High Probability Pattern Trade
Presents
Trading Forex Using High Probability Pattern Trade
Trading Forex Using High Probability Pattern Trade © Published by Alzaiak Trading CC Nominee Old Tree Publishing CC Suite 509, Private Bag X503 Northway, 4065, KZN, ZA www.tradeology.com Copyright © 2014 by Alaziak Trading CC, KZN, ZA Reproduction or translation of any part of this work by any means, electronic or mechanical, including photocopying, beyond that permitted by the copyright law, without permission of the publisher, is unlawful. Trademarks: Alaziak Trading CC, Tradeology
www.Tradeology.com
RISK DISCLOSURE STATEMENT / DISCLAIMER AGREEMENT Trading any financial market involves risk. This report and all and any of its contents are neither a solicitation nor an offer to Buy/Sell any financial market. The contents of this material are for general information and educational purposes only (contents shall also mean the website http://www.tradeology.com/ or any website the content is hosted on, and any email correspondence or newsletters or postings related to such website). Every effort has been made to accurately represent this product and its potential. There is no guarantee that you will earn any money using the techniques, ideas and software in these materials. Examples in these materials are not to be interpreted as a promise or guarantee of earnings. Earning potential is entirely dependent on the person using our product, ideas and techniques. We do not purport this to be a “get rich scheme.” Although every attempt has been made to assure accuracy, we do not give any express or implied warranty as to its accuracy. We do not accept any liability for error or omission. Examples are provided for illustrative purposes only and should not be construed as investment advice or strategy. No representation is being made that any account or trader will or is likely to achieve profits or losses similar to those discussed in this report or anywhere on http://www.tradeology.com/. Past performance is not indicative of future results. By purchasing any content, subscribing to our mailing list or using the website or contents of the website or materials provided herewith, you will be deemed to have accepted these terms and conditions in full as appear also on our site, as do our full earnings disclaimer and privacy policy and CFTC disclaimer and rule 4.41 to be read herewith. So too, all the materials contained within this course, including this manual, whether they appear on our domain(s) or are in physical form, are protected by copyright. "Warning: The unauthorized reproduction or distribution of this copyrighted work is illegal. Criminal copyright infringement, including infringement without monetary gain, is investigated by the authorities and is punishable with imprisonment and a fine." We reserve all our rights in this regard. Old Tree Publishing CC, in association with http://www.tradeology.com/, the website, content, and its representatives do not and cannot give investment advice or invite customers or readers to engage in investments through this course or any part of it. The information provided in this content is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject us to any registration requirement within such jurisdiction or country. Hypothetical performance results have many inherent limitations, some of which are mentioned below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and actual results subsequently achieved by any particular trading program and method. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program or system in spite of the trading losses are material points that can also adversely affect trading results. There are numerous other factors related to the market in general or to the implementation of any specific trading program, which cannot be fully accounted for in the preparation of hypothetical performance results. All of which can adversely affect actual trading results. We reserve the right to change these terms and conditions without notice. You can check for updates to this disclaimer at any time by visiting http://www.tradeology.com/. Governing law: this policy and the use of this report/eBook, provided in any form, and any content on the website are governed by the laws of the Republic of South Africa. Further details on this are found under the Terms and Conditions on our site. Please ensure you read and agree with all Terms and Conditions as set out on our site before using any of the materials. Your use and reliance on the materials is based on your acceptance of such Terms and Conditions and policies as appear on the site.
