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Stock Market > Rayner Teo > Flashcards

Rayner Teo Flashcards

1
Q

What is the term “prop trading” short for, and what is it?

A
  1. Proprietary trading;
  2. Proprietary trading occurs when a trader trades financial instruments with a proprietrary trading firm’s (AKA “prop firm’s”) own money (AKA the “nostro account”) in order to make a profit for the company itself.
    * https://en.wikipedia.org/wiki/Proprietary_trading*
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2
Q

What are the three general trading styles (as opposed to investing styles) and their most-commonly associated chart trading timeframes, as identified by Rayner Teo?

A
  1. Day trading: 5 min & 15 min;
  2. Swing trading; 1 h & 4 h;
  3. Position trading (“trend following”): Daily;

Note I: Scalping and Spread Trading are also briefly mentioned.

Note II: According to https://www.tradeforextrading.com/index.php/types-forex-traders the different types of Forex currency traders are:

  • Scalpers
  • Day traders
  • Swing traders
  • Position traders

Rayner Teo, Trend Tarding Boot Camp (Video), Part I

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3
Q

___ is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. ___ actively ferret out stocks they think the stock market is underestimating. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond to a company’s long-term fundamentals.

A
  1. Value investing;
  2. Value investors;
    * https://www.investopedia.com/terms/v/valueinvesting.asp*
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4
Q

According to Rayner, price action trading is ___. The way you interpret a chart will naturally be different from the way another trader sees it.

A
  1. Subjective;

Rayner Teo, Price Action Trading Secrets, p. 15, 2020

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5
Q

According to Rayner, in the short run, trading results are ___. It’s only in the long run, after a decent sample
size of trades, that your system will align toward its expectancy. This concept is commonly known as the ___.

A
  1. Random;
  2. Law of Large Numbers;
    p. 20
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6
Q

According to Rayner, most traders think that when prices goes up it’s because there are more buyers than sellers. It would be more accurate to state that prices are going up because ___.

A
  1. Buying pressure is greater than selling pressure;
    p. 28
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7
Q

According to Rayner, price action trading is not a strategy but a “___.”

A
  1. Framework for trading in different market conditions;
    p. 35
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8
Q

According to Rayner, an Accumulation Stage:

  • Occurs after price has fallen over the last ___ candles or more.
  • Looks like a ___ Market with obvious areas of Support and Resistance within a Downtrend.
  • Features a flattening-out of the ___-Period Moving Average;
  • Features price swings back and forth around the ___-Period Moving Average.
A
  1. 100 candles (based on Rayner’s statement of “five months or more [on the daily timeframe]);
  2. Range;
  3. 200;
  4. 200;
    p. 37
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9
Q

According to Rayner, an Advancing Stage:

  • Occurs after price breaks out of ___ in a(n) ___ Stage.
  • Features a series of ___ highs and lows.
  • Features price action ___ the ___-Period Moving Average.
  • Features a ___-Period Moving Average which is starting to point ___.
A
  1. Resistancee;
  2. Accumulation;
  3. Higher;
  4. Above;
  5. 200;
  6. 200;
  7. Higher;
    p. 38-39
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10
Q

According to Rayner, a Declining Stage:

  • Occurs after price breaks out of ___ in a ___ Stage.
  • Features a series of ___ highs and lows.
  • Features price action ___ the ___-period moving average.
  • The ___-Period Moving Average is starting to point ___.
A
  1. Support;
  2. Distribution;
  3. Lower;
  4. Below;
  5. 200;
  6. 200;
  7. Lower;
    p. 41
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11
Q

Rayner teaches that if the market is in a potential ___ Stage, there’s a significant potential upside if price action breaks above Resistance. Hence, in this scenario it is wise to look for ___ opportunities.

A
  1. Accumulation;
  2. Buying;
    p. 41
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12
Q

According to Rayner, how should a trader generally determine whether to look for buying or selling opportunities in a particular market?

A
  1. Identify the current stage of the market (Accumulation, Advancing, Distribution, Declining);
    p. 41
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13
Q

Rayner teaches that during a Declining Stage, a trader should be looking for opportunities to ___.

