Learn To Swing Trade Using Charts | Damanick Dantes, CMT | Skillshare
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10 Lessons (1h 26m)
    • 1. Introduction

      1:06
    • 2. What is charting

      11:22
    • 3. Basics of Japanese Candlesticks

      9:37
    • 4. Determining a Trend

      6:49
    • 5. Finding support resistance

      6:21
    • 6. Chartpatterns

      9:37
    • 7. Momentum

      7:12
    • 8. Price targets

      9:15
    • 9. Calculate trades

      10:33
    • 10. Macro

      13:40
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About This Class

Students will learn how to apply classic charting techniques to assess market behavior. Each 5-minute lesson uses past and current market set-ups for analysis. Projects allow students to build conviction by drafting current trading plans step by step. The basic principles of trend and momentum are outlined using advanced visuals to clearly explain concepts. The Charting class is created for beginning swing traders who aspire to build a self-directed portfolio in equities, forex, commodities and fixed income ETFs. Ultimately, in just 60 minutes, you will be equipped with necessary tools to help power your portfolio.

  • Understand classic Japanese charting techniques
  • Analyze price trend and momentum
  • Determine when to enter and exit trades
  • Consider macro and portfolio factors for swing trading

*Swing trading is defined as trades held more than one day, typically 1-week - 3-months

Meet Your Teacher

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Damanick Dantes, CMT

Macro Trader at Dantes Outlook

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Hi, I'm Damanick Dantes, owner of Dantes Outlook. This channel offers classes on trading for beginners and also explores techniques to boost productivity and mindfulness. Over the past few years, I've learned that the hardest part of trading is the ability to properly execute a plan and manage risk. With all of the market noise, it's easy to develop anxiety as a trader, which contributes to a significant decrease in productivity.

So, traders must master the soft skills too. Making any bet, whether it's a decision to take a trade or start a business, requires the right mindset to develop, execute, and actively refine a process. And if you get that right, decision outcomes will hopefully be in your favor. Join me on this journey and stay tuned for fresh content and upd... See full profile

