Module 3

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 Module 3: RichTL Objective Trading Style

1. Introduction to RichTL – Objective Technical Analysis

2. How to Draw Objective Trendlines

3. Objective Last Swing Standing

4. Objective Chart Patterns

5. Objective Supply and Demand Zones

6. Objective Support and Resistance

7. Swings Analysis – Market Structure

 Module 3: RichTL Objective Trading Style

8. RichTL BOMB – RichBomb

9. Objective Stop Loss

10. Golden Candlesticks

11. MDB – Objective Divergence

12. Confluence List – Cheat Sheet

13. Our Top-Down Analysis Approach

14. Live Examples

 1. Introduction to RichTL – Objective Technical Analysis

Problem: If you give two traders the same chart, and ask them to each plot a line – you
will probably see two very different results.

This subjective viewpoint can negatively affect decision-making because it’s based on
feelings and opinions rather than preplanned strategies.

Solution: To be profitable, a trader must trade and think like a robot. Leave emotions
and subjectivity at the door and execute a strict set of rules laid out in the trading plan.

What is RichTL? And how it works?

Originally I have developed RichTL for myself in 2016. Now RichTL is used by members
worldwide.
RichTL is NOT the holy grail!

RichTL helps traders make Rule-Based Analysis with confidence. Objective Technical Analysis!
 2. Objective Trendlines

With RichTL we will be connecting the swings with the dots.

Or what we call Objective Swing.

 b. How to Draw Trendlines Correctly

Rule 1: Number of Touches

All these trendlines are not valid as they connect only two dots/swings.
Rule 1: Number of Touches
These two trendlines are valid as they connect three dots.
Rule 2: Draw Unbroken Trendlines
Trendlines shouldn’t be broken by a candle close.
Rule 2: Draw Unbroken Trendlines
However, Wicks are tolerated.
RichTL dots show us the “swings” to connect.
Not exact points/candles.
RichTL dots show us the “swings” to connect.
Not exact points/candles.
RichTL dots show us the “swings” to connect.
Not exact points/candles.
Just like support and resistance levels:
Trendlines are zones, not laser lines.
Just like support and resistance levels:
Trendlines are zones, not laser lines.
Rule 3: The Distance between the swings has to be equidistant or symmetrical.
Here is another example, the distance between the first dot and second dot, is a
lot smaller than the distance between the second dot and third dot.
Here is an example showing a valid trendline where the distance between the first
and second dot is almost equal to the distance between the second and third dot.
The Distance between the swings doesn’t have to be exactly equal,
but almost equal visually.
Otherwise the two dots that are very close to each other will be considered as
one dot only.
This purple trendline is objective, as it is formed from three equidistant dots.
Here is another example
The two red dots in the middle are considered one dot.
One more thing:
The length of the swings used to draw the trendline has to be relevant.
Even though this trendline is connecting three dots and the distance between
the dots is symmetrical, but it is not valid because the last swing isn’t relevant.
It is not about the size of the swing. But its relation with the other two swings
used to draw the trendline.
Rule 4: Trendline = Rejection, not continuation.
If price and trendline are going down, we will be looking for buy opportunities.
Rule 4: Trendline = Rejection, not continuation.
If price and trendline are going up, we will be looking for sell opportunities.
Rule 4: Trendline = Rejection, not continuation.
If price and trendline are going up, we will be looking for sell opportunities.
 d. How to trade trendlines?

Trendlines Types

Long-term Short-term

* From Daily and * From H4, H1 and

Weekly Timeframes M30 Timeframes

* Act as key rejection * Act as trigger

levels
* By connecting three
* By connecting two swings
swings
Short-term:
Trendlines on M30, H1, H4 = Break, Trigger
Long-term:
Trendlines on Daily, Weekly, Monthly = Rejection, Reversal
Long-term:
Trendlines on Daily, Weekly, Monthly = Rejection, Reversal
Long-term:
Trendlines on Daily, Weekly, Monthly = Rejection, Reversal
In closing
 3. Objective Last Swing Standing

Trendline Last Swing Standing Examples.

