Candlestick Reversal Trading with backtest results included

1. 0preview: let me show you some Candlestick charts. What do you see here? The omit money, right? New York's really easy to make money. Buy here. Sell their and you'll be rich in no time. Most causes out there will teach you technical analysis with benefit off hindsight talk about Southern trading strategy. Then they show you some cherry picked charts. Examples off the strategy. Success. I'm sure you're being drawing, but then they feel toe answer The most important questions and these questions are that's the strategy work. How risky is this trading method? What is the wind rate? Are you able to sleep well at night? This cause will be very different. Yes, as you respect, I'm gonna teach you can mystic reversal patterns and the our respective trading setups. But then after that, I will conduct a back tests. So you know exactly how well or how badly the method forms. This speck test will answer all those important questions which I mentioned earlier on this costs shall be conducted by experienced instructor with proven track record. Unlike other causes out there where you just here in shock and the sea and you only see boring text in the Power Point presentation. This cost shall include animations, images, shots and diagrams to help you understand the various concepts. And I guarantee your understanding. I promise I will not be teaching generic on actionable ideas like you must buy your high. Also, this is not the more division cast where pitched you. You must work hard to succeed or you must have is a pinto profit from the market in this cause, I will teach you exact, fashionable methods and framework that you can immediately apply to your investments. So what are you waiting for? It is time to take action. Go head to kick in and row bottle and I'll see you at our calls. 2. 0First Things skillshare: before we start off the course that me quickly go through some technical tips, I tend to speak police. Cody, if you think that I'm speaking too fast or I'm speaking to so early, you can always change the speed by cooking on the speed option and selecting a different speed to enjoy the full benefits off. This costs peace. Do not skip any actress. 3. S01 Introduction 01 Introduction and lesson plan: introduction and yes, unplanned. Before we begin, we need to go through some disclaimer Knowledge pursue is not arrested or credit that financial adviser or nor the shed here is purely for educational purposes only Investments and trading involves risk. Past performance is no guarantee on future performance. Peace concert. Your license. Financial advisor Before starting on any investments that involves risk now that we got it after way Yeah, that's begin. Hi. Oh, thank you for persons persisting this cause What is this costs about? And why in this cause in this cause I'll be teaching Candlestick reversal patterns And they are as follow Doje Star, Graystone, Doje, Dragon Fly Doje Hammer or hanging men inverted hammer and golfing How are me, kicker? Piercing the ein star formations? You let me show you some candlestick charts. What do you see here? The only money, right? You buy here and you sell here. Buy here. Sell here by here Celje Whoa! You It's really easy to make money by here and sell their and you'll be rich in no time. Most causes out there would teach you technical analysis With the benefit of hindsight, they would talk about certain trading strategy. Then the show you some cherry pick charts, example off the stretches. Success. I'm sure you're have been through that. But then the often feel to answer some of the most important question The question is not see strategy, even work at all. How risky is the trading method? What is the win rate off the trading system? And also they feel to answer her whether you are able to sleep well at night or not. It's so much lacking in the cost us out there. So that's why I created this Costs this costs will be very much different. Yes, as I promise. And as you respect, I'm gonna teach you can mystic reversal patterns and the our respective trading set up. Then, after that is where I'm gonna add a lot of value to you. I'm going to conduct a back tests so you know exactly how well or how badly the method performs this back tests who answer those important questions which I mentioned early on. This is how ah, back tests results. Typically, you look like if you are new and you have no idea how to interpret thes back test results. Don't worry, I will cover that. I created this cause. Forced to students off all level, Some students may be unfamiliar with back testings and basic off trade ing's. Therefore, I included back testing an introduction. Ah, and trading basic section toe help, beginnings Begin the students, if you're on for media, were back testing and your new trading peace jumped. Oh, those section first, these sections at the greater part off the cause under back testing basics and trading basics section It's not if you are already an experience trader and you know how to interpret back testing results. B is continued a cause using the default sequence. So what are my credentials? Why am I qualified to teach most instructors out there? We're usually showcase how many students they thought, or how many videos they created or how many you do presence they have. How many YouTube subscribers they have. Okay, the question is, do they walk the park house? The investment track record like most all time, you will not see them publishing any off their track record at all. Maybe they have a track record for teaching, and they have many students bodies, successful investors themselves. Did he achieve their success to investing or teaching. If they are not successful investor themselves, you might be yelling nonsense from ourselves. Men for me, I have achieved 20% time. Waiter returned from only investment using the knowledge. Shakya, I've been here seven years or experience in business, investment and trading, and I'm also MBA educator. Along the way, I will share my first hand experience beyond what you yearn in the textbook. I'm going to condense all my knowledge into my cause. So you do not have to figure things out yourself. I meet the mystics in the past and open e share view what works and what doesn't. And believe me, the holes are really, really expensive mystics and the end of day. The most important thing is that you take away actionable knowledge and have lots of fun. Just got the folks in this picture over here 4. S02 Dojistar Patterns 01 Doji Star: Doje Star Introduction Doje STAIs form when the opening price and the closing price ah equal it can occur if the open and close are almost the same level, so they need not be as Acri equal for lying represents the day range. The longer the vertical line, the wider the day range. Horse on the lying represents the open and coasts visually, don't you start? Candlestick looks like a cross. Oh gee, Star formation is a neutral pattern. It represents indecisiveness off the market. The cargo off the Kendall has no rials and it comes important on this. Formation is not really that important. Neither the buyers or the sellers have control over the price. There is equal match between supply and demand, and this quote possibilities signify an upcoming trend. We've also one single Dorji star in the kids in decision and a group off them, like so in a string, or indicate even more indecision from the market. As a general rule, the market tends to move in the same direction in which the market opens. The next day, Doje star set up discussions according Toe the Candlestick Turi. If after dodgy star or Siri's off dodgy star and the price opens higher than the previous day close. There is a high probability that the price will start going up. Stogie star set up to according toe Can security If, after a dodgy star or a Siri's off those esta the price opens lower than the purest a coasts, there is high probability that the price was start going down. According Toa Candlestick Terry. If a dodgy star appears at the bottom off a downtrend and the next day price opens above the previous day, Coz like so over here, this is bullish confirmation. That reversal has happened, and it is a good opportunity toe by over here, another set up. According to the Candlestick Curie, if a dodgy star appears at the top off an uptrend like so over here and the next day the price opens. Be old a previous day close. This is bearish confirmation. That reversal has occurred and is a good opportunity to sell our shot over here. 5. S02 Dojistar Patterns 02 Doji Star Backtest: Doje star testing results. So this is a set up that we're going to use. We're gonna buy on the day after the Knicks open Price. Let's say we have a doggie star here, and the next day it is a bullish confirmation over here. Like so we were gonna buy on the next day. We have a perfect target off 10%. Meaning if the price goes up by tempers and we were cell for profit and stop loss off 5% that will make a 2 to 1 risk reward ratio. So it looks you look something like this. This one example whereby we have a dog east are here. And the next day, confirmation and we buy on open. Once you have a 10% gain, we sell for profit. Let's have a look at the treating results. Okay, so I programmed this in tow, the Emmy broke back tester. And here's the trading result. Uh, and your return is very, very ho has and 1% not very good here. The winning percentage is 41%. The users are 58% makes consecutive loss. You get 22 off them. So, um I mean, when I The moment I see these, I don't like it any more. I look at this 0.7% return. I'm not interested anymore. But anyway, that's half a yoke. Okay, So look at how well or how badly this system perform in the past is on flat and it goes up and down. This is stuff. It's big new on the roller coaster, right? And the mix drawdown is okay. Fine is minus 18%. Not as bad as I thought, but it really is bringing you for right This this system is pretty used to us. Ah, OK, so you get a profit distribution and suspect that we are cutting those at 5% and doing a profit taking a 10%. That's why these two spikes over here so that that's a profit distribution. That's just have a look at the Monte Carlo. The best you can have is actually 1.35 The worse is a slight loss. So this is not a very good system to use. Okay, So we're going to use as extreme set up when the dodgy size form the next day. A bullish confirmation tells us to buy and we will buy. But in this case, we will have a profit target off 40% much higher profit target and stop loss off 20%. So we are allowing this training system. More movement for volatility ups and down. So this is how you look like? Yes, after you get the trading results. So he had a trading results. The annual return is about 3%. Not very good over here. Ah, we know this is 46% users is 50 tree um, Mex consecutive loss. About too many tree. Let's get the charts. Okay, this is much better over here. It goes up in a state of state, but and goes to the pick during 2007. But during the 2008 financial crisis, it crashed down very badly. And after that, it nicey recovered. Like so, the maximum Jordao is about 40 43%. Quite a lot of drawdown during the financial crisis in 2000. It over here so we can see that the profit distribution since we are cutting girls at 20%. Most off the losses occur about 20%. Most of the profits around 40%. Let's have a look at Monte Carlo The best. The best return is 1.6 there Waas was return is 1.6. The best return is trip on five. Okay, this is nice. This is positive, but ah, the results are not as good as we hoped because the returns are very Nitto on day. It's only like invitation. I think a lot of your cost goes to the brokerage. You get a transaction cost you for you are you are just paying a lot for your brokers. Your bogus will be rich if you treat this system. So this is not as good as its hope at this. The chart shows that is training up. What's in the nice? Ah, street lying. So that's that's fine, but it's not a very good system. Okay, We're gonna do the same thing by after the doggy style is form here. And on the next day, we look for the bullish confirmation and then we buy on open over here. Now we're gonna have a trailing stop off 20%. So in a way, it's a stop loss of 20%. And when the price moves out, the stop loss of moves out with it and allows it will drop by 20%. So it would look something like this. Don't you start here, but is confirmation you buy. And over here you have your trading stop. So this is more for transforming system. Let's see how it performs. So these treat results for the training stop system for the dodgy star with 20% trading. Stop Brocato. Any return looks nicer now, is that somewhere around 4%? Um, still not as good as the index, but it is much improved. Um, the weariness 42% and the users are 57% Makes consecutive process 19 over here. Yes, every look at a chart. The chart looks much better now it goes up smooth. T asset again for 2008 crashed down and ah, drawdown for these crashes. 35%. Not so bad, I I think that's much better. And after that, it goes up. So it doesn't really work well during the financial crisis. Over here the profit distribution is like this and a lot off. Small little losses. 15 to 20% regions. And this Ah, Young till off of weakness. Yes. Okay. The Monday cargo. So the best you're get is for 4.3%. There was, You will get is 1.6%. So on average, you boy, get our own tree 0.1% and every straw down. It's about maybe 8.16%. Okay, this system is much better than the previous ones. But still, I don't really like the returns over here, so it's not gonna be worth my time. We're still going to dodgy star. And after stogie star, we have a doggy style here. And if the next day is bearish kendo confirming a downtrend, we will shot in. We were shot with profit target off 10%. We have a stop loss off 5%. Well, this is how you excite dodgy star confirmation shot. And after making our 10% profit target, we we buy back for for the Costa Trait. Yes. Have a look at this Shopping buildings time at that. Okay. For your gets to find us, it percent 7.5% over here. The winners are 31% only, and users are 68% the Mex consecutive the process 29. Okay. We could use quite a lot if you use this method. Yes. Look at the charts. Oh, this is a very house. Each other. It goes all the way down. This is a secret of losing. Money is very bad. Remember, my commissions are pretty high. I'm putting at 0.25%. And the Meckstroth now is Ah, minus 50%. Don't youth dis met it. Don't Don't Shot of this matter is really gun has all stick against you. Monte Carlo also confirms that you are going to use money most of the time. 50% of the time, you're gonna make a return off minus, um minus tree person. And I'm drawdown is going to be, Ah, about 50 56%. So don't don't don't use this method is really bad, Okay? So now we had Don't you son set up to dash to, which means we're gonna have a some We're gonna have ah, dodgy star here. And the next day, once we see the bullish Kendall, we're going to sell shot over here. Now we're gonna have ah, even bigger profit target. The periods perfect target was quite, you know, we're going to make this perfect target 40% and we're gonna have our stop yours at 20%. So treat were to puke ideas. Don t start here. Confirmation can, though. Shot ends we buy back after we hit our profit target. So let's have a look at how well the trading results are. All right, So this is the trading results for the doggy. Okay, at first we receive annual return is minus 4%. So this is a using trading system Here you are goingto use most of the time to be 2% and you're goingto you're going toe. Ah, have ah have a huge ah, as I have a huge using rate, most of a kind, And you gonna service more winning rate, the maximum consecutive. You also say said 40 tree. Okay, this is a really, really lousy met that don't using. And the charts is showing you that you're going to have a very all the method over here, so don't use this method. Oh, if anything, you might like to have the opposite off this method, and you're gonna have ah, very bad drawdown off minus 73%. This is your profit distribution chart. And that's the what Monte Carlo. Say so. Monday. Two houses. Your use money almost all the time. On average, you have annual return off minus 4%. And you ever makes drawdown off 67%. So this is a bad method. Don't use it. All right? The previous method waas pretty bad. So what I done is I reversed. The people's met it instead of shouting after this next day, Confirmation I buy after the next day. Confirmation profit target 40% Stopped. Lost 20%. This is how a chart looks like. Now, don't you start here. Confirmation can, uh bye bye. Bye bye. Bye bye. Bye bye. And you, you shot after you get your 40% profit target. Let's see the trading results. So here's a trading results and your return. 1.7%. You you get ah, winning percentage 43%. Much better than periods. One. Users that 56% makes consecutive losses at 43. Okay, this is at these. This is positive. That's okay. The charts. Okay. At this this is uptrend, but there is a total spike over here. Up and down. You're gonna get ah, drawdown off minus 45%. during the financial crises. But then after that, you recover. And here's a profit distribution. As expected, my stop loss is 20%. That's why I'm getting a lot off a lot off us. Selling over here and my profit is for my profit target is for 40%. That's why you get a spike over here. The 40% you moment settings, my settings on 0.5% commission. So it's pretty high. A lot of money we're going to commission. Monte Carlo says that on the average you'll get any return of 1.35% with ah mix drawdown on average off 10%. Okay, not so back on. The drawdown by the any return is a pretty bad, so we don't really like that. 6. S02 Dojistar Patterns 03 Gravestone Doji: Graystone Dull Gee, introduction. Wriston Dorji is the doggy style information with long upper shadow. It is form when opening price and closing prices are equal. It can also occur if the open and close are almost the same you ever, so they need not be exactly equal. The vertical line represents the highest specific price off that specific time frame. Perfect. Graystone Doje does not have any your shadow. However, If the lower shadow is small, it can still be considered a Graystone told Gee formacion. The longer the vertical line, the stronger potential for reversal. The color off the Kendall has no real significance on the formation. The gravestone Doje indicates that the bulls or the bias have moved in with some shrink, and they taken the price up. But by the end of the day, the best or the sellers have taken the price back to where it waas on the opening the boys version off the gray stove. Graystone Doje appears at the bottom off a downtrend, and the bearish version off the Graystone Doje appears at the top off uptrend. As a general rule, the market tends to move in the same direction, which the market opens the next day. Graystone Doje set up discussions. If the Graystone Doje appears at the bottom off, a trend be prepared to buy but do not buy yet. If the next day price opens above the previous they close, it is Buddhist confirmation. That reversal has happened and it's time to buy. So we need to make weight for this next day. A bullish confirmation. If the Graystone Doje appears at the top of a trend, be prepared to sell but do not sell yet. We need to wait for the British. The bearish. Sorry, the bearish confirmation. If the next day price opens below the previous day goes like so this is perish confirmation . That reversal has a cut, and it is time toe cell. 7. S02 Dojistar Patterns 04 Gravestone Doji Backtest: Graystone Dodgy testing results. So we're gonna have this set up over here. Set up 1-1 and we see a day stone toe. Graystone dodgy over here. There's a bullish confirmation the next day. This shows that the trend is reversing and it's time to buy. We'll buy on the day, uh, on the opening price off this day. Over here, we have a profit target off 10%. Stop loss off 5%. And this how you looks like Kristen doggy booties. Confirmation by and price goes up, we hit the profit target and we sell. Let's see the trading results. So this is the trading results we have. Ah, Henny. Return of 1% read. Very pathetic. And, um, we have a winning written off 43%. The largest makes consecutive losses topping. Not very good so far. That's gotta chop. Okay, the chart looks nice. It is up. What Sloping off course there some years where they are drawdowns. But in general, res up. What? Soaping. So that's really nice. The next draw down, you can get its Ah, 6%. 