Module 2
Module 2
Forex Simplex 2.0 – Module 2
Legal Disclaimers & Notices All contents copyright © 2011 by Forexsimplex.com or Tyler Regan. All rights reserved. No part of this document or accompanying files may be reproduced or transmitted in any form, electronic or otherwise, by any means without the prior written permission of the publisher. This ebook is presented to you for informational purposes only and is not a substitution for any professional advice. The contents herein are based on the views and opinions of the author and all associated contributors. While every effort has been made by the author and all associated contributors to present accurate and up to date information within this document, it is apparent technologies rapidly change. Therefore, the author and all associated contributors reserve the right to update the contents and information provided here in as these changes progress. The author and/or all associated contributors take no responsibility for any errors or omissions if such discrepancies exist within this document. The author and all other contributors accept no responsibility for any consequential actions taken, whether monetary, legal, or otherwise, by any and all readers of the materials provided. It is the readers sole responsibility to seek professional advice before taking any action on their part. Readers results will vary based on their skill level and individual perception of the contents herein, and thus no guarantees, monetarily or otherwise, can be made accurately. Therefore, no guarantees are made.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 2
Forex Simplex 2.0 – Module 2
Table of Contents Legal Disclaimers & Notices.............................................................2 Chapter 1: Candlestick..................................................................... 4 Candlestick Pattern.................................................................................................5 Pin Bar Pattern........................................................................................................5 Bullish Pin Bar Characteristic..........................................................................................6 Bearish Pin Bar Characteristics.......................................................................................7
Engulfing Pattern.....................................................................................................8 Bullish Engulfing Pattern Characteristic..........................................................................8 Bearish Engulfing Pattern..............................................................................................10
Candlestick Pattern Entry and Stop Loss..............................................................11 Candlestick Tips....................................................................................................11
Chapter 2: The Trend......................................................................12 Identifying trend.....................................................................................................13 Buy Trend...................................................................................................................... 14 Sell Trend.......................................................................................................................16
The Relationship between trend and candlestick pattern.....................................18
Chapter 3: Support and Resistance............................................... 19 Identifying Support And Resistance......................................................................20 Setting Support And Resistance....................................................................................21
The Support and Resistance Tactic!.....................................................................23 Finding Support Level....................................................................................................23 Finding Resistance Level.............................................................................................. 24
The Relationship Between Support and Resistance with Candlestick Pattern.....25
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 3
Forex Simplex 2.0 – Module 2
Chapter 1: Candlestick One way to analyze the movement of a market within and between specified time periods is by using candlestick reading. In reality, candlestick is an absolute winner when it comes to analyzing the behaviour of the market visually ( friendly, colourful, reliable ). Candlestick reading was invented by a japanese trader with the name of Homma Munehisa. Later on westener trader name Steve Nison introduced the candlestick which candlestick reading or technique grew in popularity in the 90s until today. The ability to reading and understanding candlestick is very crucial. There are open, high, low, and close of the chosen time period.
Bullish Candlestick
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Bearish Candlestick
Page 4
Forex Simplex 2.0 – Module 2
Candlestick Pattern You might asking to yourself, why candlestick?how powerful is it? Let me throw away your doubt and here is the advantages of using candlestick.
➔ Easy to identify since it is almost everywhere ➔ Highly reliable ➔ Very powerful ➔ Very accurate
I want to introduce you the two candlestick pattern that is the most successful through my experienced. You don't need to learn and memorize lots of candlestick pattern which can cause you headache.
Pin Bar Pattern
This pattern is called Pin Bar pattern. It is obvious why it is called by Pin Bar pattern because of its long shadow like a pin. It also known as hammer for bullish and shooting star for bearish. But in this guide, let me called it as Pin Bar pattern. Pin Bar is divide into two:1. Bullish Pin Bar 2. Bearish Pin Bar
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 5
Forex Simplex 2.0 – Module 2
Bullish Pin Bar Characteristic Bullish Pin Bar is for buy. When you see Bullish Pin Bar Pattern, you want to see it as buy signal.
•
It must be long lower shadow below the candle body
•
Body must be very small or no body at all
•
The upper shadow must be short
See how powerful it is the Bullish Pin Bar in ACTION
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 6
Forex Simplex 2.0 – Module 2
Bearish Pin Bar Characteristics Bearish Pin Bar is for sell. When you see Bullish Pin Bar Pattern, you want to see it as buy signal.
