TABLE OF CONTENTS

I. CANDLESTICKS
a. Foundation
b. Candlesticks Patterns
c. How to Use Candlesticks

II. TRENDS
III. RANGE
IV. SUPPORT & RESISTANCE
a. Support & Resistance Flips

V. TRENDLINES
a. Downtrend & Uptrend
b. Channels

VI. RETRACEMENTS
VII. BREAKOUTS
VIII. STOP LOSS
IX. MOVING AVERAGES
a. SMA
b. EMA

X. PATTERNS
a. Do Patterns really exist?
b. Common Patterns & How to
Trade them

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TABLE OF CONTENTS
XI. INDICATORS
a. RSI
b. MACD
c. TD Sequential

XII. RISK MANAGEMENT

a. The 5% Rule

XIII. APPLYING THE

CONCEPTS
Trade Examples

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 1. Candlesticks
a. Foundation

What charts are we going to focus on, or what kind of chart

do I use daily?

Chart formed by candlesticks:

For each time interval, a candlestick chart uses a bar
(called the “shadow”) and a rectangular box (called the
"body").

For a certain time interval:

The opening and closing prices define the dimensions of
the body
The maximum and minimum prices of the considered
period define the dimensions of the bar.
The part of the bar above the box is called the “upper
shadow”.
The part of the bar below the box is called the “lower
shadow”.

It is important to clarify:
In my charts I use black candles as bearish candles and
white candles as bullish candles.

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 1. Candlesticks
b. Candlesticks
Patterns

Credits to the owner of the picture

Study and remember this cheat sheet

On the left of the cheat sheet you have bullish candlestick

patterns, on right are the bearish candlestick patterns, and
in the middle of the cheat sheet are the NEUTRAL candlestick
patterns.

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 1. Candlesticks
c. How to Use Them?

Every trader has his own system and time frame in which he
operates.
Candlestick patterns will always be more reliable on higher time
frames. I usually operate on 4H - 1D, for a spot position (mid-long
term). If I want to swing trade, I focus the time frame on 1H.

Candlestick patterns will be more effective and reliable when

they occur on support or resistance. That's why we can only use
Candlestick Patterns are confluence and not the basis of our
trades.

For example, a bullish hammer on a support on 4H - 1D when

the RSI is oversold, will mark as a buy. Then, a bearish engulfing
candlestick on a resistance on 4H - 1D and RSI is overbought will
mark as a sell.

The Time Frame you are going to use depends on yourself, in

which time frame you feel more comfortable. But I really
encourage you to study that cheat sheet, and you will find the
patterns easier.

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 2. Trends
It must be determined as soon as possible when a trend
starts. For this we must look at the market structure.

An uptrend will start when HH and HL are formed on the

chart, while a downtrend will start when LL and LH are
formed on the chart.

HL means “Higher Low”, and LL means “Lower low”.

HH means “Higher High”, and LH means “Lower High”

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 2. Trends

Trends are fractals, the patterns repeat themselves regardless

of the time period considered.
The long term trends are affected by the next shorter time trend
(indeed, the shorter time frame trends often give an early
warning about longer trends)

The definition of a trend is simply the direction that the Price of

an asset is going to follow. We need to understand that the
“trend” indicates a direction of the Price. It is not a line that the
Price follows.

When the trend is not clear, that is, neither down nor up, and it
moves between support and resistance, that area is called
“trading range”

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 3. Trading Range
We will be in a trading range when the new peaks and low points of the
prices are at approximately at the same height as the prior peaks
and points of the previous lows.

Trading ranges usually occur after a very long uptrend or downtrend

comes to a temporary standstill. In fact, “trading ranges” are also called
“consolidation zones” or a “congestion area”.

The trading range is characterized by prices staying in a specific range

over time. The price of the asset tends to fluctuate between support
and resistance.

A “trading range” or transaction area is an area where both the

resistance zone and the support are relatively close and the price
oscillates between them until, at some moment, momentum will break
one of those zones.

This raises two possible strategies:

1. Make transactions within the “trading range”.
2. Carry out transactions when the break occurs.

We will search for entries at the bottom of that trading range (at
support), in order to sell at resistance. Indicators will help us to know
when the price is overbought or oversold in that trading range,
indicators we will use for that:

1. Relative Strength Index (RSI)

2. MACD

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 3. Trends
Another thing to note is a Deviation, it is when Price deviates or
goes out of the Range and then comes back to the original
Trading Range
Examples of a Range:

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 4. Support and Resistance
Prices in the market and the market itself, move by trends. There
are two types of trends as you already know, bullish and bearish.

Support, or a support level, refers to the price level that an asset

does not fall below for period of time. An asset's support level is
created by buyers entering the market whenever the asset dips to
a lower price.
Resistance is just the opposite of support, it represents a level at
which the pressure to sell beats the pressure to buy, then the
price falls down from that resistance.

