Technical Brilliance 1
Technical Brilliance 1
P J. Gideon
The important message that I can deliver is to focus on the absolute best trades, avoid the
absolute worst setups and work on growing your account to enormous numbers.
In this book, I'm approaching the analysis of price action from a trader's viewpoint. While
seasoned traders likely grasp the concepts discussed, my aim is to offer a fresh perspective
on describing price movements. I acknowledge the collective knowledge and terminology
shared among successful traders, emphasizing that there are no hidden secrets in the
trading world. Instead, traders rely on well-known setups, each often labeled with its own
distinctive name.
In my view, mastering the art of trading price action is an essential skill for every trader.
However, many beginners hold onto the belief that success demands something more
complex, perhaps a rare mathematical formula that only a select few possess. This mindset
often leads them astray from the fundamental principles of trading and overlooks the power
of understanding and interpreting price movements effectively.
Observing affluent and sophisticated traders, many novices assume they rely on
supercomputers or advanced software for an unfair advantage, perpetuating the notion that
individual traders are destined for failure. This misconception overlooks the fact that success
in trading stems from skill, discipline, and a deep understanding of market dynamics, rather
than solely relying on technology or resources inaccessible to the average trader.
I encourage you to approach trading with an open mind, believing that anything is achievable.
It's essential to stop comparing yourself to others who might be making larger profits.
Instead, appreciate your own successes, no matter how small they may seem. Remember,
trading isn't a video game; those numbers on the screen represent real money that can
impact your life. Focus on building consistent gains rather than aiming for massive wins right
away. Comparing yourself to others only leads to frustration and overlooks the unique factors
influencing each trader's journey. Also, be wary of traders boasting about huge profits, as
some may be using unconventional methods or trading on self-created platforms. Ultimately,
stay true to your own trading style and goals.
examples..
It takes so much patience to hold on trades like this without panicking and moving your stop
loss and take profit around.
Catching the whole trend as early as possible in trading can be challenging but
rewarding.
Firstly go to 4hr timeframe and mark the levels where the trends reversed mostly. The roof
and the floor. (Our psychological levels which we may refer to as support and resistance).
Then identify the structure of the market, if it’s trending or not. Now find price levels of your
interest, where the market is likely to reverse if it’s been trending then wait to counter the
imminent reversal. If the market has been going sideways or consolidating, then wait for a
break out and counter it whether upward or downward.
Keep your chart simple and professional. This is important because we don’t want a
messy chart here. Keep it simple and clean.
Example…
VOLATILITY 75 INDEX 4HR
ALWAYS MAKE SURE YOUR CHART IS CLEAN AND SIMPLE.
We have a left shoulder, the head, and the right shoulder. But let's break down everything
that we see in the chart and let's try to understand all the different components of a good
head and shoulders.
So first of all we need to look at the swing points. From the left shoulder to the head, this is
market structure of an uptrend, the market is breaking the previous higher high which is our
left shoulder, forming the head which results in break of structure (BOS). Then a very
important thing happens, from the head to the right shoulder is where the market makes a
lower high. Now when the market break the neckline of our pattern we have a gradual turn in
market power dynamics (CHoCH) - change of character. This shows that the trend is likely to
reverse.
NB: The horizontal line of a head and shoulders is called the neck line. In my experience
trading head and shoulders with a horizontal neck line is preferable because it is more
objective. I will have another example later where we will look at a tilted neck line.
The head-and-shoulders is a trend reversal pattern. But it can also be a continuation, but
here we are not interested in trading continuations.
During the uptrend the market undergoes a distribution where the buyers are slowly exiting
their trades, more sellers are coming in, and this distribution then shows us this gradual shift
from more buyers that kept the price pushing higher to then more sellers in the market. And
then once the market breaks through the neckline, this is where the head-and-shoulders is
activated. That's the trigger. There are a few different ways on how to trade the head-and-
shoulders as I’ll show you. But once the market is leaving the distribution, very often you will
see that new trends emerge.
4HR TIMEFRAME
the entry is at the neckline and stop loss should be placed a few pips above the entry. At
least 10 pips.
