Trading Made SIMPLE - Use These 3 Specific Steps To Master Any Market

This guy is a seven figure verified professional money manager in the UK trading forex.

One of the things I've noticed working with other traders that they don't often have a process to it. There's a guesswork in terms of what they do. So I have a process called if you're a trader that is trying to use one of these but can I use these three tools to determine what condition that market is in and then use various filters to then look for potential trade. One thing I did want to cover and again this is where I see a lot of traders struggle is Alistair.

Crooks joins Chart Fanatics. In this episode Alistair goes through his exact simple trading strategy that he uses to swing trade forex.

This is the challenge when you're trading. A lot of people call them strategies but actually they're just a set of entry criteria. They're not actually a full strategy and that's what they end up doing is they'll more appropriate to go against the trend. And it's the old adage people say oh trading against the trend is risky. Well it's only risky if you're Alistair.

Walks through his exact exact entry process, trade management and how to exit correctly.

You'll notice here that price creates the low at this point and now we're looking for price to come back up and test the moving average. What you'll notice is price comes back up and it actually does a higher low prior to coming in. And again that makes traders nervous but data over drama. One of the things that's nice about trading a trendline break setup is you can allow for price push above the level. Obviously what we don't want to do is be just trading a break of any trend line anywhere. So the rule that we have in this scenario.

Welcome back everyone to Chart Fanatics the.

Go to channel for all of the very best strategy breakdowns and concept breakdowns from the very best traders in the world. And today we are joined by the.

One and only Alistair Crooks who is.

A verified seven figure trader and a wealth of experience with two decades of.

Experience plus yeah, getting on for two and yeah, two and a half now.

Yeah, two and a half. I love creeping up and we're going to go straight into it. So we got some strategy to break down today. Where do you want to start?

I think I'll give you a quick history, a quick brief breakdown of where this came from. So I was 13 years as a day trader and one of the things that I, I used to love trading a specific setup. I used to Call it otherwise known as a fade play. So what would happen is if you'd had a decent run all day and you had a scenario where you've done about 150 of ATR, so the market was essentially extended on the day you were coming into decent levels. What I would do is I would fade that move overnight. So I trade against that trend, hold the position overnight, and then exit in the morning prior to the next day. So it was something I did for a long while. And then once I started doing more swing trading and more and more people came to me wanting to swing trade rather than day trade, I thought, how can I take that concept and bring that into a swing trading scenario? So I thought I would do today is break that process down, where the process comes from and just go through some of the hurdles that people, people face when they go through something like.

Yeah, sounds great.

Good. So what I think the starting point is the idea, it's really simple concept is the idea of what I call the sideways principle. So keeping it very simple, markets are spending a lot of time in a sideways move. So you're creating areas of resistance up here and areas of support down here. And then obviously there'll be times when markets will break that area and go higher. So what I'm looking to do when I'm looking at any market is to determine where it is in this process. Is it what we call free? So is the market free of any immediate support and resistance or is it working in between those areas? So the idea that I, the idea that I had is how can I define specific areas within that move? Now, as many of your listeners will know, most markets aren't looking like this. An upward move will have periods of consolidation. You'll even consolidate at levels. It will move down quickly, it will move up, consolidate here. So the idea is it a move would look more like that. It's much more, it's much more complex. So rather than simply just saying, well, I'm going to trade short upper areas of resistance and trade longer areas of support, how do I factor in that? During a sideways, during a sideways move, there's a choppy area, there's a consolidation, there's a breakout, there's all these different things going on within that sideways move. So the idea was we would create what I call a discretionary analysis process. So what tools can I use that I can use repeatedly, over and over again to then define what we call a specific market condition? So what tools will give me the certain conditions? So I'll go through These in a bit more detail, but essentially support resistance is the first one, second one trend lines, third one momentum, and then what I would call, I would say they. The key ones that I would use. And then on top of that, what I would call filters. So things like divergence.

Yes.

So is the market diverging at certain points and then other things like sentiment. So if you're a trader that is trying to use one of these, the problem there usually means you haven't necessarily got a system up there. So a lot of people dive in and think, right, I want to learn about divergence, I want to learn about sentiment. But it's like anything. You can use divergence and sentiment any, anywhere, but it might be less effective. So the idea is, first of all, I'm going to go through these in a second, but can I, can I use these three tools to determine what condition that market is in and then use various filters to then look for potential trades? Yeah.

No, I love that. I love that. As you said about the sentiment divergences, positioning, where you actually positioned in the market, where that really starts to take a hold and be more prevalent and important.

Yeah. So let's look at support and resistance. Now. You know, I'm, I'm a bit of a dinosaur, so I still call it support and resistance. There's always other words, liquidity. You know, I've had a bit of stick online for saying, oh, you know, why not just call it support and resistance? But you know, if you want to call it liquidity or your supply and demand zones, fine. But one of the things I've noticed working with other traders is that they don't often have a process to it. There's a guesswork in terms of what they do. So I have a process called what I call the frequency and proximity method. So when I'm looking at a chart and we'll just do a random chart like this, if I'm looking at a chart like this, I can see that I've got an area of resistance up here, I've got an area of support down here and I've got a potential area of resistance here. So when I'm looking at this, what I'm looking at is I'm looking at the frequency in terms of how often price has reached that level and I'm looking at the proximity. And basically what that means is what has happened most recently. So in this scenario, it's nice and simple. I've got two high hits here and I've got three here. So as far as I'm Concerned, I, I would define those as what I call key levels.

Yes.

Now, again, relative to different time frames, when I look at that, I say they're key levels because at the moment I've got frequency and proximity. What has happened most recently, two hits high and nothing else happening there. Three hits low, nothing else happening there. Whereas in here, not only am I a little bit more mid relative to the range, if I look at what's happening prior to this move here, what's happened most recently I've got one hit. And then when I look at further back, what have I got? Price breaking that level. So if I'm looking at that, I'm going to evaluate those levels differently. So if I'm looking at the hits up here, the key level at the top and the key level at the bottom, I am far more likely to make a decision about trading counter trend. Yes. There or there, whereas here I'm not. Now, it might be that price does turn and go that way, but I'm not going to be as aggressive at this point because I don't have as much backing it up.

