FOREX

A Distilled Approach to the Foreign Currency

Exchange Market

2nd Edition

Urna Semper
 © Century Capital Group 2020

Century Capital Group publishing Inc.

Eric Doustov, Levis Doustov

@Igdoust, @centurycapitalgroup, @doust02, @mr_us30_
https://www.centurycapitalgroup.org
© Century Capital Group 2020

Table of Contents

Module 1

1.0 Introduction to Forex

1.1 The Forex Timeline

1.2 The Main Forex Players

1.3 Different Styles of trading Forex

1.4 Anatomy of a Chart

1.5 Forex Nomenclature

1.7 Charting and Execution Software

Module 2

2.0 Psychology

2.1 Fundamental Analysis

Module 3

3.0 Introduction to Technical analysis

3.1 Timeframes

3.2 Support- Resistance

3.3 Story of Candles

3.4 Exponential Moving Average

3.5 Pivots

3.6 Fibonacci Principle

Module 4

4.1 Art of Journalling

4.0 Trade Execution

 Our Mission
“Contrary to the popular belief, there is no such thing as
being born into ‘a good trader’.”

The intent to create this course was to transform anyone

with little to no knowledge about financial markets into
professional traders through the concept of hard work,
dedication, self-belief and perseverance. Here at Century
Capital Group our goal is to create a personal bond with all
our students, by talking about immediate and long term
goals whilst catching up with every single one of our students
to ensure that progress is being made.

To break the ice, we will mention the cold hard truth where
92% of all traders lose their capital through the lack of
proper trading knowledge. This is why we are here to help
you be the part of that profitable 8%.

Following our in-depth research pertaining to the academic

realm of Forex, we have noticed that the majority of the
available courses place emphasis on the wrong tenants of
trading, needlessly overcomplicating them which as a
consequence, leads to analytical paralysis and failure of new
traders as a whole.

This educational program provides a simple yet efficient

method that was devised to be applied a multitude of times
under various market conditions, yielding quite significant
success in the retail realm of trading.
We have given personalized mentorship to hundreds of
students that are now successful FX traders. Many of them
had either no knowledge of the FX market, or came from
other trader gurus and received little to no value from their
irrelevant courses. Having had various individuals express
their limited financial resources and the monetary burden
pertaining to our one-on-one in person mentorship, we
decided to provide the exact same content on a more
affordable online platform.
We believe that financial knowledge should be available to
every single individual who seeks its interest and we hope
that in doing this we have eradicated the existent financial
barrier.

On behalf of Century Capital Group, we would like to thank

you for choosing us as your educational platform.
Furthermore, we would like to remind you that with grit,
correct mentorship, and a vision, anyone can become a
successfully profitable trader, trust us we were there.
 Module 1

“Trading doesn't just reveal your character, it also

builds it if you stay in the game long enough.”
- Yvan Byeajee

1.0 Introduction to Forex

Let's begin our discussion by discussing the main types of

financial markets. Firstly, the stock market is the oldest most
common and well known method to make capital from an
investment as there’s an endless amount of companies to
invest in. On average, the stock market yields an 8-20%
return per year, however, the inherent caveat is that it is
nearly impossible to know when a company will rise, file for
bankruptcy or vanish completely from earth. Furthermore,
in order to impart any significant financial gains from the
stock market, substantive capital is required.

Another major market is the cryptocurrency one. With the

advent of bitcoin and subsequent cryptocurrencies, a novel
market emerged. With quite volatile properties an a general
uncertainty of what governs price action fluctuation,
cryptocurrencies are best left for specialists.

Foreign currency exchange market is our area of interest and

what this educational program will focus from now on. It is
an aggressively traded, 24 hours a day 5 days a week market,
which opens 17:00 Sunday night and closes at 17:00 on a
Friday. Different parties such as governments, investors,
businesses, institutional traders and retail traders like us,
exchange and predict the currencies that are available via
broker, using both a combination of fundamental news and
technical analysis.

These currencies are commonly traded as pairs (2

currencies), as (AUD/USD) Australian dollar/ US dollar or
(GBP/USD) Pound/US dollar, and anyone is able to make
money based on the correct positioning of the market. This
market is the largest (by far exceeding the crypto or stock
market being in the billions) with over 5 Trillion dollars in
traded daily volume. Despite the lack of a physical trading
location, the general Forex trading areas from around the
world consist of: New York, London, Hong Kong, Singapore,
Paris, Sydney, Frankfurt and Zurich. To those who master
it's dynamics, forex gives a greater return in a much shorter
period of time than other financial realms with a smaller
constituent capital.

Copyright © Century Capital 2020

1.1- The Forex Timeline

This section will focus on the history behind the foreign

exchange market. Retrospectively, in the 20th century, the
great depression that occurred in 1929, changed the world
for most investors, and in 1931, gold standard was removed.
This standard was used to correlate any specific currency to
gold, for example 1 USD would be able to buy a specific
amount of gold, the same applied for the Great British pound
etc. In the United States of America, one ounce of gold had
an annual monetary sum of 20.56 USD, making the currency
quite strong.

For a period of 14 years (1931-1945) there was a huge

economic calamity for many countries as decentralized paper
money was prominent on the market. This in part, lead to
the beginning of World War II. Since then, this market
experienced a very quick evolutionary change up to 1970 and
in 1971, where the FX market was born. Another important
date to note was when the government released a policy in
1963 to generate paper money with no promise to pay back
or have any REAL value of that money. Within the same
decade, silver was completely eradicated as metal of choice
for all coin denominations.

Therefore, these currencies became overtime “free

floating”—moving in respect to one another (ie. Euro versus
USD) . As investors and individuals began speculating on the
price rates, this market gained lots of interest which led to
the liquidity and traded volume increase and the formation
of a now modern Forex market.

One decade later, in the 1980’s as computing power grew

exponentially, financial markets became more prominent
with an increase in transactions and statistical analysis.
During that time, trading itself was limited to swing (long-
term position trading) as all charting and technical analysis
was predominantly done through paper and pen and all
executions were done via a phone line (such methods were
too delayed to permit scalping or day trading).
Subsequently, an increase of traded volume was observed—
from 68 Billion Dollars per day in the early 1989’s to over 3
trillion in 2005 up to 5 trillion in 2019 and day by day this
industry is expanding as upcoming retail traders are
discovering the advantages of Forex and the amount of
money one can make trading this market.

Presently, trading in all markets has shifted to two major

groups: quant trading (coding algorithms that trade huge
volumes of capital) and retail trading. From the retail
perspective, there is a multitude of online charting platforms
and brokerages that allow an individual to gain access to the
markets with an unsurpassed ease.

Copyright © Century Capital 2020

 1.2- The Main Forex Players

Depending on where you live, there is a currency associated

with your country. There are 130+ currencies worldwide that
are used, nevertheless, USD (US dollar), JPY (Japanese Yen),
EUR (Euro) GBP (Great British Pound) are the ones most
commonly traded and used for payments in Forex trading.
Other currencies such as CAD (Canadian dollar), CHF (Swiss
franc), AUD (Australian Dollar) are also traded, and are
favoured by f Hedge Fund traders, Investors, Big Banks,
large Companies and Corporations, Central Banks, small
investors and retail traders.

Investment bankers/ asset managers, are the ones that

manipulate this market the most as they got the most capital.
Around 65-92% of all the FX trades are based on
institutional speculation.

Secondly come the big banks I.e. HSBC, DB, J.P Morgan and
Barclays. About 50% of all FX trades and volumes that are
created everyday are done by them. They trade billions worth
of liquid money every single day, and sometimes this is
executed via customers, but most of the time it is preformed
via proprietary traders who trade these big banks of their
own capital for substantial profits.

Next we have companies and corporations. Their goal is to

exchange currencies from other countries for commerce
reasons. Let's assume you as a consumer go to the Apple
store situated in Canada to buy an iPhone. In order to
purchase the product, the Apple store acquires it from a
factory in China by paying it in USD. Once that product
arrives here, they charge you in CAD. That shift in money
creates fluctuations in currency prices hence making up the
shifts in the forex market. This is called overseas commerce
which is one of the underlying factors of the currency flow.

Another important player in the forex market are the

General banks or commonly referred to as the central banks.
All financial transactions effectuated by such banks do affect
the economy, and make increase and decrease in a currency’s
value. At various times, the foreign exchange market affects
export and import taxes, gas pump prices, food you buy and
many more goods/services. Throughout moments of
deflation, a central bank of a country (ex: Bank of America)
would print more money hence weakening its currency, in
order to purchase foreign currency.