In this case, when we want to connect the right shoulder and the left shoulder, we have to
use a tilted neckline to align those bodies and those patterns. However, in my experience, I
have seen that a lot of traders struggle with trading trend lines because those tilted trend
lines are more subjective and that's why I would not recommend to look and to trade tilted
necklines or trend lines in the beginning.
What I would recommend is that on the left shoulder, you look for the lowest swing point and
instead of waiting for the market to only clear the neckline, I would recommend to look for
where is the market making a lower low. That is often a much better signal.
However, a significant shift occurs when the market forms a lower high,(marked in red)
breaking the pattern of higher highs and higher lows for the first time. This change in high
points suggests a potential reversal or shift in market dynamics. It's essential to pay
attention to such structural changes as they can provide valuable insights into future price
movements.
Examining the lows reveals that the market has been consistently forming higher highs and
higher lows, indicating an uptrend. A lower low only occurs when the market breaks below
the most recent higher low and when the market pushes back up for a lower high then
returns, it pushes below our newly formed high low hence forming our head and shoulders
pattern. It's essential to recognize that head-and-shoulders patterns may not always
conform perfectly to textbook examples. Variations are common, and you should focus on
identifying the gradual change from higher highs and high lows to lower highs and lower
lows, which is the key characteristic of the pattern. This understanding will allow you to
recognize and interpret head-and-shoulders patterns effectively, even in less-than-ideal
scenarios.
HEAD AND SHOULDERS AS LIQUIDITY GRAB (fake out)
We can also add the fake out component to our head and shoulders pattern. So what we have
here is we have a left shoulder, then we have the head and the right shoulder. We have a very
well-defined horizontal neckline. If we zoom out, you can see where is this head and shoulder
happening. It’s happening at important turning point.(demand zone) So this was a very
important turning point that led to a strong sell-off. This is an important turning point that led
to a move to the downside. And the market is coming back here, showing signs of a
distribution.
: Head and Shoulders at levels the market has never reached when you go backwards
DOUBLE TOP
After meticulously analyzing hundreds of chart patterns, I've uncovered some secrets that
can enhance the double top or bottom success. These insights include identifying optimal
placements of tops and bottoms, as well as utilizing divergence. I'll reveal these secrets for
identifying high-quality double tops and double bottoms, which can significantly boost your
success rate. We'll begin by examining the structure of double tops and double bottoms,
then delve into the hidden strategies.
A double top pattern typically occurs after a prolonged uptrend, characterized by a series of
higher highs and higher lows. However, at some point, the price fails to surpass the previous
high, indicating the formation of the first peak of the double top. This failure to make new
higher highs suggests a lack of buying pressure and can serve as an initial indication of a
potential reversal in price direction. The pattern signifies a shift in market dynamics, with
sellers potentially gaining control over buyers.
This is our first top and we have marked our primal and distal lines.
Now we wait for the price to tap back into our kill zone which is the area between the primal
and distal lines.
When the price reaches our kill zone three things might happen…
1. The price will pull away and start accelerating downwards. This is
what we want
2. The price will break the two lines and comes back leaving a long
wick which will go beyond our distal line. This is okay too
3. The price may break our kill zone and a candle close above the
distal line. If this happens then the setup is invalidated. NO
TRADING
All I want is the price to test but not close above the distal line in both tops. What does that
mean? It means that price can come back up with candles and I can see a wick come into the
kill zone, I can even see a body close right here in the kill zone or I can see a wick going
beyond the distal line, all of that would be a valid double top for me but what i cannot see is
price come back up and then a candle close above the distal line and the logic behind this is
that a close above our kill zone indicates further upward pressure and indicates that we could
be seeing a continuation of this uptrend that we have so I want the market to stop before this
high but I want it to at least test the lowest body of this swing high…
When it comes to double bottoms, a strong pattern emerges when the second bottom forms
slightly above the first. This signals that the buyers who entered at the first bottom are
holding strong, preventing the price from dropping below that level. Essentially, buyers are
taking charge, reversing the price before it hits the previous bottom. This shift from a
downward to an upward trend indicates a potential price increase, making it a good time to
consider entering a long trade.
