Copyright
All rights reserved. No part of this publication may be reproduced, distributed,
or transmitted in any form or by any means, including photocopying,
recording, or other electronic or mechanical methods, without the prior
written permission of the publisher, except in the case of brief quotations
embodied in critical reviews and certain other noncommercial uses permitted
by copyright law. Copyright © 2018 by ForexSwing
Disclaimer
This book is designed to provide helpful advice regarding the subject matter(s)
covered. The author and distributors do not engage in the practice of providing
legal or professional advice and that the laws and regulations governing the
subject(s) covered in this report may vary from state to state, and country
to country. It is understood that the author and distributors of this book
specifically disclaim any liability that is incurred from the use, application,
or recommendations of this book . The author and distributors make no
representations, warranties, or claims whatsoever regarding the accuracy,
effectiveness, legality or completeness of the information included in this
book , including all links, references, content, and recommendations therein.
The author and distributors shall in no way be held liable for any loss or other
damages, including but not limited to special, incidental, consequential,
accidental, or other damages. Legal, professional, tax, accounting, and any
other forms of advice should be sought from a professional and is in no way
implied in this book. All links and recommendations are for instructional
and informational purposes only and are not warranted or guaranteed for
accuracy, content, reliability, or reputation, or any other expressed or implied
purpose.
ForexSwing Trading Manual
2
TABLE OF CONTENTS
My Story......................................................... 6-7
Introduction...................................................8-13
Pre-requisites
Brokers
Timeframes
Leveraging
Candlesticks...................................................14-19
Bullish Engulfing
Bearing Engulfing
Evening Star
Morning Star
Strong Candle
Candlestick Recommendation
Support & Resistance......................................20-22
Strategy..........................................................24-25
What I do
Tools
Pairs I trade
Trendline........................................................26-47
Bullish and Bearish Waves
Drawing Trendlines
Final Thougths on Trendline
ForexSwing Trading Manual
3
Patterns:- .......................................................48
Channels.................................................................49-65
Channel Entry Methods
Finding a Break on a Descending Channel
Horizontal Channel with Stop Order Entry Method
Descending Channel Example
Channel Break with Head and Shoulders
What I Think About Other Ways of Channel Trading
Final Thoughts on Channels
Triangles.........................................................66-72
Trendline Breaks ............................................73-76
Managing Trades............................................77-83
Stoploss
Phase 1 - Managing Trades - Breakeven
Phase 2 - Securing Profits
Overall Management
Final Thoughts................................................84
Bonus.............................................................85-86
ForexSwing Trading Manual
4
ForexSwing Trading Manual
5
MY STORY
I wasn’t planning on writing anything about myself, but one of my followers
begged me to add my story so here goes.
My trading journey began about 5 years ago. I was introduced to Forex by
my friend. Little did I know I was in for a roller coaster ride. I started off by
reading and watching videos like everyone else. I was pumped and ready to
make a lot of money, buy the big house, get my parents whatever they wanted.
I was learning very quickly. I knew all the bells and whistles, indicators you
never dreamt existed and some you can’t even pronounce. I knew a lot, so I
was confident the money would come. I was killing the demo accounts. I was a
demo killer. After convincing my friend to give me $100 to trade, I loaded the
account.
Before I could say the word “Trade”, I had cents left. Totally devastated I went
back to demo. Where did I go wrong? Everything was different in the realworld. The demo was so peaceful, there the market obeyed me, but there’s
something about the real market that you can never get in a demo.
I kept at it, as any determined person would. I convinced more friends, got
even more money but I lost it all, over $600. I gave up for the 1000th time. I
decided I needed help, so I went on Instagram. I could spot the fakers from a
mile, but I found a few good ones who answered my questions. Not long after,
I found a signal guy who traded just like me, and he was good. So I added
$500 and I was ready again. Following his signals, I lost again, $500 all my
money.
I decided I didn’t want to lose anymore money, I would learn on my own, and
that’s when the real venture started. One thing I knew, I was never going to
trade using demo accounts again. My friends were also trading at the time and
they were blowing accounts too. So, I waited until they “blew” their accounts.
I’d then ask them for those accounts which normally had just some cents. I
can remember clearly, taking an account with only $0.72 to $5. That was my
ForexSwing Trading Manual
6
greatest accomplishment at the time, I was getting the hang of it, becoming
very disciplined.
I continued practicing trading cents. Then, depositing $5 or $10, I was blowing
these accounts, but I was also learning. I was taking up to 300 trades on a
$5 account and I was learning a lot trading these accounts. Sometimes in the
middle of the night I would have “light bulb moments” with trading solutions
to problem I had had. I would get up, write it down then implement it. I’ve
read books, learnt new methods and have adjusted my strategy to fit me.
Finally, I had 6 weeks of profitable trading. I was so happy, I was ready to take
on the world.
The skills I have now didn’t come over night. It took almost 4 years before I got
a break through. Here I am today.
ForexSwing Trading Manual
7
INTRODUCTION
This is my trading journal which documents my overall trading approach
from the basics to the advanced level. My strategy does not include indicators
as it heavily relies on trendlines, support and resistance, price action and
candlestick patterns.
Pre-requisites
Before you can dive into my strategy which shows exactly how I execute my
trades, I must advise that this is not a book for beginners. You must have some
experience trading forex. Most of the terms may seem foreign to beginners,
so to ensure that you fully understand I highly recommend going through the
www.babypips.com course.
The direct link to the course is https://www.babypips.com/learn/forex. Please
ensure that you sign up so you will be able to track your progress. Be sure to go
through the course in its entirety. The course spans from Preschool all the way
to Graduate, which is approximately 13 courses. If you have been trading forex
and haven’t gone through this course, you should. The course takes baby steps
while teaching you everything you need to know about forex.
ForexSwing Trading Manual
8
Brokers
My preferred brokers include:
•
Pepperstone
•
XM
•
VantageFX
•
FXChoice
I highly recommend registering using Micro (1 lot = 1000) with the leverage at
500:1
Timeframes
When I’m trading I only use the larger timeframes from H4, Daily, Weekly and
Monthly. These are the only timeframes I use for analysis. However, when my
entry is confirmed I normally go to the h1 chart to find an entry and nothing
less than H1.
Leveraging
It is imperative that you trade risking only 1% of your account size per trade.
What that means is you will be able to lose up to 100 trades before your
account is wiped out. New traders tend to risk a lot of money when trading.
Some will lose a $100 trading on a $1000 account which means, if you lose 10
trades you will be out clean. Trading is not gambling but more of a game of
probability. It doesn’t matter how great of a trader you are, you will lose
trades, and we must come to accept that. As such, we should be quick to accept
losing trades when they come and be able to move on to the next trade without
fear. If you win more than you lose you will be fine.
ForexSwing Trading Manual
9
After meeting and interacting with a lot of new traders it has come to my
attention that most, if not all, new traders do not understand what it means
to risk 1% of their account per trade. This is the most critical part of trading
forex. Let’s say you have a $1000 account and you lose ten (10) $100 trades. It
means you will be wiped out by just ten (10) trades. How much can you learn
from just 10 trades?
Everyone knows that if you are trading a $1000 account, you should be risking
no more than $10 which would be 1% of your total account size. Where it gets
tricky is applying it to your trades. What I see most persons do, is that they
enter trades and then move their stoploss to any point so that its losing $10
which is totally incorrect.
The Approach: Calculating lot size and risking 1% of your account
Account Details:
Account Balance: $1000
1% * Account Balance = Percentage we should be risking
1% * $1000 = $10
For each trade we should be risking at most $10
Before entering a trade, the first thing should be to find out how many pips
away your stoploss would be. Looking at the chart below as an example let’s
say we were going to sell this pair at the line highlighted in red (ENTRY) and
the stoploss would be at the line STOPLOSS.
ForexSwing Trading Manual
10
The next step would be to determine how many pips away the stoploss would
be, in this case 68 pips. Now that we have determined the amount of pips, the
next step would be to calculate the lot size we should be using.
We already know we shouldn’t be risking more than 1% of our account balance
and in this example our account is $1000 so we shouldn’t be risking more than
$10 on a single trade. The key here is to always place your stoploss wherever
you want and adjust your lot size. So, wherever your stoploss is, it will be
losing only $10, should the trade go against you.
