Raising Investment Standards TRADING SEMINAR
Raising Investment Standards DISCLAIMER Leveraged foreign exchange and options trading carries a significant level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You should be aware of all the risks associated with foreign exchange and option trading, and seek advice from an independent financial advisor if you have any doubts. The contents provided in this seminar are subject to change at any time without notice. There is no guarantee that the systems, trading techniques, trading methods, indicators or other information presented at this seminar will result in profits or not result in losses. The content is provided for informational purposes only and is not intended as a trading recommendation.
FX TRADING I. The Basics II. III. Trading Tools Money Management
FX Market What is FX? Characteristics High Volume: USD 4 trillion/day - 80% speculation High Liquidity: Tight Fixed Spread High Leverage: 1:100 Trading Hours: 24/6 Accessible Purely Electronic Short Selling without any rule Fits Technical Analysis Studies
FX Market FX as an Asset Class Major Currencies USD,EUR,CHF,GBP,CAD,JPY,AUD,NZD Traded in Pairs: EUR/USD, AUD/USD More Combinations EUR/GBP.
FX Market Tick Size 0.1 Pip : the smallest price increment in FX trading Pip Value : depends upon the pair being traded and its price
FX Market Leverage Loss and Recovery Simulation Initial Capital: $ 10.000 Loss 1:1 1:5 1% $9,900.00 $9,500.00 1% $9,801.00 $9,050.00 1% $9,702.99 $8,604.50 1% $9,605.96 $8,162.95 Recovery 4% 22%
FX Movers Global Macro Key Economic Indicators Interest Rates Differentials Risk Appetite V/S Risk Aversion M&A Activity Auction Results
Advantages Of AKSYS Trading Platform Most competitive fixed spread Commission-free trading Swap free trading No slippage Minimum of 10,000 trading unit Streamlined dealing on real-time prices Place orders inside the spread Hedging capabilities No debit balance Built in back-office Round the clock help desk : Technical analysis Macro views Execution
AKSYS Trading Platform
Order types : Market Orders
Order Types : Pending Orders
Understanding The Terminal
Money Management & Trading Strategies Trading Frequency Trading Size Trader Behavior The Fallacy Of Winning Streak
Trading Frequency High: Always in the market Hit & Run Between 10 to 30 trades per day Cut all accumulated losses when breaking a trading range
Trading Frequency Low : Opportunistic Swing Positioning Between 2 to 3 trades per week Trailing Stop Loss
Trading Size On a fixed USD stop loss value basis Consistency Check your risk level AMOUNT OF EQUITY LOST RETURN REQUIRED TO RESTORE INITIAL VALUE 25 % 33 % 50 % 100 % 75 % 400 % 90 % 1000 %
Trader Behavior Trend Buy / Sell continuous patterns Counter Trend Sell Resistance Buy Support
The Fallacy Of Winning Streak Trade P&L pips 1 + 30 pips 2 + 25 pips 3 + 35 pips 4-110 pips Total - 20 pips The trader has a 75% winning trades but ends up losing money.
The Fallacy Of Winning Streak Trade P&L pips 1-30 pips 2 + 50 pips 3-35 pips 4 + 60 pips Total + 45 pips The trader has a 50% winning trades and ends up winning money.
Adding To A Winning Position EUR/USD: Position Risk Risk Vs Position size Short 20k at 1.5020 Adjust stop on entry for 20k and add 20k at 1.4970 Adjust stop on entry for 40k and add 20k at 1.4920 200 $ 1 % Market move 200 $ 0.5 % - 50 pips 200 $ 0.33 % - 50 pips
Technical Analysis What is Technical Analysis Technical analysis is defined as the art of forecasting the market trend direction through analyzing the current and historical price action and projecting it into the future by using different tools. Historical Glance Homma Munehisa(1724-1803) Charles Henry Dow (1851-1902) Ralph Nelson Elliott (1871-1948) William Delbert Gann 1878-1955)
The Use Of Technical Analysis It provides: The time to enter the market Decision: Long, Short, or Not to enter The Stop Loss Level (invalidation of the scenario or bias) The Time Frame Of The Trend The Profit Taking Level (Trade Objective) All these factors are exploited in product structuring in order to estimate the product maturity (duration of the trend) and the bias of the product (direction of the trend) barrier level (support resistance).
Technical Analysis Tools Explained The Three Major Factors For Technical Analysis are: Time Pattern Price
TIME Time is divided into five categories: Dynamic Projections/Retracements/Alternations form tops and bottoms Fixed Time Cycles Seasonal Cycles Astrologic Cycles Gann Squares and Fibonacci Numbers
Examples Swings relation based of the Fibonacci ratios to achieve a time cluster for a top
Fixed Cycle GBP/USD daily chart: Every 12 trading days a bottom is marked even though is adown or an uptrend.