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 4. Support and Resistance

You need to understand the concepts of resistance and

support. In an uptrend each low must be higher than
the previous one. If, therefore, we see that in this
upward trend the price reaches the previous low, it can
be an indicator that this upward trend is coming to an
end, therefore there may be a change in the trend.
If support for this current trend is lost, the trend
structure will turn bearish.

It is necessary to mention that every time a resistance is

retested (the price touches the resistance but does not
break it), it becomes weaker. That is, the more we
touch a resistance, the easier it will be to break it, and
for the price to exceed it. This is similar with support,
the more times the price retraces to that support, the
support will be weaker, and with a tendency to lose it.

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 4. Support and Resistance
a. Support and Resistance Flip

In the image below we can see a flip from resistance to support.

When the resistance is broken, the price retraces to that previous
resistance and establishes it as support, it is a good opportunity
to open a LONG. Never open a position before price establishes it
as support.

If we open a position before establishing as support, it may not

break the resistance, or it may break it and go back to the same
point or even lower.

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 4. Support and Resistance
a. Support and Resistance Flip
In this case, we have our support, which has been tested, and we
lose it. When the price tries to re-establish itself at that support
(now resistance since we have lost it), as you can see the price
goes back down.

Therefore, our support now becomes a resistance. At the

moment of retreating in that resistance, having no buying force,
the price falls.

Therefore, support and resistance are a kind of psychological

barrier stored in memory, that slows price movements.
And for this reason, we assume that the prices, probably, will
stop when they touch those local minimum and maximum points
(or zones).

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 4. Support and Resistance

To determine Support and Resistance:

Draw a horizontal line through the switch points (either low
points or peaks) that are relevant.
The greater the number of times a certain price level has
served to stop price falls/rises, the stronger the
support/resistance will be in the future.

If the price enters the support or resistance zone and

exceeds the lower or upper boundary of the zone, it’s called
a “breakout”.

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 5. Trendlines

It is the oldest and simplest method of determining the

trend of prices. To draw them, it is only necessary to draw
a line that passes through two local minimum prices or
two local maximum prices.
In an uptrend, the trendline joins the lows, and in a
downtrend, the peaks.

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 5. Trendlines
a. Downtrend and Uptrend

An uptrend or downtrend line, is a line that passes

through what would be moving support/resistance.
Remember that our purpose is to detect signs of change
in trend. In the case of trend lines, what we are going to
look for are prices that break these lines.
It is necessary to clarify that in the trend line, the more it
extends in time and the more times the trendline is
touched (without overtaking) by prices, will be the signal
generated when finally the prices break the line.
Trend lines are not an exact tool; it must be taken into
account that deviations may occur which may not be
permanent.

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 5. Trendlines
a. Downtrend and Uptrend

Examples:
Uptrend Trendline

Downtrend Trendline

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 5. Trendlines

Accelerating Trends:
Local lows or highs can join by a convex or concave
curve, instead of with a straight line.
This type of trend line occurs when the prices fall or
rise very fast and occurs at an ever-increasing speed.
It’s associated with speculative bubbles or financial
panics.

Decelerating Trends:
Fan lines (decelerating trends) are contrary to a trend
accelerated.
They are a set of normal trend lines that are being
successively broken, without there being a clear change
in the direction prices will take.

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 5. Trendlines
b. Channels

To build a channel, join the peaks or low points, so that

price movements are contained in the area within the
channel.
The upward or downward trend lines are drawn joining
low points or peaks, so when prices rise or fall they remain
above or below the trend line.
So, we can have a bullish or bearish channels.
When the peaks in the channel are getting lower, this
could indicate that a trend reversal is about to occur.

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 6. Retracements
A retracement is a small counter-trend within a trend.
For example, in a strong uptrend, you have a retracement when
the rise in prices is periodically interrupted by downward
corrections.
In an uptrend, the start of a pullback/retracement is always a
resistance and the minimum recoil level is always a support.

A retracement is, in fact, a trend in itself, but of shorter duration

than the general trend in which it is part of.

A pullback/retracement/throwback can be an opportunity

for those investors who missed the opportunity to join the
trend at one point.
Now, given the drop in prices in a uptrend, we could take
positions in the trend, with a more profitable price.

Bounces are a variant of retracements. There are two types:

Pullbacks: After a breakout to the downside, occurs a

“pullback” when prices return to temporarily stand above the
broken supports.
Throwbacks: After a breakout to the upside, occurs a
“throwback” when prices return to momentarily fall below the
broken resistances.

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 6. Retracements

Example:

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 7. Breakouts
A breakout occurs when a price “breaks” a support or resistance
level or zone. And also a breakout occurs when a trend line is
broken, breaking it is a signal that the trend may be running out.

A breakout usually signals that a significant change in supply

and demand has occurred and that a new trend may be about
to start.
However, false breakouts are frequent.

