Trade what you see not what you think

1
Planning the Trade, Trading
the Plan
23 June 2014
Nabil Mattar
Premium Client Manager

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DISCLAIMER
IG Asia Pte Ltd (Co. Reg. No. 20051002K) holds a capital markets services licence from the Monetary
Authority of Singapore for dealing in securities and leveraged foreign exchange trading and is an exempt
financial adviser. It is also licensed by International Enterprise Singapore to trade CFDs on commodities.
CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that
exceed your initial investment, so please ensure that you fully understand the risks and costs involved by
reading the Risk Disclosure Statement at www.ig.com.sg. Trading in CFDs may not be suitable for many
members of the public. You should carefully consider whether such trading is appropriate for you in the light
of your personal circumstances. In considering whether to trade, please be aware of the margin
requirements, commissions, fees and other charges for which you will be liable. These charges will affect
your net profit (if any) or increase your loss.
IG provides an execution-only service. The information in this presentation is intended for general circulation.
It does not take into account the specific investment objectives, financial situation or particular needs of any
particular person. You should take into account your specific investment objectives, financial situation or
particular needs before making a commitment to trade, including seeking advice from an independent
financial adviser regarding the suitability of the investment, as you deem fit.
IG accepts no responsibility for any use that may be made of this information and for any consequences that
result. No representation or warranty is given as to the accuracy or completeness of the information.
Consequently any person acting on it does so entirely at his or her own risk. This presentation must not be
reproduced or further distributed.

IT IS MORE IMPORTANT TO KNOW WHEN TO BUY/SELL
THAN WHY THE ____________ WENT UP/DOWN
4

5
Good level to BUY? Think again

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TRADING PROCESS
BIAS
• Bullish or Bearish
• Fundamental factors
• Interest rates, central bank
policies, recent news
Planning the
TRADE
• Support and Resistance
• Indicators
• Multiple time frames
• Risk to reward
Trade
Management
($$$$$)
• Managing of psychology when in
the market
• Managing stop losses
• Managing oneself after a
winning/losing trade
PSYCHOLOGY

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WHO IS THIS SEMINAR FOR
• Tired of being ping-ponged by the news
• Sick of getting stopped out only for the market to go to the direction you originally predicted
• Desperate on getting it right and gaining consistency
• Frustrated of taking profit too early, only for the market to move in your favour by another
100pips
• Disgusted by the trades that you missed when it is so obvious to you after looking back over
the weekend
• Dismayed by the number of trades that you tried chasing only for market to move against you
completely
• Totally NEW and lost

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UNDERSTANDING WHAT PRICE IS
DOING ON THE CHART

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PRICE ACTION
• Price is simply the purest form of data
• Price Action is historical price data plotted on a chart without any indicators
• Trust what the price is doing, NOT what you hope will happen
• Let price show you, not an indicator
– Use indicators as confirmation tools
– Most indicators are lagging
– Indicators typically wait for price close on a bar or candle before plotting
• Price Action involves these elements
– Support & Resistance
– Chart Structure
– Trends
– Multiple time frame
– Candles

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CHART STRUCTURE
SWINGS IDENTIFICATION
LL
HL
HL
HL
HH
HH
HH
LH
- Swings are formed at major turning points in the markets
- Usually around support and resistance levels
- Number of candles that form a swing varies

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CHART STRUCTURE
SWINGS IDENTIFICATION

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Chart Structure
THREE MARKET PHASES
Consolidation
LH
LH
HL
LH
HL
HL
Up Trend
HL
HH
HL
HH
Down Trend
LH
LH
LL
LL

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CHART STRUCTURE
Price is going up –
Looks like it is
toppish, I will look to
sell
Price is still going
higher and I think
this is the highest. I
will look to sell
Price is still pushing
higher, maybe I
should have bought?
• Everything you need is being played out on the charts
• Most traders think contrarian
• Trust what the price is doing, NOT what you hope will happen
• Most traders enter late, miss trades, keep losses, because we refuse to follow what the price on the chart is doing
Traders normally
don’t enter the market
because they think it’s too high
Market moves higher
and your gut feeling tells
you that you missed the move
Now traders enter a buy,
which is too late

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SELECTING WHICH MARKET TO TRADE
Clearest Direction, Strongest Conviction
Hang Seng

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Clearest Direction, Strongest Conviction
S&P 500

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Pairing the Strongest and Weakest
AUD/NZD 2013

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AUD/USD 2013

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EUR/USD

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EUR/GBP

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Goldman Sachs

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Citibank

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SUPPORT & RESISTANCE
VISUAL & PSYCHOLOGICAL
• Look for whole numbers
– 00, 20, 50, 80
• Previous failures and bounces
• Pay attention to shadows and body close of candles – ROLE REVERSAL
• Always think of S&R levels as zones
• Look for a candle close above or below S&R levels before considering it broken
– Many times, they are simply market spikes
• Use multiple time-frames to confirm levels
• The higher the time-frame, the more respected the levels are
• A broken support can turn into resistance and vice versa

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Trade Planning – Looking for Confluence
Why Confluence Works