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Transcripts

1. Introduction: Hi, I'm Damanick Dantes and I'm a chartered market technician. I started Dantes Outlook with the basic premise that profit and loss responsibility is the best way to understand financial markets. In this class, students will learn to apply classic charting techniques to assess market behavior. Each five-minute lesson uses past and current market setups for analysis. Projects will allow students to draft current trading plans step-by-step. The basic principles of trend and momentum are outlined using advanced visuals to clearly explain concepts. The charting class is created for beginning swing traders who aspire to build a portfolio of equities, commodities, forex, and fixed income ETFs. Ultimately, in just 60 minutes you will be equipped with the necessary charting tools to help power your portfolio. 2. What is charting: Hello everyone and welcome to the chart imports. Learn to swing trade using charts. It's a method to power your portfolio, and welcome to the course. I'm glad you're with me and it's really awesome to share my passion about the market and about macro. I've been doing this for a long time and it's great to now share my experience with you. I'm Damanick Dantes and my Twitter handle is DANTESOUTLOOK. Please go follow me there, so you can stay up-to-date with some of the recent changes in the market and my thoughts on it. Let's get started. What is charting? Charting is a method of visualizing supply and demand of price. I like to think of it as a disciplined way to trade or trade and follow. This means that if you were to have a particular conviction on a security, let's say it's a fundamental conviction. You think that earnings are going to be great, or there's a new product out, or there's a new release in the news or some catalysts to move the price higher and you want to get in. Instead of blindly buying or selling a particular price or a particular instrument, you really have no idea of a particular entry point to enhance your profit. You really have no way of calculating one to get out once you're acceptable loss. There's really no way of looking to see whether or not the other market participants are bidding to a certain level for you to make your trade as profitable as you can. A way to do that is to visualize what market participants are saying or believing in based on their action, which is buying and selling a particular price to arrive at the equilibrium. By supply, I mean suppliers or sellers that are unleashing shares from the market and the demand meaning the buyers or the bidders that are bidding up a particular amount of shares in the market. A good way of visualizing this is by looking at a chart. The chart offers a lot of information. Number 2, we can observe previous zones of support and resistance. Again, looking at this discipline playing field of this war if you like, it's an ancient Japanese tradition of using charts rice traders used to use it as a way for them to accurately assess supply and demand. Looking at the past, you can figure out where support is. If you're looking at an up trend, a price where chart where price is continuously rising, there are particular zones of which buyers come in and they view it as an attractive enough level to continue to bid shares higher, this launchpad. Then you also have resistance where sellers tend to step in at a particular level and push shares lower. There's the ceiling and that's the resistance support is the buffer. You can also identify trends looking at a series of price highers highs looking at higher highs and higher lows by identifying your longer-term trend. Then you can also measure the momentum or the speed at which price is moving. The rate of change, that's the measurements of momentum. If you place momentum underlying with the trend, you can measure or figure out when things are going to get exhaustive or when things are really accelerating to the upside. Now this quote really puts it all together. "The market is not a weighing machine on which to value of each issues recorded by an exact and impersonal mechanism. Rather, the market is a voting machine, whereon countless individuals register choices which are the product and partly which are the product of and partly of emotion." That's by Graham and Dodd, the book security analysis in 1934. This is basically saying that the market is not this impersonal machine where it just weighs things accordingly. Something that you can measure as a holy grail.This is made up of individuals with emotion. Sometimes they're wrong, sometimes they're right. It's full of opinion and you really have to assess it on a systematic approach. But that systematic approach is not a holy grail. It's something that's dynamic. What it really pushes us to do is to remove the emotion or removed the opinion, and look at something that is factual and that is price and that's something that a chart can enable us to do. There are two types of players in the market. You have the uninformed players and the informed players. The uninformed player's are ruled by emotion and biases. They act irrationally. They're optimistic after the market is rising and they buy, and they create what we call the market peaks. They are also pessimistic during market declines and they sell creating what we call market bottoms. Then you have informed players which we attend to be. They act contrary to the majority, selling at the top and buying at the bottom. They tend to ride the trend until participants are nearly fully invested in the market, which is at the peak. If you think about all the uninformed players which are mostly retailers, they tend to act in high. They buy things up when the tensions are high and they hike things and they create that peak. That's when the informed players come in and they know when you're fully invested and they tend to sell there, they go against the hurt. In order to do that, they use information or they identify what sentiment is like. They use particular charting tools to separate opinion from the price fact. Again, the opinion is really the informed players pushing up price or pushing down price in fear or irrational exuberance. The price fact is the trail that they leave behind. It measures the speed at which they're doing this, which is momentum. It also looks at when things are extreme in terms of price over bought or oversold, when the hype is too strong or too real, and you know that things are fully invested in, and you can act against that to greater your profit potential. That's the informed investor uses charts to his advantage. This is a good example of looking at the phases of greed in the market. The first phase is the stealth phase where you have smart money taking in, that's an accumulation at the bottom part of the chart here. This is when usually the smart players tend to get in, the price is usually at a low price. It's not really doing anything, but there's some catalyst that's going to take it off that this informed smart money knows about. Institutional investors tend to do all the fundamental research at this phase. They tend to see, will this company has some profit potential, long run or maybe there's a medical condition here where the central bank is going to do something. There's a lot of research that's going in here. As technical analysis or charters, what we tend to do is we see this accumulation and the prices tend to move higher. There's also this little slight decline which shows that some folks are exiting, or there's a better price point where the smart money is going to enter in. This is when people become aware that something is moving higher, something is brewing on the inside, media tends to get a hold of it. There's rapid rise now. The uninformed player's are hopping in. They creating this euphoric stage of enthusiasm and greed. Then there's also some delusion here, thinking that this could continue to higher, this parabolic move. There's a new paradigm. This is usually at the peak when everyone from this stage to the public is fully invested, this is when smart money, smart investors, or informed investors tend to step in and they'd deny this. You get this huge sell-off and then you get this bounce-back higher. Things returned to normal things are fine, it's what we call the bull trap. Fear kicks in, capitulation then kicks in where you have a lot of these guys at accumulated shares are stopped out of their position they tend to get out. There's a bleeding phase. People are exiting the trade. There is excess supply, little demand in the market, then you have a blow off where things get so oversold, there's really no one left. That's a time when you want to come in and buy for a reversion to the mean of where the price tend to was before him, that's the appropriate price level. That's just an evolution of price by measuring the market behavior or the market participants trail that they leave behind. This was all seen in a chart. This allows us a visual of this war plan in this war game, this battle between the buyers and the sellers. Now, just as a general look of where I tend to look at my tools, you can go to the website, dantesoutlook.com and see the trading process. Here I give just a base rundown of macro and technical. The next class you'll be learning about Japanese candle sticks, which is a way to measure the supply and demand. For charts, I tend to like investing.com, which gives you a good charting tool that is run by TradingView which I'll show you in a second. With investing.com, you can look at a chart here. This chart again shows you basically S&P 500. You can see no real trend here, but a trend can be shown here by lower price highs and lower price lows. Then here up some higher trend of higher price highs and higher price lows. Just as a general thing of tool, I tend to like looking at the VIX, which is a volatility indicator. Here this is just basically showing you what a chart is, connecting the higher highs and higher lows and looking at things like moving average. It's really my way of measuring the supply and demand of a particular instrument over time. There's tradingview.com which I use a lot in terms of looking at my charts, and here I have a whole list of all portfolio full of indicators and full of different instruments that I use to measure overall