www.Tradeology.com
Trading Forex Using High Probability Pattern Trade Introduction The High Probability Pattern Trade we will be discussing today is based on a three day reversal pattern. It is commonly known as the Pinocchio Bar or Pin Bar trade. These patterns are referred to as Pinocchio bars because, like the famous W alt Disney character, the pattern is recognized by a large nose. Traders use this pattern as an indication that the current price action lies to us about the true direction of the trend. As a result, you may sometimes find traders that use these patterns usually make bizarre statements like, "Pinocchio’s nose gets bigger the larger the lie." This is because of the formation that is created by three consecutive bars. The middle bar is usually referred to as the Pinocchio bar or nose as it is the same bar which grows, very much like the nose of the famous cartoon character, whenever a lie is being told. The bars to the right and to the left of the Pinocchio bar are commonly referred to as the eyes. The lie being told is essentially the direction in which the Pinocchio bar or nose is moving in. When price surges in a certain direction, many traders follow. As we know, this surge may be short-lived and price can reverse and continue in the opposite direction. Waiting for a Pinocchio bar to form often keeps traders out of bad trades and ensures that they enter trades in the direction of the overall trend. The bigger the nose, the more significant the reversal/whipsaw. Pin bars occur frequently on all time frames and across all currency pairs. You can usually expect a Pin bar to have an effect on prices for at least 5 to 10 bars. It is important to bear in mind that as you learn more about Pin bars, you will find that occurrences on a monthly chart will have a much longer influence than one on a 5minute. In this report, we will take a closer look at how to identify Pinocchio bars and how to trade them effectively, so… Let’s get started!
www.Tradeology.com
How To Identify Pinocchio Bars Identifying a Pin bar is simple. It has a distinct shape and characteristics that make it easily identifiable on a regular bar chart. A Pin bar must have the following characteristics:
It must have an open/close within the first eye. It must protrude from surrounding prices or stick out from surrounding prices . It must NOT be an inside bar. Take a look at the following example:
On the image above you can see an example of a Pin bar. Notice how the nose bar has an open and a close that is within the range of the bar on the left, or the left eye. Also pay attention to how the nose protrudes above the surrounding prices. Price has extended beyond the previous bar so there’s no chance of this being an Inside bar pattern. In this scenario, price surges upwards leading many traders to believe the trend is up. But as you can see, price reverses and heads downwards. By identifying Pin bars when they form on our charts, we can avoid entering trades in the wrong direction and grow our account by taking trades in the right direction.
Not all Pin bars are created equal. You will find that the BEST Pin bars all share the following characteristics:
It has a long nose relative to the open, close and high/low. It has a nose protruding a long way from the prices around it. It has the open and/or close near one end of the bar.
By trading only the best Pin bar formations, we inevitably shift the probability of entering more profitable trades in our favor. Let’s take a closer look at how to identify and enter trades using Pin bars.
How To Trade Pinocchio Bars Knowing how to identify a Pin bar is easy, and trading the setup once it occurs is a breeze! The most important components of any trading technique are the entry and exit levels. Depending on the techniques you’re using, it can get pretty complicated but when it comes to Pin bars, it’s a piece of cake. Take a look at the image to the right… In the example shown on the image, you can see that a Pin bar has formed between the left and right eyes shown by the red circles. Once the nose candle has closed, we simply confirm that the formation is valid. Notice how the nose bar has an open and a close that is within the range of the bar on the left, or the left eye. The nose protrudes above the surrounding prices. Price has also extended beyond the previous bar so there’s no chance of this being an Inside bar pattern. We simply wait for the nose bar to close and for the right eye candle to start forming. As soon as we have the right eye starting to form, we can place a Sell pending order a few pips below the low of the Pin bar or nose bar.
www.Tradeology.com We can then set our initial Stop Loss level above the high of the Pin bar or nose bar. We then measure the distance from the entry level to the Stop Loss. In this scenario, the distance from the Entry Level to the Stop Loss is 83 pips. To observe a 1:1 Risk/Reward Ratio we then place our Take Profit at exactly 83 pips away from our entry level. As you can see on the previous image, our Take Profit level was reached and we were taken out of this trade with a profit within the next two bars. Now let’s take a look at how to approach a Buy trade using Pin bars…
In the example shown on the image above, you can see that a Pin bar has formed between the left and right eyes shown by the red circles. Notice how the eyes can sometimes be a little bit lopsided, or un-even. That’s ok, provided that the rest of the criteria are met. Once the nose candle has closed, we simply confirm that the formation is valid. Notice how the nose bar has an open and a close that is within the range of the bar on the left, or the left eye. The nose protrudes below the surrounding prices. Price has also extended below the previous bar so there’s no chance of this being an Inside bar pattern. We simply wait for the nose bar to close and for the right eye candle to start forming. 6
www.Tradeology.com As soon as we have the right eye starting to form, we can place a Buy pending order a few pips above the high of the Pin bar or nose bar. We can then set our initial Stop Loss level below the low of the Pin bar or nose bar. We then measure the distance from the entry level to the Stop Loss. In this scenario, the distance from the Entry Level to the Stop Loss is 135 pips. To observe a 1:1 Risk/Reward Ratio we then place our Take Profit at exactly 135 pips away from our entry level. As you can see on the image, our Take Profit level was reached and we were taken out of this trade with a profit within a few bars. Another good trade! Trading Pin bars is very simple. Now let’s take a look at a few ways that you can take this powerful technique a step further and zero in on more accurate trade setups.