And the lower probability.

Yeah. And the market isn't as extended relative to those two. So what I'm trying to do is. So when I'm looking at any chart is I'm saying, right, I'm not just going to, I'm just going to go through and go, is there a level? There is a level. There is a level there. I'm going to look for what I call the key levels, which have a combination of frequency and proximity. Yeah. Now this is part of what I was just saying earlier, which is my discretionary analysis process. So there's an element of discretion to this. But the more you can make this systematic, the more you can measure it and like you just said, the more you can generate an element of probability to your analysis. Yes. Rather than just probability around your simple entries and exits. So that would. That's a, that's a summary of the.

I really enjoyed it. That's so clear in terms of. Because this, this element here I think is so important because I think a lot of people don't look left as often as they probably should. Yeah. Because they will see. Okay. A little bit of resistance, probably on a lower time frame, no doubt as well. Yeah. You know, that's just happened recently, but not taking into account actually that same level that you're looking at has been disrespected and not really even treated as support resistance or a key level or any of those terms. Literally just maybe. And there's 10, 15 candles to the left.

Yes. Yeah. And what happens is, and this is the challenge when you're trading, a lot of people call them strategies, but actually they're just a set of entry criteria, they're not actually a full strategy. And that's what they end up doing is they'll, they'll hyper focus in on what's happening here and then wonder why. So to rephrase it, you might say, well, hang on a minute, Ali, why would, how do you know that it price won't do that? Well, I don't, but I'm going to make that decision up front and say, no counter trend trades here. Price has got to prove itself before I'll do anything. Whereas up here I'm willing to be that, that bit more risky. Now, trade by trade, you might not actually notice any difference, but when you've got 150, 200, 300 trades that tell you that when that market is in a more extended position, it's more appropriate to go against the trend. Great. And it's the old adage, people say, oh, trading against the trend is risky. Well, it's only risky if you're piling in as price is in a momentum phase. And I think that's where a lot of people go wrong when they try and trade counter trend. They're not looking at the market in an extended enough scenario. So that's a bit of a brief version of how I look at support and resistance. The next element is trends. I look at trend lines in two ways. So if I'm looking at my higher time frames, weekly, monthly, possibly the daily, then I'll use the simple analogy or the simple concept of joining up higher lows. Yes, simple, simple. Every, most traders listening to that will know that. However, what I will look at within the concept of our analysis process is I will look at trend lines slightly differently. So I will look and wait for what's called the price action. I call it the price action momentum point. It's the point that defines further momentum. Because again, a lot of traders are drawing trend lines on and just saying, well, I'm drawing it on because I can see a trend. What are you actually doing with that? Are you using it to, are you using it to trade off? Are you waiting for the trend line to get broken? So I look at and say, well, in real time, at this point here, the previous high is broken, the price action momentum point has been broken. So now what I'm looking at is a trend with momentum. Now what might happen is price pauses for a little bit and then pushes up higher.

Yeah.

So what a lot of traders will do, and there's nothing wrong with this, is they take a stance like that.

Okay.

Because they take the big picture stance and there's nothing necessarily wrong with that. But within this discretionary analysis process that I run, I, I want to be able to again have a repeatable way of drawing trend lines. So in a scenario like that, if I get a pause or I get a series of lower highs and then price shoots off, I'm going to put more weight on that more recent trend line. You'll see why as I break down the whole process. So it's not that that trend line isn't wrong, but I'm going to go, right, okay, price, over this shorter term period, the momentum is steepened. I want to factor that in going into my, going into the next phase of what I'm doing. So the easiest way to remember it is you have an origin point on a trend. So you have the initial point. So the simple way is price is going sideways. You break that area, you come up, you come down. As soon as that first price action, momentum point is broken, I've now got an origin point. Yeah, One origin point. And then the second point is a reference point. If price continues in that fashion, comes down, trend line doesn't change. If it steepens, then I will actually. And you'll see this when you look at some of the examples I show you later is I will. If the price, if price hasn't paused, I will actually cut through because I want to focus primarily on that area there. I want to focus on the most recent higher low that has created a higher high. Now, obviously you might have a scenario where price goes like this and steepens so much that if you try to use an origin point all the way down here, you've, you're straight through. But invariably. And this, this is just down to experience. If price steepens, there's usually a pause. So you'll have a trend that's doing this. Price will pause and then offer up a steeper move. Well, if that's the case, and I've had the pause, as I've just said, drawing it badly. But I would focus in.

Yeah.

On that area there. So I would essentially put more weight on the most recent higher low that's creating the higher high and obviously vice versa in the other direction.

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Now let's go back to the episode.

So that's trend lines. So that's support resistance trend lines. What I didn't mention earlier and the.

Reason you go in steeper though just before we go on is the fact that that's the most recent move. So you're going off the most recent momentum.

Yes.

For example, if then that most recent momentum line gets broken and they end up going towards the original trend line that was positioned, are you still looking to trade off that? Are you?

So this is really important as you. As you'll see when I go through the process, part of the reason why we do this is we're not actually looking to trade off the trend line. So rather than trade off the trend line, we're looking for the trend line to be broken. Okay, so this is why I'm not. This is why this was a stand. Yeah. So a standard trend line. So if I'm looking. If you think about the original day trading strategy, you've hit hit the nail on the head. Because if it's steepened up overnight, well, we won't go on the premise that steeper the trend, the weaker the trend. So I don't want to have my trend line all the way down here and might get triggered in at, you know, six in the morning. I want to be triggered in just before market closes. So I've taken that process and applied it onto the, onto a swing trading element. Didn't assume they would work, obviously, went away and tested it, of course.

Yeah.

So one I didn't mention was moving averages. So the reason I use moving averages is they tend to be. Well, it's one of two of the entry points that I've got. So I'm using a 21 and a 50 moving average. So the reason I use those is because they were the two moving averages I used to use when I was trading momentum pullbacks as a day trader and rather than reinvent the wheel, I just moved them over and I remember hearing it was ages and age ago, a trader that I was, I was listening to and he said that whenever you get a trend line break, the retest of the 21 moving average is a high probability setup. Now the challenge there is when traders hear that, I think, oh great, I'm going to trade that. Yeah, I had, I was lucky enough to have enough experience going, what do they mean by high probability? So I was like, right, I'm going to go away and test it. So when I think that's a really important thing to the people listening is whenever you hear someone say it's high probability, don't take my word for it. Don't take anyone's. Go away and go and prove it to yourself.