E.g
Secret 2. Momentum of the candles forming the last top or bottom. The candles will start
overcrowding as the second top or bottom forms, they lack momentum and they shows us
the market is about to rise or decline harder
e.g
THE RULES OF A DOUBLE BOTTOM ARE THE SAME TO THE ONES OF DOUBLE
TOP
We have another patterns like the triple tap, flags, channels and trend lines… I only
recommend the above patterns discussed here as they have proven to be of great value in my
trading experience.
1. **Fear and Greed**: Fear of losing money or missing out (FOMO) on profits can lead
traders to make impulsive decisions, such as closing positions prematurely, moving your stop
loss and take profit around or chasing after trends without proper analysis.
3. **Confirmation Bias**: Traders tend to seek out information that confirms their existing
beliefs or biases while ignoring contradictory evidence. This can lead to poor decision-
making based on incomplete or biased information.
4. **Loss Aversion**: Traders often feel the pain of losses more acutely than the
pleasure of gains, leading them to hold onto losing positions for too long in the hope that
they will turn around, instead of cutting their losses.
5. **Anchoring**: Traders may fixate on a specific price level or outcome, anchoring their
decisions to that point even when the market conditions change, which can result in missed
opportunities or holding onto losing positions.
6. **Herding Behavior**: Traders may follow the actions of the crowd without conducting
their own analysis, leading to buying into rallies or selling during downturns based solely on
the actions of others rather than fundamental or technical indicators.
1. **Clarity and Focus**: Setting clear and specific goals helps traders stay focused on what
they want to achieve. Whether it's a profit target for the month or a specific percentage
return on investment, having a clear goal provides direction and motivation.
2. **Motivation and Persistence**: Goals provide traders with a sense of purpose and
motivation to overcome obstacles and persevere during challenging times. When faced with
setbacks or losses, having well-defined goals can help traders stay committed to their
trading plan and bounce back stronger.
3. **Measurable Progress**: Setting goals allows traders to track their progress and
performance over time. By regularly monitoring their results against their goals, traders can
identify areas for improvement and make necessary adjustments to their trading strategies.
4. **Psychological Resilience**: Goals provide a framework for developing psychological
resilience by encouraging traders to adopt a growth mindset and view failures as
opportunities for learning and growth rather than setbacks. By setting realistic yet
challenging goals, traders can build confidence in their abilities and develop resilience in the
face of adversity.
MODULE 2
Cultivating Discipline and Patience in Trading
Cultivating discipline and patience is crucial for success in trading. Here are some strategies
to develop these qualities:
1. **Stick to a Trading Plan**: Develop a well-defined trading plan that outlines your
strategy, entry and exit criteria, risk management rules, and goals. Adhere to your plan
consistently, avoiding impulsive decisions driven by emotions or market noise.
2. **Practice Risk Management**: Set predefined risk limits for each trade and stick to
them rigorously. This helps prevent emotional decision-making and protects your capital
during periods of market volatility.
5. **Continuous Learning**: Invest time in educating yourself about the markets, trading
strategies, and psychological aspects of trading. Continuously refine your skills and adapt to
changing market conditions. The more knowledgeable and prepared you are, the more
confident and disciplined you'll become as a trader.
6. **Practice Patience**: Understand that success in trading takes time and requires
patience. Avoid the temptation to constantly monitor the markets or make impulsive trades
based on short-term fluctuations. Trust in your strategy and be patient during periods of
market consolidation or drawdowns.
7. **Review and Reflect**: Regularly review your trades and performance to identify
strengths and weaknesses. Reflect on your decisions and learn from both successes and
failures. Use this feedback to refine your strategy and improve your discipline over time.
2. **Stick to Your Plan**: Develop a solid trading plan with clear entry and exit criteria, risk
management rules, and goals. When fear or greed creeps in, rely on your plan to guide your
decisions. Trust in your strategy and avoid deviating from it based on emotional impulses.
3. **Set Realistic Expectations**: Understand that trading involves both wins and losses.