•
It must be long upper shadow above the candle body
•
Body must be very small or no body at all
•
The lower shadow must be short
Imagine you enter all the trade based only by using this bearish pin bar... How easy it is to cash in more money in your trading account..
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 7
Forex Simplex 2.0 – Module 2
Engulfing Pattern
Engulfing Pattern is also one of the best pattern like pin bar pattern. It should be easy to recognize this pattern in the forex market. Engulfing Pattern is also divided into two:1. Bullish Engulfing Pattern 2. Bearish Engulfing Pattern
Bullish Engulfing Pattern Characteristic Bullish Engulfing Pattern is for buy. When you see Bullish Engulfing Pattern you want to consider it as buy signal.
•
The body of the second candle( bullish candlestick ) must be engulf the previous body of candle ( bearish candlestick )
The rule is simple right? Now, lets see how powerful bullish engulfing pattern in ACTION!
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 8
Forex Simplex 2.0 – Module 2
There are lots of bullish engulfing pattern and even if you miss some, you'll find it next time shortly...
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 9
Forex Simplex 2.0 – Module 2
Bearish Engulfing Pattern Bearish Engulfing Pattern is for sell. When you see Bearish Engulfing Pattern you want to see it as sell signal.
•
The body of the second candle( bearish candlestick ) must be engulf the previous body of candle ( bullish candlestick )
Bearish Engulfing Pattern in ACTION!
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 10
Forex Simplex 2.0 – Module 2
Candlestick Pattern Entry and Stop Loss There are 2 ways to enter a trade:-
•
Wait for retracement ( recommended )
•
Buy instantly after you see the pattern First Way, You can set buy stop( for buying ) or sell limit ( for selling ) on the retracement of 21%-50% of the candle which mean when the price retrace back to 21%-50% of the candlestick, it automatically execute a trade. First method is most recommended as you can gain profit very earlier and minimize the stop loss which it is useful for the risk reward which will be discuss in module 4. Second way, you can execute a trade right away after you see the pattern. Put Stop loss below the candle for buy Put Stop loss above the candle for sell
Candlestick Tips Bear in mind, candlestick patterns do not work all the time but it works like 70% of the time and can be more accurate with solid system. Basically, there are 2 factors that can boost the candlestick power and accuracy:-
•
Trend
•
Support And Resistance
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 11
Forex Simplex 2.0 – Module 2
Chapter 2: The Trend You have to know what trend you are into, is it selling or buying. It is crucial to know and understand regarding the trend of the market as it helps you to be able to filter bad trades. What do you mean by bad trade? Bad trade is a trade against the direction of the trend. For example in this chart, you can see the trend is down but what happen if you're execute a trade for buy? Remember, trend is one of the factor for the efficiency of the candlestick pattern. If you're trading against the trend even though you see a candlestick pattern, there is a chance that the candlestick not work.
Bullish Pin Bar failed ( against the trend ) We buy when the market is rising and sell when the market is falling. It is simple as that. One reason why following the trend is awesome is because you can enjoy the long lasting trend which basically mean BIG profit!
“Trend is your friend”
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 12
Forex Simplex 2.0 – Module 2
Identifying trend We use a exponential moving average which the setting is 21.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 13
Forex Simplex 2.0 – Module 2
Buy Trend When the EMA 21 crossed below the price, it shows the price is trending up.Hence, we're looking for buy trade only.
Example 1
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 14
Forex Simplex 2.0 – Module 2 Example 2
©Copyright 2011 Tyler Regan http://forexsimplex.com/
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Forex Simplex 2.0 – Module 2
Sell Trend When the EMA 21 crossed above the price, it shows the market is trending down. Hence, we're looking for sell only. Example 1
Example 2 ©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 16
Forex Simplex 2.0 – Module 2
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 17
Forex Simplex 2.0 – Module 2
The Relationship between trend and candlestick pattern As you already learned, trading against the trend is called a bad trade which mean the accuracy of winning the trade is low. It same goes to candlestick pattern. If you have identified bullish pin bar pattern but the trend is sell, then no trade since it is against the trend.