A
  1. Short the market;
    p. 41
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14
Q

According to Rayner, a Distrubution Stage:

  • Occurs after price has ___ for the last ___ candles or more.
  • Looks like a ___ Market with obvious Support and Resistance areas in an ___.
  • The ___-Period Moving Average starts to ___.
  • Price action whips back and forth around the ___-Period Moving Average.
A
  1. Risen;
  2. 100 (based on Rayner’s statement of “five months or more [on the daily timeframe]);
  3. Range;
  4. Uptrend;
  5. 200;
  6. Flatten out;
  7. 200;
    p. 39-40
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15
Q

An Advancing Stage is most commonly referred to as a(n) ___.

A
  1. Uptrend;
    p. 43
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16
Q

A Declining Stage is most commonly referred to as a(n) ___.

A
  1. Downtrend;
    p. 43
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17
Q

When drawing lines of Support and Resistance, Rayner recommends pulling up a chart with at least ___ candles, focus on drawing only the ___ levels, and then adjust the drawn lines to get as many “___” as possible.

A
  1. 300;
  2. Most obvious;
  3. Touches (i.e., contact the greatest number of candle wicks and/or bodies);
    p. 46
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18
Q

According to Rayner, the more times Support or Resistance are tested in a short period of time, the ___ they become.

A
  1. Weaker;
    p. 47
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19
Q

Rayner teachers that price action reverses at Support as a result of ___. When price action continually re-tests Support, more and more pending Buy Orders are filled, leaving less available to support the price level.

A
  1. Buying pressure;
    p. 47
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20
Q

When price action break through Support, that price level often becomes ___.

A
  1. Resistance;
    p. 48
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21
Q

One reason Support often becomes Resistance is that when price breaks below Support, traders who originally bought at Support may look to sell at that price level in order to just “break-even.”

A
  1. Break-even;
    p. 49
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22
Q

One reason Resistance often becomes Support is that when price unexpectedly breaks out above Resistance, traders who regret missing the move place ___ at the breakout price point in the hope of a repeat of similar Price Action.

A
  1. Buy Limit Orders;
    p. 49
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23
Q

Rayner teaches that Resistance tends to break in a(n) ___, while Support tends to break in a(n) ___.

A
  1. Uptrend;
  2. Downtrend;
    p. 51-52
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24
Q

Rayner teaches that _(chart pattern)_ into Resistance are a sign of strength (i.e., Bullish), while _(chart pattern)_ into Support are a sign of weakness (i.e., Bearish).

A
  1. Higher Lows;
  2. Lower Highs;
    p. 52
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25
Q

“Higher Lows into Support” often creates the visual image of a(n) _(shape)_ on a price chart, while “Lower Highs into Resistance” often creates a(n) _(shape)_.

A
  1. Ascending Triangle;
  2. Descending Triangle;
    p. 52
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26
Q

Both Ascending Triangles and Descending Triangles are often called ___ patterns since Price Action will typically breakout in the ___ direction as the trend that was in place just prior to the triangle forming.

A
  1. Continuation;
  2. Same;
    * https://www.investopedia.com/terms/a/ascendingtriangle.asp*
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27
Q

A minimum of _(number)_ Swing Highs (which confirm Resistance) and _(number)_ Swing Lows (confirming an Upward Trend) are required to form a(n) ___ Triangle’s trendlines.

A
  1. Two;
  2. Two;
  3. Ascending;
    * https://www.investopedia.com/terms/a/ascendingtriangle.asp*
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28
Q

With regard to an Ascending Triangle, Investopedia suggests:

A long trade may be considered if Price Action breaks above ___.

A short trade may be considered if Price Action breaks below ___.

A Profit Target is commonly calculated by taking the ___ and adding or subtracting that to / from the breakout point.

A
  1. Resistance (the top of the pattern);
  2. The trendline (based on Swing Lows);
  3. The height of the triangle (at it’s thickest point);
    * https://www.investopedia.com/terms/a/ascendingtriangle.asp*
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29
Q

A minimum of _(number)_ Swing Lows (which confirm Support) and _(number)_ Swing Highs (confirming a Downward Trend) are required to form a(n) ___ Triangle’s trendlines.

