SIMPLIFIED APPROACH

TO
PROFITABLE TRADING

MUTUJU STEPHEN
NOBLE TRADING STRATEGY

SIMPLIFIED
APPROACH
TO
PROFITABLE
TRADING
Table of Contents

Chapter One: Understanding Financial Markets

Chapter Two: Introduction To Charts

Chapter Three: Market Geometry

Chapter Four: Time Frames

Chapter Five: Trading Indicators

 CHAPTER ONE

UNDERSTANDING FINANCIAL MARKETS

Financial markets literally means a system that provides
means for buyers and sellers to trade financial
instruments such as foreign currencies, equities, bonds,
and derivatives. The interaction between buyers and
sellers is what we refer to as Financial Markets Trading.

TYPES OF FINANCIAL MARKETS

The Financial Market is an evolving system that

metamorphoses with increase and emergence of new
financial appetites that seek to be satisfied. There are
numerous types of financial markets, albeit for the sake
of this booklet we will mention only a few and focus our
attention on one or two to help us better understand the
idea of how trading is done. The approach unravelled in
this guide is a sure compass direction to help any body,
whether a novice or a trader with some experience but
has been at the wit's end burning his cash trying to find
out what really works, to navigate the financial markets
and trade proficiently anything that moves. Among the
types of financial markets we have:

 Stock market

 Forex market

 Over–the–Counter market

 Derivatives market

 Commodities market

 Crypto currency market, etc

The financial market is so enormous, and the scope

continues to expand with financial aggrandisement.
With our keen interest anchored in how best we can
trade the financial markets, we can handpick Stock
market; the most ubiquitous of financial markets, forex
market; the most liquid in the world today, and crypto
market; the most recent and decentralised yet most
volatile market. The good news is also that most trading
platforms have all or at least most of these markets
included on them. It therefore becomes easier to
diversify your portfolio as long as you know the art and
science of trading financial instruments. For example
brokers or brokerage firms may provide instruments
that include forex pairs, indexes, derivatives,
commodities, metals, stocks, crypto currencies, and so
much more. The choice therefore becomes yours to
appropriate your trading skill and trading goal to choose
what to participate in.

MARKET MOVERS AND MARKET PARTICIPANTS

For the market to be a complete ecosystem, there must

be participants who keep the market balanced. The
financial market like any such systems is not immune to
this phenomenon. There are market movers and market
participants.

i) Institutional Traders . Institutional traders are market

participants who, by virtue of the colossal amount of
funds they inject into trading, are able to move the
market drastically in a single transaction. They trade big
lot sizes such that the impact on the market is so big.
They are able to summon resources from their clients
and therefore can trade big volumes. They include
Banks, Credit unions, Pension funds, Insurance
companies, Hedge funds, Mutual funds, Real estate
Investment Trusts etc.

ii) Retail Traders. Unlike institutional traders who

participate in the financial markets by trading on behalf
of their clients, retail traders enter into the market with
modest accounts and are limited to move in the market
as the institutional traders move. This is not because
retail traders cannot move in the opposite direction, but
rather, because it is the ideal thing to do. This is very
important to note because if you are a retail trader and
you discover how institutional traders trade, you will
save yourself a great deal of heartache and loss. A
single transaction by a retail trader is like a drop of
crystal in the ocean.

iii) Brokers and Exchanges. A Broker or brokerage firm

is a firm which acts as a middleman to connect buyers
and sellers to complete a transaction for financial
instruments. The firm charges a fee or commission for
executing the buy and sell orders submitted by the
investor. It also follows that since, traditionally, market
participants were the capitalists who had the capacity
to trade significant volumes, the retail traders were for
so long excluded from the market, hence the need for
middlemen. The retail trader could now be allowed to
deposit funds and place investment orders through a
licensed brokerage firm. Brokers charge a fee to
execute transactions or provide special services called
brokerage fee.

Decentralised exchanges on the other hand allow

buying and selling of crypto tokens for fiat at zero
margin. They are trustless, meaning the user's funds
and personal data are safe. Security and privacy are
preserved.

Decentralised exchanges are still serving collaborative

purpose with the centralised exchanges which are
becoming obsolete.
iv) Market Makers. The last category of market
participants that we cannot afford to ignore for this
discussion are the market makers. These provide
trading services for investors and, of course, determine
liquidity in the market. They are responsible for the bids
and ask offers for securities as well as their market size.
While the broker (brokerage firm) facilitate sales by
bringing together buyers and sellers, the market makers
help to create the market for investors to buy or sell
securities. Their participation ensures that there is
enough volume of trading so trades can be done with
utmost flexibility and efficiency.

MARKET POSITIONS (BULLS AND BEARS)

Apart from the diverse roles played by the market

movers and brokers, the primary motive why investors
flock into financial markets is to buy and sell. There are
basically two types of positions an investor will hold in
the market, buy position or sell position. As a crypto
currency trader, or forex trader, or even a stocks trader,
you will enter the market with either the intention to buy
or sell the financial instrument you choose depending
on your appreciation of the market.

BUYERS OR BULLS

Buyers are sometimes called Bulls in the financial

markets. Because of their demand for the asset, they
cause a proportionate increase in the price of the
instrument. The name Bulls is derived from the bull's
tendency to throw its opponent in the air during a fight.
Therefore because buyers move the price upward, they
are synonymously referred to as Bulls.

It is also important to note that "Buy position" is also

called "Long position" or Hold in crypto currency.

SELLERS OR BEARS

A bear when fighting will pounce on its enemy and try to

suppress it to the ground. These strong beasts lend
their name to the sellers in the financial market who
tend to move and push the market downward owing to
the force of supply. The sellers are therefore also called
Bears in the financial markets, and the sell position,
Short position.

HOW THE BULLS AND THE BEARS MAKE

TRADING DECISIONS

There are basically two ways that the buyers and sellers
employ to make informed trading decisions in order to
successfully participate in the financial markets
whether as purely investors or active traders. These two
methods of analysing the market is what their trading
career hinges on to the admiration of workers in other
sectors of life. Those who have mastered the art and
science of market analysis have won admiration while
those who have not made anything of it don't have
anything to show for their quest. It is the admiration to
develop a sustainable career out of this simple yet
taunting field that led to this holistic approach to
analysing financial markets and thus profit thereby.

i) Fundamental Analysis.

Fundamental analysis is the methodology where

investors and traders decide whether to or not to take
positions in the financial market basing on the
prevailing information or news concerning a particular
asset or security. Global business news have great
impact on market positioning and consequently,
investors' decisions whether to hold or sell a particular
asset. When the news is positive as regards the
economy or stock, it induces positive sentiment and
therefore buyers will come in and take positions with
hope that the value of the instrument will appreciate and
profit from the move. On the other hand, if the news
does not favour the economy or stock in scrutiny,
investors will dump the asset and sell it off. The
resultant effect will be a noose dive in price.

Fundamental analysis seeks to asses the intrinsic value

of a stock or security of interest by analysing economic,
social, and political forces that may affect the price. In
crypto currency, investors look at the authentic and
objective value of of a crypto currency and every aspect
of the token that contribute to its overall value.

Fundamental analysis is usually employed in long term

investment by investors who wish to buy securities and
tokens and hold for a long period of time, also known as
HODLing. There are developer communities where open
-source projects are hosted to avail good fundamental
analysis resources for crypto currency market such as
Github, Bitbucket, Gitlab, Rhodecode, Phabricator,
Google Cloud Source, Repositories etc. International
business news channels like Bloomberg, BBC,
Al–Jazeerah etc are all places to go to for world
economic updates.

Another salient component of fundamental analysis is

the Non–Farm Payroll (NFP) report. This is a key
economic indicator for the United States. It is the
benchmark for one of the largest rate movements of
any news announcement in the forex market. The report
relates the total number of paid workers in the US minus
farm employees, and employees of nonprofit
organisations.

