7 Secrets of Consistent Forex Profits | Improve Your Trading Today!


– [Instructor] Hey everyone,
welcome to today’s training. We’ve got the 7 Secrets of
Consistent Forex Profits Webinar Masterclass. And yes, this is a masterclass because I have seven lessons for you that are jam-packed
with actionable content so you can start using it today and improve your performance. The agenda for today’s training is first we’re gonna talk about this misconception about indicators. We’re also gonna talk about
drawing support and resistance, and I’m gonna show you
a few tricks that I use to find the most accurate levels. I’m also gonna talk about confluence because it’s so important that you use it to stack the odds in your favor,
and as I mentioned earlier, I’m also gonna show you two ways that you can identify potential
reversals in the market before they happen. I’m also gonna share with
you three trading strategies, that I use, including
a continuation pattern, a reversal pattern, and
a candlestick pattern that I use all the time
to make profit, all right? And I’m also gonna share what ratio I use for my risk to reward and it’s something that I teach my members and can make all the
difference in the world. And lastly, this is the way
that you can double your profit on one setup without increasing
the risk for that setup, and again, it may sound
too good to be true, but I assure you that
myself and my members are doing this all the time. My promise to you is that
by the end of this training, you will become a better trader, okay? If you really devote yourself
and learn this stuff, you can start using it right
now, today, to become better, and the only thing I ask of you is that by the end of this training you take at least one of these lessons, one of these tactics, and implement it into your trading, and I guarantee that you will see results. (uplifting music) All right, so let’s go ahead
and jump into the first topic, and the first thing I wanna talk about is ditching the indicators. So what that means is
we’re gonna get rid of every indicator on your chart and this is really gonna set you up for the rest of this webinar. So it’s gonna set the foundation for you to be able to trade
price action, all right? So this may be a little
bit basic for some of you, but just hang with me
because I promise you that later lessons are gonna get into some more advance topics and this section is really gonna make your
chart easier to read. All right, so there’s
this common misconception that you need indicators
to become profitable. Well guess what? You don’t need indicators
to become profitable in this business and I’m proof of that. When I entered the market, back in 2007, I thought that my job was to find this magical combination of indicators, such as the RSI or the MACD, that was gonna make me
millions of dollars, I thought that’s just
what I was supposed to do, and that’s really not the case. Now for me, there is one
exception, two in fact, and that is that I use
the 10 and 20 exponential moving averages as a mean reversion tool. I’ll cover that in a moment but I do wanna just mention that there’s nothing special
about the 10 and 20 EMAs, it’s just what I found
to work the best, okay? So you can experiment
with an eight and a 15, or a 12 and a 25, it doesn’t really matter but
I found that the 10 and 20 work pretty well in any market. All right, so let’s talk about
mean reversion really quick, and this is really important
because it prevents you from buying high and selling low. So mean reversion is this idea that prices always come back to an average in a trending market, and I’ll show you an example in a moment, but this is where the
10 and 20 EMAs come in because I use them as a way to avoid buying high and selling low, right? Because we wanna do the opposite. So I’ll show you an example in a moment but first I wanna run through
some of my chart settings. All right, so in MetaTrader, and if you use a different
platform, that’s perfectly fine, you’ll just have to check with your broker to figure out how to change
these settings on your platform. But in MetaTrader, if you
right-click on a chart and go to the Properties
tab, or select Properties, and then go to the Colors tab, there’s a really quick way
to get the look that I have and that is to go to color scheme and select Black On White
and what that’s gonna do is it’s gonna change all of
these settings over here. All right so that takes care of all of the colors on the chart. Now, as far as the grid
and everything else, on the Common tab, if
you select chart shift, select candlesticks, and show open-high-low and close, and just make sure that
everything else is deselected. All right, now you can play
around with these settings, this is just how I have my chart set up and it works out really well for me. Okay so next up, let me run you through the settings I have for the 10 and 20 exponential moving
averages, and for the 10, the period here is gonna be 10 and the method is exponential, and I’ll show you this in a moment, where you can find this within
the MetaTrader platform. For the 20, obviously the
method is gonna stay the same as exponential, and the period,
we’re gonna change to 20. Now for those of you who are more visual, let me just pull up a chart
of the Euro/USD here, and this looks rather
intimidating, and to be honest, I’m not sure if they still do it, but MetaTrader used to
start new accounts this way. So if you were a brand new trader, opene a brokerage account,
download the platform, this is what you would see. And to be honest, for
the way that I trade, this looks pretty confusing, right? We’ve got a MACD down
here, stochastics, RSI. So the first thing you wanna do, or the first thing we’re gonna do, is get rid of each of these. Okay so we’re gonna delete stochastics and we’re gonna get rid of the RSI, I’m gonna get rid of both of those levels. All right, there we go. So you can see already that we have a lot more real estate to work with and that’s what we want. We want as much room as possible to be able to see the
price action on this chart. All right, so now to run through those settings I just showed you,
if you right-click on this, go to Properties, and
under the Colors tab, go ahead and select Black On White, and under the Common tab, we’re going to turn off
the chart on foreground, and I’m also gonna turn
of these two down here. So the only thing I should
