher prices over here and the closing price and the opening price is pretty much at the same level. So this is again right.

A valid entry trigger you know that you can use to go short. The main thing that we are looking for is rejection of higher prices right in the downtrend, so in this case we can see right rejection of this higher prices over here. This long, this shadow over here is upper shadow, is in essence right telling you that the buyers right got overwhelmed by the sellers and that's how the price you know reverse back down towards the opening price of the day. So that's how we get this pattern over here next day, the market open over here you can look to go short now what about stop loss? So if you recall stop loss, i like to use the 20 period atr so i'll just walk you through this stop loss exercise to just kind of refresh your memory.

So what you'll do is you'll pull out the 20 period atr. The value right now is 0.0155. So find out the highest price point over here and add on 0.0155, which is the current atr value. So if to walk you through this exercise, this high, the point is about six dollars.

Six point: five: five: three! Okay! So i'll take six point: five! Five! Three! Oh six point five, five, three zero and i add on one atr and i can find the one atr value over here, which is zero point zero one, five, five four and take my trusty calculator out, and it gives me six point: five. Five three plus point: zero one: five, five, four and answer is six point: five, six, eight five, six point: five, six, eight five! So if you're going to sell right on this candle open, your stop loss will be at six point: five, six, eight five and i'm just going to use this little tool over here to demarcate my stop loss. Let's change this to how about rate color. So we know it's, you know, stop loss and the coordinates.

Is it basically the level five? Six? Eight five press? Okay and there you have it so this red line over here is your stop loss so now what about target? So if you recall in the downtrend, we want to set our target right before opposing pressure comes in before this before the swing low. So in essence right, i can see that there is this couple of swing low and this swing low over here. So you want to be confident. Conservative right, i would say somewhere about here right, would be a good uh level right to consider you know taking profits right for this particular trading setup.

So, what's the outcome of this trade, i'm not going to share with you, because the individual outcome from a trade to trade basis is pretty much irrelevant because in the short run your trading results are random. I want you to take this strategies. These concepts, you know, do the back testing the forward testing yourself and see whether you know it will work for you now, let's move on to the stock markets right and see how this trading strategy right can be applied to it as well so same concept over Here number one: what is the trend? This market is in an uptrend series of higher highs and higher lows number two: where is the area of value? So, as you can see over here this market, we have uh one test over here, two tests. Here almost i was considered this a third test.

Then he break out of this swing high and came back for a fourth test over here, so yep area of value for this uh 50 period moving average. Clearly, this market respects it and, on top of the 50 period moving average, you can see that there is also this. Previously it was a swing high price broke above it and it re-tested swing. High now became a swing low and then back here again.

So actually, this is an area of support right as it that is acting as an area of value as well, so the 50 period moving average and this area of support, so multiple uh factors coming together for your a rate of value and then the third thing Is there a valid entry trigger? So if you look at this most recent bar over here, you will see that this market, the previous day the price, closed right, really bearishly below the 50 period moving average, but the next day it gets up higher and pretty much closed right near the highs of The day, so you can see that previous day wow sellers were in control right, you know celebration, let's celebrate all right and the next day the buyers step in and push the price right back to. You know uh near the highs all right of the day. So this is where you know: suddenly, you know, selling buying pressure came in right and reverse right, uh, quite a bit of the losses right from the previous day, so you can see that no buying pressure is now stepping in and on top of it right, we Are trading in the direction of the trend from an area of value, so the story here is pretty good. So again to me: that's a valid entry trigger to go long as it shows you know, bullish price rejection, buyers coming in to push the price up higher.

You know you can see this kind of like a a quick reversal up higher and again, if you can't really, you know see this right, a line chart sometimes might be able to help you just pull out a line chart. You can see that the quick spike all right it came down and a quick spike up higher, so there you can see that it's kind of like a v like this, so this tells you there is a rejection of lower prices. The price is: the market is rejecting this lower prices, so anyway uh. Where was i so now stop loss? You should be a pro buy this by now right, just pull out your atr indicator find out what is the atr value? Take the low over here minus one atr, and that is your stop loss.