NFP shows the total monthly increase or decrease in

paid US workers across most businesses and it is
typically released on the first Friday of each month. A
higher payroll figure indicates growth in the economy
while a lower payroll figure is an indication of a negative
employment picture. The economy is deemed healthy
and headed for more robust economic growth when
there is a positive addition of at least 100,000 jobs per
month, and the opposite is also true. An unexpected
change in payroll figure causes a mixed reaction in the
market.

ii) Technical Analysis

Technical Analysis is the method or form of investment

discipline employed to evaluate and identify trading
opportunities by analysing past price behaviour to
predict future price action. It is the framework in which
traders study price action or movement. This is very
important to understand, as an active trader of anything
which moves in the financial markets, we employ
technical analysis by studying past price action to
determine the next move of the market.

In the absence of business news, or in the atmosphere

where access to such vital information is scarce, we
delve into developing a concrete technical strategy that
gives us an advantage of profitability by stacking the
odds in our favour. This book is a deposition of such
skill with the goal to place the advantage you need in
your hands so that you can step out into the financial
market with absolute confidence and come out
profitable.

In the proceeding chapters we are definitely going to

discuss one of the immutable approaches to profitable
financial markets trading using technical analysis you
will ever find. And the good news is that the strategy
cuts across all financial markets that can be well
represented on a trading chart.
 CHAPTER TWO

INTRODUCTION TO CHARTS
We can in simple terms say, Chart is a representation of
statistical data in diagram form. In financial markets
trading we look at no other charts apart from a graph of
price plotted against time. We have our chart showing
how price changes with time, that's to say, it can be over
a period of 1 minute, 1 hour, 4 hours, 1 day, 1 week, 1
month, or even a second.

EXAMPLES OF CHARTS

There are quite a number of charts or graphs to be more

specific used in financial markets depending on the
trading style and how one approaches and tackles
technical analysis. Some of the examples include the
following:

 Base Line

 Area

 Heikin Ashi
  Hollow Candles

 Renko

 Line Break

 Kagi

 Rang

 Line

 Bar

 Candlesticks

 Point and Figure

 Columns

These may all be available on your trading platform

depending on the broker with whom you're registered.
For our trading course we will be focusing on only one,
the Candlestick chart. However, it will also do us good
service when we briefly make ourselves acquainted with
some two before we can dive into candlesticks.

1) Line Graph

Line charts are created when a line is drawn connecting

the closing price of one period to the next thereby
forming a line which represents the price movement
over time. This becomes key in giving the general
overview of the overall market trend. Line charts are
also very important in identifying peaks and troughs or
resistance and support levels as we shall see in the next
chapter.

Below is a figure showing a Line graph

2) Bar Graph

A Bar graph shows the price bar of an instrument for a

specific period of time. An individual price bar shows
the opening value, highest value, lowest value and
closing value or price of an instrument. In other words,
the bar simply represents one segment of time plotted
on the graph. It can be 1 hour, 4 hours, 1 week, 1 month,
a day, or any other time period.

Since the chart shows the Open, High, Low, and Close
price for an instrument, it is sometimes called the OHLC
chart.

The figure below is a Bar Graph

3) Candlestick Graph

This is the most popular among traders, probably

because of its simplicity and visual appeal. It conveys
the most critical information regarding price action and
movement over time just like the bar graph, except its
graphical format is more nuanced and unique.

The figure below is a candlesticks graph

CANDLESTICKS IN DETAIL

The study of price action shows that in a volatile

situation where there is liquidity, price tends to fluctuate.
This means that for a busy market where there is active
buying and selling of an asset or trade instrument, price
tends to fall and rise owing to the forces of supply and
demand over a particular period of time.

In a situation where price is rising over a period of time,

say an hour, the movement of price can be represented
as a candlestick as seen in the figure below
Explanation:

Price opened at the Opening value (O) and moved

slightly below it to the Lowest value (L) in that hour. But
it managed to recover to the opening value (O) leaving
behind a shadow we called the Lower wick. The price
then continued to move upwards to the the Highest
value (H), but because it could not close there for the
hour, it again moved slightly downward to the Closing
value (C) leaving a shadow we called the Upper Wick.
The final range between the opening price (O) and the
closing price (C) is what is represented by the body of
the candlestick.

Since the forces of demand and supply are induced by

buying and selling respectively, what the candlestick is
trying to tell us there is that:

At the start of the hour, the instrument was valued at

the opening price (O). The sellers came in and, owing to
the force of supply, the value of the instrument fell
pushing the price down to the lowest value in that hour
at (L). However, buyers now saw the opportunity to buy
more of the instrument because the price had dropped.
The demand became greater than supply hence forcing
the value of the instrument to rise again. The buyers due
to the great demand pushed the price up through the
opening price (O) to the highest value (H) in that hour
until when more sellers came in again and the price
slightly lowered down to the closing value (C) when the
time elapsed.

In a situation where price is falling over a particular

period of time, say an hour, the movement of price can
be represented as a candlestick as seen in the figure
below.

Explanation:
Price opened in that hour at the opening value (O) and
moved slightly upward to the highest value (H). It then
dropped back to the opening price (O) leaving behind a
shadow we called the Upper Wick. The price fell further
to the Lowest value (L). But because it could not close
at the lowest value at the end of the hour, time elapsed
when price was at the closing value (C) leaving behind a
shadow we called the Lower wick. The final range
between the opening price (O) and the closing price (C)
is what is indicated by the body of the candlestick.

Interpreting the candlestick we are able to understand

that at the opening price (O) buyers came in and, owing
to the force of demand, moved the price up to the
highest value (H). But it was not forever when the
sellers overwhelmed the buyers and the price dropped
to the lowest value (L). At this point in time, buyers
gained a little more momentum but not overpowering
the force of supply. The price therefore managed to
close for that hour at the closing value (C).

Every time you open a chart and look at the individual

candlestick, you should be able to interpret the
language it is communicating. Now, depending on the
trading platform you use, some platforms have set
default colours to distinguish between candlesticks;
green candlesticks for situations where price rises and
closes above the opening price, and red candlesticks for
situations where price falls and closes below the
opening price. Some platforms however, allow yo the
chance to set your preferred colours for the rising and
falling prices. The candles will be hollow or empty for
rising prices and for falling prices the candles will be
filled with black. In both cases the shadows or wicks are
simply sticks at the top and bottom of the candlesticks
depending on the distance covered by the price
movement.

FURTHER INTERPRETATION OF THE CHARTS

In understanding the charts here, we will look at

basically four components: buyers, sellers, time and
price. These are the basic things or components of the
chart to understand, because they form our point of
interest every time we open the charts to trade. Other
things such as the functionality, trigger buttons, etc that
are required for execution solely depend on the trading
platform you use and your ability to navigate through
the interfaces. I would therefore advise that before
pulling a trigger to make a live execution, get familiar
with your trading platform, how to locate the tool bar,
how to switch the time frames on the graph, how to
make drawings and alter or delete them from the graph,
and so on, and so forth. This is crucial and the good
thing is that they can be mastered by instinct. If you can
use Facebook or WhatsApp and TikTok, then you can
successfully navigate a trading platform.
Back to our charts, when you open your trading platform
and go to the trading area and select the pair of
instruments you wish to analyse, say Bitcoin/Tether
(BTCUSDT), the chart will appear as below.

Figure showing a BTCUSDT chart

We will use the colours green for prices that rise and
close above the opening price, and red for prices that
fall and close below the opening price. The green
colours or candlesticks indicate that price was opening
and rising, and would close above the opening price.
And since we saw that the force that pushed the price
above the opening price and would force the price to
close above it was the force of demand which could be
induced by buyers, it therefore means that the green
candlesticks represent buyers or bulls and their buying
power or what we call buying momentum.

Likewise, since we saw that the force that pushed the

price down below the opening price and would force it
to close below there was the force of supply which
could be induced by sellers, it therefore means that the
red candlesticks represent sellers or bears in the market
and their selling power or momentum.

Figure showing more buyers than sellers

Figure showing more sellers than buyers

From the figures above, we can see that generally, when

the buyers had more power or momentum than the
sellers, the chart showed the price moving upward, and
when the sellers were more than the buyers, the market
toppled and it was moving downward. In price action we
define every shift or change in price whether upwards or
downwards. The smallest unit change in price is what
we call apip . It is the smallest price move that an
exchange rate can make based on market convention.
 The termpip is actually an acronym and it stands for
"price interest point" or"percentage in point" .