have left is the chart shift, candlesticks, and show
open-high-low and close. All right, so I’m gonna
go ahead and click okay, and there we have it, a nice clean chart with black on white. To get the two moving
averages that I mention, the 10 and 20 EMAs, I’m gonna go up here
to View and Navigator, and from here, I’m gonna drag
the Custom Moving Average onto the window, and under the Inputs tab, I’m gonna select 10 and Exponential. All right, I’m gonna do
the same thing for the 20. So I’m gonna select 20, and change this to exponential. (uplifting music) Whoop, I wanted to change
that to blue actually. Okay so, and again, I’m gonna provide you guys
with some notes afterwards, so if I’m running through this
pretty quick, don’t worry. Be sure to take your own notes but I’ll also provide
you with these slides after the presentation. So I’m gonna close out of this window, and there we have it, we’ve got
a nice black on white chart, lots of real estate to work with, and I’ve also got my 10
and 20 moving averages. All right, now let me just explain where these moving
averages come into play, and if you’ll remember, I mentioned mean reversion
a few slides ago. So with the Euro/USD,
what we’re looking at here is the mean, the average
for this market right now, for this trending market,
is right here, right? So it’s right in between the 10 and 20 moving averages. So right now, with price up here, I don’t want to buy, right? I’m not gonna buy up here because there’s a good
chance that the market is gonna come back down
here into this range, right? So in a trending market, that’s
where you would wanna buy, somewhere in that area, and of course, we would use key levels to find that, which I’ll get to in the next lesson. But if you notice down here, right, this is where you’d wanna
buy, back here as well. Okay, so we want to avoid obviously buying too
high and selling too low and that’s how the 10 and 20 EMAs help us. So now that we’ve talked about
getting our chart set up, and your chart should
be nice and clean now, let’s go through and talk
about mastering support and resistance, and let me
just say, right off the bat, that this is one of those topics that I really can’t stress enough because, I’ve said it before that
if you get this right, trading becomes almost effortless,
and if you get it wrong, you’re gonna struggle a
lot more than you have to. Think about it this way, when you were a kid, if you
had a coloring book, right, your job was to color
in between the lines. Well, support and
resistance are no different. Once you have these levels on your chart, your job as a trader is to
trade between the levels. So go ahead and write that down now, in your worksheet or your notepad, that your job, as a trader, is to trade between
support and resistance. Let’s run through a few key points here and then I’ll get into an example. All right, so the first
thing I wanna talk about is that when you’re trading price action, it’s best to use the daily
and weekly timeframes to find key levels. Most of my, I would say probably
90% of the levels I draw, come from the daily and weekly timeframes. Now between the daily and weekly, I would say that probably 70
to 80% of the levels I find come off the daily, right? And the other 20 to 30%
come from the weekly. So next up is to focus on
the swing highs and lows. So the first thing you wanna do when looking for key levels is focus on those highs and
lows that really stick out, and again, we’ll take a look
at an example in just a moment. Next up is to include as
many touches as possible without cutting off the
upper and lower wicks. So what does that mean? By touches, I’m talking about the upper and lower wicks
that touch off the level, whether it’s a horizontal,
support and resistance, or a trend line, you wanna try to get as
many touches on those levels but you also don’t wanna
cut off too many wicks. So it’s a little bit of a balancing act and it’s also something that
just comes with practice. And speaking of trend lines,
don’t forget about them. I know a lot of traders
don’t favor trend lines, they try to stick to horizontal levels, and that’s okay, you can do that, but I will say that if
you’re not using trend lines, you’re really missing out
and in another lesson, we’re gonna get into
trend strength, right? We’re gonna get into
how to spot reversals, and if you’re not using trend lines, you’re gonna be at a huge disadvantage. So just be sure that when
you’re drawing these levels, that you don’t forget
about the trend lines. So how do you know that you’ve
drawn a level correctly? Well, this is where price action comes in because what I normally do
is I’ll allow the market to show me whether or not
my level is accurate, right? So it kind helps me to justify whether I should keep
that level on my chart or just get rid of it. All right, so you always wanna make sure that you’re letting the
market do the work for you. So if a market comes around and doesn’t respect the key level you have drawn several times, you probably wanna think about
getting rid of that level because it’s probably not something you wanna pay attention to. All right, and this one
is a little known secret that I’m gonna show you, there’s kind of a certain science to drawing these levels on your charts and you’ll notice that
once you get good at this and you start drawing the levels, a lot of times there’s a certain distance between each level, it could
be 100 pips, it could be 200, typically at some kind of range, that could be something like, you know, between 250 to 350 pips, and once you start to
see that type of pattern, between these horizontal levels, what you can do is actually
use that same range to find the next level in the sequence. So we’ll take a look at that on the Euro/USD chart in just one moment. And last but not least is
don’t go overboard, all right? Keep the levels to a minimum, don’t try to have 20
or 30 levels on a chart because what’s gonna happen
is you’ll have so many levels on your chart that you
won’t be able to trade. You won’t have enough space between them to be able to put on a trade. So you wanna focus on the
really key levels in the market, which are usually those
swing highs and lows. All right, so let’s
pull up the charts again and run through an example
here on the Euro/USD. All right, so the first
thing I wanna point out is, if you’ll remember, I