Yeah, love that.

So I've got moving average. Yeah, I've got moving averages. Trend lines support resistance. They're essentially the key elements that I'm looking at. So what I'm trying to do when I'm using these tools and I'm going to go back to this sideways moving market and again I'm simplifying the move a little bit is I'm looking then if I'm looking at any market to define where we are in the move. So what areas can I consider trades? So the three conditions that I work to are against the trend, which I just put as ATT with the trend and then the trend. The condition I'm going to spend a lot of time talking about today is what I call the trend line break condition.

Yes.

So against the trend, probably the most aggressive with the trend 1. The biggest area within that move that you can consider trendline break. I refer to this as the pocket. It's a little area that you can look for that is before you get into the, with the trend area but after the against the trend area. So if we take our simple process here, I've got my upward trend there. So Price comes up and let's assume we've established the level previously. This here I'll draw in a different color. This would be where I would consider not just simply trade off the level. That's not how I do it. Again, I'm not saying that's wrong but. But I wouldn't do it that way personally. That's where I would consider and against the trend trade. So that area there against the trend. Once the trend line gets broken, this little area here is where I would consider a trendline break setup. The whole area below becomes your.

With the trend.

With the trend area. Yeah. Now again people listening will go, well, hang on a minute, Ali, what about if the chart is choppy? So you've got often when you look at sideways moving chart, you've got a choppy area in the middle. Okay, that's still a with the trend area. But I'm going to wait until Price gets out of that way. So the idea being is how can I essentially take a little bit less risk than getting in rider level, a little bit more confirmation and potentially have a trade in this area here, but over time consider running that trade further or splitting the trade in half. So the idea being is I don't necessarily want to get in at the resistance. I just want to wait for Price to confirm that a little bit more and what that allows me to do it. Also, if we look at our previous example where I had the two had the levels there.

Yes.

And then the level here, this area here, I'm going to go against the trend. But it allows me, if Price proves itself at that point there to take the trendline break in that area. Because rather than say right, I'm going to risk going against the trend here and being unsure about whether or not that's a level. I wait for a little bit of confirmation. So I by all means I can trade the trend line break here. But it opens up other opportunities or potentially opportunities on lower time frames where the level isn't as good. But Price has decided to prove itself.

Yes.

So what it does is it stops me going, should I? Why shouldn't I? Well, I know that if it's not a key level, I'm waiting for a trendline break condition.

Yes. So added confluence and then as you say higher probability wise. Yes. You check the data to confirm that.

Yeah.

That then creates the turns a low probability that was we mentioned earlier into a higher probability.

Exactly.

And then is this like a cycle Though, because then once you get here, you return to ATI here, att, sorry at the bottom and then to trendline break and then to yeah, continuation.

So it's a simple, a simple way a trader can manage this is they can say, well actually I would rather trade one condition. Okay, so I'm going to trade one condition. I'm like, okay, well if you're doing that on the euro, then you're not going to have a lot of trades.

Yes.

So if you're going to trade one condition, you're probably going to want a multiple market approach. So you're going to want a bigger watch list. So what you're doing then is you're scanning all of the different markets in your watch list and what you're saying is that one, that one and that one have the potential to be in a trend line break condition. The rest of them I'm not interested in. So when I say trades, yeah. I've got 40 markets on their watch list. Like how do you keep track of it? Well, I'm not trading all of them because I'm only looking for ones that fit a certain condition. Whereas some, another trader might have the approach with, well, I'm going to trade two or maybe three of the conditions. Okay, well then you may only want 10, 5 to 10 markets in your watch list because you're going to be busier as a trader because you're going to be picking up with the trend setups against the trend setups and trendline break setups. And obviously there's this scenario there with if you trade against the trend and with the trend, then you could be in a scenario where you're taken against the trend trade, you're stopped out, but price decides it wants to go back up, breaks the trend line and then you've got the trend line break very soon after.

Yeah.

So I'll talk about the pros and cons in a little bit. So, so essentially I'm using the support resistance, the trend lines and the moving averages to determine whatever it is, Market X, is it in any of these conditions or is it in no man's land? So is it essentially choppy through the middle, it's not going anywhere or is it sitting, you know, either side of a, a resistance level? It's not made its mind up at that point.

Sec, I love that. So clear. And I love the, the how to add in confluences such as this area here where we turn a lower probability scenario to create a more higher probable scenario. And the mention of, you know, if you Want to focus on one specific style of entry and methodology, then how do you go about creating the opportunity problem with that comes with that?

Yeah. If I was, see if I was listening to the, if I was listening to this 15, 20 years ago, I'd be like, show me how I can trade in each condition. But as I've got, as I've got older and I'm not saying I'm taking a more cautious approach, but I trade frequency is less now than it was 10 years ago, I'm quite happy trading in one condition or I might reach into another condition. If some of those filters that I mentioned earlier, like divergence and sentiment, mean that I can I see a setup that again is higher probability.

I think the, the as experience continues and as you're, you know, market, not only market experience but also data is added over time and added over time. It's a natural order of things to go for the higher probable scenarios, the ones that you see least resistance with yourself when it comes to psychology, but also performance wise. I mean that's a very natural order of things. But I can understand being early on, you want every opportunity and you want the strategies that presents every single opportunity as much as possible.

Right? Yeah. And I think the other, the other thing I think when we talk more about pros and cons is as a swing trader, it can feel, it can feel an age. You know, three days between trades you feel an age. But actually when you add it up over the year, you could be up to 150, 200 trades. Yeah. So in the moment it feels like nothing's happening. But actually there's plenty of trades when you, when you. Yeah, so that's, that's, that's essentially the discretionary analysis process part. So it's how do I choose what condition that market is in against the trend, trend, line, break. And then essentially it's, you already know which conditions you're going to trade. So if you're going to trade a trendline break condition, there are now a set of specific, what I call entry criteria, what a lot of people would call a strategy, I see it as entry criteria. So now we're going to talk about what are the ABCs that mean if it does those three things, I take the trade.