Seasonal Cycles Known as anniversary dates : you choose a specific date or period for a specific chart and check it historically to know the behavior of the market at this period.
Application of the Fibonacci series number and ratios between bottom and tops on time analysis
PATTERNS Patterns are divided into three categories: Classical One to Three Bars Elliott Waves
Classical Patterns These patterns are discovered by observing and studying the historical charts data Their names often reflect the shape of the formation such as the Double Top, Double Bottom, Head and Shoulders Top, Flags and so on. Example:
An inverted head & shoulder that reverse this daily bearish trend.
A continuation wedge in a daily Bearish trend A continuation wedge in a daily Bearish trend
One to Three Bar Patterns These reversal bars are telling you that the trend for that time frame has run out of gas and that no new buyers or sellers are coming into the market. Outside Key Reversal Key Reversal Reversal Bar Snap-Back Reversal Signal Bar Gap Signal Reversal Confirmation
Example: An hourly up trend with a reversal bar pattern at each bottom.
Reversal Bar Pattern at each top on the Euro Hourly Chart.
Elliott Waves There are five waves in the direction of the main trend followed by three corrective waves (a "5-3" move) An impulsive wave (1, 3, 5), which goes with the main trend, always shows five waves in its pattern Corrective waves within a five wave sequence are waves two and four. Once a five wave pattern completes, the entire sequence should be corrected by a pattern of either three waves (ABC )
PRICE Wave patterns of a similar degree are related to each other by Fibonacci ratios. Fibonacci numbers provide the mathematical foundation for the Elliott Wave Theory. The challenging part of Elliott Wave Theory is figuring out the relativity of the wave structure. Important price levels will be found when a narrow price zone is projected from several different ratios and from several different degrees.
Here is a squaring between time and price based on Fibonacci ratios that confirm the count of Elliott wave
Minor Factors Oscillators: Moving Average Convergence Divergence MACD Relative Strength Index: RSI The Oscillators are used to indicate: Overbought and Oversold Areas Divergences Moving Averages: The Moving Averages are used to indicate: The direction of the trend Dynamic Supports and Resistances
Putting all together:
Here (EUR chart above) is a combination of all technical tools described before: Time: Fixed Cycle Bottom vs. Top that indicates a time zone for a top. Patterns: Elliott Wave count for four degree (lesser degree confirm the higher ones) One bar reversal at each bottom to confirm the new up move. Price: Price relations Elliott Wave Theory using Fibonacci Ratios to marker objectives: 100% 161% form WI, 38.2% from WI-III, 100% from last swing projected from the bottom of WIV. EMA: Exponential moving averages (50,66,252) acting as dynamic supports and resistance. RSI and MACD: Reaching a repeated historically level that confirm the reversal bar at each bottom.
After:
Since 13 June 2007 the EUR is trending upward forming a 5 waves cycle (blue degree) confirmed by the lesser ones (green & red). Forming on the highs, a potential double top accompanied by a clear divergences on both MACD (39.19.9)& RSI (14) on daily and weekly charts & a confirmed Head & Shoulder at the right top. Over a year this upward rally was sustained by the 133 EMA (green dotted line) and the Red trend line that are breached 2 times. The sideways range since 23 April 2008 has overbalanced in Price and Time the similar formation that started 23Nov 2007 ended 7 Feb 2008. All these technical indications suggest that the EUR is suffering at these levels to test bearish first support 1.5285 (neckline of double top + W4) that will squeeze the market on its break at least 750 pips gradually 1.4968, 1.4652, 1.4311 What invalid the bearish bias is the break of 1.6038 otherwise every upward rally is considered as a selling opportunity.
GBP/USD hourly chart shows a market rhythm (equality between the impulsive down moves and the corrective up ounces)
CONCLUSION Technical analysis is a tactical method that generates substantial profits. The selection of the trade is done by the combination of the different technical methods and dimensions. Besides, technical analysis is a decision tool for asset allocators, product structures, hedge fund managers for its high probability of accuracy in market timing and opportunity spotting.
Raising Investment Standards 6 th Floor, Netherlands Tower, Charles Malek Avenue P.O.Box: 16-6631, Beirut, Lebanon Phone: +961 1 217 888 Fax: +961 1 217 889 E-mail: contact@aksyscapital.com Web: www.aksyscapital.com