Having addressed the main players of the game, let’s delve

into the topic of a retail trader— or who we are in this
industry. Retail traders utilize inflation rates policy
expectations and other fundamental news alongside
technical charting patterns like support resistance and price
action candlesticks and even the depth of market to place our
trades.

Copyright © Century Capital 2020

 1.3- Different Styles of trading Forex

Before we characterize the 4 main styles of forex trading, it is

important dichotomize a professional trader vs a beginner. A
professional trader has attained a level of professionalism by
correctly speculating about the future price of a currency pair
for a prolonged period of time. A professional forex trader
sees set ups, minimizes risk and maximizes profits, whilst
constantly seeking to become better at their craft. Fear of
being wrong or taking a minor loss is virtually non existent.

Traders can be segregated into 3 types: technical ,

fundamental, or a mixture of both.

The art of technical analysis in forex trading is a very

powerful tool that one might use to trade. By reading chart,
one is able to see a broad picture of various economic and
fundamental factors, which are depicted via price action
movement. By basing their predictions off technical analysis,
traders eradicate the ever-present issue of market
manipulation which is effectively done through news release.
Hence creating a type of trader who executes their trade
through news releases. More formally known as fundamental
analysis, this trading involves using predictions about
economic news in order to buy or sell a specific currency.
This form of trading is one of the most ancient methods of
investing especially prior to the advent of advanced
computing power (which allows one to perform technical
analysis with ease). The logic behind this form of trading is
that no matter the fundamental news releases, the price of
the currency trade will sooner or later follow the released
economic data. This form of trading involves the
announcements of interest rates, elections, and economic
releases into account. Main issue with this methodology is
that price action may or may not be affected by news releases
hence decreasing the said accuracy of trades.

This is why traders routinely rely on a mixture of both

technical analysis as well as fundamental analysis as it is
easier and safer to predict the direction of the market

Next, let's discuss the formal types of trading of which there

are 3: swing trading, scalping, and day trading,

Swing or trend trading is a style which is based on medium

term market perspectives. This might require a few days,
weeks or even months for a trade to play out. This style of
trading is mainly analyzed on the weekly, daily and 4 hour
candlestick formation. It involves having about 2-4 trades
running per week and relying on economic releases to impact
the movement of your currency pair. Individuals trading in
this particular style will have wider stop losses letting the
trade to come through fruition.

Next style involves scalping and day trading. Both of these

techniques go hand in hand, and are both heavily used by
good traders. Scalping is the technique of using the 5-15
minute time frame to trade the charts. One scans the charts
very quickly looking for profits and this is a very short form
of trading. As a scalper one aims for 5-10 pips as profit whilst
risking a smaller portion of a capital. Such individuals use
bigger lot sizes and gain substantial profits through the day
trading 5-10 instruments. This method is very fast paced and
can work for a few investors or traders that prefer excitement
and volatility.

Day trading (intraday trading) is the most common form of

trading where individuals hold trades for a couple of hours
to about 24 hours. The goal is to acquire 80-100+ pips with a
focus on 1-2 currency pairs at once. This is the preferred
strategy at Century Capital Group.

Copyright © Century Capital 2020

1.4- Anatomy of a Chart

When performing technical analysis, one will encounter

different types of charts. They can include: candlestick
charts, line charts and bar charts. Candlestick charts are the
preferred charts as they are the most informative.

Line Charts

The line chart enables one to see the overall trend of the
market with the appropriate support/ resistance levels. It is
not useful to trade individual price points as the shorter
entries will be much harder to find. The line chart concept is
made from the connection of a line from the HIGH price of
one period to the HGIH price of the next. Conversely, low to
low and open to open and close to close. It is practical from
time to time to use the line chart to plot levels.

Figure 1. Line chart

Bar Charts

The bar charts are indicative of the price bars for each
respective time frame (15min, 1 hr, 4hr, Weekly). For
example, on the daily time frame, the bar would be indicative
of when the bar opened, where it closed, where the high price
was and where the low price was. Each set of bar charts is an
individual price point with no connection to other prices
around it.

Figure 2 Bar Chart

Candlestick Charts

Candlestick charts are the most used for technical analysis as

they show the price action in a clear informative manner
thus allowing traders to spot resistance levels alongside
supports and potential entries. The upper vertical line that
sticks out is called the line/wick, and it is referred to as the
upper shadow whilst the bottom is referred to as lower
shadow. The one difference between candlesticks and bar
charts are shown via the opening and closing price. The main
body of a candlestick indicates the range between the
opening and closing price whilst the wicks tell the trader the
place where the price has tapped previously. There can be 2
types of candles :bearish and bullish. If the body of the
candle has closed at a higher price from where it has opened
it is considered to be a bullish candle. If the price of the
currency has closed at a lower price than it has opened, it is
said to be bearish. There’s a plethora of candlestick
formations, some which are very important in trading that
will be discussed later on.

Figure 3. Candlestick Charts. From all 3 types of charts,

candlestick formations are the most used as they allow
traders to find exact entries/ exit points.
Identifying Trends

As a trader it is imperative for one to identify long term and

short term trends as they dictate where the price action can
potentially go to. There are 3 types of trends: Uptrend,
Downtrend, and Consolidation

Uptrend
The uptrend is considered when the market is making
successive higher lows and higher highs (refer to figure 4).
The uptrend is also called the bull trend and is seen via price
action movements (series of candles) that supersede the last
highest point. The correction or the decline must end above
the lowest point of the previous decline.

Figure 4. Uptrend
Downtrend

The downwards trend is seen when the market is creating

lower highs and lower lows. It is also most commonly
referred to as the bear sequence or trend. These sequences,
ends under the greatest point of the last decline. The series of
consecutive lower highs and lower lows are displayed in the
figure below.

Figure 5. Downtrend

Consolidation

Trading the consolidating market is more commonly referred

to as trading the range. The price action is appreciating at
the same rate as it is depreciating thus there is no net
movement to the upside or downside. Traders usually wait
for price action to break out from this range to either the
upside or downside.
Figure 6. Consolidation

Copyright © Century Capital 2020

1.5 Forex Nomenclature

It is imperative to understand the basic terminology utilized

in this industry before we can advance in our discussion of
Forex.

PIP (Percentage in Points)

A pip is the 4th decimal place (except for YEN pairs where
the pip itself is counted as the 2rd decimal place.)
The fifth decimal place is called a pipette (3rd decimal place
for YEN pairs) and is rarely used by the brokers. A point is
equivalent to 100 pips and is sometimes utilized by traders.
The number of pips gained or lost are based on the difference
between the bid and the ask price (Refer to Figure 8).

The trading formula for PIP’s calculation (buy) is: (Entry

Price- Closed price)
The trading formula for PIP’s calculation (sell) is: -(Entry
Price- Closed price)

Lets’ take CAD as an example. If one took at sell (short)

position at 1.3050 and they decided to close the trade at
1.3000, the difference between the two is their profit of 50
pips. Same applies for buy (long) positions.

Figure 8.PIP Calculation

Figure 7. PIP positioning

 PIPs themselves are then translated into a monetary sum
which is based on 3 factors: ones account size, its currency
type, and the size of the trade.

Suppose one executed a trade with a 1 $ per PIP on the

USD/CAD trade discussed earlier, if one caught 50 pips and
each pip was worth 1$, that would of been 50$ profit. (50
pips x $1 per pip)= Total profit

The formula to calculate ones’ monetary profits is:

Monetary sum (in USD, GBP., EUR)= (Net PIP’s x price per
pip in USD, GBP, EUR etc.,).

Various brokers utilize the concept of a lot since FX pip

quantities are so minute. A standard lot depending on the
broker and the currency that is being traded equates to 10$/
pip. Lot 0.5 is 5$/lot, lot 10 is 100$ per pip, whereas a lot
100 is equivalent to 1000$/pip. As the conversion rates
differ from brokerage, it is best to consult its support team
for clarification.

Understanding Exchange Rates

The main tenant of the FX market is buying one currency

whilst selling another currency at the EXACT same time. The
exchange rate is stated as USD/CAD, AUD/NZD and one
were to execute a sell (short) on USD/CAD, the US dollar
weakened against the CAD dollar then profit in PIPs would
be made. This would be shown on a chart as price
(depreciating) falling down and making CAD dollar
becoming stronger. (Think of forex trading as a tug war, one
is always pulling the other and one party strengthens while
the other weakens. In the end, someone pulls harder and
thus ends up winning).
As displayed below the first currency shown on a quote
board is commonly referred to as the base currency, while
the second one is called the quote currency. In other words
base currency is the basis for the trade hence back to the
USD/CAD example mentioned earlier, the USD is the base
currency and CAD is the quote currency. So if one buys USD/
CAD you are buying USD (base currency) and selling CAD
(quote currency) and if one sells USD/CAD they are selling
the base USD and buying the quote being CAD.