I love that.

Rather than just seeing ABC anywhere on a chart, it has to be in that condition. So the nice. So the way to think about this, if there was a word to describe the discretionary analysis, I'm essentially filtering out the markets that don't fit that criteria and what I have and the guys I work with will have is they will have specific ABCs for each of the strategies.

Discretionary the translation then to mechanical using that discretion.

Because what this allows, has allowed me to do and allows other traders to do is create more data because they're not trading a different scenario every time they, they wake up or they're not just trading at a support and resistance.

Yeah.

They're saying, okay, I can measure all of my, I can measure how good I am at finding the condition. And also then I've got a measurable set of criteria now that's going to reduce the number of options. But, but over time the trader can act like I've said, not only can they go that they can go the way of reducing the number of conditions like I've done over time. They can go the other way and say now I've mastered the trend line break set up, I can move on to the. With the trend setup or and increases.

So you're creating high probable, you're reducing first to create high probable scenarios and trade opportunities and then once you've done that for one, you then can increase those opportunities by then going through that same process again.

Yeah, exactly. So once we get down to the, the criterion and I'll, and I'll work through it, there are two elements to it. They're what I call initial technical triggers. So an initial technical trigger are a set of, set of almost keys instead of absolutes like, like gates. It's like if they don't happen.

Yes.

The rest doesn't occur. So even though you might think this is going to happen or Powell's going to say this and I want to be in that market, if these initial technical triggers happen, you leave the market alone. So if I'm looking at trend line break as we go back to that, let's assume that we're happy with this level. Price has got to come in and it's got to hit the level.

Yes.

So can't get close, can't be a little bit far away. Has to hit right now. Some of you might say, yeah, but what if there's a divergence or what if it's close to the level? What if it's only three points away? We'll come to that in a bit because that's the more advanced. But again, what I say to traders is be disciplined with the basic setup first and then as you master that then you've earned the right to add in a little bit of flexibility as you go.

Intuition, the different elements. Yeah.

So it Must hit the level. Then we've established a trend line based on the idea that we are working to the most recent low lower. Well in this case the most recent, most recent lower high. That creates the lower low.

Yes.

And then very simply Price has to come up and break the trend line.

Okay.

So at that point, once that trend line's broken, Market X comes out of the main watch list and goes into what I call your possible trade list. So it's one of your short listed markets because it's in the trendline break condition. It's done the two initial technical triggers of hitting the hitting the level and breaking the trend line. Yes. Now I know there'll be traders out there that would want to get in at that point and I'm sure if you went away and there's, there are strategies that say that would work if you say right, as soon as the trend line breaks get in. Yeah. But if we think back to what I said before about coming down and that hitting of the 21 being high probability. Yes. What I wait for, we need another color is I wait for Price to break the last lower high in the move.

Yes.

So again if we think back to our conditions, if I'm looking to trade against the trend down here, much more risky because I'm going I've only got the trend, but now I've got a bounce off the level, I've got a break of the trend line and Price has told me it wants to go higher. So very simply all I will do in that scenario is I will wait for Price to come back down and test the moving average. So if it comes down hits the moving average, that's my entry. So I'm in at that point there I love.

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Now let's get back to the episode.

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Now let's get back to the episode.

Now, the core strategy. Again, I want to, I want to focus on the core because I could give everyone like loads of different variables and they wouldn't do it. So the core element is you simply trade back up to the high and that distance there, whatever it is, let's say it's 100 points. Yeah, your stop goes 50 points below, so your stop is always half the distance between the entry point, which is the 21 moving average and your target, the previous high. So again, if that was 200 points, your stop would be 100. 100. You just, you just, you just move it that way you have a one to Twos. Yeah. Because if we think about it, in this scenario, this area, once we come back up. So let's say the trade triggers, we're good and we reach our target. If we go any higher than that, we're moving into a different condition. Yes, we're moving into the, with the trend condition. Now, somebody might be listening. Simple. Well, what could I hold it, Can I hold it for longer? And the answer is yes. But you want to know how that's going to impact your results because since 2018, a 2 to 1, we're operating at a 58% win loss ratio. Now, I've worked with traders that have upped it to three, but that will impact their win loss ratio. So the answer is yes, you could run the trade for longer and there are some factors I'll talk about. But the idea here with entry one is wait for Price to come back down to the moving average, enter at the moving average, get out the target, stop half the distance. The nice thing about that is from a swing trading point of view, it's easy to set up. You only need to check it two or three times a day and it's very easy to program in, you know, an entry bot. To do that.

Yeah. To signify.

Yeah. Not to, not to do all of this just to do that, just to do the entry for you. So that's the other one. Now if Price starts to come back down, but not make it all the way back down to the moving average and starts to consolidate. Yes. Then you can look for a breakout entry. Now the breakout entry probably fit here. I'm needing two highs, either as a neutral, as a minimum and two lows, or I'm needing two highs and two lows as an ascending. So either neutral, consolidation, ascending and then you do the same process here.

You go in, stop loss below the.

Low, stop loss below the most recent low.

Yeah.

And then you're looking for another two to one scenario there. So again, I would suggest to anyone listening that they go and focus on one of those two entries.

Yes.

First, because otherwise you risk having two entries. One condition. I mean, that's still better than having lots of different conditions in lots of different. Yeah, you know, lots of different entries in lots of different conditions. But yeah, so what we're allowing for there is the price action to do two different things. It might be the Price wants to consolidate. We've had a, we have, we've had a very similar scenario on Euro. Prior to the breakout a couple of days ago, we didn't have it come into a Level, So it wasn't the setup, but it's done that consolidation, then it's popped. So it's a similar process.

So artistic. Yeah. So great. Yeah, I love it. And it's so clear as well. And what I love most is, and I think a lot of traders don't do this and they don't do it enough is being able to split the conditions up and understanding that if you've taken a particular trade under a certain condition when it's hit your target. Because I think traders get guilty of it. I know I have. It was where you've gone into a trade for a certain reason and had a target set, but because that trade's moving very nicely, you kind of like, let me hold this longer. But then once you've gone beyond your original target, it becomes a different trade.