Now, let's talk about target: where do you want to take profits so again in an uptrend right? You want to take profits before the swing high, because that is where opposing pressure could come in. This is where sellers could come in. So if you look at this right, this over here to me, looks like a swing high or some of you might call it an area of resistance. So again i won't recommend putting in 104 or 108, because this is an area on your chart.

The price right may not get to that level and then reverse earlier. You know the market. The market could possibly come up higher. You know before it reaches this high, it starts to reverse lower and if you set your target, you know two, i would say too optimistically right.

The market will get close right to your take profit level right only to reverse all your profits. You know see all your open profits just you know vaporize in front of your eyes. So that's usually what happens right when you are too kind of like optimistic with your target, so be a little bit more conservative. If you have seen or if you can identify the swing high, you know set it a little bit lower somewhere around 99 or so right.

That would be a good level to take profits. So again, right no point sharing with you the outcome of this trade, because the process is what matters. Okay, let's have a look at one more trading example right before we move on back to the uh powerpoint, slides presentation. So again same thing: number one ask yourself: what's the trend of this market market this in an uptrend number, two area of value? So at this point right, i haven't overlay the 50ma, so you won't know if the market respects the 50ma, but from what you can see right this over here is an area of value right.

This previous swing high right, which has now become support, support and the price is back here once again, so we clearly have this support acting as an area of value and if i were to overlay with the 50ma yep right, pretty much it as well right. The price has tested the 50 period moving average here once twice and now the third time over here, and in fact it could be even testing uh more than three times now. If i, you know, go back in time to see the charts, but again i'm not just i'm not going to do that, since you know you pretty much know where i'm coming from and finally the last thing do we have a valid entry trigger. So let me share this with you, you can see over here.

Yes, we do right. We noticed that over here, price right has a gap below the previous day and then closed bullishly higher. So at this point i to be honest, i will be hesitant right to to buy because, after all, the the market, the price this stock right - has not reclaimed right back this area of support and he has not reclaimed back above the 50 period moving average. So i at this point to be honest, to be honest, i won't buy yet i want to see the price you know break back above the 50 period, moving average and break back above support.

That tells me the buyers are really uh back here right with conviction. So that actually happened right on the next day and no doubt when that happened right i it will seem that i'm actually entering at a later price and that's perfectly fine with me, because that's kind of like the the price i'm paying for quote unquote confirmation. So when this happened, the price over here has break back above the 50 period, moving average and back above this area of support. As you can see over here on this candle, i will now enter on the next day open, which is on this candle over here.

So next day, market open here right and i will enter stop loss, one atr below this lows again, you're a pro. You know to do it now, it's probably somewhere at this level and as for target remember we want to set it right. Just before opposing pressure comes in before they swing high, so i'll say over here right is a pretty conservative level for targets. So in this case, what what about outcome of this trade? Okay, i'll just share with shared this outcome with you this one right, you can see that the market did eventually get to our target, but it's not exactly the smoothest path to it.

So initially our target was here somewhere about here price hit up close. Then he made a pullback, so some traders who are not comfortable right with watching some of the open profits. You know you know, reverse or get smaller or even turn into back into a small loss right. They might you know, exit the trade too early, but if you have a plan - and you stick to it right, yeah in this case right it eventually, you know reach your target over here.

So sometimes, when you set your profit target, is the market won't? Just you know: zoom right go in one straight line, you know, give you give you money in the bank right, it sometimes will pull back. You know mess with your emotions and if you have a concrete trading plan in place, if you know where it's your stops waste your target, you can just you know kind of let the trade play out the way you know it's supposed to be okay. So, in this case, right there's a little bit of you know, sitting on the hands before the price reaches your target and, of course, another way to look at this is that some of you might argue right here. You know at this point when the market makes you know a retracement now at this point, this swing high right.

This is where opposing pressure could now come in, and i agree yes, this is another level where opposing pressure could come in. So what you want to do is that, if you are, you know a little bit more conservative. You can see how the price reacts at this level. If, let's say the price comes up into this level, and then it forms like a shooting star pattern like this.