market, feel overall market conditions. We'll be playing around with a lot of these tools to help us understand how to use charting tools in real life practice. It's a lot of fun and looking forward to you joining in on this second episode of learning to swing trade using charts. See you then. 3. Basics of Japanese Candlesticks: Hello, and welcome back to the second edition of learning to swing trade using charts. The first edition we talked about what is charting and some of the basics of why we use it and how we use it to identify trend and momentum and price. Now we'll delve into a little bit more of the specifics of candlestick charts. It's again an ancient Japanese tradition, and candlesticks are used as a war plan. You're looking at the battle between the buyers and sellers and how they're registering their moves in a candlestick. Now, here again on the trading process page on.tsoutlook.com, identify the macro and the technical basis of my trading process. The macro is basically the division between risk-on, risk-off scenarios by looking at convergence versus divergence situations. Convergent, think of it as a smooth trend, nothing's really happening, no major gaps but diversions is those gaps between the trend. Sometimes it can be wild, sometimes it can be swift, but it really measures when things go awry or against a smooth trending situation. That's where candlesticks will help us identify the nature of this. So what is a candle? A candle is devised of a real body and wix or shadows. They can either be white or black or in some cases, green and red. A green or white real body means that the price closed above the open, making it a higher price day. Here at the top of the candle is the close, here is the opening. Then here is the price low at the lower shadow and here is the price high at the higher shadow. So you can see here that the price was clearly higher than it was, we want it open, creating it white or green in some cases. Here, on the opposite hand, the price closed, blow it's open, making it a red or black canyon. Here, the same here is the high at the upper shadow, here is the same thing, a low, at the lower shadow. This just shows that extreme range of price and how it closed in that session determines whether or not the body is white or black. Now, that can be a little bit confusing, but that's just a general playground of, what is a candlestick? Now, let's look at it in live action. Here I'm looking at the price of gold. Now, look at this chart as a war plan, a war field, a battlefield between buyers and sellers, and you're trying to find that right price point each week. This is a weekly chart, so every bar here represents a week's range of price. By zooming a little bit, not to go back, but zoom in, we can see here the candlesticks in action. Now, the price is laid here, the dates are laid here on the X-axis, I'm sorry, now each candlestick has a particular name, but I'm not really going to go into it because I don't follow them by a particular name, I follow them by the nature of their movement or the recorded range that they provide. This is a nice one that's called sort of a doji or it's a stalemate between buyers and sellers. You can see here that the range was very wide, the price was able to close right in the middle of that range. So buyers and sellers really couldn't find that right price point. It means that there's going to be a shift in direction. Now where is the direction leading us? Direction was high after this previous doji type of bar here, but there was a pause. There's a pause mean that we're going to decline, go up we look at it in relation to the previous candle, and this was a previous black engulf the previous candle. That trend direction was heading a little bit lower, but it was stopped out, it didn't continue lower. The buyers and sellers read a stalemate trying to figure out where to go. That ended up being a launch pad of some sort. That launch pad following maybe this moving average, which will provide a little bit of support, which we'll talk about later, provided there's nice boost to price. Prices were able to close above the high or close above the previous day's closed, consistently. Consecutive closes, consecutive higher highs, then we get to meet with this extreme range. Surprise dipped lower, but then buyer is able to push it back higher and close below the particular opened on that week. That was clearly a little bit of a bearish move because buyers were not able to close above the open price. That gave us a bearish signal. Prices then began to move lower, extreme lower on the week there, but it was captured by this moving average support line, which we'll talk about again a little bit later. Provided that catapult higher, lower, and can see the general range that buying and selling pressure, trying to figure out where the price is going to go. Again, we get one of these doji bars. This stalemate after previous kind of smooth line upward and then we get this stalemate. This range and then this tight real body here, in the middle showing that steel made between buyers and sellers. It gives us a warning that trend is going to shift a little bit and the adverse direction to the previous move. The New direction will be a little bit lower. So just keep on moving, lower, price tends to dip, there's lot more, you see this pauses here, but then lower, lower. Then you get another little type of stalemate here. Kind of longer the range, here as well, this is an important candle. The price here actually dip lower, and this is the entire range to the low, the extreme low of that week. Buyers are able to push the price a little bit higher, but it's still close below the open of that week and it shows us that there was some sort of wash out that's going to catapult the price a little bit higher and that it did. Price continues lower, here you have another range that was left aside that, the sellers rejected anything lower than this close here. It's also connected to the support base from here, this established a support level. Then it tapults price higher a little bit. For the sake of time, we're just going to look, just track to see how the candles move. Gold price. This is beginning in the year 2016 or so gold had a really nice rise upward, fear sets in the market, maybe there's some macro thing going on here. Here nice, perfect type of doji. Prices were going great in 2016, something happened here in the middle of the summer, prices tend to dip across below that moving average, people are thinking that trend is shifting, but then selling gets exhausted. There's a stalemate between buyers and sellers and then price done catapults higher and here we are. This is where the gold price currently stands at this move here in the beginning of this year, or there was stalemate between buyers and sellers, maybe there was a fear of the market, people rush towards gold, and that's the move that we have here. There's really no telling of the current candle position, you can say that, obviously price closes below the open of that week, which is kind of bearish and real body is small, meaning that the range of price action during that week wasn't much to signify any type of real continuation after strong move upward in the prior two weeks. So it shows a little bit of a stalemate. We're heading into this resistance line where prior highs have led to a breakdown. So maybe that is a bearish thing, but we'll have to look at a broad range of indicators to measure that momentum of these prior moves and also the level of over-bought or over-sold was the trend heading, things like that, that we'll discuss in later videos to really understand maybe where the gold price is headed, that can be our case study. All right. So stay tuned. Thanks. 4. Determining a Trend: Welcome back to Session 3 called determining a trend. Now, there are three main trends in the market. One, you can have a rising trend, where price is making a series of higher price highs, higher highs, and higher lows. You can have a declining trend, where a price is making a series of declining price highs and also declining price lows. Then you can also have a stationary or stable trend, or no trend at all, I'm sorry, where price is neither rising or falling, it's just in this flat range over a given period of time. Now, for example, let's look at Microsoft. We're also going to use our candlesticks that we learned in the past lesson to determine the strength of this trend. Microsoft, since inception around 1987, started off in an uptrend. Remember, each bar represents a month. Here, we had a stalemate starting out, like what we called the doji, or there is a thin range and a thin real body. Gear off to a price high after a period of a little bit of accumulation. We had our uptrend here, defined by higher price highs over the month, and also higher price lows. We can draw this. Right here in the corner, TradingView has a set of tools where you can draw trend lines, chart annotations, and things like that. I'm going to draw a trend line just to connect to show you a series of higher price highs and higher price lows. See this little minor trend line here basically shows that the price low of around this time hit a trend line and then it hit it twice. You also look for two or three hits of a trend line, just to make sure that price is responding to this zone or this angle of support. Now, you can see here, it broke it, which means that that uptrend now is invalidated. You're having a congestion fees or an accumulation somewhere where price, supply, and demand is at a hold. Then you get out of that congestion phase, which you would signify by, maybe a horizontal line right around here. This states that this congestion or accumulation phase is over. Now, you are continuing uptrend that began from 1987. Here, you have that trend increasing very strongly over several years. Here, I've signified lower support, that just launchpad this uptrend here. Now, as we've gone through time, you can now see that the trend has deteriorated or flanged out over a longer period of time. I have this on the Log Scale, by the way, just to show the extent or the better variation of price over time. If it was standard, you would see more of an inaccurate depiction of price change over time. Now, this is really no trend. It's just stationary, nothing's