 Welcome guys to today's session I just want to do a quick audio test if you can hear me loud and clear and see a tick mill we want traders to succeed screen on your screens and please type a Y in the chat box great stuff okay let's let's get things going first of all as always we are going to start the disclaimer it's incredibly important that we all understand the risks involved in foreign exchange trading or trading of any other instruments provided by tick mill so just give you a second there to make sure you review that and I can say that you're helping yourselves by participating in this education to become more aware of those risks as we proceed okay so let me just jump in and give you a quick overview of who I am and the context in which I'm presenting here today my name is Patrick Manley after I graduated from King's College London I went on to co-found and eventually exit a consulting startup after that I moved on to explore my passion for markets I researched developed tested and implemented a robust trading plan underpinned by a rigorous risk management strategy this plan has delivered profitable annual returns since 2008 since 2010 I have personally minted over a hundred private traders of all experience levels from complete novices to former CME floor traders in developing trading strategies to reach consistent returns from the markets I also consult I've also consulted numerous brokers trading education brands contributing written webinar and live presentation content on a range of topics from market analysis to trading strategy development and execution I'm currently the head of trading and trader education for a leading on online trading education firm called FX career swap I also manage a proprietary trading team for a firm called little fish FX as well as managing my own capital and that of my investors I run a managed account service and have done since 2013 delivering annual positive returns so let's jump into today's topic without further ado and we are going to be looking at the concepts of supply and demand moving into some initial forays into price action and we're going to open up some charts today and take a look at those for the first time in this series so let's get going the basic premise of technical analysis is that history keeps on repeating itself past snapshots into market patterns that start to become identifiable clues to the way the markets may react in the future some chart patterns are more reliable than others in price forecasting as they can be repetitive that's great because it takes away some of the seeming randomness of the markets if markets were truly random then why do chart patterns so often seem to rest at the same points in this session I'm going to teach you how to read the market in the most primary way via the chart you'll learn about the concepts of supply and demand support and resistance candle six and trend channels to aid your ability to understand the moves that are happening in the forex markets along with order entry types to get you started placing trades so let's think firstly about the concept of supply and demand the process of supply and demand sets the exchange rate of a currency essentially if supply outweighs demand then the exchange rate will drop if demand outweighs supply then the exchange rate will increase this will be covered in greater detail later in later sessions but for now understand the basic concept this is no different to your normal goods in the supermarket if the supply at the bakery has more capes than he sold and then only last a day before they go off then the price is reduced to sell them off there was simply more supply than there was demand the forex market is therefore made up of lots of orders to buy and sell currencies at specific prices these orders along with the flow of supply and demand create the price action that we actually see on our charts supply and demand can be naturally increased or decreased or manipulated by central banks changing their country's interest rates the analysis of this is referred to as fundamental analysis and this is an extremely interesting and influential topic one simple example of supply and demand was during the 2008 financial crash the US dollar and gold are considered safe havens for money i.e. the US is unlikely to ever go completely bankrupt so during the financial crash they were so much in demand that the US dollars value rose to record highs orders in the market tend to bunch together around key levels the reason for this is that speculators who make up the majority of the trading volume use key prices to set reference points for entry and exit points in the market in general this means the orders in the market bunch at these levels an example of this is using relative highs and lows on the chart to place exit orders i.e. if a price goes above a certain level an open position will be closed when all does congregate around a certain level they create a large amount of liquidity in a small price range liquidity is simply the term used to refer to how many orders are in the market at a certain price so lots of orders mean lots of liquidity and fewer orders mean less liquidity when there is no liquidity erratic moves in the market are common as price jumps between orders typically this has the effect of causing what we refer to in the market as support and resistance zones one of the fundamentals to trading as a speculator is understanding how the market moves in theory the market moves purely by supply and demand like any product however skeptics might suggest that there are certain amounts of psychology involved as well the more demand there is for a product the more the price increases and the more that is supplied to the market until it reaches a tipping point when there is so much supply that the price starts to fall again currencies and foreign exchange are no different as indicated in the chart you can see on the screen when considering trading it's necessary