Figure 8. Reading Exchange Rates

Copyright © Century Capital 2020

So to recap, irrespective of one’s is buying or selling position,
the execution is always contingent on the first currency
within the pair of interest!

In another example, if one where to buy AUD/USD

(Australian Dollar vs US Dollar), the exchange rate is
indicative as to how much one needs to pay in terms of the
quote or second currency in order to buy the first or base
currency. Hence, if one wanted to buy AUD/USD and it
displayed 0.69990, it meant that 1 Australian Dollar will
exhibit the purchasing power of 0.69990 U.S Dollar.

The fundamentals behind FX trading is to execute a buy

position assuming thinking that the first or the base currency
will appreciate in value vs the other pair. In both cases
something must depreciate and appreciate at the same time.
Remember it is a constant tug of war between the two
parties!

The Spread

Every time an FX trade is placed, access to the market needs

to be provided via the broker (middleman). The broker
charges an execution charge, also known as a commission /
spread.

In FX trading there are 2 types of prices for a currency pair

at any time that are referred to as the ASK and the BID price.
The spread is the difference between the two prices and it is
deducted as PIPs automatically when one enters into a trade
irrespective of whether that trade is winning or losing.
Let’s assume you are trading the same USD/CAD pair, and
you buy or go long your trade entry would be placed using
the ASK price and when you are selling or going short on a
currency pair you are using the BID price.

As shown in figure 9, in this currency pair there is a 0.3212

(1) - 0.3212 (2) giving a spread of 0.00001 or 0.1 PIP’s. To
break even the trader must make at least 0.1 PIPs. The most
liquid and hence the most traded currency pairs have the
smallest spreads therefore making them the cheapest to
trade. However, there are currencies that expensive to trade
due to them being not as popular (referred to as exotic
pairs). Other entities such as indices have an even greater
spread due to the significant volatility (hence ability to
generate greater capital gains). The numbers for spread
always shift from session to session being heavily affected by
news releases.

Figure 9. Indication of Spreads

Copyright © Century Capital 2020

Main FX pairs:

There are two types of currency pairs. First being the Major
Pairs and second— Exotic pairs. The major pairs are the
ones that are the most traded around the world.
The majors have the most liquidity and thus are the cheapest
to trade as the spreads are the smallest, whereas exotics are
less liquid and hence are more expensive to trade. The
“Majors” include EUR/USD, GBP/USD, GBP/JPY,USD/
CAD, USD/JPY, EUR/JPY. The exotic pairs may be
considered as CAD/JPY, EUR/NZD, EURAUD GBP/CAD,
AUD/NZD, USD/ZAR. Again, the aforementioned
distinctions vary from individual to individual, but the best
way to discern between majors and exotics is by the lowest
spreads (hence greater liquidity). Listed below are a
nicknames professional traders use around the world for Fx
pairs.

GBP/USD- Cable

EUR/USD- Euro or Euro Dollar

USD/CAD- Dollar Cad

AUD/USD- Aussie Dollar

USD/CHF- Swissy

NZD/USD- Kiwi
Cross Rate

The cross rate is the exchange rate between two currencies

that do not belong to the country where it is quoted.
Assuming one resides in Canada and is trading the British
Pound and Japanese Yen. The rates provided will be
considered cross rates but if the British pound was not
quoted in ones country it would no longer be considered a
cross rate.

Leverage

The term leverage in the FX market is paramount as it

dictates the purchasing capacity of one’s trading account.
The choice of leverage is given once a trader opens a an
account with a broker and it affects the buying power while
determining the amount of margin that is required per trade.

Assuming a trader deposits 5,000 USD onto their trading

account, and broker provided leverage is 1:100. This
ultimately means that every dollar you put in gives you 100
times more the buying capacity of what you really have.
Overall, you will have 5,000 x 100 meaning your total buying
capability would be 500,000. It is important to understand
that the leverage is a double ended sword. One way it can
grow the traders’ account rapidly. It can however, destroy
ones account at the same rate should the trade go against the
trader. Starting with a smaller leverage for FX trading is a
safer approach to long term financial gains.
To calculate the leverage being used on a certain trading
amount start by diving the total amount of the open
positions positions by the total trading portfolio or balance
shown. Assume on has $10,000 worth of margin in their
account and by opening 2 lots on USD/CAD. This equates to
100,000 units of the base currency for $100,000, the
leverage ratio is 10:1. If the broker gives 400:1 leverage the
trader can control a huge position 100,000 with only a
capital of ONLY $500!

Margin
Margin is the amount required to open a new forex position,
it is not a fee or a charge to one’s account. In essence, it is an
amount one sets aside, from their free equity for any new
trade. Assuming a trader has a $5,000 margin balance in
their trading account to open a new position, they will
require a 1% margin so that one can either buy or sell a
position up to $500,000. This instrument allows one to
leverage their account 100 x or a leverage of 100:1 (every
dollar inputed equates to 100 dollars worth of purchasing
power). One thing to note is that the higher the margin
percentage on the portfolio, the higher the risk one has to get
margin called (positions being automatically closed to
prevent the account from falling into a negative amount,
should a trade go against them)

If one is deciding to work with high leverage one MUST be

aware of how many positions they can have open at once.
Trading Sessions

The FX market is open all weekdays (5 days) 24 hours a

day. There are 4 main trading sessions, Sydney, Tokyo,
London and New York session.. The displayed times are
when these major trading sessions open and close:

SUMMER TIME:

SYDNEY OPEN (6 PM EDT OR 10 PM GMT)

SYDNEY CLOSE (3 AM EDT OR 7 AM GMT)

TOKYO OPEN (7 PM EDT OR 11 PM GMT)

TOKYO CLOSE (4 AM EDT OR 8 AM GMT)

LONDON OPEN (3 AM EDT OR 8 AM GMT)

LONDON CLOSE (12 PM EDT OR 5 PM GMT)

NEW YORK OPEN (8 AM EDT OR 12 PM GMT)

NEW YORK CLOSE (5 PM EDT or 9 PM GMT)
WINTER TIME:

SYDNEY OPEN (4 PM EDT OR 9 PM GMT)

SYDNEY CLOSE (1 AM EDT OR 6 AM GMT)

TOKYO OPEN (6 PM EDT OR 11 PM GMT)

TOKYO CLOSE (3 AM EDT OR 8 AM GMT)

LONDON OPEN (3 AM EDT OR 7 AM GMT)

LONDON CLOSE (12 PM EDT OR 4 PM GMT)

NEW YORK OPEN (8 AM EDT OR 1 PM GMT)

NEW YORK CLOSE (5 PM EDT or 10 PM GMT)

Copyright © Century Capital 2020

1.6 Charting and Execution Software

Trading View

To set up Trading View go to : https://www.tradingview.com

sign up for whichever account suits your needs and please
refer to the video tutorial that enumerates the specific steps
involved in setting up your Trading View. In the end one
should have the correct Pivot Point settings, the correct
moving averages (14, 50, and 200 EMA), ant the correct
liquidity zone settings. This software is utilized for technical
analysis.

MT4- Metatrader 4

For trade executions, MT4 is utilized. It is available on both a

smart form and computer based platform.
Lets explore the main interface features of MT4

Figure 10. MT4 Interface

Market Execution: Entering into the trade at the present
moment.

Buy Limit: (For Buy or long positions). The limit order is

inputed if one is looking to buy at a specific price provided
that the price has already passed ones desired number and
they are waiting for the price action to revisit the rate.
i.e. Trader wants to enter at for CAD JPY at 81.94 but price
has already surpassed it and is at 82.00, by placing a buy
limit the trade will be activated if price revisits 81.94.

Sell Limit. (For sell or short positions). The limit order is

inputed if one is looking to sell at a specific price provided
that the price has already passed ones desired number and
they are waiting for the price action to revisit the rate.
i.e. Trader wants to enter at for CAD JPY at 81.94 but price
has already surpassed it and is at 79.00, by placing a sell
limit the trade will be activated if price revisits 81.94.

Buy Stop (For Buy or long positions): Buy stop is placed if

the trader wants to enter trade automatically when the price
action visits a level of interest. Usually used when one is
away from the charts, or expects the price action to visit that
level a rapid rate. I.e The price action for CADJPY is at
78.00, trader has determined its a long and places buy stop
at 80.00. Once price attains 80.00 the trade is automatically
activated.