7%. Maybe so. Not too bad. Mex drawdown is quite held. D And here are the results of, as expected, we are having, Ah, 10% stop loss and a 20% ah profit target. So this is this distribution cuff over here. That's okay. Monte Carlo and Monte Carlo say's that you're you're going together. Average off 1% return, which is very bad. Your every drawdown will be around tree 3.4%. So the at least the drawdown is very goal for this family that's going toe. Another Graystone dodgy set up as extremists a previ ous. You have your grace on dodgy here. Next day, Buddhist confirmation is time to buy. You buy it. Opening price profit target is 30% and I will stop. Loss is 10%. So treat one. We walked to Reese racial here. That's what get Howard got shot. Will say Grayson doggy booties confirmation by and sell over here for profit. So this is how it's typical. Set up a site. Let's look at the trading results. So here's a treat to one ratio off the Graystone Doje and all nice is not so bad. The the any return is 6% which is Ah, quite nice. But of course it feels to be the index, but still it's one of the nice says I have so far the winning percentage. 52%. Very nice Mex Eamon Ah, consecutive losses. We have a 30. Not very good yet and that's OK, The charts. The chart is a very nice upward sloping curve, except for this year's over here. I don't know why, but it looks pretty nice and the next drawdown is maybe around 20%. Not so bad. And I suit I bought a profits over here so you can see that Ah, most off your losses is about 10%. You stop loss a 10% take profit 30%. That's why the distribution chance are like this. It's quite nice. So I pretty like this system for its Ah, it's cuff is low drawn out, but it's Ah, any return is still not very good. It still doesn't really beat the index off. 7% still is one of the best I've seen any return 6.36 point 13%. Maximum drawdown at the 50th percentile is about seven seven going 1% Now Here we have the shot that the shot set up over here. So we have a gravestone dodgy forming. Here. We see a next day confirmation, and we shot on the open. The profit target is 30%. Stop loss is 15%. So you look something like this Graystone doggy confirmation shots. And over here, you take profit that seed are treating with. So he had a treating results. And oh, the hen you return is negative. Not good. You have a love users. You have about 80% user, 20%. Weiner's not good. Also makes consecutive users is 25. That is a downtrend. So this is a lousy system. And the draw thou is ah, 42%. So this is a bad system to use. This shotting system is no good and suspect that you get a 15% lawsuits most of time and get 30% profit taking most of the time. So Monte Carlo's days that almost all the time you use money using this system. So this is not a good system. Don't use it. So he other results. The Henny return is slightly negative. The winning rate is very low. Makes consecutive users. Is he ever not so good? So far that is a downtrend. So this this is no good. The drawdown at these it's only 7% but the charges double trends, so it's no good already, and this is a waste of your time. This system will make your broker rich. You're going to get a lot off losses over here a bit a profit. Told the Ways of Time. Mordechai Oh says that you are going together negative return almost all the time and makes drawdown off 14% with average off around 7% or 8%. So the it's really negative, so let's not waste time on this anymore. 8. S02 Dojistar Patterns 05 Dragonfly Doji: Jagan Fry Doje Introduction. So this is a dragon fried orgy. The dragon fight Oh, gee is a gorgeous confirmation with a long, lower shadow. It is form when opening price and closing price Ah equal. It can occur if the open price and the cost price almost the same Nevoso they do not be need to be exactly equal. The vertical line represents the your specific price off that specific time frame. A perfect dragon fly dodgy has no upper shadow. But if the upper shadow it's more, it can still be considered a dragon fly Doje formation longer the vertical line The stronger potential for reversal The color off the Kendall has no real significance on the formation. The Dragon of Ideology indicates that the best or the sellers have moved in with some strength and taken the price down. But by the end of the day, the bulls on the bias have taken a price back to where Iwas on the opening the Buddhist version off the dragon for ideology appears at the bottom off a down train. The bearish version off the trigger of ideology appears at the top off an uptrend. As a general rule the market tends to open in the same direction which the market opens on the next day. Set up discussion drug Dragon fly Doje appears at the bottom off a down train. Be prepared toe by but do not buy yet You have to wait for the next day Price confirmation If on the next day price opens above the previous day Coast like so this is a bullish confirmation That reversal has a cut and it is time toe by. If the dragon fly Doje appears at the top off a trend prepared to sell but do not sell yet . Here's the trick and fried Oh gee, we need to wait for next day Confirmation If on next day the price opens being Yoda pierced a coast This is bearish confirmation. That reversal has occurred and it is time to sell our goal shot 9. S02 Dojistar Patterns 06 Dragonfly Doji Backtest: drinking, fried orgy testing results. So this is a drunken fight, Georgie set up. You have a dragonfly ideology over here, and you have, ah, bullish confirmation on next day. Once you see this, you buy on the following days. Open price with a profit target of 10% and a stop loss off 5%. So this high yolks I shouldn't find Georgie. Confirmation by on the open and profit once it hits the 10% profit target, that's cedar trading results. So here are the trading results off this set up. Okay. Very oh, annual return. Almost near to zero. We notice at 40%. And ah Mex consecutive losses. Like 16. This is not very good already. Yes. Okay. That shot the chart is pretty much all over the place. Up and down, up and down. You don't get much gains. You don't get much. You also see the only thing you do is to make your broker rich. So not very useful. It's not without time spending spending time in effort on this system. IHSAA lost off about 5 to 10% and a profit target about 10 to 15%. Monte Carlo say's that sometimes you mean you also Sometimes sometimes you mean you also. Sometimes you meet again. Your return is almost zero is gonna be a waste of time. So this ihsaa lousy trading system Okay, Another dragon fly doggy set up the PVC. We see a dragon fly doggy next day this Ah, a bullish confirmation. Once we see this bullish confirmation, we buy on the open off the following day with a profit target of 30% and the stop blocks off 15%. This how you looks like drinking Fry Doje Confirmation by right. The trend up and sell at a 15 foot at a 30% profit target. So here are the results. Okay, Not to bet it is positive. You get a positive four point sample send. So by increasing your profit target upto 20% actually, you can have a pretty good results. And you're not really going to spend much on brokerages. It's got. So now you're winning rate is 51%. Your maximum user says that 17. Okay, this looks like a promising system and we get a chart. Oh, nice. This is a nice uptrend over here, but the thing is that you're gonna get pretty fete returns from 2000 and 2 2005 So you're going to be sitting around doing nothing. And the Mex Jordanian spotting percent, It's expected 15% profit. They are sub lost 30% profit target. So this looks pretty promising. And Monte Carlo says that you're gonna make money most of the time. Your next drawdown is Raul 13%. So, yeah, this system looks promising, but of course, it still doesn't beat the index. The index off 7% if you would buy and whole. So it's not really Ah, something that I were use personally, but it's nice. The aquatic of it is really, really comfortable over here. So now we have the shot version off the dragon fried orgy set up. So we have Ah uptrend! Over here we see Ah, Dragon Fried orgy. We have ah Barrish confirmation next day and we go shot on open profit target off 30%. Stop yours off. 15. So this is a shot system over here. Here's how your guy drinking for ideology. So he drinking fight Oji confirmation shot and you write the trend down. And once you hit 30% profit target you. You cash out. Let's see how the trading results fair. So here are the trading results. The first guns. You get negative annual returns, so there's not a good system ready. You're going to use money most of the time going. Took half a large concept. Atif Users over here. What? The six is a big number. The chart is downtrend. So you know how bad the system is. The trod our is very badly. 60%. Ah, as as expected, You gonna get most of loss at the 15% never and your profit at the Taliban 30% because off our profit profit taking and stopped Lost's Monte Carlo says that you're going to use money all the time and you're gonna get very only draw down. So this system is lousy. This shouting systems lousy. That's no use it That's moving again. We have the same shutting set up Dragon Fire Doje over here next day bearish confirmation and we shot. But we are profit. Target is very small. It's only 5% and I'll stop losses 2.5%. Maybe this Wynkoop improve our trading results as compared to the 30 15 numbers were used over here. So here's how it looks like drinking for ideology, confirmation shot and take profit over here. So this is how it looks like. Let us have a look at the trading results. All right, so here's the treating results off. Ask using the shot version of the Dragon for ideology and any return is negative, but it's just Nick Atif in house or is much better The wieners on Italy to prevent the makes contact with different sauces. 16. Let's see the chart downtrend shot. Okay, this is lousy. No doubt about it. Maxim Andrada or 70% as expected. Most of the also side. 5%. Most of the gains. Most of the losses I 2.5% doesn't really show the small little division well, most of the game. But you got so many losses and so few gains. It's pretty much a waste of time trading this system. Monte Carlo says that you can use money off the time, so that's not waste time on this 10. S03 Hammer Patterns 01 Hammer: hammer introduction. The hammer is a dragon fly information with a strategy bigger body. The hammer is formed when opening price in the closing price on you know, the same Llevo The vertical lying represents the lowest trading price. The yank off the lower shadow must be at least twice the size off the body off the candle. So this is the body of the candle, and this is the your shadow. So this is maybe two units off the ANC, and this is only one you need off. This could also be three units of Yang. And this could also be one union thing, but never. Yes, sir. Then 21 no longer does overshadow the stronger the potential. We've also a perfect hammer does not have and up a shadow. If there's a very small upper shadow, information can still be considered a hammer. If the closing price is hired an opening price. The color off the hammer is green. And if the closing price is lower than the opening price, the collar off the hem ice rate a rate hammer is more bearish. A green hammer is more wish the kind off the hammer. It's not as important as the position where the hammer is located. So here is what I want us straight to you. Then the cut off the hammer. It's not. It's important. So if the the British version off the hammer of cures at the bottom off a downtrend so it appears at the bottom of downtrend, it is a Emma. Now, if we have a bearish version off the hammer and this version would be called and ah, hanging man in ST off a hammer So the hanging man will appear at the top off the top off a downtrend of ah object. Sorry, Hammer set up discussions If the hammer appears at the bottom of a train me prepared toe by but do not buy yet. We need to wait for the next day Confirmation If the next day the price opens above the previous day goes. This is Buddhist confirmation. That reversal has occurred and in his time, toe by 11. S03 Hammer Patterns 02 Hammer Backtest: hammer testing results. So he has the Hemmer set up. I quite hemo set up one dish one. And when we see a hammer at the bottom off Donald trend, we we want to buy what we do not buy yet. We wait for the next day. Buddhist canda confirmation. So once you see this, we buy on the next day opening price, and we're gonna have a profit target off 10% and a stop loss off 5%. So here's one has above a successful trading set up. So here's the hanging man. So here's the hammer. We see the hammer, the next a confirmation and we buy on these candles open. Once we hit a 10% profit target, we sell for profit. Yes. Have a look at how the trading results are. All right. So here's the hammers trading result. Okay, so the annual return is positive, but it is razor thin. I think if you treat the system, you you can see that you're broke. A were very rich. You have 100 k off a goatee. 30 k will come with your broker. You have a win Great off 40 40%. And you have ah Mex consecutive losses off the tea tree Quite painful to bay. So the chart is pretty much over the place. Up and down, up and down, down and then up and down. It's very bad here. Draw down 20% and your win rate, maybe 2009 was an exceptional year. So stop blows on 5% profit target off 10% will give you this kind off a profit distribution chart. And Monte Carlo is saying that you're going to use money. Ah, pretty much sometimes. And you gonna win money sometimes. And even if you win money, the returns are razor thin. So I think you're Boco. Be very happy if you treat this house system because you're gonna be paying a lot broker fees. So let's not waste any more time desire, lousy system. Okay, so we are still at the hammer. Step up now is one dish, too. When we have a doll trend, we see the hammer and when we see the next day bullish confirmation candle being formed, we buy on the following days opening price, and we're gonna give more room for it. We go in self 10%. We have a profit target off 30% and we have a stop loss off 15%. So it's exactly the same as the periods Hammer set up. Just that we are giving more room for it to move up and down. So here's example of a successful set up, uh, hem over here. British confirmation by on the next day, open opening price. And once we hit ah, 30% profit target. We sell for profit. Yes, have a look at the treating results. All right, so here's the hammer trading results and, um, the annual return is better, but it's not that high. Also, um da the winning rate is 42%. The maximum losses is ah, 20. All right, so let's have a look at the charts. The chart is not very nice. Is picking you on the rubber. Costa, I So maybe for the beginning years, this system will be working Where? Well, for you. Then, after that, during the financial crisis, you'll be torn apart. You are. You bet you'll be reset back to zero. And after that, once you recover, you, you go higher. So I don't think anyone can treat this count Trading system. It's is going to be very volatile for them. Maximum drawdown, 45%. Very painful as well. And here's the profit distribution we have. Ah, we We have a 15% stop loss. That's why a lot off loss is our loss. Stop losses are 15% and 30% profit target. Yes, have a look at Monte Carlo. So Monte Carlo says that you will most I deeming money. Maybe on rare occasions you use money. But even if you make money at the best case is only 2.6% much yester than a 10 year you'd henyo. You is already giving you 2.6% Reese free. So this system, even though it gives the process a positive return, it's not worth the Reese time and effort. It will make your broker very original. 12. S03 Hammer Patterns 03 Hanging Man: hanging man introduction. The bearish version off the hammer is caught. The hanging man. The hanging man is form when opening price and the closing price on the on the same Llevo. The vertical line represents the lowest trading price. The hanging man has a sex. Same characteristics. Esta hammer the length off the lower shadow must be at least twice the size off the body off the candle. The longer the lower shadow, the stronger the potential. We've also a perfect hanging man doesn't have any up a shadow. If there's a very small upper shadow, the formation can still be considered hanging man. If the closing price is higher than opening price, the color is green. If the closing prizes lowered and opening price, the car is rape. Great hanging man is more bearish. Green Hanging man is more bullish. The cargo off the hammer. It's not as important as the position where the hanging man is located. The cargo off the hammer, it's not his bottom is where the position is located. So the British version off the ham appears at the bottom of a down train, and since it's at the bottom of a downtrend, this is not a hanging man. This is called a hammer instead. So what? He's a hanging man. The bearish version off the ham appears at a pop off and uptrend. In this case, it is called a hangman. Because office position off it. Bringing, being seated at a top, often uptrend hanging men set up discussions. If the hanging man appears on pop off a trend. Prepare to sell. But do not sell yet. We need to wait for the next day. Barish confirmation. So here we have a hangman appearing. Okay, so we are on that. Now we are preparing yourself. So you look at the next day and Oh, okay. The next day it shows that the price open b o the previous day. Coast, This is Barry Barish confirmation that reverse. We've also has a cut. And in his time toe cell 13. S03 Hammer Patterns 04 Hanging Man Backtest: hanging men testing results. Okay, so we have hanging men over here. We see the next day, there is ah, bearish confirmation. After this parish confirmation, candidates form we sell or we shot over here, we have a profit target off 10% and a stop loss off 5%. So it's a 10 5 number that we're using. And here's a sample of the trading results. We have a hanging man over here. Barish confirmation. And on the open, you sell and goes down. And after you have ah, 10% gain, you buy back in. Cover your shops. Let's have a look at the trading results. All right, So here's the results off hanging men that testing any return 2.3%. Not very good, but it is positive. The Weena win ratio is study 6%. Okay, Not very good either. The Mex consecutive losses. 