This course is designed for those who want to improve the timing of their trading. It focuses purely on the technical aspects of trading and deals with so-called
technical trading set-ups
Of course, it is impossible to have one set-up
that will work under all circumstances, despite what you might be told by people who are trying to sell you expensive secret set-ups
. Using other people’s set-ups
without thinking about the current market or your own style and personality does not strike Lex van Dam as a winning strategy.
Technical Trading Introduction
When it comes to set-ups that work for technical strategies, fundamentals are pretty much irrelevant; it is purely about price action. This module begins by explaining the different types of traders in the market, so you can understand what kind of trader you might be yourself, and design your trading strategy around that.
You will start by having a look at the different types of traders that are active in the FX markets. There are four major groups: scalpers, day traders, swing traders and position traders. The reason that there are different groups is because traders tend to have different time horizons and different holding periods for their positions.
When you analyze these four groups of traders, it is clear that the shorter the timeframe for holding a trade, the fewer the amount of pips that can be made, and the smaller the adverse price movements that should be allowed. Also, the shorter the timeframe, the more time a trader needs to spend monitoring and following the markets.
What is also important to realize is that these four different types of traders focus on different charts. Scalpers might not even look at a chart at all but just concentrate on where a currency pair is trading right now and where the market limit orders are. Day traders tend to focus on charts with each point representing only a five-minute interval. Swing traders normally look at one or four-hour time periods, and position traders mainly use daily and weekly data. The great thing though about technical analysis is that the timeframe does not really matter. The basic analysis remains the same.
It is impossible to have one set-up that will work under all circumstances, despite what you might be told by people who are trying to sell you expensive secret set-ups.
In this module, Lex discusses a variety of technical indicators that he uses himself. He will look at how they are derived and what they exactly indicate. By the end you will have a far better understanding of how and when they should be applied and whether the information they provide is currently relevant.
A technical indicator tends to use historical price data to give an indication of what has happened in the past. An indicator might tell you that a currency pair has gained momentum or that it has been ranging. It might tell you that a currency has fallen dramatically or gone up a lot over the last couple of days. Or it might show possible support and resistance levels.
There really are an enormous amount of indicators available but Lex only discusses the ones that he uses himself. They can be divided into three main groups, will Lex will expand on.
The first group is leading indicators, which give signals before reversals and trends occur so they help you get in a trade early. Lagging indicators give signals a bit later after a reversal or a trend has already occurred. Informational indicators are there to support the decision making process and give even more information.
The Trading Plan
In this part of the course Lex introduces the idea of the trading plan, and explains why all traders should have one before placing a single trade in the market. The objective of this module is to help you create your own plan using some of the techniques shared in the course, adapting them to your preferred trading style and personality.
You can’t trade technical set-ups unless you follow a trading plan and stick to it. A trading plan will ensure that you only initiate trades according to set-ups that you have identified beforehand, using technical indicators that you understand and trust. It will stop you from executing impulsive trades and hopefully make it less likely that your losing trades dominate your winning trades.
Sticking to a trading plan makes it a lot easier to manage the emotions involved in trading. However, you will need to make sure that you remain patient and disciplined enough to execute only the high probability trade set-ups, and that you are consistent in your approach. Lex will show you the main ingredients that a good trading plan should contain.
Day Trading Set-ups
Lex provides examples of three of his favorite day trading set-ups, which are essential for anyone looking to improve the timing of their trades. For day traders, execution is everything and a small improvement in the price at which you entered or exited a trade will often be the difference between a winning or losing strategy. From his time spent as a market maker for Goldman Sachs, Lex will share his many years experience in successful day trading.
Trend Following Set-ups
Many people like the idea that «the trend their friend, until it bends». Trend following is arguably the most common technical trading technique, however many people ignore the changing state of the market and rely on the same strategy when it is unsuitable for the current market environment.
In this module, Lex explains the three trend following indicators that he uses, and when they are best applied. When used correctly, they can provide a very simple way of capturing the majority of a major move without having to be in front of your trading screen all day long.
Trend following set-ups continue with another eight set-ups that are not purely intra-day set-ups. The first four are intended to catch large directional trend following moves, while the last four aim to trade ranging and reversing markets.
Another trend following trading set-up was taught by Richard Dennis and William Eckhardt to a group of people from different backgrounds in the 1980s. The goal was to show that anyone can trade the markets using a set of simple trading rules. The novices were called the Turtle Traders because the idea of training them was born at a turtle farm in Singapore. The experiment worked out very well because within the space of a few years the Turtle Traders had become very profitable.
One of the systems the Turtles traded was the 20-day break-out, which will be discussed in detail here.
Range Trading Set-ups
Markets go through both trending and directionless periods. Some people believe that markets spend more time within a range than they do following a clear upward or downward trajectory. In this module, Lex explains how to classify these conditions and identify whether price is prone to mean-reversion. These conditions are ideally suited to range trading, and Lex shares another three of his favorite set-ups for this type of market.
Generally speaking, when a currency is trading near a resistance level there are three possibilities. The first is that the resistance gets broken and the price breaks out to the upside. The second is that the resistance holds, and the price reverses. The third option is that resistance is indeed broken but only for a short time before the currency sells off, and the price is below the resistance level again.
The other set-up that will be mentioned here is called The Turtle Soup, first discussed by Linda Bradford in her book Street Smarts.
Technical Trading Conclusions
Lex will conclude the course by summarising the benefits of technical trading systems, including how they can make trading less emotional and more objective. He also reveals his personal favorite indicators and provides some useful hints for successful trading with them in your arsenal.
The main aim of this course is to show you the thought process behind a systematic trading strategy, and to give you some inspirational set-ups to help get you started. Unfortunately there is no holy grail as markets keep changing, but by the end of this course you will have a good understanding of technical indicators and how they can best be used in specific trading set-ups. Good luck!
Technical Indicators (32:27)
Trading Plan (12:09)
Day Trading Setups (26:16)
Trend Following Setups (35:03)
Range Trading Setups (22:59)
Lex’s Conclusions (6:19)
5-Step-Trading® Technical Strategies Workbook