Yes.

And I think it's so easy to forget that. And I love how this is really highlighting that as well.

And the nice thing about this process is all of this is done before your, your tick box criteria, I. E. The new high, the pullback down to the moving average. So. And also the filters that we use when I mentioned, when I mentioned divergence.

Yes.

And I mentioned sentiment.

Yes.

These are all done before the one, the ABC criteria. So if I'm going to choose as a. To run that trade for longer, I'm making that decision prior to the setup.

Not once the filter comes in.

Yeah. So we're going to talk about that in a second.

Okay, look.

Because what, what a lot of traders do is exactly what you said. They go, oh, I think this is going well. And then they stay in it. And then they stay in it. And then reverse, reverse out. And then they're sitting there going, I wish I'd just taken two.

One and then that what leads to the revenge trade, the next trade not being on plan. And.

Exactly. Or the opposite happens. They do two to one and it rallies off. And then they go, I wish I'd stayed in it.

Yeah.

So part of what we're doing here is to eliminate that element of, you know, that element of bias where you, you, you, you feel you've missed out because of what's happened. So the only, the only way that I will run these trades for longer if there are certain things happening in the market and that will still have a consequence on my, my overall overall profitability, or it might, I might be more profitable. My win loss will, will drop, will change.

Yeah.

Yeah. So I'm going to come to the filters in a second. But the one thing I Did want to cover is. And again this is where I, I see a lot of traders struggle is time frames.

Yes.

So how do I approach this from a time frame point of view? So I've got my discretionary analysis process where I'm determining the market condition. So what I have, what a simple way of putting it is I've got analysis time frames. So time frames where I'm going to do the analysis to determine which condition we're in and then what I'm going to have is trigger time frames. So the time frames I'm actually going to take the trade on. So there's no, there's no flex in this because the otherwise you risk going down to a time frame you're not used to suddenly seeing a trend of thinking I'm going to jump in on this.

Yeah.

But there's no necessarily no data to back that up.

It stays.

Yeah.

Very mechanical in that sense.

So it's a top down approach. So if I'm looking at a swing trade setup monthly chart I'm not going to spend too much time on there. It's only if I need to weekly and daily. That's where I'm going to establish my key levels, support resistance or my, my key levels or my what I call the proceed with caution level where I've only got one, one high. Yes. My trend line is primarily going to be on the daily and then the trigger time frame for that is the daily.

Okay.

Now I'm going to show you a little a way that you can, you can go slightly lower but that principle there. So if you were going to look at something like this and say well I quite look I'd like to see if where this works on a 15 minute timeframe. Well adopt a similar approach. So if you're looking as an intraday trader then you want to be looking at your daily, your 60 and then your trigger time frame for where your trend line and your break of your trend line would be probably something like a 15 minute.

Yeah. So again would be like the hourly basis. Yes.

So in that scenario I can tell you straight away that the data that backs this up works. I can't tell you there because there's nobody I know that's trading that. So but there's no reason why that principle wouldn't work.

Yeah. Price is very fractal.

Yeah. But the idea is if you can keep your time frame and say right, these are time frames I do the analysis on. These are time frames I take the trades on. It makes it much easier to measure.

Yeah. It's that rule based that creates a big difference in certain elements because as we say there is room for discretion, but there's also room and necessity for rules and tick boxes.

Yeah.

And even though you may not have the data for that, you know, if the rules are followed then the results can be there.

Yeah. And, and different traders. It's a little bit of a scaled line. Some, some traders need to be some data if that's, if that's mechanical and that's pure discretion where anything goes fibs on one day and something else on the other day. Some traders, if there's a sweet spot, some traders are a bit more towards the discretion side, some are a bit more towards the mechanical.

Yeah.

There's nothing wrong in that. As long as you, as long as you own the process, you don't have to be slap banging them. I'm not sitting here saying this is the most optimum, but after working with so many traders over the years, you realize that I usually see the trader when they've been over here.

Yes.

Too much discretion. They go all the way over there and they struggle because they go, I just need a strategy. And then they want something where it's, I'm going to buy above this candle, sell below this candle and stop goes in the middle. Yeah. And what you don't realize is that might work, but there's a consequence to that and you've got to take every single trade. Whereas with this you've got this filtering process. And the other issue I see as well is that traders don't. I like think of a different way to explain it. I like to get my discretion out the way at the start so I know that market is in that condition. And then we'll talk about the filters in a second. If the filters are there, which add to the price potentially moving further.

Yes.

I make the decision to do that there and then I'm just. The rest is just a wait rather than this, oh well, I'll wait and see if it sets up or may or, or maybe I'll run it.

It's more like freestyle discretion at that point versus planned discretion.

Yeah. And what I found is most traders end up using discretion. So formalize it, do it up front.

So then you can kind of in a way making a mechanical process for your discretion.

Yes, that's exactly great way of putting it. So the filters, if we go back to the scenario of price coming into the level, breaking the trend line and then the potential move back down to the moving average if as price comes into the Level or prior to price coming into the level, I can see a clear set of lows like this. I will look for what's called a divergence. So to explain what a divergence is, a divergence is just where I'm seeing the lows moving in one direction, so they're coming down. And then I've got another tool, but the other tool that I'm using, I'm seeing the lows coming up. Yeah. So the two lines, although some people say. Hang on a minute, are they converging because they're coming together? No, that's just a form of divergence. It's the. They're moving in the opposite way.

Yes.

So this is really the only indicator process that I use other than the moving average to get in on the trade. This is the only other thing I will use. So what I will look at is what's called an macd. So an MACD is just the term is moving average convergence divergence. It's a. Like an underwater in indicator. So it's below the price action area, it's sort of down there. And what you've got is you've got two lines, you've got a moving average line, a standard deviation line. All of that doesn't matter, it's how you use it that matters. So if I see the move at the macd, the two lines on there, if I can see that they are moving in an upward direction as price is coming into that level, then that will be a potential reason for me to consider holding. Holding the trade, either to a higher time frame, moving average, another level of support, resistance, something that's predefined. Predefined as well. The only other one that I bring in that I'm going to mention is sentiment. Now what I'll look at is retail sentiment. So the principle with retail sentiment is very simple, is most retail traders are on the wrong side of the market most of the time. So if you're looking at a market and you want that market to travel up and at that point retail sentiment, or a certain percentage of retail sentiment is selling. Selling short.