30 tree. Yes, I will get a chest. The chance seems to be quite over the place in looks like it performed very well during the financial crisis. And after that goes up and down the next draw down 16%. Um okay, fine is still okay, But my I wouldn't use it. Um, So just to verify that we have 5% stop loss and the 10% profit target, Monte Carlo says that this is a profitable system. Makes Georgia. I can get it's 10%. And how returnees. About 1.52 in 3%. Not very good. I would not use this system that causes burial. Okay, so we have another hanging man stepped up is a sex ain't set up as 1.1. Just that we were going toe change our profit target and sit off. Fight yourself. 10 5 We're gonna have only 15 so I probably target is 30%. We have a stop loss off 15% once we see hanging, man, you see a Paris confirmation we shot cell on the next day is a sambo. We have a hanging man here, Barrish confirmation, and we shot cell. Once he goes down, we make our profit. We buy back, recover our shocked. Let's have a look at the trading results. All right, So here's the treating results off. Don't trading system we talk about and okay is think of the free ton. We're going toe green 20% of time Oniy. Maximum consecutive losses and country. The chart is over the place. This is nonsense. I'm then the draught. How is crazy? So, uh, you can take a lot of losses and a big wins. It is really quite quite better over here. Monte Carlo says that you are use money almost all the time. You can hardly return zero negative, so the system is not well our time. 14. S03 Hammer Patterns 05 Inverted Hammer: invert that hammer introduction they invented. Hammer is a gravestone, totally star formation with slightly bigger body. It is form when opening price and the closing price equal. The vertical line represents the highest Maastricht price off that specific time frame, but perfect invited. Emma has no lower shadow. However, If the lower shadow is more, it can still be considered as an inverted hammer formation. The longer the because I a stronger potential for reversal. If the closing price is hired, an opening price. The Hammers green. If the closing price is lower than opening price, the hammer is ready. The car off the kendo has no real significance on the formation. The position off the inverted hammer is more important. The rating. But the hammer is more bearish, and a green involved a hammer. The green invite a hammer is more Bush than the rating mother Emma, As mentioned of the on the British version off the inventor Hammer appears at the bottom off a downtrend, and the Barry's version off the inverted hammer appears at the top off em and out Uptrend inverted hammer set up discussions. It invited him, appears at the bottom, off, down train maybe prayer toe by, but do not buy yet. We need to wait for the next day. Confirmation. So here is the in front of hammer forming. We still come by yet we look at the next day and the next day say eyes open up and the next day that if the price opens a bit above the purest echoes, this is Bush confirmation. That reversal has occurred, and it is time toe by. If the inverted hammer appears a top off, a trend be prepared to sell. So here's the inventor Hammer but don't know by yet. We need to wait for the next day confirmation and if the next day, the price opens. B o the people staying coast This is Barry Barish confirmation That reversal has occurred and it is time to sell. 15. S03 Hammer Patterns 06 Inverted Hammer Backtest: in the hammer testing results. So here's the inverted hammer set up. You see a in front of him over here, and we need to wait for the next day. Confirmation next confirmation is higher than a People's Day. So I was set up, tells us that it is time to buy and we buy on the next day or putting price over here. We don't know what's opening price, but once opening price comes, we will buy. We have a profit target off 10% and stop loss off 5%. So this is a 10 5 park. It was us lost racial. So here's how you like in front of him over here, Lito. Bullish confirmation. And it's time to buy. And once in most out, we see that we can sell over here. Let's have a look at our trading results. All right, so here's our treating results. Uh, and your return Very oh, win rate is 41%. Makes consecutive losses. 46 numbers. Not very nice over. And you looks like it's working, working, working on to the great financial crisis hit, and he's walking again. Okay, so I don't really like this this thing over here and find nobody. I see I think everyone suffered during the break. Financial crisis. The drawdown is 25% and here's a off return you get, um, is inspector we we are going toe have ah Uganda cutting losses at 5% gonna take profit at 10%. So that's why the charges said this. And that's see what Monte Carlo say's one DeCarlo say's that best case in Herro you're calling get 1.2% return. The and Mexico dow is about 15%. So this is not a very good system. I will not use it at all. They just goto this set up over here. It is exactly the same as the previous set up. As for 1-1 you have ah, small Tito Donald Train. You see a invented hammer wait for the next day confirmation, and once it's screen, you buy on the following days opening price and your profit target is more now in a study percent profit target and the 15% stop loss. So here's example we see invited him over here a Buddhist confirmation, and we buy and we hold on for profit. And once there's profit. We resell it for 30% profit. Since our probably target is 30% let's have a look at our trading results. All right, So here's our trading results on your return. 4%. OK, looks the decent, but still not as good as I hope to be. We know this is 53% um, Mexicans, entities lost and king looking okays over. I'm not really fantastic, but Okay, um O is giving a nice uptrend over here on during the financial crisis is stuff. It suffered very badly and after that, it power on banker hit. So this is okay, I wouldn't really uses is just okay. And I suspect that we have 15% loss and a 30% profit taking, so we are making more profits and loss, so that's OK. And that's the Monte, by the way. These are very nice cover are like this cuff, but the percentage return is not very good. That's my only problem. So these are for sloping and we see the any return 4.3% 2.7%. So on average, we're going to get around 3.6% annual return makes Jordan off 5%. Um, so this is okay, trading system, but not the best. Because maybe your Reese fear it is that the 10 year U is at 2.2 point 6%. 3%. So not the returns are not that fantastic. And but this this is making a profit. All right, we have. Ah, do, Dash one. We're gonna have the invited hammers shot set up over here. The previous two setups were long set up with bye bye with for price appreciation and yourself. So over here we have the short selling set up, and this morning, the up trend you're seeing. But that hammer and on the next eight is a bearish confirmation. On the very following day you shot cell. You have a profit target off 30% and a stop loss off 15%. So here's a shot sell strategy and his a sample. We have involved a hammer, a barrish confirmation and shot cell. And there we go. So this is one good example off a successful off the strategy be being successfully implemented. Let's have a look at our treating results. All right, So here's our trading results, or it is negative. Not good. Sova Uh, no win rate. Only 25% maximum losses that the not looking good so far? Yes. OK, chat. Okay, the charges down. What's hoping? This is exactly what the system that you do not want to use And the drama is 45%. Ah, with returns are very old and the losses are quite a lot and we go to Monte Carlo. Monte Carlo says that you are going to use money off the time and this is not the system that we were one to use and we were we were not use the system at all. 16. S04 Engulfing Patterns 01 Engulfing: and golfing introduction. The engulfing pattern usually happens at the end off the trend. It is formed by two candles off opposite colors. The cargo off the first kendo is usually the same color off the market direction. So if the first tender is rate, the current market direction is in a doll trend in the first candle is green. The current market direction is in up train. The exception is when the first candle is a dodgy and in this case, the color off the first candle east irrelevant. The first kendo is small. The second Kendall is these twice the size off the first candle. Now you may be asking why this pattern is caught engulfing pattern. What is engulfing, what it's called in golfing pattern. It's because their second canda completely and goes the first that the body off the first candle and in some cases in me even engulf the shadow off the first CanDo, the shadow off the second candles are not taken into consideration. The volume off the second Kendall is also higher than appears day, according Toa Candlestick Yuri. The engulfing pattern is a high, probably that the signal and one off the strongest. Reverse a pattern. Head off course Whether this is true or not, we will find that out later. In our back, tests engulfing pattern can be bullish or bearish. Depending on where it is found in the trend, we will discuss about bullish and bearish engulfing patterns in later anxious. 17. S04 Engulfing Patterns 02 Bullish Engulfing: bullish and golfing introduction. The bullish engulfing is made off to can does the verse Kendall is read. If the first kendo is a tautology star in the car off, the first tender is irrelevant. The second kendo is green. The price off Daito should open beyond the closing price off. They won the price off the to shoot coast above. Open price off day one. So where this? You see the body off day two and counting the body off day one. Sometimes the shadow off day one might be engulfed too. I do know the shadows off Daito are not taken into consideration. The bush and golfing pattern shows that the best are running off energy on day one and the bulls are coming in to take control on day two. We should also see higher trading volume on day two, Nobu dish and golfing. That represents a complete turnaround change in investor and traders. Decision wood is engulfing set up discussions. If the bullish engulfing appears at the bottom off, a trend be prepared toe by. But don't just buy yet We need to wait for the next day Confirmation If on the next day, the price opens above the previous take host. This is bullish confirmation that reversal as a cut and it is time to buy. 18. S04 Engulfing Patterns 03 Bullish Engulfing Backtest: bullish and golfing testing results. So here's the set up for Bush and golfing. We have a spot in a downtrend, and then we see a petition golfing with a day one Rick Kendall and a day to green Candle. But we don't buy yet. We wait for the next day confirmation, and once we see the snakes a confirmation on the following day, me by and we buy on open price profit target off 10% stop loss off 5%. And, yes, example off strategy being successfully used. You have a bullish and counting pattern over here next day confirmation by and once we reach our perfect target off 10% we sell for a quick profit. That's have a look at the trading results. Right? Here's the trading results off the board ish and golfing pattern we are making. Some will also see a as you can see minus 0.16%. We are paying money to our brokerage. For them to be rich. Um, win rate is only 30 presents in maximum consecutive losses that tell you 1%. Not very good. So far you get a chart. The equity chart shows that Oh, No, it's all over the place. Okay, so this is a lousy system to use Mex drawdowns minus 20. Piper Sense. You're hardly making any money. You're just making a broker rich. And there is a problem hatch off a profit to be made stop loss at 5%. Perfect target a 10%. That's the one. Morning Kyle Jose's Monte Carlo. Tell us that you are gonna make losses on the average. So there is nothing fantastic about this system. That is. Now we know that this system sucks and we should not be using it. That's the our bullish engulfing pattern set up. One dash to it is the same as the previous one. We have a bullish in coughing pattern over here. Look up for the next day buying confirmation and we buy. We have a bigger profit time. It now profit target off 30%. Stop loss off 15%. And here is an example off the system being successfully implemented is the bush engulfing pattern over here. Next day, confirmation and buy on the open make a profit off 30% and we sell. Let's see the trading results. So here's the trading results. Oh, we have a positive return. That's good, but not very Heidel. Um, we have, ah, weaning rich off 46% losing riddle to Tea Tree Mex. Consecutive losses at 60%. Not very good. I see how it shot goes. It's nice, but not as nice as we hope, because it suffered very badly during the 2000 and eight financial crisis. And after that, it recovered nicey. So the maximum George out happened during the financial crises and it's minus 45%. And throughout the years, nothing fantastic over here as inspector off having ah stop loss of 15% in a perfect target of 30% we have the self profit distribution and still get Monte Carlo Monte Carlo Say is that you will make money off the time using this system. Okay, so you is that this system is pretty okay, But of course the no and the return is not that fantastic. I don't really like the new Any return. At least this is positive. It's better than the other candlestick patterns we see out day 19. S04 Engulfing Patterns 04 Bearish Engulfing: bearish and golfing introduction. The bearish engulfing is been off. Do can does the first candle is greed. If the first kendo is a tautology star, then the color is irrelevant and have no significance. The second Tendo is rape. The price off day to should open above the closing price off day one The price off the two Chicos above Sorry, the price of day to Chicos bdo the open price off day one. So with this you see the body off day to engulfing the body off day one. Sometimes the shadow off day 1 may be engulfed to like in this picture over here Do note that shadows off Daito are not taken into consideration. The bearish engulfing parent shows that the bulls are running off energy on day one and it shows that the best are coming in to take control. We should also see higher trading volume on day two. Bearish engulfing pattern represents a complete turnaround Change investors and treatise decisions Bearish engulfing set up discussions. If the bearish engulfing appears at the top of a trend, be prepared to sell or shot cell but do not sell yet. We need to wait for the next day. Confirmation. So here's a bearish engulfing parent they wanted to. We need to make for next day Barrish confirmation. And if the next day the price open knows the purest in Khost, this is bearish confirmation. That reversal has a cut and it is time to sell. 20. S04 Engulfing Patterns 05 Bearish Engulfing Backtest: bearish engulfing testing results. So we already talked about a set up and this I called the set up. Do dash one. We have ah, small adopt trend with a bearish and cow bearish engulfing pattern over here. Anyone Data Kendall showing up. On this day, we have, ah Barish confirmation. And according to our system, it is time to sell. So we sell on the next day Open price. We have type profit targets over here and type stop loss. We have a 5% profit target and stop laws off 2.5%. You're Here's a sample off the system being implemented successfully Variation, coughing pattern over here. Confirmation price over here shot down. And whilst he reach our profit target off 5% we cover our shop, you buy back. And most important, me. That's a joke at our trading results. So here's our treating results. Oh, not so bad. It's positive. Is 5.7% reading release 0.4% and Mexicans active. Lost is 26%. So the chart is okay. The Chartier is very nice. It's not working for these years until maybe 2007 whereby during the financial crisis It just keeps going up. Drawdown is only minus 6%. So on each year you can expect to make like, uh, maybe 29%. 6.9%. 20%. So not too bad. It's interesting system. Um, as a spectre, we make many small eater. 5% losses. We make fuel, 10% gains. And so here is the coffee distribution. Monte Carlo tells us that this is going to give us a positive trading results almost all the time. Any return off? About 5 to 6%. Next rod off or makes off 6% at the worst case, you narrow. So this is a system that is pretty interesting. We we can do cause we can consider this. Of course. 5%. Not really a lot. I met you, your king, for maybe 20%. I'm not sure why it's not working on the first few years, but this system is pretty interesting. Okay? No, no, he have another version off the same set up again. You have a bearish engulfing over here and on. The next day is a price confirmation, and it is time to sell. We shot cell over here and open but we're gonna have a longer profit target, period. See, we have a problem. Tank of 5%. Now we are using 30% and we have a stop loss off 2.42 point 5%. Now, we haven't stopped. Lost off 15%. So that's that's see what's gonna happen over here. Here's example. Off a system looking successful. T you have a bearish engulfing over here the next day. Confirmation shot. Once you shot, it goes down. And once you have your 30% profit target, you take profit and cover your shot. Let's have a look at our trading results. So here's our trading results on the bearish and golfing. Okay, it's *** dish doesn't look so good. You're going to use money most of the time going toe only win about 2026% of the time. You have a huge make consecutive loss off 40 tree. Not very good. Yes, to get the chop. Okay, that is downtrend. So obviously this system is no good, and we have got not going away some time. Move such, uh, fashioning of their system. Of course, it wants good on hindsight. During the 2000 because 2008 everything was crashing and any shot system would have made a lot of money back then. This is not good profit distribution, 30%. It's not very high. It is only a few cases where we're taking a lot off 15% losses, and Monday Cairo tells you that you lose money all the time, so that's not border about this system. 