From your graph, price is plotted on the vertical axis,

and the smallest change in price in either direction, up
or down, is what we call a pip. Pips have a vital role in
setting trading parameters, to determine the entry point
and exit (stop loss and take profit).

The value of one pip varies with currency or instrument

pairs because of differences in exchange rates. But if
you can put at the forefront of your mind that a pip is a
point in percentage then you won't have much trouble
dealing with it.

Time is plotted on the horizontal axis of the graph. It is

displayed in intervals depending on the time frame you
have chosen your chart to be displayed. More important
than the time intervals however, is the relationship
between the candlestick patterns and the time frame. If
you can relate the two, and be able to interpret what the
candlesticks are communicating at that time, then the
mystery of time is solved.

CANDLESTICK PATTERNS

There are over 40 candlestick patterns that you will be

told exist on any trading chart with thousands of names
given to each. But to profit from trading financial
markets you don't really need to remember all of them.
In fact, with the approach that I am about to show you,
you don't need to remember even a fraction of it. Most
people complicate their trading experience which would
have been fun trying to cram and remember the jargons
of candlestick patterns. Yet one only needs to spot one
pattern and is able to stack a tremendous move of the
market in his direction.

Depending on the magnitude of the forces of demand

and supply, candlestick patterns can be indications of
three major sentiments in the market.

 Market continuity

 Market reversal

 Indecision

The pattern therefore is only valid when the market

direction obeys the sentiment depicted by the
candlestick or pattern. However, since the safest haven
for retail traders in the financial markets is to buy when
they are convinced that the price is beginning to rise
and sell when the factors of confluence show that the
market is starting to fall, we will thus look at high
probability reversal candlestick patterns. When we open
our chart and spot these candlesticks, we are certain to
a higher degree of accuracy that the price is switching
direction.
1) Hammer.

Hammer, just like the name suggests, is a candlestick

with a body on one end and a long tail (wick or shadow)
on the other. It is very important to note that these
candlestick patterns are either bullish or bearish.

Hammers are also called Pin Bars

a) Bullish reversal Pin Bar or Hammer. Bullish reversal

pin bar is generally referred to as a hammer when
spotted on the chart because it stands upright, body
up–wick down, regardless of the colour. When it
appears, it depicts market reversal to the upside. The
colour is not a factor.
b) Shooting star or Inverted hammer. Like the hammer,
inverted hammer or shooting star has the very
characteristics of a hammer except it is upside down. It
shows the price is changing direction to the downside. It
can be a green inverted hammer or red candlestick, but
as long as it is typical inverted hammer, it depicts
change of direction to the downside.

It's a bearish reversal pin bar.

2) Spinning Candlesticks

These are relatively small candlesticks compared to

other candlesticks on the chart. They have a small body
and very short wicks. They are either bullish or bearish
candlesticks. The colour of the individual candlestick is
not a major factor; the major factor is where they
appear in the direction of the market.

a) Evening Star or Spinning Top. The evening star is also

called spinning top. This is because they appear in the
rising market and when the reversal is valid, they form
the top or peak. They can be green or red candlesticks,
but as long as they appear in the rising market, it signals
a high probability reversal to the downside.
b) Morning Star or Spinning Bottom. These possess the
exact features of the evening star except they are found
in the falling market. When the reversal is valid, they
form the bottom or trough on the chart. Also the colour
of the candlestick does not matter, it can be red or
green.
3) Doji

The Doji is a candlestick with significant wick(s) but

with little or no body. In other words, the candlestick has
long shadows or wicks but with a very small body. The
body may be so small that it can be insignificant. This is
simply because for a doji, the opening price and the
closing price are almost in the same place or at the
same place. There are 3 examples of doji.

a) Long–legged doji. The long–legged doji has long

wicks on either sides of the little body. This should not
be confused with the spinning top or spinning bottom
because its body is much smaller and the wicks much
longer. The opening price and the closing price are
almost at the same point of interest and this shows
indecision in the market. The buyers and sellers are not
decided about who takes on the market. The slightest
action by either parties can impel a greater selling
power or buying power hence triggering a reversal or
continuation in the market depending on the current
direction. When the reversal is valid, the candlestick
indicates either a bullish reversal or bearish reversal.
b) Dragonfly doji. The dragonfly doji has a small body
and a longer lower wick with no or insignificant upper
wick. The opening price and the closing price are almost
in the same place or at the same place. Dragonfly doji is
indicative of bullish reversal. When they appear in a
falling market, and the reversal is valid, they are at the
troughs.
c) Gravestone doji. The gravestone doji has tinny body
and a longer upper wick with no or insignificant lower
wick. The opening price and the closing price are almost
the same or are the same. The doji is a bearish reversal
indicator. When it appears in the rising market and the
reversal is valid, it forms a peak. The bodies are far
much smaller than for the inverted hammer.
4) Engulfing Candlestick Pattern

Unlike other candlesticks, the engulfing candlestick has

no essence as a single candle except that it totally
engulfs the candle which comes before it. It is therefore
a pattern of two candlesticks, a bigger candlestick
completely engulfs a smaller one that it follows.

a) Bullish engulfing candlestick. This is a green

candlestick which engulfs a smaller candlestick that
may be either green or red. The colour of the smaller
candlestick does not really matter, if the engulfing
candlestick is a bullish candlestick, it denotes a bullish
reversal. Expect an upward movement in the market. It
is also important to note that the market will continue to
move upward if the engulfed candlestick is equally
green.
b) Bearish engulfing candlestick. This is a red
candlestick which engulfs a smaller one that may be
either green or red. The colour of the smaller
candlestick does not really matter as long as the
engulfing candlestick is red, it depicts bearish reversal.
You can predict with higher degree of confidence that
the market is headed down. Also note that if the
engulfed candlestick is red(bearish), anticipate the
market to continue its downward movement.
NOTE:

By now you should be familiar with the exact piece of

information that each candlestick is communicating at
a mere glance. That is why the engulfing candlestick
stands out in the picture it relays among candlestick
patterns with little exception. We will look at the
exception in the latter chapters.

Also note that when a hanging man or red hammer

appears in the upward trend, or rising market, it
indicates a pullback or minor bearish reversal. It is
therefore a bearish reversal in that context. And if a
green inverted hammer appears in a falling market or
down trend, it signals a pullback to the upside or minor
bullish reversal. These could be momentarily but pay
attention to them.
 CHAPTER THREE

MARKET GEOMETRY
Market Geometry is, in simple terms, a way of analysing
the market using the set of tools available on the
trading platform with the primary objective of
establishing the market structure. Any good trading
platform is fitted with a tool bar which contains a wide
range of drawing instruments that make it easy and
possible for the user to make, alter or remove drawings,
marks and words on his trading chart. These should be
readily available in a wide range basically to suite the
trading style and technical analysis methodology of
different traders. Traders don't have the same
techniques and skill to analyse the market, although we
all have the same goal, profitability!

MARKET STRUCTURE

Market Structure is the behaviour of the market. It

defines the movement of price in relation to the forces
of demand and supply. In other words market structure
simply refers to how the price is moving in relation to
the behaviour of the buyers and sellers in the market.

In financial markets the price does not move in a

straight line. It moves haphazardly because buyers and
sellers do not jump in at the same time, or rather place
orders in the market which are executed at different
intervals. Without proper analysis therefore it becomes
quite uneasy to predict the definite direction of the
market over time. That is where market geometry
becomes relevant.

Since price takes haphazard movement, yet as a trader

you only want to buy when the market is beginning to
rise, and sell when it wants to fall, it becomes necessary
that you establish such turning moments to the upside
and downside. Market structure will reveal to you that
there are points above which price finds it hard to rise
and points below which price is not willing to drop. It is
in such areas that as traders we seek to enter our
positions to buy or sell. These are called levels of
resistance and support.

SUPPORT AND RESISTANCE

Support is a point in the market where the market price

bounces to the upside. For example if the market was
previously moving downwards and it reaches a point
and reverses to the upside, that turning point is what we
call support level. At that level price has found a support
to propel it upward. This level can be indicated on the
chart by drawing a horizontal line touching the lowest
part of the candle or candlesticks before the market
reversed. This is one of the easiest ways of drawing a
support because it serves well for both line graph and
candlestick chart. The support level therefore forms
troughs or valleys on the chart. And it's from this area
that determine our buy position.