Extreme Pin Bars Pin bars work well on their own but they can also be incorporated into other systems. Technical analysis allows traders to experiment by combining different techniques to improve their trading systems. Pin bars 'plug and play' very nicely with a variety of different trading techniques and are especially powerful when used as a trade entry component together with other techniques. Support/Resistance and Channels can be used effectively as a filter with Pin bars. For instance, a Pin bar that forms close to an area of support or resistance will have a higher probability of success. If we were using a channel, we would pay close attention and be on the lookout for Pin bars whenever price reached either the upper or lower channel trend lines.
7
www.Tradeology.com
Multiple Time Frame Pin Bars Using multiple time frames can be a great way to use Pin bars. All you need to do is start off on a higher time frame, like a Daily chart. You then simply need to identify a Pin bar that is currently forming the right eye bar. By just looking at the nose bar, you can already determine which direction the market is likely to go. For an uptrend, the nose bar will be pointing or surging to the downside and for an uptrend, the nose bar will be pointing or surging to the upside. Armed with this knowledge, we can shift down to a smaller time frame like the 4 hour or 30 minute and look for opportunities to enter trades in the direction determined by the Pin bar on the Daily chart. So, if we found that the Pin bar on the Daily chart had surged to the downside, we would be on the lookout for Buy trades ONLY on the lower time frames. These are just some of the ways that you can trade with Pin bars. As you get more familiar with these techniques, you will find that you will start to develop into a trader capable of dealing with any market scenario, so don’t be afraid to experiment.
Sincerely,
http://www.tradeology.com/
8
Trading Forex Using High Probability Pattern Trade
Trading Forex Using High Probability Pattern Trade © Published by Alzaiak Trading CC Nominee Old Tree Publishing CC Suite 509, Private Bag X503 Northway, 4065, KZN, ZA www.tradeology.com Copyright © 2014 by Alaziak Trading CC, KZN, ZA Reproduction or translation of any part of this work by any means, electronic or mechanical, including photocopying, beyond that permitted by the copyright law, without permission of the publisher, is unlawful. Trademarks: Alaziak Trading CC, Tradeology
www.Tradeology.com
RISK DISCLOSURE STATEMENT / DISCLAIMER AGREEMENT Trading any financial market involves risk. This report and all and any of its contents are neither a solicitation nor an offer to Buy/Sell any financial market. The contents of this material are for general information and educational purposes only (contents shall also mean the website http://www.tradeology.com/ or any website the content is hosted on, and any email correspondence or newsletters or postings related to such website). Every effort has been made to accurately represent this product and its potential. There is no guarantee that you will earn any money using the techniques, ideas and software in these materials. Examples in these materials are not to be interpreted as a promise or guarantee of earnings. Earning potential is entirely dependent on the person using our product, ideas and techniques. We do not purport this to be a “get rich scheme.” Although every attempt has been made to assure accuracy, we do not give any express or implied warranty as to its accuracy. We do not accept any liability for error or omission. Examples are provided for illustrative purposes only and should not be construed as investment advice or strategy. No representation is being made that any account or trader will or is likely to achieve profits or losses similar to those discussed in this report or anywhere on http://www.tradeology.com/. Past performance is not indicative of future results. By purchasing any content, subscribing to our mailing list or using the website or contents of the website or materials provided herewith, you will be deemed to have accepted these terms and conditions in full as appear also on our site, as do our full earnings disclaimer and privacy policy and CFTC disclaimer and rule 4.41 to be read herewith. So too, all the materials contained within this course, including this manual, whether they appear on our domain(s) or are in physical form, are protected by copyright. "Warning: The unauthorized reproduction or distribution of this copyrighted work is illegal. Criminal copyright infringement, including infringement without monetary gain, is investigated by the authorities and is punishable with imprisonment and a fine." We reserve all our rights in this regard. Old Tree Publishing CC, in association with http://www.tradeology.com/, the website, content, and its representatives do not and cannot give investment advice or invite customers or readers to engage in investments through this course or any part of it. The information provided in this content is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject us to any registration requirement within such jurisdiction or country. Hypothetical performance results have many inherent limitations, some of which are mentioned below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and actual results subsequently achieved by any particular trading program and method. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program or system in spite of the trading losses are material points that can also adversely affect trading results. There are numerous other factors related to the market in general or to the implementation of any specific trading program, which cannot be fully accounted for in the preparation of hypothetical performance results. All of which can adversely affect actual trading results. We reserve the right to change these terms and conditions without notice. You can check for updates to this disclaimer at any time by visiting http://www.tradeology.com/. Governing law: this policy and the use of this report/eBook, provided in any form, and any content on the website are governed by the laws of the Republic of South Africa. Further details on this are found under the Terms and Conditions on our site. Please ensure you read and agree with all Terms and Conditions as set out on our site before using any of the materials. Your use and reliance on the materials is based on your acceptance of such Terms and Conditions and policies as appear on the site.
www.Tradeology.com
Trading Forex Using High Probability Pattern Trade Introduction The High Probability Pattern Trade we will be discussing today is based on a three day reversal pattern. It is commonly known as the Pinocchio Bar or Pin Bar trade. These patterns are referred to as Pinocchio bars because, like the famous W alt Disney character, the pattern is recognized by a large nose. Traders use this pattern as an indication that the current price action lies to us about the true direction of the trend. As a result, you may sometimes find traders that use these patterns usually make bizarre statements like, "Pinocchio’s nose gets bigger the larger the lie." This is because of the formation that is created by three consecutive bars. The middle bar is usually referred to as the Pinocchio bar or nose as it is the same bar which grows, very much like the nose of the famous cartoon character, whenever a lie is being told. The bars to the right and to the left of the Pinocchio bar are commonly referred to as the eyes. The lie being told is essentially the direction in which the Pinocchio bar or nose is moving in. When price surges in a certain direction, many traders follow. As we know, this surge may be short-lived and price can reverse and continue in the opposite direction. Waiting for a Pinocchio bar to form often keeps traders out of bad trades and ensures that they enter trades in the direction of the overall trend. The bigger the nose, the more significant the reversal/whipsaw. Pin bars occur frequently on all time frames and across all currency pairs. You can usually expect a Pin bar to have an effect on prices for at least 5 to 10 bars. It is important to bear in mind that as you learn more about Pin bars, you will find that occurrences on a monthly chart will have a much longer influence than one on a 5minute. In this report, we will take a closer look at how to identify Pinocchio bars and how to trade them effectively, so… Let’s get started!
www.Tradeology.com
How To Identify Pinocchio Bars Identifying a Pin bar is simple. It has a distinct shape and characteristics that make it easily identifiable on a regular bar chart. A Pin bar must have the following characteristics:
It must have an open/close within the first eye. It must protrude from surrounding prices or stick out from surrounding prices . It must NOT be an inside bar. Take a look at the following example:
On the image above you can see an example of a Pin bar. Notice how the nose bar has an open and a close that is within the range of the bar on the left, or the left eye. Also pay attention to how the nose protrudes above the surrounding prices. Price has extended beyond the previous bar so there’s no chance of this being an Inside bar pattern. In this scenario, price surges upwards leading many traders to believe the trend is up. But as you can see, price reverses and heads downwards. By identifying Pin bars when they form on our charts, we can avoid entering trades in the wrong direction and grow our account by taking trades in the right direction.
Not all Pin bars are created equal. You will find that the BEST Pin bars all share the following characteristics:
It has a long nose relative to the open, close and high/low. It has a nose protruding a long way from the prices around it. It has the open and/or close near one end of the bar.
By trading only the best Pin bar formations, we inevitably shift the probability of entering more profitable trades in our favor. Let’s take a closer look at how to identify and enter trades using Pin bars.