to translate this supply and demand at key prices into support and resistance support is simply a price at which there are a large amount of orders to buy a currency pair which which I refer to quite often my daily reports as bids and resistance is an area where there are large amounts of orders to sell a currency pair which I often refer to in daily reports as offers support is the lower line relative to price and resistance is the higher line relative to price as the price moves in its normal flows in the currency pair the majority of orders will build up around these support and resistance levels this price is primarily due to the fact that orders are driven by large commercial organizations and the banks who provide the liquidity therefore price tends to jump to these key levels and I'm going to take a look at a chart on the screen of the euro dollar chart shows support and resistance levels on the daily charts and then we are going to look at the same levels on a two hour chart the process of plotting these levels will be covered later but for now the important thing is to notice how the price moved between these levels on the two different time frames what this shows is how price gravitates to these levels and jumps between them it's important to identify that in order to utilize one of the most basic strategies known as a breakout strategy and this is based on the premise that when price breaks through a key level it will often test the next key level in that direction we look at this for our chart but now on the screen the circle shows a clean break of resistance level while the square shows the price testing the resistance level now in the next chart the square shows multiple failed breaks of a support level therefore price balances to test the upper resistance and in this case also breaks through excuse me these support resistance levels are key to trading and they are remarkably easy to work out here now we are going to work through a routine for plotting them first we're going to start with a weekly chart and plot horizontal lines where highs and lows join the highs and lows on the bold line have been circled so that it's clearer to you then on the same chart we're going to repeat the process on a daily time frame the weekly support resistance lines will be more important than the daily lines as you can see now on the screen finally in the next chart look how price interacted with these lines on a four-hour charts it's interesting how well these levels hold up and how they become so important for the market using these with your current strategy can significantly increase your profitability in fact a large number of profitable and successful traders simply trade from support and resistance lines for instance if your strategy suggests taking a position and you're close to a key level wait for the level to break before entering the order this thing gives you confirmation very simply if there is a rejection of a line take the trade in the opposite direction if there is a break in the line enter the trade in the direction of the break so if you're going long you can put your stop below the key line normally about a quarter or one-third of the distance between the support and the resistance line if you're going short put your stop above the key line and aim for the next immediate line then keep repeating the process remember these lines work as they are based on order flow highs and lows and candlesticks are created by underlying orders pushing price in one direction and then it being rebounded therefore joining these together highlights there has been a large number of orders placed there previously the large number of rejections suggest a large number of buyers at this level the key here is to understand that the more that the orders are being eroded the more likely the level is to give way one sign to look for is whether to test lower or higher on consecutive candlesticks if you test lower each time but push back to current levels traders are eroding orders and therefore there could be a break in the level if the lows get gradually higher and the candle closes at similar levels then buyers are stepping in so now what we want to think about is actual candlesticks and this is what we're going to take a look at now and introduce you to this concept candlestick charts make it easier to visualize support and resistance charts can be used to help visualize movements in price and understand how supply and demand is working charts come in all shapes and sizes from line to bar charts but the particularly interesting ones and the ones most used are candlestick charts candlestick charts are extremely powerful as they really help to tell a more visual story of the price action at the various key order levels a candlestick can represent any time frame though this let in this session will typically focus on daily and for our candlesticks as these tend to work better with a specific style of trading called pinbar trading which we're going to look at later on the screen at the moment you can see a candlestick it's the candlestick we have the high the close the open the low the lower wick and the upper wick now what we're going to do is take a look at a chart patterns in these candlestick charts give telltale signs on what price may do in the future and how orders are positioned in the market there are lots of patterns you can look for but this strategy focus on one major pattern coupled with some general concepts what we're now going to look at is how we can introduce trend lines to show us the flow the natural flow in the market the first step is to define the key component in this strategy which is the concept of a trend line as previously mentioned orders can create an overall trend or direction in the market a trend line acts as a guide to determining that market direction in defining trade entries and also it helps us in deciding when and where to exit our trades in addition drawing trend