Figure showing support levels

Resistance is a point in the market where the market

price reverses to the downside. If the market was
originally rising and it reaches a point and it is pushed
back downwards, that turning point is a resistance level.
The price has found resistance at that level. It acts as a
ceiling to the market. This level can be indicated by
drawing a horizontal line touching the top of the last
candle or candlesticks to rise before falling to the
downside. Like I said, this is the most convenient way of
drawing both support and resistance lines because
when you switch the graphs, they remain consistent.
Nevertheless, there is another way of drawing the lines
by touching the tips of the wicks at the peaks and
troughs. They all work well depending on one's flexibility.

Figure showing line of Resistance

Resistance levels form peaks on the chart, and this is

the level a trader looks forward to going short on the
instrument. Do not forget, to go short simply means to
sell and to go long is a casual way of saying to buy.
Therefore we sell at resistance levels when our analysis
is validated and we buy at support levels when when the
factors of confluence satisfy our expectation.

RULES OF THUMB FOR DETERMINING SUPPORT

AND RESISTANCE

There are factors or rules that one ought to bear at the

forefront of his mind when determining support and
resistance levels. Although it is obvious that in young
markets such as crypto market, single troughs and
peaks may form a significant support or resistance level
respectively, there are factors we put into consideration
when determining the strength of these levels.

— Support line touched by two or more troughs denotes

higher support strength at this level. It indicates the
force of demand is stronger at that level. When price
comes to this level it means it has entered a demand
zone, therefore expect it to bounce and rally upwards.

— Support lines drawn from bigger time-frames are

more significant than the levels established from
smaller time-frames. The higher the time frame, the
stronger the support level.
— The more recent the support is in a given timeframe,
the more relevant it is to your analysis.

— For resistance, the more recent the resistance level is

in a given timeframe, the more relevant it is to your
analysis.

— Resistance lines drawn from bigger time-frames are

more significant than the levels established from
smaller time-frames. The higher the time frame, the
stronger the resistance level.

— Resistance line touching two or more peaks denotes

higher resistance strength at this level. It is indicative of
a stronger force of supply at that level. When price
comes to this level, it means it has entered in a supply
zone, therefore expect it to be resisted and pushed
downward.

MARKET TREND AND DIRECTION

When we analyse market structure, you discover that

there are three directions that the market will ultimately
take. Although the market moves haphazardly, it will
either take that higgledy-piggledy movement upward or
downwards, or sideways in absolute terms. To find out
this eventual course, we establish the trend in which it is
moving.
The trend or direction of the market price is established
by drawing what we call trend lines. And this is very
simple, because we use the same concept of drawing
support and resistance lines. In fact, trend lines are
drawn by drawing a line joining the troughs in the rising
market and drawing a line joining the peaks in the falling
market. These will give you a clear indication if the
market is moving downwards or upwards. If a line is
drawn through the troughs and is neither moving up or
down, and another line is drawn through the peaks and
they're parallel, it means the market is in a range and is
moving sideways.

Analysing market structure therefore reveals to us three

things:

– If the market is moving up (upward trend)

– If the market is moving downwards (downward trend)

– If the market is moving sideways (ranging market)

Figure showing market in up trend:

The market in the upward trend as seen in the figure above
forms progressive Higher Highs (HH) and Higher Lows
(HL).

The Figure showing market in down trend:

The market in the down trend forms progressive Lower
Highs (LH) and Lower Lows (LL) as seen in the figure
above.
Figure showing market in a range:
In the figure above, the market oscillates in a range
between two lines, the support and resistance. It
touches the support line several times at points A,
B and C. It also touches the resistance and is
rejected several times at points 1, 2 and 3.

HOW TO IDENTIFY CHANGE IN MARKET

STRUCTURE

In up trend, the market forms Higher Highs (HH) and

Higher Lows (HL) over a period of time. We also saw
that in the down trend the market forms Lower Highs
(LH) and Lower Lows (LL). Therefore, we identify
change in market structure when the market shifts from
making Higher Highs (HH) and Higher Lows (HL) and
starts to make Lower Highs(LH) and Lower Lows (LL).
This implies the market structure has changed from
upward trend to downward trend.

We are also able to realise that the market structure has

changed course from the down trend to the upward
trend when it shifts from forming Lower Lows (LL) and
Lower Highs (LH) and starts to make Higher Highs (HH)
and Higher Lows (HL).

Figure below shows change of market structure from

upward trend to downward trend
Figure shows change of market structure from
downward trend to upward trend.

APPLICATION OF MARKET GEOMETRY (HOW TO

TRADE USING MARKET GEOMETRY)

When you have opened your trading platform, selected

the pair of instruments you would like to analyse, the
first thing you want to do is establish the general market
structure. Go ahead and draw the relevant support and
resistance lines on your chart, and trend lines.

There is one thing that will surprise you, and this is very
important, you will be amazed at how spontaneously
you spot the reversal candlesticks we looked at in the
previous chapter at the areas of support and resistance.

It is crucial to remember that trend lines run through

support and resistance levels, therefore they equally act
as support and resistance lines in the upward and
downward trends respectively. That's why we have
reversal candlesticks touch them.

Having established our support, resistance and trend

lines, watch out for the reversal candlestick in these
areas and enter position appropriately. Look for a
bullish reversal candlestick at the point of support and
enter a long position just a few pips above it after it has
formed.

Look for a bearish reversal at the point of resistance

and enter a short position just a few pips below after it
has formed.

Figure showing long position

In the figure below, immediately we spotted that the last

candle to form was a hammer, we entered a buy
position just a few pips above it. The result is what is
captured in the figure that follows; the market rallied
upwards to the next resistance level.
Figure showing short position

The figure above shows a sell position. As soon as

we spotted a reversal candlestick, Inverted hammer,
we went short a few pips after it had formed. The
result was a downward move as we anticipated.
See in the figure below how it played out. The
market moved downwards to the support level until
another reversal candlestick, Hammer, formed.
HOW TO ENTER AND EXIT POSITIONS

Trading financial markets successfully is like flying a

helicopter, you must first plan for the take off and
landing before lifting off the ground. A competent pilot
will first examine the possibility that the plane can soar
into the sky and bring them back to the ground safely
before anything. That therefore means flying becomes
optional if you are not sure you will have a safe landing.
Likewise, trading financial markets demands critical
planning and analysis before pulling the trigger to enter
a position.
We have different market orders we place in that regard.

1) Instant Execution

This is when you decide to enter a position at the

prevailing market price. When you open your trading
platform and conclude with your market analysis, as
soon as your set up is spotted, you enter a sell or buy
position forthwith.

2) Limit and Stop Orders

These are orders placed to be filled when the market

comes to your desired price. It is the preset position you
command your broker or trading platform to activate
once the market reaches that price. In other words,
Limit and Stop orders are your bargaining power as a
trader. It is a position you set to be activated at the price
you're willing to buy or sell the instrument.

Buy limit orders instruct that a position is opened when

the market price reaches a level lower than the current
price. Sell limit orders instruct that a position is opened
when the market price reaches a level higher than the
current market price.

Buy Stop on the other hand, instructs that a buy position

is activated when price reaches a level higher than the
current price. And, Sell Stop instructs that a sell position
is activated when the price reaches a level lower than
the current price.
3) Take Profit

Before entering a trade, it is important to set parameters

for your exit depending on your risk tolerance and
appetite. It is important that you anticipate how far the
market may move in your favour basing on your analysis.
When the expectation meets your appetite, go ahead
and set the take profit. Setting take profit is important in
having the trades automated if your schedule does not
allow you to sit in front of your computer glaring at the
screen. It also offers you psychological bliss. You keep
anxiety outside your courts because you have
confidence that according to your analysis, you have
some sure pips as a reward for your effort from the
trade.

The best way to determine your take profit is by

considering key areas of support and resistance. For
long positions, pay attention to the levels of resistance
and place your take profit a few pips just below it. And
for short positions we look at the reverse; consider
support levels and place your target a few pips above.
Giving an allowance of some pips from the levels saves
your trade the likelihood of missing the target because
of the spread. Spread is the difference between ask
price and bid price, and if not catered for in calculating
pips, you may miss your target only for the market to
reverse and begin to move against you.