mentioned that we wanna focus on the swing highs and lows. So I’m just gonna go ahead
and draw out some of these swings on here and we’ll take a look at whether or not we can use
these to draw key levels. All right, so what I wanna
do is just take my horizontal level here and any time I’m
presented with a blank chart, I wanna start with my horizontal levels, and once I do that, then I can start looking for trend lines or channels or wedges or things like that. All right, so the horizontal levels are sort of my foundation when I’m presented with a blank chart. All right, so the first
area I wanna look at, because I can tell right off the bat that this might be something worthwhile is this level right here. We can see we’ve got this swing high and a swing low back here. The next area that I
pointed out was this here. Now it does get a little
bit choppy through here but that looks pretty good at the moment. And the next high is this one here, however, look at how
close these are together. So what I wanna do now is
just look back on my chart and we can see this one up here, that I just drew a moment ago, actually looks pretty
good ’cause we’ve got this swing low back here, as well as some lows through here. However, this one gets pretty choppy. If you’ll notice, there’s
really not much happening here. So I don’t think I wanna keep this one on, so I’m gonna go ahead
and delete that for now. All right, so if I move down
I’ve got (clears throat), excuse me, this area right here, so we’ve got a swing high and we’ve got a bunch of lows back here. And then I’ve got a level right here, where we’ve
got this swing low back here and some lows here, and then I’ve got this
major swing low down here. Now you’ll notice that there’s
really not much down here, however, the fact that this
is a multi-year swing low, you better believe that if
the market comes down here and tests this level, that there will be some sort of bind. All right, so I wanna
keep that one on my chart. Okay, so let’s see, there’s
another low swing high here but I’m not, yeah, see notice how this gets choppy through here, so that’s not something
I wanna keep on my chart. I’m looking for the really
obvious stuff, folks, that’s what we wanna focus on, right? So as far as up here, I mean this has been pretty
much a straight up market, I mean, there hasn’t
been much of a pullback, no swing high here, so I’m gonna move out to the weekly chart and you’ll notice that we’ve got this swing high right here and we’ve also got a swing high back here. However again, these are
really close together, so chances are it’s gonna
be one or the other, and if I move in here, you can see that it’s definitely this
lower one and not this one here because it gets choppy through here. All right, so I’m gonna remove this one, and that one looks really nice. All right, so if the market
comes back into this area, again, there will most likely
be some buying through here. Okay now, as far as where the market might find some resistance going forward, again, if we move out to the weekly chart, we’ve got some major swing lows back here. (uplifting music) And actually, the market’s testing this major swing a little back here right now. So if I move into the daily chart we can see that yesterday, the market found some
selling pressure up here. That’s a really quick
way of how I go through and mark my horizontal levels, and one thing you’ll notice is there’s a bit of a pattern, right? This isn’t a perfect science,
but if you’ll notice, there’s about 300 pips
between these levels, there’s about 260 pips
between these levels, the one exception here, really,
is this area right here, ’cause down here, again,
there’s about 340 pips, there’s about 260 pips, so the idea here is that
the next level, right, is likely gonna be somewhere
between 250 to 350 pips higher. So if you start getting
areas like this where, you know, notice everything’s
kinda spaced evenly and then you get an area like this? You know, chances are one of these two levels is incorrect, okay? It could be like that or it could be this, you know, or it could be here. So it’s not always gonna be the case but a lot of times you’re gonna find that there’s gonna be even spacing between your horizontal levels. All right, let’s wrap
things up with a trend line. So for that, if I come
back here in the market, there’s actually a really nice
area that I’m gonna show you and I wanna focus on this one because it kinda highlights the idea that you wanna get as many touches as possible without cutting off too
many wicks, all right? So if I draw my trend line here, starting at this low down here, you’ll notice that there’s
two ways to draw this and this is the big question
that traders is they say, “Well, should I draw
it here where I’ve got “this lower wick and this lower wick or, “right, do I draw it up here “where I’m also including this swing low?” And here’s my role, and again, not an exact science but this
has worked really well for me, is I try to get as many
touches as possible, and it’s okay if I cut off
a little bit of a wick here and a little bit of a wick there. What you don’t want is you don’t want to start doing this, okay? Notice how I’m cutting off all this here, I’m cutting off more of this wick and I’m cutting off almost
half of this candle back here. So I would draw the level here because I want to include that swing low. Now granted this is in
hindsight, so it’s a bit easier, however, if I pan forward, we can see that the market
found selling pressure up here when it retested the level,
right, as new resistance, okay? So it looks like that would’ve
been the correct placement, and again, you know it’s
easier in hindsight, however, if this had happened in real-time, this is what I would’ve wanted. So I would’ve wanted to include that swing low right there. Okay, so you know, that’s
just a quick lesson, guys, on how I go about drawing key levels. Just make sure to focus
on the swing highs. Don’t forget to the trend
lines and, you know, one key trick here is to make sure that your levels are spaced evenly. It won’t always be the
case but a lot of times it’ll make your job a lot easier if you start spacing
your horizontal levels evenly throughout your chart, just don’t forget about
those swing highs and lows. That’s actually the perfect
segue into our next topic, which is confluence. All right now confluence
is gonna help to increase your odds of success because