Let’s say, for example, you decide to take the trade below using the account
size above ($1000). With your normal lot size, if when you put the stoploss
at 68 pips away and it works out to be a $50 loss, it means your lot size is too
large (should be losing $10 not $50), and you should lower the lot size. If it
means closing and reopening another trade, then do it, but lower your lot size
so you are losing the $10 you are supposed to be losing.
What most persons usually do is adjust the stoploss closer to the point of
entry (shown in the image below) so that the stoploss is at -$10. This is totally
wrong, because that isn’t the original area we had planned for the stoploss to
be for this trade.
ForexSwing Trading Manual
11
Never compromise your stoploss. Adjust your lot size instead. If you are using
a lot size of 0.10 and when you adjust your stoploss, its way more than 1%,
lower your lot size to maybe 0.03, and see if your stoploss will be equal to the
1% ($10).
Let me repeat. You should be only adjusting your lot size and
never let your stoploss suffer. You should be able to place your
stoploss wherever you are comfortable, and adjust your lot size
accordingly, so you are only losing 1%.
ForexSwing Trading Manual
12
Leveraging Solution for Non-Profitable Traders
For new traders, I wouldn’t suggest you risking 1% of your account you could
risk even less it will give you the chance to make even more trades if you risked
even less. When starting, I would suggest getting the smallest size account
which is a micro account (Find a broker that offers micro accounts).
I am not one of those traders who over complicates trading. I could have given
long formulas showing how to calculate lot size but the simplest solution and
best advice I have for non-profitable traders is to trade with the lowest possible
lot size your account offers which is 0.01.
I know you are new and you are after the quick money, but know this, if
you have a $1000 and you are using a lot size of 0.01 on each trade with a
Micro Account it will take a long time for you to blow your account. Trading
a micro account with $1000 and a lot size of 0.01 will give you room to make
thousands of trades because the profit would be in cents. I implore you to
follow through. If you do otherwise, you will blow your account in a week.
You will gain a lot of experience in trading without losing thousands of dollars,
as well as teach yourself to be disciplined. The demo psychology will be gone,
because you won’t be trading demo, instead you will be trading a real account
just with small lots.
For each week you are profitable increase your lot size by 0.01. So, if week
1 ends and you were trading 0.01 you should increase your lot size to 0.02.
When you are not profitable for a week go back to the previous week’s lot size.
If you do this, I guarantee your story won’t be that you have lost thousands
of dollars trading over 2 years it would be you have learnt a lot over a year
without blowing a single account while trading a real account. I wish someone
had told me this when I had just started.
When you are profitable and comfortable with your strategy, only then should
you adjust to bigger lots, risking up to 2-3% of your account.
ForexSwing Trading Manual
13
CANDLESTICK FORMATIONS
There is a wide variety of material available on the internet about candlesticks,
so I won’t go over them. I will only show the ones I use for future reference.
The candlestick patterns I use are Bullish Engulfing, Bearish Engulfing,
Evening Star, Morning Star and my favorite which I call Strong Candlestick
(Don’t know where I got the name from lol). There’s nothing hard about these
candlestick patterns. They are very easy to identify. These are basic patterns
and more details are readily available either on the internet or trading books.
Feel free to research more about these.
ForexSwing Trading Manual
14
Bullish Engulfing Candle
A Bullish Engulfing pattern is basically when a Bullish Candlestick fully
embodies a previous Bearish Candlestick. Please note we are referring to the
body of the candlesticks not the wicks. So, the body of the candlestick must
engulf the entire body of the previous bearish candlestick. In diagram below,
circled in red is a perfect example of a Bullish Engulfing pattern which as you
can see is very powerful. The more the body covers the previous candlestick
the stronger the signal is. It is often seen in a down trend. Note that this
pattern should never be used on its own. Can you see the other Bullish
Engulfing pattern in the image below?
A Bullish Engulfing candle normally means the market will start making
bullish movements, but it should never be used on its own.
ForexSwing Trading Manual
15
Bearish Engulfing Candle
As you guessed the Bearish Engulfing pattern is the opposite of the Bullish
Engulfing Pattern. To see a perfect example of such a pattern please see image
below (circled in red). This is when the body of a bearish candlestick fully
embodies the body of the previous bullish candlestick. This usually marks the
beginning of a bearish trend.
ForexSwing Trading Manual
16
Morning Star Pattern
The morning star pattern consists of three candlesticks unlike the engulfing
patterns which consists of only two candlesticks.
The first candlestick in the pattern is a bearish candlestick with a large body
suggesting a price drop. The second candlestick is an indecision candle which
can be either a bearish or bullish candlestick (color doesn’t matter). The third
candlestick is a bullish candlestick which suggest a price increase. The image
below is an example of a Morning Star pattern highlighted in the red box. I will
emphasize again these patterns are not standalone and you should never take
a trade because of a single pattern.
The image below is another example of a Morning Star Pattern with smaller
candlesticks.
ForexSwing Trading Manual
17
Evening Star Pattern
The Evening Star Pattern is basically the opposite of Morning Star Pattern.
It consists of three candles. The first being a bullish candle followed by an
indecision candle then finally a bearish candle. It is usually found in an
uptrend. The chart below shows an example of such a pattern. It’s even more
powerful if the third candle (bearish candle) has a longer body than that of
both the indecision candle and the first candle. Since I don’t use these patterns
on their own I’m not too picky on how they appear.
ForexSwing Trading Manual
18
Strong Candle
You will hear me mention the phrase “Strong Candle” throughout the book
so I’ll explain what I mean by a strong candle. A strong candle can be either
bullish or bearish. It is any candle that has a much larger body than both tails.
The larger the body of the candle than the length of the largest tail, then the
stronger that candle is. Below you can see two strong candles (Bullish and
Bearish strong candlesticks) both with large bodies and shorter tails perfect
examples of what a strong candle looks like.
Candlesticks Recommendation
There are many other powerful candlestick patterns out there which can be
very useful. One of the best books to learn Candlesticks is “The Candlestick
Course” by Steve Nison. These patterns are more than enough for me as I like
to keep everything clean and simple.
ForexSwing Trading Manual
19
SUPPORT AND RESISTANCE
Probably the most talked about in forex is Support and Resistance. These
are powerful zones on your chart that the market struggled to get pass. I
specifically said zones because they are not just lines that run horizontally on
your chart they are areas and not specific lines. The market doesn’t move in
straight lines so it’s important to be able to spot these zones.
ForexSwing Trading Manual
20
Support
Support are zones on your chart where the market has repeatedly tried to fall
through but couldn’t. Looking at the chart below you will notice 5 green arrows
where the market has tested repeatedly trying to fall through but each time
it went back up. This area where it keeps bouncing from is called the support
area/zone.
How I draw my Support
Firstly, my support and resistance are only drawn on the H4, Daily, Weekly
and Monthly. I don’t observe trendlines drawn on smaller timeframes because
the market tends not to respect zones on smaller timeframes.
I wait for the market to bounce from the same area twice. On the second
bounce I start to observe that area as a support area. These two points must
have space to the left (highlighted in yellow on chart below) for them to be a
considered a true point of support.
In the chart above my support area is highlighted in red. This area is basically
from the lowest point the market reversed to the highest point the market
reversed (marked by green arrows). In this case it would be from the first
green arrow to the second green arrow. You can see that the price came down
the lowest at the first green and at the second green arrow that’s the highest
point the market reversed. So, the distance between those two points I call my
support zone.
ForexSwing Trading Manual
21
Resistance
Resistance is an imaginary roof that the market failed to break through after
a couple of tries. Again, I only look for these on the h4, Daily, Weekly and
monthly charts.
Resistance is the opposite of support, so the same rules apply, the only
difference is it being at the top. In this case the first red arrow is the highest
point the market went to before reversing. The third red arrow is the lowest
point the market went to before reversing. So between those two points would
be your resistance area.
ForexSwing Trading Manual
22
STRATEGY STARTS HERE
What I Do
Outlined below is a summary of my strategy. I will explain each aspect in
Detail.
1.
Draw trendlines
2.
Wait for A STRONG break
3.
Enter trade with stoploss
4.
Adjust Stoploss
Very Simple!