4) Stop Loss
Another tool without which you shouldn't trade is a stop
loss. Every successful trader is armed with this tool to
guard his investment capital against unavoidable
unexpected market movements. You might be a king in
the financial market but to sustain your position there
you must aggressively guard your capital as a god, or
else you will be kicked out of the game sooner than later.

With the stop loss you're telling the market how much
you are willing to lose in case the odds are completely
against you.

Below are a few ticks to note when determining the stop

loss:

— Risk to reward ratio. A professional trader will tell you,

if the risk to reward ratio is not 1:3, he won't take up that
trade. You should have such a mindset. Nonetheless, if
the gain you are expecting from a trade sits within the
ratio of 1:1 in relation to the amount you are investing, it
is fair enough. This however should not serve as solace
for emotional trading. You should appreciate the fact
that the bigger the risk to reward ratio, the more
rewarding the trade. Therefore the amount of pips you
risk to lose when your stop loss is hit must be
compensated more than once if the take profit is hit.

— Never risk more than 3% of your capital in a trade.

This is because it is easier to recover from such a small
loss with one successful trade of not less than 1:3 risk
to reward ratio. For example it may take you 33
consecutive losing trades to blow up your account if you
were only risking 3% of your capital, and yet you only
need to be 45% correct to be profitable with such risk
management technique.

— Do not invest more than 20% of your capital in a

single trade. This is a profound risk management
principle, and if coupled with the one above, you will
have good consistent success in your trading career.

— Use small leverage of not more than x10 for crypto or

a small proportionate lot size for forex. This will give
room for the market to breathe back and forth without
causing tension in your nerves.

— The best place to put your stop loss is a few pips

below the support level for long positions and a few
pips above the resistance level for short positions. For
conservative trading, a few pips below the candlestick
pattern from where you are buying or above the
candlestick pattern from which you are selling. These
are all safe practices of setting stop loss.

5) Trail Stop Loss.

One of the best habits of managing a profitable trade is

trail stop loss. You could be having a take profit target
that is giving you a huge risk to reward ratio, trail stop
loss is instrumental in taking partial profits off the chart.
All you have to do is keep shifting your stop loss to a
previous peak for a sell position and below the previous
trough for buy position, or simply place the stop loss a
few pips above the previous three candlesticks for short
positions and a few pips below the previous three
candlesticks for long positions.

Trail stop loss works best in trending markets.

 CHAPTER FOUR

TIME FRAMES
As trader, it is of paramount importance to understand
the time frame from which you are trading.
Understanding how to analyse the market from diverse
perspective of time frames adds a key milestone to your
understanding of when to trade and in which direction
you should trade. Direction and time are crucial in
trading because lack of strict adherence to them only
works against your wallet.

TOP TO BOTTOM ANALYSIS

The top-to-bottom analysis is the systematic way of

analysing the market starting from a higher time frame
progressively downwards to the smaller time frames.
For example, for old markets like stocks and forex
markets, and some earlier crypto coins like the Bitcoin,
you may start analysing the market from a monthly
chart, weekly chart, daily chart, down to 4 hour, 1 hour,
and minutes charts.

Although top to bottom analysis means analysing the

chart from higher time frames down to the smallest
possible time frame, you will realise that the more you
switch to the smaller time frames, the more crowded
your chart becomes with drawings and markings from
your market geometry. Therefore, the best way to
analyse the chart from top to bottom without leaving it
messy is by employing what is called Time Frame
Matrix (TFM). This is easier than trying to look at the
market from all time frames that there is on the chart.

Simply identify three time frames that suite your trading

style and analyse the market basing on them. If you are
a swing trader or spot trader, you will want to consider a
set with bigger time frames such as monthly, weekly
and daily. If you are intraday trader, you will wish to use
weekly, daily, and 4 hour time frames, or daily, 4 hour,
and 1 hour timeframe charts. For scalping, you can take
advantage of the 4 hour, 1 hour and 15 minutes or 1
hour, 30 minutes and 5 minutes time frame charts.

SIGNIFICANCE OF MULTI-TIME FRAME ANALYSIS

We will basically look at three important reasons why

time frame matrix plays key role in the trader's module
of market analysis.

— Identifying trend.

In financial markets, the trend is your friend. The only

way to feel safe when trading in financial markets is to
trade in the direction of the trend. You don't want to
trade against the trend because if you do not watch
your stop loss, your entire capital will be wiped out in a
single swing. The best way therefore to identify the
general trend of the market is by switching to a higher
time frame. What may appear to be a down trend in a
small time frame for example, may actually be a minor
retracement or pullback in the bigger time frame. We
therefore switch to the bigger time frame to establish
the general trend of the market and then switch to the
smaller time frame and trade accordingly.

Figure shows ZECUSDT on a 5 minutes chart

In the figure above, we see a nice upward trend in a pair

of ZECUSDT on 11 July, 2022. And one would be
intrigued to follow the trend when entering a position.
But notice, that's on a 5 minute time frame chart. Let us
look at a higher time frame and see what exactly is
happening.

Figure showing a 4 hour chart for ZECUSDT pair

On a 4 hour chart time frame, we discover that what

was an upward trend on a 5 minute chart was actually a
pullback. The general market trend from a 4 hour time
frame chart perspective is a downward trend.

— Confirming market structure.

Like we have just seen, we switch forth and back from

time frames to establish the behaviour of the bulls and
the bears. Having identified the general trend of the
market in a higher time frame, we switch to a smaller
time frame to confirm the market structure. This
basically helps us to align with the general market trend.
If for example, the general market trend is upward and
there is a retracement, we move to the smaller time
frame to catch the change of market structure from the
minor down trend to the major upward trend. Likewise,
if the general market trend is bearish and there is a
pullback, we switch to the smaller time frame so we can
catch the change of market structure from the minor
retracement to the major down trend.

— Spotting entry.

Having identified the general market trend and

confirming the market structure, we now have the
chance to step into the market with confidence and take
decisive positions at the right time. This is mostly done
on the smallest time frame of your time frame matrix.
But also we can set limit or stop orders on the higher
time frames. Immediately you spot your trading pattern,
you have confidence to pull the trigger. When you spot a
reversal candlestick confirming that the pullback has
come to an end, you can now jump in with absolute
confidence.
TRADING EXAMPLES

Example:

I identified this setup in BTCUSDT, therefore I

determined to go long on the instrument. But how did I
come to that conclusion? That's exactly what I am going
to show you.

First, I wanted to establish the market structure,

therefore I drew my lines of support, resistance and
trendline. I discovered the market was in the infant
stage of changing market structure. It had just shifted
from the down trend to the up trend. It had already
touched the upward trend line twice and the price was
propelled up, and it was back the third time. Since price
follows a trend, I knew the market would definitely go up.

But that was not enough, I couldn't just enter position

blindly. The market had reached the upward trendline,
but there was no signal for entry. I knew this was a
momentary pullback, but I needed to confirm when the
main trend would resume to the upside. I therefore
switched to a smaller time frame in pursuit for clear
confirmation.

I switched to a 1 hour time frame chart, and behold a

long-legged doji formed exactly at the trendline. See the
figure below
This gave me confidence to enter a Buy Limit Order a
few pips above the doji. Nonetheless, I wasn't very sure I
had the odds absolutely in my favour. I had to ascertain
if the uptrend had resumed with a change in market
structure. Again I moved to a smaller time frame chart
for a confirmation, which was the 15 minutes time
frame, and this completed my Time Frame Matrix.
On the 15 minute time frame chart, there were both a
confirmation of change of market structure to the
uptrend and a bullish reversal candlestick. A red
hammer appeared forming a higher low and the market
reverses and closed higher than the recent high.
That was absolutely an amazing setting up for me to
trade. I had all the factors of confluence in play. It gave
me absolute confidence. I therefore completed setting
up the autopilot mode of the trade by setting the Stop
Loss and Take Profit target.

