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How to backtest price action trading for stocks?
There are a lot of angles to this question.
This means it’s not an easy question to answer.
Because first of all, if you backtest price action
This is Emerson Electric Company.
If I backtest my strategy on this stock from 2010-2023.
Let’s just say I get a 115% return using price action.
However, if I remove all the drawings on my chart:
And then backtest again, from 2010-2023, my results will most likely be different, okay?
Because that’s the thing with price action. Sometimes price action trading cannot be truly quantifiable.
However, price action is a concept that you can use to adapt to different market conditions.
That is the one caveat to this question with regards to price action.
In the forex market, it can be quite easy to backtest because there are only a few forex markets out there and most of them are liquid, but for stocks, there are thousands.
Out of those thousand stocks, how can you consistently pick your stocks to trade?
For example, if you backtest your strategy on penny stocks, then it’s most likely it would not have an edge on blue chip stocks, mid-cap stocks, or something like that.
The one solution you can do is.
Backtest stocks with Price Action
First of all, with stocks…
The method of your backtesting should depend on what type of market you should use.
The way you backtest the stock market should not be the same way you backtest the forex market and vice versa.
One thing you must do for the stock is to have a consistent stock selection and you need a stock screener for that.
I believe in the UPAT course, it is statistically proven that strong leading stocks for the year are most likely to continue or to be in profit for the rest of the year.
I suggest you just check that out, when it comes to backtesting, that’s the first thing you need to do.
You need to have a consistent stock selection method.
Fixed Position Size
The second thing is when you are going to backtest you want to backtest with a fixed position size. Because in the stock market, there is the portfolio allocation method.
Whereas in the forex market, we make sure we risk 1% for our trade.
So, for example, you want to buy stocks.
This means that, of course, once you have the screener, the next thing that you need to do is that you need to have a fixed position size.
I have an article with this which I will share with you will later on.
But the main takeaway of that article is that you only backtest price action, for you being proficient at executing your setups, at determining your setups.
It’s unnecessary to figure out if your setup makes the most money or how to make it lose less.
Because like I said, if you backtest this stock for 10 years, you get 100%. But if you backtest the same stock with your price action setup, the same support and resistance you draw your chart, your results would most likely be different almost all the time.
We are going to back-test your strategy after you have your screeners, market cap leaders, and so on.
Then you want to have this mindset that when you’re backtesting stocks or when you are in the forex market rather with the concepts in the UPAT course you want that kind of expectation that you’re only training your eyes how to look for the best setups.
How can you manage your trade more efficiently, until they become second nature to you on how you manage your trade and determine your setups.
So, you won’t second guess your setups.
Because once you have that high level of pattern recognition and creativity in trade management, it will help you build confidence.
When you’re backtesting with the concepts that we teach you in the UPAT course, you’re honing your confidence and your pattern recognition skills.
Once you’ve done that, train your pattern recognition skills and trade management, that’s the time when you need to do forward testing.
If you trade the daily timeframe, I suggest you start immediately with a small capital.
Because for the daily timeframe, it will take you a whole lot of time for you to play your edge.
But if you trade the 4-hour timeframe or 1-hour timeframe, then it pays for you to look at price historical data.
If you forward the 1-hour timeframe, that would mean, you would have to be glued to your screen during the day.
That’s true. Yes.
If you trade lower timeframes like the 1 hour/15 minutes, then you need to have a time blocking. You need to have a specific time on your day when you should trade the markets.
In the forex market, we have the most liquid sessions of the day.
- Sydney session
- Tokyo Session
- London Session
- New York Session
If you are trading the Forex market on the lower timeframe, then of course you want to dedicate your time to those specific market sessions.
In the forex factory, you can see it here:
It’s the London/New York session overlap, this is the most liquid session of the day, the overlapping of the London/New York session.
This means that if I trade a little more timeframes, I would have to make sure that I trade from 8:00 PM-11:00 PM Singapore time.
These are the most liquid session and then after that, during the day from 6:00 AM-7:00 AM is when I do my regular job.
If you trade the lower timeframes, you must focus on the most liquid markets.
But if you have a job, you have family responsibilities during this time, please don’t do it, because your lifestyle is much more important than forcing yourself to day trade.
Now for stocks,
I believe the first half of the session, before the lunch break, the first morning half of the session is the most liquid.
Our stock market opens at 9:30 AM, our lunch break is around noon.
I want to make sure that I’m on my screen by 9:00 AM and then I will stop trading when it hits noon.
If I have a freelance job in the evening, or my work is in the evening, but if I work in the morning, then of course, I wouldn’t do that.
I hope that gives you a perspective when it comes to this one.
Because the truth is that yes, you do have to be glued to your screen when it comes to trading the lower timeframes, but only to a certain schedule of the day.
You don’t have to be glued to your screen for a whole day.
I hope that makes sense.
Basis price action concept, I want to start algo trading, how can I start with that?
Algorithm trading is not Price Action.
Because you cannot quantify price action concepts. Even if you do, there are a lot of moving parts to it.
If you want to backtest the head and shoulders, how can you quantify the shoulder?
A left shoulder, a head, a right shoulder.
There are three major components that you have to make sure the automated software is identifying.
I could be proven wrong.
To me, backtesting price action trading in a quantitative way is almost impossible.
However, there are alternatives, such as Module 6 of the UPAT course, which is how to figure out the best trending and mean reverting markets. Where Rayner tests the weekly highs and lows of the market.
He back-tested it and shared which markets statistically trends and mean revert.
From that statistic in itself, we teach in the UPAT course, you can use that spreadsheet to your advantage to trade along the patterns or the concepts that we teach in the UPAT.
Let me direct you to it just if you are not familiar with the dashboard:
In the ultimate price action trader, go down to “understanding market behavior with statistical analysis”
You can use the module here to complement the price action concept that you use.
The second part…
‘’I want to start algo trading, how can I start with that?’’
When it comes to algorithmic trading, is a whole new field of trading. There is discretionary/systematic trading and there is algorithmic trading.
Algorithmic trading is a whole new field in itself and it deserves to have its course.
I guess it’s just me trying to give you more perspective on this.
With algo trading, you have an automated system that profited in the market.
But how do you know it’s robust?
That’s the keyword over here “Robust”
This means how do you know that your algorithmic expert advisor or trading robot not only works in the past but will also work in the future?
Because this means that once you have a working algo trading robot, you need to do your best to disprove it.
You need to stress test it to make sure that you don’t lose money when it is in real-time trading.
This is something that I cannot teach.
However, this is something that I can give you a perspective on.
How to start with Algo Trading
I’d love to admit that my resources and my answer may not be the best.
But I’ll just do my best over here.
If you are already familiar with MetaTrader4, you can use a website called EA Builder.
I have my account for this and it’s not free, by the way.
It’s an interactive export advisor generator and intuitive.
You just have to put your criteria. If the indicator is above this, then you exit or you can also add your custom indicators to this.
There we go…
Basically, In the end, on the source, once you put your conditions here:
By all the conditions, your exit conditions:
Your money management:
Then at the end, it will generate a source:
Which you can just download.
You don’t have to learn to code, you just have to be familiar with this platform. And there you go.
From then on, in my opinion, this is one of the best ways for you to start algo trading, it already gives you the tools, and the convenience, even if you don’t know how to code, it is a learning curve by itself.
But once you know how to make your algorithmic trading systems, then you need to find someone who has a good perspective on this field.
Within Rayner’s field, price action is pretty much my profession.
Rayner is more versed and experienced with price action and systematic trading.
I dabbled into algorithm trading but I would say that my level is not too extensive
That’s my suggestion that with algo trading, you can start with the software. It’s an investment, of course.
For me, it saves you a lot of time and gets you started almost immediately, especially if you are familiar already with MetaTrader4 and MetaTrader5.
Do you have any opinion on ChatGPT making buying scripts to automate trading? Do you think it’s worth exploring?
I don’t know. I haven’t tried ChatGPT.
I’ve only heard of it when you get to ask questions and it gets to generate, but if it works then why not?
If you want a tool to generate an expert advisor that you must, it’s better to have a dedicated website like this one:
Solely to creating indicators and expert advisors on trading algorithmic.
If you can find a similar thing like this, when it comes to Python scripts, then that’s good.
But if not, you just do have to learn how to code. But you can try.
I haven’t tried it yet. But if ChatGPT can do that, then why not?
I trade in the 4-hour time frame of gold.
- What stop loss shall I set?
- usually do I need to wait for how many hours or days until it reaches my take profit?
- Is that I look at 4 hours for the chart and then I shall trade around 4 hours?
My experience trade was I set 50 pips stop loss but most of the time it hit my stop loss.
There are principles that I do have in mind that often work in something you can narrow down to so let me start answering this on the number 3 part.
The question is, if I look at my 4-hour time frame chart then should I also trade around the 4-hour time frame the answer to that is yes.
When it comes to timeframes, you always often have two things:
We have the entry time frame, and we have the analysis timeframe.
Entry timeframe is of course this is where you make your trading decisions. in terms of risk management and trade management.
In your analysis timeframe, this is where you do your market structure analysis and also market conditions.
For the market structure, we need support and resistance and of course market conditions
Here’s the key to this is, when it comes to the entry timeframe and analysis timeframe, we try not to interchange this.
So, each of these is tied up to their purpose:
My analysis timeframe is daily, and my entry is at the 4-hour timeframe.
This means that if you have defined your market condition and market structure on the daily time frame then there’s no need for you to try to define the same thing again on your lower time frame because it only results in analysis paralysis.
Secondly, you can manage your trade on the higher time frame called transition trading but more often than not, this is where you pull out your indicators.
If you need the RSI indicator, the moving average indicator to help you with your entries and exits.
This is called management timeframe:
If you require those indicators to enter to make trading decisions, then you don’t pull them out on the lower timeframe.
Let me give you an example of how I would approach this trade.
I haven’t gone through this, I’m just going through number three just to give you more detail in depth, but you know, I’m not sure what the analysis behind this question is.
But let me analyze the goal.
We can see that the price has made a break of structure.
It hasn’t made a decent flag yet, but you know, it is currently breaking this market structure over here:
And could potentially go even lower.
So now that we have defined the market condition, which is currently in a new downtrend, we would look for support and resistance relevant to the current price.
What are the relevant support and resistance?
We have an obvious one over here:
It’s very close to the current price, we also have one over here:
And of course, we have, I would say around here:
Now let’s look at the 4-hour timeframe, this is where we apply our setups and so on. For example, what do we see?
As of now, the price is currently making a consolidation over here:
But it’s currently sloping weirdly, something like that. For example, what do you want the market to do for you to meet your trading setups?
For me, in this case, I would like the price to retrace even further lower here:
And to form a build-up and, in this case, you can have a short position:
If you use a moving average to trail your stop loss then this is the only time you would pull it out.
There we go…
If I use the 50-period moving average to trail my stop loss on my management timeframe, I don’t pull it out on the higher timeframe.
The key here is to keep things as reasonable as possible and to avoid market paralysis.
So that is the answer to this.
If your entry timeframe is the 4-hour time frame then of course you should trade on the 4-hour timeframe.
But of course, you are free to ditch this altogether and just only have one management time frame.
That is also correct.
If you want to keep things simple, you don’t want to higher timeframe and you only want to focus on a one-time frame then that is fine.
Except of course one caveat to this is that if you go down lower than the 1-hour time frame then the more it can be subject to the higher time frame structure.
That’s one thing you have to keep in mind.
But yes, having an analysis timeframe can give you more flexibility in your trade management and also give you more confidence in your market analysis.
However, if you’re new there’s a risk called analysis paralysis.
So, I’ll leave it up to you to decide but in terms of choosing time frames, that is the key.
You need to know these two timeframes, know their purpose of them, and not interchange them.
What stop loss shall I set?
As I said it depends.
It depends on your setup; it depends on your trading plan but what we do teach on the UPAT course is that we always use the average true range.
There are other ways how you can set your stop loss objectively.
But for us, this is how we do it.
We use the average true range. The ATR indicator measures volatility in the markets.
For example, we have here the 20-period SMA for calculations for the ATR
What this means is that for the past 20 days, the price has been moving around ±24 above or below:
This is the average volatility of this market based on the last 20 days around 24.
What we do is that we use that value to measure our stop loss.
For example, we have a short position, Let’s just say we enter here:
Now how do we define our stop loss first?
If you look at the ATR, it’s 25:
This means that we take the highest point of this market structure over here or the nearest swing high and then we add 25 to it:
This means that we want to make sure that our stop loss is way beyond the average volatility so that our stop loss won’t get hit by volatility, just get spiked out or what they call it.
That’s the purpose of the ATR.
It reduces your chances of getting spiked out immediately after you enter your trade.
But of course, it doesn’t prevent you from getting stopped out but it reduces the probability of you getting stopped out or spiked out.
Our stop will be 18.72 around here:
That is how we objectively define our stop loss.
If you want, you can just multiply this by two and subtract it from your entry price.
That’s also okay.
But since we take into account market structure and the price action.
For example, if you’re shorting then we add this to the highest to the nearest didn’t swing high over there.
So, the answer is that it depends.
But what we teach you in the course is to use the average to range indicator.
Usually, I need to wait how many hours or days until it reached my stop my take profit?
Before, when I was a new trader, I do not have fixed hours or days until it reaches your take profit you know because of course that’s why your take profit.
Is that for you to play out your edge and wait for the market to hit your take profit?
To have that patience.
But as I matured as a trader, there are times when I had to exit my trades prematurely.
Let me give you an example, this was like a decent flag pattern.
For example, I have a short setup over here:
I took a short there because there is a nice break of structure:
It broke down, make a flag and it broke down once again and I entered a short position over here:
For my stop loss, I will add 27 above the nearest swing high.
So, 27 so over here:
Let’s just say you know I’m keeping my take profit down here.
Very bold. so over there down there:
So of course, some traders would just wait it out.
But of course, as I’ve mentioned in the previous or the last session, is that the higher your risk-reward ratio is, the riskier your trade would be.
Because before the market reaches your take profit level, which is a risk-reward ratio of 2.75
A lot of things can happen.
You’re giving the market more room to do a lot of things before it hits your take profit.
So, you know, a lot of things can happen.
The higher your risk-reward ratio, the higher the risk it often is.
If the market makes the head and shoulder:
Which is a bullish trend continuation pattern, whenever I see market structure forming or confirming against my position and that is the only time I exit my trade prematurely.
To sum it all up, I enter a nice trade.
I have a bearish trend continuation trade a break of structure with a decent risk-reward ratio.
However, if the market forms a chart pattern or a market structure against my position, then I would exit the trade prematurely.
So that is the only time I often exit my trades.
If I’m on a trade, and the market forms a price action against my current position.
But other than that, I don’t count hours, I don’t count days until I reach my take profit.
However, if you look at your trading journal and let’s just say for the past 50 trades, you’ve noticed A consistent pattern, let’s say 70% of your losing trades happen when the trade last for more than two weeks.
So. if you can see a statistical correlation from your trading journal that indeed the longer you hold a trade, the more you lose, then, of course, you can have that rule.
You can have a rule fixed.
Let’s say if the market, if your trade lasts for more than two weeks, then you exit the trade. Because it’s what is shown in your trading journal.
Those are the answers that I have in mind for you.
To those who are here, you have to be very careful with this word.
Because how do you know that your experience is accurate?
Who knows, maybe you’re basing your data based on your previous trades based on your two or three trades.
You will only know your edge after around 20-50 trades.
Of course, in that you have losing streaks, you have winning streaks, you have win trades, you have losing trades and at the end of those trades you end up profitable, then you have an edge.
However, you cannot conclude whether your strategy makes a profit or not based on two trades, because short-term results are random.
It’s the same thing with this.
When you are using a tool, an indicator, or a trading concept and you said that it didn’t work for you.
Does that mean it didn’t work for you for the past 2-3 trades or it didn’t work for you after 50 trades?
If you say that based on your experience if that based on your experience is only three trades then of course those results are pretty much random.
If you’re setting your stop-loss to 50 pips then I suggest you keep on executing that, having that fixed rule of 50 pips, and see after 10-20 trades whether or not it is profitable or not.
If not, then, of course, you can make those changes.
That there’s just one heads up. You always want to make sure that you conclude things with a huge sample size.
Not just based on your experience or last short-term experience.
So of course, it can be costly trying to do trial and error, but that is why we have risk management.
We only make sure we risk a max of 1% of our capital in our trade for stop loss because that gives us more room or opportunity to improve our trading plan.
That is pretty much my answer to this question.
So I want to split and manage my daily mindset/ discipline/ activity to follow the process daily from:
1. PRE-TRADE MENTAL Preparation. Trading Portfolio and Business evaluation
2. MONITOR WATCHLIST Every weekend
3. SPOT – Spotting the trading opportunity 8 am, 12 pm, 4 pm, 8 pm
3a. ENTER – Enter Market and Place Trades.
3b. RISK MANAGEMENT
3c. TRADE MANAGEMENT
*Optimize your trading platform workflow (how can you do this faster).
4. POST-TRADE EVALUATION JOURNALING. Once a month (on the weekend before the first trading day)
Any advice i.e. knowing when a 4H candle opens and closes 8 am, 12, 4 pm, or 8 pm? Any advice on how to split my daily activity without getting distracted?
Normally, of course, I would like to ask you what your daily lifestyle is.
If you have a full-time job or you have a freelance job, this gives you enough flexibility to look at this 8-4 pm consistently.
This by the way is a good schedule.
First of all, it’s good of you to have defined these categories, which I think is a very big thing, a very good one at least.
The first suggestion that I have for you is that for example, on the 4-hour timeframe, you need to have a specific schedule.
Usually on your number 3:
- ENTER- Enter the market and place trades
- Risk management
- Trade management
I’m more on the daily time frame just to keep things much simpler.
Usually, I perform all of these at those specific times.
My first advice is to also segregate each of these on your time during the day or the week.
But my current advice is that you optimize your trading platform workflow or basically how can you do this process faster.
It can depend on each platform, for me, I use the Meta trader4 platform. I use this feature of MetaTrader that is tiling markets, as you can see over here:
I’m currently tiling these markets. I just have these different profiles.
If I have open trades then I would create a profile and tile them up and make sure they are in the same profile.
This is one concept of trying to optimize your trading platform to execute your trades faster or to monitor your trades faster. Is to do something like this.
To use profiling the tile your charts, which trades are open, which trades are closed, and which trades do meet your trading setup.
That’s one thing you can do, to optimize your trading platform or workflow.
For the Post evaluation or journaling, I usually perform this once a month (On the weekend before the first trading day).
As a 4-hour trader or even a daily trader now, I only evaluate my trades at the end of the month.
Because since I trade the lower timeframes and I will need a lot of sample size to make sure I evaluate accurate data.
For your number 4, post-trade evaluation, I suggest you do this once a month on the weekend before your first trading day.
Then monitor your watch list. You can do this every weekend.
For pre-trade mental preparation. I am not sure what this means.
But I could suggest that you change it to trading portfolio and business evaluation.
Do it once a month as well.
You would decide whether you want to add more funds into your account or since you are losing trades consistently and you still want to evaluate your trades and even further your strategies to refine them, then you would reduce your capital, and so on.
You mismanaged your risk. But you got lucky, and you doubled your account.
What should you do?
Should you withdraw your profits, or should you keep that?
Should you keep those unexpected profits and compound them?
I suggest you replace it with that.
Because I think it means mindset preparing yourself emotionally because usually, I don’t do such routines.
Because in my mind, usually what keeps discipline, and objectivity in the markets is to be objective on how you manage your trading account and also how you manage how your emotions.
If you have a trading account, let’s say 80% of your net worth is in your account and you are new to trading.
You’re trading without any confidence
Of course, that would affect it.
What I have in mind is that your objectivity in how you deal with your trading account often ties up to training psychology.
I’m trying to do this full-time Monday to Friday, I want to build this routine and discipline daily
If you’re trading the 4-hour time frame then of course you don’t have to check.
Of course, you are trading 8 AM, 12 PM, 4 PM, and 8 PM and between those, you’re not supposed to check your charts.
There we go.
You build your watchlist every weekend and you watch your watchlist, enter risk, manage your risk, and trade management every 4 hours.
In my experience, I look at 9 PM before due to daylight savings.
That is what I do and usually, they only last for less than three minutes.
At 8 AM, I look to see if there are any trading opportunities or look and see if I have to exit my trades prematurely or scale into my trades.
Those things usually take less than 3 minutes for me.
If it’s taking more than five minutes, then I suggest you optimize your trading platform workflow or do what I suggest.
I don’t see how this is full-time.
But that’s what I do as a 4-hour trader. Before I only check at these times and I strictly do not check my open trades or if especially my open profit or loss between these times 8-12 and 12-4.
There we go.
I don’t have enough time to answer your questions so to give opportunities to other questions.
My advice is that this is important, the one that you have made.
It’s good that you have this.
But of course, I do suggest that you try to simplify them and also know which categories you have to do frequently and know which ones you don’t have to do frequently.
For number 4,
I only do them once a month because it doesn’t make sense to evaluate my trades every single day or every single week if I’m just reviewing one or two trades.
I’d rather review my trades based on a lot of sample sizes.
As much as time I can give to this question, those are the answers that I could give and I hope that helps you.
If I’m a beginner that is looking to start learning about trading. Is it good to start with paper trade?
If you are a beginner and you are still learning the concept in the UPAT course, especially the setups, then I don’t suggest paper trade but I suggest a charting platform such as Tradingview that can improve your technical analysis.
Which is determining market conditions, determining support and resistance determining setups, and so on.
Once you think you nail that down, then I suggest you paper trade.
Because once you improve your technical analysis skills, now you want to improve your risk management skills.
Group Coaching Webinar (2022)
May I have some examples of trading the lower timeframes like 5mins, 15mins, and 30mins by using the strategies that had taught in UPAT (Breakout, False Break, Break of Structure)?
The questions can be quite complex.
Because normally when I answer questions, I tend to make sure that I answer in a way that you’ll be able to benefit from them.
I won’t just give you the answer, but I will teach you how to find the answer yourself.
He mentioned there is the breakout of the false break and the break of structure.
First of all, let’s start with the breakout…
A breakout is when the market is in consolidation and in the market recently made a strong breakout to the upside:
A breakout is like an immediate change in the market condition in the context of what we are teaching in the UPAT course.
You can consider it as a trend continuation.
The false breakout is more of an entry trigger for me than a setup.
The market is in a range and then we have a valid support and resistance, the market closes above resistance for example, and then closes below resistance:
It closes above the resistance area and then again below back inside the range. when it does that, the closing back on the range is what we call a false breakout.
Similar thing if a price of a certain market closes below the area of support:
Then it closes back up again inside the range:
That is what you call a false break setup. Normally this is what you can do to set up your entries.
In some cases, you can set up an entry over here
Stop loss 1 ATR above these highs:
Target profit just before the area of support assuming you are going short:
This is normally how we do this setup.
Now we have here my favorite setup which is the break of structure…
A break of structure is also a similar description to the breakout except that a break of structure is more common
If you connect the trend lines you can see a clear area of resistance.
Now, when the market cross or breaks that trend line of resistance, makes a flag pattern and then breaks out:
There you have a valid break of structure. Because it confirms this trend over here:
It is already invalidated well of course anything can still happen in the markets. But trading this system for years, it does have an edge in the markets.
An opposite trend break of structure setup is that if the market is in an uptrend, you can see a clear trend line area of support:
Then the price closes below that trendline here:
Of course, we can be sure yet if this is a trend reversal.