A
  1. Two;
  2. Two;
  3. Descending;
    * https://www.investopedia.com/terms/d/descendingtriangle.asp*
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30
Q

With regard to a Descending Triangle, Investopedia suggests:

A short trade may be considered if Price Action breaks below ___.

A long trade may be considered if Price Action breaks above ___.

A Profit Target is commonly calculated by taking the ___ and adding or subtracting that to / from the breakout point.

A
  1. Support (the bottom of the pattern);
  2. The trendline (based on Swing Highs);
  3. The height of the triangle (at it’s thickest point);
    * https://www.investopedia.com/terms/d/descendingtriangle.asp*
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31
Q

Flags are areas of tight consolidation in Price Action showing a ___-trend move that follows directly after a sharp directional movement in price. The pattern typically consists of between ___-___ price bars. Flag patterns can be either ___ trending (Bullish Flag) or ___ trending (Bearish Flag). The bottom of the Flag should not exceed the ___ of the flagpole that preceded it. A Flag’s pattern is also characterized by ___ markers over the consolidation area. If lines converge, the patterns are referred to as either a ___ or ___.

A
  1. Counter;
  2. 5-20;
  3. Upward;
  4. Downward;
  5. Midpoint;
  6. Parallel;
  7. Wedge;
  8. Pennant;
    * https://www.investopedia.com/terms/f/flag.asp*
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32
Q

According to Investopedia, Flags suggest a ___ of the current Trend.

A
  1. Continuation;

https://www.investopedia.com/terms/f/flag.asp

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33
Q

It’s said that Japanese candlestick patterns originated from a Japanese rice trader called ___ during the ___s. Almost 300 years later, this concept was introduced
to the Western world by ___, in his book, ___.

A
  1. Munehisa Homma;
  2. 1700;
  3. Steve Nison;
  4. Japanese Candlestick Charting Techniques;
    p. 55
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34
Q

Name the five basic Bullish Reversal Japanese Candlestick patterns.

A
  1. Hammer;
  2. Bullish Engulfing Pattern;
  3. Piercing Pattern;
  4. Tweezer Bottom;
  5. Morning Star;
    * The Monster Guide to Candlestick Patterns, Raynar Teo*
35
Q

Name this Japanese Candlestick:

A
  1. Hammer (a Bullish Reversal Pattern);

Note 1: A Hammer represents a Bullish Engulfing Pattern over a one-candle time period.

Note 2:

  • Little to no upper shadow;
  • Price closes within top 1/4 of range;
  • Lower shadow is 2-3 times the length of the body;

The Monster Guide to Candlestick Patterns, Raynar Teo

36
Q

Name this Japanese Candlestick pattern:

A
  1. Bullish Engulfing Pattern (a Bullish Reveral Pattern);

Note:

  • First candle has a bearish close;
  • Body of second candle completely covers body of first candle (disregard wick);
  • Second candle closes bullish;

The Monster Guide to Candlestick Patterns, Raynar Teo

37
Q

Name this Japanese Candlestick pattern:

A
  1. Piercing Pattern (a Bullish Reversal Pattern);

Note 1: This pattern is not as strong as the Bullish Engulfing Pattern.

Note 2:

  • First candle has a bearish close;
  • Body of second candle closes beyond halfway mark of first candle;
  • Second candle closes bullish;

The Monster Guide to Candlestick Patterns, Raynar Teo

38
Q

Name this Japanese Candlestick pattern:

A
  1. Tweezer Bottom (a Bullish Reversal Pattern);

Note:

  • First candle shows rejection of lower prices;
  • Second candle re-tests the low of the previous candle and closes higher;

​The Monster Guide to Candlestick Patterns, Raynar Teo

39
Q

Name this Japanese Candlestick Pattern:

A
  1. Morning Star (a Bullish Reversal Pattern);

Note:

  • First candle has a bearish close;
  • Second candle has a small range;
  • Third candle closes aggressively higher (more than 50% of the first candle);

​The Monster Guide to Candlestick Patterns, Raynar Teo

41
Q

Under what two general conditions does a Bullish Reversal Pattern indicate a high probability of continued Bullish Price Action?

