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1. It's Not Difficult To Learn Technical Analysis Strategies transcript
1. Title Slide
2. Good day traders, this is Roger Scott with another video tutorial for you today.
Before I begin please don’t forget to subscribe to our video channel and please
visit market geeks.com for your free swing trading report.
3. During the last two days I presented basic techniques for beginners who want to
learn technical analysis trading strategies. More specifically I focused on my
favorite indicator the Exponential Moving Average or EMA for short. The first day
I covered the basics of the indicator and demonstrated the difference between
the Simple Moving Average (SMA) and the (EMA). The EMA proved much more
responsive to short term price fluctuations and demonstrated better response to
momentum and volatility. You can see by looking at this chart how much more
responsive the EMA can be compared to the SMA.
4. After adjusting the EMA to 20 days I demonstrated the precise entry method that
we will use to enter the market using the 20 day EMA. The basic principle is to
use the EMA to measure pullbacks away from the trend. We simply find a stock
that's trending strongly above the EMA, the more distance between the stock and
the EMA the better the trend.
5. The next step is to wait for the stock to trade completely below the EMA for 5
days or less. If the stock trades below the EMA for more than 5 trading days the
trade is nullified and if the stock trades completely above the EMA within the 5
trading days you would enter a buy stop order above the first bar that trades
completely above the EMA.
6. The last step we covered yesterday was where to place your stop loss level so
that random price fluctuations or market noise doesn't cause you to be stopped
out prematurely. My advice is to place your stop at the EMA level immediately
between the last bar that traded completely below the EMA and the first bar that
traded completely above the EMA. This may sound a bit confusing so take a look
at this example for clarification.
7. The final step is to strategically place your profit target and that's something we
will cover in today’s tutorial. You want to make sure and place your profit target at
a level that provides you with a solid risk to reward level. Most professional
traders use a profit to risk ratio of two to four. This particular method is based on
short term price momentum and volatility, therefore using a profit target that's
designed to keep me in the market for a long time will not work with this type of
strategy.
8. I simply measure the distance between my entry price and the stop loss level and
multiply that number by two. I then add that amount to my entry price and that
becomes my profit target for the trade. This ratio offers me a reasonable risk to

2. reward ratio and provides me with an opportunity to take quick profits from the
increase in volatility before the momentum dries up once again.
9. In this particular example the distance between my entry price and my stop loss
level was approximately $2.25 cents. I would multiply that number by two and
add that amount to my entry price, which in this particular case was $28.60. I
then add $28.60 to $4.50 and my profit target in this particular case would be
$33.10.
10.In this final example you can see exactly where the entry and the protective stop
loss level are placed. Since we are selling short we would subtract our risk level
from our entry and that would provide us with our profit target.
11.In this particular case the risk level on the trade equals $3.00. We would multiply
that number twice and subtract it from our entry price. Since our entry was at
$158.00 and our risk level was $3.00 we would subtract $6.00 from our entry
price and that would provide us with a profit target level of $152.00 even.
12.Always remember that pure momentum strategies that are based on volatility
have lower profit to loss ratio than other technical trading methods. Also
remember that the 20 bar EMA can be adapted to any market and time frame.
The only market I don't recommend you trade using this method is options. If you
want to learn more about this strategy or have any questions, please don't
hesitate to contact me at rscott@marketgeeks.com.
http://www.marketgeeks.com/learn-technical-analysis/
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