Because we want a confirmation and the confirmation is a flag pattern or a build-up I would say and then a breakout.
Once it closes as a breakout, then we consider it a valid break of structure.
As usual, once it breaks out, the entries can be here:
Stop loss 1 ATR below the flag pattern:
Then you can trail your stop loss.
The reason why I had to share this with you guys first is that the setups are very different from how you choose your timeframes.
Because the thing here is that the breakout, false break, and break of structure can be applied to any timeframes.
You can apply to the 5-minute timeframe, 15 minutes, daily, and so on.
I can’t answer this question directly, because you can use these setups in every timeframe.
However, if you shift this question a little bit, to how you can trade the lower timeframes by using the concepts taught in a UPAT course.
I think that is a much better question.
This leads us to a new whole topic “How can you choose the timeframe for you”
We discussed it in last year’s session. We are not able to determine the timeframe for you. You must identify whether it suits your lifestyle.
The reason why I say that is because you want to choose a timeframe that you can commit to consistently.
This means that if you choose to trade the 15-minute timeframe in the Forex market, your lifestyle must permit you to check those timeframes consistently
Because we are treating this as a business and now as a hobby.
If you treat it as a business, you have a consistent schedule on which times you should trade, and which times you shouldn’t trade.
From then on, you can consider choosing your timeframe yourself.
But that’s pretty much the concept here. It’s based on your lifestyle.
Knowing the capabilities of your lifestyle, what you should do first is choose an entry timeframe.
This is what leads me back to the first one.
The Trading styles…
We have here
- Intraday Trading
- Swing Trading
- Position Trading
This is what we call the trading style. now you’ve determined your lifestyle, you want to choose first a trading style.
For intraday traders, normally the most common entries are the M15.
I think M5 is too small unless you’re trading in the forex market, it’s okay or crypto.
For stocks trading M5 needs a specific parameter on your screener to make sure you capture volatility, but to standardize things, I think M15 is okay.
This is mostly on the H4 timeframe.
The position trading is usually on a daily timeframe.
Going back to the question…
May I have some examples of trading the lower timeframes like 5mins, 15mins, 30mins?
Before I discuss this, I need you to get to the bottom of this how you can choose your timeframe.
Firstly, you want to choose a timeframe that you can commit to consistently and schedule which time to trade and not trade.
From then on, you can find your entry timeframe by your trading style.
There we go…
Determine an entry by your trading method, the first is choosing a trading style.
That’s what we are discussing here.
Normally we have M15, H4, and Daily.
You have two options.
Rayner uses these multiple timeframes.
But in reality, if you are a swing trader or a position trader, you can just use one timeframe based on how I have traded this.
This is just optional.
If you wish to keep things simple, you can choose one timeframe, especially on the higher timeframes.
The reason why you must use the higher timeframe is that the lower the timeframe you go, the more information on the higher timeframe can affect the lower timeframe.
You have now chosen your trading style and of course, your entry timeframe. You can identify your higher timeframe.
Essentially, the higher timeframe is what we call the analysis timeframe.
Because we use the higher timeframe to get the information that we need to take a profit and stop loss.
This information we can use on our entry timeframes.
The concept here is that we used to factor by the factor of 4-6.
I think this is a concept of Alexander Elder, if I’m not mistaken, when you multiply your entry timeframe by 4-6, that will be your higher timeframe.
If you multiply the 4 hours by 6, that’s 24 hours.
Therefore, your higher timeframe would be the Daily timeframe.
I hope that makes sense.
Let’s get to the meat of this question.
How can you apply the concepts in the UPAT course?
If you are a swing trader, a position trader, or an intraday trader…
-I will just pick one.
I think what interests you the most is intraday, but unfortunately, I don’t have too much experience with intraday.
I think it’s unfair for me to use it as an example. I choose to be a swing trader; my lifestyle permits it.
I’m a part-time freelancer. However, I’m quite busy with my freelance job. I can still choose to look at my charts every 4 hours.
I think the H4 timeframe is the right one for me.
If I trade the Forex markets, how do I apply the UPAT course?
How will you apply the concept to my specific trading style?
I’m going to use my Tradingview to give you a couple of examples…
Looking at the higher timeframe, on the daily timeframe, what we can see is a trend of a break of structure:
It is a valid uptrend on a Daily.
Then as of now, this is uncertain because anything can happen.
But as you can see, on the daily timeframe, I’m already determining the market condition, I’m already determining the market structure.
If you go long and buy, there can be a potential target profit and the nearest area of support is over here:
This is what you do on the higher timeframe. Your higher time frame analyzes the market condition.
As simple as possible, plot out your support and resistance lines or moving average if need be.
Then on the 4-hour time frame, this is where you will pull out the indicators that you need to enter this trade:
I don’t see any setups, you want to ask yourself based on the information on the higher timeframe.
Looking at the lower time from the H4 what should the market do before I would commit myself to long or short this thing?
one setup that I could consider, as you can see is already closed within the area of support:
If it makes a bullish candle close above here, then this could be a good long setup, stop 1 ATR below the lows:
There we go.
On the daily, we have here a market structure, get the nearest major structure, we can set this take profit.
As you can see, on the higher timeframe:
We analyze the market condition and the market structure, and we don’t pull out any indicators that we use for entering our trades.
When we go down to the 4-hour timeframe, this is where we manage our trade:
Higher timeframe = Analysis.
Lower timeframe = Trade management and Risk management.
That’s been a False break setup, by the way.
If the market makes a consolidation over here:
Then breaks out over here:
Then we can consider this a breakout setup. In this case, we can have a valid short position over here:
1 ATR above the highs depending on how this consolidation will go.
Then we can use a medium-term moving average, to trail our stop loss.
What is the medium-term moving average?
It’s around 50-100 Moving Averages. If you want to use a 60 Moving Average, 70, or 50-period moving average, it doesn’t matter.
But that’s what matters. in this case,
I would like to trail my stop loss using a medium-term moving average because when it’s a breakout, you don’t know how the trend will go, will it be a strong trend, a weak trend, or a healthy trend?
Just to be safe, I would like to trail this using a 50-period moving average if the market makes a consolidation and then breaks out, and then I could enter this trade:
That’s one example of NZD/USD
Being an intraday trader, my higher timeframe would be the H1 and M15 would be my entry timeframe.
I start my analysis with a black chart without an Indicator. I pull the indicator out only if I need them
The market is currently in a downtrend.
But if you trade what we see right now, we are seeing a valid downtrend because it has broken out of this:
It’s a valid market structure with a validated build-up over here.
What is the market structure that we should keep in mind?
This one over here:
If you can zoom out it also extends all the way here:
We are pretty much in a free fall over here currently:
In the 1-hour timeframe, we have spotted down a valid downtrend although not yet established.
We spotted a valid area of resistance.
If you go down to a 15-minute timeframe, which is our entry timeframe, the entry timeframe is for trade management and risk management.
You want to ask yourself, what do you want to see for the market to do before
you commit yourself to the market into a trade?
I’m seeing two options over here. I’m seeing a potential trend continuation and a potential false break.
Let’s go for the easy one, trend continuation.
As you can see over here the pair is making a flag
If this breaks out:
Then this would be a very nice short-term continuation trade.
1 ATR above the high so you can be conservative, above this support over here:
Then you can consider the trail your stop loss again with a 50-period moving average.
There we go.
You want the market to break out.
The second is a potential false break.
Because now we want to use the information, we got in the 1-hour timeframe.
If the market closes within or above this area of resistance and then closes back below it came back below the area:
In this case, you can have a very nice short position as well.
1 ATR above the highs.
And now, what I will do is that once it reaches this swing low over here:
I would scale into this trade.
For this part, it depends on the trader. Do you want to scale out, or do you want to commit 0.5% first and then scale in when it breaks out to the lows?
Because, you know, we already have a valid starting downtrend. So, on my end, I could be more aggressive here.
That’s one thing you can do.
If it’s a false break, and it reaches this swing over here:
I will scale in and then trail my stop loss with the 50-period moving average.
So yes, recently I’ve shared with you some technical trade management and analysis.
But I want you to get the concept over here that in the 1 hour, I analyze the market condition and the market structure.
Then the 15 minutes, that’s the only time when I will come up with some trading ideas on how I can manage my trade.
Don’t overlap things unless, of course, you choose one timeframe.
That is pretty much for the multi-timeframe analysis.
Hi Rayner, how valuable is Tradingview over Mt4? Many thanks, Rayner
This one is simple because it depends…
Because MetaTrader 4 is both a broker and a charting platform.
Overall, I think Tradingview has more pros than cons because Tradingview is already a platform and a broker in itself.
Assuming that you can connect multiple brokers to that platform.
You already have multiple tools that you can already insert, because for MetaTrader4 you still have to install them.
However, Metatrader4 is software only.
Overall, if you want to get started, I highly suggest you familiarize yourself with Tradingview.
How do I prevent getting in a trade too early..?
Even if you have a concrete rule, like you trade the breakout, or use limit orders, there will always be a cost of doing business where there will be times you will get into early, may it be due to slippages on your orders and gaps.
You can never really prevent it in the long run.
However, if you are entering a trade too early, maybe because you don't have a fixed rule of entering a trade, then that's already a red flag.
What’s important is your entry trigger.
What is an entry trigger?
An entry trigger can be waiting for a candle close or a breakout above the close. You can have an automatic buy stop order above the breakout.
Once you already have a rule and have executed 10-20 trades, you want to refer back to those trades on how could have optimized your entries.
Then ask yourself some questions and observations.
The only thing that’s going to answer those questions is your trading journal and that’s for discretion.
"I'm a newbie to stock. When you mention SHORT the stock, how do we execute it in TOS? Do we hold SHORT stock and sell on the same day, or we can hold as long as on paper it is profitable?”
There are a lot of variables to answer here.
I think this question is derived from not having a trading plan at the moment.
So yeah, maybe if we can narrow down this question.
When you should take profits according to your trading method?
Then they can progress from there. For now, I can’t answer this one.
Do you hold short stock and sell on the same day?
It depends on your trading plan. I can't answer that. I think it's you who will be able to answer this one.
When you mention SHORT the stock, how do you execute in TOS?
Shorting is you profiting when the stock decreases in price.
But what I do know about the term shorting is that the price is zero.
However, the downside of this one is that the trading fees are higher when shorting. Shorting is not recommended unless you are a short-term trader.
Because if you're a long-term trader, stocks tend to go up in a parabolic move.
Rayner discussed in the UST Training the "Law of Large Number and Truth About Consistency" which I think also applies to UPAT Strategy. To see the results of your system using the UPAT, it means we must have more number of trades in a certain period to determine your "Edge or Expectancy". Does this mean that it's better to develop and apply the UPAT in Day Trading or use a lower time frame where more trades are executed compared to when your trading is in a higher time frame which has fewer trades?
This is a good question. This is something I've also gone through.
I trade the daily timeframe.
But you know, I check the daily timeframe because it suits my lifestyle and my frequency of trades is quite low. Sometimes I can only have 5-10 trades in a month.
Sometimes I can't even review my trading journal and make some changes because the sample size is so small.
It doesn't mean that we need to have the same method. But as much as possible, if you're in the UPAT course I highly suggest you trade on the H8 and H4 time frame.
We are discretionary traders. We build our edge.
This means that just because you built your own price action trading plan after finishing the UPAT course doesn't mean that it already works in the long run.
That is why it is a part of the UPAT course. In module seven, we emphasize trade generally, how do we review your trades?
At the same time, we don't want to review trades if it's just two or three trades.
I suggest if you're in the UPAT course you try developing a trading routine that surrounds the H8 time frame below.
But if you're someone who wants to trade the daily timeframes or higher, you have no time for part-time trading, I highly suggest you check out the Ultimate Systems Trader.
All the systems in the UST are back-tested for 20 years. They are designed to be robust and they're optimized in a way that they work, not only in the past but will also work in the future.
The UST course is mainly for stock traders. We do have one system for forex and futures trading in the UST course. But if you trade the US stock market, then the UST course is a good investment.
When waiting for a False Break to happen on a 4 Hour (my entry timeframe), I sometimes notice there has been a clear price rejection in the 1-hour time frame. Would it be ok to still go ahead with a 1-hour price rejection since that gives a more favorable RR instead of waiting 4 hours to complete?
When there are two conflicting questions, this means that it's the first sign of inconsistency.
If you time your entries on the H4 time frame, why would you still look at the H1 time frame to time your entries?
Instead of trying to decide
“Should I enter the false break or the 4 hours or 1 hour? “
Decide for yourself
Are you more comfortable entering trades on the H1 time frame or the H4 time frame?
That's pretty much it.
Once you decide you want to enter consistently on the H1 timeframe, just use the higher timeframe to reference support and resistance or the trend.
For example, if you trade 2-3 timeframes, and all those three timeframes have identical purposes, you're going to have analysis paralysis.
The key to multiple time frame analysis is to make sure that each of your timeframes has a role.
H1 timeframe to define your entries and exits. Then H4 to check the trends and where you could base your take profits.
Entering on the H1 and basing your take profits on the H4 is called Transition trading.
You can use the daily timeframe to plot your relevant market structure or you can just trade one timeframe, which is the daily timeframe, and ignore others.
Decide what is your entry timeframe and ignore the rest.
Firstly, you shouldn't be contemplating whether you should take the false break on the H4 or H1.
Secondly, your Risk reward ratio. I don't take trades if it's below the Risk to reward ratio of one.
If your risk-reward ratio is below one then your position is best spent elsewhere in another trade. This applies whether you're in an H1 or H4.
Let’s say you wait to enter a trade on 4H TF on the next candle open but the candle is strong that it exceeded half the distance to the next area of value making your Risk Reward ratio small (<1.0) and risk that opposing pressure may step in.
- Will you still take the trade and stick to the rule
- don't take the trade,
- is there any other way to enter?
If I were to look at these choices as a trading coach, A, and B, can be correct answers. Whether you take the trade or stick to the trade or follow your rules.
The risk-reward ratio shouldn't be less than one. The risk-reward ratio doesn't give you the complete picture.
You can have a risk-reward ratio of less than one, but still, be profitable.
For example, if your risk-reward ratio is 0.5, but you have an 80%-win rate, then you can still be profitable.
The higher your risk-reward ratio is at 1 to 4, the longer it takes for the market to take profit.
Therefore, you would have a smaller win rate.
HIGH RR = LOW WIN RATE
LOW RR = HIGH WIN RATE
I don't think there is such thing as the higher risk-reward ratio with the high win rate. The principle here is that the win rate is on everything.
If I were to trade my own money, and my risk appetite as a trader, I wouldn't take a risk-reward ratio of less than 1.
Because you can be profitable with a 1:1 risk-reward ratio even though your win rate is 50%.
If you're in the forex market as most of you are here. You shouldn't trade correlated forex pairs.
If you already have two positions, NZDJPY and NZDUSD. You wouldn't want to be entering a third NZD trade because you already have two correlated trades together.
In the forex market then “B’’ leans more towards a correct answer because there's context.
In the forex market, it's highly discouraged, we trade every forex pair we see because we have to deal with correlation. Therefore, our maximum trades are limited.
In this case, don't take the trade, it can be a correct answer If your maximum open trades are limited. If you have a maximum open trade rule then then “B’’ is okay.
“A’’ is a correct answer. If you trade the higher timeframes, you trade a lot of markets and you want to diversify your portfolio.
For stock traders, we have a risk management method called portfolio allocation, for example, if our portfolio is $10,000, we don't buy stocks that are worth 10% of our portfolio.
This is not risk per trade, but this is our allocation. We will not allocate more than 10% of our portfolio per trade. This gives you a maximum open trade of 10.
The maximum of them is 10% allocation. If you have a lot of maximum open trades, you want to diversify, especially if it's a bull market.
For example, there's a bull market in the stock market, then, of course, it's okay to take trades, even though it's less than the risk-reward ratio of one as long as you are following your rules.
What about “C’’?
It is neither a right nor wrong answer.
This is where we think outside of the box. Because “C’’ is something only you must answer moving forward with your live trades.
We have to review our trading journal. Have you entered 20-30 trades?
Do you notice that most of your losing trades are derived from trades you take with a small risk-reward ratio?
Could you have avoided 60% of the loss, if you take those risk-reward ratio trade of one?
“C’’ is something you must optimize and continue to improve from your trading strategy.
This is what trading is. Trading is not black and white.
In trading, we can both be two very different traders, but we can still both be profitable.
This means that just because I say something that works for me might not work for you. That is why I answered this question in a way that I'm not trying to be politically correct or in there might be some sense these answers.
What are the forex and future system?
The forex and futures are both markets, but the futures have a mechanism wherein you are buying contracts.
If you’re going to buy a soybeans contract or the Bitcoin futures, your contract has an expiry.
In the UST, the forex and the futures are systematic trend following systems. It trades the forex and futures.
How about "C", set the market order on the next lower timeframe where you can find an area of value within the candle on the higher timeframe.
Using the Donchian Channel to check for a breakout,
Example NIO Daily
Then go back to the H1 (lower timeframe), to see if we can find a better entry. The price is breaking below the lows, but we want to catch a better risk reward.
The stop loss is set in your H1 timeframe because we want tighter and there is a market structure to reference.
Is it possible to show an example of a pattern of recognition? False break and trend continuation.
I guess you want me to look at the chart and see how to define these patterns based on your question.
A false break for me is an entry trigger. We are waiting for a false break before we enter a trade.
To determine where a false break is, we have to plot our support and resistance by finding the relevant market structure to the current market price.
Now we lookout for where the false breaks are
The price closed within the area of support and the price closed above the area of support. This is a valid false break setup.
You wait for the candle confirmation and enter on the next candle open.
Criteria for a false break.
- Price needs to close within or above the area of resistance (Vice versa for shorts)
- Price needs to close back the area of resistance, with a long body candle.
Rayner has a different classification for a breakout and a trend continuation. If you enter in the swing highs here,
Random Length Lumber Futures 1W
This is what I call a breakout. At the same time since you are entering on an existing trend, I will still consider this as a trend continuation.
The way Rayner defines these breakouts and trend continuation is you are entering a pullback in an existing trend.
A breakout can occur in a ranging market, makes a build-up, and then breaks out from that range making a new market condition.
Some charts respect the daily chart moving average, but some follow weekly or monthly, should we take the basis of that timeframe?
The forex market opens 24 hours. When you are in stocks your stick with the daily timeframe or you go below the H1 timeframe.
Whether or not a stock tends to respect the higher timeframe or the moving average, I don’t know.
If I should tell you anything on my own, I should have statistical proof on my end.
However, what I can tell you based on our statistical research, stocks tend to rise higher on market leaders.
This means during the year you look for a stock that has performed the most in volume for the past three months. There is a higher chance the stock would keep going higher.
That’s one principle you can integrate into your trading system which is to follow leaders and not the opposite.
Even if our stock market is down, there’s always one or three stocks that keep going up for the rest of the year. Those are the kind of stocks you should follow.
How do you select stocks for an Intraday and how many should we trade?
I’m not a day trader. But I can give you an answer that can help you out. You need to have these tools.
You need to have a stock filter. If you are in the Indian stock market then try to find a screener or a website you can use to screen your stock market and you must ensure it has a stock volume.
High impact news doesn’t affect price in the long run, it just spikes. The same thing with stocks. One company can have a piece of major news and it could help the stocks go higher.
You can follow “humbled trader” on YouTube. She is a successful intraday stock trader. But she trades on the US stock market and not the Indian Stock Market. You can learn something from her.
Number of open trades
Your maximum open trades should not exceed five. The more open stocks you have you might have some errors monitoring them.
I presume the buildup can happen at both the Support and the Resistance in a flag pattern. And that it is traded in an uptrend when the buildup is at Resistance? and vice versa, in a downtrend, that is it traded when the buildup is at Support?
I will share with you my MetaTrader 4 because I can easily navigate these charts.
A build-up is what happens if the price is at resistance and makes a flag pattern.
That's a buildup.
And also, a buildup is when the price makes a bearish flag pattern at Support.
If we are to classify the word “build-up” then it must be traded with the trend and be at the area of support and resistance.
However, if we are trading these patterns, it's just called a flag pattern even if there’s no resistance or support.
A buildup is essentially a flag pattern, but it's paired at the area of resistance or the area of support.
A build-up is what happens if there is a bullish flag pattern at resistance and the bearish flag pattern at support.
Would you please explain what order block is?
I might not be the best person to ask because I barely use it in my trading decisions.
Even if I were to give the basics, it might not be worth the time in this session.
I suggest you just take a look at it in some other sources because I don't look at order block in trading.
Even if I tried to explain, my answers may not be accurate as I'm not too versed in this area.
I use support and resistance lines only on 1hr timeframe to identify the move direction. What other key indicators can help me be more accurate in direction and gain good win rates?
If you think you are getting good results, on the H1 timeframe using the support and resistance, and not losing money, then just focus on what you have.
Because chances are, if you add more indicators on your trading plan, you might be trying to reinvent the wheel in taking a higher risk that it may or may not work in your next following trades.
If you're live trading, and you are already on a price action trading plan using the 1-hour timeframe, and you are already doing good, your results are good without indicators or more indicators, then just stick to it.
Let's just say you made 30-40 trades, regardless of whether you are losing or making money, after 30-40 trades on the H1 timeframe, you will now look back on those trades from your trading journals.
What indicators could I use for me to sustain my wins or cut my losses?
The main thing here is that the only indicators that can help you, depend on your trading journal, it depends on your results.
If you want to add an indicator, we want to make sure it's compatible with what we have. and compatibility is sometimes very hard to gauge or to know whether it has an edge or not, sometimes it's a hit or miss.
Win rates have nothing to do with indicators. It has more to do with your trading setups. If you want to have a higher win rate, reduce your risk-reward ratio.
That's pretty much it.
You have to remember this throughout your trading journey.
Can you please explain Fibonacci retracement using a current chart and how best to execute based on price action?
The Fibonacci ratio isn't taught in the UPAT course.
However, I have used the Fibonacci ratio for quite some time. And the Fibonacci ratio depends on how you use it.
Are you using Fibonacci ratios for market analysis purposes?
You might want to use it for confluence
I use swing high to swing low and see if there is any confluence on the chart.
There is a method where you can use Fibonacci Confluence or extensions to see where the price can go or what are some confluence depending on the swing highs and lows.
Another way to use the Fibonacci extension is for you to time pullbacks in an uptrend, there’s a good chance that the price can reverse on those levels.
How do Rayner times pullbacks in an uptrend?
Rayner uses the support and resistance or the moving average to time his pullback. The Fibonacci retracement can be a similar thing.
For example, if the price reverses from the .618 over here
You can enter at the candle close over there. Then set your stop loss below .618 and your take profit below the resistance level.
If the price reverses on a .618 level, you can take a swing trading opportunity. But if the price reverses from .318 or .236 then you can enter on a breakout.
It's similar to the concept of a strong or weak trend taught in the UPAT course on how you can take advantage of it.
Nonetheless, if you're using the Fibonacci extension to time pullbacks in the market, then make sure you are measuring the lowest low to the highest high
I don't use the Fibonacci now. But before that's how I used to use it.
Here is my trading strategy.. (1) Stock selection with fundamental analysis (2) Keep tracking on those stocks their price movement with Elliott Wave Principle and other suitable technical indicators (3) Once the price movement is in my favor, I make the trade (Buy with stop loss, hold and sell for profit as the price approaches my target. I am happy to learn a new approach from the experts like you."