essentially what we’re doing is we’re looking for areas
where key levels intersect. All right, so confluence is
the act or process of merging, and for a trader what that means is we’re looking for
areas where a trend line may intersect with a horizontal level and it’s really just a
three-step process where the first thing we wanna do is identify things like horizontal
levels, trend lines, and even channels. All right, we wanna draw those levels as soon as we open a blank chart. So remember I mentioned a little bit ago that as soon as I open a blank chart, I wanna get my levels on
there as soon as possible. Once I have those, I can
start looking for areas where they intersect, and those are called areas of confluence of support or resistance. And then it’s really
just a matter of watching for buy or sell signals from those areas. (uplifting music) And here’s a great example of one that I commented on a while back, and you’ll notice that we
have this trend line here and we also have a horizontal level. The third thing, now, for confluence all we need is two levels, so those two would’ve
been enough to create this areas of confluence, however, in this case, we also had
this ascending channel and what was great about this setup, and I actually shorted this
market to the downside, on a break below this level, but what’s great about
this kind of setup is that no matter what the market
does, you can trade it. All right, so if it comes
up here into this area, we can look for sell signals. If it closes below this
level, we can look to sell. And alternatively, if the
market comes up here and closes above this area of confluence, then we could have a potential
long opportunity on our hands because the market is breaking out from this area of confluence. All right so let’s go ahead
and jump into the chart now and I’m gonna show you an example that also occurred on the British
pound versus the Japanese yen. All right, so we’re back to the chart now and I’m gonna pull up the daily chart of the British pound
versus the Japanese yen, and the setup I’m gonna
look at right now is this bullish pin bar right here, and if you’re not
familiar with the pin bar, it’s okay ’cause I’m gonna cover that in one of the next few lessons, but right now what I wanna
draw your attention to is we had this horizontal level right here and if I scroll back, I
can actually see where the market made this high back here, and it doesn’t touch it exactly
but it’s within that area. So this would’ve been one
that I wanted to watch and we had this bullish pin bar. Now on its own, this would’ve
been a decent setup, right? So we’re talking about
this bullish pin bar, and the reason it would’ve
been a decent setup is because we had this horizontal level and if we do a proper analysis here, we can also see that this
market was in an uptrend, right? It’s making higher highs and higher lows. But there was also another level here that we could have
traded off of, all right? So if I come back here, there was actually a trend line. Now obviously we wouldn’t
have seen any of this at the time, okay? All we would’ve seen
were those two touches and this horizontal level. Now, when this bullish pin bar formed, all right, we would’ve really honed in on this area because again, we have this intersection right here, which is a confluence of support. So this bullish pin bar
became a lot more appealing because we have an uptrend,
we have a horizontal level, and we also have trend line support. Now in hindsight, just to
show you how this level actually affected the market afterward, we can see that it played a critical role in the reversal over here where the market tested it here, here, and a few times
just before it broke down, and then retested it as resistance. All right, but again,
the key here is to focus on these areas that intersect because you’re gonna find
some of the best opportunities with the highest percentage
of success, okay? So this bullish pin bar would’ve been one that I would’ve been one
that I would’ve traded because it formed during an uptrend and also at a confluence of support. Okay, so next up is a topic I
get asked about quite often. It’s probably one of the most
common questions I receive and that is how do we tell when
a trend is about to reverse? And the first thing I wanna say is that it’s not our job as traders to
know what’s about to happen. That’s true for the
direction of the market, as well as the buy and sell
signals that we look for. So when we talk about trend analysis, it really comes down to
figuring out what’s likely. Is the market likely to reverse or is it likely to go higher? And there’s a few different
ways that we can identify that, but first I do want to talk about a few of the various trend lengths. All right, so it’s important to understand that there’s three
different types of trends. First off we have a
long-term or secular trend, and that’s one that lasts
for five years or longer. Next up is intermediate or primary, and that’s a trend that
lasts for at least one year. And last but not least, and this is the most common
that most people look at, is the short-term or secondary trend, and that’s one that lasts for
a few weeks or a few months and the reason I say it’s
the most popular is because most traders that I’ve
spoken with over the years use something like the 15-minute or the 30-minute or even
the one-hour timeframe, so typically they’re
looking at a period of time that spans about one week, maybe two, up to about two or three months. And that brings me to an important point and that is that the terms
uptrend and downtrend are really incomplete thoughts without specifying a length of time. So if you come to me and
say that the Euro/USD is in a downtrend, my
next question is gonna be, well, are you referring to the long-term, intermediate, or short-term? Because that’s gonna matter. If you’re talking about the last few weeks being in a downtrend, if we scroll back on the chart, maybe the last three, four, or five years, the pair is actually in an uptrend. So saying that something is
in an uptrend or downtrend is really an incomplete statement. All right so now that we know that, let’s take a look at
what actually illustrates or defines an uptrend, or a downtrend, and that is the swing highs and lows, and you know, this is what
we’ve been talking about this entire presentation
