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Risk Warning
Trading
Foreign
Exchange
and
other
Derivatives
involves
a
significant
and
substantial
risk
of
loss
and
may
not
be
suitable
for
everyone.
You
should
carefully
consider
whether
trading
is
suitable
for
you
in
light
of
your
age,
income,
personal
circumstances,
trading
knowledge,
and
financial
resources.
The
information
in
this
material
and
the
links
provided
are
for
general
information
only
and
should
not
be
taken
as
constituting
personal
investment
advice.
Only
true
discretionary
income
should
be
used
for
trading
Foreign
Exchange
and
Derivatives.
Any
opinion,
market
analysis,
or
other
information
of
any
kind
contained
in
this
material
is
subject
to
change
at
any
time.
All
trade
ideas
and
trading
scenarios
found
in
this
material
are
hypothetical.
Past
performance
is
not
necessarily
indicative
of
futures
results.
Nothing
in
this
material
should
be
construed
as
a
solicitation
to
trade
Foreign
Exchange
or
Derivatives.
If
you
are
considering
trading
Foreign
Exchange
or
Derivatives,
before
you
trade
make
sure
you
understand
how
the
markets
operate,
understand
how
ThinkMarkets
is
compensated,
understand
the
ThinkMarkets
trading
contract
rules,
and
are
thoroughly
familiar
with
the
operation
of
and
the
limitations
of
the
platform
on
which
you
are
going
to
trade.
A
Financial
Services
Guide
(FSG)
and
Product
Disclosure
Statement
(PDS)
for
these
products
is
available
from
TF
GLOBAL
MARKETS
(AUST)
PTY
LTD
by
emailing
compliance@thinkmarkets.com.
The
FSG
and
PDS
should
be
considered
before
deciding
to
enter
into
any
Derivative
transactions
with
TF
GLOBAL
MARKETS
(AUST)
PTY
LTD.
The
information
contained
in
this
material
and
on
the
ThinkMarkets
website
is
not
directed
at
residents
of
any
country
or
jurisdiction
where
such
distribution
or
use
would
be
contrary
to
local
law
or
regulation.
2013
TF
GLOBAL
MARKETS
(AUST)
PTY
LTD.
All
rights
reserved.
AFSL
424700.
ABN
69
158
361
561.
Please
note:
ThinkMarkets
does
not
service
US
entities
or
residents.
We’ve All Been There
Most
of
us
have
experienced
the
“whipsaw”,
the
correction
that
keeps
on
going,
high
volatility,
and
the
painful
contrarian
trade.
And
for
many
traders
that
is
the
sum
total
of
their
trading
experience:
Frustration
and
confusion.
What
if
I
told
you
it
needn’t
be
that
way,
that
with
a
handful
of
indicators
I
can
show
you
how
to
understand
why
trades
“go
wrong”
and
to
reduce
that
helpless
feeling?
I
can.
My
name
is
Raghee
Horner
and
I
have
been
trading
for
over
twenty
years.
I
have
traded
stocks,
options,
futures,
and
forex
and
have
seen
it
all
and
suffered
through
many
of
the
same
things
that
may
be
troubling
you
now.
There’s
no
magic
bullet
but
there
are
better
ways
to
select
and
prioritize
your
trades
and
increase
your
winning
percentage
so
let’s
get
to
it.
Why Do you Need a Watchlist?
Coming
from
a
background
of
nearly
a
decade
of
trading
futures
and
stocks,
it’s
not
so
long
ago
that
my
mornings
were
filled
with
endless
scans:
Scans
for
the
biggest
percentage
moves,
scans
for
overbought
and
oversold
markets,
scans
for
price
breaks
through
a
50
or
200
day
moving
averages.
This
was
all
in
an
effort
to
whittle
a
mammoth
list
of
potential
symbols
to
trade
into
a
management
and
focused
watchlist.
This
is
initially
why
trading
the
foreign
exchange
market
was
so
appealing;
my
world
consisted
of
anywhere
from
six
to
seven,
maybe
eight
pairs.
Soon
however
this
“focus”
became
limiting
as
I
realized
that
while
different
individual
currency
stories
played
out,
I
was
missing
opportunities.
Naturally
I
began
to
expand
my
watchlist
and
as
a
result
it
began
to
lose
focus.
I
found
that
a
longer
watchlist
wasn’t
necessarily
a
productive
thing
and
I
began
to
see
that
my
focus
was
my
“edge”.
I
began
to
consider
why
a
pair
was
on
my
watchlist
to
begin
with.
I
shifted
my
criteria:
A
pair
had
to
offer
me
an
edge
to
be
on
my
watchlist;
it
had
to
earn
a
spot
on
the
list.
But
with
what
criteria?
This
process
had
to
be
simply,
fast,
and
straightforward
as
to
not
distract
or
slow
down
my
process
of
setting
up
actual
trades.