Set realistic expectations for your trading results and accept that losses are a part of the
process. Avoid chasing unrealistic gains or expecting to win on every trade, as this can lead
to impulsive decisions driven by greed.
4. **Practice Patience**: Cultivate patience in your trading approach. Avoid rushing into
trades out of fear of missing out (FOMO) or closing positions prematurely due to fear of
losing profits. Wait for high-probability setups that align with your trading plan, even if it
means sitting on the sidelines at times.
6. **Focus on Process, Not Outcome**: Shift your focus from the outcome of individual
trades to the process of trading itself. Emphasize disciplined execution of your trading plan
rather than obsessing over short-term results. By focusing on the process, you can reduce
the emotional impact of wins and losses.
MODULE 3
Stress-Reduction Techniques for Traders
Managing stress is crucial for traders to maintain optimal performance and decision-making.
Here are some stress-reduction techniques specifically tailored for traders:
2. **Deep Breathing Exercises**: Incorporate deep breathing exercises into your daily
routine, especially during moments of heightened stress or anxiety. Deep breathing triggers
the body's relaxation response, helping to calm the mind and reduce physiological symptoms
of stress.
4. **Physical Exercise**: Engage in regular physical exercise to reduce stress and improve
overall well-being. Activities such as walking, jogging, yoga, or strength training can help
release endorphins, reduce cortisol levels, and improve mood, all of which contribute to
stress reduction.
6. **Limit Exposure to Stressors**: Identify and limit exposure to external stressors that
can negatively impact your trading performance. This may include minimizing distractions,
setting boundaries with news and social media, and surrounding yourself with a supportive
trading community.
8. **Seek Support**: Don't hesitate to seek support from friends, family, or professional
resources if you're feeling overwhelmed or experiencing prolonged stress. Talking about your
feelings and seeking guidance from others can provide perspective, validation, and coping
strategies.
10. **Take Breaks and Rest**: Schedule regular breaks during trading sessions to rest,
recharge, and prevent mental fatigue. Stepping away from the screens, practicing relaxation
techniques, or engaging in enjoyable activities can help reset your mind and alleviate stress
buildup.
MODULE 4
Risk Management and Capital Preservation
Risk management and capital preservation are paramount in trading to safeguard your funds
and sustain long-term profitability. Here are key strategies:
1. **Position Sizing**: Determine the appropriate position size for each trade based on your
risk tolerance and the size of your trading account. Limit the amount of capital you risk on
any single trade to a small percentage of your total account balance (e.g., 1-2%).
2. **Stop-Loss Orders**: Set stop-loss orders for every trade to define the maximum
amount of loss you are willing to tolerate. Place stops based on technical levels, volatility, or
other factors relevant to your trading strategy. Adhere to your stop-loss levels to prevent
significant losses from accumulating.
4. **Risk-Reward Ratio**: Assess the risk-reward ratio of each trade before entering the
market. Aim for trades with a favorable risk-reward profile, where the potential reward
outweighs the potential risk. Set profit targets based on this ratio to ensure that potential
gains justify the risk taken.
MODULE 5
Avoiding revenge trading and impulsive decisions is crucial for maintaining discipline and
preserving capital in trading. Here are strategies to help prevent these behaviors:
3. **Reflect and Learn**: Instead of reacting immediately to losses or setbacks, take the
time to reflect on what went wrong and what lessons can be learned from the experience.
Analyze your trades objectively, identify any mistakes or areas for improvement, and use this
knowledge to refine your trading strategy.
4. **Stick to Your Plan**: Adhere to your trading plan and predefined rules, even when faced
with adverse market conditions or unexpected outcomes. Trust in your strategy and avoid
deviating from it based on emotional impulses or the desire to recoup losses quickly.
Consistency and discipline are key to long-term success in trading.
5. **Implement Risk Management**: Prioritize risk management to protect your capital and
mitigate losses. Set strict stop-loss orders for every trade and adhere to them rigorously,
regardless of market conditions. By limiting the amount of capital at risk on each trade, you
can prevent impulsive decisions driven by the fear of losing more money.