8/23/2019

FINANCIAL MARKETS
TECHNICAL ANALYSIS
BY AR. DANILO O. DONOR JR. AKA “D. ILLUSTRADER”
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Contents

Financial Markets The Golden Ratio

Cryptocurrency Elliot Wave Theory
Bybit and Tradingview Platforms Harmonic Trading
Trading Basics Confluences
Trend Identification
Support & Resistance
Basic Trading Patterns
Retail vs Institutional Investors
Price-Oscillator Divergences
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Financial Markets

A financial market is a broad term describing any marketplace where trading of securities
including equities, bonds, currencies, and derivatives occur.
It started in 12th century in France when the agricultural communities started trading debts
from the banks.
Types of Market:
Stock Market - enables investors to buy and sell shares of publicly traded companies.
Foreign Exchange (Forex) Market - where currencies are traded. This financial market is the most
liquid market in the world, as cash is the most liquid of assets.
Cryptocurrency Market - where cryptocurrencies are traded.

Cryptocurrency

Blockchain – a growing list of records, called blocks, that linked using cryptography. By
design, a blockchain is resistant to modification of the data. It is "an open, distributed
ledger that can record transactions between two parties efficiently and in a verifiable and
permanent way".
Blockchain was invented by a person (or group of people) using the name Satoshi
Nakamoto in 2008 to serve as the public transaction ledger of the crypto currency Bitcoin.
The identity of Satoshi Nakamoto is unknown.
Major cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Monero (XMR),
Cardano (ADA), Ripple (XRP), Tron (TRX)
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ByBit and TradingView Platform

Trading Basics

A candlestick represents
the price activity of an
asset during a specified
timeframe through the use
of four main components:
the open, close, high and
low.
The “open” of a
candlestick represents the
price of an asset when the
trading period begins
whereas the “close”
represents the price when
the period has concluded.
The “high” and the “low”
represent the highest and
lowest prices achieved
during the same trading
session.
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Trading Basics

Trading Basics
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Trading Basics

Trading Basics

Long Position – to buy shares hoping the price will go up.

Short Position – to sell shares hoping to buy it again at a lower price.
Market Buy/Sell – to buy/sell shares are current best price.
Limit Buy/Sell – to set a buy/sell order ahead of the price movement in anticipation of a
reversal.
Stop Market Buy/Sell - to set a buy/sell order ahead of the price movement in anticipation
of a continuation.
Stop Loss (SL) – price level to cut your calculated loss, avoiding a bigger loss. This can be
done with Stop Market order with “Close on Trigger” enabled.
Take Profit (TP) – price level to close your trade with profits.
Bull Market - market that is on the rise and is economically sound.
Bear Market - market that is receding, where most stocks are declining in value.
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Trend Identification
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Support & Resistance

Horizontal Support/Resistance
Diagonal Support/Resistance
Moving Average Support/Resistance
Support-Resistance (SR) Flip

Basic Trading Patterns

Pennant
-Opposing
diagonal
support and
resistance lines
-Symmetrical
Triangle
-Continuation
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Flag
-Parallel
support and
resistance lines
-Continuation

Triangle
-Converging 1
horizontal and
1 diagonal
support or
resistance lines
-Ascending or
Descending
-Continuation
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Basic Trading Patterns

Wedge
-Converging
diagonal
support and
resistance lines
-Reversal

Basic Trading Patterns

Cup &
Handle
-Reversal
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Basic Trading Patterns

Head &
Shoulders
-Reversal

Retail vs Institutional Investors

Retail Investors - Individual investors. Trades with relatively small volume.

Institutional Investors - large institutions, such as banks, insurance companies, pension
funds, mutual funds, and exchange-traded funds (ETFs), that buy and sell securities for their
investment portfolios.
Liquidation – The process of converting property or investments into Cash.
Liquidation Pool – Price zone where retail traders close their trades. It is also where the
institutional traders accumulates.
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Retail vs Institutional Investors

Price-Oscillator Divergences
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Golden Ratio

Fibonacci numbers are based upon the Fibonacci sequence discovered by Leonardo de
Fibonacci de Pisa (b. 1170–d. 1240).