Starting Where you Have an Edge!
Starting
with
pairs
where
you
have
an
edge
is
the
first
step.
Keeping
with
the
idea
that
the
filter
I
want
to
use
must
be
equally
as
fast
as
it
is
effective
I
kept
with
the
notion
that
the
dominant
psychology
of
the
market
is
the
market
TREND
that
will
be
most
agreed
upon.
The
simplicity
in
that
is
the
fact
that
the
daily
chart
is
the
most
viewed
time
frame
across
all
market
participants
and
therefore
that
trend
-‐
the
daily
trend
-‐
is
the
one
that
most
trades
will
agree
is
the
dominant
psychology
or
trend.
My
process
for
creating
a
watchlist
became
very
simple:
I
would
identify
whether
the
daily
chart
had
an
up
or
down
trend
and
then
include
that
pair
on
my
list
of
symbols
to
consider
for
a
trade.
Now
let
me
mention
this:
Just
because
I
am
using
the
daily
chart
does
NOT
mean
that
is
the
time
frame
I
will
ultimately
trade,
it
simply
is
a
means
of
looking
a
market
with
ideal
price
action
organization.
Think
about
it
this
way:
If
most
(it’s
never
all)
market
participants
agree
that
the
daily
chart
is
in
an
uptrend,
it
then
increases
the
likelihood
and
expectation
that
moves
lower
are
corrections
and
the
floors
that
these
corrections
test
will
likely
be
supported
and
bought
into.
Uptrend
increase
the
expectations
for
higher
highs
and
when
a
market
is
in
an
overall
(dominant)
uptrend,
traders
also
tend
to
gravitate
towards
the
positions
fundamentals
in
the
market.
There
is
a
bias
that
a
trend
creates
in
a
market
and
that’s
why
I
identify
a
trending
daily
time
frame
as
having
“Directional
Bias”.
I
call
my
main
list
of
pairs
to
scan
and
trade
my
“D.B.
Watchlist”.
D.B.
of
course
stands
for
Directional
Bias
and
therefore
my
list
of
pairs
is
made
up
solely
of
pairs
that
are
trending
on
their
respective
daily
time
frames.
This
keeps
me
focused
on
those
specific
pairs
that
have
what
I
call
Market
Clarity.
I
will
get
into
what
that
is
and
how
I
measure
that
in
a
moment.
Find the Dominant Psychology in a Pair
This
is
where
the
Directional
Bias
concept
meets
the
chart.
I
will
now
share
with
you
a
tool
that
I
have
been
using
since
I
basically
developed
it.
It’s
called
the
34EMA
Wave
and
it
is
comprised
of
three
exponential
moving
averages.
Why
exponential
moving
averages?
Most
simply
put,
this
weights
the
most
recent
price
action
more
heavily
than
older
price
action.
In
a
simple
moving
average,
all
the
prices
(for
example
all
the
closes
in
a
simple
moving
average
calculated
on
the
closing
price)
are
weighted
equally.
I
prefer
to
place
more
emphasis
on
what
has
most
recently
plotted
on
the
chart.
The
setting
I
use
is
based
on
34
periods
so
this
means
that
I
would
be
calculating
the
exponential
moving
averages
on
the
last
34
days
on
a
daily
chart
or
the
last
34
five-‐minute
candles
on
a
five-‐minute
chart.
Why
34?
It’s
a
Fibonacci
number
and
as
a
believer
in
the
power
of
Fibonacci
as
applied
to
the
way
in
which
things
in
nature
expand
and
contract,
I
believe
there
is
application
in
the
financial
markets
since
it
is
a
reflection
of
human
nature.
The
last
part
of
putting
together
the
34EMA
Wave
is
the
three
exponential
moving
averages
themselves.
I
use
three
because
it
plots
a
wider
footprint
on
the
chart
and
gives
me
more
insight
into
the
area
in
which
price
action
could
be
accelerating,
decelerating,
stalling,
and/or
reversing.
I
don’t
believe
price
action
always
necessarily
turns
on
a
dime.
The
34EMA
Wave
is
plotted
on
a
chart
by
inserting
three
separate
exponential
moving
averages
(EMA):
There
is
a
process
to
follow
to
find
the
D.B.
easily
and
correctly
every
time.
Understanding Directional Bias
Subjectivity
is
the
bane
and
blessing
of
discretionary
traders
and
unless
you
are
using
a
system
to
trade,
you
are
to
some
varying
degree
a
discretionary
trader.
But
let
me
add,
at
some
point
even
the
most
dedicated
systems
trader
had
to
have
and
explore
discretionary
ideas
that
eventually
became
systematized.
These
ideas
had
guidelines
and
rules
and
it’s
these
rules
and
discipline
that
discretionary
traders
can
learn
from
as
they
build
their
methodology.
