Date post: | 17-Dec-2015 |
Category: |
Documents |
Upload: | patrick-french |
View: | 214 times |
Download: | 1 times |
Conquering Technical Analysis Webinar Conquering Technical Analysis Webinar
Wednesday, 13 February 2013Wednesday, 13 February 2013
Presenter: Shaun van den BergPresenter: Shaun van den Berg
: Head of Client Education at PSG Online: Head of Client Education at PSG Online
• What is Technical Analysis?
• Simple vs Complex Charts
• Chart Setups
• Psychology of Trading
• The Trading Plan
• The Stockbroker Report
• Summary
• Conclusion
AgendaAgenda
Presenter: Shaun van den Berg
What is Technical Analysis?What is Technical Analysis?
Presenter: Shaun van den Berg
Two broad categories used to analyse shares to make investment decisions:
• Fundamental analysis: – Characteristics of a company– Estimate its value
• Technical analysis:– Does not care about the "value" of a company.– Technicians (also called chartists) only interested in
price movements.
IntroductionIntroduction
•Fundamental Analyst– Goes into each store– Studies the product – Decides whether to buy
•Technical Analyst– Sits on a bench in the mall – Watches people go into the
stores. – Disregards intrinsic value of the
products in the store – Decision based on the patterns
or activity of people going into each store.
Shopping Mall AnalogyShopping Mall Analogy
Source: www.investopedia.comPresenter: Shaun van den Berg
• Method to evaluate securities – Shares, indices, futures, commodities, exchange
rates, etc.
• Analyse market activity (historical performance)
– Past prices– Volume
• Use charts and other tools • Identify patterns • Future activity – Direction/ trend
What is Technical Analysis?What is Technical Analysis?
Presenter: Shaun van den Berg
• Study of supply & demand
• Attempts to determine:
– What direction or trend - Continue into future
• Attempts to understand:
– The emotions in the market by studying the market itself, as opposed to its components
• Some chartists use technical indicators & oscillators
• Others rely on chart patterns.
• Most use some combination of the two.
Price ActionPrice Action
• The market discounts everything (Priced in)– Price discounts everything (Reflects all information).– Broader economic factors (GDP, inflation, interest rates) – Company's fundamentals (Financial information relative to price)
– Market psychology (Greed, Fear & Expectations)
• Price moves in trends (The trend is your friend)– Price movements are not totally random– Once a trend is established, future price movement is more
likely to be in the same direction than to be against it. – Most technical trading strategies are based on this assumption.
• History tends to repeat itself (Market sentiment) – The "What" is more important than the "Why."– Market players react consistently to similar market stimuli over
time. – Emotional aspect of the market (Bullish or Bearish)
Basic AssumptionsBasic Assumptions
Simple versus Complex ChartsSimple versus Complex Charts
Presenter: Shaun van den Berg
• Step #1: What is the Overall Trend? – Identify the overall trend – use trend lines,
moving averages or peak/trough analysis. • As long as the price remains above its up trend
line, selected moving averages or previous lows, the trend will be considered bullish.
• As long as the price remains below its down trend line, selected moving averages or previous highs, the trend will be considered bearish.
Chart AnalysisChart Analysis
Trending & Trading RangesTrending & Trading Ranges
Trading Range
Trading Range
Trading Range
Trading RangeTrending
Trending
Trending
Trending
Three types of trend:
– Uptrends
– Downtrends
– Sideways/Horizontal or Neutral Trends
Trend AnalysisTrend Analysis
Example of a Up Trend (SAB)Example of a Up Trend (SAB)
Higher Highs
Higher Lows
Key & Critical Support LevelsKey & Critical Support Levels
Key
Critical Early warning Something is not right Protect profits Raise your stops Critical level – Beginning of new trend
Example of a Down Trend (TKG)Example of a Down Trend (TKG)
Lower Highs
Lower Lows
Key & Critical Resistance LevelsKey & Critical Resistance Levels
Key
Critical Early warning – Move is pausing Move is coming to an end Protect profits (if short) Tighten your stops (if short) Critical level – Move up is complete
Trend Lines (SAB)Trend Lines (SAB)
Resistance Trend line
Support Trend line
Moving Average CrossoversMoving Average Crossovers
• Step # 2: Where is Support? – Congestion (trading range) or previous lows
below the current price mark support levels. • A break below support would be considered
bearish (Open short positions / Sell).
• Step # 3: Where is Resistance? – Areas of congestion and previous highs
above the current price mark the resistance levels.
• A break above resistance would be considered bullish (Open long positions / Buy).
Chart AnalysisChart Analysis
Example of a Sideways Trend (ANG)Example of a Sideways Trend (ANG)
Resistance
Support
2006 2013
• Step # 4: Where is Momentum?– Momentum is usually measured with an
oscillator such as the MACD indicator. • If MACD is above its 9-day EMA (exponential
moving average) or positive, then momentum will be considered bullish, or at least improving.
• If MACD is below its 9-day EMA or negative, then momentum will be considered bearish, or at least deteriorating.