I set my stop Loss a few pips below the previous low,

and take profit just before the tip of the recent peak.
Note that my take profit would have been at the 22000
level, but I chose 21000, because I didn't want to hold
the trade overnight. Both targets were hit, and the first
target helped me to aim for the second mark stronger.
Example:

I spotted another good example here of BTCUSDT.

After finding a ceiling at around 24000 value, there
was change of market structure and the market
started to form lower highs and lower lows. As
soon as I noticed the change in behaviour, I laid my
trap and waited for the right time to jump in.
I knew the market was in a down trend basing on the 4
hour time frame, but it was for a brief retracement. I
therefore kept an eye on the downward trendline for the
price to touch it or come closer to it and see it rejected.
Immediately it touched the trendline, I looked for a
reversal candlestick to confirm the rejection.
A shooting star or inverted hammer formed, like you can
see in the figure below. This gave me confidence that
the market is continuing to drop downwards. To avoid
missing out on a great move if it did, I had to secure my
position with a Sell Stop order. When the price was
rejected from the trendline and it came back down, it
met with my pending order and activated it. What
followed was a noose dive and the market didn't look
back until it had hit my first take profit target.
When my trade was activated, I set my Stop
Loss a few pips above the inverted hammer
and my take profit at the next support level.
Basically what I do when I get such trades,
my take profit target is always at a point
slightly above the candlestick that precedes
a candle showing the greatest momentum.
This works either way for both long and
short positions. It's the best precaution to
stay on the profitable side in case the price
fails completely to touch the line of support
or resistance before reversing.

Our market went nicely down upto our final

take profit, target 3. See the figure below
how it played out.
THE MYSTERIOUS CANDLESTICK PATTERN AND
THE PSYCHOLOGY BEHIND ITS FORMATION.

In the previous examples we have looked at

positions which we took by virtue of the
market getting into our killing zone around
the areas of support and resistance and we
pulled the trigger as soon as our signal was
spotted. It's important that we observe all
the technical analysis we have learnt from
this book and apply it decisively, because
trading financial markets is not gambling.
It's people without this knowledge who
think it is gambling. But when you have the
right information you discover it's a career
that your life would entirely depend on and
you will forever be grateful to God that He
orchestrated the course of your destiny in
this path.

In the next few examples we are going to

have a glimpse of how institutional traders
are able to sustainably survive in the game
for ages using just a single secret. Knowing
the single secret that the banks, financial
companies, and the big financial Dons is in
itself a holy grail for a retail trader to race
among the professionals and finish
honourably. This is the secret behind the big
financial institutions' audacity to hold and
invest huge chunks of money from their
clients without panic or fear that they would
lose any of it.

We're going to trade using a prime

candlestick in the financial market that
gives us the highest winning rate. Whether
you are an amateur in financial markets or a
seasoned professional trader, this
candlestick pattern is what will drastically
add a brick to your profitability. It's the
pattern that sums up the behaviour of
institutional traders in the market. Which
means, we're able to look over the
shoulders of theseBig Dons and know
exactly what they are doing behind the
scenes to manipulate, mitigate and retain
the reward of moving the market. The
candlestick pattern that is able to deliver
such sensitive information is nothing else
but theEngulfing Candlestick pattern.
The engulfing candlestick pattern sums up the
behaviour of the market makers in the financial
market. It's a representation of the game played by
the institutional traders in the financial markets
through accumulation, manipulation, and
distribution.
Throughaccumulation , the market makers are able
to place a big volume of trades. This is seen by the
formation of spinning tops or spinning bottoms at
significant levels of resistance and support.
Breakout traders place there stop orders and limit
orders around this area.

When the next candle forms, which would be an

engulfing candlestick, the institutional traders start
by raiding on those orders placed by the breakout
traders and manipulating the amateur traders with
turtle soup to think that the market will continue in
that direction of breakout. This is called
Manipulation .

However, the institutional traders mitigate all the

positions in the reverse direction and will continue
in that direction for some time until other factors
come into play. This is what is calledDistribution.
On return from the stop order hunt, the resultant
effect is the formation of engulfing candlestick
with a long wick behind engulfing the preceding
candlestick.
Trading Engulfing Candlestick pattern gives us a
75% win rate. We will dive right away into examples
to see exactly what I mean, and how we can
mitigate the 25%.

Example:
In the figure below we have a bearish engulfing
candlestick at the top of the hour.
When we see an engulfing candlestick pattern has
formed, ideally, the direction of the market follows
the nature of the engulfing candlestick. If the
engulfing candlestick is bullish, the market will in
most cases follow a bullish trend regardless of the
colour of the preceding engulfed candlestick. Also,
if the engulfing candlestick is bearish, it's a sign
that the market will most likely take a downward
movement regardless of whether the preceding
engulfed candlestick is bullish or bearish. In this
example, we have a bearish engulfing candlestick
preceded by a green candle. We therefore
anticipate that the market will most likely move
downwards.

We therefore begin to set parameters for a short

position as seen above. We draw a line of resistance
extending from the top of the engulfing candlestick
backward to see if it is hanging from a level of
resistance. This is to make sure the pattern is actually
indicating a bearish reversal. We used a sell stop order
to enter our position because the price left a lower
shadow or wick when the engulfing candlestick formed.
We also went ahead and set the stop loss and take
profit targets. Our stop loss is a few pips above the
engulfing candlestick and our target for take profit is a
few pips before the next significant support level.
We see how nicely our trade played out above. The
market headed straight to our take profit target without
hesitation.

Take note that in order to ride the trade and collect

more pips, you should consider setting the take profit
targets at areas of significant support and resistance
levels on a higher time frame in the Time Frame Matrix.
For example, if you had switched to a smaller time
frame to spot the perfect time for entry, you may use
that very time frame to set the stop loss, but switch to
the higher time frame for take profit. This will help you
to achieve a greater reward to risk ratio and avoid being
taken out prematurely.

See how the above traded extended beyond our first

target to finally hit the second one.

Example:

We have another example, and this time we are taking a

buy position. As it's the tradition, the rules of
engagement remain the same. We open the chart at the
top of the hour and look for the engulfing candlestick
pattern if it has formed. When we spot it, we go ahead
and get set to enter our position accordingly. In this
case we spotted a bullish engulfing candlestick,
therefore our interest is to take a long position.

Like I said, the market will most of the time take the
direction indicated by the engulfing candlestick.
Therefore when you see your bullish engulfing
candlestick, go ahead and determine your position.
Establish that the market is trending upwards in a
higher time frame. Draw your support level tracing it
back in earlier sessions to make sure the pattern is
standing in the region of the right momentum. Your
candlestick could also be standing on a upward
trendline. These are all signals of confirmation that your
prediction is valid.
Set your entry point at the top of the engulfing
candlestick and the stop loss a few pips below it. Your
take profit target should be a few pips before the next
significant resistance level.

Also like I stated before, in order to ride the trade and

collect more pips, you should consider setting the take
profit targets at areas of significant support and
resistance levels on a higher time frame in the Time
Frame Matrix. For example, if you had switched to a
smaller time frame to spot the perfect time for entry,
you may use that very time frame to set the stop loss,
but switch to the higher time frame for take profit. This
will help you to achieve a greater reward to risk ratio and
avoid being taken out prematurely.
 CHAPTER FIVE

TRADING INDICATORS
With the bogus nature of financial markets which is so
dynamic, it is only important that one keeps abreast
with the dynamics of trading. It is very important to have
an up to-date trading style that will sustain you in the
game. Trading financial markets is a game of
probabilities. It is therefore expedient that we find ways
of stacking the odds in our favour, and one of the ways
we can do that is to have choice indicators or at least
one in our toolkit.

Speaking of indicators, there are a myriad of them, but

categorically speaking, we talk of the lagging indicators
and leading indicators. Lagging indicators are designed
to help confirm price action, if it has entered into a trend
and the strength of the trend. On the other hand, leading
indicators help to measure the rate of change in price
action, which gives it the ability to register when the
price action is slowing down or speeding up. Leading
indicators therefore can give signals ahead of time
unlike the lagging indicators.

Also to mention, lagging indicators find core usability in

trending markets most while leading indicators are
suitable for ranging markets. That therefore means you
need a keen familiarity with some of these indicators
before including them on your chart. This will help you
to avoid overcrowding your chart and also to generate
the right signals in the market.

