Trading guides - Mundo Markets

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01.
All About Bullish And Bearish Engulfing Patterns
Bullish Engulfing Pattern (page 2)
Bearish Engulfing Pattern (page 3)
02. How Important Are Support And Resistances In
The Forex Trading?
Support (page 2)
Resistance (page 3)
03. How to Start Trading With MT4?
Opening Charts (page 3)
Trading (page 3)
04. Ways to Draw a Trend Line Effectively
Right Way to Draw Trend Line (page 3)
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TRADING
GUIDES
ALL ABOUT BULLISH
AND BEARISH ENGULFING
PATTERNS
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01
TRADING
GUIDES
02
01. All About Bullish And Bearish
Engulfing Patterns
Are you familiar with the candlestick charts? If yes, then you must be knowing that there are
several kinds of candlestick patterns, which can be used in trading to determine or predict
direction for a particular instrument.
One of the most popular candlestick patterns is engulfing pattern. It can be of two types –
Bullish and Bearish. The Bullish engulfing pattern means that a particular instrument price
might rise for the next few candles.
Similarly bearish engulfing pattern means that a particular instrument price might fall for the
next few candles. In this article, we will see some examples of the engulfing patterns and try
to learn how to trade with them.
01.1 Bullish Engulfing Pattern
As mentioned earlier, the bullish engulfing pattern helps in understanding a reversal for a
particular instrument or Forex pair. Basically, a bullish engulfing pattern represents a potential reversal in the market when it is seen in an instrument or Forex pair in its downtrend.
The bullish engulfing pattern is formed with two candles, as can be seen in the image below.
First one will be a small candle generally a Red/Black candle defining bearish candle.
Second one would be a comparatively big candle which is completely opposite of the last
one signifying that the buyers are taking control i.e. a nice bullish candle overlapping the
previous bearish candle. This can be easily seen in the image.
When such bullish engulfing pattern is formed it means that buyers are starting to appear,
and there is a great chance of a reversal in the short term.
It is also said that when this pattern is formed the bullish candle completely engulfs the body
of the previous bearish candle. This particular pattern is a solid one, which signifies that the
control has shifted from sellers to buyers. In that situation, one might consider buying that
particular instrument/ Forex pair.
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TRADING
GUIDES
03
01.2 Bearish Engulfing Pattern
The bearish engulfing pattern is completely opposite of the bullish engulfing pattern. Basically, a bearish engulfing pattern represents a potential reversal in the market when it is seen
in an instrument or Forex pair in its uptrend. This pattern can be called as Mirror Image of the
Bullish Engulfing Pattern.
The bearish engulfing pattern is also formed with two candles just like the bullish pattern.
First one will be a small candle generally a Green/White candle defining bullish candle.
Second one would be a comparatively big candle which is completely opposite of the last
one signifying that the sellers are taking control i.e. a nice bearish candle overlapping the
previous bullish candle.
When such a bearish engulfing pattern is formed it means that sellers are starting to appear,
and there is a great chance of a reversal in the short term.
In that situation, one might consider selling that particular instrument/ Forex pair.
There are some other complex conditions for an engulfing pattern, but I have not covered it
in this article because it would be difficult for a newbie to understand it.
For a complex explanation we will have another write up on the same topic.
Bearish Engulfing
Bullish Engulfing
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TRADING
GUIDES
HOW IMPORTANT ARE
SUPPORT AND RESISTANCES
IN THE FOREX TRADING?
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04
TRADING
GUIDES
05
02. How Important Are Support And Resistances
In The Forex Trading?
In the Forex world two terms are very important – support and resistance. These two play a
critical role in not only the Forex trading world, but also in almost every financial trading. I
think words itself point the meaning.
In my opinion, knowing support and resistance is very important and if you learn how to plot
proper and significant support and resistance levels, then I think you likely win 30% of the
battle. So, let us discuss a few things about both terms in this article and learn some key
aspects which one need to keep in mind while drawing support and resistance.
Remember, in this article we will only discuss simple support and resistance and not any
complex stuff related to trend line and Fibonacci support and resistance levels. We will
discuss that in another article.
02.1 Support
Many experienced traders will explain and suggest to make proper use of support levels. In
a very basic step a support can be drawn using a horizontal line.
If I have to explain a newbie, then it a price level from where a particular instrument or Forex
pair bounced two or more than two times. In other words, we can mention that it is a price
level where the market has been rejected at least twice, and buyers appeared time and
again around the same level to protect more downside.
One of the best examples of support can be seen in the image above. There was a level,
which acted as a support on four occasions. Every time the pair came close to the highlighted area, it bounced from the there. It is a perfect example of a support.
If the market turns or jumps higher from a particular level on a number of times, then it
means that it holds a lot of importance. Support levels are the ones where you might
consider buying an instrument or a Forex pair. In some cases it is also considered as a trend
analyzer.
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06
Let’s say a level acted as a support on a number of times, but it was broken at the end.
It might help you in understanding that the prices might fall further because an important
support was broken and means sellers are in control.
02.2 Resistance
Resistance is just opposite of the support, as can be seen in the image as well. A resistance is
formed when an instrument or a Forex pair fails to break a particular level two or more than
two times.
In other words, we can mention that it is a price level where the market has been rejected at
least twice, and sellers appeared time and again around the same level to protect more
upside.