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 7. Breakouts
Example:

How did I predict this bullish rebound?

First of all the volume was very low, look at the previous
volumes. The price remains above the support, and the
candlestick at the time was forming a hammer. The MACD
indicator marked us a purchase (green dot), as well as the RSI
marked us purchase, bouncing off an "oversold" level.
It is necessary to mention that the price returns to its market
structure, that is, the price returns to levels that have
previously served as supports, also compare the volumes
prior to that support, and as you can see, the volume grew
dramatically once the price bounced off that support.

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 7. Breakouts

I show below the movement of the price after the purchase:

Sign of a possible bullish rebound: Prices oscillate low or

in the support zone, and the volume grows with price
increases.

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 8. Stop Loss

A stop is a buy/sell order when a specific price is reached.

A sell stop order or also called stop loss, is an order to sell an
asset at a specific price below the actual price. The order is
executed automatically.
Therefore, exit stop orders (SL) are used to:
– Cover from further losses (protective stops).
– Protect profits so that they do not become losses.

Stops should be placed based on the price action of the relevant

asset and the levels where breakouts are likely to take place.

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 8. Stop Loss

The entry of this position would be after that big candle

that bounces on support, since we start drawing the R:R. As
you see, the price didn’t hit our SL before hitting our TP.
Establish your SL in previous supports.

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 8. Stop Loss
We can also set up stop loss on SHORTS, not only on LONGS, for
example:

Credits to the owner of the picture

@tradingous

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 8. Stop Loss

Although we can also use stops to buy, therefore, a stop is also a

buy order.
Entry stop orders are used, for example, to warrant buying the
asset if the resistance level is penetrated into a break.

This is a $SLP chart from a few months ago, as you can see,
the red lines are important resistances. Sensing that the price
would reach the second marked resistance, I would place my
stop buy at the first red resistance (once we have established
that resistance as support) in order to take profits at the
second resistance.

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 8. Stop Loss

Look at the volume we had after breaking that first red

resistance, if we had our stop buys on that resistance, we
could have earned a +40% in 1 week.
That’s the importance of stop loss and a stop buy.

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 8. Stop Loss
Although there are also some risks associated with stops.
Stop orders are defensive, but they shouldn’t be used without
sufficient caution.
If we place stops too close from current prices, you may be
taking a big risk.

A simple example, which has happened to all of us:

We buy an asset and place a stop order (loss) at a price, very
close to our purchase, the price of the asset falls, and the stop
loss is triggered and the asset is sold. Then, the price of the
asset rises above the purchase price.

This is an example in 1H on $MATIC of a stop loss hit.

We place the stop loss at a previous support. The price falls to
that support and loses it, and therefore our stop loss is
activated, liquidity is obtained to boost the price and it reaches
our target.

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 8. Stop Loss

Here you have another example of SL hit and subsequent rally.

As you can see, the SL got hit, why? Because we didn’t

establish that resistance into support. When the price
establish that resistance into support, we can then establish
our SL under the support, and it will be a much safer entry.

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 8. Stop Loss
The importance of Stop Loss:

In this example of $LUNA, my entry would be where the green

arrow is marked. The stop loss is established on a previous
key support. As you see, we respected that support before we
bounced and fall again.

This is the importance of the stop loss. If we don’t have it, the
price will fall off a cliff and we will be late to cut losses. Price
dropped from 62.57$ to 48$ in 2 days.

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 8. Stop Loss

When trading with stop loss, your losses are limited, it is about
having an invalidation point. Liquidity is the most important
thing to preserve.
Always when entering an asset, I recommend accompanying
the order of buy with an exit stop loss. The reason behind this
is to protect capital against possible losses.

The idea is to place the protective stop order at a level where

it’s known that with a high probability the trend would change.
It’s foolish to think that any investment will be profitable. The
risk always exists and some investments can generate large
losses.
This type of order allows us to set the level of capital risk that
we assume in the transaction.

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 8. Stop Loss
The risk of changing Stop Orders:

Its function is to protect the capital, stop orders should never

be changed to establish a new price that moves away from
the trend of the asset, because of an emotional decision.

If we place a stop order at a level that, given the current trend,

is reasonable, the temptation to cancel the order is less.
Otherwise, by canceling and changing it, we would be being
undisciplined and letting ourselves be carried away by
emotional pressures, for example, the refusal to admit our
own mistakes, or wanting to recover what was previously lost.

We will change the stop order when we see significant new

support and resistance forming in the development of price
action.

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 8. Stop Loss
Trailing Stops:
This type of order can be used to avoid potential losses
in profits obtained. They are necessary because, in a
trend, support and resistance can get out of date
quickly.
If the stop loss remains at a certain level, the price could
drop significantly (with the consequent loss of profit)
before the protective stop loss order is activated.
Therefore, in that case, we could change the order to
benefit the trade. Set our stop loss at a higher key
support so as not to lose any profits made.