Stock selection fundamental analysis
How exactly are you going to analyze stocks?
How exactly is your market stock selection?
How will you look at the disclosure of that stock?
How will you analyze it? Or which metrics are you going to look at consistently?
This is just a generalization.
I guess, this isn't the right platform for him to share his trading plan in full but for me, if you are to give this feedback to me as a coach into my email, then you need to be much more specific on what metrics are you looking at.
If you're going to use fundamental as your stock selection and keep tracking those stocks on their price movement.
I assume this is with regards to this technical analysis.
“Keeping track of those stock price movements with the Elliott wave principle and other suitable technical indicators”
If you plan to use the moving average or the Fibonacci, what scenario are you going to use them?
What scenario are you not going to use them?
What is your entry trigger?
How exactly are you going to enter the stock?
Will you wait for a bullish candle to close or will you place a buy stop order or a buy limit order?
What is your allocation per trade?
Assuming you trade stocks, how many shares are you going to buy?
How are you going to position size your trades?
What are your maximum open trades?
For example, if you want to allocate 10% of your portfolio per stock, then you would have a maximum open trade of 10.
And of course, again, a couple of factors.
When it comes to developing a trading plan, this is discussed in training module seven, the last module in the UPAT course.
Where is your maximum drawdown? How will you review your trades? So those are the things.
Trading takes a lot of preparation, and it's not as easy as it seems. But of course, we're here to make money, at the same time, prevent losing money.
I hope that helps nonetheless because as a coach, I try and make sure that I have as much as I can.
1. On the UPAT course, it is mentioned that we read the market structure on the higher timeframe and for reading price action mainly for entries should be on the lower timeframe, but I see some of the trade ideas Coach Jet posted on the telegram account he read the market structure on his entry timeframe, which timeframe should we be focusing on for reading the market structure?
The first factor when choosing your timeframe is your lifestyle. I trade the H4 timeframe because it fits my daily lifestyle.
I check my trades every 4 hours. That's why you see me posting trading ideas every four hours.
But if you're someone with a full-time job, you have a family, and you cannot consistently look at the 4-hour timeframe, then it's okay to only focus on the daily timeframe.
Myths Regarding Timeframe
Rayner looks at the market structure on the daily timeframe and enters his trades on the H8 and H4 timeframe.
But here's the thing, just because Rayner does that, it doesn't mean that you have to.
If you want to look at your market structure and your entry triggers on the daily timeframe only, then that’s all good.
You can be successful doing that.
If you choose the daily timeframe to enter your trades, look at the trend, the market structure and ignore everything else then that’s alright.
That's possible for you to succeed because the less variable there is to your trading plan, the easier it is for you to journal your trades.
I only look at the 4-hour time frame. I don't look at the daily. Sometimes I do, it depends.
Sometimes the H4 time frame is like ranging, it's volatile. The trend lines are all over the place, I don't know what the idea of resistance and support is.
That is the time where I need to look at the higher time frames for context, but more often than not, I only look at the H4 time frame support and resistance.
If you think you're comfortable trading everything on a daily timeframe, you can be successful with that.
When it comes to choosing timeframes, don't be too focused on what I and Rayner do instead focus on what timeframes you think you can be consistent on.
On the UPAT course, we are taught that for correlating pairs we must at least limit to two trades or halve the risk between two trades, I am now wondering for UST (STF) is there a limit for especially commodities like gasoline, heating oil, crude oil as these are also correlated?"
If you have trades on EURUSD and EURAUD then you will not anymore take trades on the Euro pair.
For the UST, I don't want to answer that questions now, because there might be some students here who are not in the UST course.
I'm not going to answer this in this session, but instead, feel free to email email@example.com
We are focusing on the UPAT course.
Sorry if this question has been answered before. Could you explain how what does the 3 values of the chandelier Kroll stop indicator does in the trading view? What are some indicators that you think are helpful? etc volume indicator, Donchian channel? Thank you!!
Going to Trading view.
We select Indicators.
For the Chandelier Kroll
The “P” is your Period
If we are measuring the volatility for the past 20-days, the Multiplier is the “X” which is the buffer to the value looking behind bars to measure the volatility of “Q”.
The Donchian channel is there to help you determine what are the breakout points. If you're a breakout trader, then the Donchian channel is helpful for you.
The 200MA helps you determine what the long-term trend is. I only use the moving average if the trend is unclear.
That's pretty much the thing as a price action trader.
You must use indicators when you think you need them. Because indicators are tools, they're not magic lines on our chart and it depends on the user, how well that tool is used.
Nonetheless, I would want to recommend a lot of indicators, but I don't use the volume indicator. But the Donchian channel is very helpful because whether you are a swing trader or trend following trader if you want to use it as a trailing stop loss, the dungeon channel is a very versatile tool.
That's pretty much it.
In the FAQ in your UPAT course, you mentioned that you were primarily trading the false break in the current market. I'm not sure when that was, but what strategy are you mostly using in THIS market?
As price action traders, we trade what we see.
If we see a ranging market, then we trade a swing trading setup, a false break approach. But if you see a trending market, then we trade a breakout approach.
As a price action trader, it's not about which strategy to pick in this current market condition, but it's about what are you seeing right now in the current market condition and what strategies are appropriate for that market condition.
Because in the end, all strategies have strengths and weaknesses.
The weakness of a trending market is a ranging market. If you see a ranging market in your chart, you wouldn't want to trade breakouts or flag patterns, because it's a ranging market condition.
Instead, you want to trade at the area of value. trade at resistance trade at support.
I don't think it's right that you should pick one strategy and restrict yourself from using the other strategies.
It depends on what do you see in this market condition and choose what strategy is appropriate for this current market condition.
Let’s take for example, based on the Russian and Ukraine conflict, the market is volatile. A lot of bearish and bull candles.
Based on what I see on my chart a flag pattern, breakout, and trend continuation setups can quite be helpful in this current market condition.
This is a comment from the FAQs for UPAT, "You’ll pretty much get filled at the price you see on the screen if you’re trading stocks with sufficient liquidity." How do we filter for that and what are the numbers that you want to see for liquidity?
You want to use a stock screener for volume and value. Luckily for you, Rayner has a screener for that in Finvis.
It's a free screener tool, and you can just access it here, I put it in the chatbox, and you can access that anytime for free.
You can make some tweaks but, in that screener, you will see that Rayner has filtered it based on market capitalization, and volume, like above $1 million.
Because in stocks, there are 1000 stocks out there, but you're not going trade 1000s of them.
You want to make sure you filter for high-quality and high liquidity stocks. And in that the link I shared with you, can filter based on market capitalization and volume in also if it's a 52-week high or low.
I'm very new to trading in terms of stock shorting though I did trade a few stocks for long before. I read quite a bit of the UPAT course mentioning the various techniques to short stock which interest me.
In the UPAT course, we do teach you a couple of trading concepts that apply both to buying and selling. In the UPAT, we don't specifically tell you to short stocks, or which stocks you should short.
We're just giving you multiple concepts that work in buying and shorting market conditions.
I understand when I trade the stock long, I am holding the stock till I sell (intraday or beyond). Can you explain when I short the stock, am I not 'owning' the stock until I 'sell', either intraday or beyond?"
This statement is true. “You are not owning the stock”
Wherein you are not owning the stock until you cover.
I'm not going to go through depth explanations of short selling but what you only need to know when short selling is that you make money when the prices go down. That’s it.
When you are long buying, you make money when the stock price goes up and when you are short selling, you make money when the stock price goes down.
That's the only thing you need to know.
Of course, there are some other factors in Forex, when you are shorting in the forex market, the mechanics are quite simpler and the spreads are tighter.
Whereas in the stock market, the fees can be extra high when shorting the market.
What are the two things you need to know?
Nonetheless, I won't be explaining in full detail how short selling works. Because it can vary from markets to markets, from stocks, from futures to Forex.
It may also vary whether you are trading leverage or without any leverage.
I don't think it's worth our time to fully explain how short selling works.
Can you please explain the difference between the green and red hammer in terms of strength?
I'll be showing you my graphic design tool.
This is paint.net
It’s a free charting tool
This is the diagrammatic representation of the green hammer and the red hammer.
In terms of strength, what are their differences?
Whether it's green, red, or gray, all of them are the same.
Because remember, a hammer consists of two things:
- A long wick, A price rejection
I think it's safe to assume that they're just pretty much the same thing. Because the story behind them is almost very similar.
It's just the closing. That’s just the difference.
No matter what color it is, as long as there is a long price rejection, and it closes higher making a Doji or a dragonfly Doji.
Because if you're to put things in perspective, candlesticks are just chart patterns in the lower timeframe, wherein chart patterns are just candlesticks in a higher time frame.
That's just that's pretty much how they correlate to one another.
The names, hammer, shooting star, etc. They are just there to generalize a market principle or a market movement of buyers’ and sellers’ characteristics.
Between chandelier Kroll stop and manually finding out what is the stop loss by calculating using the ATR, which do you find is better? Will the difference be huge? Which method are you using? Thank you!
They are the same.
The Chandelier Kroll stop and the ATR have the same calculations. What's good about the Chandelier Kroll stop is that it visualizes your ATR.
The one you see above here is the Chandelier Kroll stop while the one below is the ATR.
The bottom line is that the Chandelier Kroll stop and the ATR have the same formula. However, since the Chandelier Kroll stop needs to be visualized on the chart, there can be a couple of added calculations just to put this on the chart.
If you want to short the markets, then you want to reference your stop loss on this orange Chandelier Kroll stop.
Whereas if you want to long the markets you will reference the blue Chandelier Kroll stop over here:
To answer the first question, which is better?
Essentially, they are the same. But the better question would be,
Which indicator would be more appropriate to use?
Would it be the Chandelier Kroll stop or the ATR?
If you adopt a trend following methodology, and you trail your stop loss using the ATR, please use the Chandelier Kroll Stop.
Because it would be such a hassle if you have to calculate your ATR every single day. But if you are already at the Chandelier Kroll stop, then trail your stop-loss.
You don't have to manually compute and subtract every single day.
The Chandelier stop is a variation of the Chandelier Kroll, but it's only based on one line.
There's an added calculation though, there might be slight differences when it comes to the main calculations, but as you can see over here
There is a spike in volatility and the ATR is high.
However, if you are a swing trader, which means you trade the range, for example over here.
If you are to enter a buy with a buy order. Take profits below resistance
Where will you place your stop loss?
You can’t look at the chandelier stop, because as you can’t see the current value right now it's above here
What do you do in this case?
In this case, this is where this tool isn't effective.
When you are a swing trader, you're a ranged based so in this case, use an ATR value of the original ATR indicator.
The value over here is 67 pips.
You subtract 67 pips from the lowest. When ATR is subtracted from the lowest low, that is your stop loss. Giving you a 1:1.05 risk-reward ratio in this trade.
That's pretty much the answer to that. If you are trend-based trading, make your life easier, use a Chandelier Kroll stop or Chandelier stop.
But if you're a swing trader, you want to be more flexible on where you want to define where your ATR would be, Use the original ATR Indicator.
Why is there no special Course for TradingView, how to start?
The reason why there's no special course for Tradingview is that we don't restrict you on which platform to use.
If you want to use Meta Trader4, Meta Trader 5, Ninja Trader, Trend spider, or Thinkorswim.
There are a lot of platforms that you can use, and you can apply in the UPAT course instead that is why we do not provide a specific module or lesson for Tradingview itself.
How do I Engage in a Trade after Analyzing, like to Buy or Sell what platform do I use?
I think this is a two-part question.
“How do I engage in a trade after analyzing? (Like to Buy or Sell).”
I believe it has to do with your thought process, how do you approach a chart.
What platform do I use?
Let's start with the platform. The platform means you must choose a broker. But if you are to choose a broker, what markets do you trade because I trade the forex market.
So, currently, I am using Axi trader for the forex market and you can use IC markets as well as pepper stone or blueberry markets for forex markets.
If you're a crypto trader, you can use Binance, I've used them for quite some time or Gemini and if you are a US stock trader then you can use TD Ameritrade or Interactive Brokers
If you are looking for a CFD broker you want to trade the global markets, then CMC might be for you.
It depends on the markets you trade. If you are trading on your local stock markets or Indian stock market or Singaporean stock market, then that's where I don't have any knowledge.
With regards to the platform, know what markets you want to trade consistently.
Then from there, choose a reputable broker wherein your withdrawal and deposit do not exceed more than one week.
That's my golden standard in choosing a broker.
When you deposit, you make sure it arrives in less than a day. And when you withdraw, your funds arrive in your bank account in less than a week or three business days.
If there are any excuses, then that broker is not for you.
How do I engage in a trade after analyzing?
I will not go into too much detail on this. Because we have discussed this. I believe there's a module here on how you can apply support and resistance in technical analysis on your charts in the UPAT course.
It’s already in the UPAT course and I suggest you go through them again.
Support and Resistance
Firstly, when you see a chart, you define where your support and resistance are. You can use lines.
There we go.
When you are looking at your charts, I do suggest you plot just 1-4 so you don't confuse yourself.
Because if you're plotting Support and Resistance over here at the top
And the current price is over here
What are the odds of the price reaching there? There’s no point plotting there.
There you go.
Secondly, define your market condition.
What is the market condition right now?
An uptrend or downtrend or a ranging market.
Based on what we are seeing here, it's generally in a downtrend
But if we are to consider our support and resistance, it's currently in a range
As you can see over here, it's currently in a range.
Now you want to ask yourself.
What is an appropriate setup for this current market condition?
If it's a ranging market, you want to look for false break setups, you want to buy low and sell high and take profit before resistance.
But if the market condition is a trending market, you want to trail your stop loss for breakout trades, and so on.
That is your setup.
After you define your setup, let's say a false break setup.
Now, what would be your entry and exits?
This means you already know when you're going to enter, and you already know where your potential take profit or stop loss would be before you even enter a trade.
This is where you would then place your buy limit order and stop orders.
Manage your trades and follow your rules
Management is how you approach a chart.
I want to put $25,000 in so I can daily trade, but is there a strategy where I would invest only a portion without risking all?
This is the kind of question I cannot answer because there are a lot of variables to this. It involves financial advice.
I cannot give input on this because I am not a trading coach, I am an educator, but I am by no means suited to advise you financially, so I can’t answer this.
If you're a day trader, but you're not comfortable using that $25,000, why not start with $1,000 or $2,000 with your portfolio and apply proper risk management.
Which is just 1% risk per trade.
That’s much I can comment on for now.
How do I know which time frame to measure my charts in correlation to entry time? Is it the same period or different?
You can just choose one timeframe and not look at anything else.
If you trade the 4-hour timeframe, it's okay for you not to look at the daily and weekly timeframe unless you can't see any support on the 4-hour timeframe.
I look at the daily timeframe if there is major support.
With regards to choosing a timeframe, you must first consider what your lifestyle Is.
Because it doesn't make sense if you want to be a day trader, but you have a full-time job.
If you're trading the Forex market, and you can’t trade the most volatile sessions, which are the New York and London overlap.
Make sure you want to choose your lifestyle, and you must constantly reflect on whether that certain trading method is for you.
The second one is to choose a timeframe relevant to what you are most comfortable with that complements your lifestyle.
I trade the 4-hour timeframe, because every 4 hours, I do either have lunch, or I do my physical activities, my hobbies, etc.
The 4-hour time frame is embedded into my lifestyle, and it complements what I do. It helps me with regards to my habits which is to check my charts every 4 hours.
Yes, I can go to the 1-hour timeframe, but it's just not for me.
And if you are to trade the 1-hour timeframe and 15-minute timeframe, you need to be focused on those timeframes.
But to answer your question, let's just say you already know that you want to be a day trader.
You already know your timeframe; you want your entry timeframe to be the 15-minute timeframe.
It's weird to choose your higher timeframe, you can use the principal, a factor of 4-6.
This means that whatever your entry timeframe is, you multiply that by 4 to 6, and that is your higher timeframe.
If you trade a 15-minute timeframe, and you multiply that by 4, then your higher timeframe can be the 1-hour timeframe because 15 multiply 4 is equal to 60.
Your higher timeframe would be 1-Hour
If your entry timeframe is the 4-hour time frame, then multiplied by 6, to get 24 hours and the daily timeframe can be your higher timeframe.
Because again, if your entry timeframe is the 15-minute time frame or the 1minute time frame, it doesn't make sense if you go to the weekly.
The reason why I said that, is because the information that you are getting on a weekly timeframe may not be relevant to the time frame you are trading.
You have another trend line there in the weekly timeframe which is an ascending triangle.
Going down to the 15 Minutes timeframe
What do I see? I see a different picture. It's currently in a downtrend and it's moving away from the area of resistance
This level is not relevant, the information isn't relevant to my timeframe. That is pretty much how I would go about it. And hope that pretty much makes sense.
What are H1, H2, etc.?
This is a basic question. But, if I go on the daily timeframe, a single bar is equal to 1 day.
If I go down to the 15-minute timeframe, then every bar you see here is every 15-minutes. So currently, this candle opens and closes after 15 minutes
What is the Fibonacci retracement about weak trending markets? I was confused
The main usage of the Fibonacci tool is from the word itself.
What are retracements?
Retracements are pullbacks.
You call these impulse moves,
The hills you see below are called the retracements moves
With regards to the Fibonacci retracement, how do you go about using those tools? If you want to capture pullbacks.
You're plotting the lows and the highs over here:
I did not understand ATR with Pinbar
I think there was a module where Rayner is referring that the pin bar must be equal to 1.5 times ATR.
That can be quite confusing. Let's try to break down what he said.
What I just recently pulled out is an average true range (ATR)
What the ATR measures are the volatility of the market. The higher the value the more volatile the market is.
Based on this current ATR period, this market has moved
If the market has moved on an average of 120 pips for the past 14 days.
14 period, ATR on the daily timeframe
Then you want to make sure your stop loss is above that range. If the market tends to move 140 pips, then you want to make sure your stop loss is around 150 pips.
There we go.
It's one way to set your stop loss.
Regarding the question, the current ATR is 80 pips
Then if this pin bar has a range of 120 pips, which is quite more volatile than usual, you can quantify that it is a strong price rejection.
Because it shows that the volatility of the movement of the range of this pin bar is higher than the usual volatility of the market.
Let’s measure it.
It's 134 pips, so it's not 1.5 times. That's how we would potentially measure it.
Do we neglect the area of value and invest in the trade?
What if you spot a strong bullish market and sometimes it doesn't make any pullback, which makes sense?
In such cases, you neglect the area of value and invest in the trade.
I believe this is in the UPAT course. Rayner has mentioned that there are different types of trends.
The market is ranging and a lot of pullbacks, but it is in an overall uptrend. There are a lot of ranges and choppy markets out there.
The slope is healthy like a 70 degrees angle. The pullbacks are very clear, and it tends to respect the 50-60 Period Moving average.
The trend keeps on sloping, higher and higher. It just keeps breaking out.
In the UPAT course, we teach you how you can trade these types of different trends because not all trends are equal.
If it's a strong trend, and as you know that the character of a strong trend is it barely makes a pullback.
This means that the most appropriate method for trading strong trending markets is that we only trade breakouts.
You buy or sell the breakouts and ignore support because it’s barely going to make that anyway.
If the trend is in a strong uptrend, then yes you don’t need to neglect the area of Value
You can neglect the area of support because it's not relevant to the current trending condition that you are looking at.
That's pretty much my answer to these questions.
How do you count the pips for the various prices on the right sideline for all currency pairs like Forex, metals, etc.?
For forex, for some textbooks, it is every 4th digit of the currency pair or if it's a yen pair, it is every 3rd digit, if I'm not wrong.
But for metals, it can be tricky because sometimes metals or commodities, are traded on the futures market which gives a different measurement.
For stocks, we measure for tick value.
For forex, we measured by PIP value.
For futures, I'm not sure if it contracts.
I can only answer this by using MetaTrader 4 because, on MetaTrader 4, it's quite simple.
On MetaTrader 4, what we usually do is just click the middle mouse button, then click and hold to measure the distance.
As you can see, we have here 1875 points, but this is 187.5 pips on your MetaTrader 4 which you can easily see.
This will make things much more convenient for MetaTrader4 & MetaTrader 5 users.
This also applies to Commodities.
It’s also the same middle mouse button, click and hold.
You will see that what we have measured here shows 2,664 points but it’s 266 Pips.
The middle mouse button tool applies in any market as long as you are in MetaTrader4, as well as in Brent crude oil, and so on.
This is just it for pips.
I can only speak for MetaTrader4 but for other units, I’m not sure.
I need help with journaling, calculating pips risk, and logging it in a spreadsheet.
If you're a UST student and you're journaling your trades, you just need to capture the market by the time you entered and exit the trade.
Because in the UST course, the systems are so simple. There’s no discretion.
What you just need to do is ensure that your execution meets the rules for the UST.
How about if you're a price action trader and you buy the course How do your journal or you know all these things?
If you are a discretionary price action trader, please keep your journal as simple as possible.
Get as simple as you can.
I believe there are three questions here:
- Calculating pips and risk
- Logging it into a spreadsheet.
Let me guide you on how to do it.
In the journal, what you just need to do is the date of entry, setup profit, and loss.
That's pretty much it.
Because when it comes to journaling, as a price action trader, you must keep your journal as simple as possible.
If you want comprehensive journaling statistics, don't do that by hand. Use tools like MyFxbook.
I will show you my portfolio.
In MyFxbook, you have these statistics:
You have the profitability, pips, average, best trade, worst trade, etc.
These advanced tools should be entered automatically by systems, by platforms, like MyFxbook for free.
But if you want to do things by hand, which is also important, it's only these things, setup, profit or loss that you need.
You can input your date of trade, profit, or loss and then input the mode for your trade setup.
What do you do next?
It would help if you had screenshots separately
We could add one more called the “Emotions”
It could be pointers like you are exhausted from work, stressed from an argument, or disappointments in work. You can just keep it simple with three-pointers.
What you need to do next is to highlight the header and click on “Sort and Filter” on the spreadsheet.
Let’s take into consideration the month of May 2022 from the list.
The first question here is do our emotions correlate with our losses?
Do we tend to lose when we're happy?
You can change emotions to follow your rules.
After which, you need to do a filter once again.
In May, does following your rules correlate with your wins or losses?
As you can see these are random numbers. It will vary on an actual.
But as we can see, our losses tend to correlate when we're not following our rules.
The conclusion for May is, that I tend to lose when I don’t follow my rules.
Profit and losses
What setup tends to work?
As you can see most of our losses, as of now, we can't conclude yet because it's a small sample size.
When we have about 20 to 30 trades, we can see whether or not these trades correlate with our losses or not.
That is the concept of having a trading journal.
This is to keep it as simple as possible and to see what factors correlate with our losses.
That's pretty much it.
Other than that, please use other tools to your advantage to do the statistics.
Do we need to include the entry price?
You shouldn't include entry and exit prices.
For me, I don't think that's relevant when it comes to manually input your order.
Because look at this, In MyFxbook, you already have this here.
The opening price, stop-loss price, etc.
You don’t need to do it manually on the spreadsheet. Because the more input values on our trading journal, the less we are likely to follow it.
You're not sure how to even use those prices, in a way if they will correlate to our losses or not.
I highly suggest that you don't include entry and exit prices for this
As much as possible use tools to also do this.
In MetaTrader4, I'll show you 2 different examples. One in MetaTrader4 and one in CMC markets.
In MetaTrader4, I have what we call the mini terminal.
This is a tool that your broker might offer for MetaTrader for users.