A
  1. The Bullish Reversal Pattern occurs after Price Action has retraced to an area of support following an Uptrend.
  2. The Bullish Reversal Pattern features candles of significantly greater height than earlier candles.

Note: Consider going long on the next candle’s open.

The Monster Guide to Candlestick Patterns, Raynar Teo

42
Q

Name this Japanese Candlestick:

A
  1. Shooting Star (a Bearish Reversal Pattern);

Note 1: A Shooting Star represents a Bearish Engulfing Pattern over a one-candle time period.

Note 2:

  • Little to no lower shadow;
  • Price closes within bottom 1/4 of the range;
  • Upper shadow is 2-3 times the length of the body;

The Monster Guide to Candlestick Patterns, Raynar Teo

43
Q

Name this Japanese Candlestick pattern:

A
  1. Bearish Engulfing Pattern (a Bearish Reversal Pattern);

Note:

  • First candle has a bullish close;
  • Body of second candle completely covers body of first candle (disregard wick);
  • Second candle closes bearish;

The Monster Guide to Candlestick Patterns, Raynar Teo

44
Q

Name this Japanese Candlestick pattern:

A
  1. Dark Cloud Cover (a Bearish Reversal Pattern);

Note 1: This pattern is not as strong as the Bearish Engulfing Pattern.

Note 2:

  • First candle has a bullish close;
  • Body of second candle closes beyond halfway mark of first candle;
  • Second candle closes bearish;

The Monster Guide to Candlestick Patterns, Raynar Teo

45
Q

Name this Japanese Candlestick pattern:

A
  1. Tweezer Top (a Bearish Reversal Pattern);

Note:

  • First candle shows rejection of higher prices;
  • Second candle re-tests the high of the previous candle and closes lower;

​The Monster Guide to Candlestick Patterns, Raynar Teo

46
Q

Name this Japanese Candlestick pattern:

A
  1. Evening Star (a Bearish Reversal Pattern);

Note:

  • First candle has a Bullish close;
  • Second candle has a small range;
  • Third candle closes aggressively lower (more than 50% of the first candle);

​The Monster Guide to Candlestick Patterns, Raynar Teo

47
Q

Under what two general conditions does a Bearish Reversal Pattern indicate a high probability of continued bearish price movement?

A
  1. The Bearish Reversal Pattern occurs after Price Action has retraced to an area of Resistance following a Downtrend.
  2. The Bearish Reversal Pattern features candles of significantly greater height than earlier candles.

Note: Consider placing a short trade on the next candle’s open.

The Monster Guide to Candlestick Patterns, Raynar Teo

49
Q

Name this Japanese Candlestick:

A
  1. Dragonfly Doji (a Bullish Reversal Pattern);

Note 1: A Dragonfly Doji represents a Bullish Engulfing Pattern over a one-candle time period. This pattern is similar to a Hammer.

Note 2:

  • Little to no upper shadow;
  • Price closes at or near top of range;
  • Long lower shadow;

The Monster Guide to Candlestick Patterns, Raynar Teo

50
Q

Name this Japanese Candlestick:

A
  1. Gravestone Doji (a Bearish Reversal Pattern);

Note 1: A Gravestone Doji represents a Bearish Engulfing Pattern over a one-candle time period. This pattern is similar to a Shooting Star.

Note 2:

  • Little to no lower shadow;
  • Price closes at or near bottom of range;
  • Long upper shadow;

The Monster Guide to Candlestick Patterns, Raynar Teo

51
Q

Name this Japanese Candlestick:

A
  1. Spinning Top (represents indecision);

Note 1: This pattern is similar to a Doji.