The mathematical problem:

If a newborn pair of rabbits requires one month to mature and at the end of the second
month and every month thereafter reproduces itself, how many pairs will one have at the
end of “n” months?
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Fibonacci Sequence

The answer is: un

This answer is based upon the equation: un +1 = un + un -1
Although this equation might seem complex, it is actually quite simple. The sequence of the
Fibonacci numbers is as follows:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89,144, 233, 377… ∞ (infinity)

(0+1=1)…(1+1=2)…(1+2=3)…(2+3=5)…(3+5=8)…(5+8=13)…8+13=21)…13+21=34)…(21+34=55)...(34+55=89)
34/55 = 0.618181 ~ 0.618 55/89 = 0.617978 ~ 0.618
55/34 = 1.676471 ~ 1.618 89/55 = 1.618182 ~ 1.618

In the realm of Mathematics, the 1.618 is known as the golden ratio or Phi. The inverse (1/1.618) of Phi is 0.618,
sometimes referred to as “little Phi.” The 1.618 ratio is also commonly referred as the golden number or the
golden mean. The number is denoted by the Greek letter Phi (ϕ). The inverse of the 1.618 (phi) sometimes is
referred to as the golden ratio or golden proportion (0.618), and it is recognized by a small “p.”

Fibonacci Sequence
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Elliot Wave Theory

Impulse Wave
Regular
Leading Diagonal
Ending Diagonal
Corrective Wave
Zigzag
Flat
Regular
Running
Expanded
Triangle
Double Zigzag
Triple Combo
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Elliot Wave Theory

Elliot Wave Theory

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Elliot Wave Theory

Elliot Wave Theory

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Elliot Wave Theory

Elliot Wave Theory

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Elliot Wave Theory

Elliot Wave Theory

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Elliot Wave Theory

Elliot Wave Theory

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Elliot Wave Theory

Harmonic Trading

Harmonic Trading is a methodology that utilizes the recognition of specific structures that
possess distinct and consecutive Fibonacci ratio alignments that quantify and validate
harmonic patterns. These patterns calculate the Fibonacci aspects of these price
structures to identify highly probable reversal points in the financial markets.
Trading behavior is defined by the extent of buying and selling and influenced by the fear
or greed possessed by the market participants. The collective entity of all buyers
and sellers in a particular market follows the same universal principles as other natural
phenomena exhibiting cyclical growth behavior.
The basic understanding required to grasp this theory should not move beyond the simple
acceptance that natural growth phenomena can be quantified by relative Fibonacci
ratio measurements.
It was discovered by Scott Carney and published books entitled The Harmonic Trader,
Harmonic Trader Vol. 1 and 2 since 1998.
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Harmonic Trading

Primary Retracements
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Primary Derived Retracements

Secondary Retracements
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Primary Projection

Primary Derived Projection

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Secondary Derived Projection

Extreme Secondary Derived Projections

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Potential Reversal Zone (PRZ)

By calculating the various Fibonacci aspects of a specific price structure,

harmonic patterns can indicate a specific area to examine for potential turning
points in price action.
A PRZ represents the critical areas where the flow of buying and selling is
potentially changing.
These harmonic zones attempt to identify the price levels where imbalanced
overbought and oversold situations are reversing—at a minimum—back to their
respective equilibrium level.

The AB=CD Pattern

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The AB=CD Pattern

The AB=CD Pattern

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Alternate AB=CD Pattern

Gartley Pattern
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Gartley Pattern

Gartley Pattern
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Gartley Pattern

Gartley Pattern
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Bat Pattern

Bat Pattern
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Bat Pattern

Butterfly Pattern
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Butterfly Pattern

Butterfly Pattern
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Crab Pattern

Deep Crab Pattern

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Deep Crab Pattern

Deep Crab Pattern

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Cypher Pattern

Cypher Pattern
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Cypher Pattern

Harmonic Trade Management Model

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Harmonic Trade Management Model

Confluences
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Confluences

Confluences

The volume weighted average price (VWAP) is a trading benchmark used by traders that gives
the average price a security has traded at throughout the day, based on both volume and
price. It is important because it provides traders with insight into both the trend and value of a
security.

The Volume Profile is an indicator that displays the trading activity over a specific time period at
certain price levels. It shows what was bought and sold at those current levels, and displays
them in a histogram on the side of your chart.
Value Area (VA) – where 70% of the volume is located.
High Volume Node (HVN) – point where there is a significantly higher volume than average.
Low Volume Node (LVN) – point where there is a significantly lower volume than average.
Point of Control (POC) – the highest volume node.
Clearance – an area in the volume profile in which only LVNs are located, and there are no HVNs on
that area.
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Confluences

Volume Profile Rules:

If the price is consolidating (ranging price):
Value Area will be located in the middle of the volume profile.
Price will bounce between HVNs and LVNs
If the price is trending upward (uptrend):
Value area will be located on the bottom of the volume profile.
Price will likely retrace to Value Area High
If the price is trending downward (downtrend):
Value area will be located on the top of volume profile.
Price will likely retrace to the value area low.

References:

www.investopedia.com
Applying Technical Analysis. www.signal.com
Carney, Scott M. The Harmonic Trader. Nevada: HarmonicTrader.com, LLC, 1999.
Carney, Scott M. Harmonic Trading: Volume One. Upper Saddle River, NJ: FT Press, 2010.

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