really going on after this breakdown in 2001. Remember, this was like the tech bubble. After the breakdown, Microsoft has really been in a flat period of movement. Now, as you've gotten more price data over several different years and an uptrend, you can now include a moving average. The moving average is just an average of price movement over a given period of time. Simple. Now, there are different types of moving averages like exponential that we'll get into at a later point. But one that I like to use on a monthly chart is a 40 month moving average. I'm going to enter that in. Has it shown? Yes, there we go. Moving average is a cushion. You can see that moving average over 40 months begins here. After every 40 months, this line is calculated, and it tracks the trend pretty closely. It makes us know that even though we have these periods of stalling out, we're still in an uptrend. As we crossed that moving average, it signifies a downtrend, and that moving average has been resistance over these years. Comes resistance, resistance until we break it. Now, you can see here, the moving average, the slope of it is pretty flat, meaning that there's no trend, uptrend here as we break it definitively. Here, we have this flat range period. We can signify that by here and here, this flat range. Anyone breaking out of this range right around 2014-2013, and the moving average is also increasing its slope. It's been tested once, twice, or three times, and that signifies an uptrend. We can also draw an uptrend line from here. Sometimes it doesn't always respond. Here. It's here. As you can see, it's very similar to this moving average that's already giving you a trend slope. But sometimes that line helps us a little bit, and you can also connect the highs. Because again, we're uptrend, we want a series of higher price highs and higher price lows. There we go. Until this moving average is broken on a monthly time frame, it tells us that the uptrend is still intact. 5. Finding support resistance: Hello and welcome back. This lesson is going to be on determining support and resistance on a chart. So support, what does it? Support is a buffer. It's a place where buyers step in where they see an appropriate price to then bid the stock price or instrument higher. Resistance, on the other hand, is a point in the chart where price gets absorbed and supply is greater than demand. It's a point in which sellers would then pressure the price downward. There are multiple ways of measuring support and resistance, you can use a moving average, you can use horizontal or vertical lines on the chart, and you can also use moving averages to determine trends, support, and resistance, which we learned in the previous video. Let's just take a look at candlesticks, which we learned in our first lesson as a way of determining the strength of a trend. We see here several small real bodies, several long real bodies just to indicate the strength of momentum or the compression of supply and demand. A good way that I use support and resistance and candlesticks is to determine the reaction to a particular technical level. Candlestick charts are only as good as they respond to certain levels. Support and resistance, let's start with just some lines. This is looking at Google on a daily basis. So every candle represents a day. Let's just draw a simple trend line disconnected from here, the extreme low of around November 14th, 2016, and connecting that line upwards, we see here that it was touched three times. Remember our three rule? One, two, three, and this could probably be a four. It's just connecting that angle of support and in an up trend, Higher price loaves creates that trend higher. Now, you can see here, remember this long range and sort of a real body that's rejected upwards, o buyers were able to push the price higher than the low of that day. And that shows a downside exhaustion. Here we have a similar candle or it's downside exhaustion, pushing the price higher. Here, the low of that day responded to the angle of support here on that trend. So this gives you a long-term support buffer from a trend perspective. Now let's look at just some horizontal lines to see where would resistance and support be horizontally. We can then take the horizontal line here and just connect the price loads. So here's one example of where price would stall out here at this point, stall out again. That would create a line of resistance. That resistance now becomes support when the trend ships. Here we are in this sort of choppy zone of maybe a downtrend or something that's bearish, where price continuously is stalled by this line tend to appear state near, but it was little upside there. Prices then pushed down, then you have this clear push higher from that line of support. Here it was resistance. Now here it's support because you had this throwback here at tests to that line again and catapulted higher. Another way of measuring support resistance is looking at prior highs and prior lows. Here you have a prior high, it's given us that same line. But here you have prior highs or local highs on the chart. Here you have another local low and that high and low congestion is gives you a line of support and assistance. Another way of looking at it is looking at the moving average. I tend to use, especially on the daily chart, the 200-day moving average which gives you a longer-term trend. The 200-day moving average then provides you with a large cushion of support. So you can see here, prices declining. You tend to look at an area where buyers would tend to step in. Historically, they tend to step in a, this 200-day moving average in pink, which goes a long way back to identify the uptrend. You can also use a 50-day moving average as a shorter way of determining when the trend is shifting or changing direction. Usually we tend to look at when a 50-day crosses the 200-day moving average to signify a nice uptrend. As we can see here, another way to look at trend is to use pivot points. It's sort of your cheat sheet way of determining horizontal price and support. Now the pivot points as a way of combining the price high, price close of a previous point. It just gives you a certain level of resistance and support on the chart. Here I'm going to highlight some of them here. So you can see here this was probably going to provide you with some support, support, support, support, and it can also be resistance as you go along. But I tend to use the monthly DeMark pivots is a whole another reason behind that. Let's not dwell into that too much. But this just quantifies support and resistance on a chart that I tend to use a lot. 6. Chartpatterns: Hey, and welcome back to the next lesson on identifying chart patterns. I tend to use chart patterns sometimes during my treating just as a way to identify accumulation and distribution on a chart. By accumulation, I mean the buildup of buying pressure slowly but surely along a trend. It usually creates a stagnant information that leads to a breakout where you can measure to identify a price target from that accumulation or distribution phase. Just as a side note, a distribution is the opposite of an accumulation. It's when selling pressure builds up that's going to create a phase at the top of a chart that can trigger a downfall, where you also have a price target from that distribution phase to the lower edge of the chart. We'll view some trading or chart patterns as a way to measure that accumulation and distribution, and then also to measure price targets from it. We start with a double top and a double bottom. A double top, as we can see here, is defined by an up trend. Then you have this breakdown, the first sign of a breakdown that occurs, and that lends to a support level called the neck line. That neck line is now the launchpad to the second acceleration up to the same point of the first of acceleration. You have a double top, 0.1 and 0.2. Then the stop here is letting you know, because we already broke this trend line from a previous up trend, we're giving it another chance to form another top level. You would tend to get out of the trade if you're along at this point. As price continues to go down, it hits the neckline which is a previous support area and if it continues to go down, then we enter into a short position, then betting that the price will go lower. Typically, when you hit a double top, your measurement target to the bottom would be the base of the neckline to the top that's connecting the two top points. From here to down here, you would measure below that entry point when you entering the short position to get your target for the price to go down. The same goes if you going to have a double bottom. This would be the accumulation phase opposite the distribution phase up here, to where price is continuing from a downtrend. You get this first acceleration to the neckline resistance instead of support. Then you get the second chance up, and you would stop out of the position if you were short at this point, and then allow the price to enter and break that neckline, and get confirmation of an entry to go along this particular instrument. The target here would be the measurement from the base, which would be the neckline to the double bottom point. That'll give you the price target to go long. That's the basis of a double top and double bottom. Its one, the distribution and two, the accumulation that's occurring here, and that'll give you the target. This tends to occur a lot of times, and we'll see it in a real practice later on. I also use a lot of continuation patterns. A continuation pattern could be a pennant, or what I also like to call it a flag. A flag just doesn't have this ascending base. What it has is a parallel downwards in terms of support or resistance on a chart. Here we see the bullish pennant, which is defined by a flag pole or a strong up trend out of the base. That'll give you the height of the flag pole. Then you get this series of lower highs, but higher lows that really constrains this accumulation, this stalling out point from the previous trend. That stalling gives you an accumulation that can form a breakout. That price target would give you the base of the preceding trend point to the top of that flag pole. That measurement there would be the same measurement of the breakout. It gives you the same