Objective Last Swing Standing
Our objective last swing standing is the last dot that touches our trendline.
We always wait for a momentum candle close beyond our last swing standing.
Not too big, not too small.
We don’t want a shy candle closing above our last swing standing.
We don’t want a shy candle closing below our last swing standing.
In Parallel, we don’t want the momentum candle closing above/below our
last swing standing to be too aggressive.
Or look for entry opportunities if price retests our last swing standing.
Keeping in mind that sometimes the candle closing below/above our last swing
standing is aggressive, but isn’t closing far away from our last swing standing.
We don’t want to enter if price travelled a lot before breaking below/above our last
swing standing. Because in such cases, price would be exhausted
Here is a typical trade.
There are two ways to draw our last swing standing zone:
1- Classic or 2- Aggressive
A trendline would be an idea until it connects at least three dots.
A trendline would be an idea until it connects at least three dots.
An objective trendline would no longer be valid, if the price goes in the other
direction aggressively.
When an objective trendline is broken. The Last Swing Standing would be “Locked”
When an objective trendline is broken. The Last Swing Standing would be “Locked”
 4. Objective Chart Patterns

Double/Triple Top
When price forms equal highs with dots, we have an objective double top pattern.
Double/Triple Bottom
When price forms equal lows with dots, we have an objective double bottom pattern.
Head and Shoulders
It is formed by a peak (shoulder), followed by a higher peak (head),
and then another lower peak (shoulder).
Inverse Head and Shoulders
It is formed by a valley (shoulder), followed by a lower valley
(head), and then another higher valley (shoulder).
Then we have 3 patterns with trendlines: Channels, wedges, and triangles.

- The other trendline acts as an add-on.

- The other trendline is not used for entry.
- Unless it is from Daily, weekly and monthly timeframes, then it will act as a key rejection zone.
Channels / Rectangles
A rectangle is a chart pattern formed when price is bounded by
parallel support and resistance levels.
Wedges vs Channels
Wedges are just like channels. The only difference is that the other trendline is flatter,
and not parallel to the original trendline.
Rising Wedge
It is formed when price consolidates between upward sloping
support and resistance lines.
Falling Wedge
It is formed when price consolidates between downward sloping
support and resistance lines.
Triangles
Symmetrical Triangle
The slope of the price’s highs and the slope of the price’s lows
converge together to a point where it looks like a triangle.
Descending Triangle
This chart pattern occurs when there is a horizontal support
level and a slope of lower highs.
Descending Triangle
This chart pattern occurs when there is a horizontal support
level and a slope of lower highs.
Ascending Triangle
This chart pattern occurs when there is a horizontal resistance
level and a slope of higher lows.
Examples
These are the only objective setups that could have been taken.
Examples
These are the only objective setups that could have been taken.
 5. Objective Supply And Demand

A demand zone occurs when the price makes an aggressive movement upward.
In parallel, a supply zone occurs when the price makes an aggressive movement downward.
In this section, we are going to learn how to identify supply and demand zones objectively
using RichTL indicator.
Supply Zones
- The Rally Base Drop, or ‘RBD’.
Supply Zones
- The Drop Base Drop, or ‘DBD’.
Demand Zones
- The Drop Base Rally, or ‘DBR’.
Demand Zones
- The Rally Base Rally, or ‘RBR’
EURGBP DAILY
 Supply & Demand VS Support & Resistance

Support and resistance is where one is able to see a number of failed attempts.
However, supply and demand is a strong move that is formed from one
single fresh untouched base.
 Supply & Demand VS Support & Resistance

Sometimes, a Support/Resistance could be at the same time a Supply/Demand zone.

 6. Objective Support and Resistance

We draw our Support / Resistance levels by connecting at least three dots.

(Blue, Red, or both!)
 6. Objective Support and Resistance

We draw our Support / Resistance levels by connecting at least three dots.

(Blue, Red, or both!)
 6. Objective Support and Resistance

Support and Resistance are areas on your chart (not lines).

