Complete Trading Revision
Quick recall of key concepts from the Technical Analysis & Trading Handbook. Use for exam-style revision and fast lookup.
1. Market Basics
Bid
Highest price buyers are willing to pay
Ask
Lowest price sellers will accept
Spread
Ask − Bid; cost of round-trip
Market order
Execute immediately at best available price
Limit order
Execute only at your price or better
Stop order
Becomes market order when price hits level
Liquidity
Ability to trade without moving price much
Order flow
Stream of buy/sell orders; imbalance moves price
Sessions
Asian, London, NY; London+NY overlap = highest FX volatility
2. Price Action
Support
Level where buying tends to appear; price holds/bounces
Resistance
Level where selling tends to appear; price rejects
HH/HL
Higher High, Higher Low = uptrend structure
LH/LL
Lower High, Lower Low = downtrend structure
BOS
Break of structure (break of prior HH or LL)
MSS / CHoCH
Market structure shift; e.g. first LL in uptrend = bearish shift
Liquidity grab
Price sweeps stops (e.g. below low) then reverses
Range
Price between horizontal S/R; no clear trend
Trend
Clear HH/HL or LH/LL; trade in direction
3. Candlestick Patterns (Quick)
Single: Doji (indecision), Hammer (bullish at support), Hanging Man (bearish at top), Shooting Star (bearish at top), Inverted Hammer (bullish at support), Marubozu (strong body, no wicks).
Two: Bullish/Bearish Engulfing, Piercing Line (bullish), Dark Cloud Cover (bearish), Tweezer Top/Bottom.
Three: Morning Star (bullish), Evening Star (bearish), Three White Soldiers (bullish), Three Black Crows (bearish), Inside Bar (consolidation), Outside Bar (expansion).
Context: Always consider trend and level; confirmation (next candle) before entry.
4. Chart Patterns (Quick)
Reversal: Head & Shoulders (bearish), Inverse H&S (bullish), Double Top/Bottom, Triple Top/Bottom, Rounded Top/Bottom. Trade break of neckline with confirmation.
Continuation: Bull/Bear Flag, Pennant, Ascending/Descending/Symmetrical Triangle, Rectangle, Cup and Handle. Trade breakout in trend direction.
Breakout: Prefer close beyond level + volume; beware false breakouts (retest or buffer stop).
5. Technical Indicators (Quick)
Trend: MA, EMA, VWAP, Ichimoku, Parabolic SAR. Best in trending markets.
Momentum: RSI (0–100; >70 overbought, <30 oversold), MACD (crossover, zero line, divergence), Stochastic, CCI. Use in range for overbought/oversold; in trend for divergence or pullback.
Volatility: Bollinger Bands (squeeze, mean reversion), ATR (stops, targets), Keltner. No direction—only size of move.
Volume: Volume profile (POC, value area), OBV, A/D, VWAP Anchored. Confirm breakouts and trend.
6. Advanced Concepts
Order block: Last opposing candle before strong move; zone for retest (support/resistance).
Liquidity zones: Above highs / below lows (stops); sweeps then reversal = liquidity grab.
FVG (Fair Value Gap): Three candles, middle doesn’t overlap first; often “filled” later. Entry on fill in trend direction.
Wyckoff: Accumulation (spring = false breakdown) → markup; Distribution (upthrust = false breakout) → markdown. Volume confirms.
7. Trading Strategies (Quick)
Trend following: Enter pullbacks to structure (HL, EMA) or BOS in trend direction. Stop below HL (long).
Breakout: Enter on close beyond range/pattern; stop opposite side; target = measured move.
Mean reversion: Fade extremes at support/resistance (and/or RSI overbought/oversold). Best in range.
Scalp: Short hold; small target; tight stop; liquid instruments; low cost.
Swing: Multi-day; structure and levels; 1:2 or 1:3 R:R.
Position: Long-term; weekly/daily structure; wide stop; small size.
8. Risk Management
Risk per trade: 0.5–2% (e.g. 1%). Dollar risk = Account × Risk%.
Position size: Size = Dollar risk / |Entry − Stop|.
R:R: Aim ≥ 1:1.5 or 1:2. Expectancy = (Win% × Avg win) − (Loss% × Avg loss) > 0.
Drawdown: Plan for 10–20%; reduce size or pause after hitting limit. No doubling up to recover.
Correlation: Diversify; avoid too many correlated positions.
9. Trading Psychology
Discipline: Follow plan and rules; don’t close early or skip stop.
Fear/greed: Fear → early exit, avoid setups. Greed → overtrading, overleveraging, hold losers.
Revenge trading: No trade to “get back” a loss; pause after loss.
Overtrading: Only trade valid setups; cap trades per day.
Journal: Log setup, entry, exit, P&L, emotion; review weekly.
Plan: Written rules (entry, exit, stop, size, when not to trade).
Biases: Confirmation, recency, anchoring, loss aversion, overconfidence, FOMO—awareness and rules reduce them.
10. Backtesting & Algo
Backtest: Run strategy on history; include costs; avoid look-ahead and overfitting.
Walk-forward: Optimize in-sample; test out-of-sample; roll forward.
Forward test: Paper or small live after backtest; final validation.
Overfitting: Too many parameters; strategy fails on new data. Keep simple; test multiple instruments and periods.
Algo: Code rules → backtest → paper → live. APIs for data and execution; Python stack (pandas, backtrader/vectorbt).
11. Common Mistakes
No plan, no stop, size too big, chasing, too many symbols/timeframes, no journal.
Indicator overload: Use few indicators; filter by context (trend, level).
Context: Don’t trade same signal in all conditions (e.g. RSI oversold in strong downtrend).
Overleveraging: Cap leverage; size so one trade doesn’t blow account.
Risk: Fixed risk%, max daily loss, no moving stop against you, no adding to losers.
Chasing: Wait for setup; “no trade” is OK.
Key Charts (ASCII)
Uptrend (HH/HL):
Head and Shoulders:
Bull Flag:
For full detail, see the Handbook.
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