What I usually do is just, for example, I want to enter here and this market:
I'll measure what my stop loss is approximately 44 pips, then from my entry is 78 pips.
I'll put it in the mini Terminal, 80 pips.
And I would let this calculate how many balances I want to risk. I want to risk 2-3% of my trade.
Then as we can see, we would enter the trade with 0.05 Lots:
This is automated.
If you don’t have this on your broker, we have Rayner Risk Manager on MetaTader4.
It’s also in the UPAT course.
We have a market order, and our stop loss is at the price of 1.21821 and we want to risk 1% of our risk per trade:
When we click sell, it will automatically place the order with the right position sizing so that if our stop-loss is hit, we don't lose more than 1% of our trade.
What if you don't have this? What if you're not using MetaTrader4?
Some brokers offer this as well.
In CMC markets, I'm going to enter the (EURUSD).
What is the stop loss?
Our stop loss is around 1.0403
I have an account here, and it's valued at $4,100.
If I want to risk 2% of my account per trade, then I would enter a maximum risk of $82.
I put 2500 units here.
There you go, you can see the amount of what the potential loss would be.
Thinkorswim also has this feature where you can position size and this is for stock traders.
Entering the market at the current market price.
If we want to buy this stock worth $200.
We allocate 10%. If you want to buy $200 or $500 worth of the stock you can toggle the switch as shown below.
There are different ways to position size.
But the main concept of position sizing is that you know how much you will lose, and you know where to exit your trade before you even enter it.
I hope that answers your question when it comes to trade journaling. And also when it comes to risk management and how to position the size of your trades.
How do you usually tell it's a false breakout? Do you wait for the daily candle to close? Or do you take a risk and go ahead with the trade?
I want you guys to keep this in mind.
As price action traders, we have the power to ignore trades.
Because if you're a systems trader, if it meets the 200-day breakout, you must follow the rules.
But as a price action trader if we think that this trade has a lot of uncertainties in our mind, then, of course, you know you are free to disregard them
How do you tell it is a false breakout?
It takes practice to determine what this might be.
But the main concept is this you determine if it's a false breakout assuming that it reverses from the area of resistance, or support if it made a large body candle relative to the previous candle.
"Good day... I've been told now is not a good time for swing trading stocks (more of a "scalper season") Would this also be the case for Forex? Thanks in advance..."
I haven't scalped in the stock market.
But I do know that the stock market has higher fees compared to forex and usually Forex is always volatile, especially from Tuesdays to Thursdays.
I think if you are more of trading the lower timeframes, then the forex market may help you out.
The only thing I know is that stocks have higher commissions compared to the forex market.
In terms of commissions, you would save more in the forex market and since the forex market is a couple of trillion times bigger than the stock market, then it can tend to be quite more liquid depending on the pairs you're looking at.
Alright, but of course, one thing you have to keep in mind is that in forex, you have to deal with leverage and in stocks, you don't.
You have to learn how to manage your risk with leverage.
In this case, when it comes to the forex market, I would say that the forex market can be good in terms of scalping.
Where stocks can be a better market for trend following in the long run.
Could you advise how to use UPAT for scalping? And which timeframe do you suggest for it?
Once again, I am not a scalper. I do not trade the lower timeframes.
However, I do have some information that can help you, especially about the forex markets and also about other markets.
As you know, in our UPAT course, we do have this module called Market behavior statistics.
Where we get to identify and test the market behaviors whether the market is for breakout trading or pullback trading.
In the UPAT Course, we have a good understanding of market behavior with statistical analysis
And you have here the best market pairs for trending
I'll be sharing with you my Excel spreadsheet. In this spreadsheet, you see that there are markets over here
Anything above 1 means that this market tends to break above its daily highs and lows.
While markets below it, tend to reverse from their daily highs or lows.
If you're a scalper or you trade the lower timeframes, you can take these statistics to your advantage.
If GBPJPY tends to break out from its highs or lows, if you find that in the lower timeframe, GBPJPY is approaching its daily highs or daily lows, then you can look for a breakout trade in the lower timeframe.
The lower timeframe can be less than 1 hour, M30, M15, or M5. It doesn’t matter.
As long as you choose a time frame that fits you.
Although I suggest that if you go to the lower timeframes, I suggest you go on the M15 timeframe.
Because for me, the lower the timeframe you go, the more volatile and liquid the market should be and the fewer markets that you should look at.
The lower timeframe you go, the more liquid the market should be.
The lower the timeframe you go means that the fewer markets you should look at.
But when it comes to the lower timeframes, I think the M15 timeframe is more of a sweet spot when it comes to scalping.
I haven't been a scalper for quite some time.
When it comes to answering the question directly on helping with the scalpers, I think that information can help you out.
But of course, the market statistic I shared with you is just in the UPAT course.
But yes, I still suggest that you do your testing because this test has been performed back in 2019 or there.
Normally we manage risk on individual trades with price targets and stop losses but would you suggest anything on a portfolio level?
Yes, I do.
Maybe a bit too specific but recently I had 10 FX trades, totaling 10x Risk (1 Risk = 1% total portfolio and yes there was leverage) but in a few days that dropped to -4xR with several trades hitting stop losses. This has happened a few times before, with most of the trades not big enough to book profits but altogether the total impact on the portfolio would have been most welcome!
Back to the question: do you employ any strategies to manage risk on a portfolio level?"
This is a good question and I think it's also related to the UPAT course.
The lower timeframe analogy I shared with you is just the opposite.
The higher the timeframe you go, the more open trades you should have therefore, the more markets you should look at.
Because what will happen is that if you trade the lower timeframe, and you have more open trades, and you only look at the forex markets,
What will happen to your portfolio?
Your portfolio would be so correlated in a way that if two or three forex pairs are correlated and reverse together, it would have a huge impact on your portfolio.
There's one thing I suggest, all these three things should be in-balanced.
You should be on a higher timeframe and when you are on a higher timeframe, you should have more open trades to offset the low frequency of your portfolio, more open trades.
The most important part is the more markets you should look at.
If you trade the daily timeframes, I suggest you have an open trade of around 8-15, spread across different markets from Forex, commodities, or even bonds, or index or indices.
But if you're someone who trades off the H4 timeframe the less open trade you should take.
But on average, I do have open trades of a maximum of 5-10 and I mostly look at the forex markets and their commodities.
If you're someone who trades off the H1 or M15 timeframe, you should only look at one market and the most volatile pair.
It can be EURUSD or GBPUSD depending on the market condition.
Roughly you're only looking at 3-5 forex pairs if you look at the lower timeframes. For stocks, it’s a similar thing.
For stocks, It’s a similar thing, If you trade one market you trade the lower timeframes
Depending on what type of stock you are trading.
Which are penny stocks or stocks with catalysts on them with the fundamental report release.
Right now, I can only give you the principle of this but not a fixed number.
I want you to take a look at the principle of this whole method.
The higher timeframe, the more open trades, and the more markets you should look at.
The lower the timeframe, the fewer open trades, and the fewer markets you should look at.
From that principle, you just try to gauge it along with the timeframe you're looking at.
In the end, it’s the principle that matters.
Hope that makes sense to you.
Even if I give you open trade, or fixed market to trade, the question is.
What about our strategies?
A mean reversion trader on the daily timeframe can have higher frequency trades, compares to a trader who is a trend follower on the same time frame.
There are a lot of angles when it comes to this.
That's why the principle is what matters.
If the price chart breaks the Support Level and there's a strong downward move with no previous reference to the Area of Value, should I wait for the market to consolidate before making my move?
Let’s visualize this.
What the question is, which I believe, is that the price made a sharp move down to the area of support
But then there's no more support below it.
What should you do?
Should you sell?
Should you wait for a buildup?
Here's the thing.
If the price breaks support, it’s an all-time low, and you plan to short this trade.
The short answer is yes.
You can take the trade
It's still a valid trade because it's a downward move, it broke support, and there's no barrier looking for it to look to go down into.
However, the downside of this is where your stop loss be?
A logical place to set your stop-loss would be very wide.
or above the swing.
However, if you wait for the price to retest,
You will have a better stop loss. If you wait for the price to make a flag pattern:
You will still wait to have a better stop loss.
If you wait for the price to break down further and make a flag pattern way below the support area
Your stop-loss will still be better.
In any of these scenarios, you would still have a better stop loss.
In a way, shorting directly when price breaks support, especially when it is an all-time low or by an all-time high, Yes, you can take the trade.
However, your stop loss could be quite wide, and there's a chance that it might be a false breakout.
One confirmation is of course to wait for the price to make a build-up to confirm that the sellers are withholding the level.
They are resisting the buyers and it shows that the buyers aren't strong enough to push the price back up higher.
Why does the Weekly trade Report differ from the Weekly Market Analysis video?
That’s a good question. And I just to give you some context over here in our Pro Traders Edge
We have here the market at the Pro Traders edge report and the technical trade report
These things are two different things.
The reason is that they're being made by two different persons.
Rayner was the one giving us a weekly market analysis, and John our coach is putting this into a PDF format.
In a way, it’s a good thing, because you can see two perspectives of different types of traders.
That's pretty much the answer to this question.
They're different because they're made by two different people.
How do I set an 8-hour chart in TradingView?
You need to get the Premium or Pro version of TradingView. Because only TradingView Pro has that timeframe.
Rayner uses the 8- hour timeframe in most examples in the UPAT. But I can assure you that you don't need an 8-hour timeframe to succeed in trading.
It's just because it fits with Rayner's lifestyle. But then, if you want to invest in yourself on TradingView, feel free to do so.
But that's how you get the 8-hour time frame.
I am struggling between charting platform MetaTrader 4, which I'm familiar with, which broker to choose, and can it connect to MetaTrader 4, I think I have options to choose CMC, Interactive Brokers, and FXCM. Any advice? Can you go through an example of placing long or short on TradingView and setting up stop loss?
For Tradingview, I cannot give you an exact example because I don't think I've ever used Tradingview to execute any live trades.
But knowing that you are both in the Ultimate Systems Trading and the Ultimate Price Action Trading Course. I suggest you choose CMC markets to trade the Systematic Trend Following System, which I believe does require charting, but the rules are fairly simple.
I think CMC markets will do enough.
You can use Interactive Brokers to execute some of our Stock Trading Systems if you are not yet trading them, it's a good broker to choose.
You can also use FXCM for applying the UPAT, and for discretionary concepts if you wish.
But to me, what is most important is that you can withdraw and deposit in less than one week. That's the most important thing.
Because the broker that we recommend are CMC markets, Interactive Brokers, and TD Ameritrade as we have withdrawn deposits a couple of times.
In that case, if you're using the systems in the Ultimate Systems Trader, use both of those brokers, with two separate accounts this is very important.
Don't keep them all in one account. That’s my advice.
You can use the CMC and Interactive Brokers for systematic strategies and use IC markets or Axitrader for your price action portfolio.
I'm using a 4-hour timeframe. How many Forex trades do tend to look for in the week?
I don't have a quota. If there is a setup, then I take it. But if there isn't any setup, then I ignore it.
When the Ukraine/Russian war started, I had 10-20 open trades, because the markets are pretty volatile and I was trading the 4-hour timeframe.
As of now, I’ve less than 10 trades. For this week it has been fewer trades.
You shouldn't set a quota on how many trades you should look at, but it depends on the market condition and the setup.
If the market meets your setup, then take it. If it doesn't, then just keep on holding the trigger and be patient.
How do you stop loss effectively?
This depends on some trading methods but here's how I've been consistently doing it.
As you can see on the lower left of my screen the ATR value:
You have the ATR Indicator you can call out but I already have an indicator that already shows how many pips.
This is 1ATR, I use the 20-period ATR on the H4 timeframe to calculate my stop loss.
I see a valid false break setup over here:
I just set a pending order for a buy stop because I don’t enter trades immediately.
Where do I place my stop loss?
What I will do is subtract 78 pips, and 1 ATR on this lowest low wick over here:
Subtract 1 ATR on the 4-hour time frame from the lowest wick and know your stop loss price:
Then when I place an order, my stop loss would be 160.73:
I'll have a 1% risk/trade:
My take profit would be 1:1 and place the order:
Targets below the swing high.
Normally, I would enter this trade on the market order, but since I don't consider this a false break, I’m just using it as an example.
But that's how I place my stop loss consistently. I subtract 1 ATR from the nearest swing low.
When it comes to effectiveness, it depends on your setup or how your trading performance has been.
Because the word effective should be derived from your trading journal. Are you applying your stop loss effectively?
Do you need to set your stop loss a bit wider?
You need to identify that yourself. Effectiveness depends on you as a price action trader.
How have you categorized your profile in MT4? What do your profiles contain?
You can name the profiles to whatever you want.
For me, I use profiles like the FX-1, FX-0, etc.
FX-0 is what I use to pull out my currency strength meter. I have an expert adviser that automatically uploads my data to my FxBook.
FX -1 is where I enter all my open trades.
FX-2 is basically for my watchlist.
I use the currency strength meter to identify my watch list for the week.
I've completed the first two sections of the UPAT course. And I've gone through the third part, just having done the exercises, I'd like you to walk through two or three examples of the descriptions for the false break, buildup, etc.
I can give you an example. But the application is different. It's much better after this session, I suggest you take pictures of the chart and send it to your coach.
We can help you verify whether what you have plotted on your own is good.
This is a bad false break for me:
A false break always has two elements;
- Area of value.
- Price needs to close above that area of value.
The price needs to be at an area of value:
But in this case, it’s an area of resistance.
The second element of a false break is that the price needs to close above that area of value. We can see the area of resistance and the price closed above it:
As of now, this is not going to be a false break.The final step for this to be a valid false break is if the price closes back within the area of resistance:
As you know, this is no longer a retest of support. It means it’s a false break and it’s back in the range.
The valid entry trigger is if the price closes back into the range. The opening of this red candle is a valid entry trigger:
In terms of setup, this is a valid false break setup. The only reason why I'm not taking it is that the nearest swing low is here:
The risk-reward ratio is very poor. My entry would be here:
My stop loss would be here:
My target would be around here:
It’s not even 1:1. I wouldn’t take it
Even if it was a 1:1, If you look at this, there’s also a break of structure over here:
This means that there’s a downtrend, break of structure, and higher lows. It’s a conflicting price action that there is no chance that this might continue forward.
But in terms of setup, this is a valid false break setup.
In terms of my trading plan, I wouldn’t take this trade.
In this case, you can see the price shot up above the area of resistance, then reject above it a bit back below it.
But in this case, if the price makes a flag pattern below the resistance:
Then this is a sign that the buyers are starting to hold this level and are about to break out higher of the range.
If there’s a flag pattern at resistance then this is a valid buildup setup.
The main takeaway from all these setups is that they are always associated with support and resistance. Because when the price is at resistance or support, you want to see how the price reacts to it.
How does the price react to that resistance level?
Will the price break out and then make a false break or will the price build up at resistance?
That’s why we have those setups included in the UPAT course.
The patterns offered in CMC, can you go through that?
I've never used the CMC markets for discretionary trading. But I’ve seen that before.
I believe when you are done with patterns like the ascending triangles, pennants, heads and shoulders, you should never rely on an automated system to identify them or you.
The reason why is because those patterns are technical analysis patterns and are discretionary. They are meant to be detected by our eyes and validated by us.
You can use automated indicators. Thinkorswim has it, Thinkorswim even detects ascending triangles for you automatically.
You can use that to your advantage, but you want to make sure that you've validated it yourself whether it is correct.
The bottom line is it’s better to always plot it yourself. It takes practice.
“UPAT works differently for different markets I understand. However, even within the “Mean-reverting markets” or within the “trending markets”, different assets also behave differently within them. E.g. US stock equity tickers behave differently from US NDAQ100 futures I noticed. Do you then alter your trading plan to specifically suit them? E.g. I notice that the equity futures tend to do double false breaks before heading in the direction they are meant to go to.
I don’t trade US stock futures anything. And of course, I’m mainly a future forex and forex trader.
I might not be able to answer this in full.
However, in the mean reverting or trending markets, if you can see the module on the UPAT course, most of the markets tested are futures, forex, indices, and commodities. We did not test any equities.
Because as far as I know, based on what I’ve learned from Rayner when it comes to equities, it mostly goes down to the movement of the index.
For example, if the index is performing well then other stocks may follow suit.
And if the index S&P 500 or the NASDAQ is in a downtrend, then the majority of the time the stocks you will encounter will have false breakouts.
When it comes to the mean reverting markets and trending market statistics discussed in the UPAT course, we tested equities.
If the profit factor is above 1, it means that the market is good for trending setups because it tends to break its weekly highs or lows depending on what which tab, you’re looking at.
As you can see most of the markets tested are commodities, agriculture, currency pairs, and currency and for equities, not so much.
That is my direct answer to this question.
Hi May I know if the price of stock did not reach the support/resistance that I wanted but is (near to) and it has rebounded, what can I do about it? So that I won’t miss an opportunity. Is there any approach/strategy to overcome this?
Let me show you a good example. You should see my MT4 account now. There is an area of support over here
Then you’re anticipating a retest of support, so you place a buy limit order here:
But as you can see, the price didn’t touch it:
It’s what you call undershoots. it just undershot support and went back up. The question now is, how do you exactly try to avoid this issue?
For me, my direct answer to that is that if you’re going to focus solely on this subject so you won’t miss an opportunity.
“I think it’s a bad idea.”
Because if you would set your buy limit, if you would try to enter the market way higher than support, then you’re not having a good risk-reward ratio.
Most of the time your risk-reward ratio will be skewed.
I think if you are going to buy earlier before the price hits support, then, in the long run, it’s not a very good idea.
If you’re going to focus solely on this subject of support and resistance, so that you won’t miss an opportunity, then I think that’s what we call a fear of missing out.
Because that’s what has worked for us in the long run for years already.
When you see a support level, we want you to wait for the price to reverse below support and make a false breakout.
Therefore, the price has reacted to that support level, giving you a good risk-reward ratio, and also letting you know that the market has recognized that support.
However, if what you’re going to do is enter early, before it even touches the support, I think that’s a bad idea.
What you should do in this case, is that you wait for a break of structure.
Let’s just say that you’re waiting for a retest of major support over here:
But then what did the market do? The market just then just barely reached that support and started reversing back higher.
What do you do now?
What I suggest is that you wait for a break of structure setup.
What I mean, is that you wait for the price to break the trendline resistance:
And make a valid flag pattern, which you can see over here:
In this case, you’re not manipulating the rules of the setups we are giving you.
Rather, you’re using a different setup altogether, just in case, the price doesn’t reach the support.
To answer the question directly, no matter what you do, you will always miss an opportunity, you can’t catch every trade out there.
What we can control is ourselves, our execution. To ensure that each trade is of high quality.
Meaning that it makes sure that we are following our trading plan.
What you can do instead is if the price doesn’t reach support, wait for a break of structure or wait for the price to pull those, it might go back down again.
That’s pretty much it.
May I know how to look for stocks that are in a distribution/accumulation stage in Finviz? Thank you.
First of all, I have no idea.
Because when we use screeners, we only use the rate of change, meaning that we look for strong stocks to trade.
Because based on our experience, when it comes to stock screening, it’s really helpful to keep your candle results as simple as possible.
Don’t make it too complicated. Because what comes after the screener is where your actual trading plan comes in.
Your entry triggers, your false breaks, your trend continuation. When it comes to stock screeners, make them as simple as possible.
Let me rephrase this question. I think a better question would be how do you quantify the distribution in the accumulation stage on a certain market? Not just stocks but also in forex or futures?
I think that’s a better question here because that’s what screeners do. Screeners quantify certain parameters that we can do over and over again.
The main question here is how do you quantify the distribution and accumulation stage?
One thing you can do about it is the average true range indicator:
Using the 20 periods on the daily timeframe here we are measuring the volatility of one month:
As you know, the accumulation and distribution phase go like this:
Accumulation, advancing, distribution, declining, and so on.
What are you seeing on this face over here?
As you can see, this is a period of low volatility:
This is a period of high volatility:
What indicator helps us quantify this when it comes to volatility?
The Average True Range helps us with that. The Average True Range Indicator helps us measure the volatility in the markets.
If the ATR is on a multi-year low:
It means that the market is currently at a ranging market similar to this:
Now, once the market starts to go on a trending market, like what I showed you a while ago, declining or advancing phase, the ATR value tends to keep on rising, which you can see over here:
If you want to measure volatility in the markets, then you can consider using the ATR.
I highly suggest that you just look at it and apply price action, and technical analysis, to figure out if the stock is in a distribution or accumulation, I think, for me, it reduces the return forever.
Is 1000$ a good amount to start trading with?
I also asked this question a lot when I was new in trading, and the reality is that it depends.
For example, if you trade the lower timeframes assuming you already know risk management, naturally, your stop loss would be much tighter.
This means that the more accessible it is for you to maintain your risk with a smaller account because your stop loss is much tighter, and your position size is much bigger.
However, In forex, the higher the timeframe you go, your stop loss starts going to 60-100 pips or even more, then the more it gets hard for you to trade and get to manage your risk unless you risk more.
In short, trading a $1,000 is possible.
I think it’s a good amount to start with if it’s more comfortable for you.
Let me put this in principle.
First of all, you must determine what is your timeframe.
You need to determine your timeframe because the principle is that the higher the timeframe you go, the wider your stop loss is, and the lower the timeframe you go, the tighter your stop loss is.
Assuming you follow proper risk management.
The wider the stop loss means the lower the units or the position size. The tighter the stop loss, the higher the units.
The last part of this principle is that the lower the timeframe you go, the tighter your stop loss is then the more favorable it is to trade a small account.
The higher the timeframe you go, the higher capital would be required.
Assuming your risk is 1% per trade
This means that if you trade higher timeframes and your stop loss is wide with a $1,000 account. There’s a chance that you might have to increase your risk to 2% per trade so that you can increase your units.
I hope that I hope that makes sense.
It is possible to trade a $1,000 account. however, there will be trade-offs. It’s either you need to tighten your stop loss or increase your risk which might not be for everyone.
When I say units, it means shares and lots depending on the platform.
The reason why I went through this process of showing you the principle behind this is that there’s no fixed way of answering the question of whether $1,000 works or not.
Because for me, if I have a regular stop loss of 100 pips in the forex market, then it’ll be very hard for me to trade that account. I would need a lot more for me to maintain my risk.
But if I’m a day trader, I tend to scalp the markets trailing my stop loss at 20-30 pips usually very tight, and a $100 account would be favorable and enough to trade.
As you know the higher timeframe comes with a frequency
The higher the timeframe you go, the lower your frequency. This means that your wins, also your losses will come at a lower frequency.
The lower the timeframes, the higher frequency of trades.
Basically, what are you most comfortable with?
Our emotional attachment to it will be different as well. If you need a short answer, my answer would be to start as soon as you can.
But remember to have plans to compound your account, which means depositing more funds.
That’s pretty much it.
I hope you get what I mean when it comes to this one.
What is the best time to analyze the market before trading?
There are different ways of how to answer this but of course, let’s just say this depends on your timeframe.
Are you trading in the stock market?
Are you trading the forex market?
If you’re in the stock market, and your execution is on a daily timeframe
I recommend the time to check your chart is before the market opens.
Let’s just say you are trading the Forex markets which are open 24 hours, 5 days a week.
The execution will also be on a daily candle.
Since the forex market is open 24 hours a day, what you can do which depends on your lifestyle
Because, if you can catch the forex market on the open, which here opens at 5 am or 6 am, I’m still asleep at that time.
