Standard Operating Procedures

What are the Standard Operating Procedures?

1.

Take a gander at the ongoing market movement, recognize and check the
closest SNR and

trust that the market will arrive at the SNR region (D1 Time span)
2.

Examine D1 or H4 for confluences (Dynamic SNR, Divergence, and BRN).

3.

Search for a candlestick pattern in the H4 Timeframe.

4.
Adequately enter and manage your risk

Support and Resistance

1.1 What is Support and Resistance?

Support and Resistance also known as SNR, is a pre-determined price area

in which the price is

more likely to bounce off this area rather than break through it. SNR is one
of the most widely used

concepts in forex trading as it is the bread and butter of forex trading.

Without SNR, we cannot

predict where the price will go next.

Resistance is a price area in which upward price movement is blocked by an
overwhelming supply

indicating that sellers are looking for opportunity to SELL the market.

Support is the opposite of Resistance and it is a price area in which the

downward price movement

is blocked by an overwhelming demand indicating that buyers are looking

for opportunity to BUY the market.

1.2 Reliable timeframe for Support and Resistance

For the rest of the course it is important to mark SNR only at DAILY
timeframe as it is more

reliable in identifying trend direction.

1.3 Types of Support and Resistance
For this strategy there are three types of Support and Resistance (SNR):

1.

Horizontal SNR
2.

Role Reversal (SBR/RBS)

3.

Dynamic SNR

1.3.1 Horizontal SNR

1.

Look at the current price chart

2.

Identify the nearest swing high and swing low

3.
Draw a rectangular box of 60 to 90 pips from the swing high for resistance
and swing low for

support

1.3.2 Role Reversal (SBR/RBS)

Role Reversal is a powerful concept of Support becomes Resistance in a
downtrend and the

Resistance becomes Support in an uptrend.

Support becomes Resistance
For a support to become a resistance, there is only one condition that needs
to be met, it is as

follows:
1. Market must violate Support Area

Once the support area is violated to the downside, it becomes a new

resistance area and once

market retraces back to the new resistance area, traders will have to be alert
as it

offers

opportunity for short positions.

Resistance becomes Support

Same concept applies to Resistance becomes Support, condition needs to be
met as follows:
1. Market must violate Resistance Area

Once the resistance area is violated to the upside, it becomes a new support
area and once

market retraces back to the new support area, traders will have to be alert as
it offers opportunity

for long positions

1.3.3 Dynamic SNR

For this strategy, there are two types of dynamic SNR (chart patterns):
1.
Equidistant

2.

Wedge
Equidistant 1.

The parallel Support and Resistance levels make up the trend channel known
as the equidistant.
Equidistant

2.
Descending Equidistant line

How to find or identify Equidistant?

1.

You have to DDrawa perfet trend line

2.
Check if you can draw a parallel trend line from any given point.

3. The upper line is the Dynamic Resistance and the line below is the
Dynamic support, focus on
Wedge Patterns

In technical analysis, wedge is a pattern that is formed by two trend lines

that are drawn above and

below price chart converging into a shape similar to a triangle. The line
above is the resistance line

and the line below the price chart is the support line

Two types of Wedge Patterns

1.
Ascending Pure Wedge

2.
Descending Wedge

How to identify the Wedge Pattern?

1.
Draw a trend line

2.

Look to see if the opposite trend line can be drawn, the shape of the pattern
must be

converging into a shape similar to an arrow or a triangle

3.

The upper line is the Dynamic Resistance and the line below is the Dynamic
support, focus on
2. Confluence
2.1 What is the meaning of Confluence?

Confluence is a term when

two or more trading strategies share the same signal. This term is

used when doing technical analysis, by looking at charts and developing

levels where different

indicators and ideas are combined to help identify possible opportunities.

An example of confluence for AUDCAD is as follows:

1.AUDCAD is at Resistance area D1 SELL

2. AUDCAD pair is at Ascending Wedge near the Resistance line i.e.

(Dynamic Resistance line D1)
– its time to SELL
It

is

confluence

when

two

trading

strategies

share

the

same

signal.

2.2 Divergence
There are four types of Divergence:
Uptrend Divergence is a concept in which the price makes a higher high
but the Stochastic

indicator does not make a higher high indicating that there is a possibility of
a price retracement or

a reversal

Downtrend Divergence is a concept in which the price makes a lower low

but the Stochastic

indicator does not make a lower low indicating that there is a possibility of a
price retracement or a

reversal
(Figure X below shows an example of a Downtrend Divergence)
Uptrend Continuation Divergence is a concept in which the price makes a
lower high but the

Stochastic indicator does not make lower high indicating that there is a
possibility that the trend will

continue upwards
Downtrend Continuation Divergence is a concept in which the price
makes a higher low but the

Stochastic indicator does not make a higher low indicating that there is a
possibility that the trend

will continue downwards

2.3 Big Round Number
Big Round Number or BRN for short is an even number which acts as a
psychological Support and

Resistance
Examples of BRN:
JPY Pairs

Other Pairs
XXX.000

X.XX000
XXX.500

X.XX500

BRN is powerful because most smart traders usually place their orders at
these levels. If BRN is

somewhere near the SNR area it is a strong indicator that the area will be
difficult for the market to

violate making it a strong SNR area. How to use BRN to support our
technical analysis is

depicted in Figure X below.