Sell Stop (For Sell or Short positions): Sell stop is placed if

the trader wants to enter a trade automatically when the
price action visits a level of interest. Usually used when one
is away from the charts, or expects the price action to visit
that level a rapid rate. I.e The price action for CADJPY is at
84.00, trader has determined its a short and places buy stop
at 80.00. Once price attains 80.00 the trade is automatically
activated.

Stop loss
Stop loss is a price that is imputed which is the most the
trader is willing to lose before being taken out of a trade
automatically to prevent greater losses. Stop losses are quite
useful as they help overcome emotions associated with
losing. Additionally, one can implement a trailing stop loss
(of ex. 20 pips) allows one to let a trade running for a long
period of time whilst keeping the majority of their trade
profits should the price reverse in the opposite direction.

Take Profit
The price at which one is automatically taken out of with
profits. This is best used for limit orders and Stop orders, or
in general for market execution.

Figure 10. Stop Loss vs. Take Profit

 Module 2

“You can be free. You can live and work anywhere

in the world. You can be independent from routine
and not answer to anybody.” - Alexander Elder

2.0 Psychology

Technical vs Fundamental Trading

Technical analysis is 90% of trading whereas

fundamental analysis makes up 10% of trading. Retail
traders overemphasize the fundamental analysis and tend to
overlook the technical aspects of it. Throughout the correct
use of timeframes (15 min, 1hr, weekly, 4hour), price actions,
and appropriate indicators, one will realize that fundamental
economic news releases are not always respected in the real
world of trading (hence the problem with over-reliance on
the fundamental analysis).

Psychology vs emotions

Traders are humans and thus have inherently different

personalities. Some have risky whilst others have
more conservative trading styles. The whole goal of
trading is to discover oneself and to understand the pros/
cons associated with each style of trading (swing trading,
scalping, position trading, day trading etc. )
 Overtrading
Defined as trading an excessive amount of times over a
short period of time, which may increase the chances of one
loosing their trades. It has been shown through a multitude
of psychological studies that humans can on average
effectively undertake 2 emotionally taxing decisions a day.
Since trading deals with money, it does carry a certain
emotional burden, hence the importance of limiting ones’
trades to two trades a day. By overtrading, one increases the
propensity of making a mistake thus incurring financial loss.

PIP vs Monetary compensation

Monetary compensation (USD, GBP, CAD) is a direct
by-product of PIP acquisition. Therefore, novice traders have
a greater chance of experiencing emotions when there are
fluctuations in their PIP/$ amount during the trade. It has
been shown that individuals react less to a drawdown or a
net win when it is displayed in a net PIP count as opposed to
that same scenario in a monetary amount. This is why it is
beneficial to change MT4/5 settings so that one’s trades
show changes in the PIP count and not the dollar amount.

Lets’ take a look at a simple example:

ex. If one does a LOT 10 that is 100$/pip

If a trade in profit by 10 pips that is a net gain of
1000$, whereas a 10 pip loss is -1000 $ drawdown. 10 pips is
psychologically less stimulating than 1000 $ thus preventing
traders from experiencing emotional extremes.
 Confidence Levels
Stems from experience and repeatedly being subjected
to the exact same trade setups or similar scenarios. This
happens through time. Confidence levels can also be affected
by the phenomenon of winning/losing streaks. If one
continuously wins and does possess a high accuracy rate,
their confidence will be substantial which may translate into
them engaging in risker practices (ie. placing larger lots on
trades than usual). Conversely, if one continuously
experiences loses they will begin to doubt themselves which
will inherently cause traders to decrease their trading
efficiency.

FOMO
Fear of missing out is a common phenomenon when
one is constantly anxious of missing a trade set up (which
potentially could have been a winning trade set up.) The best
way to remedy this issue is discipline and practice. If see a
trade set up, prior to taking that trade, wait for favourable
conditions. Employ your rational and technical judgement
prior to taking a trade.

Taking time off the charts

It is recommended that following 2 trades in a single t
day, the trader should take take time off. This will allow their
emotional levels to be normalized. For example, if one has a
substantial win, by taking a break from the charts, one allows
f0r normalization of their confidence level so that they are
not too overly confident when placing their trades. Same
applies for taking large losses. Remember: EMOTIONS
INHIBIT YOUR RATIONAL JUDGMENT!
 Handling drawdowns

As any trader, one will come to a point in their careers

where they will experience some sort of drawdown. The best
way to deal with this predicament is to ensure that one’s
psychology, emotions as well as money management and risk
are in check. If in a drawdown, one may be tempted to close
their trades prematurely. The reason for that is that the
trader is emotionally attached to their trading money, and as
a human they want to restrict the loss of it as much as
possible! However, what one needs to realize is that price
actions does NOT move in a simple linear fashion. It
experiences pullbacks, corrective phases, which incidentally
may cause a trader to be in a drawdown. In this scenario a
trader remain put, trusting their analysis. If their analysis
makes sense, and the risk management (free margin/account
size) permits one to hold the drawdown, then the trade
should be left running because eventually they will turn over
profit. It just takes time!
NOTE: One must also be vigilant for an invalidation
point (price action goes to a certain level which causes your
entire trade to be incorrect) in that case if the invalidation
point is reached, it is best to close the said positions and cut
the trade loss.

Trading Fantasies
New aspiring traders may have the inclinations to
prescribe to different trading fantasies. Such fantasies are
most exploited by MLM network marketing scams. Such
companies are a cancer to trading society and
should be avoided at all cost,. The most common forex
fantasy is being able to become a millionaire over a short
period of time from a small 5,000 $- 10,000$ trading
account. While possible it is extremely unlikely to be
achieved in a short time span. The other ruse that individuals
believe in is living off trading during their initial stages of
trading careers. In order to do so, from a realistic standpoint,
one needs to have a substantial account size and a breadth of
trading experience. While this should be the ultimate goal for
a trader, it is important to comprehend that it will take time
before one can sustainably live off trading entirely. Another
lie is that trading should be treated as a competitive race.
This cannot be further from the truth. Trading is not a race,
it is a marathon. There is absolutely no incentive to rush the
process and to chase compensation without understanding
the core concepts of trading. Remember in forex no one cares
about how much work one puts in and the connections that
one may have. Trading is an art based on individualism and
focusing on ones’ unique progress.

Figure 1. Psychological mastery is paramount to

trading success

Copyright © Century Capital 2020

 Analysis Paralysis

Another aspect that must be addressed is the

phenomenon known as analysis paralysis. Such condition
occurs when an individual —subjected to various amounts of
stimuli has his/her cognitive power hindered thus inhibiting
a proper decision making processes. This is quite prevalent
in the realm of trading. Some so- called forex gurus/
mentors/educators lead the general populace to believe that
trading needs to be needlessly complicated, especially their
technical analysis. This manifests as analysis paralysis as
individuals are unable to make a clear judgement call due to
a significant amount of unnecessary charting tools. Keep
your trading simple! Trading more than anything is quite
visual endeavour!

Figure 2. A Complicated Chart which leads to Analysis

Paralysis

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 2.1 Fundamental Analysis

Fundamental Analysis
Fundamental Analysis is a type of analysis that is
predicated on news releases. News releases can be of 2 sorts:
at the macroeconomic level and at the microeconomic level.
Fundamental analysis used to be highly relevant prior to the
advent of higher level computing power. News usually
pertain to the company and its respective performance
(stocks), or on a countries’ economic state (fiat currencies).
Nowadays, since technical analysis is the predominant form
of analysis, one should not trade on the basis of fundamental
analysis, the reason being that as a trader one does not have
any way of knowing or controlling how the news will affect
price action. At times, news releases can cause sporadic
movements in price actions either completely invalidating a
trade setup or having absolutely no effect on it. This is why it
is best to all together: interpret , understand the news and
avoid them at all cost when executing trades. Think of news
as possible landmines that can detonate at any moment…
you want to know where they are situated so that you can
navigate around them!

News relating to the fundamental analysis can be

retrieved at the following websites: Forexfactory, Forex Live
Fx Tree, Bdfx. Century Capital Group’s website of choice is
forexlive.com.
When navigating through ForexLive, a trader is on the
lookout for high impact and medium impact news
disregarding low impact news and primarily focusing on high
impact news. High impact news tend to impart the most
fluctuation to the price action causing it to behave
sporadically. The extent of a news impact is denoted through
coloration. High impact news (the ones you are on the
lookout for) have a red folder, medium impact news are
orange, and low impact news have a yellow folder.