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 9. Moving Averages

The use of moving averages helps to identify trends and

changes in trend, the purpose of a moving average is to
smooth the evolution of prices, it eliminates short-term
oscillations.
Moving averages are used to eliminate or smooth out
the effect of unpredictable movements, making it easier
to see the trend.

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 9. Moving Averages
a. SMA
SMA (Simple Moving Average)
The SMA is responsible for averaging the movement in the
investment markets to identify trends in the short, medium
and long term. There is a correlation between the length of the
averaging period, the strength of the trend line and the
buy/sell signals.

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 9. Moving Averages
a. SMA

Which simple moving averages we should pay

attention to in the Short Term?

-7 days
-20 days
-30 days

For a Long Term perspective:

-50 days
-100 days
-200 days

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 9. Moving Averages
b. EMA

Another very important moving average very important is the

Exponential Moving Average (EMA), it is similar to the SMA. But
EMA is more sensitive to the price movement, is more exact. It
will help you identify trends earlier than SMA.

EMA’s are used to determine trend direction and then, trade in

that direction. They are mainly used to spot Resistance and
supports.
As you can see in the chart, the blue EMA acts as a resistance, look
the circled red area at 5.2$
Also it acts as a support as you can see. Bounces on 4.3$ (which
EMAS also marks as support)

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 9. Moving Averages
b. EMA

When we find a rising EMA, this one tends to support the price
action. But, on the other hand, when we find a falling EMA, this
tends to provide a resistance.
It’s important to clarify that Moving averages are “lagging
indicators”. They are not designed to identify the exact bottom
or top on a market structure, they will help you trade in the
direction of the trend but with a delay on the entry and exit
points, because like I said, it is a lagging indicator.

The most frequent EMA’S to use are: 20/50/100/200.

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 10. Patterns
a. Do Patterns really exist?

Some academics and traders doubts the existence of patterns;

for them, prices move at random, or at least indecipherable
and unpredictable.

However, in my humble opinion, without ever forgetting that

there is the probability of being wrong, and bearing in mind
that the past patterns may not be profitable in the future,
pattern recognition can be a another tool, which in
combination with others, allows us to analyze changes in the
market and make profitable investments.

My suggestion is to use patterns as a confluence and NOT the

basis of one's trade as trading solely based on patterns is not
profitable in my opinion.

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 10. Patterns
b. Common Patterns

The patterns are obtained by combining the resistance and

support and trend lines.
A pattern is simply a result of the movements of the price of an
asset that is bounded, superior and inferiorly, by a line or a curve.

The entry into the price of the channel is made from below, but
when making two maximums the price loses the support and
returns to a price equal to or less than the one that entered the
channel.
Looking at this picture, we can see that you could take a long
position when the price enters the channel, and sell at the
resistance. And then a short position when the price reverses
and pulls back at the resistance.

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 10. Patterns
b. Common Patterns

Patterns can occur on any chart, regardless of the length of

the period considered.
The bounces ("pullbacks" or "throwbacks") occur when
prices break the pattern (down or up) and then return to a
level (above or below) the breakout point.
One way to classify patterns is between continuation
patterns and trend reversal patterns.

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 10. Patterns
B. Common Patterns

1. Double Top
Double formations (double top and bottom) is one of
the simplest patterns.

• A double top is formed by two peaks and a low point.

• The initial price enters the pattern from below that
low point, and the output signal occurs when the price
break below the structural level.

Rules before a double formation:

- Don't buy before the breakout occurs.
- Make sure there is no consolidation zone (it is say, a flat
trend) around the pattern.

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 10. Patterns
B. Common Patterns

2. Rectangle (or range or box of transactions)

Prices don't always touch both breakout zones (the resistance

line and support), and this could be a sign of the direction it
could take the final break (as you may see in the image from
above)
About 40% of the occasions, the price bounces towards the
levels below (throwback) or above (pullback) the breakout
level, which provides a new opportunity to join the trend.
Depending on how the entry and exit of the rectangle are, this
will tell us if it is a continuation or trend reversal pattern.

Rectangles are often continuation patterns; Two out of three

rectangles are usually continuation, so the direction the
breakout is likely to occur, will be the same as the trend prior
to the chart formation.

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 10. Patterns
B. Common Patterns

3. Triple Top/Bottom

The triple bottom is a rectangle which has the peculiarity

that the number of times the price touches the support line
is equal to three.
In a triple bottom, each peak in the minimum level should
be at the same level and should have approx. the same
shape. Although the peak (point minimum) central can be a
little more higher than the rest.

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 10. Patterns
B. Common Patterns

The triple top is the inverted reflection of the triple bottom.

It is less common than the rectangle.
In a triple top, each peak should be at the same level and
should have approximately the same shape (although the
central peak can be a little lower than the rest)
In a triple top, you will only have a breakout when the price
breaks through below the two peaks of the figure.