is that much of what we do as price action traders comes
down to swing highs and lows. So here we can see that we have a market, and granted this is just an illustration but I’ll get into an example in a moment, but here we have a market
that’s making higher highs and higher lows. And this I really basic
stuff, but honestly folks, this is what it comes down to. As a price action trader, everything that we do
is really pretty basic. Okay and just the same for a downtrend, as you might guess, it’s
the opposite, right? So we have a market that
is making lower lows and we’ve got lower highs. Okay so, now as you might guess, the way that we identify a change in trend is also based on those
swing highs and lows. All right, so here we have
a market that has made, in the beginning, higher
highs and higher lows. So if we look back here,
we can see that we’ve got higher highs back here
and we’ve got higher lows. Now notice that this swing high right here is the first time that the market didn’t make a higher high. So if we see this, this is
kind of a sign of exhaustion, so if you’re looking to buy, you might wanna be careful at this point, but it’s not until this low down here that the market really starts to reverse. All right, so again, really basic stuff but you can also see how
powerful this can be. Now remember a bit ago I mentioned that if you’re not using trend lines, you’re at a disadvantage, at
here’s what I’m referring to. So again, just an illustration, but we’re gonna look at a
chart in just one moment. And here I want you to
notice how this market was making higher highs back here, but all of a sudden, it
started to make lower highs. And what’s really key about this is that every test of the trend line, in terms of the days
it took to rally higher and come back and retest it, was shorter and shorter. So we had 35 days, 25 days, 10 days and then five days. Now the result in most cases,
when a market does this, is a break to the downside. All right, so notice that,
same exact illustration, what happens is the market
closes below the trend line and then it retests that
level as resistance. Now, this is the area right here that we wanna look for
cell signals, all right? So when we talk about how to identify that a market is likely to reverse, using a trend line in
this way and watching how the market reacts to that
level over time is really key. Now another way that you can also identify a change in trend is in
addition to looking at the amount of time it takes for a market to test a trend line. Okay so here we have the different
points where it’s testing and notice that it’s also getting smaller. However, in this case, we also have what I call clustering or
sometimes as heavy price action. And what that means is
that you get a market that starts to retest it. You know, back here this
may have been, let’s say, 20 days, 10 days, five days, and then all of a sudden
you get these tests that only take a day or two, okay? This clustering price action
right above the key level, and again, in this case, the result is typically
a break to the downside. Now here’s one that happened
on a chart a while back, this is actually a four-hour chart and you’ll notice how the currency pair was in this ascending channel, and you’ll notice how the
distance between these retests is fairly close, right,
it’s not getting closer, and then notice what
happens right through here. Okay, notice how this price
action starts to cluster. Back here, it took
literally less than a day for the market to rebound, and then back here, we had several days worth of price action just hovering above that key support level. And again, what happens
most times is you get a close below the level and this is where we wanna
look for selling opportunities. And as promised, I’m gonna
wrap this up with a chart of the GBPJPY. All right, so this is the
same chart we looked at in the last lesson and it’s
also the same trend line. So we have a few things happening here, I’m just gonna get rid
of this horizontal level, let’s see, delete, all right. So we have a few things happening here and the first one that you’ll notice is that each retest
takes less and less time. All right, so notice how much time it took for this
first retest to happen, and then this next one
took about half that time, and this one up here was
about the same time too, but then look what starts happening, okay? And in addition to that, we also get this clustering price action right above the level, and you compare that to
these retest back here, that happen rather quickly, and you can see how we could’ve
used what we just learned to determine that a
break lower was likely, and that’s exactly what we did here. All right, so if we zoom in and take a closer look at the breakdown, (uplifting music) okay so the breakdown happened right here, and it’s
also important to note that this is a daily timeframe. So we wanna trade this
on a daily closing basis and what that means is
that these wicks right here don’t concern us, all right? The market may sometimes do this where trades below the
level, on the intraday, but the daily timeframe closes
above or below the level, in this case, they kept
closing above it, all right? So this was not a break back here. Now, the first close came right here, and you’ll notice that after that close, it retested the level a few
times, right through here, and again, that’s where we’d wanna look for a selling opportunity, and if I zoom in even closer, you’ll notice that we
had, on the very next day, we had a bearish rejection right here. So we could’ve used that to actually sell the retest of this trend line. So you can see how powerful this is because the market from there
ran several hundred pips. In fact, I think this move actually totaled over a thousand pips eventually. So extremely lucrative but
also really, really simple, but the key here is to look
at the amount of time it takes for the market, in between retests, and also watch out for that
clustering price action. Okay, so now that we’ve talked
about the 10 and 20 EMAs, we’ve talked about support and resistance, we covered confluence, and we’ve also talked
about a couple of ways to identify possible trend changes, let’s get into some of my
favorite strategies, all right? And we’re gonna start with the pin bar. You may be familiar with this one, and the basic idea is that
this candlestick pattern shows a rejection of