Note 2:

  • Long upper and lower shadows;
  • Small body;

The Monster Guide to Candlestick Patterns, Raynar Teo

52
Q

Name this Japanese Candlestick:

A
  1. Doji (represents indecision);

Note:

  • Candle opens and closes near the middle of the range;
  • Upper and lower wicks are generally short and of similar length;

The Monster Guide to Candlestick Patterns, Raynar Teo

54
Q

Name this Japanese Candlestick Pattern:

A
  1. Rising Three Method (signifies bullish Trend Continuation Pattern);

Features:

  • First candle is large and bullish;
  • Second, third and fourth candles feature a small range and body;
  • Fifth candle is large-bodied and closes above the highs of the first candle;

The Monster Guide to Candlestick Patterns, Raynar Teo

55
Q

Name this Japanese Candlestick pattern:

A
  1. Falling Three Method (signifies Bearish Trend Continuation Pattern);

Note:

  • First candle is large and bearish;
  • Second, third and fourth candles feature a small range and body;
  • Fifth candle is large-bodied and closes below the lows of the first candle;

The Monster Guide to Candlestick Patterns, Raynar Teo

56
Q

Name this Japanese Candlestick pattern:

A
  1. Bullish Harami (Bullish Trend Continuation Pattern);

Note 1: A Bullish Harami can be treated as an Inside Bar.

Note 2:

  • First candle is bullish and larger than the second candle;
  • Second candle has a small body and range (can be either bullish or bearish);

The Monster Guide to Candlestick Patterns, Raynar Teo

57
Q

Name this Japanese Candlestick pattern:

A
  1. Bearish Harami (Bearish Trend Continuation Pattern);

Note 1: A Bearish Harami can be treated as an Inside Bar.

Note 2:

  • First candle is bearish and larger than the second candle;
  • Second candle has a small body and range (can be either bullish or bearish);

The Monster Guide to Candlestick Patterns, Raynar Teo

58
Q

Under what general condition does a Trend Continuation Pattern indicate a high probability of continued price movement in any certain direction?

A
  1. When the Trend Continuation Pattern forms after a ranging market breaks out of Support or Resistance.

Note: If the market forms a Trend Continuation Pattern after the break of resistance, go long. If the market forms a Trend Continuation Pattern after the break of support, go short.

The Monster Guide to Candlestick Patterns, Raynar Teo

60
Q

It becomes more probable that an area of Resistance will be broken when it is repeatedly tested by Price Action featuring ___.

A
  1. Higher Lows;

Note: Avoid going short from this area of resistance.

YouTube: Support & Resistance Cheatsheet, Rayner Teo

61
Q

It becomes more probable that an area of Support will be broken when it is repeatedly tested by Price Action featuring ___.

A
  1. Lower Highs;

Note: Avoid going long from this area of support.

YouTube: Support & Resistance Cheatsheet, Rayner Teo

63
Q

Name the five basic Bearish Reversal Japanese Candlestick patterns.

A
  1. Shooting Star;
  2. Bearish Engulfing Pattern;
  3. Dark Cloud Cover;
  4. Tweezer Top;
  5. Evening Star;
    * The Monster Guide to Candlestick Patterns, Raynar Teo*
71
Q

Name two Japanese Candlesticks which represent indecision in the market.

A
  1. Spinning Top;
  2. Doji;
    * ​The Monster Guide to Candlestick Patterns, Raynar Teo*
76
Q

Name four trend continuation Japanese Candlestick patterns.

A
  1. Rising Three Method;
  2. Falling Three Method;
  3. Bullish Harami;
  4. Bearish Harami;
    * The Monster Guide to Candlestick Patterns, Raynar Teo*
82
Q

With regard to Japanese Candlesticks, Rayner teaches:

“The color of the body tells you ___.

The length of the wick represents ___.

The ratio of the body to the wick tells you the ___.”

A
  1. Who’s in control;
  2. Price rejection;
  3. Whole story;
    * The Monster Guide to Candlestick Patterns, Raynar Teo*
85
Q

___ moves into Support / Resistance offer a higher probability or a profitable trade in the opposite direction, as the first obstacle to Price Action is far enough away to allow for the needed price movement.

A
  1. Power;

YouTube: Support & Resistance Cheatsheet, Rayner Teo

86
Q

In order to understand the meaning of a Japanese Candlestick, Rayner suggests that two questions be asked:

  1. ___
  2. ___
A
  1. Where did the price close relative to the range?
  2. What is the size of the candlestick pattern relative to the earlier ones?
    p. 68-69
87
Q

To determine whether Bulls or Bears are in control during the time period represented by a Japanese Candlestick, simply ask yourself, “___.”