28

29

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TREND LINES
• Not a random drawing on the chart
• There are rules to follow when drawing a trend line
• Trend lines provide guidelines for price
• Can be a support/resistance
• Most of the time, trend lines are sloping
• The degree of the slope indicates trend strength
• Applicable to any chart time-frame

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TREND LINE - UPTREND
• Look out for swing lows on the chart
• Connect the lows of the swings to form a straight line
– Lows and not the period close
• Trend Line must have at least 3 points of contact of the swing low
• Indicates bullish momentum, more buyers than sellers

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TREND LINE - DOWNTREND
• Look out for swing highs on the charts
• Connect the highs of the swings to form a straight line
– Highs and not the period close
• Trend Line must have at least 3 points of contact of the swing high
• Indicates bearish momentum, more sellers than buyers

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CHART PATTERNS
• Used to measure sentiment
– period of consolidation
– provides parameters to the market
• Detect continuation or reversal of trends
• Same rules on how we draw trend lines
• Most common ones:
– wedge, triangle, pennants, flags
• Applicable to any chart time-frame
– adjust trade plan base on time frame
– i.e. a consolidation on a daily chart might be a new trend on a H1 chart

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Chart Patterns and
Trend lines
• Autochartist
• Trading Central

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Ascending
Triangle

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CHART STRUCTURE - TRENDS
TWO PHASES
Up Trend
HL
HH
HL
HH
Down Trend
LH
LH
LL
LL

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• Cliché – The Trend is Your Friend
The market can stay irrational longer than you can stay solvent” – John Maynard
Keynes
• Trends
– Highest Probability
– Highest Potential Rewards
• It can’t go any higher/lower”
– We tend to use fundamental analysis to “support” our “prediction” even if
chart does not show it
– “Homerun” mindset

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• Examples of Trending Charts
HH HL HH
HL
HL
HL
HH
HH
HH

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LL
LL
LL
LL
LH
LH
LH
LH
LH

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HL
HL
HL
HL
HL
HL
HH
HH
HH
HH
S&P 500

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• Examples of Non Trending Charts

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• Examples of Charts to Avoid

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Long Term Trend
Short Term Trend
Medium Term Trend

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• Trends are subjective
• Based on timeframes

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ALWAYS TRUST THE HIGHER TIMEFRAMES
5 min
1 Hour
Daily

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TRADING PRICE ACTION
Long Short
Uptrend Bullish
• Higher Low to BUY
• Support to BUY
• Resistance to EXIT
Downtrend Bearish
• Lower High to SELL
• Resistance to SELL
• Support to EXIT

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TRADING PRICE ACTION
Long Short

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LET THE CHART TELL A STORY

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LET THE CHART TELL A STORY

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A
Bullish Flag Breakout
B
Consolidation

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HL
HL
HL
LH
LH
Facebook Daily
A
B
C

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UOB Weekly
HL
HL
HL
LH
HH
HL
A
B
C

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TRADE PLANNING
Be a PROACTIVE trader not REACTIVE trader
FEAR
GREED
EXPECTATIONS
DISCIPLINE
MANAGING
EMOTIONS

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TRADE PLANNING
BE A DETECTIVE, STACK THE ODDS
Crime Scene Investigation
• Thumbprints
• Physical Evidence
• DNA
• Vehicle Number
• Autopsy
Source: www.gograph.com

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TRADE PLANNING
BE A DETECTIVE, STACK THE ODDS
Trade Planning
1) Establishing a BIAS
2) Finding out where the Buyers and Sellers are
Primary
• Visual S&R
• Psychological Levels
• Trend Lines
• Chart Patterns
• CLOCK
• Multiple Time-Frame Analysis
• Price Action
CONFLUENCE
Secondary
• Pivot Points
• Fibonacci Levels
• Candlestick Patterns
• Divergence
• Moving Average
• Oscillators

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PLAN THE TRADE, TRADE THE PLAN
1) The chosen market
1) Familiarity
2) Technical setups – ie. pairing strongest and weakest
3) Fundamentals, news driven
2) Which timeframes to execute and manage
• Analyze at least two time-frames above your execution chart
• Match time-frame to the type of trader you are
– Scalper – 1min, 5min, 10min
– Intra-day – 15min, 1h, 4h
– Swing – 1h, 4h, Daily
– Position – 4h, Daily, Weekly

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3) The chosen strategy
• Scalping, swing, position
• Trend, countertrend, range
Type of Trader Strategy
Scalper
Momentum Trades using Bollinger Bands
Day-Trader
Inside Day Breakout
Swing-Trader
Daily Chart Trend Bullish Engulfing
Position Trader
The Carry Trade /US Dollar Hedge Trade

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4) Entry and Exit Rules
• Pull backs, open/close of candles, breakout
• Stop loss, Take Profit
• EXPECTATIONS
– Timeframe to plan exits
– Estimate time needed for trades to materialize
5) Money Management
• Risk to reward
• % of capital risk per trade

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SUMMARY
• Understand what the chart is doing, be a master of leading indicators
• Price Action
• Support and Resistance
– Visual, Psychological
– Trend lines
– Support and Resistance
• Know your timeframes and make sure it suits your trading style
• Plan the trade, trade the plan

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Nabil Mattar
Premium Client Manager
6390 5105
nabil.mattar@ig.com

Trade what you see not what you think

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