I’ll be able to check my chart when I’m about to start my work, which is at about 9 am. It depends on your lifestyle, which one you are most comfortable with.
But I prefer that you start this early.
I would say the first routine of your day.
In this case for stocks:
You want to time block the first session because if I recall, the first half before the lunch break, the first half of the stock market is usually the most liquid and the most volatile.
When I say time block, this means that when the market opens, let’s just say 9 am. Up until noon, you should be focused on your charts on your trading, because you’re trading on the lower timeframes.
This means that before the first session is over.
Some of you might trade out of boredom, like after work, or after your family duties, but no, this is a business, and you must treat it professionally.
In this case, if you trade the lower timeframes, you must have a time block for this.
A specific time when nobody can disturb you, you’re focused on your business.
For stocks, I suggest that after the first session ends, then you can call it a day, or perhaps if you lose more than 5% a day you can stop trading for the day.
For Forex, you will have to time the London and New York overlap, so this is pretty much this session.
Similar to the stock market, the London and New York overlap is one of the most volatile sessions in the forex market.
For stocks and forex but this time on the 4 hours.
This is a bit similar to the first one.
When you trade a little bit of a higher timeframe, let’s say above the 1-hour timeframe, based on my experience at least, you don’t need to keep in mind the sessions.
What you just need to do is that you always set an alarm or check every 4 hours
Because every 4 hours, my execution is in the 4-hour timeframe. What I do is I check every 4 hours.
Similar to the 8-hour timeframe, because this is in the middle of a higher timeframe and a lower timeframe.
In this case, to keep it much more straightforward, you much check every 4 hours regardless of the market session.
For stocks, I don’t think it should have mentioned stocks because there are only two candles during the day.
If I’m not wrong about stocks, they’re just two candles per day.
This might apply to the crypto and the forex market.
What is the time for the London/New York overlap?
It’s up to you to research it at the Forex factory because some of you might be in a different time zone.
I wouldn’t know.
The schedule might be different on your end.
I suggest you check Forex factory and sync your time zone in there and see when exactly does it open until it closes.
These are the principles. what I want you to take away is the principle here.
The higher timeframe, the lower timeframe and I would say this is more of like the middle ground, more of a compromise between the two.
Because I’ve been trading the 4-hour time frame for about two years and then, of course, I checked the charts every 4 hours.
When it comes to the 4-hour time frame, just check every 4 hours, except when you are going to sleep.
You will miss opportunities, it has happened to me a lot. Sleep is much more important and much more sustainable for you to manage your trading business.
What are the best days to trade in the forex market?
It depends, the higher the timeframe you go, the more it is irrelevant for you to check which are the best timeframes to trade.
If you trade the Daily and H4, H8 timeframes then the market sessions are irrelevant based on my experience.
Your stop loss is wider than usual during this timeframe.
This means that whenever there are swings during the night unless it’s very huge a major gap like 80-90 Pip move, which doesn’t happen all the time, then there’s a high chance that your trade would still be there.
However, if your timeframe is below the 1-hour, then of course the best time to trade would be on Tuesdays – Thursdays.
You need to read the research this and you need to verify this yourself.
This means that if you look at based on the volatility, Is it true that the best times to trade on the lower timeframe is Tuesday-Thursdays or it depends on the market condition or the news?
You need to verify this that’s what I’m talking about.
Is it all right to use technical analysis for forex and stocks?
That’s why we’re here. I’m not going to go into details about that. That’s pretty much what we do.
Because as you know, I guess for stocks, it depends.
For liquid markets in stocks like the penny stock etc. Applying the technical analysis to those kinds of stocks won’t be good.
But for markets that have high volatility and volume, it’s quite volatile. Using technical analysis will always be relevant.
Don’t forget that in the end, analyzing your trades is different from trading them. Because your ideas won’t make you money.
Rather your trade management will.
Technical analysis will help with how you manage your trade as time goes on. That is why it’s important.
It’s not just for calling the shots of whether it’s bullish or bearish, whether the trend will continue or not.
In terms of making a profit out of it, technical analysis is meant to be used on how you are on the thought process behind you entering or exiting the trade.
For Engulfing candle, do you need the high and low of the preceding candle to be engulfed by the high and low of the current candle? Or the open and close of the preceding candle to be Engulfed by the open and close of the current candle will suffice.”
It’s not really about the textbook. It’s about the principle of the pattern in itself.
Textbook-wise, the whole candle engulfs the previous candle.
This means that the body must be higher than the wick. That’s how you would consider a bullish engulfing pattern.
But to me, if I am to use this candlestick pattern, let’s just say, it’s at the area of support, I would take it because it represents a bullish rejection.
Whether or not you call it an inside bar, a piercing pattern, or a Morningstar, it’s showing a bullish rejection at an area of value.
For some, it might not be a bullish engulfing, but for me, in terms of practicality, I would take this trade.
I think Rayner was the one who introduced it to guide us I’ll just put it here.
This is a 2-hour candle and this is another 2-hour candle. If you combine this into the 4-hour candle, what would it look like?
Then it would look like a hammer which also shows a bullish price rejection.
This is pretty much the reason why definitions of some patterns should not paralyze you from taking trades.
Because as you can see, no matter what timeframe we go, 2-hour or 4-hour, the principle is the same, it is a bullish rejection candle.
Whenever I trade on my discretionary portfolio, I don’t tell myself
“Oh, look at that. It’s a hammer.”
“Oh my gosh, look at that as a piercing pattern.”
It depends. if there is a huge rejection, or a bullish engulfing as long as it’s what we call a price rejection or a bullish candle, then it’s good.
It’s potentially a good way for you to enter the trade.
But for me in the bigger scheme of things, I only use the candlestick pattern as a tool to time my entries.
I don’t use it to tell myself whether or not, this pair is already reversing. I trade based on the trend.
Can you advise if trading on a funded account by a pro firm or a Live account is better?
This question I assume
What’s a good company to invest my funds in which fund managers can I invest my funds into?
Or is a live account better or trading your account?
That’s why you’re here in the UPAT course, we’re here to transfer you the skills to be a profitable trader.
If you join the UPAT course just to look for a fund manager, then you might be in the wrong place.
In general terms, of course, learning how to trade yourself is better, one exception to that when you look for a fund manager is that you know the ins and outs of that fund manager’s strategy.
You know the track record of that fund manager, and at the same time, you know the strengths and weaknesses of his or her strategy because that’s one thing about choosing a profitable fund manager.
The second thing is the confidence to keep your account in that fund manager.
That’s two different things because what can happen is that if the strategy went into a losing streak, of course, you would start to doubt the fund management strategy isn’t working and a scam.
But in reality, all strategy goes into winning streaks and losing streaks.
That’s more of an in-depth context into this question.
Clarification in using multiple timeframes, which timeframe should I be looking at in each of the MAEE formulas?
This is an interesting question.
The reason why I say it’s interesting is that I’ve been asked this question throughout the years.
And as I grow as a trader, interestingly, my answer changes throughout the years.
In this case, my answer to that would be first, to know what timeframe suits you.
Let’s go to the broad side before we go before, we narrow it down.
So first of all, you have to know what timeframe suits you.
Let me share with you my screen over here.
The first thing here to choose is your lifestyle.
Then choose the timeframe suitable to your lifestyle and that can be grouped into two options;
- Lower timeframe
- Higher timeframe
Before now I used to say that anytime frameworks. 1-hour, 2-hour, 8-hour, 4-hour timeframe, works.
But based on my experience as a trader, it’s either you go as low as you can on the timeframe, assuming that it fits your lifestyle or you go as high of a timeframe as you can.
Because I noticed that if you trade the type of the timeframes in the 2-hour, 4-hour, and 6-hour timeframe, I noticed that statistically based on my performance, I noticed that my strategies tend to get stopped out too often no matter how wide my stop loss is until the market reverses.
That’s just based on my experience.
Choose based on your lifestyle.
Choose whether you can trade the lower timeframe, or the higher timeframe, again it must fit your lifestyle.
If you can trade the lower timeframes then, of course, I suggest trading anywhere between the M15 is quite a headache.
I won’t go into this more but then basically when it comes to choosing the timeframe is that first, you want to ask yourself.
Will my lifestyle support trading the lower timeframes? If not, then trade the higher timeframes.
If you want to trade the higher time frames then I do suggest trading the H8 to weekly and so on.
To the main…
When it comes to multiple timeframes what should we do?
What timeframes should you look at?
When it comes to multiple timeframes, two options are correct.
This means that everything including support and resistance, the main formula, trendline entries, and exits, are done on a single timeframe to keep things simple.
Things can get a little bit technical here.
If for example, you trade on the 15-minute timeframe, you try to multiply that by 4 to 6
This means that if your entry timeframe is the 15-minute timeframe, you multiply that by 4 to 6.
15mins X 4 = 60Mins (H1)
In this case, your timeframe can be the 15-minute timeframe and your higher timeframe can be the 60-minute timeframe.
When choosing two timeframes, use a factor of 4-6.
Now the final part
On the higher timeframe, this is where you plot your support and resistance:
On the entry timeframe, just your lower timeframe, this is where you plot your entry trigger, you determine your entry trigger and your exits.
The MAEE formula is a step-by-step process on how we approach our charts. Going back, first determine your lifestyle and see what suits you the best.
Can you trade the lower timeframe or the higher timeframe?
If your lifestyle says that no, you have a full-time job, you have a family, then I suggest you abide by that. Don’t force yourself to the lower timeframe. Check the higher timeframe from H8 to weekly.
In this case, you have two options.
Option A is to choose one timeframe, and keep everything in there, the main formula.
But if you choose to go the two timeframes, which is what Rayner does. For me, I choose Option A, but right now what Rayner does, we’re going to choose option B.
In this case, your entry timeframe is the 15-minute timeframe, and your higher timeframe is the 1-hour timeframe.
In the 1-hour timeframe, you will first look at the market structure.
What is the trend?
What are your areas of support and resistance, and what chart patterns?
The entries are in the 15-mins timeframe
What are your setups?
Is there a false breakout, etc?
With your exits on your entry timeframe. That is pretty much how you perform multiple time frame analyses.
Multiple time frame analysis is not about going all around. M15. H1, H4, daily or weekly.
Multiple time frame analysis is not about analyzing every timeframe out there. It’s about choosing the relevant timeframes based on your entry and keeping everything with a purpose.
You don’t just plot everything itself.
This means that if you plot the trend on your 1-hour timeframe, you don’t need to plot the trend or determine the trend on your entry timeframe.
There it goes. But that’s pretty much how it is.
Obviously from the macrostructure, I Should be looking at the higher timeframe. I guess the Area of Value should be a higher time frame as well, am I right? How about Entry and SL?
We’ve discussed this recently. When it comes to the market structure, and area of value, look at the higher timeframe.
Entry, stop loss, you look at your entry timeframe.
Assuming you use the one I’ve told you about, which is using multiple timeframes to keep things simple, you are free to just use one timeframe.
That’s not wrong.
Do you think the zigzag to trade is effective?
One interesting point is that we’ve recently published an article about zigzag indicators on Rayner’s website.
As you can see, we have recently published an article on October 19. 2022, which is the Ultimate Guide to Zigzag Indicator.
I’m the one who has written this article, so I provided you with a very in-depth explanation of the zigzag indicator.
When it comes to how to set it up, the principle, the concept, how it’s calculated?
And also, what are the strengths and weaknesses of it, sometimes this indicator will malfunction if you trade in in different markets, or different timeframes, so it’s best to be aware of that.
When it comes to the zigzag indicator, you can see it on Rayner’s website.
I have been demo trading on IC markets for about a week or so and I’m still quite confused. When I am buying or selling order, there is a “volume”. Does it stand for pips units or a lot? Can I learn all this basic information?
I assume that we are using the MetaTrader 4 platform.
The volume is the lot size.
When you are on your MetaTrader 4 account, and you click volume, new Order, the volume is over here:
If you put 100 and you buy 100 volumes, I swear your account is going to blow up in just a few milliseconds.
Do not do that, because the volume stands for lot sizes.
It’s not your pips. It’s not your unit, it’s not your ticks.
This is the volume:
This is how many lot size you’re willing to buy before you enter that trade.
To those who are new to the forex market, if you’re not familiar with risk management yet, please enter with 0.01, and 0.05 is your max.
But when you’re on MetaTrader 4, I highly suggest that you start with 0.01 unless you go to the UPAT course we have.
In the UPAT course, we have here an indicator for you that allows you to manage your risk automatically so you don’t make mistakes.
On the Ultimate Price Action Trader;
You go to resources and course downloads;
On course downloads:
You can find here the Risk Manager Indicator:
This indicator automatically manages your risk for you if you’re using the MetaTrader4 platform so that’s pretty much it.
Nonetheless, if you like for the basics of the basics, if you’re not sure of the terminology of Forex, I suggest you start with these trading terms:
But in the UPAT course, we did mention that you should at least be familiar with the terminologies but if not, you are free to start with this.
What is your outlook for NQ, CL and ES in December 2022?
Let’s start first with the S&P 500.
Before I do this analysis, just know that whenever I do this analysis, it always pays to know the principle or the how I was able to arrive at a certain conclusion.
For example, if I put a trendline or support and resistance, it pays to know why I placed them.
Not because I placed them there, that you will say that this market is bearish or bullish.
The benefit of asking someone your second opinion, when it comes to market analysis is that you already have made your own analysis and you just want other people to cross-check your ideas to see what you’re potentially not seeing.
I just want to put the disclaimer out of the way before I analyze things. You must treat this as an educational thing and not an advice
That’s our goal here in the UPAT course.
In the UPAT context, it went on a declining stage:
Then went into an accumulation stage:
That’s where it is right now and it’s currently ranging.
That’s what we are seeing at the moment as we are not predicting anything but what it is currently showing us.
Basically, the market is in a range.
The question is…
Is it currently prepping up for a breakout?
As of now, it’s making a consolidation below the area of resistance:
This means that in a way, it’s also a sign of strength. There’s a possibility that the buildup may fail. I’m not saying it will, but if the market continues to consolidate below resistance over here:
There’s a high chance that it can potentially break out and start another advancing stage a potentially trending market.
As of now, based on what we are seeing. It’s still in a range.
Another one is the NASDAQ:
It’s currently in a downtrend
If I created a watchlist for stock Forex etc. Do I need to scan through the watchlist every day to see whether the stock Forex has hit my target area value? if not may I know what is your routine to scan through the watch list and not miss any trade opportunities like scanning the watch list once a week during the weekend? is there any other better way?
This topic falls into the area of time management and trading psychology as well.
If you are trading both the stock and forex market, I do hope that you are trading on a daily timeframe.
Because I have traded the stock, the forex market, the futures market, and the crypto market all at the same time also our local stock market and I can tell it’s not very easy.
It’s not very easy managing a lot of portfolios. Even managing two portfolios in the market, is not very easy.
Especially if you trade the lower timeframes.
So, if you are trading more than one market, and you want to trade the stock and forex market, I suggest that you trade on the higher timeframes strictly on the daily timeframes.
Because these two markets are very different.
Yes, you will have to scan through your watchlist but of course, there is a process for that.
That’s the first thing you need to consider. If you want to trade in more than one timeframe, I highly suggest that you trade in a higher timeframe.
Because if you want to trade the lower timeframes then it’s best to just choose one.
Trading the lower timeframe gives you frequency and demands more of your time.
Just focus on one market when trading the lower timeframe.
Assuming that you are trading the higher timeframes and you want to trade both the stock and the forex market, what should be your method towards trading two markets when it comes to building a watchlist?
Here is a routine…
This is a routine Rayner does when he is starting his week. For those who are in the Pro trader’s edge you should be familiar.
Let’s categorize it.
These two things over here let’s separate them both.
Let’s just say you are both trading them on a daily timeframe:
What should your trading routine be for both markets?
What Rayner does for forex during the weekends, he analyzes major and minor pairs.
I’ll let you do the research and what they are but basically, you analyze the major and the minor pairs during the weekend when the markets are closed.
If you trade the lower timeframes, you must do this once every other day.
But you do this on the weekends trading the higher timeframe. This is what Rayner does.
Weekends are for building a watchlist basically.
Then for the rest of the week, Rayner trades these specific markets by looking for opportunities in the watchlist itself.
This is something that happens on weekdays.
During the weekends, when the window mark is closed, this is the part where you do your technical analysis, the support and resistance, and all of those things, you plot on the daily timeframe.
Then if you think that this is a market that can potentially meet your trading criteria for a setup, then you add them to your watchlist and during the weekdays this is where you execute.
This is the part where you review your journal to take a step back and to review whether or not your choice had been good, if you followed your rules, or were the trades that you have messed up, and so on.
That is pretty much for the forex market. In the forex market, there are few forex pairs out there.
But whereas in stocks you have 1000’s out there.
In this case, the process can be a little bit different for stocks…
Create a scanner or use Finviz or whatsoever because you know there are thousands of stocks
Looking for high-performing trades, get high-performing stocks out of their stocks that are above the 200 moving average in those kinds of criteria so that is the first thing that you need to do.
You need to create a scanner that complements your trading style.
If you’re a trend follower then look for stocks that are the highest-performing stocks during the year.
If you look at scanners like finviz or Thinkorswim you can put into a screener stocks above the 200 period moving average or stocks that has the highest performing during this year so far, like stock leaders.
But if you are a mean reversion trader, then you can look at your scanner like, what are stocks below the 30 RSI?
So, scanners are very important in the stock market, because there are thousands of stocks out there no matter what stock you are in.
This leads me to number one…
On a daily basis, this is where you run your scan, and update your watch lists. This means that your watch lists can change from day to day.
Of course, it’s not as hassle as in the forex market, because your screener already collects things for you automatically.
All you need to do is look at those stocks and then see if they meet your trading criteria.
Because for the forex market, once you build your watchlist, you do have to view them one by one.
But for the stock market, it can be quite different because this is where the execution lies.
Also, on the weekdays, every day you run your scan, this is also what we do, we run our scans every single day on the stock market.
But in the forex market, they do analyze them based on technical analysis before the week starts.
Going further, you have to review your trading journal:
Then the cycle goes. It starts all over again.
Do not do this if you are trading on the lower timeframes, because if you are trading the lower timeframes, just stick to one market.
That’s the routine of how we do things are TradingwithRayner.
May I know the benefit of trade through multiple time frame analysis Is there other than advantage by looking to lower timeframe to look for an entry? In addition, what is the criteria situations makes you decide to change the lower timeframe to look for an entry when you already see the price had come into an area of value in a higher timeframe?
These are the type of questions that can be very dangerous to answer.
Because it’s like assuming that the only way to become profitable is to trade multiple timeframes which is usually not true.
Rayner does perform multiple time frame analyses, but Rayner only has two timeframes, the H8 and H4 timeframe.
Multiple time frame analysis is not always about bouncing from the H1 to M15, then the daily timeframe.
It’s choosing two timeframes, which are your higher timeframe and then your lower timeframe.
Analyze them in a way that they can complement each other.
Once you have done so, then this is the part where you choose your entry timeframe, and you choose your higher timeframe.
The concept here is to use factors of 4 to 6:
Your entry timeframe and the higher timeframe. Let’s just say that your entry timeframe is the H1 timeframe.
In this case, you multiply that H1 by 4-6.
If your entry time is the 1-hour timeframe. If you multiply it by 4, you get the 4-hour timeframe.
This means that your entry timeframe is the 1-hour and your higher timeframe is the 4-hour:
Let’s just say that your entry timeframe is the 2-hour timeframe. If you multiply it by 4, you get the 8-hour timeframe.
Your higher timeframe could be the 8-hour timeframe.
The same process applies to your entry timeframe being the H4.
If you enter trades in a 4-hour timeframe, then your higher timeframe can be daily. To make this illustration more educational:
Now you have to choose what your timeframe is and if it applies to your lifestyle.
This is where you manage your risk, your stop loss basically. This is where you see whether your setup is confirmed.
That is the purpose of the entry timeframe. This is where you put your entry indicators, the indicators that you use. Anything that contributes to making trading decisions, entries, and exits.
How about the higher timeframe?
The purpose of a higher timeframe is first to identify the trend and market structure.
Here’s the most important part.
Once you’ve assigned them what their purpose is, one thing you should not do is not to interchange them.
Never interchange their purpose, it means that if you have already identified the trend on the higher timeframe, then you don’t need to identify it on your entry timeframe, because you’ve already done so.
Because if you try to compare trends on two different timeframes, you will have analysis paralysis.
That is pretty much when it comes to the multiple time frame analysis.
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Please show more example or tips on identifying break of structure setup, I’m having difficulties identifying them.
Let’s say the market is making higher highs and lows on the 4-hour timeframe, into an area of key resistance on the daily timeframe.
But at that area of resistance, the price gets pushed down by sellers and only manages to retrace up a little before it makes another strong move lower. Now the price has formed a lower high and lower low—essentially a break of structure.
For example, USDNOK:
Previously the price had made a series of lower lows and lower highs, but right now the price has made a series of higher highs and higher lows.
And notice that the range of candles in the recent pullback is much smaller than the previous strong bearish candles.
This tells you that the sellers are having difficulty pushing price lower. Also, this break of structure could work well was because that break of structure was happening near an area of support, at 8.80110 (red line), which is an area of value on the weekly timeframe.
In identifying the stage of the trend, advancing, distribution, etc., sometimes you use the 50MA and sometimes you use the 200MA. When do you use the 50 and the 200MA respectively?
If you really want to look at long term trends, you can look at the 200MA. But the key thing I was trying to point at was to use the MAs as a gauge to whether it’s in an accumulation, distribution, etc.
If you want something consistent, then just look at the 200MA since that’s longer-term in nature and you’ll get fewer whipsaws in the market.
If you’re trading a shorter-term timeframe, then the 50MA is more reactive and you have to adjust to that accordingly.
I can read the price action most of the time, but my entries and exits are making me bleed!
A few tips to help you with your entries:
- Trade with the trend
- Trade from an area of value in the existing trend
For example, in a healthy trend, you can look to buy near the 50-period MA, at support or near the swing low.
As for entry trigger, it can be something like a bullish engulfing pattern.
As for exits, I recommend:
- Capturing a swing
- Look to exit before opposing pressure sets in
For example, if you went long at support then you should look to sell before the swing high.
(We’ll look at more examples later on.)
For a false break or price rejection setup would you suggest the engulfing candle to close above or below high/low wick or just the body?
For me, I don’t look at a candle, but I look at the overall context. I want to see what’s the size of that candle relative to the earlier candles.
Ideally, the candle that did a false break is much larger than the preceding candle. If that candle is at least 1.5 times the Average True Range, then that’s a valid price rejection and I would take the trade.
When I trade stocks, I am more lenient with the size of the false break price rejection candle. Because when I trade stocks, I’m usually focusing on stocks in a very strong uptrend.
You can see that for my recent trade on KIRK, the price rejection candle wasn’t as large as previous candles:
But if I trade FX or commodities, I want the price rejection to be obvious.
Look at the huge wick that has formed in USDCNH, this is a strong price rejection candle I look for in the FX market.
In essence, look at the range of the price rejection candle relative to the range of the earlier candles.
I learnt that Wedge price pattern has an opposite price breakout direction compared to a price buildup. For example, an ascending triangle buildup has a high probability of price upward breakout. But, a rising wedge pattern, it has a high probability of price downward breakdown. Both of them look like similar price patterns. May I know how do I differentiate them so I can trade in the correct direction?