Chart AnalysisChart Analysis
MACD IndicatorMACD Indicator
• Step # 5: Where is Buying/Selling Pressure? – For shares and indices with volume figures
available, an indicator that uses volume is used to measure buying or selling pressure.
• When Chaikin’s Money Flow (CMF) is trading above zero, buying pressure is dominant.
• Selling pressure is dominant when the CMF indicator moves below zero.
Chart AnalysisChart Analysis
Chaikin’s Money Flow (CMF)Chaikin’s Money Flow (CMF)
Volume Price Trend (VPT)Volume Price Trend (VPT)
• Step # 6: Where is Relative Strength? – The Relative Strength indicator is a line
formed by dividing one data stream (share) by another (usually a benchmark).
• For shares it is usually the share price divided by the JSE Overall Index.
– The plot of this line over a period of time will tell us if the share is:
• Market outperforming (rising) • Market under performing (falling), or• Market performing (moving sideways) relative to
the JSE Overall Index.
Chart AnalysisChart Analysis
Relative StrengthRelative Strength
Data 1 = BHP BillitonData 2 = JSE Over Index
Synthesise StepsSynthesise Steps
Chart Setups Chart Setups
Presenter: Shaun van den Berg
• Chart setups are situations where all or most of the chart conditions are "right" for a long or short entry. – "Right" conditions, depending on the setup,
may or may not include other indicators. • Technical indicators support price & volume
action– Indicate or support what the action is, but– Do not dictate what to do, or – When to do it
Chart SetupsChart Setups
• Many setups are a result of self-fulfilling prophecies – Traders see the same chart patterns & price
action. • Early identification & perhaps even an early entry is
important • Understand all influences & indicators &
interpretation.• Only experience will get you to
– Understand how they work, – When to use them, and – Trust chart setups.
• Back-test, Paper trade (Simulator) & Start small. – Pick a trade candidate, – Plan your trade – Execute your plan.
Chart SetupsChart Setups
• The stronger the primary trend the more confidence you should have.
• Watch for big changes in volume as price approaches targets.
• Increased volume should accompany any breakout.
• Big volume spikes start & end a rally regardless of time frame.
• Play around with various charts but always use more than one time period using the support-resistance levels of one to tell you where your limits are in the other.
• Above every resistance level & below every support level lie plenty of orders to buy or sell once price breaks one way or the other. – This is what accounts for major volume increases on a
breakout or breakdown.
Chart Setups: Observations Chart Setups: Observations
• All stop-losses should be set to allow a 2% - 3% loss & no more.
• Smart money tends to put on trades when markets are quiet; amateurs tend to jump on the news.
• Buy the rumour, sell on the news. • Buyers wait for pullbacks & sellers wait for resistance • Technical indicators show what is going on with price
– They DO NOT dictate what you should do.
• Technical indicators are either:– Momentum type - showing you strength of the trend, – Overbought and Oversold type - showing you
weakness at support/resistance.
Chart Setups: Observations Chart Setups: Observations
Ascending TriangleAscending TriangleDescending TriangleDescending TriangleSymmetrical TriangleSymmetrical Triangle
Chart SetupsChart Setups
• Bullish chart pattern - easily recognizable - distinct shape created by two trend lines.
• One trend line is drawn horizontally - level that has historically prevented the price heading higher (i.e. resistance)
• Second trend line connects a series of increasing troughs or higher lows/ supports.
• Enter a long position when the price breaks above the top resistance.
Ascending TriangleAscending Triangle
• The more mature in time the pattern is the stronger it is.
• Trade the primary trend.
• Set buy limits just above the highs of horizontal resistance.
• Increased volume must accompany the breakout.
Ascending Triangle - RulesAscending Triangle - Rules
Ascending TriangleAscending Triangle
Ascending TriangleAscending Triangle
Mature Bullish Broken resistance Increased volume
Open: 28300cHigh: 28892cLow: 28300cClose: 28892c
Resistance @ 28500c
Entry Price: 28510c
• A bearish chart pattern • One trend line connects a series of lower highs• Second trend line - strong level of support. • Watch for a move below support - suggests
downward momentum is building.• Once the breakdown occurs - enter a short
position
Descending TriangleDescending Triangle
• The more mature in time the pattern is the stronger it is.
• Trade the primary trend.
• Set sell limit just below the lows of horizontal support.
• Increased volume must accompany the breakout.
Descending Triangle – Rule Descending Triangle – Rule
Descending TriangleDescending Triangle
Descending TriangleDescending Triangle
Support @ 39320c
Open: 39770cHigh: 40096cLow: 38851cClose: 39190c
Entry Price: 39315c Mature Bearish Broken support Increased volume
• Easily recognisable chart pattern• Distinct shape created by two converging
trend lines. • Draw two trend lines that connect a series of
sequentially lower peaks & a series of sequentially higher troughs.
• Both trend lines act as barriers that prevent the price from heading higher or lower.
• Once the price breaks above or below one of these levels, a sharp movement often follows.
Symmetrical TriangleSymmetrical Triangle
Symmetrical TriangleSymmetrical Triangle
• Can break either way – Up or down
• Stick with the primary trend.