If you have learnt anything so far that’s great. That was just some basic
information explained in my own words. It was an introduction to some basic
concepts that I use in my strategy. From here on out everything else makes up
my entire strategy. I will give my exact setup and open my trading to you so
you can get knowledge on exactly what I do each week.
You will realize that trading forex doesn’t have to be difficult. It doesn’t have to
include all the bells and whistles, but just simple rules that work.
Tools
For those who are curious I only use MT4 and my brokers of choice are XM
and Pepperstone. If you are a beginner I strongly advise that you use a laptop
to trade with. Trading on mobile phones is not recommended, especially if you
will be reading naked charts. You will need a bigger screen to see the message
the market is trying to tell you and a few candlesticks on a tiny screen just
won’t cut it. If you are using Moving Averages and scalping, then phones are
fine, but swing traders need bigger screens.
I don’t have trading apps on my phone. All my trading is done on my laptop,
hooked up to a bigger monitor. I suggest this setup for new traders especially.
ForexSwing Trading Manual
24
Pairs I Trade
I am always updating the charts I trade. The reason for this is to find pairs that
my strategy works best with. I currently trade 20 pairs which are listed below:
AUDJPY
AUDNZD
AUDUSD
CADJPY
CHFJPY
EURCAD
EURJPY
EURNZD
EURUSD
GBPAUD
GBPCAD
GBPCHF
GBPJPY
GBPNZD
GBPUSD
GOLD
NZDUSD
USDCHF
USDJPY
USDZAR
ForexSwing Trading Manual
25
TRENDLINES
Before you can trade breakouts or reversals, you must first learn to properly
draw trendlines and identify proper triangles and channels. My entire strategy
depends heavily on trendlines so it’s imperative to know exactly how to draw
proper trendlines.
The foundation of drawing trendlines is built around the simple principle of
higher highs/higher lows and lower highs/lower lows. Identifying the highs
and lows is all you will need to understand. Keeping track of current trends
and knowing when a trend has reversed must always be noted.
I can’t tell you how many persons draw trendlines the way I do, or even how
many people use them the way I do. What I do know, is my way of drawing
trendlines works and based on my results they are of high standard. Not only
does it eliminate low quality trades, but it is simple and brings a new level of
understanding to the market.
The main purpose of a trendline is to highlight trends. This makes trends
more visible, so you can keep track of the market and have an idea of what the
market is doing. If you can’t identify the market trend does it even make sense
trading? Well, scalpers would argue that they only need to focus on just a small
block but knowing the trend the market is in puts the odds in your favor and
you should always trade with the odds on your side.
ForexSwing Trading Manual
26
Let me show you why it is important to know how to draw proper trendlines.
Below is the GBPCAD Daily chart. Many persons would draw this trendline
(white line below) which is totally incorrect. I intentionally added a 200 SMA
just to prove my point. Looking at the chart below, a trendline like that means
you are saying the market is in a bearish trend and will continue down. But
as you can see the price is about to test the 200 SMA which means it could go
up, and it did. So that one incorrect trendline would put you at a loss instantly.
In fact, the market has been in a bullish trend for some time now. So the only
thing you should be looking for is a buy (market making higher highs and
higher lows). You should try to always go with flow of the market, do not try to
swim upstream. Not only would you lose trades trying to sell a bullish market,
but you would have already missed out on a few bullish runs.
I will be going through this same chart from start to finish. I will show you how
to draw, adjust and eliminate the trendlines no longer needed or those which
just doesn’t make any sense.
ForexSwing Trading Manual
27
Intro to Trendlines
I have had the opportunity to interact with over 700 members in my telegram
group. I have seen many of their charts, with all types of indicators, and the
attempt to put trendlines on their charts.
Out of the many charts I have seen, the amount of incorrect trendlines is very
alarming, considering that trendlines are the foundation to technical analysis,
that’s very bad. You cannot be a technical analysis and don’t know how to
properly draw trendlines.
This will probably be the longest chapter of the book because my entire
strategy is based on drawing trendlines. This is the chapter you should go
through over and over and over until you understand everything clearly.
“ Trendlines are used to show trends ”
If trendlines are used to show trends, it means if your trendlines are
incorrect, you won’t be able to tell the trend of the market. If you can’t tell
the trend of the market what are you even doing in Metatrader? You would be
trading without the odds in your favor. The market is already tough, and as I
said earlier, you need all the odds in your favor.
This chapter could be my entire book because of how powerful trendlines
are. I literally use them to do everything. When we watch YouTube videos,
read books and blogs, they all show easy trending markets, with trendlines
connecting all highs perfectly but what happens when the market does its
thing (which is all the time). This is when we start to see trendlines from hell,
trendlines showing all manner of evil which is bad for our analysis.
ForexSwing Trading Manual
28
Trendline Quiz
Know your Trendline status. Do the Trendline Test!
I have a quick quiz to test your trendline drawing skills. Follow the instructions
below:
1.
Find a chart you trade currently which has the most trendlines (count them if necessary).
2.
Take a screenshot of that chart and save it somewhere.
3.
Delete all the trendlines on that chart.
4.
Redraw all the trendlines without looking back on the screenshot.
5.
Open and compare the screenshot to the chart when you are done.
If you didn’t draw the same trendlines it means you don’t know how
to draw trendlines!
When analyzing the market, I ONLY draw trendlines on the H4, Daily, Weekly
and monthly if needs be. I won’t join the debate about using wicks and bodies,
because I use both depending on the situation. A trendline is drawn with
higher lows (bullish trendline) or lower highs (bearish trendlines).
I will be breaking down the components of a trendline for you to understand
the overall concept. No more will you be scared to draw trendlines on complex
charts.
Trendlines form waves when trending, but not all waves are valid when
drawing trendlines. Not all highs or lows in a trend should be touched or even
considered when drawing trendlines. Before we can draw trendlines, we need
to know how to determine if a wave is valid.
A wave has three points and it takes a similar form to the letter “L”. It has two
ends and an elbow. The elbow is where the points of the trendline touches.
These points can be the wick or body of the candle depending on the chart.
ForexSwing Trading Manual
29
Bullish Waves
In a bullish trend there are Bullish Waves, and each wave consists of three
points. Looking at the chart below we see a bullish market and bullish waves
are shown at points A, B and C. In the first wave of both bullish and bearish
markets, point A (green A in the image below) isn’t important. Everybody can
already spot the first leg of the trend (shown below with green brush stroke).
Point A at the start of a trend is insignificant because the trend can start from
anywhere. However, all other waves which comes after the first, must follow
the rules (B must be lower than A and C must go above A).
In the image below, you can see two valid Bullish waves (green ABC and red
ABC). A Bullish Wave is valid if point B is lower than point A and
point C is higher than point A. Whenever we see a valid wave it means
point B is a valid point of contact for the trendline. This is the condition for
the trendline touching a low. If point C isn’t made (higher than A), then you
are predicting the market will go up. Point C must be formed for point B to
be considered a point for trendline. Looking at the chart below you see two
valid point B’s hence the trendline touches both and that’s a proper trendline.
ForexSwing Trading Manual
30
Bearish Waves
A Bearish Wave is the opposite of a Bullish Wave and can be found in bearish
trends. In the image below, you can see a total of 4 waves already formed
including the first wave. By now you know point A on the first wave isn’t
important. For each valid wave it creates a valid point B which I used to draw
the trendline.
In the Bearish trend, for point B to be considered a valid trendline
point, point B must be higher than point A and point C must be
lower than point A.
Looking at the image above, you will realize that the last wave isn’t completed,
but the fact that it went lower than point A makes it valid, even if it reversed at
that point (point C did go lower than point A).
ForexSwing Trading Manual
31
Drawing Trendlines
Now that we understand the anatomy of trendlines, it’s time to put everything
together. A trendline is made up of waves and valid waves has elbows which
are the points of contact for trendlines. It’s now time to learn how to connect
these points. Although these points are valid, not all points will get a touch of
the trendline because we must always avoid cutting through candles.
In the image below, you will see two trendlines. One I call invalid (red
trendline), because it cuts through a few candles (see in biggest yellow circle).
The goal is to connect as much points without cutting through candles using
wicks or the bodies of the candlesticks but never cut through. Although the
valid trendline (yellow) only touches two points that’s perfectly fine.