For the ascending triangle, you always have higher lows forming into a horizontal area of resistance.
For a rising wedge, you don’t have a horizontal resistance level. Yes, there are higher lows, but the higher highs are getting gentler instead. You will see 2 diagonal lines on the wedge pattern.
Yes according to the textbooks, a rising wedge pattern is bearish, but I can’t agree with them. Because if you think about it, a rising wedge is in an uptrend. Even if the price breaks down from the wedge, it doesn’t mean that the entire uptrend is invalidated. It could breakdown from the wedge as a steeper pullback in the uptrend and then continue up higher.
I don’t trade rising wedge because there’s just not relevant price structure I can use to trade that. I totally ignore it as a chart pattern.
What are your favorite candlestick patterns for entries and exits?
To be honest, I don’t have any favorite candlestick patterns, but what I find myself trading often are the false break setups. I like to see strong price rejection, the longer the wick, the better. I like to see the size of it relative to the preceding candles. The larger the range, the better.
I don’t focus that much on a pattern because sometimes it can print on the chart in those forms, but sometimes it could appear in a form that has no name to it.
For this bullish price rejection pattern, I won’t call it a bullish engulfing, neither is it a hammer, but it’s still a bullish price rejection that rejected the lows and closed back bullishly.
What is the best way to use price action to decide when to enter a trade in a trend following strategy?
There are a few ways.
Setup #1: Let’s say the market is in an uptrend, then you can also look to buy when it forms a false break near the previous swing low. It’s a setup I trade pretty often to get on board an existing trend.
Setup #2: If the market is in a strong uptrend, respecting the 20-period MA, then I’ll look to buy the breakout of the previous swing high.
How do you adjust/adapt to the price when it’s almost hitting your take profit level, especially when it’s like 0.5 to 2 pips away before moving in the opposite direction?
Let me share with you a recent trade that I took on AUDCAD on the 8-hour timeframe.
You can see on the right side that there’s a false break setup at an area of support, and the trend is upwards. So I went long on the next candle open with stop loss 1 ATR below the lows of the false break candle.
The way I set my first take profit target was that I referenced this swing high over here:
But I do know that before the price hits that level, it could face trouble breaking out above these highs at 0.985:
So although I set my first target at 0.99, I am also watching the 0.985 level. If it shows signs of difficulty breaking out of 0.985, I will just take my profits at 0.985 instead.
You can see that this market eventually went in my favour but didn’t hit my target and then went against me but didn’t hit my stop loss.
When it hit the 0.985 level, I took some of my positions off since it’s showing weakness at that level.
I have my profit target and stop loss levels in place, but I would be on a lookout for levels which could pose as obstacles for the price to hit my target levels. If there’s difficulty breaking through those obstacles, then I would take some profits off first.
That’s how I pretty much adapt to how the market evolves.
Just started using Thinkorswim to scan the market. Hope you can show us some examples of using the filter rules to identify market’s that are currently in a retracement to get a swing setup.
When I trade stocks, I recommend you to just rank those stocks according to their 50-week rate of change. Rank from the highest to the lowest, chances are, those stocks are in a nice strong or healthy trend. Add them to your watchlist and look for potential setups.
You can also head to Finviz and use these filters and sort them by Perf Year highest to lowest:
Hi Rayner, seeing that there are multiple forex pairs out there, is there a way to screen them and to know which pair is potentially reaching an area of value or do you look at them manually?
I look at them manually, for stocks and also for FX.
I will create a watchlist and then highlight a few better candidates with potential setups that I will pay more attention to. I do these on the weekends manually.
How to find low volatility stocks? I am using Thinkorswim. This is to find breakout stocks. I am looking for buildup, how to find buildup stocks?
One possibility is that on Thinkorswim, you can use an ATR filter that only looks for stocks with ATR value below a certain value, like less than 1 or less than 0.7 over the past 5 or 10 days.
If that’s the case, then that would signal that there’s low volatility before the breakout.
For any trade, it is suggested in UPAT to consider 2 timeframes, one higher and other where we will take trade i.e. lower timeframe. What is the preferred lower and higher timeframe in the case of intraday trading? The trading hour for equity in India is 9:15 am to 3:30 pm (i.e. around 6 hrs 45 mins only). Should it be 15-min and 1-hour timeframes combination or 1-hour and daily timeframes combination?
As an equity intraday trader, the 5-min & 15-min or the 1-hour timeframes is a popular combination. Alternatively, you can consider the 5-min& 30-min timeframes combination as well.
Can you explain what is the purpose of higher timeframe (weekly) if we are taking trade along with stop loss and exits in the daily timeframe?
The purpose of the higher timeframe is to see what’s the big picture like. As much as possible, we want to align the trade with the higher timeframe trend.
For example, if the daily timeframe is in an uptrend, but the weekly timeframe could be in a ranging market or a downtrend.
You want to make sure that you’re not trading against the higher timeframe trend.
Hey Rayner! Been watching some of your weekly trades for a while now. (1) For trend continuation trades, assuming going long, I realised that sometimes you would buy if it breaks the absolute swing high. (2) On the other hand, sometimes you would buy if price retests support and you would exit partially at the swing high. I’m just wondering what’s the thought process between the two.
On the (1) part, that would be true if the market is in a strong uptrend and the price is consistently above the 20MA and I would consider buying the breakout of the swing high.
For (2), that’s true if there’s a valid false break set up at support.
What are the most suitable strategies, timeframes, methods of analysis, indicators and procedures that should be followed by a totally new Forex trader?
There’s a lot of trading strategies out there and I can’t say what’s the right tool for you. Because I don’t know the personality that you have as a trader. I do not know the goals you have as a trader. Thus I can’t say what’s best for you.
This is something that you got to explore on your own to see what resonates for you. It will take some time, but you will find a certain methodology that aligns with you eventually. Once you have figured that out, then you can dive in deeper to develop a trading strategy or plan around your needs.
How can we identify stocks for positional trading (stocks for 1 month holding period)?
Go with the Finviz method that I’ve shared earlier. Those are strong stocks which are likely to continue trending for a few weeks or months.
How do you know if the stock market is about to go into a recession?
To be honest, I have no idea. What I do is I’ll use a trend filter on the stock market index, for instance, the Russell 3000 which looks at the largest 3000 stocks in the US.
When the Russell 3000 goes below the 100-week moving average, that’s a signal to me that I should remain in cash as the overall stock market isn’t looking bullish.
I will look to buy again when the Russell 3000 crosses back above the 100-week moving average.
For example, during the 2008-2009 financial crisis, I don’t have to endure the deep correction as I have sold my positions and remained in cash when the price closed below the 100-week moving average:
It’s not a way to predict a recession, but rather, it’s a way to protect my downside if the market decides to go against me.
Can you share how you use the screening feature on TradingView?
I don’t use the TradingView screener, I use the one on Finviz (it’s a free tool):
Or you can use the one inside Thinkorswim to shortlist your stocks.
What’s the best market to trade?
If you look at my UPAT, a lot of my examples are on Forex, but if you look at the weekly videos over the last few months, I covered a lot of stock trades as well. You can also apply the concepts to the stock markets as well.
When I trade stocks, I am purely focusing on trending stocks, since there are thousands of stocks out there. There’s no reason for me to trade ranging markets or counter-trend trades when I can easily find stocks in an uptrend.
Compared to FX where you might have 20, 30 pairs, and sometimes you might only 2 or 3 pairs which are trending.
Yes, you can trade both FX and stocks for diversification, it’s fine.
How to decide the stop loss levels and how to calculate risk-profit ratio? Reason: I am struggling in deciding on the stop loss. When I set a stop loss, it mostly hit the stop loss and lose money. When I don’t, it also seems to be losing money or I have to hold for a very long time until it breaks even. I trade mainly gold and currently, I am in this difficult situation.
When I set my stop loss, it’s usually 1 ATR away from the price structure. My suggestion is to go and watch my weekly market analysis, where I hammer in this concept consistently. I share stop loss placements, my profit targets and how I manage my trades.
Check that out and it should help you set better stop losses. If you can’t find it then email firstname.lastname@example.org and we will point you in the right direction.
Is there a way to identify the 1st, 2nd and max profit target levels?
Usually, my first target is before opposing pressure sets in. If I’m long, it’s usually before resistance or swing highs.
I don’t have 2nd target, but for the remaining position that I have, I’ll trail my stop loss to ride the trend for as long as possible without any target level.
There’s no way to get a max profit target level since no one can predict the absolute highs and lows of the markets consistently.
During UPAT remember that for false break setup you like to trail using previous bar high/low. I notice that one of your trade you don't trail this way example the video on 5 Feb 2021 on AUDCAD, I also notice that after the false break setup is followed by 2 bearish candles, would like to ask why you still decided to hold on this trade?
As of now, I don’t trail my candles based on the previous candle highs or lows, because I find that I get stopped out of my trades early even before the trend could continue.
So I tweaked my approach and I have 2 targets. First one is before opposing pressure steps in at resistance or swing highs, and then trail my stop loss for the remaining position.
I do this to give it more room to breathe because I am trading in the direction of the trend. Whereas, if it’s a range market or a counter-trend trade, then I might trail my stop loss using the previous candle highs or lows.
Hi Rayner, I’ve been trading with a small trading account size of about US$5,000. If I only want to risk 1% on each trade, this means that I can only trade stocks that are below $50. Would you say that there are enough opportunities out there which would allow me to trade with a $50 limitation per trade? Some stocks can easily be over $100 and more.
If you only want to lose $50 on a stock, then let’s say you’re trading a $100 stock, then your maximum stop loss is $50, you can buy 1 of that stock.
If for that $100 stock you’re trading, your stop loss is only $10, then this means that you can buy up to 5 stocks so that your max loss is just $50.
The most important is to determine if the size of your stop loss is more than $50 or less than that, not so much on the share price per se. That said, of course, if the stock price is let’s say $2,000, then the size of your stop loss is unlikely to be only $50, then you might want to avoid this stock altogether.
What are your thoughts on position sizing?
It’s very important because, without proper position sizing, it makes it difficult for you to be a consistently profitable trader.
Sometimes when you win, you don’t win a lot because of your poor position sizing.
Or sometimes when you lose, you lose too much because of poor position sizing.
When do you think one should use leverage to grow account size faster?
It depends on the markets that you’re trading. If you’re trading forex, you’ll definitely use leverage in your trades because the volatility in FX is too small to make money without leverage.
Yes in FX you’re using leverage, but you are using it responsibly with proper risk management and position sizing.
For stocks, you may not use leverage and make decent returns because stocks have more volatility.
So, don’t think about growing account size purely based on leverage. Rather, you should consider risking slightly higher per trade at 2% or 3% instead of 0.5% or 1% per trade. Your returns will be amplified but so do your drawdowns.
Hi, Rayner. I'm just about to finish the course. Anyway, when you say high probability trade, what do you mean? What's the probability of a win? What is the percentage?
I don’t have a fixed percentage to provide, but anything above 50%.
It also depends on the number of confluence factors coming together. For example, if you trade an area of support that coincides with your 50-day MA, at the same time, you’re buying at support in a market that statistically tends to find support at a 50-week low.
The more confluence factors there are, the higher the probability of the trade working out.
There’s no fixed percentage to provide especially since there’s no way to backtest these kinds of discretionary setups.
How much volatility or ATR(20) value will be considered as low volatility?
Volatility is subjective. For Bitcoin, it could swing $200, $300 per day. But for currencies, it could just be less than 1%.
To me, what is low volatility is if you look at the 20-period ATR and you look at the weekly timeframe and you notice that the current volatility is at multi-year low, say it’s a 2-year low, then there’s a good chance that the market could be making big moves soon.
I compare the volatility to its multi-year highs or lows in that market.
When forward testing what’s a good enough sample size of trades for the 5-minute timeframe?
I recommend a minimum sample size of 100 trades. But during forward testing, you also want to test across different market conditions.
Because for instance when forward testing the 5-minute timeframe, the market could be in a multi-year trend for a few days or weeks.
So you want to make sure when you forward test, the market is in a range market, low or high volatility environments, etc. That will give you a much more accurate gauge of how your trading strategy will work out in different market conditions.
Note that 100 trades in an uptrend market will not as accurate as taking 50 trades over a few different market conditions.
Can I use the currency strength meter for the 5-minute timeframe?
Yes, you can, and you can focus on the currency strength meter of the currencies over the past 3 to 5 days, which will be more relevant to someone trading on the 5-min timeframe.
How can I identify stocks for Intraday trading?
I’m not a stock intraday trader, so if I were to give you any trader, it’s not going to be based on my experience. I don’t think it’s justified for me to give you an answer since I have no experience in that.
I really appreciate the way you teach UPAT, it is very helpful. Can you also suggest someone like you who can teach us options trading in Indian context similar to UPAT?
Unfortunately, I’m not aware of anyone who trades options in the Indian market and can teach in the same manner.
Hey Rayner, as a profitable trader with little to no capital would you say executing your trades through eToro or Zulutrade is a good way to make extra money? If so, how much could one earn considering the platform's fees?
To be honest, I’m not the best person to ask since I’ve not used eToro or Zulutrade.
I am interested to invest in newly listed companies (or new companies), what is the best way to analyze a newly listed stock to avoid having high risks?
Based on my understanding, a newly listed company, you’re probably referring to Initial Public Offerings (IPOs), when it trades initially, the chart is pretty much blank. There’s not historical price action that you can refer to.
It’s not possible to look at the charts, because the charts don’t exist before the IPOs. Technical analysis for IPOs is practically useless since there are no charts that you can refer to.
When the market is on an uptrend then decides to retrace before continuing, how do I know at what particular pivot it will choose to bounce up from? Because to me when I draw my lines I try to get as many previous resistance & support points but they both look like good spots which it can bounce up from but the market always proves me wrong. I don’t want to have a super-wide stop loss to remedy the problem. I would like to learn more precise entries (not perfect entry points) or maybe I am just wishing too much.
I will pick the level which has more confluence factors. If there are 2 support areas you are looking at.
But let’s say one of them has the confluence of the 50MA which the market has respected the last 3 times. I’ll pay more attention to that support that has the confluence compared to the support which is just a standalone without confluence.
Also, don’t trade blindly off support. I look for bullish price rejection in the form of a hammer, to get my “confirmation”.
When drawing a trend line, where should the line start from? Should it start from the lowest point of a wedge shape? Should the line be touching on the wick or the candle body? Can you provide an example?
You can learn more on my YouTube video over here: https://www.youtube.com/watch?v=BONTuuxhujk
If there’s a clean move into support or resistance and the price don’t take off the previous high and it makes a strong rejection without taking out the previous high can we take a trade or not?
You have to journal down your trades to see if this works for you or not.
But for me, I like to see the highs or lows being taken out or rejected before entering the trade.
In the UPAT, you mostly show examples on the 4-hour and daily timeframe, how can we take those concepts and apply them to the 1-hour or 15-minute timeframe?
You can use the same concepts on the lower timeframes, the way you draw support resistance, the way you trade breakouts, entering based on entry triggers like hammer etc.
Let’s say you are trading the 1-hour and the 4-hour, then the market reaches a level of resistance with a clean move on your 1-hour but it doesn’t break. But when you go on a lower timeframe like the 15-minute, you see that it is in consolidation near the highs. What can I do or what is your view on this trade?
There’s nothing to trade here because the price is at resistance, there is no bearish price rejection for me to go short.
Since it’s consolidating, it could breakout afterwards. I would do nothing and wait for bearish price rejection before I take the trade.
I won’t go down to a lower timeframe to jump the gun on the trade. Because the trading timeframe that I want to trade should be defined ahead of time.
I am currently trading on the 4-hour and daily chart; however, I want to move down to the 1-hour timeframe as I have more time on my hands. Would it still be possible to use my charts on the daily timeframe (support resistance, trendlines, etc.) and apply them to my entries on the 1-hour chart? Or should I bring everything from the daily timeframe and move it to the 4-hour to get a better gauge of the market?
The tricky part is if you’re drawing your support resistance on the daily timeframe, and you’re using 1-hour timeframe to find your entry based on the support resistance area you’ve drawn on your daily timeframe, then it’ll be very big on the 1-hour timeframe.
One way to overcome that is to draw support resistance on the 4-hour timeframe, and that support resistance will not look as huge compared to if you were to see it on the 1-hour timeframe.
How can you tell a trend has changed i.e. from an uptrend to a downtrend?
Sometimes it looks as if a trend has changed - lower lows and lower highs but it returns and breaks resistance going back up.
You can learn more about this over here: https://www.youtube.com/watch?v=R01q--5M4SA
Hi Rayner, I believe you've mentioned using the 200MA as a guide on your trend bias. If the price chart shows signs of a reversal to the upside with a break of structure, however, the price is still below 200MA, should that trade be avoided? Thank you.
For this, the context matters. If the higher timeframe is in an uptrend, then I might consider taking the trade towards the upside.
If EUR/USD has a bullish setup but EUR/AUD has a bearish setup, what will you do?
I will take the trade which has a nicer trend since I’m a trend trader.
If the price on the higher timeframe is above the MA, while the lower timeframe, the price is below the MA, which MA will take precedence to time our entries?
The timeframe that’s the most relevant will be the moving average of your trading timeframe. If you trade off the daily timeframe, then the MA of the daily timeframe is the most relevant to you, not the 5-minute nor the 15-minute.
Always take the cues from your trading timeframe.
Market uptrend: how do u determine the nearest swing high or low as your area of value? There are times that I took the nearest swing low as my area of value but the price went lower to the next swing low as its area of value.
If the market is in an uptrend, the next thing I ask myself is what the type of trend is. If it’s a healthy trend, the price usually respects the 50MA.
Usually, if the price retests the 50MA, it’s near the previous resistance which can act as support. That’s the area of value that I want to trade.
If I know that the price is respecting the 50MA, then if it touches the 20MA, I will not look to buy yet because I know that the 50MA is more relevant for this particular market.
For the USD/SGD, it’s currently at an area of value waiting for a false break setup. However, the price might not form a nice hammer and I might have to set a large stop loss because of that. My question is, should I wait for a nice price rejection?
Yes, I will wait for a confirmation like a hammer or an engulfing pattern near the 1.34 level before entering the trade.
Also, there are so many opportunities out there in the market. There’s no reason to be forcing a trade that you are not comfortable with.
Hey Rayner, when we are referring to buildup, do you typically look at the daily or a lower timeframe? I’m asking because on the lower timeframe, candles appear more frequently and you will have more candles which would make it seem like there’s a buildup whereas in the daily time frame it might take a while for it to be visible.
You have to look at the overall context. I start by finding a range that took about 80 candles or so to form. Then I look for a buildup that’s about 8-10 candles to form in the range.
I don’t blindly trade buildup in the middle of nowhere. It has to be leaning against resistance or leaning against support.
I also use the 20MA to give me some clues. The 20MA has to touch the lows of the buildup before the breakout.
If you want to learn more, you can head over here: https://www.tradingwithrayner.com/breakout-trading-explained/
PSXP (31 Mar 2021, daily), since July, the price is in the range, but there is no buildup, and also 5 Aug 2020 had the strong price rejection. But since 2014 the price hit low, should I take the breakout strategy or pending false breakout pattern (no buildup, chop move)? What is your thinking process?
I believe this is the stock you’re referring to:
Looking at the trend, it’s a downtrend so I would stay out of the market. Because there are so many other stocks out there that are in an uptrend that you can choose from instead.
Why go with a stock that’s in a downtrend? I would rather trade along the path of least resistance and not try to look for buy opportunities in a downtrend.
How often do you screen your stocks and what parameters do you use?
I do this every Sunday, I use Finviz and these are the parameters that I use:
And I’ll look for uptrend stocks. I don’t look at ranging stocks or stocks in a downtrend.
Can show some examples on how to trade stock using the 52-week low (as we know what go lower will go even lower)?
I don’t buy stocks at a 52-week low, it’s kind of a difficult way to trade. It’s much easier buying stocks at a 52-week high.
If you’re looking to short, it’s possible, but I don’t short the stock markets because:
- There may not be sufficient shares available to short.
- When there’s a dead cat bounce or short rally, you can get stopped out of your trades easily.
- In the long run, the stock market is in a long-term uptrend. I don’t want to be against the market.
I’d suggest just look for buying opportunities and hold in cash if there are no such opportunities.
I made a few futures trades with 1 in 4 success and lost money in net. Then switched to Forex to better control position size and had 3 in 8 success and lost money in net but lesser loss than Futures. Does the UPAT strategy work better for one vs the other?
The thing about price action trading is that it’s discretionary. I can’t that it works better for stocks, forex or whatsoever.
Ultimately, price action trading is taking advantage of the imbalance between buyers and sellers in the market.
Another thing to note is, 4 trades in futures and 8 trades in forex markets are very small samples size. You need to trade more and get a larger sample size to extract insights from your trades.
Is it possible to have two trading strategies, one being on the 4-hour & daily, while the other is on the 1-hour & 4-hour?
I don’t recommend it in case you get confused as to which timeframe to stick to for your trading timeframe and higher timeframe.
If you’re new, I suggest that you stick to 2 timeframes, one higher timeframe and one trading timeframe. That’s pretty much it. Don’t try to bring in too many timeframes.
Hi Rayner, is there any stock screener you would recommend for ASX stocks?
I do not know of any free ones for the ASX stocks. I am aware of Finviz, which covers US stocks.
Is there any way in which we can screen and filter stocks in the early stages of a trend as there are many to choose from?
The screener I’m using is for the stock markets, where the stocks are already trending nicely. As you’ve seen in the Pro Traders Edge, the setups and stocks I’ve shared, are already trending higher.
Does UPAT apply to Crypto markets?
Yes, you can apply the concepts and strategies to the crypto market. Especially for crypto markets, technical analysis works pretty well. Probably because it’s a new market and there’s not much fundamentals or centralised information.
How to find out potential stock to trade continuously?
You must ask yourself what’s the market condition that you want to trade in. Once you’ve defined that, then you can use a scanner to filter out the market conditions you want to trade.
A stock with a high P/E ratio, for example, a 72 P/E ratio should we avoid that stock?
I don’t look at the P/E ratio for my trading. But for stocks with high P/E ratios, like Tesla or Amazon, they are likely trending nicely now.
If you were to avoid high P/E ratio stocks, you might miss out on stocks that are trending nicely.
What is the win rate of your trades where you use UPAT? What is the % return on your investment capital per year using UPAT?
I have to be honest. There are a few things to understand. Price action trading is only one of the strategies that I trade. I also trade several systems.
When I trade using price action, I typically risk less than 1% of my account and I trade on the 8-hour and daily timeframe. So the frequency of trades wouldn’t be as high as day traders. For this, I trade the Forex and commodities markets.
But with these in mind, my annual return is around 15%-20%.
Win-rate here is subjective because it depends on how many % you’re risking, the type of exits you’re using be it trend following or swing trading.
Please I can I have the maximum drawdown of our strategies
This is not possible to tell, because there’s an element of discretion to price action trading, and drawdown is a function of a few things: the market that you’re trading, the percentage you’re risking, the timeframe you’re trading.
It’s not possible to tell you your maximum drawdown of the strategies when there so many variables that are subjective to individual traders.
If you want to have a fixed number for your drawdown, then that is possible through systematic trading.
Can you be growing your income by doing like a fixed target profit at the nearest swing low and riding the remaining one?
In trading, there will always be a period of losing streak. If you’re trading on the higher timeframe, it’s very difficult to be making money every week or every month because the number of opportunities you get on a higher timeframe is less than that on the lower timeframe.