lines can help to keep you out of riskier trades by providing a clear indication of whether a particular instrument is trending or consolidating you'll see how the market tends to be attracted to these lines and once they're broken the price more often than not pulls back to retest them in addition to trend lines we've also we also have horizontal support resistance lines these lines are ideal in identifying additional levels for profit taking as well as potential trade entries using these two sets of lines together will give you a robust system and the beauty of it is that anyone can use these systems it doesn't matter whether you're a scalper a day trader a swing trader or a position trader these become critical areas to watch for trades in the market this next section we're going to look at some basic rules and guidelines for using these key but first it's necessary to destroy some of the myths there are a lot of opinions out there that all trend lines are subjective and frankly this isn't true like a lot of things in trading drawing trend lines has clear rules to follow and we're going to cover these now so the key the quick the first key question is what is a trend line well it's extremely simple trend lines simply join a series of two or more highs or a series of two or more lows this might seem extremely subjective but actually there are a few rules of drawing trend lines that traders tend to stick to firstly a trend line cannot dissect other highs or lows that is to say it must stay above or below the price action it may touch highs and lows but not pass through them secondly we typically use a higher time frame to determine the key support resistance zones on the lower time frame essentially the best way to find major trend lines is to zoom out on your charts and use higher time frames highs and lows to determine the trend on your trading time frame so on the chart on the screen at the moment we can see the correct way of drawing a trend line and now we're going to look at the not so correct way of drawing a trend line hopefully it'll be clear to you which trend line would be more responsive to the price major trend line give us an overall direction for a trade we can use the subtrend lines to determine key areas to look for price signals in the chart on your screen now you can see the horizontal trend lines have been plotted near the pivot lines to highlight the key horizontal support and resistance zones it is possible to have multiple trends on the chart as is the case on the as you can see on the screen at the moment here there was a clear downtrend price then broke above the major downtrend line found some support and then pushed higher to create an interim uptrend now potentially there may be a reversal or a further continuation lower at some point but the break of the major downtrend line offer great potential long setups the horizontal support zones may also indicate interim buying opportunities you should always use the major moves in a currency pair normally found by going to the higher time frame and zooming out on the chart to help determine the overall trend trend lines offer lots of possibilities but in their simplest form they can significantly increase your odds of a successful trade in the direction of the overall trend going back to the old adage the trend is your friend statistically is however the most profit can be gained by finding turning points and these often occur at trend line support and resistance zones whether it's a minor support resistance zone or a major one combine these two points above and play retracement turning points and you have an even more successful strategy that is taking trades in the direction of the trend looking for a price to move countertrend back to a key support level or the major trend line then entering in the direction of the trend with the stop below the next major support level is a profitable way to trade and if any of you follow my chart of the day that I post on the tick mill expert blog you'll see a pattern I've identified today in in the GBP USD that that's a great example of what I've just mentioned there now let's look at another concept that we can use with trend lines and that's channels traders often talk about following the trend and for good reason trading in the same direction as the trend is far more forgiving in terms of entry price since there is already a bias towards price moving in the trade direction less commonly talked about though are methods for defining the range of acceptable movement both with the trend and against for the trend still to be considered valid one of the most effective ways of doing this is to draw trend channels on to the chart using parallel trend lines this is however a skill that is very much open to interpretation making it seem more of an art than a black and white set of rules or science correct application of trend channels allows the user to not only define the strength of the trend by its angle but also the volatility within the trend via the width between the channel extremes this in turn gives the trader a useful set of tools for defining potential support and resistance as well as the ability to clearly determine when a trend is ended and reversal side signals should then be taken with the benefit of hindsight this is a fairly simple task to neatly define trends in this way as you can see on the screen at the moment however this is with the ability to see how the trend ended up developing which obviously you do not have when you're trading live or on the steep right-hand side of the charts therefore a step-by-step method is required for drawing a channel as early as possible within a new trend when there is a mature trend as we can see in the chart on the screen now the bearish trend has been clearly defined parallel lines have been placed on the chart to touch the highest number of turning points possible without any significant overshoot this allows traders to see when the