Hello, and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Technical analyst for City Index. Welcome back to another lesson in technical analysis. And, as always, these are simply for information and educational purposes only.

Now, in the previous lesson we discussed how to catch a big moves and so this is really part two, and the idea is to follow on some of the ways of getting involved with these big moves. And what I want to focus on today is a couple of different aspects or additional add-ons to what we learnt previously.

Now, the idea is that markets will occasionally create large swings and we want to capture these but the problem is that we tend to see them after they've occurred. So we're trying to focus on if we capture these moves before they occur, so ideally we want to see the initial signals to observe and of course which technical indicators to use and of course the entries and exits.

I noticed that in the previous charts we looked at only daily charts so here what we've got is the weekly chart. And this is the big swing, on the right-hand side that we were trying to capture. But on a weekly chart notice that before that actually occurred there was a stair-step towards a downside; and of course these were quite big moves too. And we noticed that first of all the markets started to break above the recent swing high, but that point it's a little bit too late if you want to capture the significant move. So my main aspect here is what can we do? We're looking at a bar chart right now, what other filters can we add onto this?

Well the first thing is you might want to change to candlesticks because they do give us some fairly good patterns.

So step one, if you're using a bar chart move towards the candlesticks chart if you can't already recognise the pattern in the bar chart. And the second step is, which patterns occur straight away?

Well, in previous lessons I've discusses a very specific pattern called the Doji pattern, and these tend to occur at reversal points and the Doji pattern is really an indecision indicator. So once the market had made the move towards the upside we saw some indecision patterns there. The market moved towards a downside and then of course we had a Doji towards a downside. So how would you have traded this?

Me personally, I wouldn't have just jumped into the market, I would've waited until the next bar would've taken out the high of that particular Doji bar which actually occurred. My stop would've placed below the low of the Doji bar.

And from that point he market moved towards the upside and there is another pattern which occurred but I'll move onto that a little bit later on.

So let's assume we've moved into this trade over here on the break of the Doji. The other thing that you could have looked at is by adding a, again a 20-period moving average as indicated by the arrow. Once the market had closed above that moving average on the weekly chart, do you just jump in? Well if you're an intermediate to a longer-term trader, yes. But in my world I would have probably have gone down to a lower timeframe.

So I'd keep an eye on the weekly chart, once the market closes above the moving average I would then go to the daily charts to look for entries and exits. And that's what we've done over here, so as you can see the arrows on the lower side of the moving average indicate where we would have entered the position.

Now the way to trade it is you use these as entry and once the market closes below the moving average you exit. You do not take a short position, you only exit the position.

So, as you can see, there have been several entries on here. Now the market closed (this is sterling/dollar) at 1.4826 on the weekly chart, and it's from that point that we would've entered the daily chart, so you would have missed the initial buy signals on the daily chart but that's okay.

So we've managed to capture a significant amount of move. Now, currently, the last bar has actually closed back above the moving average for the first time after a recent decline, so that would suggest that this is now a buy signal. The only way to exit this is if the market closes below the moving average.

Now here we have the higher timeframe reversal. So you noticed that initially I told you we would have taken a buy signal above the Doji bar and our stop would have been just below that. That would have been a great entry. If you wanted to wait for the moving average, that's fine too. But if you would have taken a break above the Doji bar and waited for the Bearish Engulfing pattern which you have seen just recently - and that's toward the extreme right-hand side - you'll notice that the huge red candlestick, that engulfed the previous bar.

So here, on this instance, I would've waited until the market had taken out the low of the Bearish Engulfing and that would've managed to have captured 962 pips, so that's a very, very good move.

The idea really is to try and use two timeframes. If you're using an hourly chart then look at your four-hourly. If you're using your four-hourly then include the daily. If you're looking at your daily look at the weekly, and the weekly you would look at the monthly.

It's so important and many traders tend to miss that one valid point that using multiple timeframes is such a key to long-term success in the market.

So in their own right you can use weekly charts for entry and exit. You might want to compare that to the monthly charts. But if we're short-term trading then I'd like to look at the daily and the weeklies.

So the key factors are use multiple timeframes. Use the lower timeframes for entry and exit and use the minimum amount of technical indicators, and of course use patterns.

So for me I like to use the candlesticks patterns whether you're using Dojis or Bullish or Bearish Engulfing or the Harames, and all of these lessons you can look back on the Cantos website to look at how to apply these. And then use minimal technical indicators. You know, ideally you don't want to have more than two technical indicators on your charts. Preferably I'd like to get you to the point where you're only looking at price because price action, for me, is really key.

So I hope these lessons have been useful for you. As I say, this is part two of the two lessons we've looked at and you'd need to incorporate both to try and get the best out of this, so if you haven't already seen lesson one have a look at the Cantos website. In the meantime, have a great trading week. This is Sandy Jadeja for CantosCharts Masterclass.