The fixed profit target affects the consistency of your income, but what also matters is your frequency of trades and timeframe. You need to have a larger number of trades over a month for the law of large numbers to work in your favour, to have a consistent income.
If you’re trading on the daily timeframe, it’s unlikely that you’ll be taking on 100 trades per month.
This is why the day traders and prop traders are on the lower timeframe because there are more trading opportunities and they can let the law of large numbers work out in a short period.
As a day trader should u have a list of market u would be looking at for the day or you should just look at all the market?
To clarify, I’m not a day trader, I’m a swing trader and position trader.
How can I implement fundamental inside my trading cause I’m trading the 15-minute timeframe?
I don’t use fundamentals in my trading, I use the higher timeframe and so the stop losses are usually wide enough to accommodate the price swings during news release.
If you trade off the lower timeframe, you should look out for the news or events on Forex Factory that’s flagged as red. You might want to exit your position before the news release so that you don’t get stopped out of your trade due to a price spike.
Having a fixed target of pips every week or every month is that a good mindset or not?
I don’t think that’s good because the market will do what it wants to do.
Trading is all about probabilities because market conditions change. If you expect certain things from the markets but it doesn’t happen, then you might take actions that are not according to your trading plan, like widening your stop loss, averaging into losses, etc.
That’s why I don’t expect to make a fixed amount of pips or dollar profit each month, I simply follow my trading rule and let my edge play out.
Hi Rayner, with regards to the higher and lower timeframe, you said it should be between a factor of 4 to 6. Would there be any disadvantages if I use the daily chart as my higher timeframe and the 8-hour chart as entry and lower timeframe since it's only a factor of 3?
It’s not an issue. For me, I time my entry on the 8-hour timeframe as well and use the daily chart as my higher timeframe. A factor of 3 is the bare minimum.
Rayner, what do you look for in stocks to create your watchlist? And how do you determine what sectors to invest in?
I look for stocks that are trending higher. It must be in a nice uptrend. I usually look for a false break setup or a pullback towards the 50-day MA, or retest of previous swing low, a retest of support.
That’s the same setup that I trade in stocks over and over again.
I don’t have specific themes or sectors to look at, I simply look at trending stocks and I simply trade them if there’s a valid trading setup, regardless of the sector they’re in.
What do liquidity and range have to do with choosing stocks to trade?
Ideally, you want to be trading stocks that are not penny stocks with low liquidity. Because if liquidity is low, you tend to get slippages where slippages mean if you want to buy a stock at $100, you might end up paying $105 instead when using a market order.
On contrary, you’ll pretty much get filled at the price you see on the screen if you’re trading stocks with sufficient liquidity.
Futures vs Forex, which is better for the UPAT strategy?
You can apply the strategy to both. But if you need to choose, then stick to the Forex market because you can better manage your risk through nano lots. Futures don’t have that benefit.
Though you have micro lots for futures, usually the liquidity on the Forex market is much better than the futures market.
I've done the UPAT course and want to apply it to my investment objective which is: to make money every month from trading using weekly charts. Happy to drill down into daily charts to find a break of structure, etc., but the main thinking will be in the weekly timeframe. I like to think of this as medium-term swing trading. Do you have any advice for setups and developing an approach in this timeframe?
It’s very difficult to trade the weekly timeframe and expect to make money every week or every month because your trading opportunities are very little. You’re not going to get hundreds of trading opportunities on the weekly timeframe each month.
You have to manage your expectations in that sense. But if you want to make money every month, then you should trade on the lower timeframe to get more opportunities for trading and let the law of large numbers work out in your favour.
My biggest problem is that I sometimes trade too big positions and then I always blow my account. I am trading Indices DAX/NASDAQ in the 1 and 5-minute timeframe. I don’t know how to avoid it. I can trade prudent for weeks and then suddenly I begin the craziness. I read trading phycology books, write in my trading log, meditate etc.
I’m not a trading psychology coach, but I’ve written an article on something similar, you can check out some of my tips that I’ve shared in my blog: https://www.tradingwithrayner.com/trading-psychology-6-practical-tips-to-master-your-mind-and-money/
When you come across a situation when you want to place your stop loss and there are two almost similar market structures, how do you handle that?
I’ll usually wait for the price to come to the best market structure before I enter a trade. If it’s even at the second-best one, I might not even enter the trade.
I want to trade from the best area of value that I’ve identified on my chart.
Also, are there any ways of mitigating foreign exchange risk when trading stocks that are not in my home currency? Thank you.
You can do hedging. Let’s say you have AUD100,000 and you want to trade the US markets. So you’ll need to convert AUD to USD, which you’re technically selling the AUD to buy the USD. This means you’re bullish on USD/AUD.
You can head to the spot currency market to short the USD/AUD to hedge against your above actions.
What is scaling in and scaling out in trading? Can you explain the concept behind it and give practical examples of how it's done?
You can find out more in my YouTube video here: https://www.youtube.com/watch?v=BxCnhpvV6CM
In terms of risk management, you always share on your videos to set the stop loss of at least 1 ATR. Does this 1 ATR include the risk set by the trader, i.e. 1% of the deposit amount?
Usually, this means setting your stop loss 1 ATR below your support, such that if your stop loss gets hit, it shouldn’t cost you more than 1% of your capital.
You can find out more over here: https://www.tradingwithrayner.com/atr-indicator/
Which stop loss to use if let's say I'm trading from a 1-hour chart in combination with a lower timeframe analysis of 10-minutes? Is it the 1-hour or 10-minutes?
It depends. If you’re entering on the 10-minutes timeframe while your 1-hour chart is the higher timeframe, then you can set your stops based on the 10-minute timeframe.
I'm trading in the Forex markets with 1-hour and 4-hour as my higher timeframes and 15-minutes as my lower timeframe, and I find it difficult to place my take profit (TP) and stop loss (SL) areas. Most of the time the price doesn't reach my TP area by a few pips and then reverses back to a much higher/lower price and I get stopped out. Which timeframe should I base my TP and SL areas, and how can I know if my TP area is too far away and the market is starting to reverse?
When you set your stop loss and profit targets, ideally you want to set them at your trading timeframe. If you’re entering on the 1-hour timeframe, then your stop loss and target should be set based on the 1-hour timeframe.
You can refer to the UPAT course’s module 5 on Risk and Trade Management to learn more.
After watching videos, in the last 1 month, I made money only on 4 out of 15 trades. Net I lost money so far. I am not risking more than 1% of my capital. How long or how many trades usually it takes to start making an overall profit? Do you normally see a trading performance increase in the first few months?
15 trades are a small sample size and I don’t know if the 15 trades are of the same trading setup nor the markets that you’re trading. There’s no way to make a good conclusion based on these statistics you’ve shared.
This is where your trading journal would come into play, so you can track your performance over time.
If you’re not comfortable losing money while experimenting with what works for you, you can reduce your position size or move to the demo account to collect a larger sample size of trades. Once you’ve traded enough of a particular trading setup, then you can take it to live.
Otherwise, 15 trades are too hard to tell. And only a trading journal can help you. After recording your trades in your trading journal but you’re unable to tell how to make sense of it, you can always email John and he will help you review your journal.
Without calculating the profit factor, how can we know that stocks are mean-reverting?
I have done numerous backtests on the US stock markets and I’ve found out that whenever there’s a pullback or decline in stocks, they tend to end the pullback only to continue higher.
That’s what we mean by mean-reverting because the pullbacks are short-lived, and the uptrend continues.
That’s also kind of the entire basis of the Pullback Stock Trading System. It’s my book that teaches you to buy the dips in the stock market because of this mean-reverting nature of stocks.
But don’t assume that this applies to Forex markets.
When you were illustrating your examples in the UPAT you didn’t mention the mean-reverting market or trading of the market in the lower timeframe. I’m a bit confused on how to integrate it into my trading plus I’m mostly trading the 15-minute timeframe, would that backtest help me?
If you know that AUD/CAD tends to reverse at the previous day low from the backtest, you can look for bullish price action to confirm your hypothesis and look for buying opportunities near the previous day low.
How can I know the number of pips per day does a Forex pair moves, so if EUR/USD has reached that number of pips I shouldn’t be expecting more pips from the market?
If a Forex pair has moved more than 2 times its average true range for that day, there’s a good chance that the market is slightly exhausted for the day and is unlikely to breakout to new highs.
You can discover more about this over here: https://www.tradingwithrayner.com/intraday-trading/
How do you incorporate market behaviour into your decision making when making a trade?
I like to look at trends, if the market is trending higher in an uptrend, I simply buy the dips or the breakouts. If I know certain markets have a trending behaviour, I might be more willing to buy the breakout if there’s a valid trading setup.
I would probably place a buy stop order above the previous day high to look to enter the trade.
If I know the market is mean reverting in nature, I could look for buying opportunities at the previous day low, depending on which timeframe exhibit such mean-reverting behaviour.
What are the contact emails of the staffs at TradingwithRayner?
Here you go:
John – email@example.com
Jet – firstname.lastname@example.org
Tochukwu/Jet – email@example.com
Rayner – firstname.lastname@example.org
Hey Rayner, is price action trading what the old pros call "tape reading"? I see references in old trading books to tape reading all the time. Could you explain what that is and if it's the same or similar to price action trading. Thanks.
Price action trading is different from the old tape reading, which doesn’t require charts. I’m not too aware of tape reading, but I would say they are the same.
It’s probably not used as much these days anymore.
I want to be a day trader, what books can you guide me to read to be a good day trader? What are the different steps for me to have a complete view of day trading?
I’m not a day trader, but you can check out this booked called How to Day Trader for a Living by Andrew Aziz.
Which screener can I use for trend following and momentum strategy for stocks to trade? Finviz does not have a stocks list on the Indian exchange.
I do not know of any stock screener for the Indian stock market because I don’t trade Indian stocks.
I want to ask how to use the Finviz to find a suitable breakout with buildup (I choose above 200SMA for "range" + above 20 SMA + Horizontal S/R signal+ average volume over 1M), and there is no "decreased volatility" to let me search for "buildup", I nearly can't find the chart pattern I like.
I haven’t come up with a parameter to help you screen for buildup in the markets easily yet.
Does the UPAT/Resources introduce other scanners? Can I use busystock/ASX stock screener?
If you have other stock screeners then, by all means, go ahead and use them.
But the screener that I’ve shared in the Ultimate Price Action Trader is more geared towards the US stock market which is a market that I trade as well.
I can make a consistent profit for several weeks until I blow up on a single day. Can I ask you or John (the coach) for that? Because maybe it would help to be responsible to someone?
Yes, you can consult your coach, but ultimately you have to be accountable to yourself because you can’t be giving John your trading account. Probably come up with a framework and suggestion and share with him.
Which broker best to use if want to pick up all the weekly alert tips you provide. Am currently with vantage and don’t have T-Bills as an instrument to trade?
You can try CMC Markets, you can pretty much trade most of the Forex and commodities markets there. For stocks, I’m with Interactive Brokers.
What are your thoughts on trading on Order Flow analytics data?
I know what is order flow, but I’ve no idea what is order flow analytics data.
What criteria have to be considered to create a watchlist for day trading in stocks?
I don’t day trade stocks, so I’m not qualified to answer this.
Hi Rayner. Keep up the great work! I finished UPAT last year and enjoy tuning into your recent videos. I just want to ask, what is the future of UPAT? What do you plan to be teaching or offering one year from now? I'm a fan of your work and would like to know what's in store for us UPAT graduates who want to keep developing price action trading skills and knowledge. I know you have an indicators course, but I came from an indicators background, and now prefer price action as my main analysis. Also, there are so many indicators of "magic system" courses out there. Your price action trading style is what makes you unique, so keen to get more of that mate!
All that I use for my price action trading is already in my UPAT course. I didn’t hold anything back at all.
The latest addition we had was the market behaviour secrets where I share with you the statistical data in the market and how to trade with that knowledge in mind.
The future for it is whenever I come across something useful from a price action trading perspective and I find that it can help traders, I will add it into the UPAT.
But as of now, I don’t have any tools or techniques that I want to share that I haven’t already added to the UPAT.
(I don’t have any indicators course, so you might be referring to someone else. I only have the Ultimate Price Action Trader course and the Ultimate Systems Trader course. Maybe you are referring to UST. For UST, it’s not the indicators that give the systems the edge, but rather, it’s the concepts that give the systems the edge.)
Is volume based on the amount that big market makers are buying and should it be an indicator to us that we should buying when the volume is high?
To be honest, I don’t look at volume in my trading, so my comments here are limited.
Is it possible to scalp the market by just reading/understanding price action?
I’m not a scalper, but I do know of traders who scalp the markets simply by reading the price action of the markets.
How can I do backtesting of stocks listed on the Indian exchange (Nifty)? Which software? Do I need to know the programming language? If yes which language is required and how to learn that?
I have no idea since I don’t trade Indian stocks. I don’t have any input for that.
Can I rely purely on UPAT techniques? Or should I add indicators? Thanks.
I don’t condemn indicators. In my price action trading, I use moving average, I use ATR to manage my price action trading approach. There’s nothing against indicators.
But if you want to use indicators, you must know what it is for. Don’t use for the sake of using without knowing the purpose.
I use the moving average to identify the trend; I use the ATR indicator to define the buffer I should have for my stop loss.
How to hedge long term portfolios of stocks?
You can short the futures market, or you can use options. I do none of that, so this is something that you need to research further on.
I am facing a problem in screening the stocks. Can you please share the rules to be used for screening the stocks? I will look for trade setups discussed in the UPAT (false breakout, counter-trend, breakout, trend continuation) of listed stocks only.
My bread and butter setup that I look for is the false break setup, which is easy to use Finviz to screen.
For those of you who are not familiar, these are the settings I use on Finviz (technical settings):
At the top left, I’m looking for stocks that have increased at least 200% a year. This tells me that the stock is likely to be in an uptrend, and I want to focus on buying these stocks which are in an uptrend.
If the market has been really strong, I might increase that to 300%. You can play around to see if you want 200% or 300%.
Next, I look for stocks that are 5% or more below the 52-week high. This means that they’re likely in a pullback right now.
These are the settings I use for Finviz (descriptive settings):
At the top left, I’m looking at companies that are above $300 million in market cap. Volume is at least 1 million so I’ve no problem entering and exiting my positions.
You can see that the stocks are ranked according to their “Perf Year”, which is the performance for the year.
Next, I go through all these tickers one by one and see which one of them has the setups that I had taught in the UPAT.
TradingView’s screener is not as comprehensive as this, so we’re not able to use such a screener on TradingView directly.
Can you please explain to me what is ROC?
The rate of change measures the percentage of change of a stock over a period. If you use a 50-week ROC, then that measures how many per cent did the stock rise or fall over the last 50 weeks.
Do you have signals, planning to have, or would you recommend anyone?
I don’t have any signals per se, but the closest I have would be the Pro Trader’s Edge’s trade alerts where I send out potential trading setups that I’m looking at ahead of time.
Would it be useful for me to learn how to read level two data effectively for when I'm buying breakouts or would it just add confusion? Thank you.
I find that level-two data is more relevant to day traders and scalpers. If you’re a longer-term trader trading on the daily timeframe, then it’s not necessary for you.
What is trading short, and what advantage is it and do you need a margin account in most cases for this?
Basically, trading short is the opposite of trading long. When you short, you’ll make money when the price goes down. The advantage of shorting is that even in a bear market, you’ll make money.
Hi Rayner, are there any specific patterns that are particularly misleading? For example, in my own experience, I've seen a lot of descending triangles (lower highs into support), break out on the upside. But you have a broader experience than me so keen to get your comments. Thanks.
For me, the descending triangle is a sign of weakness and I expect the price to head down lower. Depending on where you get your source of information from, some people say that descending triangle is a sign of strength as it could breakout to form higher highs.
A lot of patterns are not misleading per se, but they are used in the wrong context. If someone talks about head and shoulders pattern in an uptrend, and they look to go short once the price breaks below the neckline, then that’s not something I’ll readily agree with.
Because you have to look at the context of the market and determine the trend. If the trend has persisted for the last 300 candles or so, while the head and shoulders pattern has only formed for 30 candles or so, then what are the odds that this head and shoulders pattern will reverse the entire uptrend?
To me, chances are low that the head and shoulders pattern can negate the entire uptrend.
But let’s say the uptrend is about 100 candles, while the head and shoulders pattern is 150 candles, then you can see that the head and shoulders pattern is more significant now as it takes a longer time to form.
Context matters, and you shouldn’t be using the candlestick patterns blindly.
Rule-based discretionary trader vs systematic trader, who has the higher potential to produce higher expectancy trading result? Are the best traders discretionary or systematic?
From my experience, I’ve seen discretionary traders have a high expectancy relative to systematic traders. But that doesn’t mean discretionary trading is better than systematic trading.
If you look at the richest traders in the world, they’re mostly systematic in nature.
And also, the word ‘best’ here is subjective, because do you define ‘best’ as making the most money?
Discretionary traders have do have a higher expectancy of trading results than systematic traders. But in the long run, systematic traders are the ones who make the most money.
Based on your experiences, what is the accuracy or expectancy of a trading strategy using the false break setup? You may reference your timeframe.
For me, it’s about 60-65%. But bear in mind, I trade the stock markets as well, and the stock markets have been trending upwards over the last few years and that probably skewed my results towards the upside.
For stocks, it’ll mainly be the daily timeframe. For FX and commodities markets, it’s usually the 4-hour, 8-hour and daily timeframe.
Another thing to note is, 65% is achieved from taking half my profits off before the swing high or swing low. I will hold the remaining half of my position to ride the trend.
Among the following: trade setup, entry, trade management and exit. Which is the most important? And why?
It depends. If you’re a trend follower, what’s more important is your trailing stop loss and exits, and the number of markets that you’re trading. Because the more markets you trade and if you use a trailing stop loss, it will increase the odds of you capturing a trend.
If you’re a trend follower, whether you trade breakouts of the 50-day high or 60-day high, those are not as important trading more markets and setting a trailing stop loss.
On the other hand, if you’re a mean reversion trader, if you want to buy the pullback and sell the rally, what’s important is your entry. Because if your entry is wrong and you time your pullback poorly, you’ll encounter many losses because your stop loss is usually not as wide as a trend follower.
It depends on your trading strategies.
Some argued that random entry would work with the stock market if you focus on exit management. Do you agree?
Yes, it could work if you have a trend filter and you are selecting the right stocks like the strongest stocks in the stock market. However, if you’re randomly buying stocks including those in a downtrend, then I would say that random entry wouldn’t work.
Yes, the entry can be random, but you can see that other conditions need to be met before I go with the random entry.
How long did you take to become a profitable trader?
It took me about 4+ years to be profitable, it took me a lot longer like 8-10 years to be consistently profitable.
Consistently profitable took a while as it took me time to grow the account size.
What would be your advice to traders, who are applying trading strategy with an edge in the market, right psychology and position sizing but showing below average results? How to improve for such traders? E.g. Reducing their mistakes.
My advice is that if you know that you’re trading a strategy with an edge, but your results are still not good, then reduce the position size first or reduce your risk per trade.
You might have an edge, but if you’re risking an amount of money that you’re not comfortable with, then you’ll tend to doubt yourself because the money on the line is too great for you to handle.
My suggestion is to decrease the position size or lower your risk per trade from 1% to 0.5% per trade. 1% is a good guideline but it doesn’t take into consideration the size of your account.
If let’s say your entire net worth is $100,000 yet you have all of that in your trading account and you’re risking 1% per trade, then you’re technically risking 1% relative to your net worth, and that’s a lot.
Bring that size down to something that you’re comfortable with and let your edge play out. Once you see your trading strategy start making money for you in the long run, then you’ll have the conviction to scale up the size of your trading account.
In your courses, you teach about the MAEE formula. Recently I've discovered on my own about the Volume Profile. Would you consider using the Point of Control as a possible definition of "Area of value"? If so, can you elaborate, if not why?
I’m not an expert volume profile trader, but from my understanding, the point of control is the area on the chart where the most amount of transaction volume has taken place.
That usually coincides with classical support resistance on the chart. Therefore I usually just look at support resistance and not the point of control.
Also, I find that volume profile matters more to shorter-term traders and day traders. Where they use that tool to help them make trading decisions.
How to overcome painful feeling when reviewing my trades?
I’m guessing it’s painful for you because you’re reviewing the losses on those trades. I don’t have an answer for this because I don’t experience that kind of pain when I review my trades. What I felt was enlightenment as to why I had such losses and I discover patterns that led to these losses.
About the false break strategy, I'm a little lost when you say clean move, if the price approaches an area of value, should it be 2 to 3 bullish or bearish candles? How about if the candles approaching the area of value is 5 or 6 bullish candles, is that still a clean move? Thanks in advance Rayner.
This depends, if you’re looking to go long, then naturally the clean move would be a series of bearish candles coming into support. But if it’s a downtrend then it’s going to be the opposite, where you’ll see a series of bullish candles going into resistance.
A clean move isn’t dependent on the number of the candles but rather, the size of the candles. The larger the bearish candles are when they come into support, the better it is for me. It will allow the market to swing back up in my favour when there’s a false break afterwards.
What I avoid is a series of choppy moves with lower highs into support, I don’t want that. I’d rather look for one big strong move into support to look for a false break at support or reversal at support to go long.
Noted that there are some modules such as bonus modules without video. Will you be uploading them? As I find that video helps in the learning more than the transcript. Or even an audio file works as I can listen on the go to give myself a constant reminder of finding and determining my edge and trading strategy.
The bonus modules are extra content that I’ve written that I find would be useful to the UPAT members, there weren’t videos dedicated to those and hence I call them bonus videos because they’re like additional pieces of content that I’ve written that I think will enhance your learning in the UPAT.
Is it possible to mix UPAT with UST to improve the returns?
Yes, it’s possible but bear in mind that the UPAT and the UST they’re two very different programmes. The UPAT deals with discretionary trading and there’s an element of subjectivity while the UST is completely black and white with clear, concrete rules.
Having both of them can improve your overall results because the UST focuses a lot on the stock markets and ETFs, whereas the UPAT course is used by traders more on the FX markets.
What markets do you think a beginner should start with?
There’s no specific market that a beginner should start with because there’s no such thing as a market that is easier to trade than the other market.
Do you recommend the UPAT to be applied on crypto and any recommendation on how to do so?
I don’t trade cryptocurrencies but I do see the chart of bitcoin from time to time, and you can apply the trading strategies and concepts to cryptos as well.
For cryptos, the timeframe matters a lot. Because on the daily timeframe, it could be in a downtrend, but on the lower timeframe, it could be in an uptrend. Therefore, you want to be trading the timeframe that you are on.
I have finished the UPAT course modules. What should I do next? (e.g. follow your YouTube videos? Read the books recommended in the resource section?)
I suggest that you watch the Pro Traders’ Edge weekly report, and you will see how the concepts and strategies that I’ve taught in the UPAT are being applied in the real world of trading.
Is there any advice in setting the buy limit to enter a trade to get a better entry price? Like how many cents lower from the next candle open or previous candle. Thank you.
I don’t have a fixed rule like 10 cents or 5 cents below. Because different stocks have different volatility. 10 cents might be a lot or too little depending on a stock.
Maybe a better approach is to use the ATR indicator. Maybe you want to use 0.1 ATR above the previous day closing price to place your buy limit order.