21. S05 Harami Patterns 01 Harami: Harare me in production. Hawrami pattern usually happens and end off a trend. It is formed by two candles off opposite colors. The cover off the first kendo is usually the same color as the mark. That's a current market direction. You already under engulfing pattern. The hawrami pattern is the mirror image off the engulfing pennant For the Harambee Pattern , the first day is a poor long candle. The second day it's a small candle. Daito candle shook me half or less in the size off day ones. Can those body the body off day to is well contained within the body Off the first tall CanDo, the shadows all day one are not taken into consideration. You can no upper and your shadows. You may be wondering what Haram Mimi's If you transit Harumi from English to from Japanese English, it means pregnant. Day one. Paul Candle represents the mother, while Day two small Kendall represents the baby contained waiting. The Betty off the mother, the Haram E. Palin can be bullish or bearish, depending on where it is found in the trend, we will discuss about bullish and bearish Haram E in Quetta fractures 22. S05 Harami Patterns 02 Bullish Harami: bookish hawrami introduction. The bullish hawrami is made off two handles. The first kendo is tall, and it's a great kendo. The second kendo is green. The price off day to should open and close inside the price off open and goes off day one candle. So with this you will see the body off. Day one. Cover the body off they to sometimes the shadow off Daito, maybe, and golf and cover to I do know the shadows off Day one are not taken into consideration. The bullish Harumi pattern shows that downtrend is about to finish and the bulls are moving in where some energy bullish army set up discussions. If the British army appears at the bottom off trend, be prepared to buy. But do not buy yet because we need to wait for the confirmation we need Wait for the next day confirmation. And then they say the price opens above the People's Day coast. This is bullish confirmation. That reversal has a good and it is time to buy 23. S05 Harami Patterns 03 Bullish Harami Backtest: bookish Harumi testing results. So we have. Ah, Bush Army testing bizarre, Nimet. One dish one. You responded The downtrend and harm me. Pattern forms day one day two. And we need to wait for the next thing confirmation. And it does happen. And that's where we buy bound. The next day. We bother next day, following day open and a profit target is temples, and I will stop. Last is 5%. And here is example. Off Karami, You have the mother over here. They want candle, the tools being in golf. A tree is a confirmation. And we buy on the very next day, right? The train up for 10% profit, and we sell that. See the trading results. All right, So here's the trading results. Okay? Is positive and your return, but very slightly Ever positive. Only you're gonna have 40% win us and makes concept. It will also say that it's a funny tree. Not very good. The chart is over the place. This is done A very good system. Nothing consistent Over here. The annual return is very goal. Not very good. The profit distribution is As for our expectation, 5% stop loss, a 10% profit taking. And then we look at Monte Carlo. It's telling us that this system is over. The place can be negative or positive, depending on your Huck. The 50 of percent. How is will give us a 0.6% annual return that makes you are now in somewhere around 30%. So this system, it's not something that were used. All right, so we have the British army stepped up again. I caught one dash to It is exactly the same as one dish one just that the profit target is 30% and we have a stop loss off 15%. So we're giving this system more room. It will be bothered out again. The harmony pattern Accursed day one day two You mean for the next day confirmation to form . And once that's form, we buy on the following days open. And here's the example off a successful pet him. If Harari pattern makes a confirmation you, by my goes down and after that it goes back up. So you sell it once you hit your 30% profit target. That's see treating these up. All right, so here's the trading results off the Boucheron me 30% profit target, 18% stop loss. So the any return is positive. 3%. 3.5%. In fact, not so bad you have a Weena off 24% makes concept of losses is pretty high at 62. Yes, you'll get a chop. Okay. The child is nice until the financial crisis occurred and it's nice again. Ideally, I do not want to see this drawing over here. Ideally, this disappear. But a parodied I don't I don't know if there's a way to get rid of it and the next drawdown is 40% and happened during the great financial crises and the profit distribution is as the expectation. We have a 15% stop loss in a 30% off target. 20 cargo is saying that this will be a profitable system and your return can be 2% and you off 4.3% on the 50th percentile is triple 4%. We're half a maximum drawdown off 20.6%. So yeah, this is this is the system over here. It is positive. But of course the returns. I'm not very good 24. S05 Harami Patterns 04 Bearish Harami: Barrish Hawrami introduction The bearish army is made off to can does The first kendo is tall and green and the second kendo is red. The price off day to should open and close inside the price off the open and close off day one. So it is you see that the body off day one cover the body off day to sometimes a shadow off day to maybe cover covered it engulfed too. I do know that the shadows off day one are not taken into consideration. The bearish Shammari Palin shows that the up train is about to finish and the best are moving in with some energy Barrish Harumi set up discussions If the very Shara me appears at the top off a trend be prepared to sell but do not sell yet We need to wait for the next day confirmation if the next day the price opens below the peoples that goes This is bearish confirmation that we've also has a cut and it is time to sell 25. S05 Harami Patterns 05 Bearish Harami Backtest: bearish hawrami passing results. So here we have the Haram E set up over here this morning. The up train Army's Foam Day one and day two kendo. You see a barrish confirmation on the next day and it's timeto shut or sell on the open. Our profit target is pretty tight. 5% and the stop loss off 2.5%. Here's a sample off the shot. Here's a Haram e pattern next in confirmation and you have ah, shot sell on the open and very goes down. And on the once you hit your profit target, you convoy are shot over here. Let's see our trading results. All right, So here's our trading results. 5.16 Your school was good. Um, we nose at 46%. Next. Consecutive losses at 22. Good job. Okay, you looks very nice over here. Especially during the 2008 financial crisis, and looks OK as inspector stopped lost on 5% profit taking off 10%. That's why they're so many losses over here. Monte Carlo shows that this system is going to make money. So, uh, small to draw down, Gonna have average off fiber 1%. So Ok, not to bet. No, As high as I hope. I'm looking at 10% but this is an is positive with nice scarf, so it does goes good. Okay, So the exact same set up over here, they one day toe with her army Pedone showing up, and we're gonna give it more volatility. They're going to give it more room for profit profit taking and stop lost. Here's a successful example. You have a harambee pattern over here, Day one. The next day, confirmation and shot sell on the open and goes on the way down. Go sites where your bid and after that goes down and we take our prophet here at a 30%. That's CEO trading results. Oh, okay. This doesn't that go negative trip on 5%. You have? Ah, very old win rate Mex Consecutive losses off 28. One shot. Looks like Looks like crap. It keeps going down maybe for the financial crisis and went up, but it's pretty bad over here. Profit distribution shows that we're gonna make a lot more glasses in the 30% game that we are getting. So not very good. Monte Carlo says that we will lose money all the time. So this is not going toe be wolf our time. Meckstroth now is very ridiculous. So no, this is a very lousy system. 26. S06 Kicker Patterns 01 Kicker: kicker introduction. The kicker pedant can occur anyway. It can occur at the beginning of the trend, the middle of the trend or, at the end, off the trend. The kid, a Pap done, represents a complete turnaround change in investors sentiments. It is such a strong levers. A pedant that is position in the trend is almost irrelevant. The pattern. It's made off two candles with opposite colors. The color off day one Canda may or may not be the same color as the current market direction. The main feature off the kicker pattern is the opening price off Day one Kendall. An opening price off day two candles are the same. The difference in the day one and day two candle is that the prices moved in the opposite direction after the are open. The bigger the Daito kendo, the stronger the reversal pattern. By the way, this is also true for other candidacy. Reverse up parents, unlike other contest IQ formations like dodgy Star or Hemmer, the kick a pen and doesn't need any next day confirmation. But prices should preferably not retrace today. Once trading range the location off the kicker. It's not important. Therefore, the trend can be uptrend, downtrend, all, even sideways. In the following, the actors were going as I mean the bullish kicker and the bearish kicker separately. And then after that, we also back test them separately. 27. S06 Kicker Patterns 02 Bullish Kicker: bookish kicker introduction. Now we're gonna talk about the Buddhist kicker. The strongest version off the Buddhist kicker is usually found at the end off a downtrend or after Siri's off rate CanDo, however, the bullish kicker can appear and you ain't the trend. It is usually caused by positive news are positive earning reports that are released in the premarket. Our all after market closes when market opens. Price caps up in response to these positive news. The pattern consists off two candles. Day one kendo is raped. They do. Kendo is green, the opening price or both. Candles are the same when they are the same. This is a perfect Polish K confirmation. Sometimes they're not exactly the same Llevo, but they are nearly at the same level. After opening the our prices moved in opposite directions. On Day one, the price moves downwards, and on Day two, the price opens at the same level off day ones, opening price and moves upwards. Unlike other contestant formations, like maybe the hammer or the doggy star, the British kicker doesn't require any Next a confirmation information is complete at the end. Off day to sometimes you will see day toes open price open higher than the highest price off day ones. Price. This is known as a gap gets spaces on the price chart where the prices jumped. This job can be in either direction. You can be up or down this news and area where no trading takes place. Get further. Reinforces the kickers. Bush reverse up heron. The bigger the gap, the stronger the river. Also do be mindful that whenever there any gaps, the market will try to feel that get so. If there is any gap between the one high and day to open, do expect prices to move down to try to fill the gap before it moves up. The Buddhist kicker represents a turnaround change in investors and traders. Emotions and decisions. The booze have taken over control, price action and the best are weakening. British kicker set up discussions. If the Buddhist kicker appears it is time to buy. There is no for confirmation required because is the bullish kicker. So there we have the Bush kicker and unlike other, we've also convinced information it doesn't require any confirmation and once the information is complete, go ahead to buy 28. S06 Kicker Patterns 03 Bullish Kicker Backtest: bookish kicker. Testing results. Buddhist kicker test results one dish one. All right, so here we have a downtrend and then we see a Kika. The day one in Taito Candle appears and we don't have to work for any book. Next day Confirmation we can buy on open off the next day. Profit target 10%. Stop loss 5%. So this is how you will look like Ah, here's a kicker. These two candles are the kicker. And once the kicker is done, we buy on these days open And once we hit our tempers and profit target, we exit for profit. So how does this matter perform? Let's have a look. So yeah, we have the bullish kicker 10% perfect target, 5% stop loss and we have 0.9% Any return, you should check out these 100 k And look at how much How much money? How you paid paying to brokers. We have pain. 30% of Broca's Oh man. Sometimes I wonder who are the guys who are making the money Here is either trader or the brokers, so we have a 42% winning winning rate. Not very nice But that's fine if we can make profit. And yes, we make a bit off profit razor thin profit over here. Um, the guy just constructed processes to entry. All right, I can take that literally. And you get a charts. Um, not really nice here. I don't really like this chart is still uptrend, but it's not really nice. I don't like it. Um, maximum drawdown, Chopra Sand, That's fine by me. And if you will get a profit distribution cut loss at 5% profit taking a 10%. So that's why we have this kind off this kind of distribution. And Monte Carlo is telling us that a mortal time, you will make money, and on the average, you make a guess than 1% Best case scenario, maybe 1.65% compound annual growth rate. So I don't really like these numbers, and this is not a trading system I would use. All right, that's let's have another a simulation. So we have the borders Kika step up one dish to its as they get the same as previous. You see a bullish kicker and there's no confirmation needed. You buy on the next day open price and we're going toe. Have more profit target now, instead, off a 10%. Probably target. We will have a profit target off 30%. And the stop loss shall be again Have of it sold a stop loss off 15%. Here's example. We have ah, bullish kicker over here and we buy on open price prices goes up. And once you hear the 30% perfect target we sell for profit got. See how this trading system performs. All right, So this is how the borders kick up of forms and your return? 2%. Mm. Not ready as well as I thought it could be. We know that 43% the brokerage reach Bukit. Fees are. Yes, sir. It's the only child k. Okay, At least we are not paying so much for broke us. Remember, I'm using 0.25% brokerage. Your brokerage might differ from mine. Um, the number off Mexicans it if lancers at 20. Okay, that's you get the charts. Ah, here's a nice uptrend. It's a spike up, but it went down again by eventually recovered up. And this, despite thou, is like 30 35% drawdown, which can be pre painful for most people. Here's how you make you make, like, very lit up. Yeah, 2000. It is where everyone suffered and years of profit distribution cut glass at 50% Profit target at 30%. Let's see what Monte Carlo tells us. So Monte Carlo is saying that, yes, this system is profitable, but have best case You can only make 2.7%. How much is a 10 year re spirit? 10 year? 10 year U is about 2.5, maybe 3%. So not very good here. Ah, draw down about, um, 8.34% on the average. That's not to bet. All right, so this is the bullish kick over the second set up, which is better combative first set up because in the second set up, we extend that the profit target and ah, I was stop lossed. Ihsaa Were you out? The stop loss to increase 29. S06 Kicker Patterns 04 Bearish Kicker: Barish kicker introduction. Now we're going to discuss about bearish kicker. The strongest version off the Barrish kicker is usually found at end off an uptrend or after Siri's off green can does. However, the bearish kicker can appear anywhere in the trend. It is usually caused by negative news or negative running reports that are released in the premarket hour or after the market closes. When the market opens, prices get down in response to these negative news the parent consists off to Can Does Day one kendo is green and day to kendo is rape. The opening price off both can does are the same when the other same. This is a perfect, bearish key confirmation. Sometimes they are not exactly the same, but they are nearly at the same level. After opening, the prices move in opposite directions. On Day one, the price moves upwards. On Day two, the price opens at the same level off day ones, opening price and moves downwards. Unlike other can mystic formations, not the hammer or the Dorji star, the bearish kicker requires no next day for up confirmation information is compete. After the end off day to sometimes you will see Day two's open price lower than the lowest price off day. Once price, this is known s again gets spaces on the price chart. Where prices jumped. This jump can be either Dacian up or down. This leaves an area where no trading took place. Get further. Reinforces the kickers. Bearish. Reverse a parent. The bigger the gap, the stronger the river. So do be mindful that whenever there is any gap, the market will try to feel debt. Get so if there's a gap between day one slow and day toes open, do expect prices to move up to try to feel the gap before it moves down. The Barrish Kika represents a ton about change investors and traders emotions. And did she should making the best? Have taken over control of price action and the booze are weakening. Bearish kicker set up discussions. If the bearish kicker appears, it is time to sell. Unlike other candlestick formations, it does not require any confirmation day, and the formation is complete by the end of the two and want to see Day two. You can sell on the next day's open 30. S06 Kicker Patterns 05 Bearish Kicker Backtest: Barish Kika trading results. So here's the bearish kicker Information day, one green candle day to re Kendall. And once you see this formacion you sell on the next day's open price. No confirmation is required. We're going tohave a target off 5% and we gonna we're gonna have a stop loss off 2.5%. So here's a bearish kicker may not be that obvious over here, but this is a parasitical by definition. And when the next day comes, we sell. And after we make our 5% profit, we me take up, we cut out, we take profit over here. Let's see how this performs. All right, so here's the bearish kicker. We've, ah, take profit or 5% and the cut gloss off 2.5% 0 nice. We're making any return of 5.22% the winners at 44% and ah, Max contacted. Consecutive losses is 16%. Okay, numbers are looking OK so far and the chart is very nice. Before 2005 the charges up like this no movement, maybe something off the data over here and ah, 2005 to 2016 everything is uptrend and draw it out is very old And so the returns are not too bad. So you get ah, profit distribution. We're going to make a lot off losses at 2.5%. But the the profit will come back in other forms. Let's see what Monte Carlo stays. And so we're getting 4%. Ah, and your return minimum and ah, 5.75% return at the maximum eso The drawdown is also free. Dio I like this town curve is very It's not very, it's no scepter is very tight. So this is a nice, nice Monte Carlo curved I like So this system looks OK looks better than the other systems . The only constant 1/2 is again. The return is only 5.2%. The other system that can give maybe 10%. This is not very good. So Ah, yes, this is still ah profitable system and, uh, it gets pipe on 23% per annum. All right, so here's the bearish kick again. We see Day one and Day two CanDo. And after that, once we see these two candles, we make a shot cell at the next day's open, we're gonna expand our profit target. Ah, profit target is the deep sense, and I'll stop. Loss is only 15%. Here's an example of a successful treat. Here's the kicker. In fact, he has a gap over here. Once the formation is done, we sell on the next day. No confirmation is required. So, so, so so cell. And once we hit a 30% profit target, we cover up, which you should Let's see how this trading system performs. All right, so, uh, the net profit is the net profit annual return that C is 2.25%. Uh, not that very good. Transaction consistent in K. Um, win rate for the tree percent. Maximum consecutive losses. 