As price approaches a Resistance, we will be looking for sell setups on lower timeframes.
As price approaches a Support, we will be looking for buy setups on lower timeframes.
As price approaches a Resistance, we will be looking for sell setups on lower timeframes.
As price approaches a Support, we will be looking for buy setups on lower timeframes.
 Support & Resistance Types

Market
Key Level
Structure
Long-term zones. Short-term Swing
High/Low.
From Daily and
Weekly Can also act as a
Timeframes. trigger.
 7. Objective Swing Analysis / Market Structure

Structure of A Downtrend (Bearish) Market Structure of An Uptrend (Bullish) Market

Prices will be making Lower Highs and Lower Lows. Prices will be making Higher Highs and Higher Lows.
 Impulsive & corrective move

-Impulse move – “Longer leg” on the chart, which points the direction of the trend.
-Corrective move – “Shorter” leg on the chart, which is against the current trend.
 How to Determine a Trend Weakness

- Slope of impulse moves getting flatter - Slope of corrective move getting steeper
How to Tell when the Market is Ranging
You know that you are in a range
when you don’t see a clear direction, up or down.
Now let’s add RichTL to our chart and go over this section again but this time,
using RichTL dots to make our market structure analysis objectively.
Now let’s add RichTL to our chart and go over this section again but this time,
using RichTL dots to make our market structure analysis objectively.
You can identify a range objectively using RichTL when the market is not able to do two
consecutive higher highs and higher lows (dots), or lower lows and lower highs (dots).
You can identify a range objectively using RichTL when the market is not able to do two
consecutive higher highs and higher lows (dots), or lower lows and lower highs (dots).
Here is another example on USDJPY Daily timeframe.
If the range is from Daily/Weekly, then we will be looking for sell setups around the
upper bound of the range, and buy setups around the lower bound of the range.
If the range is from M30, H1 and H4, we don’t simply enter on the break of the range but
we try to find objective trendlines or patterns as per trading style and trigger rule.
We have to wait for the range to be broken to enter for extra confirmation.
We have to wait for the range to be broken to enter for extra confirmation.
On lower timeframes, when you see the dots forming a range, here is where you
should start looking for patterns.
On lower timeframes, when you see the dots forming a range, here is where you
should start looking for patterns.
 8. RichBomb – Customized Strategy

We want to see at least 3 dots coming together to consider it a valid RichBomb setup.
The more the better.
To make it even easier for you to spot RichBomb setups;
RichBomb dots will be colored in orange.
Once we spot a valid RichBomb setup, we look to the left and identify the last
swing high and swing low and draw our range.
Our stop loss goes beyond the last swing from the other side.
And our take profit is always double the stop loss size.
RichTL Bomb is not a stand-alone strategy;
but can as one confluence in our trading plan.
In parallel, use your common sense and S.O.T. (sense of trading).
Only look for sell setups around resistance and only look for buy setups around support.
We do have three confluences for the sell setup.
1- Trendline in red | 2- Richbomb in orange | 3- Resistance in blue
To be considered a confluence, the RichBomb has to be relevant to the setup;
And hasn’t made its explosive movement yet.
Here is another example.
1- Channel in red | 2- Richbomb in orange | 3- Double Bottom in purple
 9. Objective Stop Loss / Take Profit

Stop loss should be above the previous swing high in case of a sell and below the previous swing
low in case of a buy.
 Objective Stop Loss Placement

With RichTL our stop loss should be below the last blue dot in case of a buy.
 Objective Stop Loss Placement

With RichTL our stop loss should be above the last red dot in case of a sell.
 Objective Take Profit Placement

Our Take Profit is always double the stop loss size.

And we move our stop loss to breakeven (entry) when the trade reaches +1R
 10. Golden Candlesticks

“There are so many candlestick patterns. How do I remember all of them?”

Well, you don’t have to.

How to understand any candlestick pattern without memorizing a single one?

Here’s what you must know…

1. The color of the body tells you who’s in control

2. The length of the wick represents price rejection
3. The ratio of the body to the wick tells you the “whole story”
 Engulfing Candlestick Pattern

A Bearish Engulfing Pattern is a (2-candle) bearish reversal

candlestick pattern that forms after an increase in price.

A Bullish Engulfing Pattern is a (2-candle) bullish reversal

candlestick pattern that forms after a decline in price.
 Outlier Candlestick Pattern

Outliers are candlesticks who pushed away from the crowd.