Can you share more about trading strategy in more detail when the price goes into a range market in a previous trending move? Since price often consolidates and continues trending move again, so it is difficult to tell when the trend is going to end and which is accumulation or distribution stage. For example, if there is buildup leaning against a range’s top resistance in a downtrend, will you choose to long on the breakout to expect trend reversal or go short to expect the price to continue travel back inside range? Because it seems to me both are valid setup.
When I spot a potential accumulation or distribution stage is look at the number of candles the price takes to form the range.
For example, I was looking at the USD/CNH:
To me, this chart is potentially in an accumulation stage. But we can only confirm if the price can break and close above the 6.58 area of resistance.
I see this as a potential accumulation stage because there are about 131 bars in the range.
Usually, I look for around 80 candles in a range to determine if it’s in an accumulation stage. So to me, the example above is in an accumulation stage.
I would shift my bias from bearish to bullish if the price can break and close above resistance.
Also, if there’s a buildup that could be formed near the 6.58 price level, I would then overlay that with the 20MA. If the price can break out of resistance, I will be looking to buy.
Of course, that didn’t happen for USD/CNH, the market eventually broke down and tested previous support at 6.41 instead.
Looking forward to seeing Nifty and Bank Nifty as examples.
You can see that the market is bullish and is in an uptrend, there’s no reason to be bearish. Next, you can identify the areas of value.
You can see that the 15200 area could potentially be resistance turned support while the 14400 area is likely support.
What is TradingView, and how is it used?
TradingView is basically a charting platform, I’ve done up a tutorial on that so you can check that out here: https://www.youtube.com/watch?v=Vqrkbcdmuqc
After doing a trading journal, if I have losing trades, what do I do with my trades?
When you have a trading journal, it’s very important to be trading the same particular trading setup over again.
Let’s say in your trading journal and you have 50 false break setups, and out of the 50, you have 35 losers. Then you want to ask yourself what’s wrong. The first thing you want to look for is a pattern.
What are some of the similar patterns that make you lose money?
One of the common reasons why many traders lose is because they’re usually trading against the trend.
Secondly, their stop losses are too tight and didn’t set a proper stop loss which is usually away from the price structure, like 1 ATR away from support or resistance.
When you have these two, the losses are usually reduced by quite a bit.
Any recommended brokerage accounts to trade for multiple assets?
To be honest, I use CMC to trade FX, forwards and futures. I use Interactive Brokers to trade stocks. But if you want a brokerage to trade FX, stocks and the rest, maybe Interactive Brokers might allow you to do that. I’m not sure if they offer cryptocurrencies.
If you want a one-stop-shop, you’ll likely have to go with a CFD provider because they usually offer you a variety of products to trade.
Of course, CFD brokers have their pros and cons as well. I’ve written an article about it before, so you can check it out to understand what you’re getting involved with: https://www.tradingwithrayner.com/forex-broker/
For the Finviz screener, can you list the filters we play around to screen for trending stocks, like the minimum we can play around to obtain trending stocks?
I go with small-cap because I find that I get more trading opportunities, but not all traders are comfortable trading the small caps because the gap and volatility could be higher.
I also have another rule where I have at least a million shares traded, so I can, you know, identify those stocks that can quickly get me in and out of stocks.
If you want to be safe, I'll say the mid-cap is safe for most traders because the market cap is at least $2 billion.
A far base to look at is at least 200%
But again, if the market is in a recession in a downtrend, you will get very few stocks that appreciated more than 200%.
If the market is in a downtrend recession, then maybe you might be just holding on to cash and not trading at all.
The Finviz link you just shared now, what type of pattern you're looking for?
For a Finviz link, what I usually would get is stocks that are in an uptrend. A couple of patterns I trade is primarily a false break in an existing uptrend.
That's like 80-85% of my trades.
Sometimes I could also get a trend continuation trades like a bull flag or even a breakout with a build-up but not as often as a false break setup.
Do you close your FX positions before the significant market-moving event, like major rate decisions, inflation data, etc.?
The answer is no. Because when I trade FX, the timeframe, the lowest timeframe that I'm on is usually the four-hour time frame.
I'm mainly on the eight or even the daily timeframe. My stop loss is wide enough to accommodate terrible news.
Most of the time, most of my position positions are trading in the direction of the trend, usually when there's big news coming out, more often than not.
That news helps the market push further in the direction of the trend.
To answer your question, I don't exit positions ahead of time, even before the major news release.
For false break setup, do you always recommend setting a target profit, and why?
When I trade the false break setup, let's say I buy a false break at this area of support.
I will look to at least target the most recent swing high, in this case...
If the price comes up and reaches this swing high...
I will take a half position off. But let's say what if the price doesn't get to this high?
What happens next? This is more like trade management.
If the price rises, almost reaching the swing high but didn't test it, they come down lower:
At this point, how do I shift my stop loss? Or do I continue holding the trade?
I wouldn't shift my stop loss yet, because my stop loss is slightly 1 ATR below this support, probably somewhere here...
But what I will do now is that my first target from this swing high will now be shifted to this swing high over here.
The market can now reverse up higher into the swing high; I will then exit half my position at this swing high.
In a way, I have brought down my first target to the most recent swing high.
The market can now reverse up higher into the swing high; I will then exit half my position at this swing high.
In a way, I have brought down my first target to the most recent swing high.
I have a question about stop-loss using ATR; if the higher timeframe (daily) is trending up, and I go down to the lower timeframe (H4) for entry, which ATR do I refer to?
If you're entering your trade, let's say on a four-hour time frame, then I recommend just using the ATR value from the four-hour timeframe since that's the timeframe you are using to time your entry.
Do you have a discount code for the trading view?
I don't have any discount code for trading view here. From what I know, they don't give any discount code. The only thing I know is that they tend to have a slightly better deal during Black Friday compared to any time of the year.
What broker do you use?
My forex broker is CMC, and my stockbroker is the interactive brokers.
Do you analyze your past trades based on setups?
Yes, I analyze it based on a trading setup, whether it's a false break or trend continuation trade, whether it's a breakout.
Could you recommend a broker and a platform? I'm tempted to go for the trading view as I do my testing and learning there, but I noticed that most brokers work with MT4/MT5, not trading view?
For the broker, I recommend if you trade stocks, you can look at interactive broke and TD Ameritrade.
If you want to look at forex, you can look at CMC.
You mentioned about 80 candles to estimate range or accumulation. Can I use the Donchian channel?
If you use a Donchian channel, it will identify the highs and lows right over the last 80 days. I'm not sure if that will be too relevant because the critical thing we are looking for is for the market to be in a range of at least 80 candles.
Do you prefer to use indicators like RSI and MACD or to keep it clean?
If you look at the UPAT, I use mainly price action, moving average, and average true range; that's pretty much it.
I don't use RSI and MACD.
I have YouTube videos on RSI MACD, but it's just mainly for educational purposes. For people interested in learning more about those indicators and how they work, so that's was my purpose.
In the pro trader's edge, when the market is in an uptrend, how do we know that the uptrend is over to delete them from the watch list?
When I look at a trend, I want to see that the price is above the 100-period moving average.
If it breaks and closes below the 100- period moving average, probably that's not a trend I want to be in because they are likely to be other more beautiful trends to trade.
I would likely remove the stock from my watchlist.
This is a general guideline that you can use to figure out the trend.
You have a $10,000 account, and you risk 1% on each trade. So that's about $100 on each trade. Do you adjust when the account has grown decently? Or do you change every time you make a profit loss?
To make my life easier. I don't adjust it after every trade. I only adjust it when I have made a decent amount or when adding funds. If I have $10,000, I will change it when my account gets to $15,000.
Interactive brokers are upon opening a position; how do I see the open positions to check the P&L?
This is a very technical question, and usually, I don't answer questions on brokerage because the broker is the one that can help you best.
How do I improve the quality of trade selection? I find that I always choose the wrong trade and loss quite a lot. What should I focus on when I do self-study?
My suggestion is to trade in the direction of the trend and trade from an area of value. You wait for a good entry trigger like the hammer or bullish engulfing pattern.
Have a reasonable stop loss, and your stop loss should Ideally go a distance below your area of value.
Set a target just before the most recent swing high. This should improve the quality of your trade once you are trading from an area of value and in the direction of the trend.
Do me a favor; even if the market is ranging and it's at resistance, don't take the trade yet instead, focus on trending markets.
Do a review on the EURJPY daily timeframe.
To me, it's an excellent trending market I would say is a strong uptrend. If I overlay the 20MA, the prices are above the 20MA
Usually, the daily timeframe can challenge your entry for solid trending markets because the pullback is generally relatively shallow.
I want to go down to a lower timeframe like the eight-hour time frame to time my entry.
I would say the area of value on this timeframe maybe around the 132.50 level somewhere here.
You can look for a potential setup around the 132.50 level.
My take right now is the market is bullish. But of course, when I identify the area of value, it doesn't mean that the price comes to this area of value; I will trade it.
Because sometimes, I might get a better trading opportunity on other currency pairs, and I might choose the different currency pairs.
Trading in an area of value is one thing, but when you get multiple trading setups, you always choose to pick the trading setup.
Do you exit current positions before taking on a new position? How many positions are you usually in?
This depends on my stock discretionary stock trading account; I usually have not more than eight positions.
For some systematic strategies like the systematic trend-following could be up to like 40 or 40 plus positions is possible as well also generally depends on the system but primarily for price action trading strategies for discretionary trading strategies. I have no more than eight positions.
How do you handle the up and down in a trade?
The thing about stock markets is that the market could get up higher and lower. To me, it's the cost of doing business; if it goes against you and didn't trigger a stop loss, then I will quickly bail out of the trade to prevent further damage.
Is the UPAT course more for forex or individual stocks?
The ultimate price action trader is a course for discretionary traders to apply the concepts on almost any market and any timeframe.
You can apply the concepts in any markets, crypto markets, indices, as long as the markets you are trading have enough liquidity and volume.
You will see many examples in the UPAT course regarding forex to commodities and stocks; that's what Rayner trades when making those videos.
The Ultimate System trader (UST) is a systematic trading course. If you want to use a strategy that's already proven and backtested or has survived a couple of financial crashes, then the UST is for you.
How can you know a reversal or pullback will occur, and when's the correct entry?
It depends on the context. If the market is trending, in an uptrend, I will look for entry usually near an area of value usually at support.
Check out my video here to learn more: https://www.youtube.com/watch?v=R01q--5M4SA&t=6s
How to enter with chart pattern using multiple timeframes?
When I trade chart patterns, it’s never in isolation, it always depends on the context of the markets.
Let’s say price comes into the Daily timeframe’s area of support. Then on the 4-hour timeframe, I will look for a bullish reversal chart pattern in the form of an inverse head and shoulder pattern. If the price builds up at the neckline of the inverse head and shoulder pattern, I will look to buy that breakout.
In essence, the reversal chart pattern on the lower timeframe is leaning against the area of value of the higher timeframe.
Bitcoin (Daily) market belongs to trending behavior or mean-reverting behavior?
I have not done any backtesting on it honestly. But based on my chart observations, I believe it tends to exhibit trending behavior—it bursts out in a single direction for a while, pauses, then moves in one direction.
If investing in Bitcoin, do you suggest which ETF or Fund?
I don’t have any suggestions on any ETF or fund. But if you want to buy Bitcoin, why don’t you buy the direct Bitcoin itself, instead of the ETF or fund, since the ETF would incur expenses and funds have fees to account for as well.
Can Interactive Brokers be linked to the TradingView platform? Do you use Oanda + TradingView / CMC + MT4?
I believe Interactive Brokers can’t be linked to Trading View at this point.
I don’t use any of the combinations you mentioned. I use TradingView simply for my chart and I use CMC simply to execute Forex/Commodities trade. And I use Interactive Brokers for stocks and ETFs.
In your breakout videos, you suggest using the 20MA for the "coil" part (the buildup). In the break of structure video, you specify a close above/below the 50MA. Are these guidelines regardless of timeframe or not?
The short answer is yes. But what’s important is the concept I’m trying to share.
Buildups can form over varying lengths of time and that’s why I came up with using the 20MA to let it touch the low of the buildup as a signal that the market is getting ready to make a move. I’m using the 20MA to help me define the length of the buildup.
Whereas, in the break of structure video, we wait for a close below/above the 50MA as we want to wait for the price to form a mini distribution stage where you can identify the highs and the lows, to trade the break of structure set up.
When using the ATR to set your stop-loss, do you use the ATR from the previous candle?
I use the current ATR value, the most extreme candle on the right.
I am wondering if the stock on your radar is from a previous search. I refer to "CROX," which is in the "Pro Edge" released on August 6th.
If that's the case, for how long do you keep tracking the stock from the time you find it on Finviz?
How do we know it is time to ignore it since we have "lots" of opportunities in the market?
I keep the stocks on my watchlist as long as:
- In terms of relative strength, the stocks are on par with the S&P 500, or stronger.
- If the stocks are trending in a healthy trend, which means there could be opportunities
I usually remove stocks which are:
Weaker relative strength than the S&P 500—let’s say S&P 500 is making new highs while the stock goes lower than the S&P 500
Can we feed TOS the Finviz field and give the same list of stocks? It will be easier to rank the ROC via TOS than Finviz.
They might not give you the same list of stocks if their data are slightly different, but most of the list of strong stocks should be the same.
I have been making losses in the forex market. Do you think the US stock market is a better choice since it is in a bull market now?
Yes, because for the US stock market you only need to trade in one direction, that’s to go long. And the benefit of trading the US stock market is that you can identify strong stocks relative to the S&P 500. That’s something quite straightforward compared to the FX market, but it doesn’t mean you’ll make money easily.
How many confirmations do you use before entering a trade?
The key thing I look for is market structure, if it’s in an uptrend, I will buy, if it’s in a downtrend I will sell.
Secondly area of value, third is the entry trigger.
The fourth thing I look for is market behavior:
- When it comes to stocks, I like to buy stocks that are stronger in relative strength
- When it comes to forex, I like to trade forex which has certain statistical behaviors, like AUD/CAD tends to reverse the previous week’s high or low
- I also look for a low volatility environment, as the price usually breaks out afterwards
A retest of the support resistance one or two times?
Doesn’t matter to me once or twice, I consider the other factors as well before deciding on a trade.
I found that 4-hour and Daily timeframes aren't giving me enough setups to see my edge. What should I do?
For stocks, there are many opportunities out there, so you can simply focus on more stocks while still being on the Daily timeframe.
Do gap downs from poor stock earnings represent a clean move into support?
You can look at it that way, as that means you have strong selling pressure coming into support.
I almost usually never buy when there’s a huge gap into support.
I usually buy into trending stocks. So, if there’s such a gap down, it will usually invalidate the entire trend and I don’t want to be in the trade anymore.
False break - close within 1/4 of high low. Will it be counted if there's a gap down, though?
It depends on how big the gap is, if it’s a 1-2% then yes, I will still see it as a false break. But if it’s a 10-15% or more gap down, I will likely skip the trade.
May I know how to interpret a very bearish candlestick (i.e., long upper wick) on support? Do we ignore the bearish candle since the context is not correct?
If I see a long bearish candlestick, it’s going to look like a shooting star at support. This is a sign of weakness as there’s strong selling pressure at support but don’t short just yet because I don’t want to be shorting at support. Neither do I want to buy just yet because I don’t have a valid entry trigger. So, I will stay out of the trade.
Do you still keep a trade journal after many years of profitable trading? Or are there no new mistakes to spot once we hit that stage?
For discretionary trading, I still keep a journal to keep track. But for systems trading, I don’t because it is automated.
It’s not so much about spotting new mistakes, but rather, identifying patterns in your trades that lead to winners and losers.
I found that from my trading journal, at least from a discretionary trading standpoint, it’s much more profitable to buy stocks when the S&P 500 has made a pullback of 10%. Because when the pullback ends, the bounce on the stock will be greater than the S&P 500.
What is your maximum drawdown (say for 2018 and 2019) based on your account trading UPAT? (Yes, based on your parameters, and it may vary for others.)
My maximum drawdown was about 30% in 2018, I was risking 1.5% on each trade and this was solely for the FX and commodities market. Now, my risk is back to 1%. I don’t just trade FX, I also trade stocks.
For my stocks, the drawdown is nowhere near as steep, because when I trade stocks, I have more opportunities out there and I don’t have to force trades in the currency market, because I know that there’s probably something I could find in the stock market.
That gives me more opportunities to improve my overall trading results.
Do you personally use 20 ATR or 14 ATR on stocks? Does it matter?
It doesn’t matter. If you just pull out your 20 ATR and 14 ATR, you’ll see that the difference is negligible.
If Daily is our main timeframe for stocks and I only trade the open (from 9.30 to 11 am EST), does this mean I will not be able to benefit from lower timeframe (4-hour) analysis?"
If Daily is your main timeframe, then you don’t have to be trading from 9.30 to 11 am every day. It should require very little time to execute your trades on a Daily timeframe.
Is the correct way to use RSI as an oversold/overbought indicator or a sign of strength? i.e. if RSI>80, it will boost my confidence to buy the breakout (if seen as a sign of strength).
If the RSI is consistently above 70 or 80 for example, then it is a strong stock. But I can’t say that it boosts my confidence to buy the breakout because I don’t use RSI myself. I will still want to look for a valid entry trigger before entering.
Usually, when the stock is above RSI 80, I would say that the stock is usually on a parabolic move or in a strong trend above the 10MA.
Do you mind sharing more on price vs. volume divergence? Why is it not used in UPAT?
I don’t use volume in the UPAT because I don’t use volume in my trades. Also, for my other trading courses, none of those look at trading at all, it’s only based on price. It’s because based on my own research’s data, the volume doesn’t help improve the overall trading result.
Do you care about any other form of divergence (e.g. price vs. MACD, price vs. Stochastic), or does price action override these divergences?
No, I don’t care about those.
Could you share how you managed your trades during the COVID crash in March 2020?
For the FX markets back then, I don’t remember there being huge moves in the FX markets back then. But what hit me hard was my stocks, when my stop losses got hit, I went into a drawdown as deep as 30-35% from a system trading standpoint. One of my systems went down close to 40%.
After I got stopped out, the rally happened as quickly as the collapse and I almost wanted to override my rule because I felt uncomfortable entering the trades after getting stopped out. But since I know that was my systematic trading strategy, I just had to pull the trigger and follow the rules.
I was glad I pulled the trigger because that got me out of the drawdown. It was one of the better years for my systematic trading.
Were there clear signs of a crash before it happened? If yes, what was it?
In hindsight, it’s easy to identify these signs of a crash. But I was expecting the price to bounce at the 3,225 price level but it didn’t. It closes very bearishly for 2 days straight and that to me was an earlier sign that something was not quite right.
But I wouldn’t have known for sure that it will crash so low, by more than 30%.
Is it true that high volume at market all-time-high is a bearish sign or time for a reversal?
I don’t have any data to back this up. I wouldn’t rely too much on this, because what’s high can go higher. To me, price is king.
Moderna is a good example:
You can see that the price was at an all-time high, which highest volume for a period. But what happened was that there was a follow-through afterwards and the price exploded up higher.
I won’t pay too much attention to the volume, I will trust the price and if it’s moving higher, then look for buying opportunities, rather than going to short the market when the price is at an all-time high.
Do you bother about the buying vs. selling volume ratio per day?
Is there any broker (especially IBKR or Thinkorswim) that allows us to auto-trail stop using ATR instead of updating the stop loss manually every day?
Based on my limited knowledge, I do not know. I don’t use that function as of now and I still use my trailing stops.
What is the difference between accumulation, buildup, and "price congestion"? See TDOC (daily) from May 14th, 2021, till now.
Let’s say the market is in a downtrend and goes into a range with clear highs and lows. That to me is a potential accumulation stage.
A buildup is a tight consolidation, which is much smaller in range than an accumulation stage.
Using the same chart, how do we know if this is considered a bear flag or it is in accumulation mode, hence has bottomed out and thus time to go long?
Let’s look at TDOC as an example.
Is this a chart I would trade? The answer is no because if you look at the S&P 500, it’s in a very nice uptrend. Meanwhile, TDOC is in a downtrend and has broken the $180 support level, putting it in a declining stage. I wouldn’t want to buy such a weak stock.
There are other opportunities out there and that’s the beauty of stocks because you can be picky with your trades. You don’t have to buy stock in a downtrend because there are other stocks out there in an uptrend.
Are there statistics showing how often stocks retest the resistance turned support after a breakout or is there a higher tendency not to retest in the next two weeks?
I don’t have any statistical data on that. Based on what I know, it’s near impossible to backtest something subjective like support and resistance.
What we can do as close as possible, is to test, if the price breaks out to the 52-week high, then how many times does it retest the 52-week high X no. of days ago.
Are UPAT strategies evergreen? i.e. They should still work 30 years down the road regardless of market conditions?
UPAT strategies are a methodology, where we seek to always define the market condition. I might be biased when I say this, but it will work in the long run as long as we can define the current market condition and find the right strategy to trade it.
So if the market is trending higher, then I want to buy at an area of support and use a few other confluence factors to time my entries.
It should work years down the road. And if the market stops trending, I can trade a strategy suitable for a range market.
How do we know how much headroom there is to go after seeing a three-white soldiers pattern? E.g. CTVA Daily.
Let’s look at CTVA.
Again, I always like to compare stocks with the S&P 500 in terms of relative strength. This stock is still in a long-term uptrend, but it’s not as strong as the S&P 500.
The next major swing point to pay attention to is around the $49.85 level, which is an all-time high that the stock could retest.
These are possible levels that you can reference, in terms of how much more can the stock grow, as these are levels where people might look to take profit as well.
Why do you trade false break at resistance (assume prior uptrend) since countertrend has a much lower probability? Any stats in win rate for with-trend vs. counter-trend trade in stocks?
I don’t usually trade countertrend, but there are usually multiple factors coming together, it’s not just about the retest of the highs.
I almost always trade with the trend unless there are really good reasons to take on counter-trend trades.
In case you’re wondering why I added it into the UPAT lessons, it’s because there are traders who want to trade countertrend and that’s just kind of like a way for them to trade with proper stops so there know where to get out of the trade.
Do you filter the relative strength of stocks purely based on price performance in Finviz, or is there a better method, since stocks that have run up +200% in the past year might not have more headroom to grow?
I filter based on price performance on Finviz because what’s strong is likely to continue in the same direction in a sustained period. It may have gone up by 200% but it can still go up by 1000%. Just look at Tesla, look at Moderna.
I understand you don't do scalping these days, but can we apply the same UPAT principles for scalping?
There are many definitions. Some people scalp using order flows, looking only at bid and offer prices, then the UPAT is not going to be very relevant.
But if you talk about scalping the 5-minute timeframe on the FX markets, then the principles still apply like finding the area of value, identifying market structure. But there are more things you have to pay attention to, like a news release, because that will widen the spread of the currencies and you might get stopped out.
However, there are more things to take note of for scalping which I do not cover in the UPAT as I do not scalp the market.
The principles in UPAT do apply, but you cannot just rely on these principles, you need more tools and techniques at your disposal as the market is moving much faster.
For the entry trigger after price dips to support, is it essential to clear the previous candle HIGH?
To me, I don’t pay attention to that. Instead, I look at the size of the rejection candle, the bigger and stronger it is, the better. Sometimes it may not clear the previous day high especially if it trades down lower and then quickly reverses to close near the middle of the body of the previous candle.
Does a bullish harami have any meaningful signal since, in UPAT, it will simply look like buildup or accumulation?
I don’t pay attention to the harami pattern.
Does the 8-hour or 4-hour timeframe matter for stocks since the market opens for