24. Okay, the chart looks nice. It's up trying to spike here, but you went back down. So I think the spite was due toa the 2000 and eight financial crisis. And once he recovered, he went back Now, But still, it's It's positive here. So it is not so bad. And, um and remember, I will stop lost its 15% our profit targets 30%. So here's the win last this profit distribution. Let's see what Monte Carlos is. So this is quite a sketch. A graph over here, the minimum and your returns. Europe on 59 maximum two point it want. And Ah, Max, drawdown. Is that 19%? So, uh, at this this is positive for the way my own concert again is with the annual return. It's still pretty. Oh, I'm hoping that I get 10%. So this is the testing results for the bearish kicker. 31. S07 Piercing Patterns 01 Piercing line: piercingly eyeing introduction. The piercing line pattern is made off to can Does Day one. Kendo is rate day two. CanDo is green. The price off day to candle should open the older closing price off Day one. CanDo Day to shoot coast morning halfway up the body yank off Day one on day two on day one , the best are strong on Daito. The best continue to protect prices down. But then, by the end of the day, the bull step in with energy to bring the prices up the higher day, two kisses up compared to the first candle, the stronger the reversal is. We should also see volume increase on Day two, fusing lying set up discussion. If the piercing line appears at the bottom of a trend, be prepared to buy this in the case. A bookish Revo so may happen, but do not buy it after the key confirmation is there. We need to wait for the next day, a bullish confirmation, and here it is. If the next day price opens above the purest a close. This is bullish confirmation that we've also has a cut and it's time to buy 32. S07 Piercing Patterns 02 Piercing line Backtest: piercing line testing results. So here's the piercing. I set up one dish one day one day, two piercing the information. And once we see the next day confirmation on the following day. After the next day, we buy on the open. We have a profit target off 10%. Stop loss off 5% s usual. So here's example. Off a successful Pearson line, we have, ah, day one and Day two and the next day is a confirmation and we buy. After buying, we write up for 10% profit and we we sell for the for profit. So how does this testing does? How does this system performs? Let's have a go getter testing results. So here's the testing results off the piercing line. We have initial capital of 100 k and look at how much brokers Europe, saying we are paying kinda hard to our broke us. Ah, we wonder who is the ones getting richer? Is the broker off the tree or the trader and your return is negative? That's not very good. So far. Ah, 27% win rate, also not very good. And the Mex contacted fluorosis, 47 not very good. Also, the chart is downtrend and sideways. No good. This is lousy chart and you can see that we took profit. We took losses at 5% and we take gain set 10%. So drafty. This is a profit distribution shot. What does Monte Carlo tells us? Wanted co tells us that at the best case scenario, we can make resulting profits after so many years And the Meckstroth, How can be 45%? It's Ah very diverse Scatter plot over here. So this is a Ozy Ozy system. Please do not use it. I don't know why. I do not know why is taught in chemistry Curie. But in my teary, given such lousy trading results, you didn't. You can just treat it as theory. But don't ever use such a trading system. All right, so here's a piercing line again with another step up. I call it one day stool. Its executive same set up its before, after the day one and Day two, piercing my information, we were for next a confirmation and one says up we buy on open. We have a profit target off 30% and a stop loss on 15%. So we are giving more weaker room toe to it as compared to the first Sendero whereby we only have a 10% profit target and a stop loss on 5%. So here we have more volatility in this. Ah, we're giving it toe be vote how from more range and we're giving it more the way to go up and out. So here's a sample off a successful ah piercing I'm being executed piercing information Next a confirmation and buy on the open Right the candle up And once we hit ah profit pocket we sell for profit So how industrious trading system performs? Let's take a look. Okay, so here's the piercing eyeing Ah trading system Initial capital 100 K are fine. We're giving our brokers this amount and you looks like we're getting 4.13% annually. Looks much better now the winners at 43% in our consecutive losses that are yet all right, yolks or cays off our and all the charges ripe in for her. What I say is painful because look at this draw down. Look at this fret area here. So from this year to this year, you are not going to get any profit. You're going to be sitting there and wondering if this is a profitable system at all. So you might, ah, use the system for maybe another two years and abandoning all together. So this ah zone over here, this is nice for you. And after that they can. Just down during the financial crisis, everyone plunges down, so you're back to square one, and after that it goes up. There's some, uh, some doubts and goes up again. So the chart, although it is in general trend, but it's quite stressing for the psychology for most people to take. I don't think I can right through this system myself and the drawdown off more than 50%. That's also very painful as well. So here's the profit distribution shot, about 15% profit cut loss and 30% profit taking. So Monte Carlo tells us that we gonna make a minimum of 2.3% and the maximum piper 1% with a mean off 3.91 And and here's a curve are you looks like, and he's going to say that we have a Mex rolled off 26 plus 25%. So yeah, this is the the back, Tess 33. S07 Piercing Patterns 03 Dark Cloud: Doc Crowd introduction The doc Our parent is made off two candles Day one kendo is green and day to Canda is rape the price off day to CanDo Shoot open a perf the price The closing price off day one candle Daito CanDo should not coast more than halfway down the body yank off day one on the one. The bulls are strong. On day two, the bulls continue to take prices up, but then the best stepping with energy to bring the prices down. The lower day to pierce is down compared to day one. The stronger the rivers are is we should also see it Volume increase on day two, not go Set up discussions if the dark coat appears at the at the end off the uptrend pre prepared toe cell. This indicates that the bullish reversal may happen, but do not sell yet. Here's the doctor set up. We need to wait for a bearish confirmation on the next day. And if on next day the price open b o the people because this is bearish confirmation that we've also has occurred and it is time toe by 34. S07 Piercing Patterns 04 Dark Cloud Backtest: that cow testing results. So here's the duck house set up toe dash one. So we see a day one and day two CanDo to complete the dark confirmation And 13 CDs We do know by yet. We wait for the next day Barrish confirmation. And once we see a bearish confirmation, we shot on the following days open. So we have a proper target off 5% and the stop loss off 2.5% which is rather tight. But maybe he works. We only know once you test it. And so here's a sample off the dock confirmation. You see a bearish confirmation and we shot over here once. We hit a 5% profit target, we cover our shot for profit. So how thus, this system performs that see our trading results? So he has the dark out trading results. Okay, a yolks. Ah, positive. Over here. I wish it was more, but no. All right, fine. Oh, we have ah, High percentage in winners and 52%. And next concert. If losses off 16. Wow. Looks promising so far. And the chart looks wonderful. So this is so far good looking and the maximum drawdown is maybe 5% and it's quite positive so far. So a profit target of 10 or 5% a stop loss off 2.5% is that's, well, our profit distribution looks like this. And Monte Carlo is telling us that, um, we're gonna make 4 to 5% with the average off, maybe 4.9% 4.59% over here and this system. Yours. Good. I I I think it was good. Just at the any return is very low. And maybe it is higher costs to do shotting I'm using do upon to 5% across the board here. All right. Yes. Tests. Another dark coat set up is exactly the same as the previous day. One day, two information is complete, the bearish confirmation appears. And we shot on the very foreign day after the next day Bullish Babbage confirmation. And so we're gonna have a profit target off 10% and the stop loss off 5%. You're gonna give more room for volatility. And here's an example of a successful treat that confirmation confirmation and shot on the open down. And once we have a 10% profit we cover shot for toe because our position Yes. Take a look at our trading results. So here's our treating results. And your return. 3.2%. Um, we nurse Ah, 39% No is good as before. Mexicans active users, 27% The chart New York's also uptrend also looks nice, but no, it's nice. Is a previ ous The draw dow is ah, 10%. And, um, the profit distribution yolks Okay. Books, as expected. Um, we have, ah profit target profit taking off 10%. And ah, stop loss or 5%. Let's see what Montecarlo tells us. No, these that the curves I'm on disperse now. Um, it say's that we're gonna have ah minimum return off 2.2%. And the maxim involved around 4%. So yeah, this This is positive, but not as good. Ah, not as good as a hope. Maybe because this this area over here, the drawdown is pretty painful, I think Just draw. That is very painful over here. So 35. S08 Star Patterns 01 Morning Star: Morningstar introduction. The morning star pattern is made off tree candles. Day one kendo is a rape all Kendall confirming a downtrend Day two Kendo is a spinning top pattern. In some cases day to can be a dodgy star as well. Both Doje star and Spinning Top represents some kind off indecision. Day two forms The star for this pattern Day tree is a rather tall green candle confirming that reversal is occurring. Nay tree should open up higher than Day two's opening price day tree should also close at these half way above the body. Yank off day one. On day one, you will see a strong down train. This indicates that the best are in full control. On Daito, you'll see the price moves down even further. Often you will see ah, get down. But on Gato on Day two, we will see some bullish activities with the price trading near the opening level. Day two indicates indecision where neither pools and best have control over a price. It is represented by a spinning top o. R. Doje On day tree. The price opens with a gap up. The bulls are getting control and they start moving up the prices higher. Closing at Niece halfway off day one. The size off day one and day tree indicate the strength off possible reversal movement. The bigger the CanDo, the stronger the river. Also price get between day one and Day two and between day two and day. Tree also indicates stronger reversals. They are good. The larger the gap, the stronger the reversals gets ideal, but they are not really required for this formation. Mornings are set up discussions If the morning star pattern appears at the bottom off downtrend, be prepared to buy, but do not buy yet. You need to wait for next day. Well, a bullish confirmation the next day. Confirmation can. The body should be above the halfway point off day tree Kendall. And once this next day, candor is form. You can go ahead to buy on the following day. 36. S08 Star Patterns 02 Morning Star Backtest: Morningstar testing results. So here we have the morning star testing without set up. One dish one, we see a morning star formation over here. Tree can does. We were starting the center, and on the next day once the next day Kendall comes up, we buy on open off the following day we said a profit target off 10% and the stop blows off 5% as you, Joe and years example off. Successful. Set up. Morning. Stop heading over here. Next. A confirmation following day by and we write up for 10% profit before we exit over here. That's this. Set up works? Yes. Have a look at our trading results. So here's the results. Okay. It's razor ting profit over here is it's ah, negative. And look at these. Most of our money is going toe the broker. I'm setting 2.0 point 25% commission here. So your broker we rich if you use the system, your winning rate is only 37% your using mets Mexicans active Flosses, 20%. Sorry. 28 numbers and they also get a chart. Oh, no. This charges over the places. It's no youth it's dancing up and down. Do not use this system here. You're going to get no where you only make your broker which and draw down is pretty bet. So the profit distribution shows that you're gonna have ah fi person stop loss and 10% profit Taking Monte Carlo is like a mirror image of a year. So it's telling you that depending on the luck, you may be profitable or being the losses. So this is a lousy system. Do not use it at all, right? Yes. Have a look at morning sun set up one dish to Maybe if we do something about the stop loss , we can get better results. I'm not very sure that's have a test. And here we have the more or the morning star formation of a star in the center. And the next day, Bush confirmation and we buy on the open over here, and this is set up good. Here's a sample of a success. A Morningstar Information Here tree. Kendall's makes the confirmation and we buy. The price goes up, and once we have our 30% profit, we sell to lock in our profits. So let's have a look at the trading results for this system. All right, so the system would be better. You got getting tree 0.5%. See, E g r. Yeah, we know Czar at, Ah, 43% your Mex consecutive fluorosis. Whoa. This is really painful At 47 is prepping for over here. So the shot is going going to say that you have upward sloping, but the draw down here is extremely paying for your going together. 45% draw the home over here. So Tone is wrapping for I during the financial crisis. I don't know if anyone will be able, tow, undertake this kind off drawdowns. And the profit distribution shows that true enough, 15% stop loss and the 30% profit target. Monte Carlo says that you will make money. Yes, but, um, your any return is not very good or your any during this. Maybe 4.4% at the best, and you're gonna every tree 0.35%. So not a system that trait Too much. Reese for Tony. Toby, What 37. S08 Star Patterns 03 Evening Star: Evening Star introduction. The Evening Star has made off tree can does Day one Kendo is a green tall Kendall showing an uptrend. Day two Candor is a spinning top pattern. In some cases, Daito can be a doggy style as well. Both Doje star and Spinning Top represents some kind off indecision. Day two forms the star for this pattern. Over here, Day Tree is Arata Tory Kendall, confirming that we've also is occurring. Day tree should open up lower than Day two's opening price day tree should also close at these halfway beyond the body. Yank off day one On day one, you'll see ah, strong up trend, and this indicates that the bulls are fully in control on day one. On Day two, you will see that the prices move up even further. Further. Often you'll see a get up. But on Day two we will see some bearish activities with the price trading year, the opening level and they too, in the case in decision where neither the bulls know the best have control over the price. It is represented by a spinning top or Doje on day tree. The price opens with a get down the bears are getting control and they start moving the price down. Closing at these halfway off the one the size off day one and day tree indicate the strength off possible reversal movement. The bigger the candle, the stronger the reversal price get between day one and day two and between day two and day tree also indicate stronger reversals. The larger the gap, the stronger the reversals GIPs ideo But they're not required for this information. Evening star set up discussion If the evening star pattern appears at the top off an uptrend be prepared to sell but do not sell yet. You need to wait for the next day confirmation. So here's the information And once we see the next day next day body should be below the halfway point off day tree candle Once this next a candle his form go here to sell 38. S08 Star Patterns 04 Evening Star Backtest: evening start testing results. So here's the evening's Confirmation day one day two and day tree. Here's to start information. And when you see the next day bearish confirmation you sell on the open off the following day we have ah profit target or 5% and a stop loss off 2.5%. So is pretty tight over here. This is how a successful if things that looks like you have Ah, evening, stop. You have the things not Patton. And why is the next day confirmation a cuss you sell And after you have 5% profit, you'll take you, you knew Cover your shot. So how does this system perform? So here's the testing result for the Evening Star and we see that the annual return is tree 0.4%. Not very good much. This is positive. The wind rate 47% and the Mex consecutive losses. 