ForexSwing Trading Manual
32
Putting Everything Together
I will now go through the entire chart below. I will put on display all the rules
of drawing trendlines. I will draw all the trendlines from the Start Point to the
End Point and analyze step by step to the end.
You will learn when to remove, adjust and add new trendlines when necessary.
ForexSwing Trading Manual
33
From the start point we have noticed a fall in the market (LL2) and we
have seen our first few waves. We can now safely mark B1 as the start of a
downward trend because we see the market falling to LL2, spike up to B2, and
then made a lower low to LL3. That was basically two waves and that’s enough
to draw our first trendline.
The market then goes up to B3 and made a lower low to LL4 which marks the
end of another wave. So now we have three (3) B points which should be used
to draw trendlines. Based on the steep fall from B2 to LL4, the first trendline
will prove to be a waste being so far away from the price action. Also, if we
drew a line from B1 to B3 it would cut some candles of area B2.
In cases like these, you should draw your trendline with the latest B points and
leave out the first B point (B1) to keep the trendline as close as possible to the
price action. It doesn’t make sense we have a trendline that is so far away from
the price action. It tells us nothing about the market.
ForexSwing Trading Manual
34
The “First Trendline” isn’t necessarily useless because it could come into play
with future price action. It is the second trendline that is now active (Active
Trendline), and if price action stays below this trendline we will not adjust
the trendline unless we see another steep fall in prices or if price breaks the
trendline and then make a lower low than LL4.
ForexSwing Trading Manual
35
Trendline Breach
We see price has obeyed our second trendline for a couple of waves and the
trendline looks beautiful (chart below). Now we have reached the point which
they don’t usually teach. The trendline has been breached. What do we do
from here?
Everybody understands trendlines up to this point. Whenever trendlines are
breached it means we should sit and wait for the next wave it creates, then
we will know exactly what to do. LL7 could possibly be the starting point of a
bullish trend, that’s if the market made a higher low and then a higher high
creating a second wave, hence producing two waves needed to draw a Bullish
trendline.
On the chart above not only was the trendline breached, but price made a
higher high passing the previous high (B6). In this case, the active trendline
should remain until price breaks below LL7. If price never goes below LL7 it
means the active trendline shown above would’ve been completed and marks
the end of that trend.
ForexSwing Trading Manual
36
Price Breaking below LL7 Scenario
Price happened to breach the then active trendline marked at the purple line
and made a higher high as seen below. If the price went down lower than the
low LL7 (yellow waves), the trendline would be adjusted (labelled “Active
Trendline”), but only if price broke below LL7. If it doesn’t, then the previous
trendline (grey) would stay in place and mark the end of that bearish trend.
ForexSwing Trading Manual
37
Trendline Drawing Main Mistake
Many will draw trendlines like the red trendline below which is indubitably
incorrect. Two reasons for this:
(1) Market has made a higher high (yellow X)
(2) The Bearish Wave is NOT valid.
If the market makes a higher high that’s a bullish move, so adding a bearish
trendline where the yellow X is would disregard the bullish move the market
just made. When the market is showing bullish moves, your trendline would
be saying the opposite (bearish) if you had drawn that incorrect trendline
which isn’t good for your analysis.
As you would’ve learned earlier, in a bearish wave, point B must be
higher than point A and point C must be lower than point A. In the
image below point A would be LL7 and point B would be at the yellow X. So,
point B is higher than point A, but a point C hasn’t been formed because price
hasn’t gone below point A (LL7) which would’ve made point C. Hence, the
trendline is invalid because the wave wasn’t completed. It still needs price to
go below A (LL7) to form point C and only then would red trendline be correct.
I know it is probably confusing at first but go over the previous chapters.
ForexSwing Trading Manual
38
Drawing New Trendline
Knowing when one cycle of a trendline has completed and a new one has
started is critical when trendline trading. A bearish trendline should have
bearish movements and bullish trendlines bullish movements. Looking at the
chart below we can see two valid bullish waves that were formed which is all
we need to draw our new bullish trendline. You can go back to the previous
pages where we discussed bullish waves and see if these are correct for
yourself.
Now we have a new active trendline which is the only one we are interested in
for now.
I will stress again, the completed trendline in the image above will
only be activated again if price moves below the lowest point (LL7)
if prices stays above LL7 then the trendline should remain and a
new trendline takes precedence.
ForexSwing Trading Manual
39
Trend Continuation
From drawing our bullish trendline with those first two (2) waves a third valid
wave has been formed. Although our first trendline was perfect for the first
two waves (below in the image greyed out shadowing the “Active Trendline”), I
don’t like the idea of it cutting through candles, so we will adjust our trendline
to accommodate the new wave that has been formed. We will continue doing
this until price breaks a previous low. See image below:
ForexSwing Trading Manual
40
Adjusting Trendline
So, after drawing our first trendline, we had to adjust it to accommodate the
third wave because that trendline was cutting through candles. A simple rule
to note when you have a bullish trendline is, as long there is a higher high that
trendline is still the active trendline and you should adjust where needs be so
that trendline doesn’t cut through any candles or wicks. If in a bullish trend,
the moment price breaks a previous low (L10) as seen on the chart below
where a lower low was made at L11, we should start looking to draw a bearish
trendline. We are bearish until a higher high has been made (Higher than
HH3).
ForexSwing Trading Manual
41
From our second trendline (white), from HH3 we notice that price has made
a higher low LL10 which formed perfectly with our trendline then attempted
to make a higher high but stumbled to a lower low LL11. This marks the
completion of two waves as seen with the blue and green brush strokes on the
chart below:
Which means a bearish trendline is in order and because the market never
made a higher high but instead a lower low and broke the trendline it means
the active trendline now would be the yellow trendline until it has been
breached.
ForexSwing Trading Manual
42
Trend Continuation
There’s a reason I chose this chart to go through. I knew it would have all the
real movements of the market and I would have been able to put on display the
intricacies of drawing trendlines. If we look at the chart below we realize price
has gone to break the bearish trendline (yellow) and has also gone to break
the highest high of the previous bullish trendline. This means that the bullish
trendline is reactivated. We would adjust our trendline to accommodate this
new high HH4 and new low LL11.
In a movement like this you can now look at everything from HH3 to LL11,
then from LL11 to HH4 as one wave and disregard LL10. We are now at HH4
so let’s see what the market does after this.
ForexSwing Trading Manual
43
Major and Minor Trendlines
From the chart below, price went down to make a higher low at LL12, spiked to
a high at HH5 then made another higher low LL13 after which it made a higher
high HH6. So we see the market is trending perfectly, wave after wave, making
higher highs and higher lows which is all we look for in a bullish trend.
Looking at the chart below we see the previous trendline still intact and still
holding perfectly, but price has gone far away from that trendline. No doubt
it is still active and still means a lot. In cases like these however, I draw Minor
Trendlines to get closer to the price action. This way, I will be able to catch a
trendline break very early, instead of waiting for it to appear and break the
“Major Active Trendline”. Since I’m solely trading trendline breaks as you can
see, it would take a very longtime for price to go down and break the Major
Trendline. Hence, a Minor Trendline is needed in these cases.
ForexSwing Trading Manual
44
New Bearish Trendline
Looking at the chart below you will notice that the Minor Trendline (from
previous chart) is broken. In a case like this, I would’ve entered a sell when the
Minor Trendline broke, but we are not going over entries now.
Price fell from the high HH6 to the low LL14. It then made a lower high LH1
after which it fell to a lower low LL15 breaking the Main Bullish Trendline
(now deactivated). This completes two full waves, enough for us to draw our
bearish trendline.
Once price broke the Minor Trendline and then made a lower low, it means
that the Minor Trendline is no longer active hence it has been greyed out. Price
then went and broke the Major Active trendline and made a new low which
means the new Active Trendline would be the bearish trendline. Unless price
made a high above HH6 then the bearish trendline will remain active.
ForexSwing Trading Manual
45
Final Stage
In the chart below you will see the final stage of the chart. The white bearish
trendline is still the active trendline. I know many will make the mistake and
draw the red trendline again, but that trendline would be incorrect. That B
point or elbow hasn’t made a low, lower than LL15. The only way that trendline
would be valid is if price broke below the purple line. Only then that incorrect
trendline would now be correct.