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 10. Patterns
B. Common Patterns

4. Descending Triangle

Prices can enter a triangle from any direction.

Prices should touch each limit of the figure at least twice and they
should "sweep" all the interior space of the triangle.
There can be both an upward breakout, but also, a breakout
downward, but it is usually more common a breakout downward.

However, upward breakouts are usually, on average, more reliable

and profitable.
The trend lines that define the figure limits are almost never
precise, and usually generate a large number of false breakouts.
Therefore, to make beneficial use of these pattern, you must strictly
follow a strategy of clear breakouts.

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 10. Patterns
B. Common Patterns

5. Ascending Triangle

The features of an ascending triangle are similar to those of a

descending triangle.
The erratic signals that a descending triangle generates are also
present for this type of pattern; they are configurations with a lot
of movement of prices, many peaks and bottoms, false breaks,
etc.

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 10. Patterns
B. Common Patterns

6. Inverted Triangle

Inverted triangles, (like other triangles), also have several

possible combinations.
This type of pattern is the least useful and occurs infrequently
and are often difficult to identify; it's hard to profit from them.

Because the break lines are constantly moving away from

each other (for example, since the point of upper break is
increasingly found high, in case it finally cause a breakout to
the upside there may be little travel to obtain benefits)
And also the level of rupture is more and more distant of any
possible protective stop order, which implies assuming
greater risks. Failure rate of this pattern rate is higher than
any other chart pattern.

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 10. Patterns
B. Common Patterns

7. Diamond Pattern

Not a common setting but it is very profitable. Each part of

the diamond has two peaks and two minimum points.
Diamonds are mainly patterns that occur at the peak of a
trend. After an uptrend, breakouts to the downside occur in
67% of the occasions (that is, the diamonds are usually a
shape typical of the end of a bullish trend)
The diamonds that break towards to the downside generate
signals that usually are one of the most profitable patterns.
Although the breaks upwards are less profitable.
Diamond pattern is used as a signal for a investment
strategy which is reasonably reliable.

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 10. Patterns
b. Common Patterns

8. Cup and Handle

The Cup and Handle is a continuation pattern that looks like a

cup and handle with a defined resistance level at the top of
the cup.
It forms from a strong upward thrust that pulls back and
consolidates over a period of time creating the cup before
doing another push to resistance where it pulls back again
but not as far creating the handle and then does the final
push passing the resistance level and continuing the trend.

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 10. Patterns
b. Common Patterns

What to look for in a Cup and Handle?

– Depth: The ideal cup pattern should not be too deep. Also
avoid patterns with handles that are too deep, as the handles
should form somewhere in the top half of the cup pattern.
– Volume: Volume should decrease as price decreases, and
then remain lower than the average seen at the bottom of the
cup. The price should rise as the security starts to move higher
towards the previous high.

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 10. Patterns
b. Common Patterns

How to enter a Cup and Handle trade?

To trade using a Cup and Handle strategy, place your stop buy
order a little higher than the upper trend line of the handle.
Your order will only be executed if the price breaks the
resistance of the pattern.
Alternatively, you can wait for price to close higher than the
handle's upper trend line, and then place a buy limit order
slightly lower than the pattern breakout level, which will be
executed if price pulls back.

Wait for a handle to form. The handle often takes the form of a
lateral or descending channel. Buy when the price breaks
above the top of the channel. When the price breaks out of the
handle, the pattern is considered complete and the price is
expected to rise.

Although the price is expected to rise, that does not mean that
it will. The price could go up a bit and then drop, it could move
sideways, or it could drop right after the entry. For this reason,
a stop-loss is needed.

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 11. Indicators
a. RSI

1. RSI:

The RSI or relative strength index is an oscillator that

reflects the relative strength, between the uptrend and the
downtrend.
It measures the relationship between the ascending and
descending movements and normalizes the calculation so
that it fluctuates on a scale from 0 to 100.

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 11. Indicators
a. RSI

RSI indicator around level 30: reflects oversold levels, as well

as indicates that prices have accumulated relative strength. In
this case, it’s a situation where prices have dropped sharply
and now the move could run out of steam.

RSI indicator around level 70: reflects overbought levels, as

well as indicates that prices do not have accumulated relative
strength. This is a situation where prices have risen sharply
and the move is likely to weaken.

The RSI indicator oscillates horizontally around the 50 level: it

means that the market lacks a trend. The 50 level is the
middle line that separates the indicator's bullish and bearish
territories.

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 11. Indicators
a. RSI

To draw an uptrend line on the indicator, you need to connect

two or three or more peaks of the RSI indicator as higher and
higher points appear.

On the other hand, a descending line is drawn by connecting three or

more peaks as the points descend. The breakout of an RSI trendline
could indicate a possible price continuation or reversal.

Note that a trendline breakout on the indicator usually

precedes a trendline breakout on the main chart of your asset,
thus providing early warning and an opportunity to anticipate
the move and determine the trend.