Yes.

Then the idea is you're better off going long because you're going against retail and retail.

And that's in line with all the rest of your confluence.

Exactly. Now what you tend to find if we exaggerate this move out is retail sentiment becomes more apparent once we go into a. With the trend condition rather than in our trendline break condition. So you're more likely to see a disparity if you're Long. At this point here, retail sentiment tends to be starting to go. A greater percentage is going short. So, for example, here you might be long, but 70%, 75% of retail sentiment is short.

Yes.

And that usually if the trend is strong, that will increase. So the further the trend goes, the higher the retail segment. So a lot of the time in this scenario, you don't see retail sentiment heavily short. In fact, a lot of the time it's neutral. But on various positions might be 1 in 20, 1 in 30 at that point there, if I see 60 to 70% of retail short, that is an early sign for me to potentially hold that for longer. It's no guarantee, but that's something that I will look at. And again, these are the little nuances. So if I'm starting to look and see, I've got a nice divergence on here. I've got retail sentiment short very early in the game and again, I don't want to see 80 or 90% because that's too far. But if it's moving in the right direction and more retailer getting short here, when normally that would happen up here, that's a nice sign for me to put. Potentially run that trade longer now. I'll still potentially pay the consequence from a win loss point of view.

Yes.

But that's how I'll get bigger trades. And obviously you've just got to flip it for the. For the short side.

I love that. Yeah, yeah. Because the short side would just be the opposite way around. This would be facing downwards and this would be.

I can draw it if you want, because it's. If the guys want to see it, because it's just. It's the visual element. Because the, the idea of the trend running up here, we come into the resistance. So at that point there, I'm looking at. I'm looking at the MACD above the midline on the indicator and I'm just lining it up. If I see that too low, the, the highs getting lower and these highs getting higher, then that's what I'm looking at there. And if I'm looking at retail sentiment and I've got retail sentiment sitting at 60, possibly 60, 75% short at that point. So, sorry, not short, long. Yeah. And I'm wanting to go short. That's. Those two, those two filters, they're not a filter that makes me think, right, I've got more chance of the trade. I've got. I've got more. It doesn't add certainty to that move. It adds certainty that if the trade.

Works they could continue.

That could continue.

Yeah, yeah.

So that's how I'll do it. In terms of anything else of the, the strategy itself, I would say the pros of it. Again, some of your listeners might be listening to this. Thank you guys. There's a lot there. But if you break down.

Very clear. I think it's very, very clear.

Three steps.

Illustration was amazing.

Yeah. So three steps is define the market condition. For this one, it's trendline break. Then you've got your ABCs that are set up which include the initial technical triggers, which is the must. It must hit the level. It must break the trend line. And then you look for the, the high and then you've got on top of that your filters. I would suggest that you do you practice this. Perfect this before you start going in, trying to go for your 9 to ones, your 10 to ones, your 5 to ones. Keep it simple and work to the 2 to ones to start with because that's where the higher probability win loss. And I think whenever you're a new trader.

So it builds the confidence.

Yeah. Or even if you're not a new trader but you're doing something new.

Yeah.

You want to, you want to bet in with that strategy first. There's plenty of time to, to start filtering and optimizing it from that.

I mean that's what it is. I think a lot of people are trying to optimize to perfection straight away versus build a foundation where the confidence comes from. You've really learned all the processes at that point. You've really learned about data, you really learned to the more about nuance and then start to optimize.

Yeah, love that.

Which I, which you know, this highlights really, really well. So what are we talking in terms of pros and cons to this approach?

Good. I would say pros of this. So we're looking at. I think the key thing is that you, from a swing trading point of view, it's easy to fit in with what you're doing. So if you're somebody out there listening who's not got a lot of time. The nice thing about this is to define the markets that are in the trendline break condition. That's probably two scans of your whole watch list a week, maybe three. So two to three scans a week into seeing what markets are in that and then your possible trade list, which is the one that is close to getting to the level, it's starting to do. The initial technical triggers, that's 20 minutes in the morning, possibly 10 minutes at lunchtime. 20 minutes in the evening.

Yeah.

So you've only got to check that list because you're essentially just ticking off the ABCs so you can fit it in nicely. If you're a swing trader, it'll fit around what you're doing. So that's, I think, one of the key ones. I would say win loss now at 58%. Somebody listening to that might not think that's a good win loss, but when you've been around as long as I. 58. 58 or 2 to 1 sure is good.

I would say as well that yes, it's discretionary, but it has a balance because it gives you a balance of discretion and mechanical, which a lot of strategies that people try and hunt for don't give you one or the other like we talked about. I mean, that's definitely a pro, which also in the discretion element you could say is a con in a sense because people always let it go. But that's down, I guess, lesser to the strategy, more so to the person. But I would say the balance of, you know, having that discretion to. To mechanical is very clear, you know, and it's very. It is very clear in terms of what you're doing, the processes and I think the dynamicness of being able to go take a strategy with still a mechanical approach in a sense, in terms of the filters, of how to actually extend targets. Yeah. Is a very great benefit too.

Another one is for your listeners out there that may be already using supply and demand or they've got a different way of analyzing because it's broken down into support resistance, trend lines. Obviously I'm looking at that. That simple frequency and proximity method. And I will use zones. So I don't. It's not simply only one line on one line. I'll use zones, but they may have their own way of doing it. Well, great. I'm not sitting here saying you've got to do it my way, but you've got to go and test it. So the idea is you can use your own, Your own analysis process. Yeah, but test it first to know whether or not it works. Of course, I think that's a key one. I think some of. I wanted to highlight a couple of the cons because it's easy to focus on these positive. Yeah, I think one of the key ones is. I've mentioned this earlier, it's swing trading. So I've, I've seen the data, I've seen the distribution of the trades. It can. You can go a couple of weeks, maybe even three weeks with no, without A setup. But then what happens is you'll get loads of stuff. Yeah. So you might go. You get. You'll get a quiet period and then you'll get four setups all in one go. Yes. Now, I wouldn't say this is necessarily a con, but it's something to be aware of is because of the nature of having forex cross pairs majors, having various things in your list is you might come in and go, wow, euro yen, CAD yen. So. And then you've got. And maybe not CAD yen, but Aussie yen, you've kind of got. You've got a load of cross pairs all doing a thing similar.