support or resistance. All right, so we have the tail,
the body, and also the nose. Now what makes this
candlestick pattern effective is this right here. So the tail should be
2/3 of the entire range, so from the high to this low, and the same goes for the bullish pin bar over here, all right? So this should be 2/3 of the entire range, and the color of the body
doesn’t really matter, all right? So it doesn’t matter if
this was black or white, same goes for this. If this was a white candle, or if it was a down day and it was black, that doesn’t matter, what matters again is this tail right here. All right, so let’s take
a look at an example on the New Zealand dollar, and
this one actually occurred, and it’s a bullish pin bar, that occurred at horizontal support. So we have this level right here and you can see
where it was tested once before, all right, so we have this retest, and then we had this
bullish pin bar that formed. Now again, notice how long the tail is. So this is certainly
2/3 of the entire range, and there’s two ways to enter this type of candlestick pattern. The first is to, in this case buy, on a close above the high, and our stop loss would go below the tail. Now the second way is actually
to do a 50% entry right here using the Fibonacci tool, the upside to this is that you
can increase your R-multiple, the downside, of course, is that you won’t always get filled. So if you notice here, the market never actually
came down this far. So in that case, if you
had a 50% entry right here, you would not have been filled, all right? And just to show where I
would’ve targeted, in this case, I would have looked at
this area right here because we have these two lows back here and we also have these highs. All right so just remember
that with the pin bar, the two most important
things are the placement, so you wanna look for a key level and also the length of the tail relative to the range of the candlestick. The next pattern we’re
gonna take a look at is the Head and Shoulders, and this is probably my
favorite reversal pattern. They don’t come around that
often, but when they do, you should really pay attention because they can be extremely reliable and also offer some incredibly
risk-to-reward ratios, so I’m talking over 10 R. So if you’re risking 2%
of your account balance, it can be over a 20% profit. All right, it’s made up
by a few characteristics and it’s really a pretty basic pattern. We have the head up here, we then have the left shoulder
and the right shoulder. This level right here
is called the neck line, and a key characteristic of this is that it occurs after
an extended move higher. Now there’s also an inverse
Head and Shoulders pattern which occurs after an extended
move lower, all right? So all the characteristics are the same, the only difference is that it occurs after a downtrend versus an uptrend. Okay, so if we head on over to the charts, I’m gonna pull up the New Zealand dollar versus the Japanese yen, and just like some of the other structures we’ve looked at today, this is actually one that I
commented on as it unfolded. All right, so here we have,
we’re on a weekly timeframe and you can see that this is
the left shoulder over here, we’ve got the head and the right shoulder. So this was actually a really
nice neckline right here because we had all of these touches line up almost perfectly with it. Now the break happened right here, and in this case, the
way that we would find the measured objective is we’d measure from this high up here,
down to the neckline, and then we take that same
distance from the break and measure it to a lower
point in the market. All right, so let’s take
a look at what that was. So we can see here that this is almost exactly a thousand pips. So if we come over here and
measure a thousand pips lower, all right, that brings us to right about here. So this would’ve been our profit target for this entry, all right? So we would’ve entered up here, this right here is the break, and our target would’ve been
this level here, all right? So that’s our target, and if you look, what’s interesting about this
is if you look over here, you can see that we
actually have several lows that had formed a few years prior, right? So that’s a great way to validate this measured objective and know that you have the right level. All right, so in closing, just a few things to keep in mind. They should be traded
after an extended move up and I also don’t trade it on anything below the daily timeframe. All right, so I only trade this pattern on the daily and weekly timeframes because I found that those
two are the most reliable. The third strategy I wanna look at today is the channel, all right? So we have the ascending
and descending channels. Now you may have also
heard these referred to as a bull or bear flag, which they can be. They aren’t always a bull or bear flag, but they are quite often. All right, so we have a few
simple characteristics here. We have a preceding trend,
we have consolidation, and then a continuation of that trend. All right, now this can also
form at a descending angle, which would be a bullish pattern, where the market trends
higher, consolidates lower, and then continues higher. So what we wanna do is once
we have these levels drawn, we want to wait for a
close, a break of support, and then we wanna look to sell on a retest as resistance, all right? So let’s go ahead and take a look at the British pound versus
the New Zealand dollar. All right so we’re on the
British pound/New Zealand dollar, and at first glance, this
may not look like a whole lot but we actually have a
ascending channel here, so if I draw this top level first, okay, let me just get this accurate here, and then if we draw the second level down, you can see that we
actually had a really nice ascending channel where the
market had made this move lower, and this part right here is
the consolidation, all right? So this is the part that
we don’t wanna trade. What we wanna do is wait
for a close, and again, we’re on the daily timeframe here, so we wanna wait for
the close below support, that’s the break, okay? Once we see that, we
know that we could have a potential setup on our hands, and if you’ll notice, the very next candle produced a bearish pin bar. So what we’d wanna do is
enter on a 50% retracement, right here, stop loss goes
above the candle high. Now our target for this, the measured objective