trend has broken to the upside for the next stage reference points are required turning points can be used in the as these in the example on the screen price rallied higher after the breakout and retraced to form a new higher low for the trend it is therefore possible to draw trend lines between these points and observe that a straight line can clearly define all of the turning points at this early stage on the chart you can see the master trend line drawn this could have also been found by drawing a line from the bottom to the low of the first retracement which gives a good idea where the second high may run out of steam however this is only useful at this stage for placing countertrend short at the second high this is not a good idea early on in a bullish trend so it's better to wait for confirmation from a second high which we're going to see now on the screen. Low of the channel can be defined by copying the master trend line to the low of the chart so there is no price within this new trend that overshoots the trend line as you can see on the screen now now that the channel has been defined the chart shows that when price reaches the low of the bullish channel there is a reasonable chance of an accurate long trade. The rally shown on the screen at the moment has gone so well that price after testing the highs of the channel several times finally gathers momentum and breaks through to the upside. This means that the channel needs to be reevaluated by copying the master trend line to the next significant turning point which will give you a reasonable idea of where the next resistance should be. Remember you're not really using these as entry points for trades since the trend is bullish so you want to be buying not selling as such these offer good suggestions of where you could take profit if desired. As shown the trend has now been defined and the upper limit of the channel is correctly predicting where the tops of rallies have begun to sell off. Also notice that the previous tops of channels now shown as dashed lines will act to support rather than resistance when price retraces to them from above and in return the resistance when price is below them. Now we're looking for possible long entries from these broken resistance lines now turned to support. With the low of the channel defined once price sharply moves towards it a decision has to be made. It's necessary to check to see if there are other angles that may better define the trend now that you have lots of turning points to reference against. These other angles may allow a push below the current low of the channel without breaking the bullish trend. If this is the case you can simply redraw the channel as long as you are sure that the new trend angle and associated channel is a better definition of this trend. Alternatively as shown on the chart now the channel may be correctly drawn so as a break below the channel will signal a trend change and the need to look for short entries. When trading in the foreign exchange markets it's essential to understand the properties of the security or trading or the currency or trading. The analysis of these factors refer to as fundamental analysis. This is because you're evaluating the fundamental properties of the currency pair and trying to place a price based on its analysis. An example of fundamental analysis would be looking at currency pairs economic data calculating the ratios and proceed to compare them to similar currencies. The number that you end up with will sometimes differ from the actual price and this can happen for a number of reasons. Large price differences can occur as a result of market participants belief in the currency value different to its current price because this price may incorporate new information that's not reflected in the currency's current value. In order to become better at valuing currencies or predicting the future prices you need to look more closely at what is happening in the market through technical analysis which mainly deals with the price action and trading volume. The concepts of trend and momentum play key roles in technical analysis as does economic data for the fundamental analysis of a currency pair. When someone asks what's the latest trend this can refer to many different things. They might be asking about the latest fashionable currency or cryptocurrency. The essence of the question however is identical for each subject. That is the purpose of the question is to find out about the most recent news regarding the subject whatever that may be. With this in mind when considering trends in foreign exchange markets traders are generally thinking about the most recent price action and hoping to use this information to make an educated guess about where price is headed. The easiest way to determine the trend of a currency pair is by looking at the price chart. This can be shown through many different types of charts but usually the candlestick chart is the preferred chart for professional traders. There are also many indicators that come in handy. The most popular are moving averages which are a lagging indicator but they confirm price trends. A lot of traders like to draw their own lines on their charts as we've been looking with the channels and trend lines because they help better visualize the possibility of future trends. In the charts on your screen now we've got a good example that demonstrates a number of tools that can be used to examine the trend. In the chart you'll see the 200 day moving average highlighted in yellow. This is simply a moving average that can be used to determine the long term trend. There is also a 10 day exponential moving average in blue. This moving average shows the short term trends. Finally there is a trend line placed by the trader as mentioned earlier. This line is used to show the general trend with a hypothesis as to where price will be in the future. Another focal point in the concept of technical analysis is