The enormous list of indicators on trading platforms,

some for free while some are commercialised, all seek
to find suitability in two areas, trending markets and
ranging markets. These indicators find expression as:-

– Trend following indicators eg. MA & EMA Cross

– Momentum indicators eg. MACD

– Volatility indicators eg. Chaikin Volatility

– Volume indicators eg. RSI

CHOICE INDICATOR

If I have not mentioned your favourite indicator, don't

despair, there is a sea of them serving more or less the
same purpose. You can choose to season your trading
style with one. Albeit, for this trading technique we will
apply only one — Bollinger Bands.

As you might have noticed already in some of the

examples we looked at, there is some added element
that I haven't talked about until now. It is the Bollinger
Bands indicator. It's one of the few indicators I pull out
to supplement my trading strategy.

The Bollinger bands indicator was generated by John

Bollinger. I prefer adding this indicator to my chart
because it has proven to give consistent results over
time. It works perfectly well in both trending markets
and oscillating or ranging markets.

Bollinger bands indicator consists of a centreline which

is a Simple Moving Average and two price channels or
bands above and below it. The upper and lower bands
are plotted at standard deviation levels above and below
the Simple Moving Average, which is the centreline. The
parameters of the moving average can be set to the
trader's preference. Then, the upper band is the moving
average plus a standard deviation, and the lower band is
the moving average minus the standard deviation.

HOW TO TRADE USING BOLLINGER BANDS

Bollinger bands like I stated earlier, can be used on any

chart whether the market is trending or in a range. As
long as you can figure out the dynamics of the market,
the indicator becomes a strong tool like I am about to
show you.

1) Ranging Market

Let us start by looking at how well we can put to use the

Bollinger bands in a ranging market.

First forward, take note that we do not use the indicator

in isolation. We simply use indicators to season our
trading strategy. No indicator can be relied upon as a
complete tool for taking position unless you like
gambling. In confluence of two or three factors should
you enter a position. Likewise we shall do our due
technical analysis with market geometry and establish
the support and resistance levels on our chart to
demarcate the range within which the market is
oscillating.

Example:

Let us look at one direct example here.

Trading using the Bollinger bands in a ranging market is

quite simple and direct. First forward, we recognise that
a market is in a range after we have drawn the lines of
support and resistance and have established that the
market is oscillating between these two levels. You can
now extrapolate the chart with the Bollinger bands. The
lower band of the indicator acts as support and the
upper band as resistance. To validate this application
however, the bands must be running alongside the lines
of support and resistance.

We therefore look out for reversal candlesticks at the

areas of support and resistance to enter trade. The
candlestick must appear or touch a point where the
Bollinger band coincides with the support line or
resistance line. For example in the figure below, we see
a green hammer, and you will notice that it appears at a
point where the lower Bollinger band coincides with the
line of support.

We enter a buy position normally after the reversal

candlestick has formed and take profit some pips
before the resistance line. The same is true for a sell
position except in the opposite direction.

Example:

The example below is of OASIS NETWORK, ROSEUSDT

pair. It shows another perfect example of a ranging
market.
We established our support and resistance levels and
ascertained that the market is moving between the two
levels. We can spot clear opportunities of entry for both
long and short positions as indicated by the green and
red arrows respectively.

We have at least three factors of confluence for both

cases: the price came to the levels of support and
resistance that we established by market geometry, the
Bollinger bands further confirm the support and
resistance levels by coming close to them, and thirdly,
our reversal candlesticks appear at these levels and
touch both the Bollinger bands and the support and
resistance lines. These validate our prediction and as
you can see we have not in any way missed the mark.

There are also scenarios where the market has to limp

over a long distance to touch the resistance and move
the same distance to the support level several times,
still in a range like in the figure below.

We can still superimpose the Bollinger bands indicator

on the chart and trade accordingly.
We enter a trade when we spot our candlestick patterns
at the points where the bands intercept or come closer
to the support and resistance lines.

Example:

Let us look at a buy trade on ETHEREUM, ETHUSDT pair

that we would have taken.

The 4 hour candlestick closed and formed a green

candle at an area of intersection between the support
and the lower band of the Bollinger bands indicator,
which signaled a bullish reversal.

We would have entered our long position a few pips

above the 1073.140 value. Our stop loss would be
slightly below 1017.867 and take profit would target
some few pips below 1261.572

Look at the figure below and see how amazing it is that

the market respectfully obeyed our parameters.
 2) Trading the Bollinger Bands in a Trending
Market

The Bollinger bands indicator is very instrumental in

encapsulating market geometry. This means it can be a
necessary tool to form a ramification of the factors of
confluence in the technical analysis. When you master it
so well, it can be a perfect complement when trading
ranging markets as well as trending markets.

The upper and lower bands of the Bollinger bands

indicator represent a channel between which the market
will in most cases oscillate. They will most of the time
exhibit the repelling effect of support and resistance
levels. The centreline of the Bollinger bands indicator,
which is a Simple Moving Average also plays out as a
significant trendline in a trending market. Every time the
price touches it, it is rejected and propelled away from it.
If the price is above the centerline, it indicates the
market is in up trend, and when the price is below the
centerline, it indicates the market is in a down trend. We
can also identify a change in market structure by simply
observing how price is behaving with respect to the
centerline. The figure below shows this kind of
relationship.

In a clear trend, every time the price approaches the

centreline of the Bollinger bands it is rejected. And this
will result in several bounces off the band depending on
the period of the trend. It's at such points of rejection
that we seek to enter our positions in the market. If the
market is above the centerline and is bouncing upwards
away from it, we look for opportunities to buy. It means
the market is trending upwards. And if the market is
below the centerline, and is bouncing downward off the
band, it means the market is moving downwards and
therefore we look for sell opportunities.

Look at the figure below and ask yourself what is

happening? How is the price moving with respect to the
Bollinger bands indicator? How is it trending?
Example:

The above figure shows the last candle is a bullish

engulfing candlestick. By merely looking at the pattern,
you may wish to buy because the signal is bullish.
However, that is not enough factor to give a green flag
for a long position. The graph is some how not clear if
the market is really in any trend. We need another layer
of confirmation. We therefore check if the engulfing
candlestick is seated on a support level.

Indeed, we can see that the candlestick is at demand

zone, and it's a tradable order block. The third factor of
confluence is now to determine if the market is in up
trend using the Bollinger bands. If we find out that the
price is above the centreline, or the SMA, it means the
market is trending upwards. Let us find out in the next
figure.

Holler! The price is above the centerline. That means

the market is in the up trend. This means all our factors
for entering a long position agree.

We can now enter a buy position at the top of the

engulfing candlestick and place the stop loss slightly
below it. We target the next significant resistance level
for our take profit. See the figure below how the market
went. The market went upto the resistance line before it
reversed

That's for the buy position. We can look at several other

examples and you will find out one thing — they play out
the same!

Remember at this time we have shifted our trading

venture from simply picking candlestick patterns at
random and we are engrossed in trading only the
Engulfing Candlestick pattern from the highest time
frame in our Time Frame Matrix. In other words, we
open the highest time frame in the raw we want to trade
in and we look out for the engulfing candlestick pattern.
Immediately we see that it has formed at the top of the
hour, we go ahead and synchronise our technical
analysis faculty. There is no unbeatable strategy like
this one.

Let us pull out another example and dissect it.

Example:

On the chart above, we see the last candle is a red

engulfing candlestick. This automatically dictates upon
our interest. We would definitely want to enter a sell
position. We, at once, pull out the tools for market
geometry. Establish the obvious peaks and troughs and
draw the resistance and support lines accordingly, and
trendline if any.

When I drew the resistance and support lines, I

established that the general outlook of the market in a 4
hour time frame is actually a wide range. This should
send jitters down the nerves because such incidences
are golden opportunities for you to ride the market for a
long period of time from one end of the range to
another. If you are a day trader or intraday, this
opportunity will be available for days. You only keep on
compounding trades along the way as new
opportunities appear.
When I add the Bollinger bands indicator to the chart, it
is clear the bearish engulfing candlestick is hanging
from a level of resistance. This gives me a signal to sell
although with a little reservation that the market is
above the centerline of the indicator. For aggressive
trading, the factors of confluence are in agreement for
the execution of a sell position: the bearish engulfing
candlestick pattern, the resistance line, and the upper
band of the Bollinger bands indicator which confirm the
resistance level, they all validate our anticipation. I can
therefore invest my 20% and risk only 2% of it. My target
will be at 0.44679, a few pips before the support line.