amount of strength of the prior trend as it exhausts or phases out a little bit to catch some steam, leading to a breakout that will give you the same measurement from the proceeding accumulation or receding acceleration phase. The same goes for bearish environment, where you're coming out of this base, you're in this strong acceleration phase to the downside. You get a little bit of that break here to where the trend stalls out. You get a series of lower highs that connects down to resistance, but also this accelerated base of higher lows, it gives you that stalling out point. Again, the measurement from the base of that previous trend to the high point of the acceleration downwards gives you the same price target for going short. What we see here also is gaps. You can have several different gaps on the chart, which means that there was really no trading or price just searched at the open, giving the market really no chance to establish any type of price zone or price action during this gap up or gap down phase. You can have a continuation, which we call a runaway gap in a trend. It's just showing this empty period on the chart that can be filled at a later point. You can also have an exhaustion gap after really strong trend upwards or downwards. You can have this last ditch effort to where there was no price discovery, and it gives you that exhaustion gap at the top of a trend point. A breakaway gap occurs when you have a stagnant period, and then all of a sudden the strong breakout. The first sign of that breakout being a gap is a very positive thing, because it shows that the market was so ahead at establishing a higher price point out of this congestion phase or accumulation phase, to then continue or establish a trend upwards. Now let's look at one example. For the sake of time, we'll only keep it to one. Just showing t and x, which is a 10-year treasury yield index. This index is important because after the election, right around November of 2016, right around here, yields were starting to move up. In a broke above, its 200 day or 40 week moving average, and pink as we see here. This up trend was really strong after the election, this green bar here. It's this exhaustion gap as we saw in that PowerPoint slide. That exhaustion gap led to a continuation, but it was really limited. Then we've got this first sign of a breakdown. The second test higher again established this two point of a double top. Then now we're seeing that breakdown from the neck line. But that breakdown is probably limited here because we also get a 200 day moving average support at a Fibonacci levels, which we'll look at in future videos. The support level is from the base. If you remember I said earlier that gaps usually tend to get filled at a later point in the chart. Well, that's happening right here, and that base of support would be the base of that gap of the exhaustion period that led to this final leg up in the 10-year treasury yield. Now, with the 10-year treasury yield, it's limited and we're seeing how we're combining different indicators, different lessons of the past to a single chart to establish a point of, well, if we're going short, we definitely want to keep that short position on a tight leash or a tight stop at least to the 200 day or 40 week moving average where we typically find support. This is that first gauge of strong support or strong resistance if it was the opposite placement on the chart. But here, since it's coming down as something that was support, that was the previous launchpad, and that support is right at the base of that exhaustion gap. That gives us a good area of some upside. But again, that upside might be limited because we're having a double top, which is a bearish signal in the 10-year treasury yield. For the sake of time, this video I know was a little bit longer than the five minutes as promised, but chart patterns are important when you're looking at charts, and it aids you in the placement of trying to find measurement, also understanding accumulation, distribution of chart. It gives you a really good sense of buying and selling pressure in this constrained environment. In these constrained environments is when you start thinking about trading setups or trading plans from a chart perspective. It gives us that discipline. It also gives a visual direction of understanding how you want to place your trade for the most possible setup as we see fit. Thanks, and I'll see you in the next video. 7. Momentum: Hello, and welcome back to the next session on learning to trade using charts. This section is one of my favorite, its on momentum indicators. Learning how to use them to anticipate chart price direction and also to assess the strength of the trend. Momentum is a pure trend-following indicator. It's the measure or the speed of the change in price over a given period of time. There are two indicators that I tend to use in measuring momentum. One of them is called the MACD indicator, the M-A-C-D, which stands for the Moving Average Convergence Divergence Indicator. Remember, earlier we talked about convergence being something where the trend is continuously following, price is following any indicator that you use to measure the pace of that price. Then on the other hand, divergence is when price moves in the adverse direction of the trend relatively strongly sometimes. Divergence in this case refers to prius moving away from what the indicator is telling you. It's diverging away from its pace of prior movements, which gives us a signal of a trend shift or some change going on with the trend behavior. That's something you can assess using an indicator like the MACD. The MACD as explained here is a trend-following momentum indicator that shows the relationship between two moving averages of prices. Those two moving averages is the 26-day exponential moving average, which is just a faster moving average and the standard that we're used to using, and it takes a difference between a 26-day EMA and a 12-day EMA to compute the MACD line itself. Then we add a signal line on top of that, which is a nine-day exponential moving average of the MACD line, which is plotted here in the dotted line. That's a function that we use as a trigger for buy and sell signals when those two lines cross, being in a nine-day exponential moving average, and the underlying difference between the 26-day exponential moving average of price and the 12-day exponential moving average. As we see here, the MACD indicator is plotted to below with its dash line, which is a signal line. When those two lines cross, either from above or below, it indicates the shift in momentum, either decreasing coming from above or increasing coming from the bottom. When we cross this zero line, it's just our threshold for momentum turning on or momentum weakening into a downtrend phase. As you see here, price is steadily increasing, we reach a peak and the MACD is decreasing from a positive direction into a negative direction. Once we cross that zero line, we can be more confident in showing that the trend has indeed shifted strongly to the downside. It's not until that signal line cross from the bottom up above the zero line is when we did confirmation that that downtrend has shifted now to a more of an up trend phase. This is now convergence rather than what we saw earlier of divergence. Do you see here that the MACD is making a lower, a peak of lower highs, whereas price is just continuing to stay higher? But in this peaking zone and that divergence tells us that there is a signal coming, that the trend is indeed shifting to a downward direction. Another indicator that I tend to use is the RSI or the Relative Strength Indicator. It's a momentum indicator that compares the magnitude of recent gains and losses over a specified period of time to measure the speed and the change of price movements of a security. It's primarily used to attempt to identify overbought and oversold conditions in trading of an asset. These definitions are taken from investing.com, so you can go through and peek at it at your convenience and get a better sense of what's going on in terms of the underlying calculation. For this purposes, we're just going to keep it really simple. The RSI is an overbought and an oversold momentum indicator. It gives us a range in movement in terms of measuring when things get extended either to the upside or to the downside. Here's a particular formula if you're looking to compute it in any way. Then the relative strength is just the average gain up periods during a specified time frame. Typically we use 14 days or 14 periods. It can be 14 weeks, 14 months. Whatever chart that you're looking at, you just adjust it to the 14 period for relative strength. You divide the gain of up days during the 14 day period divided by the average loss of down periods during the 14 day time frame. That computes the relative strength line. You see here the oversold level is 30. When we hit 30, that means that the price tends to get oversold and it usually invites a lot of buyers, so then increase the price upwards. 70 is our threshold for being overbought when prices hit extreme to the upside and sellers sent to step in to mean or vert to the downside. This gives us a range bound movement for price, whether it's going to be overbought and we want to start selling, or whether it's oversold and we want to start buying. It's a good indicator to tell you when prices at a cheap enough point for buyers to step in, or it's gotten ahead of itself and its extended and seen as expensive. Now, it is important to note that prices can tend to be overbought in an up trend for a given period of time. You remain within the 60-70 range for some time, if there is in fact an up trend that's proceeding. Same goes for downtrend, if the price is continuously heading lower, we can be in a range for 20 and 30 for quite some time, not until we see a divergence to where the RSI is giving us a signal of higher lows. Yes, higher lows and price is still steadily for the bottom. That gives us a good indication of if we were in a downtrend for a given period of time, and There's a divergence between price and relative strength index that declared enough signal to try to think about going long or at least decreasing your short position to adjust for a potential shift in trend. The next lesson we'll look directly more on price extremes, using the momentum indicators, the MACD and relative strength on some securities. That'll be fun. As a homework assignment or a project tend to look at a chart and just pull up the RSI or MACD, and just assess whether or not there is momentum given from the MACD indicator, or if there's relative strength in terms of being overbought or oversold. Just assess the direction and tend to think about what if you were going to make a trade? What's the right time that you would make it and it's giving you enough conviction given the MACD or the RSI. All right, see you in the next video. 