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 11. Indicators
a. RSI

In the RSI we can also trade with divergences. But what is a

divergence? It occurs when the indicator shows us a contrary
direction of the price that can mean two things:

- The price is running out, so there could be a corrective

process in either direction.
- The end of the trend is near and it could turn around or
consolidate.

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 11. Indicators
a. RSI

Bullish divergence: This is when the price forms a series of

lower highs and the indicator is forming bullish horizontal
points. This could indicate that a turn towards an uptrend is
about to take place.

Bearish Divergence: Conversely, the price forms a series of

bullish highs and the indicator makes a bearish horizontal
high.

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 11. Indicators
b. MACD
2. MACD

MACD stands for Moving Average Convergence Divergence.

As its name indicates, what the MACD measures is the
convergence and divergence over time of two moving
averages of the price of an asset.

MACD indicates, at each moment, the separation between the

value of two moving averages with different calculation
periods.

To calculate the MACD, an exponential moving average with a

short calculation period and another exponential moving
average with an average time period are used.
Typically, 12 periods are used for the short average and 26
periods for the other average. The shorter the calculation
period, the more sensitive the moving average is to price
variation.

MACD turns two trend-following indicators, moving averages

(12 and 26 days), into a momentum oscillator by subtracting
the longer moving average from the shorter moving average.
As a result, the MACD offers the best of both worlds: trend
following and momentum.

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 11. Indicators
b. MACD

Signal line crossovers are the most commonly used

MACD trade signals.
The signal line is a 9-day EMA of the MACD Line. As a
moving average of the indicator, it trails the MACD and
makes it easier to spot MACD turns.

A bullish crossover occurs when the MACD turns up and

crosses above the signal line. A bearish crossover occurs
when the MACD turns down and crosses below the
signal line.

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 11. Indicators
b. MACD

On the chart, the MACD line is depicted in blue, the Signal line in
orange, and the histogram in two colors, depending on which
value is above it:

Green when the MACD has a value greater than the signal.
Red when the MACD has a lower value than the signal.

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 11. Indicators
b. MACD

The crosses between the MACD and signal lines will give bullish
or bearish signals about the direction of the price evolution
depending on the following:

When the crossing of the MACD line with the Signal line occurs
from the bottom up, that is, the MACD exceeds the Signal, the
trend will be bullish.
When the crossing of the MACD line with the Signal line occurs
from top to bottom, that is, the Signal exceeds the MACD, the
trend will be bearish.
Two bullish crosses (green arrows) and one bearish cross (red
arrow) are represented on the chart.

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 11. Indicators
c. RSI + MACD
3. RSI + MACD

The RSI is an indicator that is also used to analyze the strength of a

price movement, as you already know.

Due to its characteristics, it is easy to understand that it is an

indicator that combines very well with the MACD. Both seek to
identify early the creation of a bullish or bearish trend, to alert the
trader on whether he should buy or sell a certain position.
Therefore, the analysis of only one of the indicators may be
insufficient. But, by corroborating the conclusions with both tools,
your decision will be more founded and will give you greater
certainty. To better understand, I have combined the use of these
two indicators in the example of the chart above.

S O U L Z ' S P
L A Y B O O K

 11. Indicators
c. RSI + MACD
Histogram:

The MACD histogram (known as MACDh) measures the

distance between the two MACD curves, but visually it is
very useful because it tells us who is in control at any
moment, whether the bulls or the bears.
It also tells us if there is buying pressure or if there is
selling pressure.

If the bars are above zero (in this case, green) it means that
the bulls rule, therefore, the uptrend will most likely
continue. When the histogram changes the color to red,
we know that the trend no longer has the strength to
support it.

Also, we can look at whether the bars grow or shrink. If

they grow, it is a good idea to enter in favor of the trend;
on the other hand, if they shrink, it is best not to get into
trouble.

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 11. Indicators
b. MACD

Conclusion:

The MACD is a technical indicator that measures the strength

of the price movement.
The indicator is made up of three elements: two lines, MACD
and Signal, and a histogram.
The crossings of the lines give signals of possible bullish and
bearish movements.
The histogram measures the amplitude and speed of the
movement, allowing the signals indicated by the crosses to be
confirmed.
To confirm the signals of the MACD, it is advisable to use it in
conjunction with another technical indicator, such as the RSI
or the stochastic.

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 11. Indicators
d. TD Sequential
4. TD Sequential
The TD Sequential indicates when a trend is running out,
approaching turning points, and gives precise signals when to
enter the market with a new position or when to close an
existing trade.

The TD Sequential consists of two patterns:

1. TD Setup: Layout, formation of the pattern itself

2. TD Countdown: The countdown

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 11. Indicators
d. TD Sequential

1.TD Setup:

The TD Setup is the shortest duration part of the TD

Sequential. The complete pattern is made up of 9 bars.