And
yes,
a
discretionary
trader
should
have
a
methodology;
it’s
the
difference
between
having
a
system
and
being
systematized.
I
prefer
the
former,
which
is
to
say
that
I
have
a
system
or
methodology
but
I
do
not
mechanize
it
or
systematize
it,
rather
I
will
execute
it
at
my
discretion
when
I
want
to
and
on
which
pairs
I
want
to.
I
do
not
want
to
deviate
from
that
system
-‐
that
is
not
what
discretionary
trading
means.
The
goal
for
a
discretionary
is
to
use
their
discretion
to
identify
when
their
trading
approach
or
a
particular
strategy
would
be
best
applied.
So
for
me
there
are
two
parts
to
being
a
discretionary
trader.
Since
I
have
the
three
lines
of
the
34EMA
plotted
on
my
daily
chart
I
can
look
to
it
to
help
me
determine
not
just
the
trend
but
also
the
CLARITY
of
the
trend
which
takes
into
consideration
the
volatility,
the
length,
and
the
strength
of
the
trend.
The
goal
is
consistency
and
objectivity
so
there
are
guidelines
to
this
process.
It
starts
with
how
much
data
I
have
on
the
chart.
The
last
part,
the
“angle”,
is
of
course
by
it’s
very
nature
subjective
because
I
am
using
moving
averages
and
the
angle
at
which
they
are
moving.
This
angle
is
more
consistently
determined
by
using
the
same
look
back
each
time
I
view
a
daily
chart
with
the
34EMA
Wave.
The
angle
can
better
be
described
with
the
term
“clock
angles”.
I
call
these
clock
angles
because
I
literally
imagine
what
angle
the
trio
of
moving
averages
are
making
as
it
would
line
up
with
the
right
side
of
a
clock
face.
(e.g.
one,
two,
three,
four,
five,
and
six
o’clock)
Once
you
have
the
daily
time
frame
chart
you
are
looking
at
filled
with
one
year
of
price
action,
look
at
the
angle
at
which
the
three
lines
of
the
34EMA
Wave
are
travelling.
Imagine
that
it
is
the
hour
hand
of
a
clock.
What
time
is
it
pointing
at?
If
the
34EMA
Wave
is
travelling
at
between
“twelve
and
two
o’clock”
then
it
is
in
an
uptrend.
If
the
34EMA
Wave
is
travelling
at
between
“four
and
six
o’clock”
it
is
in
a
downtrend.
If
the
34EMA
Wave
is
flat
it’s
a
“three
o’clock”
angle
and
is
consolidating.
Finally,
if
the
34EMA
Wave
is
not
steep
enough
to
be
a
“twelve
to
two”
or
“four
to
six”
o’clock
angle
and
not
flat
enough
to
be
a
“three
o’clock”
angle,
it’s
a
“two
to
four
o’clock”
which
is
a
non-trending, choppy,
congestion.
That
is
like
a
warning
sign
to
price
action
organization.
In
fact,
if
all
you
were
to
get
out
of
this
section
was
to
AVOID
pairs
that
have
daily
charts
moving
in
a
“two
to
four
o’clock”
34EMA
Wave,
that
would
be
reason
enough
to
use
this
tool!
This is the daily GBP/USD trending lower in a “four to six o’clock” 34EMA Wave downtrend
This
is
the
daily
USD/CAD
moving
in
a
narrow,
sideways
range
(consolidating)
in
a
flat,
“three
o’clock
34EMA
Wave
angle.
Notice
that
the
individual
candles
on
the
chart
are
not
necessarily
in
a
comfortable
view
and
separation
for
your
eyes.
Don’t
worry.
Once
you
have
taken
some
key
information
about
what
you
see
from
this
vantage
point,
you
are
free
to
expand
the
chart
and
look
at
less
price
action.
Do
take
note
of
touch
points
for
trend
lines,
support,
resistance,
gaps,
perhaps
chart
patterns
if
you
are
a
pattern
trader,
and
again
be
sure
you
take
the
34EMA
clock
angle
reading;
too
much
price
action
can
artificially
steepen
the
angle
of
the
34EMA
Wave
while
too
little
data
can
flatten
it
out
distorting
the
real
market
trend
of
the
time
frame
and
therefore
giving
you
an
incorrect
Directional
Bias
reading!
One
last
set
of
questions
I
would
also
like
you
to
ask
while
the
daily
chart
is
in
the
market
memory
or
look
back
view
of
one
year
is
concerning
the
way
in
which
the
34EMA
is
moving.
This
is
called
determining
the
MARKET
CLARITY.
Are
the
lines
of
the
34EMA
Wave
being
respected
as
support
or
resistance
on
pullbacks
or
bounces
-‐
this
depends
of
course
on
whether
there
is
an
UP
or
DOWN
trend
on
the
chart.