35. Very painful. The chart is all the charges positive. This is a nice chunk over here, but before that iwas not really good. And the profit distribution is showing that, um, you have, um, cut glass. Is that 2.5%? And you you take profit at 5%. Monte Carlo is saying that you're gonna get annual return off 2.72 cheap on it. I don't like the system because the returns are so low you can just buy the index and get something higher. So this is not a system that will be interested in. But this is positive if things are set up to dash to. So we have the says ex same set up as before. If the confirmation comes up the next day, confirmation is is a form and we sell on the open off the following day. We have ah larger profit target now at 10% and a stop loss. All 5%. Here's a sample. The evening star formation over here won't. He's a big candle the next day confirmation. And once the confirmation comes in, we shot cell at the following day and we shot it down over here for 10% profit. And we we cover our cover our shot over here. So how does this system performs? Let's take a look. So here is how the system performs it iss positive? Yes, it's making a broker rich. Yes, Hecker. He's gonna get another commission. You get a tally 8% meaning rate and your Mexicans like a thief. Losses is 34. Not very good is showing somewhat positive. But for this period, it is. It is stagnant in the site. Ways not very good. Makes drawdown child percent. And the profit distribution is, um, like what I expected because you're cutting on choppers at 5% and we're taking profit 10%. Monte Carlo is telling us that the the annual return is to trip on 63.6%. No, I won't go for this system because off the very goal. Um, c g r Win re Seiji Ari. So curious. A system for the evening star. 39. S08 Star Patterns 05 Shooting Star: shooting star introduction. The shooting stopped. Haddon is made off to condos Day one. Kendall is a green tall Kendall showing an up train and day to Canada is a smaller body with young, upper shadow and very small or no, your Shadow Kendall looks like an inverted hammer. The color of data CanDo is not important. It can either be red or green. It really doesn't matter. On day one, you'll see a strong up trend. This indicates that the bulls are for the in control and on day toe strong buying pressure pushes the price up even further. But by the end of the day, the best come in to take the price. Now near or be old, the opening price shooting star set up discussion. If the shooting stopped head on appears at the top often uptrend. Be prepared to buy, but sorry it. The shooting star parent appears at the top of an uptrend. Be prepared to sell, but do not sell yet. You need to wait for the next day. Confirmation the next day confirmation body should BBO day to like so and once this next day, Candle is form go hit to sell on the following day 40. S08 Star Patterns 06 Shooting Star Backtest: shooting star testing results. So here's a shooting star set up. We see the day one in the day to shooting star information being formed, but we don't shot yet. We had to wait for the next day. Bearish confirmation. And once it's up, we sell on the following days. Open price profit target or 5% stop loss at 2.5% so you can see is pretty tight. Five Busses 2.5 Here's Ah, successful pattern over here. So this is a shooting star formation. And the next day, Barry's confirmation and we shot over here wants to hit our 5% profit. We talking and cover our shot. Let's see how this straining system performs. So here's a shooting star trading system with our 5% profit taking and 2.5% stop loss. Okay, the annual return is bad, is very always less than one pretence. Um, the winning ready study 6%. And ah, Max constantly for Constance is 26. Not very good over here. The chart is showing also not very good. It's bouncing up and down, especially during these periods over here during this period. Over here, I don't think it's something that anyone can psychologically on the tech, so it's pretty painful. Um, the profit distribution is not very good. All the 2.5% are here. The 5% this year, sometimes together 10%. And Monte Carlo is telling us that we will make money. Yes, but the returns are very always not very good. So don't expect toe much. All right, so let's have ah! All right, we're going to look at our shooting star set up Do dash to And it's the same as to dash one . The exact same shooting star information wants this form. We wait for the next day Barrish confirmation. And once we seat, we shot cell on the following day. And instead of five and 2.5 year, we all have a 10% perfect target and 2.5% stop loss. We're gonna give more room for these formation to prove itself. So here's a successful implementation of this trading system. Surely a shooting star formation over here. Ah, Berries confirmation. And we shot cell up and down, up and down. And once we hit here, we hit our 10% perfect target. We cover our shot for profit yet. See the treating results off this trading system. All right, so here's the trading results. Oh, the return is very low. Zero point tree tree. No, that is the law. Such a T. And the wieners is only 31% Mex losses 41. Not very good so far. It's negative. And we'll get a chart. It's over the place. Don't bother this training system, but yes, yes, have a look. Makes drawdown at 23%. And you have ah member. I was stopped losses at 5% and our profit target is 10%. So this 10% is study higher because we are a cheeks taking a stop loss on the following day . So Ah, it's not good. Sofa. Monte Carlo is saying that this system is more towards the negative site. I thing this is this is definitely a lousy system. And you appointment your broker very rich. If you use this system. Yeah. So this is the shooting star set up 41. S09 Backtesting Basics 01 Introduction: back testing basics introduction. First of all, you may be wondering why there is Ah, back testing section. Most other constants are there were only teach you technical analysis based on cherry pick charts. They show you Ah, cherry pick examples where the chart work out and Mitt in, admit money you buy here and sell their you buy here, sell them, buy here, sell their, um So And they show that if you buy here and so that you will be successful Of course, that's on hindsight. I'm sure you are. You are smart enough to know that these technical set up our selector with the benefit of hindsight. And if you were to actually trade it in real time in life, you might get a company different set off results. In fact, it is dangerous for instructors to teach Tanika and other cities like this without any discussions on historical performance off the trading system. It gives false confidence and false hope. Those students and you may even lose money. So in this cause, we're gonna do something really different. I'm gonna teach you tanka analysis as promise and and then I will show you the back test performance results to prove, or this proof the trading method. Throughout the course, we are going tobe act as the technical analysis strategies they are taught in the course. You will need to know how to interpret back testing results. And more students are probably unfamiliar with back testing in Mason are foreign concept to them. So that is why in this section off the costs, we are going to talk about back testing. This section is meant for students who are unfamiliar with back testing. If you do not know what is back testing how to interpret aquatic of how to judge backed has performance. What is Monte Carlo or why do we even back that's in the first place? Yes. Do not skip this section. Of course, if you are familiar with back testing, your you know how to read the charts and all. You may go ahead to skip this section before we begin. I'm going to talk about a serious problem we all face in treating. The truth is that most of you are never going to make money in the long run. Why? This is because off something I call the cycle off death so What is this cycle of death I'm talking about? Let's assume now you start off trading, you get yourself a strategy. You might have developed a stretch of yourself. Or maybe you copied it from another trader. Or you might even about the strategy. Somewhere from the Internet and so on. It doesn't really matter. So now you have your strategy and you are about to start trading life of this. You're gonna put your money on the line, you start putting the trigger, and right off the bed, you made some money. Congratulations. Everything is great. And then the inevitable happens. You start losing money. The strategy starts taking money from your trading account. This does not feel comfortable. So you start to tweet your strategy. You start to make minor changes to your strategy, and then you go back to trading again. You make money, and now you have a seeming me perfect successful strategy. But then again, the inevitable happens. You start to use money. Every strategy will go through losing period. Now you adopt your you doubt your strategy again. So again, you start to tweak and make changes to the strategy. The same thing again happens, use money, you tweak again and then eventually After taking so many times, you're gonna completely use faith in that strategy. And you are going to try it out and start searching for another new strategy. You're going to dumb that strategy. You are going to hop between the old strategies and the new strategists. Same thing happens again. You start losing money, you start to make money and then you start losing money. And there you go round and round the cycle off. Death hopping in between strategists in the host that you will find that for Ariel Holy grill. Well, get this. The Holy Grail doesn't exist. So what is the solution to this problem? Fussy. You need to get confidence in the strategy. So how do you get confidence in the strategy? The solution is to fully back tester strategy. You need to try and the strategy true historical data. So you know the characteristics off that strategy. You need to know how the strategy were performed in winning periods and using periods. It's only when you know and expect that you are gonna have using periods. You're not gonna lose faith in the strategy and you're gonna continue moving forward. No knowing is going to give you profit that give you the prophet that you desire. So what What is this back best thing that I'm talking about? Let me visualize this for you. Yes. Draw. Lying to represent the passions off time we mark today with a green circle, right, So so anything before this marking is the past. Anything beyond this marking is the future. So if we have a strategy now, how can we check whether the strategy work or not? One thing we could do is execute a strategy right now, over here today and wait for the passage of time to see how it performs in the future. We do not need to resent capita because we can always paper treat. So we will run that strategy day in, day out until maybe a few months. The data we can get some results on whether the strategy work or not. And this it's known as back testing on future results. Now what is strong with this particular method? The problem is that we need to wait many months ahead just to test one single strategy. By the time we are done with the testing. We probably need 10 years to compete. So a better way to do this is a test. The data In the past, we said like two points in the past. That's a point A and point B. So we were paper treat that strategist nothing. We point a and end the strategy at point B and after which we will immediately have its performance results. And based on this performance results, we can determine whether the strategy is profitable or not, and whether we want to use this strategy for our future treats when we put life money on the line. Notice that we can do this as many times as we like without spending many months into the future. Unlike the pack testing over here toe future data, we can always strange change the strategy. Maybe instead, off moving. Using moving at marriage crossover, we can change the strategy to use our size indicators or some candlestick formations. We can also change the task period, my shifting point A and point B around. Maybe if we like a longer time period, we can simply put a toe the extreme yes and pull be toe today. This way, we you have a full set off back tests results 42. S09 Backtesting Basics 02 Markets and time period: back testing, basics, market and time period. In our practice, we need to define our trading universe. Which exchange are we going to treat on? Is it the NASDAQ over here, or is it the New York Stock Exchange? Or maybe if you and supple your trading the sample stock exchange, SGX. Or maybe you're interested in all these markets and define your trading universe as a combination of Autry. Whatever it is, you need to first define the universal stocks that you are going to treat and on and obtained the end off day data required for those exchange time period talks about the starting and ending dates, which we are interested in. Maybe we are only interested in 2000 to 2017. ONI, or maybe we are interested to find out whether there any exploitable patterns in the past, Let's say, from 19 nineties toe 2000 Technica another cease methods They have work wonderful in the past may not be working now, So by defining a time period, we are able to zoom our analysis into a very specific pure in history. Now, why would time periods like should make a huge impact on our performance test results. If you define your time period during booming years like over here, the green section are booming years. How I know it's a booming here is because of stock market keeps going up. So those are booming. Yes, then obviously, he will get amazing results. If you're by buying and selling for profit, let's say you define your testing performance from the period off 2003 to 2007. The results may not be the results may not be caught. Be because you are treating Matter is so period by The result is probably due to the inherent bullishness off the market during a period. Likewise, if you define your performance testing from the period off 2000 toe 2000 and three, the results are probably ready. Pet. It's not because your trading meant that itself is that it is due to the inherent downtrend off the market. Now what we prefer is toe have a time period with a good mix off booze and deaths because the typical investor or trader will be trading for many years dropped his life. So it's a good idea to mix in periods off, up and down When you invest on tree, you have to take the losses and enjoy the profit. It comes in as a pack issue. There's no way you can 100% avoid taking losses because we can't predict when the recession were becoming. When we view our treating method or system, we seek to reduce losses as much as possible during those periods where we have mountain off course we like to intimidate. The loss is entirely, but that would be near impossible, even high probability. Off Jen trading. You have to take losses once in a while. 43. S09 Backtesting Basics 03 Annualized returns: back testing basics. Annualize returns. First, we discussed about annualized returns and annualized holder return is the geo metric average amount off money on by an investment. It's year. Given our over given over a given time period, it is calculated as geometric average to show what an investor wooden doing a period of time if the annual return waas compounded. Whoa, that's really a mouthful. Let's break this down. What is this Joe Metric average return that we were talking about? So here's the formula for any ice return over here, and U. S return can sometimes because C a g r which means compounded annual growth rate. So in this formula, we can ducking the variables and saw for C A g r C a G R considers compounding effect off money. This year you made profit $2000. We assume you have intention to reinvest these $2000 compound it as part off your ongoing investment journey. It is really important that when we are comparing across different investments, most rates or investment results are expressed as CIA JIA compound and your girlfriend Oh, annualized return. So by expressing your returns as ch er you can compare epper toe EPO. Now this Caucasian gets more complicated if we were running a real part for you because if you were running a Bria portfolio, you have to use time wait return, which is really much more complex. This is because when you run a really portfolio, you'll be putting money into your portfolio, and sometimes you may be rejoined money out from the portfolio. We need to use time with the calculations toe account for such, she narrows for now. Don't worry too much about it. We only have to know the simpler concept off C, J R and D. Nice return, where we do not take or and any money into always from a portfolio during the investment. Now I didn t see some comments on students who are really interested in time weighted return. So let me just in cook into the cost for completeness. And I can honestly tell you that after learning the formula for time waiter return, you were probably not use it for your rear part for your calculation, because it's really quite a lot of work to do so here it is before we learn time weighted return The first thing that you need to know in learn is what is holding period return or hitch P. R. Let me draw a timeline that saw from 2000 and 14 to 2017 throughout the period, and investor puts money into his investment portfolio, for example, the investment the investor receive salary and we should put his Arian as off the portfolio . So this is considered a deposit into his portfolio. The money is going into his portfolio. Throughout the years, the investor were also we draw money away from the portfolio. So let me just draw this deposit. So sometimes, um, the investor needs to take money away from portfolio for number. Maybe the investors car broke down and need some quick cash to repair it. He has no money from his bank and needs to read or money from his investment, maybe first by decree stating some off his stocks and after liquidating it, meaning after starting the stocks here, some money and your transfer that money out from his portfolio. So this is ah, we draw ra, and every time there's an addition or we draw like this, this is an external money flow and extend our money flow. Is money flowing up from off the portfolio or into the portfolio due to external factors? Do not be confused with dividend or interest. Dividends and interest are not classified as external flows. They are classified as internal flows because they are considered returns generated by the investment assets. So, whatever you have an external money flow, we need to define that as a stand alone holding period return. So let me just show you how he looks like you have another time that you deposit money into the portfolio. So this is another holding period on holding period too. So maybe over here you suddenly need toe, Rejoice some money and you have a re Giora. So this is a holding period Return number tree. So every time you have a deposit Hori Drogba, you have to define as a new holding period. So so this example there is a total deposits tree deposits and to read or a so every time there is a deposit or read rubble. We define that as a new holding period so you can see here everything every time there's a deposit in New Georgia, we defy in your holding period if you We draw and put money every day. Oh, you need to defy a new holding period. Heavy day Do no deposits and re drawer can happen any time. It may not necessary be at end off the year or the beginning after off the year. Now that you know what is holding period, let me tell you what you must do with each holding period. Do not worry so much. I mean, just print this down for you right now you need to calculate Evie purists heavy Pierre's hole holding period return and the formula is as follow for that particle holding period return it is and the one meaning ending market value minus and the zero meaning beginning market value plus any dividends or interest that came in and plus or minus any Castro from me draw from external. If it is a deposit, you subtract it. If it is Ah, Redrow. Ah, where money is taken away from the investment toe. Maybe fix your car as investor you and and you think the holding divided by beginning market value. So if you have a read or every single day you have the cockpit your holding period return every single day. Too bad. Who asked you to withdraw your money so often? All right, so now you know how to cook. Okay. Holding period return. The next step involves ka grating the geometric return off order holding periods. You string them together and multiply them together like so And you obtain the Joe Metric return. Once that is done, it is time to any ice this geometric return number. So here is a standard and utilization formula. You convert it into a single year return, you need to analyze it. You analyze it so that you squeeze the timeframe toe one year timeframe and you can compare epper toe tapper with other