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 11. Indicators
d. TD Sequential

Possible buy signal: We should be prepared to buy if 9

consecutive bars are recorded in which the closing price of
each bar is lower than the closing price of the fourth previous
bar.
If before reaching the 9th bar, a bar appears in which its
close of the candlestick is higher than the 4th previous bar,
the pattern is invalidated.
The close of the previous 4 candles must be lower for the
pattern to be valid.

Possible sell signal: when the pattern is made up of nine

bars in which the closing price of each one is higher than the
closing price of the fourth previous bar.

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 11. Indicators
d. TD Sequential

The "perfect" TD Setup for a sell signal is when the price high
of bar 8 or 9 is higher than the highs of bars 6 and 7.
As in the case of buying, if a bar or candle appears where the
close is not higher than the close 4 candles ago, the pattern is
invalidated.

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 12. Risk Management

In this section I will proceed to explain what I consider

PILLARS in risk management, as well as what percentage I
use in each trade, and how to manage your risk.

1. NEVER invest all your eggs in one basket.

When you deposit for the first time, never invest all
your capital in one coin, not even two. Divide your
capital and you will reduce the risk in your assets.

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 12. Risk Management

2. Have an invalidation point on every trade or

investment you take.

A fairly common mistake with people who start

investing is to let a winning position become a losing
one.
It is common that a position that was profitable at the
beginning, when we see that it goes into losses, we hold
it because we believe that "it will go back up". And
sometimes the market goes down more than expected
and that position ends up being a drag on our portfolio.
When we have an invalidation point in each
trade/investment we take, and we set our stop-loss
there, the losses in your portfolio are drastically
reduced.

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 12. Risk Management
3. Don’t trade against the trend, your goal is to preserve
money.

Following the market trend is key to preserving your money.

In a bear market, forcing long positions when the market
structure is bearish is a mistake. The risk in doing so is much
higher than in a bull market.

Risk management will not only help you earn more money by
having a plan in advance, but it will also help you not to make
as many mistakes as before. The important thing is to know
when to cut your losses.

4. Trade the chart, do not be influenced by your

feelings.

It is important to mention the management of feelings in risk

management.
It is key that when we are operating, we operate what we see
on the chart, that fear or greed do not influence us when
making decisions.

Always have an SL and TP prior to entry, this way we will

reduce the temptation to change both as we let the position
run.

S O U L Z ' S P
L A Y B O O K

 12. Risk Management

a. The 5% Rule

The 5% Rule

NEVER risk more than 3-5% of your portfolio on a single

trade.
3% is what I mostly use for the trades I take.
By this I do not mean that I entered the position with only 3-
5% of my total capital.
The 5 rule means that you're RISKING 5% of your equity in a
single trade.

Whatever happens in the trade, you are limiting yourself to

not losing more than 5% of your capital in a single operation.
Therefore you have risk control. And how you limit to not
lose more than 5% in a trade? Using stop loss.

The stop loss must be placed based on a previous technical

analysis.

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 12. Risk Management
The size of the trade will be determined by the LEVERAGE to
be used of that 5% of the capital.

Let's explain this with an example:

Total Equity: $200.000

Capital % we are going to risk: 5% of $200,000 = $10.000

Trading size used: Capital we risk X Leverage

Let's assume leverage = 20.

$10,000 x 20 = $200,000

So as I mentioned previously, the leverage should be based

on your stop loss and the capital you are going to risk is
based on that.

To become a profitable trader for me lies in Risk to Reward

ratio combined with proper risk management.

This cheat sheet on the next page will determine you how
much R:R you need from your winners in order to become
profitable. Make your system based on a R:R.

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12. Risk Management

Credits to the owner of the picture

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 12. Risk Management
The risk/reward ratio (R/R ratio or R) calculates how much
risk a trader takes in exchange for a potential amount of
profit. In other words, it shows what the potential rewards
are for every $1 you risk on an investment.

The calculation itself is simple. It is about dividing your

maximum risk by your target net profit.

How is it done? The first thing is to analyze where you want

to open your position. Next, you decide at what point you
would take profit (if the trade is successful), and where you
would place your stop-loss.

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 12. Risk Management
I am going to use this example of a trade that I published on
Twitter.
From its price action, I anticipated a deviation after breaking
resistance and going down again strongly, scoring two equal
highs and showing weakness.
In the following image I show you how to find out the R:R to
use in that operation.

In the image, where you can read: “Relación/ Riesgo

beneficio”, it means, Risk Reward.

It’s a 2.7:1 RR succesfull trade, nearly 3. Remember with

2.5:1 RR we only need 29% of winrate to be profitable, and
25% winrate on 3:1 RR to be profitable.

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 12. Risk Management
Here is another example using Risk/Reward ratio. The stop loss as
I mentioned before, is always set up based on technical analysis.

