Trader’s Guide to Charting Options Money Maker, LLC Mark Dannenberg www.OptionsMoneyMaker.com “Chart analysis is the first step towards being a successful trader” Mark Dannenberg, Founder- Options Money Maker © Copyright 2013, Options Money Maker, LLC Trader’s Guide to Charting About Your Coaches Mark Dannenberg is an options industry veteran with over 30 years of experience trading the markets. Trading is a passion for Mark and in 2006 he began helping other traders learn how to profitably apply the disciplines he has created as a pattern for successful trading. Mark’s teaching style and experience with all market conditions is the perfect combination for any trader hoping to improve their trading. He is actively engaged in the markets every day and guides traders through the real-time decisions necessary to succeed through his daily position reviews. Mark’s desire is to help people achieve financial liberation and lifestyle freedom through options trading. Mark’s knowledge and years of experience as well as his passion for teaching make him a sought after speaker and presenter. Mark coaches traders using his personally designed intensive curriculum that, in real-time market conditions, teaches each client how to be an intelligent trader. His seminars have attracted as many as 500 people for a single day. Mark continues to develop new strategies that satisfy his objectives of simplicity and consistent profits. His attention to the success of his students, knowledge of management techniques and ability to turn most any trade into a profitable one has made him an investment education leader. This multi-faceted approach custom fits the learning needs and investment objectives of anyone looking to prosper in the volatile and unpredictable economic marketplace. Mark has a BA in Communications from Michigan State University. His mix of executive persona, outstanding teaching skills, and real-world investment experience offers a formula for success to those who engage his services. Erin Ruemmele joins us from Colorado where she loves to snowboard and hike with her husband and dogs. Erin’s interest in trading started at a young age with a stock market class in middle school. After years of virtually trading and attending seminars, Erin began trading in 2009 by learning the strategies and techniques developed by Mark Dannenberg. In 2010, she earned her first official track record by trading her personal account to an 84% return. Erin loves being a part of the Options Money Maker team helping clients learn how to become successful traders. This document is the property of Options Money Maker, LLC and is furnished with the understanding that the information herein will not be distributed to any person who is not a client of Options Money Maker, LLC. Additionally, this manual will not be reprinted, copied, photographed or otherwise duplicated either in whole or in part without written permission from Mark Dannenberg, Founder of Options Money Maker, LLC. This work has been created and provided as part of a paid service and is intended to be used by the person who is the Page | 2 Copyright 2013, Options Money Maker, LLC Trader’s Guide to Charting registered client of Options Money Maker, LLC. Each copy has a numerical identification registered to the person who paid, or has otherwise been authorized by, Options Money Maker to use the material. This work is protected by copyright. Welcome to Charting! Congratulations on making the decision to take control of your financial future! Charting is the first step in learning how to trade and earn consistently high returns while mitigating the risks associated with trading options. Options, when understood, can build wealth and create financial independence starting with a small amount of capital. Too many people make investment decisions based on fear…..the fear of missing out on a perceived opportunity or the fear of losing money. Learning the step-by-step approach to trading profitably empowers the trader with confidence. By signing up for the Options Money Maker training, you have already separated yourself from the crowd by choosing to learn. In this Trader’s Guide to Charting you will learn how to read multiple technical indicators on a chart. These are clues that reveal the strength or weakness of a stock. When a skilled trader knows the directional bias of a stock, it is easy to turn the movement into profits. The Options Money Maker learning approach is designed to build confidence, provide knowledge, and put each trader on the path to building wealth. Enjoy the experience! “Nearly any man can withstand adversity. If you want to test the character of a man, give him power.” - Abraham Lincoln Page | 3 Copyright 2013, Options Money Maker, LLC Trader’s Guide to Charting Charting – The Key to Profitable Trading Chart analysis is essential to consistent, successful and profitable trading. Selection of the right strategy, to ensure profitable trading, is always based on a technical analysis of the chart. Understanding each of the trend, momentum, and technical indicators and how, together, they provide information regarding the directional bias of the stock, will improve the traders success and profits. This guide will discuss the following technical indicators used to assess the directional bias of a stock. The key is to find a consensus between multiple indicators. Not all will align and point to the same bias however, when several of them do, it is a strong indication a movement is coming and you have been provided a clue as to which direction that movement will be. • Support and Resistance • Bollinger Bands • Awesome Oscillator • Twin Peaks Patterns • Zero Line Cross Over • Price/Momentum Divergence • Bearish and Bullish Divergent Bars • OOPS Patterns • Stochastics Chart Programs There are several very good charting tools available. Some are free and offer limited choices. Others are very expensive and offer access to nearly every technical indicator available. The broker and trading platform you use will offer a chart package and, again, some are better than others. Start with what your broker offers then, once you are more familiar with charting and trading you will have the knowledge to evaluate the various chart packages available. Regardless of what package you choose, you must have access to the full set of technical indicators discussed in this guide. Chart Format OHLC bar charts are the preferred format. Analysis begins with a one year, daily chart. Each bar on a one year, daily chart, represents the full trading range for a single day. OHLC stands for Open, Page | 4 Copyright 2013, Options Money Maker, LLC Trader’s Guide to Charting High, Low, Close. The bar chart format is easy to read and provides all the information we need, along with our technical indicators, to assess the directional bias of a stock. Support and Resistance Parallel lines are drawn on a chart to represent the support and resistance price levels of the stock. The bottom line along a series of low price points is referred to as support. At this Parallel lines that form a price level the stock is finding support and has shown channel around the highs and lows during a specific time historically, that is has a bias to trade higher. period. The top line of the two parallel lines will be placed along a Not every price point needs to series of high price points. This line is the resistance line and touch support or resistance. refers to the price level which the stock has not successfully Study multiple time periods. traded above. to gain a clear view of the long- and short-term trends. The time period used to capture high and low price points depends on how long the pattern continued. Patterns will have different periods and some patterns will be inside other, longer time periods. It is a good idea to assess multiple time periods. When the bar is touching, or very near, either the support or resistance line it is the first strong indication of a movement in the opposite direction. If the daily bar is near resistance, there is a strong bias that the stock will move lower, back towards support. If the daily bar is near support, there is a strong bias that the stock will move higher, back towards resistance. Page | 5 Copyright 2013, Options Money Maker, LLC Trader’s Guide to Charting Diagram 1 Page | 6 Copyright 2013, Options Money Maker, LLC Trader’s Guide to Charting Bollinger Bands The purpose of Bollinger Bands is to provide a view of when the price of the underlying equity is high or low. Very simply, prices are high at the upper band and low at the lower band. Bollinger Bands When used in combination with other technical indicators, v Volatility indicator. Bollinger Bands can be a strong indication of the directional v Trading at the upper BB bias of the equity. If a stock was trading at the upper BB indicates a bias to move while also trading at Resistance, the chart would be providing lower. two indications of a likely decline in the price of the stock. v Trading at the lower BB indicates a bias to move higher. Upper 3 standard deviation Bollinger Band Upper 2 standard deviation Bollinger Band Lower 2 standard deviation Bollinger Band Lower 3 standard deviation Bollinger Band Diagram 2 Awesome Oscillator The Awesome Oscillator is displayed as a histogram showing the market momentum based on a comparison of the last 5 price bars to the last 34 price bars. The AO helps us see what is coming! When the momentum of the past 5 bars is weak compared to that of the 34 bar period, the AO displays this shift as a red bar.