for a pattern like this is actually found by
measuring this entire move down right here. So we measure from this
top to this bottom, and where a lot of
traders get this wrong is they then measure from
here to a lower point, but you actually wanna
measure from up here. So we’re gonna measure from this high to a lower point in the
market, and when we do that, all right, I’m just gonna run
through this rather quickly, so we get, let’s see. All right so we come up
with this level down here. Now as you can see, the market didn’t quite make it down here, but it came within about 30 pips of it, so that’s a pretty good target considering this was over 2,000 pips. All right, so in this case,
the stop loss distance up here, just to give you an idea,
was about, let’s see, 150, about 150 pips right here, and the target was just
over 2,000 pips, all right? So from a risk to reward standpoint, that was quite the trade. So the key takeaways
here is you wanna stick to the daily and four-hour charts and you don’t wanna
trade this consolidation. Instead what we wanna do
is wait for this breakout to trade with the prevailing trend. Okay, so the next two
lessons really bring us full circle for today’s training, and the first one I wanna talk about is a favorable risk to reward ratio. Now the way that we define
a risk to reward ratio is with an R-multiple, and it sounds a bit confusing but it’s really simply just one number that we use to identify
the profit to loss ratio, or the risk to reward
ratio, for any given trade. So some examples are if we had a setup with a 100-pip stop loss
and a 200-pip target, it would be a 2R setup. Similarly, if we had a
setup with a 500-pip target and a 100-pip stop loss, it would be a 5R, and again, 300-pip target
with a 50-pip stop loss, it’s a 6R setup. So all we’re doing here
is taking the target and we’re dividing the
stop loss amount, right, the risk, into it. So, you know, if we had a 600-pip target and a 100-pip stop loss, it
would be a 6R setup as well. Where some traders get
tripped up is with 1R loss. Now what does 1R represent? 1R always represents the
amount that you risk. So it could be represented
as pips or a dollar amount. So a 1R loss is $100 and you
make $200, you have 2R profit. If a 1R loss is $100 and you make $500, you have a 5R profit, and again, if a 1R loss is $50 and you
make $300, you have a 6R profit. All right, so just remember that 1R is always the amount that you’re risking, it can be pips or a dollar amount. So that begs the question, what is a favorable risk to reward ratio? And my requirement for every
single setup I take is 3R. So if I’m risking 100 pips, the target has to be at least
300 pips away from the entry. So that allows me to have
a win rate of less than 50% and still make money. Now of course, I always want my win rate to be higher than 50% but this allows me to make money, even if
it’s lower than 50%. So I could have a 40%
win rate, or strike rate, and I can still make money
that month, all right? So one thing that I do
wanna hit home here is that a trading edge is your entire
trading style combined. So it’s not just the
strategies that you use, it’s everything from the
timeframes, to trend analysis, to the strategies, to the
amount you’re risking, to the risk to reward ratio, so your edge is a combination
of all of those factors. And the reason I bring that
up is because a lot traders think that, well if you have a true edge, you should have a win
rate higher than 50%, and I always have to counter
that with the fact that my risk to reward ratio, my 3R minimum, is really part of my edge. So if I have a month where I only make, let’s see out of 10 trades, I lose on six of them
and I make money on four? That’s a strike rate or a win rate of 40%. That doesn’t mean that
I don’t have an edge because I could’ve still
made money that month with a favorable risk to reward ratio, so you see that ratio is
part of my edge, all right? So I hope that makes sense. So you know, your edge, really, the seven things I’m teaching you today, all of these things can become
part of your trading edge that in the long run will make you money. Okay, so how do you find the profit target and the stop loss placement
that make up these ratios? And the key here is that
you always wanna use the support and resistance
levels that we learned earlier. So it can be a trend line,
it can be a horizontal level, it can be a combination
of a horizontal level and a Fibonacci, some area of confluence, but the idea here is
that you always wanna use these key levels to make up your targets and also define where you enter and your stop loss placement. And last but not least, always, always, always
determine your profit target and stop loss placement in advance, and the reason for this is that as soon as you enter a position, you’re no longer unbiased, okay? You have a bias, you wanna make money, and that can influence your decision. So you always wanna come
up with these placements before you have money at risk. Last but not least, we have
the topic of pyramiding which is probably my
favorite topic to cover because I love talking
about how to increase our profit potential
without increasing the risk. So what is pyramiding? It is strategically adding to a position as the market moves in our favor, so you never wanna add to
a position if it’s losing. So if you short the market and
it takes off to the upside, you don’t wanna add to that. So we wanna add to a position
as it becomes profitable. As far as timeframes go, I have found that anything
above the four-hour timeframe is the most reliable, okay? And you wanna avoid dropping
below the four-hour timeframe when adding to a position, and a little bonus tip here for you is if you’re just starting
out with price action, you want to avoid dropping
below the daily timeframe, okay? So if you’re just beginning, try sticking to the daily timeframe until you become consistently profitable. Once you do that, then you
can start experimenting with the four-hour. As an example, if we
were buying this market, all right, so if this
market was in an uptrend and it broke above this key level, let’s just assume that this
is the daily timeframe, so a daily session closed
above this level down here, retested it as support, so
we’d wanna buy right here. Now, the second position comes in once the market comes up here and closes, and again, retests this