assets cast or similar investments. Opportunity. The formula for analyzing is as follows analyzed. Time later, Return equals toe one plus geometric return. You take the whole time to the power one over Why and you take the whole thing minus one. Why equals to a number of years where the geometric return is concrete? That that's a number off years is tree. Then why ecosoc three? Let's say the number of years is 2.5 or 2.6. Then why equals to 2.5 or 2.6? It does not necessary. I need a B on India, so that is the culprit. There's a calculation for time with the return. It's really a lot of work to do. They're one of the hardest things one. The hardest part is getting your part for your value because most investors won't have this number on hand to do them has. If you are lost, this is okay. I don't expect students to do this. Were pot for your tracking anyway? It's do toe this time with the return Caucasian that most people don't even know the performance off their own part for your gold up, Henny off your investment friends, Ask them once the airport for the return and how do they complete it? I usually have no idea, because they are the usual dumb border with doing time Later returns. So for time with the return, if you can get somewhere around 20% it's pretty good as a retail investor or trader. If you're somewhat good, you can get around 25 to 35% try toe set up for at these 10% C E G R for good compressing warm buff. It does around 21.6% over a period off 49 years. He has one of the most imaginary investment trying were caught around? No, just because his returns around a high 20% C g r. But because off the time period and the huge size off his portfolio, be well informed that once you skill up and you have huge amount of money to manage, getting high returns is not easy at all. Because when you have a huge amount of cash to manage, your investment options are limited. My own track record is around 28% time with return. But does that mean that I'm much better than warm buffet for me? I think it's much easier for me to achieve toe up, perform warmer fit because my portfolio is much, much more than his. I have access to investments that Warren Buffett does not So on the EMI Broker Report here is where you find the annual return. This is usually the very first number I look out for after conducting a back test. We're looking for numbers that above 10% after broker fees Why? 10%? Yes, compared among some other numbers. Yet me Ask your question. What is invasion writ? The invasion rate is how much the prices off goods are generally rising per year in the U. S. Is about 1.5 to 3%. In recent times, our investment returns need to be higher than inflation. How otherwise? It doesn't make sense for us. Toe. Take stock market risks, don't you think? What is your investment return If you were to take absolutely no market wrists, is there even such a thing as risk US returned The truth Is this actually very little off such investment, or sometimes even no such thing as a resource investment? Heavy investments involves risk. Even if you go to college and and you're paying the high tuition fees, there's no guarantee that your investments into your Judy Yushin fees will hand you a job after graduation. But I miss just ou there is something to that effect in general. The financial industry agrees that the depth that d e B t the depth off the U. S. Government is risk free. Why? Because if the government needs cash, they can always set lost raise Texas or print more money. So if you were toe hand money to the government, how much were you? How How much do we Dave pay you? How much interest would it pay you for this? You can something called the 10 year tragedy you. So here's a tenure treasure. You you can see it around 1.5 to 3%. So compared is 1.5 to 3%. Toe your stock market trading returns. If you're you get returns. Yes, and 3% is maybe a better idea to invest in the 10 year Treasury. You don't you think it's no Horace the head? Now here's a chart off the Dow Jones. The Dow Jones is an index, which consists off a basket off stocks. It is a smaller basket. It's only study off the largest U. S companies, but it's a good representation off a variety off industries. It has been around for many years. Ah, since 1896 So this is ah, more than 100 years old. Off stock market track record. The annualized return off Dow Jones is around 7% So if you trade, you want to have your return to be more than 7%. Otherwise he will be better tojust put your money in an index fund and yet your money go passivity. So remember this magic 7% number. It is a number to beat. That is why I mentioned earlier on on ah, that we hope toe achieve at these 10% return. Otherwise we are better off investing in index funds. 44. S09 Backtesting Basics 04 Win rate: back testing basics win rate. Now we talk about measuring the trading system by win rate. What is this, Wing, Rick? Every time you buy and sell ah, treat you item ing money or use money If you were to be profitable and made some money that is calling if you lost money that is called a loss at the end of the year. At the end of the your period, you take the number of times you in and divided by all the number of Treacy me and that is your win rate. Ideally, we all want tohave high winged it. But practicality investment is not so straightforward. You may have high wind rates, but end up negative on your portfolio if the quantum off your losses exceed the quantum off the winds. For example, if you win $5 for 10 times, um and that would be, ah, win off $50 total. But you lost $100 in just once in the time you would have me losses. Overall, even though your win rate is 10 out of yehven used, you lost money. Converse e. You may have low win rid but end up positive on your portfolio. If the quantum off your winnings exit the quantum off your losses, So why am I talking about win rids? This is because off psychology, when your trading system got life, you need to know how often your sister makes money. If the system is profitable, then the wind really is. Ah, very go. Maybe eso if your system is not profitable if your system is profitable, but the wind grid is very low at only 10%. Can you psychologically withstand the many times that you have to take losses on your portfolio? It's not a nice booting. You might not sleep well at night. You may abandon the strategy and the system altogether, so always look at your portfolios. Win rid and decide if you can psychologically withstand this. Your win, Rick. Typical trend. Falling systems have your in right around 35 to 45% but when they win, they can capture Hugh trends and end up very profitable. A good test on your psychological is the sleep well and night tests. If you are losing money, are you able to sleep well tonight? If you can't, you are psychologically not prepared to take the role. Women. So here is the army brokers. That's a six report. Where do you see the win rate? You can see it right over here. How? At the inn rate. So this system has, ah, 43.7% win rate, but over is profitable. It's ah, annual return is 3.7 it. 45. S09 Backtesting Basics 05 Consecutive losses: back testing basics. Consecutive losses in this. The catcher we'll discuss about consecutive losses and why is it important? So why is consecutive losses when your trading a system life, you win some time and you are you sometime? So let's say you start trading and you start making a string off treats and he had the results. So your system is 50% win rate system. And so your typical win rich and lost mediocre this win yours wind. Thus los when Los winning win you us. Okay, this is still fine. All this is within the 50% win loss. Win rate expectation. Let's do this one more time. Let's say you start trading and you made a string off traits and here are the results. Wing loss mean the US those loss, loss, loss, loss and then you house again. Oh, no, no. One. If you suffer consecutive horses like this, there are seven Kozak Day three losses here, and this is still very possible for system with a 50% win rate. Now the question is whether you can psychologically withstand all these convective losses and continue trading. Or were you abandon your system altogether using in a strict that this is not a nice feeling tohave and like the previous win realism Bow you may you sleep over it due to psychological stress. So, you see, when you test the system, they show you your time. Your lodgers using shrink When you test the system, you need to understand that they are times when you're suffer using streaks and is always in the systems possibilities. Again. A good has on your psychology is a steep well and that tests if you're losing money, you're having consecutive losses and you're unable to sleep well at night. You are probably not psychologically prepared. Maybe you should take not usually use another system or not trade at all. So here's the Emmy Broker statistics report. Where do you see the concept of Colossus in the report? You can see over here as highlighter in rate. It shows you the maximum number off consecutive losses 46. S09 Backtesting Basics 06 Equity curve shape: back testing basics Equity cough shape. Now here, we're gonna discuss about equity co shape. So you'll be asking What is this expletive curve ship that we're talking about? Before we learned about this pattern, we need to understand what is part for the Oh, I could pick up part for your equity curve. Is the market value off part for your being represented as a graph over time so that we can graphical D. C how our SS grow or shrink with time? This also includes cash that is not invested. That is, within the portfolio. Here's as number often equity curve Where assets are product over 10 years or 10 periods. You can see over the time the overtime, the powerful your moves up and down, meaning the owner off the portfolio is going through periods off ups and down. Ideally, when we invest, we want to see our assets grow in a nice, consistent trend. Ah, as much as possible with Nitta. Drop s with as data drop as possible. So here's a nice idea. Equity curve. Notice how to overtime equity increases in value consistently. Sometimes they are bumps in the road, but on the whole and still going up. We try to aim for this kind off equity curve as much as possible. This kind of equity cough shows that our trading system has successfully captured a market inefficiency. Up next is a rodders exact equity cuff. It has ups and downs, but the general trend is due up. It is not as move as the consistent one that we discussed about periods. E. It's kind of like a tree steps back. One big step forward tree suspect ones. Big step forward. This is quite common for trend trading systems, where the rain rates are low and lost us our small. But when it wins two huge trends and capture huge profits, this equity cuff is still fine but require better psychology to trade in. Compared to the people's consecutive growing and chaotic of Onex. Up you have that this order echo. Tick off over here, By the way, I generated this using random numbers, never, ever border with this kind of equity cough. It doesn't have any uptrend. Your bank account simply strings strings up and down. You cannot go your wealth over time. He even the stock market itself isn't as random as this. Here's how alive Echo D curved. May you look like if the portfolio is well profitable in the stock market, there appears off, up and down, ideally alive. Equity curve should be going up during the good times and staying pretty for yet on the back In the bad times, every doesn't just stay flat. The losses should be kept in the minimum. The last kind off equity cuff then I like to introduce to you is the Martingale Equity cough. To understand this equity curve, you need to first understand what is the marketing girl betting strategy. So why this strategy about this is a gambling system off continuous E doubling the sticks in the hope off an inventor wind that you that will win you the net profit toe cover your losses. For example, for your first bad, you a paid $1. If you lose, you bet $2. And if you use again, you bet $4 the views again, you will bet $8. You keep the bedding amount you keep betting the amount that you lost. Unfortunately, saw strategy has unexpected outcome off zero return and you may see your equity eventually implode when you suffer a string off losses. This strategy is very common in binary options. Never, ever used this kind of tragedy. You already know the expected outcome and answer is zero. So why border? As many common computer simulations have shown the Martin tear the Martingale betting strategy does not work. Here's the Emmy Boca Equity Cuff report. This is how it looks like we will be visually inspecting these every time we conduct ah back tests. Notice how the pot for your go strip years off good times where the profits are growing and the investor is feeling very happy and also periods off bad times when the investor will be stressed out wondering if the trading system works or not. So when you treat this system, you need to ask yourselves whether you are able to undertake these periods off back time back at times again. A good test on your psychology. It's the state well and night, as if you are going to appear or bad times are you able to see where I night? If you can't, you are not psychologically prepare to take on the volatility that comes with the trade. Yes, the Montecarlo Equity Cuff Report in Emmy Boca if you don't know what is Monte Carlo yet? Do not worry. I will teach you. Get on. 47. S09 Backtesting Basics 07 Maximum drawdown: back testing basics. Maximum drawdown when traders straight the young undergo periods off ups and downs. UK may have two years or very profitable results, then have five years off unprofitable results. It's really an up and down for Costa, right? So we are interested in how bad this rollercoaster, right? Yes, especially during the down times. When the portfolio goes up, the trader gets to enjoy wonderful profits. I'm sure nobody will have problems handing this profits. The problem occurs when the portfolio goes down. When the portfolio goes down is really painful for any trader investor to right through them. We need some way to measure how bad this downturn is, and we need to do that by looking at drawdowns, particularly at the maximum drawdown where the worst case in narrow is being modeled. Let's look at this in detail when you actually backed Has on the EMI broker perform Yes, how the present the results. This is one off the test that I did from 1995 to 2015. The general trend is a consistent rise in portfolio until 2000 and eight. Like so there's a consistent writes in portfolio and then on to 2008 They waas meltdown. Then the pot for your continued toe power hit on 2 2014 And then there's another meltdown. These meltdown I call drawdowns. They're extremely painful to write. True, we could be writing through them for years before we see any form off increase in the equity. It is easy to see your equity grow nice T consistently from 1995 to 2000 in the greens ago . Market. Well, eventually pick, and so will your part for you. We need to be psychologically strong to stick tight and stay from toe our trading system, especially during the the drawdown periods. Even though I know my system is long term profitable, it is still hot for me to sit through the spirits. Another way to represent Drawdown is to use this chart. We define the drawdown from the recent high to the cardio and expressing as percentage. For example, if you are sitting here in the reds ago in 2009 you have lost more than 40% off your portfolio from me speak. This only recovered four years later, in 2013 in the Green circle for the whole test Pure it. Your maximum drawdown is 40%. This trading system requires you to stomach Ah, 40% He house on your portfolio and it will only recover after four years in a green second in agreeance Sic over here. So what I'm interested in is this maximum drawdown in any Broca. This maximum drawdown is supported by a relying over here where we encounter such maximum drawdown. Nobody knows for sure, but when the time comes, we have to be psychologically prepared Back testing is so powerful because it's psychologically people as us for such drawdown. When we going to such where we're going to use a system with the knowledge that ours, our strategy has positive expected see expectancy over the long period Time again. A good test on your psychology is the steep well, and night as if you're going through periods off drawdown. Are you able to sleep well tonight? If you can, you are psychologically not prepared to take on the drawdowns 48. S09 Backtesting Basics 08 Random entry and exit: back testing basics, random entry and exit. Did you know that if you have two people using exactly the same trading system, they can get very different results? Why get me at more mystery to this question they are using the as extreme method. These methods are 100% mechanical, with precise entry and exit rules. Both traders religious, cystic toe. These metta trading rules, the market and time periods which they are trading on are exactly the same and they size their position. Similarly, chances are Hubie not be able to answer me. In fact, I haven't seen anyone being able to answer this. So let me explain to you about this mystery question Over here. The answer is because off random X entry and exit, you probably do not know what I'm talking about. So at me go into some very basics for us. First off, I need to explain what is a part for you. A portfolio is a cash you allocated for investments plus the total value off off the stocks you own. If you buy stocks, you're off the cash and convert them into stocks as you sell stocks. You moved the stocks and converting it into cash, so it, ah, value off stop A goes on 50% your part for your goes up. But if but your hope portfolio doesn't go up 30% because so a may just be a small part off the pot for Dio your so your portfolio may only go up only just 10% instead off just 50%. The gains and losses off each stock will effect the part for your value proportionally. So if stop is a huge proportion off the portfolio, it will effect the portfolios. Gains lost our gains and losses. Much more sin if Ghani Because the value off stock fluctuate daily, the value off your portfolio would also factually factory. According me. Obviously, the cash convoy opponent in your portfolio does not factor it all because there's not really a market price for for cash. Before you start investing you, we've all trading. You only have cash. You need to decide how you're going to speak your cash. How many portions are going to speak? You cannot Troy or in cannot show all your cash into one offs to stock ideas. You need to diversify them into several portions. You need to speed them up. So that say you decide to diversify into five different portions on a side note? I honestly think five is toe the toe of a number. But for the sick off simple demonstration, we pick five for our die investigation. And every day, according the Okay, so we have five portions off cash. And every day, according to the trading method, we would generate some trading ideas. And maybe today your training method represent recommends you buy to start today, stop a and stop. Be so sticking