3. Candlestick Patterns
3.1 Introduction to Candlestick Patterns

Candlestick patterns can determine the direction of the market based on the
volume of buyers and

sellers. If there are more buyers than sellers, the market will go up and vice
versa and the idea

here is to look at the candlestick pattern that can give an opportunity for our
entry point.

3.1.1 Bearish Candlestick Patterns

Bearish candlestick patterns excel at predicting downward movements
provided they are formed at

resistance

3.1.2 Bullish Candlestick Patterns

Bullish candlestick patterns excel at predicting upward movements provided
they are formed at the
support
4. Risk Management
Risk management is one of the most key concepts to be successful in forex
trading. It is an easy

concept to understand but very difficult to apply. Most traders have the
mindset to take large risk to

aim for higher profits and it is not a very sustainable approach in the long
term

As a forex trader, you should not risk more than 3% of your trading capital
per trade. To have a

profitable strategy is one thing and to have a systematic risk management

approach is another.

Our aim here is to trade indefinitely with capital preservation and a proper
risk management to

achieve financial independence.

Manage your loses

One form of risk management is knowing when you should cut your losses.
Figure out how many

pips you should set to be your stop loss, once your stop loss is set, stick with
it and do not move

your stop loss farther.

Lastly the recommended stop loss is 60 pips from the entry point and the
minimum rewards is 120

pips adopting the 1:2 risk reward ratio. By understanding your risk, you
ensure that you will be able
to continue to trade when things do not go as planned and practicing a good
risk management with

a profitable strategy can be rewarding in the long term

Calculating Lot Size

Lot size is very important and knowing what your lot size is crucial to
maintaining the 3% risk.

Below shows an example of how to calculate your lot size:

Risk: 3 %
Equity (Trading Capital): $1000

Stop Loss: 60 Pips

1. Equity x Risk = Money you are willing to risk

$1000 x 3% = $30
2. Money you are willing to risk = $ Per Pip

Stop Loss in Pips

$30 =

$0.50 Per Pip

60
3. Hence your risk is $0.50 per pip which is equivalent to 0.50/10
= 0.05

of a standard lot
REAL CHART EXAMPLES
LOOK AT EURJPY ON (25th October 2017)
1.

Mark the nearest Support and Resistance,EURJPY’s current price is at

Resistance area D1,

we look to find an opportunity to short

2. Check for confluences, in this case the price is currently testing the
133.000 area which is a big

round number
3. Next step is to look for a bearish candlestick pattern in H4 and we found
one in the form of Doji
4. So now we can Sell EURJPY and set out take profit and Stop at (60 Pips
SL, 120 Pips Target)
USDCAD (30th October 2017)
1.Mark the nearest Support and Resistance, USDCAD’s current price is at
Support area D1, we

look to find an opportunity to long

2. Check for confluences, in this case we can clearly see the price is testing
the 1.20500 area

which is a big round number and we can see the pattern formed an
equidistant in which the price is
at dynamic support

3. Next step is to look for a bullish candlestick pattern in H4 and we found

one in the form of a

pinbar

4. Buy USDCAD and properly manage your risk.

CHFJPY (2nd February 2018)
1.

Price is at Resistance Daily with a confluence of BRN area 118.500, we look

for a selling
opportunity

2. Bearish Candlestick formed at H4, We can now Enter and also manage
your risk properly
EURNZD (11th January 2018)
1.

Price is at Dynamic Support, we look for a buying opportunity

2.

Uptrend Divergence occurred along with the price is at 1.66500 BRN area
(Confluence)
3.

3.The next step is to look for a candlestick pattern on the H4 timeframe. A

bullish enveloping

pattern can be clearly seen, so enter the trade and properly manage risk.
NZDJPY (30th January 2018)
1.

Price is at RBS area, look for an opportunity to place a long trade

2. We can see a downtrend divergence and a candlestick pattern formed at
H4, enter a buy

position and manage your risk properly

Terminology and Settings
Term

Definition

Long Buy

Short Sell

SNR Support and Resistance

BRN Big Round Number

Stochastic Settings
%K Period - 8
%D Period - 3
Slowing: 3

MA Method: Linear Weighted

END