It's quite correlated.

Yeah. So you've got. You've all. They're all trending up. They're all getting nearer. Nearer level. Now, initially I've. I thought, do I want to. Do I want to potentially be in three? But what I found is a lot of the time, because the entry is very specific, only one of the three actually, or two of the three actually sets up sometimes. You'll get every marker. Yeah, no, you. You'll find all three in the trendline break condition. You won't necessarily get all three set up. So it's just something that I've had. Traders get worried. They're like, oh, God, I've got three. If they all lose or something happens to the Y, I'm going to probably lose on all three. But often you don't actually get all three settings.

And that's where the benefits of the. The mechanicals or ticking. The entry model.

Yeah. I think a big technical one that I've seen is that traders forget about the resistance level and just look for trendline breaks. And then the problem is, before they know it, they're actually not trading trendline breaks. They're just trading a choppy area and they've forgotten about letting price get further away.

I'm not following specifically.

Okay. So I'd say technically that's probably. Probably one of the big. The big ones that I see.

I love that. Well, let's pull out the charts now. I know people are probably waiting, but so far, absolutely incredible. I'm very excited to see the charts and it's so, so clear. Drop a comment of your thoughts so far, but let's jump out on the charts.

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Now let's get back to the episode.

Okay, so we've got the laptop out.

We're ready to go over now some charts. So after that incredible breakdown of the strategy so far, we're going to now see live examples on the charts, some that were actually taken with trades and receipts also, which is always amazing. So yeah, let's go straight into it.

Ali. Okay. Yeah, I thought what I'd do is I would break down both of the entries and then some of the, I think a couple of subtleties. So I've gone for some examples from a couple of years ago. So you can see here, you know, they're all trades that I've. That I've taken, I've taken it with my group as well. So I'm going to break these down, each one specifically because there's a couple of key, key elements to, to be aware of. So we're going to start with the trade on Dollyen. So if we think back to. So there's a couple of things I want to talk about specifically with this particular trade because one of the questions I get is does price? Obviously price has to level. So remember, we will established, we've established our level. We'll establish it whether it's a key level or proceed with caution. And price has to hit that level. But one of the things that's nice about trading a trendline break setup is you can allow for price to push above the level. So obviously what we don't want to do is be just trading a break of any trend line anywhere. So the rule that we have in this scenario is price can go higher, but if it was to come back down and do a second higher high, then the trade is void, even if it then comes back down and breaks the trend line. So what we allow is for a bit of flex because we're not trading against the trend up at this point here. We're waiting for price to come down and break the trend. So we get that here. But the reason I've pulled this example in is because sometimes what will happen is you'll get a move. And you can see here, we get the consolidation move here, but what we haven't got is price lower than the last higher low in the move. So we gotta wait. And this is where sometimes traders can get nervous because they're waiting and waiting. Price is falling, price is falling, but we're waiting for that pullback. Now we actually get the consolidation move right there. But this is an example of the first pullback into the 21. So the reason why I pulled this one in is because this isn't uncommon, you know, especially when you're looking at a short move, because often the market will fall quicker than it will rise. So you have to wait a little bit longer. Now what I will do in a situation like that, especially as prices move down, is I am going to keep an eye on what is going on to the left. So even though, again, this is. Even though I'm going to look to the left before the setup occurs for the. For the discretion, I'm still going to do the same thing. So if I was looking at a big area of support that would be impeding the potential of that trade, then I may choose before the trade sets up not to take it. But as I can see, really we're okay. Yes, we've got a little bit of it, but it's not until this area here, where we've got a little bit of support and a couple of other things. You'll notice here that price creates the low at this point. And now we're looking for price to come back up and test the moving average. What you'll notice is price comes back up and it actually does a higher low prior to coming in. And again, that makes traders nervous, but data over drama. We've done the testing and it's fine for price to do this on its way into the 21. It still works and still has the.

High probability it adds on more, essentially buyers that are sat there at the lows for yourselves. And one thing I love about this as well is just showing how, again, as we talked about, the nuance of how simple it can look on the whiteboard, but then the reality can look different though the rules are all there. So none of the rules change. Everything remained the same. The tick boxes, the scenario, the, you know, the positioning of where we need price to be. But notice how, as you said, like price selling off in this manner before then ticking the box. A lot of people would assume, oh, that's it's not the right trade, but it's still. The rules have then been met, a trade executed, trade played out.

Now, if we, if we were looking at this same scenario and the support level was here and it had basically done the whole range, then I'm going to say no, because. But if we actually start to look, we can see, if we zoom in a little bit, you can see that relative to the previous move, we're not sitting at the next level of support, is there. So there's enough clean air for the minimum of 2 to 1. I actually ran this trade a little bit longer because I saw there was a little bit of extra room there, so I ran it a little bit longer. But the core, two to one, if there's not the, if not the clean air, then I won't take the trade. So. So that's the first one I wanted to have a look at. £ New Zealand.

I love that pair. Well, I used to. I used to. That was one of the first pairs I became profitable on. No one really trades it well. No one I've seen. But thankfully today we're going to see that.

Yeah, you're going to see a trade here. So again, a couple of nuances on this one, you'll notice. I'm going to scroll back, you'll listen up to. Forgive me, I spend most of my time on a desktop.

That's okay.