level up here as new support. So at this point, we’ve
got two positions on. And really, we’re just doing
the same thing up here, market closes above, we’re buying again, so we’ve now got three positions on. Now you may be wondering,
well, that’s great and all but we’ve now got three positions on, it sounds like we may be
over-leveraged on that position, but here’s the beauty of pyramiding, the entire time that we’re
adding, as the market moves up, once we put on the second position, we’re trailing our stop loss, okay? So we’re trailing our stop loss up here and we are now in a no lose situation. Once the market comes up
here, breaks this level, and we put our third position on, we once again trail the stop
loss, and once we’re up here, we are in a no lose position, okay? There’s no way we can
lose position up here or lose money up here because we’ve now trailed our stop loss, we’ve got a buy here,
another position here, and we’re adding again up here, but look where our stop loss is. All right, so the beauty of this is that we’re trailing our stop loss as the market moves in our favor. Let’s bring that all together and then I’ll wrap up with
an example on a chart. In terms of percentages and our multiples, we’re risking 2% on this first position. The market then rallies
higher, closes up here, retests support. At this point, we’re putting on the same size position, right? We’re putting on 40,000 units, and again, our risk is 2%, okay, at 40,000. So we’re moving our stop loss up here into a break even position, the market closes above the next level, we buy up here, again,
trailing our stop loss. So notice that the position
size is the same all the way up. Okay, so in terms of percentage, what that does is it turns
a 6R, right, an R-multiple, which would be 12%, if risking 2%. It turns that into a 24% profit, or 12R, because these two positions added another 12% profit, or 6R, okay? 4R plus 2R right here,
those two positions. So now you’re not gonna get a
lot of these setups like this but let me tell you, even if you just get a
few of these each year, which you can do, it can
really add up, all right? So that’s the beauty of pyramiding is that we’re increasing our profit potential as the market trends
and we’re also covering our risk along the way. All right, so let me
show you an example now on the Australian dollar versus the USD. (uplifting music) All right, so we’ve got
the Australian dollar versus the US dollar here
on the daily timeframe, and the first thing I wanna
do, and just so you know, this is how I had my
chart setup at the time. So I had this trend line up here, drawn across these two highs. All right, so we had this trend line and you’ll notice what happened here is the market had come up here and sort of just churned sideways but slightly higher, right? So this was the consolidation
that I was watching, and believe it or not, but
that was actually a sell signal and let me show you why. This is called a upward-sloping flag and it’s actually something
that I also teach. So we had this consolidation right here. All right, so it’s kinda
the opposite of a bull flag, and a bull flag, if the channel
had formed at a descending, right, at a downward angle, it would be a bullish pattern, however, because it formed at an upward slope, it’s actually an exhaustion pattern. All right, so what I did is I waited for the market to close here and then I sold up here, okay? So I sold here, and I had levels, at the time, I had levels drawn right here and I also had a
level down in this area here, because you’ll notice that we had this low and this high, so this was a bit of a pivot for the pair, and we also had these highs
back here and these lows. Okay so remember I had my
first position was up here and my target for this trade
was actually in this area, it was the second level. The reason it wasn’t this first
level is because the market has spent several weeks rallying
and I said, you know what? If this thing is gonna break down, it’s probably gonna go lower than this first level right here. So I had trailed my stop on this day when the market sold off, I did start trailing
my stop loss, however, my target was down here. All right, so this was the final target and the entry was up here. All right, so once the market
closed below this level, I said, all right, you know what? I’m gonna look for another
sell signal on a retest of this key level, and notice that we got a bearish pin bar right here. So using the 50% entry
strategy, I entered short here. So now I’ve got two positions
on with the same target. So the way this works out is, let me just go ahead and clear this off and show you the numbers. So the first entry up
here, stop loss went above, that candle high, my target was down here. Second entry, all right. So this right here was a 30-pip stop loss. This target down here was 160 pips. Okay, so that right there was a 5.3R. Now this next position
was also a 30-pip stop, and to this target right
here was about 100 pips, it was just shy about 95 pips or so. So that works out to
about another 3R, okay? So another 3R, and this one was 5.3R. So you can see how this works out that the initial trade was a 5.3R, which is not bad at all because that means if I were risking 1%
of my account balance, that would be a 5.3% profit, and considering this only took, let’s see, six days to play out, a 5.3% profit in six days
is nothing to sneeze at. However, once I added that
second position, right? We changed that into an 8.3R setup. So I essentially increased,
if I was risking 1%, I increased my profit potential by 3%. And again, the beauty of it is once I trailed my stop up here, I was in a break-even trade,
so I couldn’t lose on this. So I basically added 3% profit potential and also capped my risk
so that I wouldn’t lose any additional money. So you can see how this can
be really, really profitable. As always, folks, just keep it simple, and also stick to the daily timeframe, if you’re just starting out. You can get into the four-hour timeframe but I really advice
those just starting out to stick to the daily
and weekly timeframes, and then as you get really good, you can drop down to the four-hour. If you enjoyed this video,
give it a thumbs up, leave your comment below and be sure to subscribe to my channel. See you next time. (uplifting music)

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