ForexSwing Trading Manual
46
Final Thoughts on Trendlines
In Trending markets, everything depends on Lows and Highs. Knowing
which category they fall in is critical. In a trending market the first step is to
determine the first two waves of the trend. Once this is done you will already
know if it’s bullish or bearish.
In a bullish trend the market must make higher lows and higher highs. Usually
you would connect trendlines to points or elbows, but you should always check
to see if these points are valid points.
Simply put, if you are drawing a bullish trendline and you want
the trendline to touch point B it means when price leaves point B
it must go on to make a higher high. If it doesn’t then that point
should not be used to draw a bullish trendline.
In a bearish trend the market must be making lower lows and lower highs
you should only connect trendlines to the points or elbows that made a lower
low than the previous low. If for example, we wanted to draw a trendline
connecting point B, it means when price leaves point B it must go down to
make a lower low. If price goes above the previous lower high it means, there is
a breach and we should leave that trendline intact and watch what price does.
ForexSwing Trading Manual
47
PATTERNS
I will say this again, I am a very simple trader and I always try to keep
everything simple. I don’t study big words and technical terms I keep it simple.
Many will say I trade Wedges, Pennants, Triangles. They are probably correct
but to me I only see trendlines and sometimes they are in the shape of a
triangles or channels. I don’t pay attention to what they are called, and I will
tell you why.
The names will lead you astray. For example, the rules will probably tell you
that a falling wedge will break to the upside. So, upon seeing your first falling
wedge, you will go long and instantly it will burst to the floor hitting your
stoploss all because you were following a rule which says this type of wedge
does a certain thing. So instead, when I see a wedge or whatever they are
called, I only know one thing, when price is converging to a point it will break
out strongly to either side.
So, don’t dwell on names and rules, the rules will say it is a pig (falling wedge)
it will go “oink oink” in forex the pig will quack like a duck too, nothing goes
according to plan like the forex textbooks says, if it were so, everybody would
be making money after reading the first forex book they get their hands on.
The key is to be able to flow with the market and never try to predict. So, for
me it’s simply trendline breaks that I trade, nothing more nothing less.
For this course however, to make it easier for you to understand, I will
categorize the patterns I trade as Triangles, Channels, as well as Trendlines
Breaks in the event that channels and triangles aren’t visible or just doesn’t
make sense to draw. Please be reminded that the important part is the
trendline. So, a single trendline will do if you cannot be bothered to seek out
triangles and channels.
Now that you know how to draw trendlines, the next step is waiting for the
break, then entering the direction in which it breaks. We all know the market
is not as simple as that, so with well-defined rules I will show you how I
conquer the market.
ForexSwing Trading Manual
48
Channels
Firstly, lets define what a channel is, a channel is when price moves between
two (2) parallel lines. Having highs touching the top line and lows touching
the bottom line. Prices must touch both lines at least two times but the more
touches the stronger the breakout will be. My channels are only drawn on the
4H, Daily, Weekly and Monthly timeframes no other timeframes I don’t care
how nice the channel is if its not on those timeframes I don’t care.
A channel can be horizontal, ascending or descending doesn’t matter we treat
them the same way.
Below is an example of a Horizontal Channel.
As you can see in the channel above, we have six (6) touches. After identifying
a channel like this its just a waiting game to see which side it breaks to. Notice
I didn’t try to predict and say it will break to the upside or downside its
because I really don’t care which side it breaks to.
I don’t care about the waiting time I will sit for days, even weeks waiting on my
setups.
ForexSwing Trading Manual
49
Below is an example of a Descending Channel.
Below is an example of an Ascending Channel.
ForexSwing Trading Manual
50
Channel Entry Methods
Manual Entry Method
For breaks, I enter the trade using two methods. The first is a manual method,
done by simply entering the trade once a strong candle (as seen earlier in the
book) pierces through the upper/lower channel line. Importantly, if the market
is approaching the top of the channel (resistance), it means we are looking for
a strong bullish candle to pierce through the resistance. If it is approaching
the bottom of the channel (support) we should be looking for a bearish candle
to pierce through the support. That same candle that pierces the upper/lower
channel line, must close as a strong bullish/bearish candle respectively.
DO NOT TAKE THE TRADE UNLESS THAT CANDLE HAS CLOSED.
A candle that has a much larger body than both tails is considered
a strong candle (explained earlier).
Once that candlestick has closed, I will enter manually on the candlestick that
follows even if it opens going against the desired direction, I will still enter the
trade. All I want to see is the candle that pierced the upper/lower lines of the
channel closed as a strong candlestick. See example below:
ForexSwing Trading Manual
51
Stop Order Entry Method
In this method, price should break above/below the highest or lowest points
respectively of the channel (support or resistance). So, for a channel that has
price approaching the upper line of the channel (resistance), price should
break above the highest point that price touched on the resistance, and when
price is approaching the support, the price must break below the lowest point
of the channel. So what I’ll do is set a buy stop above the highest point of
the channel, or a sell stop below the low of the channel and wait for it to be
triggered.
See example below:
ForexSwing Trading Manual
52
Finding a Break on a Descending Channel
Identifying the channel is the easy part. It’s time to learn how to find a break
and enter in the direction it breaks. On the chart below you can see the clear
channel with a total of seven (7) touches which is ideal.
ForexSwing Trading Manual
53
Looking at the chart below you can see price was making higher highs (HH), so
I was already looking for bullish entries, but I waited until my conditions were
met. The only other confirmation I needed was to get a strong bullish candle
(yellow circle) and price to move above the previous high that touched the
channel. What I did was to place a buy order exactly above the last high that
touched the channel, and it got triggered.
If you look closer, you can see there’s an entry on the candle circled in orange.
I took that trade, based on a H1 timeframe that printed a strong candle
crossing the channel (this is the H4 chart).
Many will ask about pullbacks, but I treat pullbacks differently. Firstly, when
entering channel break trades, my stop loss is always placed at the middle of
the channel. Meaning if the channel is 400 pips high my stop loss would be
200 pips, exactly centering the channel. In this case, it would be at the second
Higher High labelled HH (middle HH). So even in the case of a pullback I
wouldn’t be stopped out and I would still be risking just 1% of my account on
that trade. I will discuss stop loss later in the book.
Once trade is in profit I would implement my profit taking strategy which is
also explained later in the book.
ForexSwing Trading Manual
54
Horizontal Channel with Stop Order Entry Method
Now that we can draw trendlines and spot channels, it should be easy for us to
capture some pips from the market. Trading channel breaks means you must
be careful and watch for fake-outs. When trading channel breaks, stop orders
should be your best friend, whether it is a buy-stop or sell-stop. The rules
remain the same across the board for all channels whether it be ascending,
descending or horizontal.
With a stop order, your trade will be executed when the currency
pair you want to buy or sell reaches a price (the stop price). Once
the currency pair has attained this price, a stop order becomes a
market order and is filled at that price.
Many people will curse the market when it consolidates. Not me, I love
consolidation because they form channels which I love dearly. In the example
below, a favorable channel has formed. The next step is to wait until price
breaks above the highest high or lowest low of the channel, which is easy. In
cases like these I leave a buy stop above the high and a sell stop below the low.
ForexSwing Trading Manual
55
I see many traders’ predicting that the market will break to a side (up or down)
but I’m not into predicting the market and you shouldn’t either. The market
will break in whichever direction it wants to break. The only thing you need to
know is that it will break to one side and when it does be prepared to catch it,
which is why I set both buy-stops and sell-stops.
For a more powerful entry you could do the Manual Entry where you wait for
a strong candlestick to break through the channel and it must break above the
highest high or below the lowest low of the channel (green and red areas on
chart above), the candle must close as a strong candle (body of candle must be
larger than the largest tail of that candle).
In truth you won’t be able to stop fake-outs all together, so I don’t even worry
about them. Always risk 1% of your account and you will be fine.
ForexSwing Trading Manual
56
Descending Channel Example
Descending/Ascending Channels are slightly different from Horizontal
Channels. When trading Horizontal Channels, we are looking for a break above
the highest/lowest point of the chart but on a Descending/Ascending Channel
we could get a break, and that break didn’t necessarily fall above a previous
high. That trade would be totally valid if it breaks the channel with a “strong”
candle at a support/resistance.