Nonetheless, for conservative trading, I would only

invest a fraction of the 20% and plan to enter another
position when the opportunity appears after the price
has crossed below the centreline or SMA of the
Bollinger bands indicator. I would still maintain my total
risk at not more than 5% of the total capital.

I want you to look at the next figure and see how our
prediction for the initial position. When we entered our
sell position, the market went straight into profits.
However, we had to endure a slight pullback when the
price intercepted the centreline.
The pullback however only confirmed a change of
market structure. It formed a lower high and when it
broke below the centerline again it formed a lower low.
This was further confirmation that we entered the
market at the right time when the down trend was just
kicking off, which also meant we were destined to
swing in profits all the way down.

Eventually, the market hit our take profit target with

about 1:3 risk to reward ratio.

There is something so interesting I want you to observe.

I told you if we were to trade conservatively, we would
either wait until the market had crossed below the
centerline before we could enter a sell position when
the opportunity appeared, or we would enter positions
with partial investment capital. We invest a fraction of
the 20% at the first point when we first spotted the
engulfing candlestick, then we wait until the market
crosses the centreline and we sell again when we spot
any other bearish reversal candlestick pattern deflected
away from the trendline, which is the centreline or SMA.

The two red arrows indicate the possible entry signals

for our sell positions until the take profit target was hit.
The first arrow shows our aggressive point of entry and
the second arrow shows a more conservative approach.
If we had exploited either of the positions, the first one
would have given us 1:3 ratio, and the second 1:2.

However if we had taken both positions aggressively

without second thought, we would have realised a more
tremendous Return On Investment (ROI)

Shall we look at one more example then we see how we

can mitigate the 25%, because I told you, with this
trading strategy we are 75% right. That gives us a higher
profitability index. In the financial markets if you have a
good trading strategy and proper risk management skill,
you only need to be right 45% most of the time to be
profitable. But here we have the odds stack in our
favour with a 75% profitability advantage. We're
therefore good to trade with absolute confidence.

Example:
I know we have looked at this example already, but for
the sake of the nugget I want to unravel, that's why I
have chosen to backstate the example. You see, this is
a potential sell position because of the bearish
engulfing candlestick pattern spotted in the figure
above.

I went ahead and entered a Sell Stop order at 22552.88

a few pips just below the engulfing candlestick. I also
went ahead and set the stop loss at 23003.89 a point
slightly above the resistance from where the engulfing
candlestick hang. My immediate take profit target was
at 22078.17 slightly above the support level which rests
at 22000.00 as seen in the figure below.
The figure below shows how the price continued to
form red candles until the target was hit. That's good
enough. But I want you to observe something: the
market did not actually cross the break-even point until
one hour and some minutes had passed. In fact after
the engulfing candlestick, another red candle formed
but it closed above the entry point even after activating
our position. That means all this while our position was
in red.

The next two candles after the engulfing candlestick

formed significant wicks within our risk tolerance area.
Which means the market lingered in there for some time.
That therefore implies that if we demarcated that region
between our Sell Stop order and the Stop Loss, and
switched to a smaller time frame, we would find
incidences of pullbacks and reversal. See the figure
below.

When we switch from the 1 hour time frame to 5

minutes, we can clearly see that the market made
several attempts to reverse. Now this tells us one thing:
we had more accurate set ups with smaller risks when
we enter positions from smaller time frames. In this
very example we had two opportunities to enter our sell
positions without one entry offsetting the other. See the
graph below.

The two big blue arrows indicate the possible entry

points for our position before the Sell Stop order would
be triggered.
In total we would have had three opportunities to enter
different trades, albeit taking one would still be as much
satisfying.

You would have been able to catch a sum of over 1000

pips from the trade before it again followed the major
upward trend like you can see in the figure below.
The procedure is simple:

 Identify the engulfing candlestick pattern on your

chart.

 Establish the general market trend and the

market structure using support, resistance and
trend lines.

 Demarcate the Highest value (H) and the Lowest

 value (L) of the engulfing candlestick

 Switch to a smaller time frame to look out for

any minor pullbacks and wait for a confirmation
when the main trend resumes. You can employ
the Bollinger bands indicator in this case.

 Enter position as soon as you spot a reversal

candlestick pattern in the direction of the main
trend.

 You can set your stop loss immediately after the

reversal candlestick, or to be liberal enough, you
can still maintain it slightly beyond the engulfing
candlestick pattern. Don't exceed the initial
appreciation. Also, set your take profit target
from the higher time frame whence you spot the
pattern.

EXCEPTION OF TRADE: MITIGATING THE 25

PERCENT

In this part we are going to look at the exceptions to

trading the Engulfing Candlestick pattern. We know the
psychology behind the formation of the engulfing
candlestick pattern. It's a reflection of the game played
by the institutional traders in the market of
accumulation, manipulation, and distribution. Catching
the market at right time as the market makers move
gives us an advantage to ride at the strength of their
manipulative muscle and share in the spoil of their
might. If the tables turn however, and you are not on
guard, you will be grass on the battle ground of
elephants.

The good news is, with this Noble Trading Strategy we

don't just give in to such perdition. If you critically follow
and employ the strategy, you will never loose a dime.

Here are some examples to show you how you can

identify false set ups in the market and how to stay
away from taking such baits.

Example:
The figure above shows a red engulfing candlestick on
CARDANO, ADAUSDT pair engulfing a bearish spinning
top. This appears to be a strong signal for a sell
position. Right?

If you don't pay attention to what happens beyond the

obvious, you will be shocked how things play against
your expectation. The market did not plung into the sell
mode as one would have expected. In fact, if you had
entered a sell position without any further analysis, you
would be disappointed how the market triggered your
order and became a loser without turning back. The last
green candle on the chart went above the highest value
of the engulfing candlestick. That means if your stop
loss was anywhere in that range it would have been
knocked out too.
You might ask, "But what exactly happened?"

What did you miss out on that others knew and waited
to enter the market?

Let us solve the puzzle.

First, you will discover that the market has just

completed a short term trend downwards. This could
have only been realised with thorough deployment of
market geometry. Only a trendline could reveal that.
This means the market is in a fresh trend upwards.
Entering a sell position would be trading against the
trend.

Also by market geometry we can clearly see that there

was a change of market structure. The pattern actually
formed in a bid for a minor pullback to retest the
resistance line which was broken and became support.
The engulfing candlestick closed at the support line.
This means the bearish pattern could barely survive the
demand pressure at this point.

When we add the Bollinger bands indicator to our

analysis, you will prove that the pattern lays well above
the centerline; confirming its position in the uptrend.

As a retail trader you only have one option in such a

case: walk away from the setup and wait for another
opportunity. Avoid forcing trades if you want to
consistently profit from the financial market. There will
always be profitable opportunities, and you will always
spot them if you can dare to possess the virtue of
patience.

Example:

The above figure shows another prospective setup for a

potential profitable trade on a BTCUSDT 1 hour time
frame chart. By instinct, one would consider to jump in
with a sell order. But the market drove away from our
target before our eyes and you could wonder why. See
the figure on the next page below.
Let us dissect what really happened together.

First, let us switch to a higher time frame (4 hour) and

establish the general trend of the market.
The market is trending upwards and when we look at
the position of the engulfing candlestick pattern again
from the 1 hour time frame, it is on the trendline. It's
therefore not wise enough to enter a sell position in
such a situation.

When we add the Bollinger bands indicator to the 4 hour

time frame chart, the candle that embodies the 1 hour
time frame engulfing candlestick is above the SMA,
which confirms its position in the uptrend.

From the 1 hour time frame, the engulfing candlestick

pattern is at the lower band which is a potential reversal
point. Since the SMA on the 4 hour time frame and the
lower band can interchangeably serve the role of
support levels, it is possible that the market should be
bouncing to the upside rather than taking a deep.