The wick has to be big and somehow aggressive. And the body has to be small.
Just like a hammer/shooting star/ handing man…
 Outlier Candlestick Pattern

The candles with the Arrows are valid Outliers patterns, but the ones with the X
are not as they did not push away from the crowd and are in fact stuck in a
choppy range.
 How to use candlesticks

Trigger Candlesticks

Example 1: Engulfing
 How to use candlesticks

Trigger Candlesticks

Example 1: Engulfing
 How to use candlesticks

Trigger Candlesticks

Example 2: Outlier
 How to use candlesticks

Rejection Candlesticks

Example 1: Outlier
 How to use candlesticks

Rejection Candlesticks

Example 1: Engulfing
 How to use candlesticks

Rejection Candlesticks

Example 2: Engulfing and Outlier

 11. MDB - Objective Divergence

A divergence exists when your indicator does not “agree” with price action.
Divergence gives too many false signals especially in trending markets.
Traders get confused when drawing divergences because they do not know where to
start and where to end.
As per our MDB strategy, we will only be taking decisions when a MACD Peak/Valley is
completed.
And we will be connecting only one point per MACD Peak/Valley.
Here we drew our two MACD valley divergences, by connecting the lowest point of valley
one to the lowest point of valley two.
We connect the lowest point of the price correspondent to the first valley one MACD
histogram to the lowest point of the price correspondent to the send valley MACD
histogram.
Keep in mind that sometimes, MACD valleys and peaks can be only few or even one
histogram bar, as shown in the example above.
Here is a typical MDB regular bullish regular divergence.
Here is a typical MDB regular bearish regular divergence.
In trending markets, MACD histogram rarely crosses the zero line.
This trick will save us from many false divergence alerts.
Divergence doesn’t act as trigger. We only consider buying/selling when we have at least
three confluence and a break beyond our last swing standing or neckline.
The divergence has to be relevant to the setup to be considered a confluence.
And here is an bearish MDB example relevant to the sell setup
3 Confluences Setup:
1- Resistance
2- Trendline
3- Divergence
Keep in mind that divergence can be tricky sometimes where the price or
MACD will make a double top/bottom instead of a lower low and higher high.
 b. MDB Tweaked

One-Histogram MDB
Where a divergence is formed from one-histogram only.
One-Histogram MDB
One-Histogram MDB is simply a classic MDB on a lower timeframe.
Multiple-Histogram MDB
Where a divergence is formed from more than two peaks/valleys.
Multiple-Histogram MDB
Multiple-Histogram MDB is simply a classic MDB on a higher timeframe.
 Recap

In brief, we have got three types of divergences. No matter which one you find, you can
consider it as a confluence.

1- Multiple-Histogram MDB Divergence is the strongest because it is a classic MDB on

a higher timeframe. And as we all know, the higher the timeframe, the stronger the
setup.

2- Classic MDB Divergence

3- One-Histogram MDB Divergence is the weakest because it is a classic MDB on a

lower timeframe.
 Putting
Everything
Together

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 12. Confluence Recap & Cheat Sheet

As traders, our tools / confluences are:

- Horizontal Support/Resistance Levels
- Dynamic Support/Resistance Levels => Trendlines (from Daily/Weekly)
- Trendlines – Trigger (From H4, H1, and M30)
- Supply/Demand Zones
- MDB Divergences
- Chart Patterns
- Overall Trend (Trend-following setup)
- Or customized strategies like RichBomb
Each one of the above clues is considered as ONE confluence.
Each one of the below clues is considered as an add-on or ½ confluence.
- Psychological Levels / Round Numbers
- Daily/Weekly Previous Highs/Lows
- Golden Candlesticks patterns
- Event Areas (like Brexit)
- All Time High/Low

Find at least 3 reasons to take the trade and make sure that there is maximum one (but
preferably zero reasons) reason not to take a trade.
 13. Our Top-Down Analysis Approach

on WEEKLY and DAILY timeframes.

1- Draw Support and Resistance, Trendlines/Patterns, Round Number, and Supply/Demand.

2- Do market structure and price action analysis.

Identify key rejection areas (from the above 1 and 2).

on H4, H1, and M30 timeframes.

3- Zoom in to lower timeframes and look for objective setups around the key rejection areas.

4- Enter on at least “three confluences”. No exceptions!

13. Our Top-Down Analysis Approach
 14. Live Examples
Confluences:
1- Wedge Pattern (in purple)
2- Divergence on MACD (in red)
3- Resistance and Round Number 111.8 – 112.0 from Daily (in orange)
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