Figure 3. forexlive.com Economic Calendar

displaying the high impact (red bar), medium impact
(orange bar), and low impact news (yellow bar).

Copyright © Century Capital 2020

 During a typical trading day, if high impact news (red)
for a certain currency pair is observed, the best thing to do is
to stay away from the trade for 30 min- 1 hr. This allows one
to see if their trade set up is still valid. If not then the trader
must redo the trade set up.
While one can spend a substantial amount of time
learning and understanding what each news means and how
it can “potentially” affect the market, you as a trader have
absolutely no interest as to what the news are and what they
mean. The reason for that is because more than 80% the
time the market does not do what the news themselves
predict!
When looking at a particular trading day, multiple
news will present in a form of a schedule. This schedule can
be adjusted to correspond to the trader’s timezone. This can
be done through the “change timezone” function.

Having identified a high impact news (red folder/bar)

relating to certain country, one needs to understand which
currencies will be affected by the said news. As a general
rule, if the high impact news comes out for United States of
America, it will affect the USD and any currency that is
paired against it (ie. GBPUSD, USDJPY, USDCAD).

Next, one has to look at 3 values for the high impact

news: Previous, consensus and actual values. Those can be
either denoted as percentages, standard deviation units, or
other extraneous units that are explained by clicking the
name of the news event.
 Previous value (P): previous result from the last
available data
Consensus value (C) : General agreement and
prediction supplied by financial analysis

Actual value (A): Actual number that is released

following the news release. This this the real and true value
that we are interested in.

Previous value and consensus values are always

made available prior to the news release! Once the news are
released, then actual value is made available. Actual value
is then compared to the previous value to determine bearish
or bullish properties of a certain currency.
If the actual value is greater than previous value, then one
can expect strengthening of the currency that the news is
affecting. Conversely, if the actual value is smaller than the
previous value, then one can expect the weakening of the
currency affected by the news.

Lets explore a few examples:

A). Currency pair being traded: EURJPY

HIGH IMPACT NEWS (RED) for JPY

P: 22% C: 10% A: 15%. A<P thus, JPY is
Bearish with respect to JPY
Therefore,
EURJPY is a long (price action goes up )
B). Currency pair traded: GBPCAD

HIGH IMPACT NEWS (YELLOW) for GBP

P: 48.0 C:53.0 A: 52.0

Bullish tendency for GBP since P<A (52.0 greater

than 48.0)
Therefore,

GBPCAD is a long (price action goes up)

C). Currency pair traded: EURJPY

2 news released:
1) RED EUR P: 12% C: 10% A: 15%.
2) RED JPY P:40% C:55% A: 58%

Since the the 2nd news for JPY have greater P, C, A

values than EUR, there is a good chance that the
JPY will appreciate more than EUR, therefore,

EURJPY will go short (price action will go down)

Copyright © Century Capital 2020

Below are some basic terms pertaining to fundamental
analysis that one should be familiar with.

Interest rates: Lower interest rates give less value to the

currency and therein less people investing into the economy
hence why they lower them. Having interest rates
movements creates the flow of money which is the core
principles of the FX markets.

Employment data:Data pertaining to employment. Higher

numbers indicate longs for that currency as lower
employment are a sell. Weaker inflation and consumer
confidence has a bearish momentum for a currency and vice
versa.

The manufacturing data : Data representing

manufacturing reports. If the reports come out higher than
expected for the currency representing the country, the news
come from then turns bullish and vice versa.

Gross domestic product or GDP is one of the main catalyzers

in the trading community. The lower the GDP the more
sellers there are for that currency, the higher, the more
buyers there will be.

NFP: It happens on the first Friday of every month and

includes the total number of paid US workers of any business
in any sector excluding private households or non-profit
organizations. Economists use it to predict future levels of
the economic activity. There are major spikes when trading
the NFP thus caution must be exercised when trading during
NFP.

Fundamental Analysis Conclusion

Trading based off news is needlessly complicated with a

relatively low accuracy rate. Which is why it is important to
structure ones’ trades based off of technical analysis
predominantly.

Copyright © Century Capital 2020

 Module 3

““In order to succeed, you first have to be willing to

experience failure.” ― Yvan Byeajee

3.0 Introduction to Technical Analysis

As discussed in previous modules, trading is predominantly

based off the concept of technical analysis whilst using
fundamental analysis as a subsidiary form of confluence.
Thus it is important to understand what technical analysis
entails before we begin its discussion.
By definition, technical analysis the the concept of
performing analysis on the basis of mathematical, statistical,
visual, and formulaic elements in order to determine if the
trade is a long or a short. In this book 6 main pillars of
technical analysis will be explored. Concept of timeframes,
support/resistance levels, moving averages, pivots, candle
formations, and Fibonacci levels are what comprise the said
trading strategy.

Figure 1.
Technical
analysis
3.1 Timeframes

The first pillar of technical trading is based on perhaps the

most important element which are timeframes. A timeframe
simply put, refers to a defined time period/duration over
which price action is measured, it can range from under a
second to a yearly time period. However, the most important
time frames to understand are the 15 minute, 1 hour, 4 hour,
and daily. The 15 minute timeframe is utilized for trade
executions (entering/exiting trades). The 1 hour, 4 hour and
daily, are utilized as visual elements to predict where the
price action can potentially move.

To further dissect the timeframes, each candle represented

on the 15 minute TF pertains to a 15 minute duration where
the price opened and closed at. Similarly, each candle on the
1 hour TF refers to price open and close for 1 hour. For the 4
hr TF, each candle represents price open and close for a 4
hours. Subsequently, one 1 hour candle is comprised of 4 x 15
minute candles; one 4 hour candle is made up of 4x 1 hour
candles and 16 x 15 minute candles. By the same principle, a
single daily candle includes 6 x 4 hour candles, 24 x 1 hour
candles, and 96 x15 minute candles.
As one can see, the aforementioned different timeframes are
simply ratios of one another. Where the higher timeframe
gives the trader more lower timeframe candles thus
providing them a larger picture of the general price action for
a certain currency pair. Think of it as pixels on a TV screen,
where a large picture is made up of smaller pixels. If one
were to walk closer to a TV screen, the picture becomes less
discernible where if one steps further from the screen, the
clarity of the picture improves.
Refer to the 4 diagrams below (Figure 2A-D): Focus on the
candles encapsulated in a grey box and follow the increasing
timeframes from 15 minutes to a Daily timeframe. As
discussed, the higher the time frame, the clearer the picture
becomes. Now what kind of picture/information are we
trying to retrieve? As technical traders, one looks at the chart
to determine the direction of the price action. As we go up in
timeframes, it becomes easier to determine that it is an
uptrend (price appreciation), hence based on technical
analysis one would take long positions.

Figure 2A. 15 minute TF

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Figure 2B. 60 minute (1 hour) TF

Figure 2C. 240 minute (4 hour) TF

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Figure 2D. 1 Day TF

By looking at the higher timeframes (1 hour, 4hr, and daily)

one is able to determine the overall direction of the trend.
This in essence is the first pillar of technical trading.

Copyright © Century Capital 2020

3.2 Support- Resistance

The second pillar of technical trading is comprised of

determining support -resistance levels. In doing so, one is
able to figure out where the price action can go and where it
may experience some form of hinderance.
Let's begin by defining what a level of support is. Simply put,
it is a form of a support that price action makes before
appreciating (going long). Reason why price action goes up is
because it is unable to break through this level (hence why it
is called a support). Think of it as a basement for the price
action. In application, prior to taking a long position, one
would look for price action to build a support as a level of
confirmation to take buys.

Figure 3. Price has formed a support (it is unable to break

through it, therefore it appreciated (long)
The second aspect of interest is a level of resistance. To
define it, a level of resistance pertains to a certain price range
which the price action is unable to break through to the
upside therefore it is forced to depreciate (go short). Think of
it as a ceiling for the price action. In application, prior to
taking a short position, one would look for price action to
build a level of resistance as a form of confirmation before
taking sells.

Figure 4. Price has formed a level of resistance (it is unable

to break through it, therefore it depreciated (short)

Now to relate the second pillar of technical trading (support/

resistance) to the first pillar (timeframes), it is important to
understand that every single timeframe has a support
resistance, and the higher the timeframe the stronger that
support or resistance level is. As an example, a 4 hour TF
support will be stronger than a 1 hour support and a 15
minute support, but weaker than the daily support. The
same applies for resistance.

STRONG Weak

Daily Support > 4 hr support > 1hr support> 15 support

Daily Resistance > 4 hr Resistance> 1hr Resistance> 15 R

Figure 4A. 4 hour support.