8. Price targets: Hello again, and welcome to this edition of learning how to trade using charts. This episode will be about profit targets and how to set up the right condition for your trade to be profitable, but also looking at a point of exit on the chart visually, versus the next lesson which will be quantitatively trying to figure out how to best assess risk reward in terms of your entry price and your target price of exit. This is where it gets a little bit more fun, and a little bit more strategic, and tactical when we look at charting setups to try to figure out entry and exit points. We've identified how to use momentum trend indicators and relative strength to determine entry points on the chart and looking for confirmation. Now, we're going to look at exit points in terms of looking at the extent of a price move when we've got that entry point in play. We're going to look at some current examples. One is Nike. It's an active trading position that I have on long. It's been frustrating given some of the earnings miss that's been going on. It's been affecting my long position. But I'm still holding through there because my trend indicators are telling me to stick with it until proven otherwise. After very good, I think, entry stop and target point, that allows me to be disciplined throughout this trade. It's been going on for about a month or so, which is quite long for me given that I swing trade for more than a day, maybe about a week or two at most. But some trades do require some patience, but it also requires a good deal of risk management, which I'm continuously trying to work on. I'm learning as well. I'm not an expert in terms of structuring every trade perfectly by the book. But this does come with practice and there is no Holy Grail. Finding entry and exit points is very tough when you're in the actual position. It can be great to theorize or jot down as much as you can in preparation. But the market has a mind of its own, or no mind at all. Sometimes things do go awry and you really got to stick to your plan and be disciplined in terms of adjusting to current market conditions and letting price to really determine whether you're going to stick it through or whether you're going to take an early profit or accept the loss. That's something that we'll talk about in the next few lessons, and certainly in advanced courses, if there is demand for it, which I expect there to be. Enough of me talking about frustrating trades. But let's get into Nike and think about how this trade setup would work in the current environment. Nike has been in a long-term uptrend, as we can see here. Given some periods of ups and downs and swings, it has remained in the trend, and keeping its faith to this 50-month moving average over time in blue. Don't get caught up on some of the, what do I say, more advanced tools that I'm using, such as this cross here which are basically volatility stops in terms of me identifying a trend over time given volatility adjusted levels. That's more advanced, but try not to be confused with that a little bit. It's the simple stuff that I'm talking about, or the things that we've covered in previous lessons, such as a long-term trend holding at 50-month moving average. This bull flag of consolidation, remember when a trend tends to stall out a bit, you take a breather and you're adjusting right near this trend support level, and that gives you the signal to maybe go along as momentum is picking up, and we're in this oversold condition. Every bar represents a month, so this is a long-term trend chart. However, when we break it down and when we go into maybe, let's say, a weekly chart, we can see that break down a little bit more frustrating as I was saying earlier, breaking down within this channel here. But then this strong breakout, which was very good, that gave me the signal to maybe go along and think about a measured move to the upside. My measured move here, if we switch back to the monthly chart, you can see it a bit more clearly. I had entered at around 56.24, somewhere around here, taking advantage of this breakout. I thought this would continue higher. However, we did have some red zone in terms of the price declining when Nike missed earnings last earning season, and it did come back a little bit down. However, it's been remaining above this long-term support line, which is very good, that's keeping me in this frustrated trade. But I do have a price target up to 68, and that's measured from the base of this flag pole that led to this decline here, this consolidation. I'm expecting the breakout to be measured the same distance from here to here, to here to here, and that'll give us the next wave of impulse. My stop is if this comes back down. Again, it might be captured by this moving average, but I feel comfortable getting out if this declines below 53 or so. Momentum picking up strong trend overall. This potential breakout, we got to get above this zone here for me to be a bit more comfortable. But that's definitely how I define my targets, by looking at trend confirmation, looking at the extent of a prior move. If we look at gold here on the monthly chart, I've got a long-term measurement using wave counts, which is a blip more advanced. It's actually really simple. If we look at wave 1, wave 2, the first correction, wave 3, which is the longest impulse wave away for correction within an uptrend, and then a wave 5 is a final impulse wave of the final uptrend. That's my measurement on gold. It has a similar stalling out congestion, bullish flag along this long-term support line. If we measure the distance from here to here, to here to here, that gives us five, the level of the bullish breakout. Momentum is receding a bit, so we've definitely got to get above here, above maybe 1,300 of silver and gold for me to confidently measure an upside target above 1,400, which would be really, really good. I know it's a stretch in terms of projection, but if the price action proves, then we've got to go with it. Let's see another example for the sake of time, and I'll keep it really simple. ACWV, which is iShares Minimum Volatility Global ETF. This does follow risk markets or equity markets in general. However, it's a basket of low-vol security. So it gives me a little bit more comfort, especially if I'm trading a portfolio, which we all aspire to do. This course is made for that. Adding a low-volatility hedge is definitely prudent when volatility is very, very low, which it has been for the past maybe month or so. But equity markets tend to grind higher. Just as a safeguard, ACWV was a very good portfolio addition. I entered around 75.37, the confirmational price breaking above the 200-day moving average. At 50-day moving average over the 200-day moving average gave me confirmation that this trend will continue to kick higher. We did have some stalling out, but we remain in an uptrend, and my profit target was around 78. Again, pivot points gave me the signal that here, it will be entering some resistance point, so that gave me room to maybe lighten up on the position. I got out totally. I didn't have enough faith, I guess. That's always been a practice point for me, sticking with the trend when I get those confirmation signals that hasn't proved otherwise. You see here momentum 1 starting to fade, we were coming off in overbook condition. The trend has definitely slew to the upside, and we're getting some exhaustion signals here. Maybe it was prudent in hindsight up getting out. We can't always time these things perfectly. But the point is, we got entered in this position midway through the uptrend. We got some trend confirmation. It reached our target. That's an acceptable target point, acceptable profit taking point with our risk management system in place for the stock below the 200-day moving average. That's a good way of how I structure a trade. I've got an entry point, the target up above, and the stock that's fairly close, but also sticking with the trend making sure that we are trading with momentum and with the overall trend direction. This video, I know was a bit long, but it's important that I get these methods out there. Definitely take this on practice mode as you go along your projects. If you have any questions in terms of setting up your chart, please do feel free to reach out. I'm here to help you. I will make sure that you've got a similar platform in terms of trading, and we can work together to coach you along the way. The next session is a bit more quantitative, so we're looking at structuring a trade quantitatively to figure out the risk reward profile so that you can be more disciplined and comfortable with taking a loss, and also comfortable with taking profit. Two very different things, but they require a disciplined mindset. Look forward to seeing you there. 