religiously toe our trading method. You go out there and buy these two stocks and now your cash is gone and you have to stop there in your portfolio. The very next day, your trading system recommends you toe by another two stops Mary stock, see and stock de again. We stick religiously toe our trading system. We got there and by these two stocks and our cash is gone and exchange for stops. Okay, Things are still symbol over here. Now, here's where it gets a little bit more complex. On the very next day, the system recommends you toe by four stocks. Now you only have enough cash for one single stock. The question is, we stock. Are you going to buy from all these four stocks? You may go deeper into these four stocks and pick one with the best fundamentals or liquidity and then decide on one or you might see like them by alphabetical order. So start is the higher off a political other one, and you may cxt rt you may even throw a dice and randomly select one of these stocks. Your section were impact your future off the portfolio in an infinite number off. Different possibly. At these honesty, we do not know how the section cafeteria will be. What we do in our back, Tess, is we treat this as a random selection, so this were random. Nice. Our selection. We will get very different random entries and exit down the road. And this is the reason why if you were to run your back tests again, you will get sky D different performance results. This is why, to people using the exact same trading matter can get two different sets off trading results. Person Amy get lucky and randomly celiac winning stocks all the time and person B may be unlucky toe be be treating, losing starts off the all the time. Now your next question is probably how do we model such randomness? How do we account for these kind of randomness? They are an infinite number of ways of his house can turn up. If we are lucky we are profitable. If we are unlucky, we are unprofitable just like their an infinite number or purple dots on this screen right now. Well, it's not really infinite, but guess just pretend they are so many dots here that is infinitely. And each dot represents a single possible results. So it's gonna take a computer forever to test an infinite number off test case. Correct. So how did he really modern These with a computer? The solution is simply toe random sample. We are going to render me take maybe 1000 tents case and draw our conclusion based on this 1000 test case, it if out of these 1000 test case 90% is profitable and 10% is loss, we know that this trading system is more likely to be profitable and the arts are with us. So, out of these 1000 test case if 90% our losses and only 10% are profitable then we know this trading system is most I need to be unprofitable and the odds are against us. And we shouldn't be using this trading system. There's a name for this random something. This name is called a Monte Carlo simulation. When you conduct Monte Carlo simulation for trading systems, you will get results like this. This result is generated from Amy Boca. So let me teach you how to read this. The first thing that I like you to get is the equity kerf. The green guy represents the most profitable test case, while the brown dye represents than these profitable test case results. So OK, at niece, these are upward sloping, meaning that even even the worst has cases to profitable. So that's good. The Sendai represents an average value. Also, pay attention to how white the green and brown guys disperse apart. The further apart they are, the more random the system is. And the more uncertainty stay up the narrow it is, the better knicks are. You get the 50% over here. I okay the 50%. Any return. All right. Over here. So if the treating system is telling you that on average you'll get the annual return off 3.57%. Okay, that doesn't really beat the index. But this, you know, it is not using money. The last thing that I look at is the 1% and the 99% Monte Carlo results is telling me that at 1% it is where the worst case you never is. I'm going to get a very miserable 2.9% annualized return. And at the 99% case, at the best case to narrow my results are goingto be 4.65 and your eyes. And this is how you really do Apapa back tests off any trading system. 49. S09 Backtesting Basics 09 Testing Parameters: back testing basics testing Permit us. This structure is for those off you who are really interested in the details off the back test that we conduct here. I'm going to discuss the back testing perimeters that I use for those results which which I discuss over here. Maybe you like to conduct your own back test toe independently, verify my results. Yes, I would be very happy if you could compare results to see if you get similar observations. The first question that may come to your mind is what other markets which the suspect has are conducted for me. I used the U. S. Market name need a combination off New York Stock Exchange and on the NASDAQ and and why SCM k d I feel that these markets are very established and they have good track record history for back testing. And I believe more students watching this cause who will be also focusing on these markets as well? So choosing the U. S. Market for back testing is ideal off course. You can also test these on other markets such as today s checks in Singapore Hong Kong Exchange in Hong Kong or Tokyo Stock Exchange who knows? You may get very different results from what I have here. Second, me. What are the time periods did I use? I used First off. January 1990 toe seven off November 2017 This works out Toby around 28 years off stock market history. I believe this is a good testing period to reflect the booze and best. During this period, we are able to capture the effects off major crisis Such s the 1997 Asian financial crises , the 2000 dot com bubble and the 2000 and eight Goba Financial Crisis Dundee. I wish to discuss about the commissions for long trades. Long traits are the traits which which I buy the stock with four appreciate in price and then sell for profit. So here I used 0.25%. It may seem rather high, but hearing sing up all commissions are rather high at 0.25%. So I shall used to open 25% to be conservative. Everyone you can conduct other back tests with other bookish fees. Knicks up what other commissions they're used for short treats. So short treats are ah short treats aren't as the opposite of long traits. I make money when the share price goes down. How do I do that? I don't own the chess. So what I do is that I go to my broker. I asked them toe, lend me some shares with the promise that I will buy those shares back and returned, then let on. I used appearing 0.25% in my back tests. I didn't include interest paid for both says or CFT financing charts. In reality, this financial charts and and the bushes me at up to another 1 to 5% depending on the different brokers. But over here, I just use a very paying 0.25%. Next. I like to discuss about entry price and time. How do I choose when to enter the position? After the signal is triggered in back testing, you need to ensure that you do not use future data to make your buy sell decisions. You need to test it as if you have no access toe future information, which is exactly what we will be doing in your life. So for me to ensure this, this is what I do when the entry signal trick. When the entry trigger is formed and it comes out here, I will not end on a day itself. I will enter on the opening price off the holing day. This were insured. I do not use future prices in my trade. One positive out. One possible about other positive alternatives. Are the current days coast closing price or even intraday prices? That's fine, but for me, I want to make sure that I do not cheat by gazing into the future. So if entries this entry signal comes today, I ended a treat on tomorrow's open. Also, I'm making the assumption that I will be able to buy at the open price, which is not always possible. They can always be broker or brokerage slippage or the price can move away very fast. Now what about as it prices and timing is the same concept as the entry signal. If exit triggers today, only wait until the very next day toe exit again. I want to ensure I do not cheat by using future information. So if exit signal comes today, I exit my treat on tomorrow's open. Also just like the entry signal. I'm making the assumption that I will be able to buy at the open price again. This is not always possible. Sometimes prices run away too fast and sometimes sit fish can occur. 50. S10 Trading basics 01 Diversification: trading basics diversification. I'm sure off you hurt off how important it is to diversify. The guys who are starting new funds will be saying how superior they are. Fans are due to the investigations CEOs off this, the companies will say how they're diversifying their businesses toe last risky areas. This is actually true. And they're spot on when they say it's important. Our natio and insider with insider information or you have a risk US investment giving you high returns. You really need to diversify and spread your risks across different Countess. Even if you you have the art in your favor, you can use money you can use. Do you need to diversify? Oh, yeah. Straight days. We're gonna do some fun calling, flipping simulations. You realize that even if you have tow us in your favor and if you do not diversify, you will ruin yourself. All right, so this is our coin flipping simulator. The game is like this. We're gonna have an unfair coin. The coin has the 55% chance off getting hits and 45% chance off getting tales, and we are going toe off the obviously bad hits all the time. It sounds like a good game to play. And we're definitely win. Right? Let me continue. We start off with $10 over here, I so and every time we bet we decide how much cash to bet if it ends his we were doubled the amount that we bet. And if it the instills will use all the money that we bet we keep doing this for about 300 times and that c house our results. How is our profit? And over here, this is where I can adjust the percentage of my portfolio to bet. So over here is a diversification that I can't just so number Tree means that I speak my portfolio in tow. Tree diversification is the crew guns are buying tree. Different stocks are spitting my portfolio to buying tree different stocks. If the number is that, say 10. That means I is the cooling off me, spitting my portfolio in tow. 10 different stocks like so So let's pretend that we only speak this into a tree so effectively will be batting 33.3% off our our money. Every time we flipped a coin right over here it shows how much profit I have at the end of the game. Ah, and that is if I'm still in the game and down here, it shows whether I ruin my portfolio or not. So if I start with $10 loose money so much down to a very goal number that say, like, 50 cents, I consider myself ruin and off the game $10 may not be a great amount, but if you were to magnify this over a typical persons that are saving off that's a $100,000 is equivalent to having a portfolio drop from 100 K tau honey. Five k having 100 k dropped toe. Only five k is definitely a ruin. Yeah, I've saving. So let us begin. We assume that we are going toe diversify into a tree. Stocks. So we end the tree over here light. So we run the stimulations a few times, like so I'm hitting amateur hitting at night. And we we see that, um, whether we ruin our part for the or not And okay, no ruin, no ruin, no ruin, no ruling. And we get very good returns. Ah ha! That's one ruin Okay, so this time that we get are for the ruling. Ah, here's another time that we have our portfolio being ruined. Okay, So I'm continuously heating f to refresh, so you can see that, Um, if you could be quite unlucky sometimes. Okay. Here's another time you got ruined. If you are quite unlucky, sometimes you can ruin your portfolio If you're only diversified in tow Tree stocks. And remember the also already in your favor. You You have a 5% each. And yet it issue possible toe grew in your portfolio. If let's say we push this number down toe to and that is very detailed, I viscous that diversification. You realize that it is much easier toe ring your portfolio. Okay. So almost every time I refresh, I I get a ruin portfolio is very painful to watch. Okay? It's almost every time. No, let's say we diversify across, then stocks. Uh, I'm gonna type in 10 over here. 10. Okay. So All right. There's no ruin. How does the yolks so far I keep refreshing and yolks up pretty good. We almost never ruin our portfolio. Okay, maybe we bring the number down to fall we may get some ruins here and there, but it's better than Ah, here's one ruling over here. Yes, another ruin so forced you get us some ruin portfolio. No. So with this simulation, the moral of the story is that you must diversify and diversify into a basket off stocks. I will say 10 is a good minimum number to go for. 51. S10 Trading basics 02 Asymmetry of returns: trading basics and symmetry off returns. Here's an important concept that you must know. If you are an experienced reader, you might already know it already, but if you're just starting out, you need to understand the concept off asymmetry off return for So what is this? A signature of return that, say, you bought a share at maybe, um, $9 over here and it tumbles down to $6 with dissent. So how many percentage have you lost? It is actually you lost. Ah, minus 27%. Now let's say you bought the Sheshiah at $6.6.50 and the rise us to dined on us. How many percentage have you gain? Is it also Ah, 27%. The answer is no is actually a different number is from police from 27% that she 38% instead of 27%. We pull this back even further. Let's say you bought a share at $15 drops down to $6. 50 cents? How many percent have few laws? You punched a cop creator and your losses is 57%. No, let's say you bought the share here at $6.50 and the rise US toe $15 is again. Right? So how many percent have you gained? Is it also 57%? Ah, the answer is no. Is far from 57 is much, much brother is actually 130%. No, The point that I want to bring across is that when you use 57% again off, 57% is not sufficient for you just to break even. You need again off 130% just to break even. How often do you get 100? 30% return. So do not let that small number for you that small, negative 50 per swifty sample send them before you in that Your fact is telling you that you need a return off 100% 130% just to break even and 130% is not an easy feat. And this brings us to our next point. When we use, we want to keep it. Theo, we prefer this house situation. And when we re in money, we before this kind of situation, we want to keep it as high as possible. And hence the famous cliche. Cut your hoses quick, and yet your profits run. This is not just some why saying Based on no evidence, you can see that this famous Chris Shea is actually mathematically proven. Now here's a chart wish you can refer to when you cut your losses. At 1% you need a 1% of brick even all right, not so difficult when you cut your losses. A 2% unique are also around 2% to break even again is very easy, going down from 10 percents Unity, 11% to break even. Very easy again. But a city called down You see that it's stuck still get tougher and tougher. Uh, 30% loss. You need 43% gain to pick, even at 40% loss, you need again off 67% just to break even and 50% los you need again off 100%. Just break even. The number becomes exponential as you use more and more At 99% Haas, you need again off 9009 and 900 gain just to break even. How enough is that even possible on 9000 900% gain? So remember, the rule is toe cut your losses quick 52. S10 Trading basics 03 Risk and reward: trading basics, wrists and reward. Yes, 1/2 the well known secret off making money in treating the secret is that you you take low res for high reward. And sadly, most readers to know know this and the end up losing a lot of money when they try to invest their own money. Ni many reasons for this but one of the most common reason comes from the inability off individual investors or traders. Toe mensch Rece Reese We What is a common term in the financial world? But what does it mean? Simply put, investing money in the markets has a high degree of risk. And if you're going to take a risk, the amount off money you stand to potentially gain must be large enough more than cover. The risk that you take otherwise is going to be pretty stupid. Toe take on the res in the first place, right? If some stranger comes to you asking for $100 loan and you offer and that stranger offers to pay you $120 in two weeks, it might not be worth the Reese, but what if they offer to pay you $300? The res off losing $100 for the chance off. Making $200 can be quite appearing now. This is a 1 to 2 risk to reward ratio, which is a racial where a lot of professional investors start to get interested. A 1 to 2 ratio allows the investor to double their money. If that person offered you $400 then the ratio goes toe Treat one. Now Just look at this in terms off the stock market, I assume you did your research and you found a stock that you like. You know this, that this stock they like is cost on X and is treating at around $50. Right now over here is treating at $50 and is down from a recent high off $58. You believe that if you buy now in the not so distant future, start X will go back up to $58 you can cash in. You put the trigger and you bought the chefs. You did all the research, but do you know your risk reward ratio? If you are like most investors, you proper be don't before we done. If our stock extra is good idea. For Marie's perspective. What else should we know about this restore? We want ratio first, although a bit off got Fuding, is there restore reward is more objective. It is a Caucasian, and numbers do not lie. Secondly, each individual investors has their own Horan's forests. You, me off writing the role, costa. But someone else may have a penny attack just thinking about it. The calculation ofrece reward is very easy. You simply divide your net profit, meaning the net profit. So we want by the price off your maximum risk. We've stopped excess our example. If the stock went up, so that's a $58. Your profit is $8. But what if you use you may use your entire investments on $50 so here the reason is like a 50 $50. You take 50 units off Reese for eight units off the what? Now that doesn't sound like a wise thing to do right now. Stop prices, usually one go to the euro. Unless something really bad happens in real life, you can actually control how much losses toe take by setting a stop loss. Us. A stop loss is a price that you will sell out to stop the trade and a vote any future losses. So for a reiss reward off, one is a two. You take four units off risk for eight units of reward. You could plan your trip like this. You said a stop loss. At $46 you take on four units of Reese and yourself at 4 to $6 to Mattawa and admit that you have lost money and this allowed the trick and you take the losses that command you said your profit target at $58. It means that once the price hits $50 or buff, use out to take the profit. In this way, when you set up your tragedy, I saw your Reese to reward is one is a two, which is okay, is a good thing to do.