• Set buy limit just above the high of descending trend line resistance.
• Increased volume must accompany the breakout.
Symmetrical Triangle - RulesSymmetrical Triangle - Rules
Symmetrical TriangleSymmetrical Triangle
Open: 15900cHigh: 16700cLow: 15701cClose: 16700c
Resistance @ 15883cEntry Price @ 15890c
Mature Bullish Broken resistance Increased volume
Psychology of Trading Psychology of Trading
Presenter: Shaun van den Berg
The definition of a successful trader is someone who feels The definition of a successful trader is someone who feels good about themselves and enjoys playing the gamegood about themselves and enjoys playing the game.
• You must win the battle within yourself first, before you can win in the markets.
• Trader’s mental & emotional state• Approach your trading with the right mind-set
& attitude.• Train the mind to a level of mental fitness &
toughness– Make decisions with a clear & unclouded mind. – Keep emotions under control (Discipline)
• Visualise yourself as a successful trader– Become that person - Less likely to allow your
emotions to make mistakes / inconsistent
Psychology of Trading Psychology of Trading
Psychology of TradingPsychology of Trading
Source: Goal Mapping by Brian Mayne
• Control your emotions– Spend time every day, working on the discipline of
trading (Keep a trading journal) – Do not take losses personally– Negative personal evaluations (What did I do right?)– Self-image as a winning trader– Treat trading like a business
• Back-test a system - Confidence– Find system that suits your personally– Back-test/ Paper trade / Start small (Real-time)– Appropriate money to trade system– Go for it!
Psychology of TradingPsychology of Trading
The Trading Plan The Trading Plan
Presenter: Shaun van den Berg
1. What market(s) do you want to trade?– JSE Top 40 shares
– JSE Mid caps (next 60)
2. What instruments do you want to trade?– CFD & SSF for equities
– ALSI & ALMI for indices
3. What timeframes do you want to trade? – Intra-day for ALSI / ALMI
– Swing trades (2-5 days) for SSF (Shorts)
– Position trading (weeks) for CFDs (Longs)
4. Describe what strategies you want to trade.– Breakouts from continuation chart patterns
– Overbought / Oversold levels
The Trading Plan The Trading Plan
5. What are the entry rules of the strategies?– Long positions – breakout above resistance– Short positions – breakout below support
6. What are the exit rules of the strategy?– Target prices established by chart patterns– Previous key support & resistance levels– Retracement levels / Stop loss
7. When do you trade & when do you not trade?
– Done the homework / prepared– No preparation / tired / late / impulsive
8. What money management approach are you using?
5. Risk/ Reward ratio: 1:2 at least
6. Position sizing (Risk 2% of capital per trade)
7. Stop loss levels from support/ resistance
The Trading Plan The Trading Plan
The Stockbroker ReportThe Stockbroker Report
Presenter: Shaun van den Berg
The StockbrokerThe Stockbroker
Presenter: Shaun van den Berg
Open Trade IdeasOpen Trade Ideas
Presenter: Shaun van den Berg
OpenDate Stock Direction Entry Take Profit Stop-loss Yesterday Close P&L %
20130115 GRT Long 25.15 26.00 23.50 25.75 2.3920130116 APN Long 163.00 178.00 158.00 163.00 0.0020130117 WHL Long 64.68 72.00 59.50 67.20 3.9020130121 AVI Long 55.85 60.00 53.99 55.94 0.1620130206 LHC Long 32.10 36.00 30.99 32.68 1.8120130207 JDG Long 41.00 44.00 40.00 42.05 2.5620130208 SHP Long 180.60 205.00 174.00 176.00 -2.55
• Methodology – Top 100 list (Scan / Manual)
• Risk Management– Risk/ Reward ratio – at least 1:2 times
• Trade Ideas (CFD & SSF) – Trend analysis: Moving Averages/ Trend lines /
Support & Resistance– Price & volume action – Support & Resistance levels– Stochastic indicator - Overbought / Oversold levels– Entry & Exits / Stops
Trade Ideas Summary Trade Ideas Summary
Presenter: Shaun van den Berg
• What is Technical Analysis – Price & volume action
• Simple vs Complex Charts– 6 Steps - Process
• Chart Setups – Continuation Patterns– Trading Rules
• Psychology of Trading– Attitude & Mindset– Control Emotions
• The Trading Plan – 8 Questions: Preparation - Confidence
Webinar SummaryWebinar Summary
• Next Webinar: Fundamentals for Value Investing– Lunch (13h00–14h00): Wed, 20 February 2013 (Full)
– Evening (18h00–19h00): Thurs, 21 February 2013 (95%)
• Next Traders Forum– PTA: Tues, 26 February 2013 (18h00 – 20h00) – JHB: Tues, 12 March 2013 (18h00 – 20h00) – DBN: Wed, 17 April 2013 (18h00 – 20h00)
• Good Luck • Happy Trading!
ConclusionConclusion
Presenter: Shaun van den Berg
Contact us
Travis Robson
(011) 996 5204
Shaun van den Berg
(011) 996 5254
Presenter: Shaun van den Berg