9. Calculate trades: Hey guys and welcome back to the next edition of learning to trade using charts. As we get more strategic, more tactical in terms of understanding the visual representation of a chart of the market, and looking at being tactical and putting up your own trades and your own trade set-ups and really building that conviction, not only visually but quantitatively, when you're thinking about structuring your trade from start. Last lesson, we learned about how to identify price targets on the chart. We've already identified how to enter a position looking at trend indicators such as moving averages, momentum, the MACD indicator, the relative strength indicator, all of those things combined give us confirmation on the chart and the ability to confidently take a position and ride it through until we get confirmation otherwise, that that trend has broken, we've reached our limit in terms of our profit target, or we got stopped out by taking an acceptable loss, which is okay. Now we're looking at how to quantitatively score these positions, gives us the ability to practice discipline. I always say you are the judge of the market. You are the judge of that conviction that you built until you are proven otherwise. We're looking for justice in terms of price confirmation, let the price be the fact teller in this case. Being the judge, you have to make sure that, like a lawyer, any case that you get has to be profitable or has the ability to win in order for you to take it. You're not going to take everything that comes to your plate so a good score or a good metric to use is to filter out all these trade ideas that we get and it's to build a risk reward profile. We went through potential reward or the profit of that trade to be greater than the risks that we're putting on, and that risk is determined by the stop point that tells us when to get out of a trade because it's going in the adverse direction and it's giving us a signal otherwise that's contrary to our original conviction that we use to build that trade entry. An example here is looking at gold. It's actually really simple to quantitatively score these things. The good thing is that trading view offers a good risk reward calculator that you can visually place on a chart to determine the score in terms of risk versus reward. I'm going to move this screen over a little bit so I can get the tools here in the corner. Left-hand corner gives you, again a suite of tools that you can use to annotate on the chart. A cool one is the long or short position. This one gives you something that you can edit in terms of an entry price, your stock price, your profit targets so fourth. We're going to look at here signal that I got early 2017. Unfortunately, to my own regret, I did not take this trade. I was going through some frustrating problems in terms of getting setup with my broker and all this stuff. There's really no excuse, but I feel very bad that I didn't take this to my own judgment. We got a nice exhaustion signal from the downside here, momentum was building right at the start of 2017, we were coming awesome, oversold levels in the RSI, gold was at a long-term trend line and if we can scale out, I don't know if we can go that far, but basically you can see here this trend lines support. We're coming out of this bullish flag and let's say we wanted to go long right around here, and this is our entry point. We can edit this. Let's just say, we are waiting for confirmation actually so let's put the 13, that's too high. See the nine exponential moving average. It's also a bit high but let's just say we want confirmation to get above this point here and I've identified these. We're going to talk about this in a later at more advanced class, the Fibonacci levels of support and resistance, but maybe we can add a DeMark, no. Let's leave the Fibonacci. This gives us an accurate zone of confirmation in terms of we want the price to move above here to give us actual confirmation that this signal is actually factual and we are shifting trend from the downward move to an upward move. Let's put this right around 1,150 or so, 1,150, you're going to click on coordinates, your entry price. Let's just say 1,145, just for good merits and we're going to put our stop point, our profit level, scatter that 1202, but let's say our profit point is to this 40 week moving average. Now this 40 week moving average would have given us, it has changed over time because it's sloping upward a bit, because it trend has indeed followed through to the upside, but let's just say the 40 week moving average is right around 1,230 at the time of entry. That's when we want to take profit. From here let's move it up a little bit more. I would assume that maybe, let's just say it's around the 40 week moving average currently, 1,169. All right. Somewhere around there and we want our stop to be right around here. You don't want price to dip below this dodgy type of stall out candle. Risk-reward, really good, 327. That means that there's a three-to-one risk to reward, or reward to risk actually giving you the profit potential of three times as much with the stop-loss down here. You can actually see that there's more green than red, meaning that our trade is profitable and it gives you a little bit more comfort with taking that necessary risks to obtain that profit. We're around five minutes now, and I promise that these videos will be five minutes each but just for the sake of it, let's say we are on the long-term position in terms of gold and we are looking at this from a long-term perspective. Let's say we've got that entry point right around there. You take a long position. Let's just say we got in 1,150 because this is long term, we're going to be a bit more conservative so 1,150 entry point. It's going to give us right around there. Our stop point is going to be, let's just say somewhere around here so you don't want price to dip too much below and then our profit target is going to be at the bullish measurement of five. Remember you're taking the distance from here to here to the breakout point from here to here. Normally you would actually enter at this breakup point that would give you conformation and you don't want the price to dip back below. In this case, I would put a volatility stop. It's not showing too much, but let's just say the stop point would be right around the 40 month moving average. This is a good, again, risk reward ratio of about four or three eight in terms of profit to the risk that were taken to enter this trade, that's a good candidate for going along. Given that confirmation, we can also look at Nike, which is my current position and I know we are going over seven minutes and I promised five minutes, but these are important topics and we will do a higher level course that we'll go over some of this and then some, because I want to talk a bit more. I get too excited sometimes given the time constraints. Where I'm I going? You go on the right long position and we're going to entry, oh great, I wrote down all my numbers, so that's good. So you can actually see this live in terms of my current position, 5,624 entry price and my stop was 53, stop level 53, and then my profit target is around 68. Let's judge myself. I'm at a 363, right around three five, three-ish risk reward. That's really good. You want it generally to be two and above. Two-to-one risk reward. That's really good. This gave me the confidence that with the acceptable risk amount fairly narrow but my potential reward is great, three-to-one, that's an excellent trade to be in. It's okay to be wrong. That means that you've got an acceptable loss. It's a calculated loss and you're proven wrong. Sometimes you don't win every case, but when you do win this case, given the potential loss that you're able to stomach through those ups and downs, you do have this reward in mind and you've got to be sticking with the trend. Again on a weekly time period, I am sticking with the trend. Right now my base is above my stop at about 54. It has adjusted upwards because it's based on volatility and there was a lot of volatility around this period of time when Nike missed earnings and that was this dip, but then price rejected going below this and accelerated upwards, which is really bullish to me and now it's holding this trend line where Bubba volatility stop, momentum has receded and we are coming up off over bought levels. Some concern, but all it would take is, maybe a little bit of price stalling out for this momentum to then dip and come right back up. I am looking at this from a longer-term perspective. My risk score profile is still pretty good. Trend indicators are not telling me otherwise yet. However, this might change in the course of this video but take the advanced courses, bear with me, and you can actually walk through this trade with me, whether or not I'm going to get out or see this through to 68. We shall see. We're seeing this all come together which is great. Sometimes I get too excited and this video goes over time but I hope you share the same passion with me. This has been a great journey, being one of my first course on Skillshare and I'm definitely happy to extend a lot more information to you. Sign up for my newsletter, which is at dantesoutlook.com. We do have one more lesson that's available, I'm sorry, on macro and that's a bit more laid back. I get to talk about some of the things that are going on and on the world and how it affects our trading from a portfolio perspective and looking forward to seeing you there. This is coming to a close and I'm really sad to see it go, but this will be recorded so you can move along with it at your own pace. Definitely reach out to me if you have any questions and looking forward to our little fireside chat on macro in the next lesson. So see you there. Bye. 10. Macro: Hello and welcome to the final installment of learning to trade using charts. This final video is a blessing for me because this has been my passion, and it's great to share it with all of you. We've gone through a lot of quick lessons and I know I haven't really taken the time to explain everything in depth, but there will be another class and that'll be the level 2. A little bit more advanced but focused in on some of the topics that we schemed over a bit. I Know there might be a lot of questions you can always reach out to me at dantesoutlook.com. Subscribe to the newsletter we will receive weekly insights in terms of what's going on in the markets and trading setups. It's a good way to be interactive as a community, and learn as we grow and learn about macro in terms of driving our technical process and visualizing the market in a chart. It's really fun. It's exciting, and there's a lot of current events that are going on, which makes the best way to learn. I always believe, as I said in my trailer, that profit and loss responsibility is the best way to understand financial markets. Theory and all that aside. It's really digging into the price action and taking control of risk in a disciplined manner. That's where you develop your system and that system can be discretionary. It's really based on sound price auction. It's classic charting tools that had been used for many years. It's adaptive