As we can see, the price is bouncing off support. In the same

support that the price has previously bounced by having
buying pressure on it.

When we decide that we are going to enter a long position by

seeing this image, we should set up the SL and know our R:R
to execute the trade.

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 12. Risk Management

By setting our stop loss, and our take profit we will know the
risk:reward ratio we are going to have before entering a
position.

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 13. Applying the Concepts

As we can see in the image, the Bitcoin price action is

showing us weakness. Lower highs (LH) and lower lows
(LL) are forming, typical of a downtrend.

If we look at the RSI, we can clearly see that when it

reaches the overbought zone, it retraces strongly, and its
highs are getting lower and lower.

When we were at $41,000, the MACD gave us a sell signal

(red dot). That candle closing below resistance, lower than
the previous high, with the RSI overbought on all time
frames, and the MACD marking a sell signal, was a clear
signal to take a short position.

S O U L Z ' S P L
A Y B O O K

 13. Applying the Concepts

When I posted the image below on Twitter, I wrote this
below:

"Right now I can't find any reason to be bullish on #Bitcoin.

At 4H TF is forming LH and LL, technically a downtrend.

Also keep in mind that the S&P500 is losing important key

supports.

I wouldn't be surprised if #Bitcoin revisits the $33-34,000

zone again."

As you can see, Bitcoin has fallen more than (-25%) since this
tweet. Only by using indicators and looking at the Bitcoin MS
(market structure), we could guess where the price was going to
go.

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 13. Applying the Concepts

FTM Short Trade on the 5 Minute Timeframe:

The reason I took this short on FTM may not be as clear as

the previous trade. I made this trade in 5 minutes, at that
time Bitcoin looked very weak. $FTM retested resistance at
0.36, but going back and wanting to test 0.352, FTM does
not have enough strength and made 2 clear tops at that
price.

The MACD at that time was indicating a sell signal, and the
price was hanging on a trendline, if this was lost, added to
the weakness of Bitcoin, the price should retest the lows
at 0.33 again (when it loses the trendline, it is when it
retests those lows for the first time)

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 13. Applying the Concepts

As we can see, we lose the trendline, before losing it, it retests

it (another place where we could have executed another short
order), after that, it reaches the two marked take profits. And it
bounces hard on the second one, after taking profits.
It was a +35% trade, leverage x8.

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 13. Applying the Concepts
AAVE Long Trade on 1H Timeframe:

$AAVE at that time was leaning on support, had to keep it to

form a HL. As can be seen in the MACD it’s marked a buy
signal. Prior to the current candle that we can see, two local
highs had been marked which had to be overcome by
another high in order to reach the marked resistance.
Therefore I draw that resistance on those highs, and mark
that the break of these would precede the resistance.

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 13. Applying the Concepts

As we can see in the image above, the price manages to

break those highs and reaches the marked resistance. It
doesn't get to retest the 2nd resistance, and is landing
on support in the image. Which will lose momentarily
just to set those past highs as a support and bounce
from there to hit the key resistance at $97.2. This will be
shown on the next image.

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 13. Applying the Concepts

You can see that we lost the support of the previous image, but
we formed another one where we draw the resistance in those
highs, and from there it bounces up to $97.2, a point which we
had marked as key resistance (point where profits should always
be taken)
It was a +15% trade.

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 13. Applying the Concepts
ATOM Long Trade on the 4H Timeframe:

$ATOM came as you can see from a bearish trend in 4H TF, I

decided to take a LONG in this position because I had observed
the formation of a "double bottom" in the support.

The RSI was in the process of rising, rebounding from the

"oversold" zone, the buying volume was very weak at that time,
therefore, an increase in demand was expected.
If the price retested that black resistance and we broke it, the
most likely thing is that the price would retest the highs, the red
resistance at $20.27, and that is what happened.

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 13. Applying the Concepts

As can be seen in the chart, the histogram continued to grow

after taking the trade, this is an indicator that the uptrend
would continue.
When it touches the resistance and retraces, you can see a
sell signal on the MACD (red dot).
A rejection of resistance, the RSI overbought and falling, and
the MACD giving us a sell signal: are clear indications that we
should have taken profits and abandoned the trade.

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 A thank you note:

That concludes all the lessons I have made for this PDF.
I wanted to collect in this book, the sections that, in my
opinion, are basic and necessary to begin to understand
price action and to understand how and why the price
moves.

I want to thank each and every one of my followers for the

support and motivation to make this PDF.

Without such a supportive and interactive community, it

would be difficult to put out this type of content.
I hope that you have acquired more knowledge through
this PDF.

Those of you who are reading this, keep educating

yourselves. There is nothing more expensive than not
educating yourself in something that YOU love.

I hope you have learned new concepts. Apply what you

have learned, practice.

Sincerely yours,
Soulz

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 https://twitter.com/_Soulz

https://discord.gg/ZvMU5nnDMA

delta.exchange/?code=Soulz

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