So far you can see that the way I trade Channels is very simple, no rocket
science but there are very important principles that must be followed. I found
this Descending Channel in the image above very interesting and I’ll explain.
Below I will outline the different ways I would go about trading this peculiar
looking Channel.
Buy Stop Entry Above High
On the chart above we can see the channel clearly, but where you will enter
is detrimental. This channel appeared at a very critical area, approaching a
ForexSwing Trading Manual
57
bullish trendline (Important Bullish Trendline). The market is making lower
highs and lower lows which clearly means the market is bearish. It also means
if price should break above a lower high, it could mark the beginning of a
bullish trend. Hence, the reason we would place a buy stop at the level labeled
“BUY STOP ABOVE HERE”, will ensure that we catch the start of a bullish
trend if it happens. Notice the support so that break would be valid.
Bullish Trendline Break Manual Entry
At times waiting on price to go above the previous high of the channel will
take some time. Luckily, that’s not the only way to enter this trade. What we
are looking for is a strong break above the bearish trendline that forms the top
of the channel (More than half the candle must be over the trendline). In this
case I have highlighted the buy area in green. You should only enter a break
like this if price found a key support, then breaks the trendline explosively
and this would reduce the chances of you catching a fake-out. This break is
different from normal breaks as it has more restrictions on when to enter
the trade since price didn’t go above a previous lower high to indicate bullish
move.
ForexSwing Trading Manual
58
Manual Entry Sell
Trading is like driving, if you drive without using your mirrors you are likely
to meet in an accident. In this case if you are focusing only on the channel
that would be you trading without mirrors. In this example price has reached
a trendline (labeled “IMPORTANT BULLISH TRENDLINE”), but the chart
does not show all the points of that trendline. Follow with me for a little. That
“IMPORTANT BULLISH TRENDLINE” would be one of the mirrors which
will dictate where exactly you are in the market. When trading you should
always be checking your surroundings to see if you are clear.
If you should look at the same chart (below) you would’ve noticed price has
reached another trendline (red trendline labelled “IMPORTANT BULLISH
TRENDLINE”) which means price could reverse after touching this trendline.
Looking at the last low of the channel marked with the red horizontal line,
maybe you would think to short at that point if price had broken below that
low. That would be a bad trade because the bullish trendline still holds, until
proven otherwise. Instead, what would be best is if we waited on price to break
below the trendline (IMPORTANT BULLISH TRENDLINE) before manually
entering a sell (with a Strong Candle of course). The sell area would be the area
highlighted in red, that is where we would enter a manual sell and NOT below
that low, marked with the red line (DO NOT SELL HERE). Always remember
to wait for that candle in that area (red) to close as a strong candle, then and
only then would you enter a sell.
ForexSwing Trading Manual
59
Channel Break with Head and Shoulders
Many people have asked if I trade other patterns like double bottom, triple
bottom, head and shoulders the answer is yes but only if they are in line with
my Trendline Break Strategy. The chart below shows a clear ascending channel
which got broken forming a head and shoulder. I will explain how to approach
a chart like this.
Not all breaks are valid, looking at this channel break, if we were to inspect the
candle that broke the channel we would see that it wasn’t a Strong candle. The
body of the candle that broke the channel (blue circle) wasn’t strong enough
for us to enter a sell. Remember the body of a strong candle must be larger
than both tails of the candle and in this case both tails seem to be the same size
as the body.
We can’t ignore the fact that price did break the channel and if price remains
out of the channel we should be only looking for selling opportunities.
ForexSwing Trading Manual
60
Normally everybody would sell the first retest at TEST 1, but I would need to
see more. Like in a previous section of the book I went through the candlestick
patterns I use, and none was formed at TEST 1 so we wouldn’t have sold at the
first retest.
Looking at the second retest in the green circle, we clearly see a Bearish
Engulfing Candle which is perfect for our entry since we are already Bearish
and our Channel was broken. Another thing to note, is that the Engulfing
Candle engulfed two candles which makes it even more powerful.
Looking at the overall structure of the chart at TEST 2, it’s clear that the
second retest could possibly form a head and shoulder pattern so now we have
three (3) different reasons to enter this trade:
(1) Retest of trendline
(2) Bearish Engulfing
(3) Possible Head and Shoulder pattern.
Even if this trade goes against me, I would be unbothered because I know I
took a trade that lined up with my strategy and had three (3) solid reasons to
enter a sell. We would now wait for the engulfing candle to close then enter a
sell on the candle that follows the Engulfing Candle wherever it opens. Also,
we would then place stoploss above the engulfing candle at TEST 2 (right
shoulder) and wait for the market to do its thing. Later, we will show how to
manage trades and stacking trades.
ForexSwing Trading Manual
61
What I Think About Other Ways of Trading Channels
There is no one way of making a profit in forex and there are many ways
of trading channels. Below is one of the most common methods of trading
channels and I have also traded like this, as you can see below.
The reason I don’t trade channels this way is because it would mean I would
have to use a take profit, of which I’m totally not a fan. I think there’s a higher
possibility of catching pips when price breaks the channel than when price is
bouncing all over in the channel. At the end of the day it’s up to you the trader
to decide what works for you.
Other traders will also trade channels by placing limit orders at both ends of
the channel. If you are not too sure what a limit order is, a little research won’t
hurt. What they are essentially saying is price would hit the roof of the channel
and instantly reverse, or it hits the bottom and instantly reverses. They are
anticipating the market obeying the channel. I don’t like this type of trading, to
me it seems as if you are trying to predict the market, saying it will turn here
and go there and I never try to predict the market I only go with the flow.
ForexSwing Trading Manual
62
Final Thoughts on Channels
So now that you know how to trade channels it will take you sometime to start
spotting these channels with your naked eyes but if not, it doesn’t hurt to draw
your trendlines to assist you. Looking at the chart below you can see price
broke the bullish trendline and instantly the back of the trendline formed a
channel. It may be not so easy to spot, but it was there and waiting for a break,
is all you need to do to capture pips.
ForexSwing Trading Manual
63
The image below is the smaller timeframe of the channel above. I have
highlighted the points of the channel with yellow circles to make them easier
to spot if you hadn’t already.
This trade was taken because of three (3) reasons:
(1) Strong candle broke the channel (green circle)
(2) Price went below previous low where the arrow is pointing and
(3) Candle that broke the trendline was a strong Bearish Engulfing candle (Also Evening Star Pattern).
The entries are marked with white dotted lines and stoploss are marked with
yellow dotted lines. I know you will notice I have a sell at the point labelled
“LOW” and you must be saying why am I selling at support, this must be
a mistake. It wasn’t a mistake. If you look closer you realise I have two
trendlines T1 and T2. When price broker T2 with a strong candle I entered on
the candlestick that followed, which is one of the ways I stack my trades.
ForexSwing Trading Manual
64
The important entry is the first one. I wouldn’t advise traders when learning
my technique to start stacking trades so early. You should wait until you have
mastered the strategy before you start stacking.
When I enter a trade, it doesn’t matter what I see ahead (predict), I won’t act
unless my strategy indicates. You must always follow your strategy to the T. If
you were on the Titanic and you saw the ship heading towards the iceberg and
your strategy says stay on the ship you should stay on it.
Trading, unlike real life is different. The titanic travelling at the speed of light
towards an iceberg can stop exactly before it hits, and reverse to exactly where
it came from. For that reason, you should always stick to your rules.
ForexSwing Trading Manual
65
Triangles
Triangles, pennants, wedges I don’t care what they are called I call all of them
triangles. So, for the remainder of this book I will refer to them as triangles
(told you I like to keep things simple).
Everybody knows what a triangle is they are easy to find just look for areas
converging to a point and draw trendlines. Also, please note that only one of
the trendlines in a triangle that needs to be a valid trendline by my guide. If it’s
a bullish trend, then the bullish trendline should be valid and the bearish line
(top line that forms the triangle) should just connect and make the points of
the top of the triangle.
I will go through a few triangles for you to see how I trade them and how they
are drawn.
ForexSwing Trading Manual
66
Triangle One
I will go through the chart below with the triangle, showing exactly how I
entered those trades.
Notice how price converged to a point. This means price will break out
explosively and all we now need to do is jump on it when it breaks. Remember
we are not trying to predict which way it will break but instead we are waiting
on the break, then jump on it as soon as it shows which direction. My rules of
entry are the same for all breaks.