meaning that we are changing with the market, but we are also having our anticipatory tactical mindset in terms of thinking about direction in a macro sense. I think all of that combined makes us stronger traders and it makes a sharper decision makers, which will enable us to be profitable portfolio managers in a self-directed way. I really believe in the power of investing and the power of structuring your own portfolio based on your skill set and your understanding and your a critical judgment of the market. With that said, let's close it up with the macro discussion. Learning about how the world works and how it impacts our investing on a daily basis. I like to start with using the business cycle. I have background in this from a portfolio management and a macro perspective and I really believe that the business cycle is grounded in fundamental drivers that determine how the macroeconomy works on a global scale. It's not always perfect. There are tweaks in terms of the business cycle when we have complex monetary policy and also various dynamics underlying in terms of the business cycle, when we look at the financial cycle, which leads the business cycle. Then we also looked at the commodity cycle, which is a different beast of its own. All of these things combined create different phases and different speeds in the cycle and generally moves in the same direction. But there are tactical opportunities when you get these divergences in terms of monetary or fiscal impetus that changes the course and changes the way that the world works on a different speed. It's a little bit more complex, but we'll get into it as we explain the basics of it. I like to start here with the recession. We all know the pain of 2008, and what occurred there, was a global financial crisis led by banks over lending to risky groups. That created this downward spiral in terms of prices decelerating to accommodate for demand and that was getting scarce. In this period, what happens to the financial markets is that people tend to seek safety and they seek safety in bonds. Bonds give you this faith in terms of receiving a payment plan at a particular coupon rate over a given period of time. It's a generally safe, passive investment, unlike stocks which are generally very risky in a recessionary environment, think about profits being thin. Think about demand being scarce, and how businesses will have to adjust to this changing market. Commodities tend to be weak as well because demand is weak, meaning that prices tend to decelerate instead of accelerate to accommodate for this scarce demand. Commodities, stocks, not really good, bonds, safe haven investment, the passive flow of dividends, quality companies. That's what happens in a recessionary environment. You generally want to take safety. You wait until we ensure this late contraction period, this acceleration in terms of demand being so weak that supply has limited itself to accommodate for this weak demand. When demand tends to take a higher maybe peoples tend to find jobs, it reaches a point where price gets so cheap that it's demand is able to absorb that and re-accelerate giving life to this new cycle. That's when you get prices increasing a little bit. We're in this late contraction instead of early contraction period. Were exiting the recession. Things are looking a little bit more promising. Usually during this phase, central banks tend to fight recession by lowering interest rates and creating a more accommodative environment for people then to borrow and spend. When people are borrowing and spending, what happens is that stocks get that early cycle impetus to the upside. There is a lot of hope in terms of things getting better from such a very low base coming out of recession, or mindsets are still very fresh in terms of the weak period, but also optimistic in terms of the potential for uplift in a cycle. Commodities tend to be a little bit weaker here. Bonds stronger because we're still in this weak environment and there's still a lot of false hope. But stocks tend to do really well because of the profit potential and the earnings potential relative to where we're coming from before. This is a very important time to get invested and think about the profit potential for the longer haul. Then we enter early expansion phase where monetary cycles still very accommodative and we're still feeling this new sense of optimism in terms of borrowing, lending, picking up, spending, picking up, consumer confidence and advancing. This is really the prime spot when bonds tend to get weaker because people are more or less worried about passive investing and slow growth dividends and more towards the earnings potential of stocks. Companies doing well. Commodities tend to pick up a bit because prices are increasing. Then we enter the mid stage, mid cycle expansion when bonds tend to strengthen a little bit, because we're getting long in the cycle, stocks tend to give you moderate returns, commodities tend to fees out a little bit because there's potential for prices to then decrease to accommodate for slowing demand and a late expansion. This is where we are now. We're in this mix between the mid cycle and a late cycle, when the Central bank in this case, would then be raising rates to fight the potential of inflation, or prices get accelerated too much that might slow demand and push us more towards the recession. Central banks are fighting the pace of this cycle ending around this point in time. That tends to be weaker for stocks, a little bit stronger for commodities because prices are tending to get aggressive to the upside. However, prices are getting aggressive, but monetary policy is raising inflation. Rising interest rates which are fighting inflation, so that tends to weaken commodities a little bit towards the end of the cycle phase, not the lead part, but the end part when we are entering a recession at the get-go. That's how I think about the business cycle. Another way of putting it too is looking at implied risk premium. This is the excess rate of return that investors are demanding on the market to accommodate for certain level of risk and equities. Usually when the equity risk premium is as low this is like looking at the volatility index with the VIX in terms of volatility being fairly low. This is complacing environment or this convergence type of trading environment where things are looking okay, but very vulnerable to a divergent risk of high volatility event. That's what we get when we get prolonged periods of low implied risk premia, that triggers a 2008 type of crisis, that triggers a 2011 type of correction that we saw. That also triggers the early around 2015 flash crash short of that we got on August, and that was on the market corrected significantly. Awareness slow, low volatility, low pricing and of risk environment. This could be a good judge of complacency as our cycle has gotten mixed up a bit. We've got Central banks lowering rates to extended low levels, nearly zero. We've got a commodity super cycle that occurred prior to 2013 when China was driving most of the growth there and excess supply in the market to accommodate for this, what we thought was sustainable growth to the upside, that end up not being sustainable and the commodity cycle burst in terms of supply having to come down a bit. In terms of supply having to come down a bit to accommodate for slowing demand instead of rising demand as we hoped. That has given us deflation dynamic that occur very quickly and really didn't have enough time for monetary policy to adjust to a slower growth inflation environment. This cycle has been very weak and very long. It has been difficult to judge whether or not asset classes will perform as they've done in the past, given this opaque cycle that we're in. That has driven some complacency in terms of monetary policy being accommodative nearly zero for so long, rates being so low. However, there hasn't been a real pickup in terms of demand for spending. The consumer-driven growth because banks, they've been lending, but there hasn't been that translation from lending to spending in terms of capital expenditures of businesses, really looking at utilizing cash to stimulate the real economy, rather than this artificial low rate environment that has driven wealth creation, rather than job creation or sustainable job creation. That gets into a whole another macro argument in terms of policy, the fiscal versus the monetary. This has been a really sluggish environment for growth, and the expectation is that that will pick up. However, given the way we are in cycle entering late cycle soon, there's going to be some real show-and-tell in terms of where you're going to hide because the potential for markets to grow at this such high valuation rate, it's very slim. Time will tell what will come out of it. But in terms of seeking safety, I think gold might be the best bet. Long-duration bonds. Again, seeking that safety in bonds might have been overdone, but who knows? Bonds are more concerned about growth and inflation. If those two things are weak, that makes that a very good investment. However, if we can inflation that is back failed where we haven't seen that in a while. We might see that coming through and a rising rate environment that makes bonds a little bit less attractive, and maybe gold more attractive because gold is more concerned with this growth scare and also inflation picking up. That's a whole another higher lesson. In a general sense, I hope you understand a little bit how the business cycle works and how policy directs these changes, and how that affects our portfolio from an investment perspective. With that said, there's a lot more to delve into. There's a very interesting topic, macro and technical, and it's great to merge those two things and sharpen our trading skills. I would hope to see you in the next edition of this learning to trade using charts, Class 2, and I hope you enjoy these very short lessons. I know some of them are longer than five minutes because there's a lot to get to. But I hope I was clear enough in explaining these concepts, and as always, please reach out with questions, concerns, comments, and let's continue the discussion. I'm looking forward to having the conversation with you as a community. Thanks a lot and take care and happy trading.