The chart above shown that the failure candlestick pattern ( pin bar pattern ) when it is traded against the trend.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 18
Forex Simplex 2.0 – Module 2
Chapter 3: Support and Resistance At first, you might think that the forex market Is just a random market that move what the market want but, by adding support and resistance, you'll realized that the price movements are not always randowm all the time. You may have noticed that the price bounced few times on the same horizontal line which is support or resistance. Without adding Support and Resistance horizontal line
After putting Support and Resistance horizontal line
Notice..the price bounced everytime near or at the Support and Resistance Line
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 19
Forex Simplex 2.0 – Module 2
Identifying Support And Resistance The biggest challenging for every trader is when it comes to identifying support and resistance. Most of forex traders have doubt how to plot support and resistance correctly. Keep in mind, plotting support and resistance horizontal lines don't have to be very accurate but you want to plot it that makes sense. But, today I want to introduce with you my tactic on finding support and resistance easily and without doubt at all by using indicator that called stochastic.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 20
Forex Simplex 2.0 – Module 2
Setting Support And Resistance Before I teach you how the tactic works we have to set the indicator first. It is easy, you don't have to worry that much since I provide the step by step to set it. First, click insert>indicators>oscillators>stochastic Oscillator
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 21
Forex Simplex 2.0 – Module 2 Second, change the setting by clicking input tab> set it into 5,3,3
Third, change the setting again by clicking the colors tab>to white
Notes: If the color of your background is white, change the color to white. If it is black, change it black. The reason we did this is because to remove the second line of the stoch. Done! ©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 22
Forex Simplex 2.0 – Module 2
The Support and Resistance Tactic! The tactic is easy and simple to understand and to implement.
Finding Support Level When the blue line of stochastic make a low and rise up, it shows that the price is near or at the support level. You can see the blue line make a low and rise through green highlight
Lets take a look the stochastic in action with real chart!
***Plot support with the horizontal line below the candlestick.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 23
Forex Simplex 2.0 – Module 2
Finding Resistance Level When the blue line of the stochastic make a high and fall down, it shows that the market is at or near the resistance level.
Lets take a look the stochastic in ACTION!
***Plot resistance with the horizontal line above the candlestick.
Now you know how to plot support and resistance easily with stochastic.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 24
Forex Simplex 2.0 – Module 2
The Relationship Between Support and Resistance with Candlestick Pattern Again, you know that support and resistance is one of the factor that can boost the performance of the candlestick pattern. When the candlestick pattern formed near support or resistance, there is really really high chance that the pattern create huge impact with on the market. Lets take a look how support and resistance combine with candlestick pattern in action!!!
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 25
Forex Simplex 2.0 – Module 2
Legal Disclaimers & Notices All contents copyright © 2011 by Forexsimplex.com or Tyler Regan. All rights reserved. No part of this document or accompanying files may be reproduced or transmitted in any form, electronic or otherwise, by any means without the prior written permission of the publisher. This ebook is presented to you for informational purposes only and is not a substitution for any professional advice. The contents herein are based on the views and opinions of the author and all associated contributors. While every effort has been made by the author and all associated contributors to present accurate and up to date information within this document, it is apparent technologies rapidly change. Therefore, the author and all associated contributors reserve the right to update the contents and information provided here in as these changes progress. The author and/or all associated contributors take no responsibility for any errors or omissions if such discrepancies exist within this document. The author and all other contributors accept no responsibility for any consequential actions taken, whether monetary, legal, or otherwise, by any and all readers of the materials provided. It is the readers sole responsibility to seek professional advice before taking any action on their part. Readers results will vary based on their skill level and individual perception of the contents herein, and thus no guarantees, monetarily or otherwise, can be made accurately. Therefore, no guarantees are made.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 2
Forex Simplex 2.0 – Module 2
Table of Contents Legal Disclaimers & Notices.............................................................2 Chapter 1: Candlestick..................................................................... 4 Candlestick Pattern.................................................................................................5 Pin Bar Pattern........................................................................................................5 Bullish Pin Bar Characteristic..........................................................................................6 Bearish Pin Bar Characteristics.......................................................................................7
Engulfing Pattern.....................................................................................................8 Bullish Engulfing Pattern Characteristic..........................................................................8 Bearish Engulfing Pattern..............................................................................................10
Candlestick Pattern Entry and Stop Loss..............................................................11 Candlestick Tips....................................................................................................11
Chapter 2: The Trend......................................................................12 Identifying trend.....................................................................................................13 Buy Trend...................................................................................................................... 14 Sell Trend.......................................................................................................................16
The Relationship between trend and candlestick pattern.....................................18
Chapter 3: Support and Resistance............................................... 19 Identifying Support And Resistance......................................................................20 Setting Support And Resistance....................................................................................21
The Support and Resistance Tactic!.....................................................................23 Finding Support Level....................................................................................................23 Finding Resistance Level.............................................................................................. 24
The Relationship Between Support and Resistance with Candlestick Pattern.....25
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 3
Forex Simplex 2.0 – Module 2
Chapter 1: Candlestick One way to analyze the movement of a market within and between specified time periods is by using candlestick reading. In reality, candlestick is an absolute winner when it comes to analyzing the behaviour of the market visually ( friendly, colourful, reliable ). Candlestick reading was invented by a japanese trader with the name of Homma Munehisa. Later on westener trader name Steve Nison introduced the candlestick which candlestick reading or technique grew in popularity in the 90s until today. The ability to reading and understanding candlestick is very crucial. There are open, high, low, and close of the chosen time period.