Strong candle break outside trendlines or Stop Order entries that
are set above/below the high/low respectively of the previous
touch of the lines of the triangle.
In this case there was a strong bullish candle that formed outside the triangle
which you can see in the green ellipse. In this case I opted not to jump in this
trade at that point, because price was approaching a support area (top yellow
ForexSwing Trading Manual
67
horizontal line), so I waited. The most appropriate entry would be to use a
Buy Stop and put it above the high E1 (top yellow line) and leave it there. Price
then turned and went down inside the triangle to touch the bottom trendline
one final time (third yellow circle from right), then reversed instantly. You
should put another buy stop above that high at E2 so if price breaks above that
point you are saying the market is making higher highs so its time to enter. So
those two yellow lines would be your buy stop entries. If both Buy Stops gets
triggered it means the market has chosen its direction and we are in. I had
entered at E1 and E2 but got stopped out because I had moved my stoploss
to breakeven for both. I timed the market and made two more entries at E3
and E4. At E4 all I did was place a Buy Stop above the candlestick that peaked
although that candle was a pinbar, I was still bullish. For the next Entry at E3
I did the same thing, place a Buy Stop above that high and waited for price to
trigger it.
To manage this trade all I did was move my stoploss below the higher lows
marked with yellow circles and you can see where the current stoplosses are
(dotted yellow horizontal lines). Notice the Minor Trendline that I drew to
manage the trade that’s how I would know if the trend has reversed.
Please take note of the Major and Minor Trendlines that I drew and
the different highs and lows.
ForexSwing Trading Manual
68
Triangle Two
This is one of the most common type of triangles (chart below) you will see
in the market and should be easy to spot because the base of the triangle is
a support, and everybody knows what a support is. I never try to predict the
market notice I didn’t say I would buy or sell. The only thing we know is that
the market will break out explosively when it converges to a point (triangle)
which is why I love trading breaks.
If we know that it will break explosively, we need to put ourselves in the
position to catch those breaks even when you are not beside the computer.
I like when prices converge to a point, when this happens fake-outs are less
likely. For this triangle, since we are not in the predicting game I added a
few stop orders. Based on the converging point, if price made a higher high,
I would buy. So I placed buy stops above all the highs as you can see them on
the chart above and I placed sell stops below all the lows of the candles labelled
E1, E2 and E3. That’s all I did and went on my merry way. When I came back
and sell stops got triggered, all I had to do was move my stoploss in profit and
let the trades run.
ForexSwing Trading Manual
69
Carefully placed Stoploss is a must for entry orders which we will go through
later. Once we have both our stoplosses in place for both Buy Stops and Sell
Stops you can go to sleep, the gym or whatever is it that you do. Once they are
triggered the next step is to manage these trades which you will see later in the
book.
ForexSwing Trading Manual
70
Triangle Three
Again, these are simple patterns that are easy to spot. When I find triangles,
I start to watch them carefully waiting for the break in whichever direction.
On the chart below both my sell stops got triggered which I placed below both
lows. The reason I didn’t enter this trade manually, if you look closely at the
purple circle there wasn’t a Strong Bearish Candlestick and in cases like these
I wait for price to break the next low then my Sell Stop would be triggered. In
the purple circle we see a few bearish candles but none of them were strong
enough for me. The tails of the candles were basically the same height as the
bodies of the candle.
Trading triangles is easy and requires no indicators. It’s a game of patience.
Wait for a strong break or for price to go below/above the previous low/high
respectively which will trigger your Stop Orders.
Another thing to make note of is the top line notice how I used both wicks and
real bodies to get the best possible looking line. If price hadn’t broken the low
and reversed, I have marked the price area with a purple line to show where I
would have placed my buy stop if I didn’t get a Strong Candlestick that breaks
the channel.
ForexSwing Trading Manual
71
Triangle Four
After finding triangles, the waiting period begins. You don’t necessarily
need to be in front of the computer all the time. You just need to be beside it
when price is approaching the lines of the triangle and a break is possible. As
discussed in previous chapters I enter these breaks using two methods Manual
and Stop Orders.
I remember this trade perfectly by looking at the chart above. I missed the
manual entry which happens a lot because I normally leave the computer.
From this same chart you will notice in the blue circle, there are two (2)
Bearish Engulfing candles (zoom in) exactly on the bottom line of the triangle
which would be more than enough for me to enter this trade. Also, I would
have placed sell stops below all the lows of the bottom line of the triangle
(stacking) as seen on the chart. After entering these trades, the next step is to
manage your trades which we will discuss later in the book.
As you can see all these entries happened after each time the market broke
a low which I highlighted in green. All I did was to place Sell Stops at those
areas. Once price breaks my triangle, it’s safe to find points to jump in, because
once the break is confirmed we are good to go.
ForexSwing Trading Manual
72
Trendline Breaks
Trading breaks is very simple there is no need to over complicate stuff. I
consider my method of constructing trendlines to be a very lethal weapon in
my arsenal. I started off trading just trendline breaks which gave me all the
insight I needed to master the market just a proper trendline and a break is all
I need.
In truth, you don’t even have to think of channels, wedges or whatever else the
case may be. All you need is a proper trendline in any market and wait for a
break, follow my rules, enter without fear, never risk more than 1% on a trade
and watch the profits come in.
In this section I will go through the basics of trading trendline breaks which is
the simplest of them all, you only need one trendline to trade.
We will be looking at the chart below and confirming our triggers and further
show how simple it is to trade trendline breaks.
ForexSwing Trading Manual
73
From what we learnt earlier, there can be Major and Minor trendlines and
in this case as seen in the chart below we have three trendlines. Price broke
“Trendline 1” and “Trendline 2” convincingly which we will zoom in on soon.
We are not sure what will happen to “Trendline 3”.
Taking a closer look at the breaks on the chart below we will discuss how
we would enter these trades. Looking at “Trendline 1” where price broke in
circle #1 we can see two of our triggers. The first being a strong bearish candle
piercing through the trendline and the second a Bearish Engulfing Candle with
a pin bar which is what we want to see. We would instantly enter a sell on the
candle that follows the Bearish Engulfing Candle marked with the green arrow.
ForexSwing Trading Manual
74
The best way to enter breaks is by manually entering the trades where it is
confirmed. Set alerts if you must or check at intervals when price is close to
your trendline. When watching trendlines for breaks you are looking for two
things:
1.
A Strong Bullish/Bearish candle piercing through the trendline
2.
Engulfing candle that went through the trendline of below/above in a bullish/bearish market respectively
It doesn’t matter what happens after as long as you see these, just enter on the
next candlestick. I have marked the candlesticks that you would’ve entered on
with green arrows. You should always wait until the candlestick closes.
On “Trendline 2” (chart above) where price broke through, look carefully at
the circled regions. Circle #2 which is on “Trendline 2”, shows a strong bearish
candle piercing through the trendline, and a bearish engulfing candle (double
trigger) which means we should enter on the next candle marked with green
ForexSwing Trading Manual
75
arrow. In circle #3 we see another strong bearish candle that also formed a
bearish engulfing candle, so we enter on the candle that followed the Engulfing
Candle. Any of the two triggers can be used for entries but seeing both is even
better.
Still on the same chart (below), looking at “Trendline 3” we see price is
struggling to break. In this case, just add a Sell Stop below that point which
I’ve highlighted on the chart. If it gets triggered, that’s fine if not, it’s still fine.
Sometimes the breaks are straightforward and sometimes they are difficult like
those on “Trendline 3”. In these cases, just put a sell stop below where price is
struggling since we are waiting on breaks.
So, practice your trendline drawing skills, apply my entries to any point where
the market breaks and watch the progress.
ForexSwing Trading Manual
76
MANAGING TRADES
If you notice I haven’t really touched the topic of stoploss or take profits
greatly in the book so far. There’s a reason I chose to put it in a section by
itself, it is that important. For those who have seen my charts will notice that I
don’t use Take Profits, mainly because I manage my trades differently.
Stoploss
Before putting on a trade, I already know where my stoploss will be, and as
soon as I enter a trade I place my stoploss. I never leave anything to chance.
Stoploss is the tool that prevents you from losing everything so it’s imperative
that you place stoploss on all your trades. The way I do so is by basically
putting my stoploss above the previous high or below the previous low.