Once
you
have
asked
and
answered
those
three
questions,
you
now
know
the
volatility
of
the
market,
how
long
the
trend
has
been
in
place
(if
at
all!),
and
whether
the
corrections
are
organized.
Again,
you
have
asked
the
questions
that
will
answer
whether
you
have
clarity
in
the
price
action
hence
Market
Clarity.
This
goes
hand-‐in-‐hand
with
Directional
Bias.
If
D.B.
tells
you
what
the
trend
is
(if
any)
in
the
market,
then
Market
Clarity
tells
you
the
quality
of
that
trend.
This
is
the
NZD/CAD
daily
chart
trending
higher
in
a
“twelve
to
two
o’clock”
angle
however
it
is
important
to
notice
that
the
uptrend
has
pierced
the
34EMA
Wave
on
one
occasion
with
a
wick
that
broke
the
34
period
EMA
low
and
notice
the
“shaky”
(lack
of
smoothness)
nature of the
34EMA
Wave
itself;
this
reflects
a
higher
amount
of
volatility
and
lack
of
price
action
organization.
On
the
other
hand,
notice
the
Market
Clarity
quality
of
the
following
trend
which
has
a
smooth
34EMA
Wave,
respect
on
pullback
to
the
34EMA
Wave,
and
is
established
(it
has
been
moving
at
the
current
clock
angle
for
long
enough
to
make
the
overall
or
dominant
opinion
of
the
market
more
obvious).
Each
pair
you
are
considering
trading
must
go
through
this
process
and
if
the
pair
is
not
trending
(up
or
down)
in
a
“twelve
to
two”
or
“four
to
six”
o’clock
angle,
leave
it
off
your
watchlist.
Remember
that
even
though
we
are
starting
off
our
analysis
with
the
daily
chart,
we
may
not
even
be
trading
this
time
frame.
This
analysis
is
primarily
used
to
determine
whether
there
is
a
dominant
psychology
at
work
in
the
pair.
It
also
defines
for
us
what
constitutes
a
trend
following
intraday
trade
and
a
counter-‐trend
trade.
This
isn’t
just
trading
lingo…it’s
the
difference
between
going
with
the
(price
action)
flow
of
the
market
or
fighting
the
dominant
opinion
of
the
market.
Trend
following
is
like
floating
with
the
flow
of
a
river
-‐
while
counter-‐
trend
trading
is
like
trying
to
swim
against
the
flow!
You
may
be
able
to
swim
upstream
for
a
short
while,
but
eventually
(and
most
often)
you
will
exhaust
yourself
and
succumb
to
the
flow
of
the
water.
Time
frame
selection
therefore
becomes
much
easier
when
you
understand
the
flow.
In
an
uptrend,
going
long
or
buying
is
trend
following
just
like
in
a
downtrend,
shorting
the
market
is
trend
following.
That
is
not
to
say
that
there
are
not
strategic
times
that
a
counter-‐trend
trade
can
be
successful,
it’s
just
that
these
trades
should
ideally
be
nimble
and
executed
on
a
shorter-‐
term
intraday
time
frame.
For
example,
if
the
daily
is
in
an
uptrend.
Feel
free
to
look
for
buy
entries
across
any
time
frame;
you
are
trading
with
the
Directional
Bias
and
overall,
dominant
psychology
However
if
the
market
begins
to
correct,
there
will
often
be
opportunities
to
take
shorter-‐term
entries
that
are
counter-‐trend.
Be
sure
to
focus
on
the
five,
15,
or
30-‐minute
time
frames
for
these
counter-‐
trend
entries.
Remember
that
you
are
swimming
against
the
flow.
By
staying
nimble
and
not
committing
to
longer-‐term,
counter-‐trend
trades
you
will
avoid
fighting
the
stronger
forces
of
the
market
which
are
working
with
a
clear,
defined
trend.
You
know
what
the
clear,
defined
trend
is
because
you
will
have
already
determined
the
market
clarity
of
the
34EMA
Wave’s
clock
angle!
For
example,
to
follow
a
trend
is
to
trade
with
the
flow
of
the
market
and
the
widest
held
opinion
of
the
market’s
movement.
In
this
way
a
trade
can
choose
to
trade
counter-‐trend
trades
on
only
the
shorter-‐term,
more
nimble
time
frames.
Traders
can
also
choose
to
not
trade
markets
that
do
not
have
a
clear
trend
and
thus
avoid
the
choppy,
non-‐directional
movement
of
range
bound
markets.
Conversely
traders
who
look
to
capitalize
on
range-‐bound
markets
and
the
price
action
exhaustion
at
the
extremes
of
range
can
more
accurately
identify
when
that
approach
is
more
likely
to
be
successful.