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Figure 4B. 15 minute time with the same 4 hour timeframe
support (as indicated in figure 4A)

Figure 5A. 4 hour Resistance

Figure 5B. 15 minute time with the same 4 hour timeframe
resistance (as indicated in figure 5A)

Now one might ask themselves how can they apply all of this
information in practice? Suppose a trader is taking a long
position, they have identified the direction of the trend based
on higher timeframes, they figured out lower time frame
support/resistance levels. However, the price action will not
always continue to appreciate, at some point it will either do
a pull back before going long, or it can commence a short
(breaking the last lower low, invalidating the original long
position). To determine where the price action can
potentially go to, the trader would look on the higher
timeframe (ie. Daily, 4 hr, 1 hr) to identify potential areas of
resistance. If they identify a level of resistance on a higher
timeframe, there is high chance that the price action on the
lower timeframe will reach that level of resistance and
reverse (go short). The trader would then want to exit their
longs at that resistance level derived from the higher
timeframe. The same principle applies for shorting (higher
timeframe support levels)

Below are the 2 discussed scenarios

1) SUPPORT -LONG Scenario

Figure 6 A. 4 hour support on the 15 minute timeframe

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Figure 6 B. 4 hour support on the 15 minute timeframe

1) RESISTANCE - SHORT Scenario

Figure 7 A. 4 hour resistance on the 15 minute timeframe

Figure 7 B. 4 hour resistance on the 15 minute timeframe

This concludes our discussion of support /resistance levels.

As a recap, they are best utilized to determine where price
action can go to prior to experiencing some form of reversal,
as well as aiding one in determining when to enter and exit a
certain trade set up.

Copyright © Century Capital 2020

3.3 The Story of Candles

The third pillar of technical trading pertains to candle

formations. Since price action essentially is the collection of
candles over a certain time period, it is important to
understand what each candle represents as it will guide
traders with regards to their trade set ups.

One of the most paramount concepts that a trader must

comprehend is that future price action (reflected through
candles) has a strong tendency to mirror what price action
did before. And how the price action will behave (either
smoothly/linearly or in an a sporadic/choppy fashion) will
be determined by prior candle formations.
If the previous candles were long and linear then then they
suggest that the future candles will exhibit analogous linear
properties.
Conversely, if the previous candle formations displayed non-
linear or choppy characteristics, this suggests that price
action when it revisits that level will display similar choppy
features. From a financial standpoint, a choppy range of
candles suggests a “a ranging market”, hence market
indecision, whereas clean, linear candles are indicative of a
decisive market ideal momentum and hence an optimal
trade.
As traders, it is imperative to look at such candle formations
in order to discriminate between good and bad trade set ups.
By looking at prior candle formations, a trader wants to find
linear contiguous candles so that in the future, when they
execute their trade, price action will exhibit linearity and
predictability.
Figure 8. Clean (bearish) linear Candles on to the left that are
mirrored by clean (bullish) candles on the right.

Copyright © Century Capital 2020

Figure 9. Choppy price action to the left (bearish) mirrored by
choppy price action (bullish) to the right.

Another important
tendency that price
action tends to
exhibit is the
propensity of Price
Action to fill wicks
from previous
candles. This can
help guide traders as
to where price
action can
potentially go to.

Figure 9.1 Wicks

The next aspect that one needs to take into consideration are
a series of wicks present at a certain level (high liquidity
zone). This is indicative of price rejecting that said level and
suggests a high likelihood of the price rejecting that level.

Figure 10. Series of wicks at a certain level are indicative of price

rejecting that said level.

There is a plethora of candle formations that one can study

at their leisure, however, the most informative ones include 3
candles: 1) DOJI, BEARISH engulfing, BULLISH engulfing.

DOJI CANDLE - Consolidation Price closed at the same price

where it opened.
Bearish engulfing- Large bearish candle, greater in size than
the previous candle, indicative of bearish momentum and
imminent shorts.

Bullish engulfing- Large bullish candle, greater in size than

the previous candle, indicative of bullish momentum and
imminent longs.

Figure 11. Different Candle formations.

Higher timeframes (4hr, 1hr) DOJIs indicate ranging and
market indecision on lower timeframes (15 minute). Best to
avoid that area for a trade.

Figure 12 A. Series of DOJIS and weak bullish momentum

candles on the 4 hr timeframe

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Figure 12 B. On the 15 minute timeframe these dojis and low
bullish momentum candles are indicative of lower timeframe price
ranging (consolidation).

Similarly, higher timeframe (4hr, 1hr) bearish engulfing

candles (large linear candles) suggest a linear and
predictable shorts on lower (15 minute) timeframes.
Conversely, higher timeframe (4hr, 1hr) bullish engulfing
candles (large linear candles) suggest a linear and
predictable longs on lower (15 minute) timeframes.
Figure 13A. Linear bearish engulfing traffic candles on the 4 hr
timeframe. We can expect 15 minute timeframe to be a linear
predictable downtrend (refer to figure 13B).

Figure 13B. A linear short on the 15 minute timeframe.

3.4 Exponential Moving Average

The fourth pillar of technical analysis involves the most

powerful arsenal a trader can have— moving averages.
By definition, moving average serves as an indicator by
smoothening out the price action and eradicating the noise
from random short-term price alteration. Moving averages
tend to be lagging indicator as it is based on past price action
values.

The two most commonly utilized moving averages are both

SMA- simple moving average and EMA- exponential moving
averages. SMA is the simple average of a price action over a
a predetermined time period whilst, the EMA attributes
greater weight to the more recent price action values. Since
the 15 minute timeframe serves as the entry/exit timeframe
for this strategy we are interested in looking at the EMA as
we are focusing on the most recent price action numbers.

To compute the EMA and SMA’s the following formulas may

be utilized, however, with trading view and virtually any new
charting software, such computations are all effectuated by
the software.

Figure 14. SMA and EMA

formula
There are 3 EMA’s that are used for this strategy: 14 EMA, 50
EMA, 200 EMA. The 14 EMA represents the exponential
moving average for the last 14 x 15 minute candles; 50 EMA
pertains to the exponential moving average for the last 50
x15 minute candles; and 200 EMA is the exponential moving
average for the last 200 x 15 minute candles

Figure 15. 14, 50, and 200 EMA on a 15 minute timeframe

 Whenever 14 EMA crosses with the 50 EMA this suggests
the beginning of a new short- term trend .
If the 14EMA crosses with the 50 EMA with the 2 lines facing
to the upside this suggests a short term long (buy) position.
Conversely, if 14 EMA crosses with 50 EMA to the downside
this suggests the commencement of a short term short (sell)
position.

Figure 16. Short term created through 14 and 50 EMA cross

Whenever 50 EMA crosses with the 200 EMA this suggests

the beginning of a new long - term trend .

Should the 50 EMA cross with the 200 EMA with the 2 lines
facing to the upside this suggests a long term long (buy)
position.
Conversely, if 50 EMA crosses with 200 EMA to the
downside this suggests the commencement of a long term
short (sell) position.

Figure 17. Long term vs Short trend

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Figure 18. Example of a long term sell(short) trend and 2 examples
of 2 short term buy (long) positions.

It is important to note that whenever there is price action

trend reversal (ie from long to short), there will be a point
where the price action will encounter the 200 exponential
moving average. In this situation the price action can either
reject the 200 moving average invalidating the trend or
break through the 200 EMA continuing the original trend.
Higher timeframe bearish/bullish momentums will in part
play a role in determining if the 200 EMA will be broken.
This is why traders need to wait for the price action to close
below (short position) or above the 200 EMA (long position)
before entering into a trend or exiting it (*more on this
later.) Listed below are the 2 scenarios.

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Figure 19. Example where 200 EMA was broken and price
closed above it, indicative of previous longs (from 14 and 50
EMA cross) being still valid. Also tying in the concepts of
higher timeframe resistance and candle formations.

Copyright © Century Capital 2020

Figure 20. Example where 200 EMA was broken but price
price closed above it due in part to a lack of higher timeframe
bearish momentum, invalidating previous shorts (from 14
and 50 EMA cross). Also tying in the concepts of higher
timeframe resistance and candle formations.

There are some moving average crosses that one should not
trade as the price is ranging, usually depicted as low bullish/
bearish momentum candles and dojis on higher timeframes
(4hr). Realize that the EMAs will not work in this scenario
thus not yielding to a profitable trade. Side note: as
discussed in Module 1, never trade a consolidation/
sideways/ranging market, always wait for HH’s HL’s LH’s
LL’s to form and an actual trend to develop prior to taking
a trade.
Figure 21A . 4 hr candle formations.