Not on a laptop because I'm a bit of a. A bit of a dinosaur. So here, what we've got is the prior resistance zone. So again, I'm not looking for it to be. It doesn't have to be exactly hitting either the, the top, the bottom of the zone or the top of the zone just has to come in and hit Any of that area which you can see there. So you'll notice again with the trend line I've cut through a little bit because I want to prioritize the most recent higher low that creates the higher high that you can see there. Now with this one you'll notice that if I just squeeze in a little bit here, you'll notice that the range on this particular market isn't as deep as the last one on Dolly jpy. The range is a little bit smaller so we are extended relative to where we've been. But we're a lot closer to the other side of the range now you see we'll get the break and what you'll notice here as price comes down, there's no divergence on the indicator. So for this one this was very much. I'm not going to try and run this trade because I haven't got any of the additional filters and it is a bit of a. Here's one I've picked earlier but I wanted to pick this one for the listeners because you can see there was none of the additional filters. So as a result of that for me it was just the straight 2 to 1 and it clipped it and the trend actually carried on. So that's the other advantage of this because you're only going for the 2 to 1 if the trade, if the new trend doesn't want to continue and we push on, you've still had your trade and you've still been out of trade in that, in that pocket easily.

You know, the trade hitting the markets, breaking the trend line came into that resistance. We're at quite a significant high at this point. Bearing in mind this is the daily timeframe as well. And previously if you look to the left there, price has sold off quite aggressively back to those lows before, twice just in what's in the picture. I'm sure it's probably done it before. How easy it would be to assume to sell and hold because it didn't hit the filter. It's really showcasing why those rules are in place.

Brilliant. Exactly right. And again a lot of traders will, I always say that your levels are not your decision making point to do something, not necessarily your decision making point to place the trade because our trade comes after the trendline break. But again traders form the trap of going, well, last time it was here it went there, last time it was here it went there. Well, this is an example of where that side wave move didn't want to continue. But I've still been able to capture that trade in There, So exactly right. And then the last one I'll show you, which was on oil, is actually the other entry. This is the consolidation entry on this one. Again, I'm going to have to go down. So this is one of the nuances that I didn't mention earlier, which is four hour entries. So again I talked a little bit about the, you know, testing on a 60 minute time frame and trading on a 15 minute. One of the things that we, we, we did this strategy came into play for me in about 2016, 17, but a little bit later, around 2020, what we looked at is, well, what if we use the same. What if we use the same trend line? So we used exactly the same trend line as the daily chart, but looked at the entry slightly earlier. So essentially a fractal element to it. So looked at the entry when price was coming in to the 21, but a little lower down. So you'll see this as an example here. So these kind of setups I love because if we actually look at the price action here, what we've got is we've got a resistance level here on the four hour and we've got a trend line here. Now that resistance level will show up on the daily. I've just squeezed the data up, but you'll notice that the range is between here and here. I could pop a line in right there and then we expand to the downside and then come back up to the resistance level. So that overall price action I really like when we break to one side but then come back up to the other resistance. Because what that means is that market is stretched. So we've got our upward move, we've come into our resistance. So we're still sticking to those key technical triggers. But if you notice here, I'll have to just. Now I've got the MACD on the chart. What you'll notice. I'll just repeat what I said. You've got the level kicking in up there, you've got price coming into the level and then you'll notice between the last two highs. So the high prior to the resistance, the high there, we've got a divergence and what I call a proper divergence. A big step. Yes, Down. So you can actually see that divergence there. And then what you'll notice is we get. I'll zoom in a little bit so you can see it. So initially we get price consolidating right here.

Yep.

But what we've got is that consolidation is happening above the last high. So as tempting as it is I've got to ignore that because I need the consolidation or the pullback to the moving average to occur lower down. Now, again, I'll zoom in a little bit here so you can, you can see it a bit more.

Are you setting limits in these scenarios or manual entries?

This one for me, this one would be a simple self stop. So what you can see here is we've got the, we've got the consolidation now. This consolidation there, this one probably looks cleaner as a consolidation, but it's not below the level, so we can't do it. This consolidation here, although it's, it's, Although it's only a few candles.

Tighter.

Yeah, it's tighter. Happy with that. So that's the entry point there. But because of the divergence and what I started to see was, I started to see sentiment doing what I was saying earlier. So this was an example of where I had the filters and then this trade I ran down and we actually, I can actually remember it because the spike came at about 11 o'. Clock. It came about 11 o' clock at night. So something happened on oil at that point. But yeah, this was essentially my exit around this low here. So I saw the spike came down and again I, I was, I was watching this. I was an element of trailing stop to it as well. Because I thought, I'm not gonna, I'm not gonna.

I was.

Let all of that go.

Your management, like, what is your. Is your management using sort of more the ema?

Yeah. So with it, with a trailing, with a trailing stop, I'll use structure. So in this scenario, we have the trade. The trade is starting to build up. I'd already planned to run it down to this low because I've got the two filters. So I was like, now I'm looking at it. It's not because the price action has gone sideways previously, it's because the filters are there. And then what I'll do is I'll use, I'll use an element of structure. So I say structure. Basically. If price consolidates breaks that consolidation, then I'll edge my stop down to usually the most recent low. But I'll make again. It's a little bit discretionary. Same thing occurs here. We go sideways, we pop up, and then when we break lower, I'm bringing my stop down to this level. And then we consolidate, we break lower, bringing my stop down to this level. I wasn't expecting that move that we got there. It popped back up and then I actually took a manual exit out of the trade because it was yeah, because of where, where we were.

Amazing. And in terms of the two to one trades, would you just leave the stop loss in place and the take profit because they're quite, you know, shorter trades. So.

Yes.

Maybe micromanaging those.

No, I wouldn't. No, I. Well again, I think, I think you're probably right on that and there's no data to back it up. So for me on a 2 to 1 that those trades, if I've decided it's 2 to 1, it's in out and it does what it does. But with these trades, if I'm. If I've got a plan to run it down, down lower then I will.

Say most of the trades in terms of execution at least they stops, they sell and buy stop orders or.

Yes. Yeah, yeah. So the one thing that I will do if it's a four hour is personally what I've got is a little EA that I plug into MT4 because obviously on a four hour, if you're trading the pullback to the moving average, the moving average is going to be moving around a lot more. So having an EA that just, just kicks me in. And the EA is programmed to know where the previous low was. So it automates the stop on the daily chart a lot of the time. I'm not bothering with that because it's, it's. You only got to check it in the morning or check it in the. Yeah, check it in the evening.

So absolutely love that. Everyone at home drop a comment of your biggest takeaway. Any questions that you would have off the back of this. But make sure you watch this episode again because there's so much to take away. Make sure you make notes as well.

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