How To Trade Pinocchio Bars Knowing how to identify a Pin bar is easy, and trading the setup once it occurs is a breeze! The most important components of any trading technique are the entry and exit levels. Depending on the techniques you’re using, it can get pretty complicated but when it comes to Pin bars, it’s a piece of cake. Take a look at the image to the right… In the example shown on the image, you can see that a Pin bar has formed between the left and right eyes shown by the red circles. Once the nose candle has closed, we simply confirm that the formation is valid. Notice how the nose bar has an open and a close that is within the range of the bar on the left, or the left eye. The nose protrudes above the surrounding prices. Price has also extended beyond the previous bar so there’s no chance of this being an Inside bar pattern. We simply wait for the nose bar to close and for the right eye candle to start forming. As soon as we have the right eye starting to form, we can place a Sell pending order a few pips below the low of the Pin bar or nose bar.
www.Tradeology.com We can then set our initial Stop Loss level above the high of the Pin bar or nose bar. We then measure the distance from the entry level to the Stop Loss. In this scenario, the distance from the Entry Level to the Stop Loss is 83 pips. To observe a 1:1 Risk/Reward Ratio we then place our Take Profit at exactly 83 pips away from our entry level. As you can see on the previous image, our Take Profit level was reached and we were taken out of this trade with a profit within the next two bars. Now let’s take a look at how to approach a Buy trade using Pin bars…
In the example shown on the image above, you can see that a Pin bar has formed between the left and right eyes shown by the red circles. Notice how the eyes can sometimes be a little bit lopsided, or un-even. That’s ok, provided that the rest of the criteria are met. Once the nose candle has closed, we simply confirm that the formation is valid. Notice how the nose bar has an open and a close that is within the range of the bar on the left, or the left eye. The nose protrudes below the surrounding prices. Price has also extended below the previous bar so there’s no chance of this being an Inside bar pattern. We simply wait for the nose bar to close and for the right eye candle to start forming. 6
www.Tradeology.com As soon as we have the right eye starting to form, we can place a Buy pending order a few pips above the high of the Pin bar or nose bar. We can then set our initial Stop Loss level below the low of the Pin bar or nose bar. We then measure the distance from the entry level to the Stop Loss. In this scenario, the distance from the Entry Level to the Stop Loss is 135 pips. To observe a 1:1 Risk/Reward Ratio we then place our Take Profit at exactly 135 pips away from our entry level. As you can see on the image, our Take Profit level was reached and we were taken out of this trade with a profit within a few bars. Another good trade! Trading Pin bars is very simple. Now let’s take a look at a few ways that you can take this powerful technique a step further and zero in on more accurate trade setups.
Extreme Pin Bars Pin bars work well on their own but they can also be incorporated into other systems. Technical analysis allows traders to experiment by combining different techniques to improve their trading systems. Pin bars 'plug and play' very nicely with a variety of different trading techniques and are especially powerful when used as a trade entry component together with other techniques. Support/Resistance and Channels can be used effectively as a filter with Pin bars. For instance, a Pin bar that forms close to an area of support or resistance will have a higher probability of success. If we were using a channel, we would pay close attention and be on the lookout for Pin bars whenever price reached either the upper or lower channel trend lines.
7
www.Tradeology.com
Multiple Time Frame Pin Bars Using multiple time frames can be a great way to use Pin bars. All you need to do is start off on a higher time frame, like a Daily chart. You then simply need to identify a Pin bar that is currently forming the right eye bar. By just looking at the nose bar, you can already determine which direction the market is likely to go. For an uptrend, the nose bar will be pointing or surging to the downside and for an uptrend, the nose bar will be pointing or surging to the upside. Armed with this knowledge, we can shift down to a smaller time frame like the 4 hour or 30 minute and look for opportunities to enter trades in the direction determined by the Pin bar on the Daily chart. So, if we found that the Pin bar on the Daily chart had surged to the downside, we would be on the lookout for Buy trades ONLY on the lower time frames. These are just some of the ways that you can trade with Pin bars. As you get more familiar with these techniques, you will find that you will start to develop into a trader capable of dealing with any market scenario, so don’t be afraid to experiment.
Sincerely,
http://www.tradeology.com/
8