momentum. Momentum refers to the speed at which the price changes. When looking at candlestick chart there are candles that are very long and others that are not so long. Candle shows the price increase and decrease during that chosen time frame as we discussed earlier. Therefore it can be said that there was more momentum in one direction than the other during the time of a long or short candle where both candles have the same duration. Similar to trends there are numerous indicators that help illustrate momentum. These type of indicators are called oscillators and are widely used by market technicians. There are many different types of oscillators and we are going to be covering those in later sessions. The main function of an oscillator is to determine where a price trend will reverse and therefore they are used to find points to enter a trade that will make traders the most money. As you can imagine these type of indicators are most accurate when price action is moving in easily visible trends with little disturbance. The greater the standard deviation within a trend the less accurate the oscillator. Using both trend and momentum together will make it much easy to theorize about future prices. Using these in conjunction with fundamental analysis will provide you with a good idea of the direction of price for a future direction for a price for a currency pair. So that concludes today's content with respect to supply and demand. Initial foreings and looking at the price charts, understanding what a candlestick is and looking at how we can identify in some fairly basic fashion at this stage trends using trend lines, trend channels and then initially looking into some of the very basic indicators such as moving averages. Are there any questions now regarding anything we've talked about today? I'm happy to answer as many of those as we can. If you want to type them into the chat box I'll run through like I say as many of them as I can in the next five or 10 minutes. So please feel free to jump in with any questions you have at this point. I'll quickly take a sip of water. First question here from Haroto. What's the best time frame to find a trend? Well, Haroto, like I said, and this is something we will cover when we look at trading strategies in future sessions, it's best to use a dual time frame approach to the market. So if for example I'm looking to place my trades on the hourly time frame, so I consider the hourly time frame to be an intraday trading time frame, then what I would be doing to define the trend is I would be looking at the daily time frame. Equally, if I'm looking to trade on the four hour time frame, if I'm looking to define the trend for that four hour time frame, I'll be looking at the weekly charts. If I'm looking to trade the 15 minute chart, I would then be using the hourly chart for my trends. Does that make sense? So what we're looking to do when we're thinking about some trends is we're looking to use the higher time frame charts to give us a clearer perspective on what the dominant trend in the market is. And whilst traders always say, you know, the trend is your friend and you need to trade with the trend, it's important to realise that time frames dictate trends. So you could have a very bullish five minute trend with prices, you know, climbing rapidly higher. But then if you zoomed out and you looked on the daily chart, we could be in a downtrend for the last 10 days. So it's incredibly important to understand that trend is time frame dependence. And you shouldn't get married to this idea that, you know, if whatever time frame you're looking at, if you can see the dominant trend there, that that's the trend in the market, because that more often than not won't be the case. Where can I find recordings of the webinar? There's a YouTube link, Aruna. There's a YouTube channel. If you search tick mill, and then you look for the education series, you'll find all the recordings of the sessions we've done so far, and the future recordings as well. Supply and demand is the same with support and resistance. Any tips to notice the supply and demand using candlesticks? Why do we need, what do we need to find? Thanks. So with respect to the candlesticks, let's just go back and look at the chart, or even the chart on the screen here at the moment. You can, it's quite, sorry, bear with me. It's quite easy to see what you really want to look for in terms of candlesticks as a simple way of defining support and resistance is look for tails. I often say to traders that I mentioned, the tail is in the tail. So where you get multiple tails in candlesticks? So let's say if we're looking at the daily chart today closes and we have a long tail tomorrow opens, we test up into that that tail of the candlestick and then we pull back and we close back at the lows. So we have two topping tail patterns. Then that starts to tell you that you're seeing resistance. So always look for clusters of tails in candlesticks. That will tell you where the support and resistance is in the near term. Please, if you are an hour time frame trader, which time frame must you look at? So if you're trading on the hourly chart, Francis, I would suggest to you that to define the trend, you want to be looking at the daily time frame. So if you're looking to execute your trades on the hourly chart, you need to be looking at the daily time frame. They are full screen, no, but oh, I see what you mean. I'll adjust that for the next session. I understand what you mean now. You should be able to get the drift of what I'm saying by looking, these charts are, you can also increase your percentage viewing on your own screen as well by going to settings. Any other questions guys? Okay, if there aren't any other questions, I'll wrap today's session up here and I'll see you all at the same time next week and look forward to sharing more educational information with you. All the best for the trading week ahead. Thanks and take care.