Bullish Candlestick
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Bearish Candlestick
Page 4
Forex Simplex 2.0 – Module 2
Candlestick Pattern You might asking to yourself, why candlestick?how powerful is it? Let me throw away your doubt and here is the advantages of using candlestick.
➔ Easy to identify since it is almost everywhere ➔ Highly reliable ➔ Very powerful ➔ Very accurate
I want to introduce you the two candlestick pattern that is the most successful through my experienced. You don't need to learn and memorize lots of candlestick pattern which can cause you headache.
Pin Bar Pattern
This pattern is called Pin Bar pattern. It is obvious why it is called by Pin Bar pattern because of its long shadow like a pin. It also known as hammer for bullish and shooting star for bearish. But in this guide, let me called it as Pin Bar pattern. Pin Bar is divide into two:1. Bullish Pin Bar 2. Bearish Pin Bar
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 5
Forex Simplex 2.0 – Module 2
Bullish Pin Bar Characteristic Bullish Pin Bar is for buy. When you see Bullish Pin Bar Pattern, you want to see it as buy signal.
•
It must be long lower shadow below the candle body
•
Body must be very small or no body at all
•
The upper shadow must be short
See how powerful it is the Bullish Pin Bar in ACTION
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 6
Forex Simplex 2.0 – Module 2
Bearish Pin Bar Characteristics Bearish Pin Bar is for sell. When you see Bullish Pin Bar Pattern, you want to see it as buy signal.
•
It must be long upper shadow above the candle body
•
Body must be very small or no body at all
•
The lower shadow must be short
Imagine you enter all the trade based only by using this bearish pin bar... How easy it is to cash in more money in your trading account..
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 7
Forex Simplex 2.0 – Module 2
Engulfing Pattern
Engulfing Pattern is also one of the best pattern like pin bar pattern. It should be easy to recognize this pattern in the forex market. Engulfing Pattern is also divided into two:1. Bullish Engulfing Pattern 2. Bearish Engulfing Pattern
Bullish Engulfing Pattern Characteristic Bullish Engulfing Pattern is for buy. When you see Bullish Engulfing Pattern you want to consider it as buy signal.
•
The body of the second candle( bullish candlestick ) must be engulf the previous body of candle ( bearish candlestick )
The rule is simple right? Now, lets see how powerful bullish engulfing pattern in ACTION!
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 8
Forex Simplex 2.0 – Module 2
There are lots of bullish engulfing pattern and even if you miss some, you'll find it next time shortly...
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 9
Forex Simplex 2.0 – Module 2
Bearish Engulfing Pattern Bearish Engulfing Pattern is for sell. When you see Bearish Engulfing Pattern you want to see it as sell signal.
•
The body of the second candle( bearish candlestick ) must be engulf the previous body of candle ( bullish candlestick )
Bearish Engulfing Pattern in ACTION!
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 10
Forex Simplex 2.0 – Module 2
Candlestick Pattern Entry and Stop Loss There are 2 ways to enter a trade:-
•
Wait for retracement ( recommended )
•
Buy instantly after you see the pattern First Way, You can set buy stop( for buying ) or sell limit ( for selling ) on the retracement of 21%-50% of the candle which mean when the price retrace back to 21%-50% of the candlestick, it automatically execute a trade. First method is most recommended as you can gain profit very earlier and minimize the stop loss which it is useful for the risk reward which will be discuss in module 4. Second way, you can execute a trade right away after you see the pattern. Put Stop loss below the candle for buy Put Stop loss above the candle for sell
Candlestick Tips Bear in mind, candlestick patterns do not work all the time but it works like 70% of the time and can be more accurate with solid system. Basically, there are 2 factors that can boost the candlestick power and accuracy:-
•
Trend
•
Support And Resistance
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 11
Forex Simplex 2.0 – Module 2
Chapter 2: The Trend You have to know what trend you are into, is it selling or buying. It is crucial to know and understand regarding the trend of the market as it helps you to be able to filter bad trades. What do you mean by bad trade? Bad trade is a trade against the direction of the trend. For example in this chart, you can see the trend is down but what happen if you're execute a trade for buy? Remember, trend is one of the factor for the efficiency of the candlestick pattern. If you're trading against the trend even though you see a candlestick pattern, there is a chance that the candlestick not work.
