4th pillar: technical analysis: Flashcards
what is a support?
A support is a price level in a downtrend where the market stops, pauses or bounces to the upside
what is a resistance?
a resistance is a price level in a uptrend where the market stops/pauses/bounces to the downside
on a candlestick, where would you say the support zone is when it gets there?
supports and resistances are zones that start from the end of the candlestick to the end of the wick
how is a support created
the support is created in 2 parts:
The first part is the sellers in the market closing positions and taking their profit
The second part is new buyers coming in the market and opening new fresh positions
how is a resistance created?
The resistance is created in 2 parts:
The first part is the buyers in the market closing positions and taking their profit
The second part is new sellers coming in the market and opening fresh new positions
can the two parts of either a support or resistance happen at the same time?
yes by basing themselves from previous resistance and support zones
are supports and resistance usually random?
nah boy
there has to be a motivation for someone to close their trade or to open a new one
what is the mechanism behind the supports and resistance?
accumulation and distribution
what is an accumulation zone?
Accumulation zone is where traders/institutions are opening/adding positions to the market
They are adding a buy/sell
what is an distribution zone?
Distribution zone is where traders/institutions are closing fully/partially their positions in the market
They are removing a buy/sel
what makes longer accumulation or distribution zones?
the bigger the positions that are injected in the market or removed from the market
what has a bigger probability of being a market correction or trend reversal? why?
Large support/resistance
it contains both the Distribution and Accumulation
This is why they are longer, because they have both
what has a bigger probability of being a position adding lever for the continuation of a trend? why?
small support/resistance
there is only the Accumulation
what are consolidations
large levels of distribution and accumulation, just like the large support/resistance
They are two sides of the same coin
can large supports or resistance zones be only accumulation or distribution zones?
nah boy
can small supports or resistance zones be both accumulation or distribution zones?
nah boy
what are psychological levels?
the prices that are more important than others
what are psychological levels based on?
based on round numbers
price must finish by 3 zeros
the more zeros, the stronger the psychological level
what does it mean when you have a higher high and higher low
uptrend
what does it mean when you have a lower high and lower low
downtrend
what does it mean when it is not a downtrend or uptrend
for ex: a Higher High and a Lower Low
consolidation
what is a trendline?
Line that follows the current timeframe trend
what is a counter-trendline?
Line that goes the opposite way of the current timeframe trend
what is a key level trendline?
Line that doesn’t follow any trend, but acts as a Support/Resistance
Most of the time will slash through the candlesticks
what is a channel?
Two parallel trendlines who are following the current timeframe trend
what is a counter-trend channel?
Two parallel counter-trendlines who are going against the current timeframe trend
what is part of the break-hook-go
the break
the hook
the go
the break in the break-hook-go
When a trendline with/without another element of structure (support, resistance, psychological level, etc) is broken
the hook in the break-hook-go
When the price comes back on the broken elements and re-touches it
the go in the break-hook-go
When the market confirms us that the price is bouncing back on the element of structure
what is a big bounce
Big heavy rejection on a confluence of trendlines and elements of structure (support, resistance, psychological level, etc).
what differentiates the break-hood-go from the big bounce?
The BHG will allow you to have more confirmations to enter your trade, but you will miss out on a few pips since you are entering a bit later than a BB
The BB will allow you to have a perfect entry and maximize your pips, however you do not have any confirmation so you should be more careful and double check your analysis
what are chart patterns?
a specific price action that has been formed in specific shape and been repeated multiple times in the market over the years
what are chart patterns used for
- Enter a trade (with fundamental and other confirmations)
- Add positions to your trade
- Second chance to enter the trade if you missed an opportunity earlier
what are the 5 rules to determine wether we are looking at institutional trends?
- The trend (channel) must be represented in H4 or D1
- The angle of the trend must be around 45 degrees, it must be sustainable
- The trend must be a clear uptrend or downtrend, HH HL or LH LL
- You must prove that the heartline exists
- You must be able to count the elliott waves
what are impulsion waves
part of the Elliot waves
they are the points on a certain trend that push to counter it
what are correction waves
part of the Elliot waves
they are the points on a certain trend that promote it
in an uptrend, what are the rules concerning the Elliot waves
- Wave #2 cannot be higher than the beginning of wave #1
- Wave #3 cannot be the smallest of the impulsion waves
- Wave #4 cannot come lower than the end of wave #1
What happens if the institutional trend doesn’t follow every rule perfectly?
It becomes a structured channel (the in-between the channel and institutional trend)
The 4 zones will not be necessary respected
the 85% heartline rule will not be applied
there won’t be any Elliott waves
However the market is still very structured and more previsible than a regular channel
what are the two types of movements in the market?
impulsive leg
corrective leg
impulsive leg
Will create a Higher High or a Lower Low (pushing the price)
corrective leg
Will NOT create a Higher High or a Lower Low (correcting the price)
how do you use the fibonacci tool correctly?
we need to find the last impulsive leg of the movement
we measure it and will give us all the proportions to setup our trade properly