Figure 21B. 15 Min candle formations representing the 4 hr candle

formations. This is a ranging market, do not use the EMA crosses
to take any trades. Wait for 4 hr timeframe to display bearish/
bullish engulfing candles
To conclude our discussion on the moving averages, it is
important to note that EMAs while a very useful tool, should
never be the sole deciding factor for one to execute a trade!
Always look for market structure, higher timeframe
elements, candle formations, support/resistance levels prior
to taking a trade. The technical pillars should be used in
synergy with one another and they are certainly not mutually
exclusive. The set of the 14, 50 and 200 EMAs should ONLY
be used on the 15 minute time frame as it has been
mathematically and statistically optimized for such time
periods, remember that MA’s are lagging indicators and as
the name implies, it will lag on different timeframes.
3.5 Pivots

Continuing with the fifth pillar of technical trading, the

concept of pivots must be addressed. Pivots serve as a
method to identify the trend of the market as well as to
determine where the price action can potentially go. They
also help us discern if the EMA cross formations in question
are valid.

Let's begin by defining what a pivot point (pivots) is. A pivot

point looks at the average of the high, low and closing prices
from the previous trading day. The next day (current trading
day), price action above the pivot point (denoted as P)
indicates a bullish trend whereas the price action below the
pivot point is indicative of a bearish sentiment.

The pivot point tool will also present 6 levels: R1, R2, R3 and
S1, S2, S3. R 1-3 represents 3 possible resistance levels where
the price can potentially go to provided its in a bearish (sell)
trend. Whereas, S1-3 represents 3 possible support levels
where the price can potentially go provided it is in a bullish
(buy) trend.

To the right, we have the

formulas pertaining to the
calculation of pivot points.
Whilst a useful thing to know,
pivots are calculated
automatically with today’s
modern charting softwares.
Figure 22. Pivot points

Now lets’ see how the pivot points are incorporated with the
previous pillars of technical trading.
If the 14 EMA and 50 EMA cross to the upside, this is
indicative of a short term trend. If 50 and 200 EMA cross
this is indication of a possible long term trend. If higher
timeframes are showing lots of bullish momentum, this is
suggestive of a long term upwards trend. If the price action
breaks through the Pivot points and proceeds to the upside,
it will have a higher statistical chance of attaining the first
Resistance level R1 (or S1 if it is a sell). If there are no
signifiant higher timeframe areas of resistance then the price
has a high chance of exhibiting long trend properties.
Combing all of the aforementioned information we can
derive the following:
Price action has the highest chance of reaching R1, high
chance of reaching R2, and a lower chance of reaching R3.
Listed below are a few examples:

Figure 23 A. 4hr candle formations. Price will exhibit nice

linearity and will most likely reach the 4 hr resistance.
Figure 23 B. 15 minute TF chart derived from the 4 hr time frame
chart as shown in figure 23 A. Following steps 1-5 indicates the
price action dynamics for a long

Figure 24. 15 minute TF chart derived from the 4 hr time frame

chart as shown in figure. Following steps 1-6 indicates the price
action dynamics for a short (sell). The trend can still carry over to
the next day
There are a few scenarios when pivot points cannot be used
to determine the said trend, as well as to where the price
action can go to. This usually happens where there has been
substantial sporadic price movement to the upside or
downside. Because pivots are based off of the last day’s highs
and lows, the mathematical formula will fail when the prior
day’s price action moved substantially. One way to tell this is
the case is by looking at the price action movement from the
day before. If movement was anomalously large then pivots
will have R1-R3 and S1-S3 displayed at large intervals. At
this point the pivots are unreliable and the trade should not
be taken !

Figure 25. Pivot Point failed due to a price action anomaly

from the previous day. This happened on GBP-JPY due to
the 2020 COVID-19 outbreak.
3.6 Fibonacci Principle

Derived from Leonardo Pisano nicknamed to as

“Fibonacci”in 12th century, who popularized the use of
Hindu-Arabic numerals in Europe in his book "Liber Abaci,”
or the Book of Abacus. In this book, he described a series of
numbers 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377,
610 all the way to infinity, each number being greater than
the preceding number by 1.618. This number was surnamed
PHI. If one were to take the inverse of PHI or 1/1.618, a
number would be produced 0.618— the golden ratio.
This golden ratio mysteriously appears in nature and in
man-made creations that were deemed “aesthetically
appeasing” to the eye. Some examples include: Leonardo da
Vinci's Mona Lisa, flowers, rose petals, mollusks, trees
branches, human faces and outer space galaxies.

Unsurprisingly, the fibonacci principle has made its way into

trading as well. They are called fibonacci retracements and
are produced through derivation of mathematical
relationships between numbers in a certain trading
sequence. Dividing a number in the Fibonacci series by the
number that succeeds it, yields the “golden” Fibonacci ratio
of 0.618 or 61.8%.

By taking the high and low points on a chart, Fibonacci ratios

are produced: 0.00 %, 38.20 %, 50.00 %, 61.8%, 78.6 %,
100.00 %. These ratios are utilized to measure pullbacks as
well as the possible price reversal points.
If the price is in a certain trend (uptrend/downtrend), one
would measure from the top of the price action to the last
low point using the FIB retracement tool. Then, depending
on where the pullback aligns with the FIB level one could
expect price reversal with varying degrees of intensity.
If the pull back attains the 38.20 %, one can expect a price
reversal to be of a weak nature.
If the pull back attains the 50.00%, one can expect a price
reversal to be of a medium nature.
If the pull back attains the 61.80 % the “golden zone” one
can expect a strong price reversal.
If the pull back reaches the 78.60 % the “institutional level”,
this is the last level prior to the trend being invalidated. Can
still expect a strong price reversal.

Figure 26. Strong price reversal as per the 61.80 % pull back.
Figure 26. Weak price reversal as per the 38.20 % pull back.

Figure 27. Strong price reversal as per the 61.80 % pullback.

Please note that using Fibonacci Levels as a predictor for
future price action behaviour based on pullback is not a
reliable form of confluence. Price has tendency to respect the
Fib levels however, one should make their decision if price
will reverse following a pullback on the basis of higher
timeframe momentum, support/resistance levels, moving
averages, pivot points and general price action interpretation
through candle formations.

To conclude our discussion of technical analysis it is

important to understand that every single one of the pillars
that were mentioned in this module should be used in
concert with one another. They are never mutually exclusive,
and one area of confluence should never be the sole
determining factor of where the price will go as no pillar is
100% perfect. A combination of those technical tools will
yield a much greater chance of a winning trade, however
losses are always a possibility, which is where risk
management and the concept of stop loss comes into play.
In the last module— “Module 4”, we will dissect a variety of
trade set ups as they unfold to better apply the concepts
learned in the preceding modules.
 Module 4

“For investors as a whole, returns decrease as

motion increases.” ― Warren Buffett

4.0 Trade Execution

In this module we will explore a variety of scenarios where

all Pilars of technical analysis are used in synergy with
fundamental analysis in order for one to perform trade set
ups.

Scenario# 1 Long
In this situation the 200 EMA is situated below 50 and the 14
EMA where both 14 and 50 have crossed to the upside.
Provided that the higher timeframes exhibit bullish
momentum, different zones are made note of, low traffic
candles are present to the left of the chart, there is a lack of
news pertaining to that currency pair for the duration of the
trade, and that the price action broke and closed above the
Pivot Point, one should expect a nice linear appreciation to
the last high point or price action and beyond.

Here is an example.

GBPJPY Trade begins at 03:00 EST, Tuesday, March 24th,

2020. This is London Session.

1) Check forexlive.com for any news pertaining to either the

JPY (JAPAN) or GBP (UK)
Figure 1. forexlive.com fundamental news indicate no high
impact news pertaining to GBPJPY until 05:30. Expecting to
enter the trade soon and exiting or closing half of the
positions by 05:30.

2) Proceed back to tradingview.com and select GBPJPY on

the Daily and 4hr timeframe. The candle formations are
exhibiting bullish momentum with the possibility of price
action appreciation.
Figure 2. 4 hr timeframe indicative of longs and where the
price action can go to.