Resistance levels are the ones where one might consider selling an instrument or a Forex
pair. Just as a support, a resistance can also be considered as a trend analyzer. Let’s say a
level acted as a resistance on a number of times, but it was broken at the end. It might help
you in understanding that the prices might fall rise because a critical resistance was broken.
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TRADING
GUIDES
HOW TO START TRADING
WITH MT4?
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TRADING
GUIDES
08
03. How to Start Trading With MT4?
In one of the previous we explained why you should use Metatrader 4 platform also known
as MT4. In this article we will learn some basic steps of using MT4.
Once you download the platform, then you should know how to use it. Let us discuss how
you can quickly start using MT4 with us.
In this article we are assuming that you have opened an account with us and downloaded
MT4.
If you have not downloaded MT4, then please download it and install it before you follow
next instructions.
03.1 Login
The very first step after installing MT4 is logging. Once you open MT4 after installing, then
you will be presented with a login screen, as can be seen in the image below.
There are three fields Login, password and server. You need to enter all details as provided
after opening an account. Enter user id, password and server for live or demo account, which
will be provided once you open an account.
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03.2 Opening Charts
One you login, then you will see a market watch window on the left hand side where there
will be all symbols for instruments be it Forex pairs, indices, stocks, commodities and futures.
You select any one of them to open a chart for it.
To open a chart for a symbol you need to right click on that particular symbol in the list and
click on ‘Chart Window’ from the menu.
This will open a new chart for the selected symbol as can be seen in the image below. You
can zoom in and zoom out for any chart for better viewing of the chart. There are three types
of charts – Bar, candlesticks and Line.
You can any one of the preferred charts. I personally always have candlesticks chart as
default view for any instrument or Forex pair.
Once you open a chart, then you can attach any indicator or EA on that one. We will be
covering methods of adding some main indicators in other articles.
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03.3 Trading
Next comes trading. One you setup a chart you need to know how to open a trade and close
it. To open a trade you need to right click on a symbol chart.
A menu will appear. You need to select Trading in the Menu and then the ‘New Order’ option.
Once you click on the new order option you will see a new pop-up – Order.
With the help order window you can either place an order or open an instant trade.
An instant execution trade will be the one which will be executed at the current market price
(either Buy or Sell as selected). Alternatively, you can even select a pending order which can
be either a sell limit, buy limit, buy stop and sell stop.
We will be explaining all these order types in one of the other articles. You can even enter a
stop loss and take profit points for an order.
Last but not the least you need to enter a volume for the trade which is basically the lot size
of a trade.
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TRADING
GUIDES
WAYS TO DRAW A TREND
LINE EFFECTIVELY
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TRADING
GUIDES
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04. Ways to Draw a Trend Line Effectively
If you are comparatively new in the Forex market and just started working with the charts,
then you might need to know how to draw a trend line.
Drawing a trend line on the charts is very important and you need to make sure you are plotting it correctly else you might get into a bad trade because of it.
You might be thinking that why plotting a trend line on a Forex chart gives very critical
information?The answer is simple because it will not only show you the right direction of a
particular instrument, but it will also illustrate points of support and resistance levels.
Right Way to Draw Trend Line
The very first key thing which you need to keep in mind is that the trend lines are always
formed connecting three or more points on the charts without any intersection to the other
side, not even by a single pip. A trend line with less than three points cannot be considered
as a trend defining sequence. A trend line with more connecting points is always significant
and suggest a proper trend in the market for that particular instrument.
An example of a perfect trend line is shown in the chart below.
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TRADING
GUIDES
13
The above example is a perfect example of a trend line, which was acting as a support for the
EURUSD pair on four occasions. The pair was in an uptrend as long as it was trading above the
trend line, and one it was broken the trend was changed. The same trend line acted as a
resistance later, which signifies the importance of the trend line plotted. You always connect
points on the chart, which connect swing lows or highs. As in our example we connected four
swing lows in the pair. Similarly, if you are drawing a downtrend line, then you need to connect swing highs.
One of the examples of a downtrend trend line can be seen in the chart above. There was a
trend line connecting swing highs acted as a resistance on five occasions, and once it was
breached it acted as a support later. So, the EURUSD pair was in a downtrend until the highlighted trend line was not breached. Once it broke the same, then the trend was changed.
You need to learn to draw the trend line correctly, as shown in the examples.
If drawn properly, they can be as perfect as any other method. Unfortunately, there are a few
traders who don’t draw them correctly. Some traders try to make the line fit the market
instead of plotting it correctly. This is not the right way to draw trend lines, as you are plotting
them as you want the market to behave. You need to have a clear approach and forget if there
is any trade already opened, which might get affected.
According to me the trend lines are one of the most powerful methods to take advantage of
numerous trading opportunities. So, we need to use if effectively.
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ABOUT MUNDO MARKETS
Mundo markets is a fast growing global provider of foreign exchange trading and
related services.
We believe in honesty and transparency and provide a medium to our clients for
the greatest chance of success in the forex markets.
Clients are our priority and we are always available to work hand in hand with
them.
IN THIS E-BOOK!
Find out what you need to know as Trader
in forex markets
All About Bullish And Bearish Engulfing Patterns
How Important Are Support And Resistances In
The Forex Trading?
How to Start Trading With MT4?
Ways to Draw a Trend Line Effectively
TRADING
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