Bullish Pin Bar failed ( against the trend ) We buy when the market is rising and sell when the market is falling. It is simple as that. One reason why following the trend is awesome is because you can enjoy the long lasting trend which basically mean BIG profit!
“Trend is your friend”
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 12
Forex Simplex 2.0 – Module 2
Identifying trend We use a exponential moving average which the setting is 21.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 13
Forex Simplex 2.0 – Module 2
Buy Trend When the EMA 21 crossed below the price, it shows the price is trending up.Hence, we're looking for buy trade only.
Example 1
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 14
Forex Simplex 2.0 – Module 2 Example 2
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 15
Forex Simplex 2.0 – Module 2
Sell Trend When the EMA 21 crossed above the price, it shows the market is trending down. Hence, we're looking for sell only. Example 1
Example 2 ©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 16
Forex Simplex 2.0 – Module 2
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 17
Forex Simplex 2.0 – Module 2
The Relationship between trend and candlestick pattern As you already learned, trading against the trend is called a bad trade which mean the accuracy of winning the trade is low. It same goes to candlestick pattern. If you have identified bullish pin bar pattern but the trend is sell, then no trade since it is against the trend.
The chart above shown that the failure candlestick pattern ( pin bar pattern ) when it is traded against the trend.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 18
Forex Simplex 2.0 – Module 2
Chapter 3: Support and Resistance At first, you might think that the forex market Is just a random market that move what the market want but, by adding support and resistance, you'll realized that the price movements are not always randowm all the time. You may have noticed that the price bounced few times on the same horizontal line which is support or resistance. Without adding Support and Resistance horizontal line
After putting Support and Resistance horizontal line
Notice..the price bounced everytime near or at the Support and Resistance Line
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 19
Forex Simplex 2.0 – Module 2
Identifying Support And Resistance The biggest challenging for every trader is when it comes to identifying support and resistance. Most of forex traders have doubt how to plot support and resistance correctly. Keep in mind, plotting support and resistance horizontal lines don't have to be very accurate but you want to plot it that makes sense. But, today I want to introduce with you my tactic on finding support and resistance easily and without doubt at all by using indicator that called stochastic.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 20
Forex Simplex 2.0 – Module 2
Setting Support And Resistance Before I teach you how the tactic works we have to set the indicator first. It is easy, you don't have to worry that much since I provide the step by step to set it. First, click insert>indicators>oscillators>stochastic Oscillator
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 21
Forex Simplex 2.0 – Module 2 Second, change the setting by clicking input tab> set it into 5,3,3
Third, change the setting again by clicking the colors tab>to white
Notes: If the color of your background is white, change the color to white. If it is black, change it black. The reason we did this is because to remove the second line of the stoch. Done! ©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 22
Forex Simplex 2.0 – Module 2
The Support and Resistance Tactic! The tactic is easy and simple to understand and to implement.
Finding Support Level When the blue line of stochastic make a low and rise up, it shows that the price is near or at the support level. You can see the blue line make a low and rise through green highlight
Lets take a look the stochastic in action with real chart!
***Plot support with the horizontal line below the candlestick.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 23
Forex Simplex 2.0 – Module 2
Finding Resistance Level When the blue line of the stochastic make a high and fall down, it shows that the market is at or near the resistance level.
Lets take a look the stochastic in ACTION!
***Plot resistance with the horizontal line above the candlestick.
Now you know how to plot support and resistance easily with stochastic.
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 24
Forex Simplex 2.0 – Module 2
The Relationship Between Support and Resistance with Candlestick Pattern Again, you know that support and resistance is one of the factor that can boost the performance of the candlestick pattern. When the candlestick pattern formed near support or resistance, there is really really high chance that the pattern create huge impact with on the market. Lets take a look how support and resistance combine with candlestick pattern in action!!!
©Copyright 2011 Tyler Regan http://forexsimplex.com/
Page 25