3) Once higher time frame momentum is identified and

zones drawn, step down to the 15 minute time frame and
wait for 14 and 50 EMA’s to cross to the upside with the 200
EMA below them. Furthermore, wait for price to break
through the pivot point and close above it.
Afterwards, wait for the price action to appreciate to the R1,
R2, R3. Note the higher the R level the lower chance of price
action to attain that level.
Exiting the trade comes to the individuals discretion.
Figure 3. Step by step execution of GBPJPY long. Note that
the GBP news that came out at 05:30 had no effect on the
Price action. * Step 2 replace 4 hr support with 4hr
resistance

4) Exit the trade. In this GBP JPY trade, the duration was 9.5
hours and 250 PIPs were caught. On a lot 1 that is 2500 $
USD, lot 10 — 25000 $.

Where does one put a stop loss? Placing a stop loss is entirely
up to the individuals discretion. But the general consensus is
to place the stop loss below the last low point of price action
that can be anywhere from 30 -80 pips.
Scenario# 2 Long

In this situation the 200 EMA is situated above 50 and the 14

EMA where both 14 and 50 have crossed to the upside. If the
price action closes above the 200 EMA one can expect longs.
Provided that the higher timeframes exhibit bullish
momentum, different zones are made note of, low traffic
candles are present to the left of the chart, there is a lack of
news pertaining to that currency pair for the duration of the
trade, and that the price action broke and closed above the
Pivot Point, one should expect a nice linear appreciation to
the last high point or price action and beyond.

NOTE: One can enter the trade when the 14 and 50 EMA
cross and take the trade to the 200 EMA. However, since the
200 EMA tends to function like a dynamic support/
resistance, price action can reject it thus invalidating the idea
of longs. To circumvent this, use other areas of confluences
listed above and also enter into longs once price action has
closed above the 200 EMA and has formed a level of support.

Here is an example.

GBPJPY Trade begins at 05:30 ETA, Tuesday, March 19 th,

2020. This is London to New York rollover.

1) Check forexlive.com for any news pertaining to either the

JPY (JAPAN) or GBP (UK). No high impact news for both
Currencies were observed.
Figure 1. 4 hr timeframe indicative of longs and where the
price action can go to.

2) Once higher time frame momentum is identified and

zones drawn, step down to the 15 minute time frame and
wait for 14 and 50 EMA’s to cross to the upside with the 200
EMA below them. Furthermore, wait for price to break
through the pivot point and close above it.
Afterwards, wait for the price action to appreciate to the R1,
R2, R3. Note the higher the R level the lower chance of price
action to attain that level.
Exiting the trade and placing stop loss comes to the
individuals discretion.
Figure 3. Step by step execution of GBPJPY long on the 15
minute TF.

3) Exit the trade. In this GBP JPY trade, the duration was 45
minutes - 5 hours depending if the trade was taken above or
below the 200 EMA and 120- 337 PIPs were caught. On a lot
1 that is 1200 $- 3370 $ USD, lot 10 — 12000 $. To 33700 $.
Scenario# 3 Short

In this situation the 200 EMA is situated above 50 and the 14

EMA where both 14 and 50 have crossed to the downside.
Provided that the higher timeframes exhibit bearish
momentum, different zones are made note of, low traffic
candles are present to the left of the chart, there is a lack of
news pertaining to that currency pair for the duration of the
trade, and that the price action broke and closed below the
Pivot Point, one should expect a nice linear depreciation to
the last low point of price action and beyond.

Here is an example.

GBPJPY Trade begins at 03:00 EST. This is London Session.

1) Check forexlive.com for any news pertaining to either the

JPY (JAPAN) or GBP (UK). No news observed.

2) Identify the trend and if bearish/bullish momentum is

present by looking at higher timeframes (4hr, 1hr, Daily).
Draw the appropriate higher timeframe zones.
Figure 1. 4 hr timeframe indicative of shorts and where the
price action can go to.
Figure 2. Step by step execution of GBPJPY short on the 15
minute TF.

3) Once higher time frame momentum is identified and

zones drawn, step down to the 15 minute time frame and
wait for 14 and 50 EMA’s to cross to the downside with the
200 EMA above them. Furthermore, wait for price to break
through the pivot point and close below it.
Afterwards, wait for the price action to depreciate to the S1,
S2, S3. Note the higher the S level the lower chance of price
action to attain that level.
Exiting the trade and placing stop loss comes to the
individuals discretion.
4) Exit the trade. In this GBP JPY trade, the duration was 5
minutes - 11 hours depending on where TP’s were taken.
About 400 PIPs were caught. On a lot 1 that is 4000 $ USD,
lot 10 — 40000 $.

Scenario# 4 Short

In this situation the 200 EMA is situated below 50 and the 14

EMA where both 14 and 50 have crossed to the downside. If
the price action closes below the 200 EMA one can expect
shorts. Provided that the higher timeframes exhibit bearish
momentum, different zones are made note of, low traffic
candles are present to the left of the chart, there is a lack of
news pertaining to that currency pair for the duration of the
trade, and that the price action broke and closed above the
Pivot Point, one should expect a nice linear depreciation to
the last low point or price action and beyond.

NOTE: One can enter the trade when the 14 and 50 EMA
cross and take the trade to the 200 EMA. However, since the
200 EMA tends to function like a dynamic support/
resistance, price action can reject it thus invalidating the idea
of shorts. To circumvent this, use other areas of confluences
listed above and also enter into shorts once price action has
closed below the 200 EMA and has formed a level of
resistance.

Here is an example.
GBPJPY Trade begins at 19:00 EST. This is Asian Session.

1) Check forexlive.com for any news pertaining to either the

JPY (JAPAN) or GBP (UK). High impact news came out for
JPY suggesting that it will appreciate in value. This is further
reaffirming shorts for GBPJPY.

2) Identify the trend and if bearish/bullish momentum is

present by looking at higher timeframes (4hr, 1hr, Daily).
Draw the appropriate higher timeframe zones.

Figure 1. 4 hr timeframe indicative of shorts and where the

price action can go to.
Figure 2.. Step by step execution of GBPJPY short on the 15
minute TF.

3) Once higher time frame momentum is identified and

zones drawn, step down to the 15 minute time frame and
wait for 14 and 50 EMA’s to cross to the downside
Furthermore, wait for price to break through the pivot point
and close below it as well as the 200 EMA prior to entering
into the trade. This is just a suggestion as one can take the
trade from the 14 and 50 EMA cross and not wait till the
break of the 200 EMA. That is a risker entry but yields more
PIPS.
Afterwards, wait for the price action to depreciate to the S1,
S2, S3. Note the higher the S level the lower chance of price
action to attain that level.
Exiting the trade and placing stop loss comes to the
individuals discretion.

4) Exit the trade. In this GBP JPY trade, the duration was
about 19 hours depending if the trade was taken above or
below the 200 EMA and 200 PIPs were caught. On a lot 1
that is 2000 $USD, lot 10 — 20000 $.

Perfecting the art of trade execution will come with time and
practice. Spend at least 1-2 months practicing and applying
this strategy on a demo (paper money) account. This will
allow one to truly understand the benefits and nuances
pertaining to the strategy. Once confidence is gained and
consistent profits are observed, deposit real money into a
brokerage and start trading. Again, with real money, start
small and proceed at a slow pace as the transition between a
demo and a real account will pose some form of
psychological hinderance for most of the individuals. With
dedication success will be imminent!

Copyright © Century Capital 2020

4.1 Art of Journalling

The journalling is pivotal to the growth and development of a

trader as a whole. It allows one to develop a strict trading
protocol whilst serving as a “black box” to analyze where an
individual went wrong in the event in a loss and conversely
where the trader was correct so as to replicate the same
results in the future.

Lack of clarity will dilute the rational judgement of a trader

which in the long run will translate into a net loss.

A trader must always possess an execution routine which is

proven to work. In this case it is important to combine the
notion of different key levels, candlestick formations, moving
averages, pivot points, fib levels, and identifying trends. This
will manifest into a successful trader over time.

Performing a journal also allows one to determine what is

the most optimal time to trade, the time where they perform
the best and the respective currency pairs that yield the most
success. Doing so will once again lead to consistency and
thus success.

Trade journals are quite unique to the trader but below there
is a diagrammatic representation of what a good journal
should look like. In general, it includes the currency pair
traded, the time the trade was executed, net pip count, stop
loss, risk to reward level, wether or not the trade went into
profit or a loss, and most importantly, an explanation as to
why the trade played out the way it did and what caused the

trader to take the said trade.

Figure 2. Trade Journal

Copyright © Century Capital 2020

NOTES
NOTES
NOTES
 © Century Capital Group 2020

Century Capital Group publishing Inc.

Eric Doustov, Levis Doustov

@Igdoust, @centurycapitalgroup, @doust02, @mr_us30_
https://www.centurycapitalgroup.org