A
  1. Where did the price close relative to the range?
    p. 69
88
Q

Generally speaking, relevant Japanese Candlesticks / patterns may be judged as showing strength when they are ___ times larger than earlier candles.

A
  1. ≥ 2;
    p. 69
89
Q

According to Rayner, candlestick patterns are useful as triggers to help ___ trade entry. He suggests, “Recall that market structure tells you ___ to do. Support and Resistance (or the area of value) tells you ___ to trade. And candlestick patterns tell you ___ to enter.”

A
  1. Time;
  2. What;
  3. Where;
  4. When;
    p. 71
90
Q

Name the three general categories of candlestick patterns.

A
  1. Reversal;
  2. Indecision;
  3. Continuation;
    p. 71
91
Q

Rayner suggests that if you want to know if there’s strength behind a move, ask yourself, “___.”

A

What’s the size of the candlestick pattern relative to the earlier ones?

p. 71

92
Q

Paul Tudor Jones once said, “The most important rule of trading is to play great ___, not great ___.”

A
  1. Defense;
  2. Offense;
    p. 72
93
Q

Rayner teaches that if an institution wants to long the markets with minimal slippage, they tend to first place a ___ order to trigger nearby ___.

A
  1. Sell;
  2. Stop Losses;
    p. 73
94
Q

Rayner teaches that when setting a Stop Loss a “barrier” should be utilized to prevent Price Action from easily moving against you. Such barriers should represent a price point at which your trading idea is essentially proven to be ___. Name five common useful barriers.

A
  1. Invalid / wrong;
  2. Support;
  3. Resistance;
  4. Relevant Swing High;
  5. Relevant Swing Low;
  6. Trendlines;
    p. 74
95
Q

Rayner states, “When you set a Stop Loss, it should be at a level that ___ your trading setup.” Additionally, a buffer equivalent to approximately ___should be added / subtarcted to the selected level in order to guard against occassional “price spikes.”

A
  1. Invalidates;
  2. One ATR;

Note: Rayner commonly uses the 20-Period ATR.

p. 75

96
Q

Rayner suggest against risking more than ___ of one’s trading capital on any given trade.

A
  1. One;
    p. 76
97
Q

When limiting potential losses to 1% of trading capital, how many futures contracts may be traded at once?

A

1.

________(Trading Capital x 0.01)_______\_

(Magnitude of Stop Loss/Contract x $/Point)

The number of contracts which can be traded when using a Stop Loss of Four Points while trading the /ES with a $50,000 account equates to:

__________($50,000 x 0.01)_________\_

(4 Points/Contract x $50/Point)

= 2.5 (round down to 2)

98
Q

What are the five potential Market Structures which Rayner suggests may be identified?

A
  1. Advancing Stage;
  2. Distribution Stage;
  3. Declining Stage;
  4. Accumulation Stage;
  5. Undetermined;
    p. 86
99
Q

What does Rayner’s MAEE acronym stand for?

A

MAEE

M - Market Structure;

A - Area of Value;

E - Entry Trigger;

E - Exits;

p. 86

100
Q

What are the three potential Areas of Value which Rayner suggests may be identified?

A
  1. Support;
  2. Resistance;
  3. Trendlines;
    p. 86
101
Q

What are the three potential types of Entry Triggers which Rayner suggests may be identified?

A
  1. Candlestick Patterns;
  2. Chart Patterns;
  3. Indicators;
    p. 86
102
Q

Rayner suggest identifying the current Market Structure in order to know “___ to do.”

A
  1. What;
    p. 86
103
Q

Rayner suggests identifying Areas of Value in order to know “___ to enter a trade.”

A
  1. Where;
    p. 86
104
Q

Rayner suggests identifying Entry Triggers in order toknow “___ to enter a trade.”

A
  1. Where;
    p. 86
105
Q

Rayner suggests identifying Exits in order to know “___ to exit a trade.”

A
  1. When;
    p. 86
106
Q
A

Stock Market (6 decks)

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