The chart below illustrates where exactly the stoplosses would be for the
entries marked with the white dotted lines. The yellow lines marks where the
stoploss would be for the entries where the arrows begin to go up.
ForexSwing Trading Manual
77
Also ensure that when you place your stoploss in these areas you are not
risking more than 1% of your account. In cases where you are using multiple
entries, like on the chart above where there are five entries, If you normally
trade 0.10 then that means for each of these trades, you would have to risk
0.02. So even if it goes bad, you will be only risking 1% of your account just the
same.
Channels are special, I normally use the halfway point as my stoploss. So,
if the total height of the Channel is 400 pips, then my stoploss would be in
the middle at 200 pips (Already stated in the channels section of the book).
Everything else is always above the previous high or below the previous low.
ForexSwing Trading Manual
78
Phase 1 - Managing Trades - Breakeven
As soon as you enter a trade, the management begins with your stoploss.
I have two phases of managing my trades. I have the first phase which is
basically to get the trade to break even. This is simply to move my stoploss
above/below the entry point so I’m breaking even. This is the first and simplest
part of managing my trades.
The first phase basically is moving my stoploss to break even as
soon as the trade is 50 pips in profit. Once this is done we are finished
with Phase 1 of managing the trade.
When managing multiple entries, I move all stoplosses at the same time to the
same place when any of the entries has gone to make 50 pips or more. Even
if it spiked and came back down a little (referring to chart below), if the price
went to make 50 pips, that’s all I need to move stoploss to breakeven.
Let us look at the chart below to explain in detail. We have a total of five (5)
entries as you can see with the white dotted lines. I will use the first two sells in
this example E1 and E2. The approach for the other entries would be just the
same. Let’s say entry E1 has moved 50 pips in profit but the others haven’t, I
would move all stoploss to the breakeven point of that entry shown in purple
SL1. So, the Stoplosses of E1 and E2 would be moved to SL1.
ForexSwing Trading Manual
79
When Entry 2 labelled E2 moves to 50 pips I would move all the stoplosses to
SL2 which is the breakeven point for entry 2. I would continue this until all the
stoplosses are at the breakeven for the last entry.
Once all stoplosses are at the breakeven point of the last entry then its time to
move to Phase 2 of managing the trades, which is securing profits.
ForexSwing Trading Manual
80
Phase 2 - Securing Profits
Everybody knows I don’t use indicators and I don’t use risk reward to take
profits either. A lot of people will say that is dumb, but this aspect of my
strategy is unique.
I use a simple method for adjusting my stoploss and that is by drawing a
trendline. It doesn’t matter what I’m trading whether it be channel, triangles
or just plain trendlines the way I manage opened trades is the same.
The first thing I do when in Phase 2 is draw a trendline, if one doesn’t exist
already, because it could be a trend continuity. This trendline is a guide for
price action and it will dictate where my stoplosses are placed. Using the
chart below if price just got out of Phase 1 of Trade Management, we draw our
trendline (it’s a sell so it would be a bearish trendline).
So, our stoplosses are at the point labelled “SL1”. The only thing we are doing
now, is waiting for another lower high to form then move stoplosses above that
area. As you can see a lower high was formed and we moved our stoplosses
above that area labelled “SL2”. The price went down and found support after
which that support then turned into resistance. So, what we do, is to mark this
as a critical point and put our stoploss above that point which has now turned
resistance labelled SL3. SL3 would be our new stoploss area and I would
continue until I’m stopped out.
ForexSwing Trading Manual
81
I Never close trades manually. If the price breaks the trendline and doesn’t
touch your stoploss don’t panic, leave it as is. You are already in profit anyway.
What’s the worst that can happen? Chances are even after breaking the
trendline it will probably make a lower low (bearish market) and in that case
all we do is adjust our trendlines like we learnt. The purpose of the Trendline
is to help us to be on the lookout for trend reversals. So, if price breaks our
trendline and breaks the previous high which would stop us out, it would be
time to start looking for bullish entries. Most times, prices will just break the
trendline and continue down so always keep your stoplosses in place.
ForexSwing Trading Manual
82
Overall Management
Although I said I don’t use take profits I do use another type of profit taking
strategy. Let me share a story with you. My last hurdle before I became
profitable had to deal with taking profits. It seems I could’ve been profitable a
lot earlier if I had just applied this simple profit taking strategy to my overall
strategy.
I found myself making up to 60% on my account then lost it back before the
week ended. That was crazy. I’m not sure if you understand what I meant by
60% so let me explain. If I had $1000 in my account I would make $600 and
lose it back to the market.
To overcome this, all you need to do is create a weekly target. My target is
20% on my account. So, a $1000 account would be a profit of $200 in the first
week. So now when I go up to 60% I close all my losing trades and move all my
stoploss so that worst case I secure 20%. That is how I trade so freely, leaving
trades running for days, because I have already locked in my 20% for the week.
ForexSwing Trading Manual
83
FINAL THOUGHTS
My strategy is simple but very hard to follow. Our own enemy when trading
is our emotions, at times we are missing just the level of control needed to be
successful in the financial markets.
My strategy is simple and anyone who understands and pratice it will see
profit. My entire strategy is based on trendline breaks and once we see a break
in line with our rules we take that trade regardless of what happened in the
previous trades.
I trade this strategy two (2) times a day, when I wake up and before I go to
sleep. I get up set my entry orders and adjust my stoploss and that’s it. My
strategy is perfect for people who are in the 9-5 and can’t afford themselves
any other time to trade or if you just don’t want to stare at the charts all day.
There’s no need to complicate trading it’s already hard to master don’t add
voodoo to your charts or hunt for all types of indicators they are all the same.
Trading the naked charts is the best thing I have ever done. My charts are free
from clutter which makes it very easy to see price action and what the market
is telling me to do.
I encourage you all to practice and train yourself to be discipline. Don’t watch
the hype on instagram pay attention to your growth. Get a notebook document
all your trades every week go back and see if you followed your rules on all the
trades be honest with yourself.
Do not worry about losing trades focus on following your strategy regardless.
I’ll be here remember to email your payment receipt to forexswingltd@gmail.
com to be added to our team and lets make some money.
ForexSwing Trading Manual
84
BONUS SECTION
Correlation
This is a always overlooked in the trading realm but when trading forex you
need to try and have all the odds in your favor so here’s a little nugget.
When you are trading Correlated pairs for example USDXXX, USDXXX taking
a trade with two correlated pairs is very risky if you are not doing it right.
Lets say you buy two correlated pairs and for whatever reason USD gets weak
(assuming the correlated pairs are USDxxx, USDyyy) and start to fall, those
two trades will go against you. So if you were risking 1% on each trade you
would be risking 2% with the same odds which is more than the amount you
would want to risk.
My advice when trading correlated pair is to compare the correlated pairs then
take the trade on the best chart based on your analysis.
The next approach is to split your lot size. Lets say you normally trade 1.00 on
USDXXX and you want to buy both USDXXX and USDYYY you could split the
lot size to 0.50 for each.
Psychology
I can’t teach psychology and no one can. What I can do however is tell you
how to limit attacks from your emoions. The biggest contributing factor to
emotional attacks in trading is over-leveraging and I’ll explain. When we put
on a trade if we were risking 1% of our account, if we lose, that wouldn’t be a
big deal but if in one trade we lose 20% of our account that’s a lot.
When you lose that amount of money you are no longer in control your
emotions takes over. Whether in the form of revenge trading or just blinding
you to the market or totally discouraging you.
I implore you to stay within reasonable limits, you don’t need to be risking
ForexSwing Trading Manual
85
more than 1% especially if you are not profitable. Don’t watch people posting
big money take your time and grow your account.
Document all your trades so you know exactly where you have a problem. One
of the most frustrating things is jumping from strategy to strategy without any
luck. You would be surprise that it wasn’t the strategy all along it was actually
you. Most times you think you are following your rules but you aren’t and then
you move on to a next strategy (indicator) and the cycle continues. A strategy
needs time, you should trade a strategy for at least 2 weeks following it to the T
do not stray then find the issues you are having then work on them.
Get the big losses out the picture and watch how easier it is to control your
emotions.
ForexSwing Trading Manual
86