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The Ultimate Price Action Trader

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  1. Getting Started
    1 Topic
  2. Support & Resistance
    10 Topics
  3. Market Structure
    7 Topics
  4. Candlestick Patterns & Entry Triggers
    12 Topics
  5. Trading Plan and Strategy Development
    10 Topics
  6. Risk and Trade Management
    15 Topics
  7. Understanding Market Behavior with Statistical Analysis
    5 Topics
  8. Becoming The Ultimate Price Action Trader
    12 Topics
  9. Resources & Course Downloads
    1 Topic
  10. Bonuses
    4 Topics
Module 10, Topic 3
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Group Coaching (Recordings)

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Group Coaching Webinar (2021)

February

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:

  1. Trade with the trend
  2. 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:

  1. Capturing a swing
  2. 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 example:

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 support@tradingwithrayner.com 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.

April

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 – coach@tradingwithrayner.com

Jet – jet@tradingwithrayner.com

Tochukwu/Jet – support@tradingwithrayner.com

Rayner – rayner@tradingwithrayner.com

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.

June

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.

August

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?

No.

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 only 6.5 hours daily?

I don’t look at those timeframes when trading stocks. But if you want to look at an 8-hour timeframe while trading stocks, then you might as well just trade the daily timeframe.

Do you set aside a % of your portfolio for undervalued stocks besides trend following and discretionary trading? E.g. BABA stock looks terrible, but it's undervalued. In such cases, will you go long without any stop losses?

The short answer is, no, because I have no fundamental knowledge of these stocks. And it depends on what is the stock undervalued relative to, maybe based on some fundamental ratios.

What I did that cost me $100,000 was buying oil. I didn’t look at the fundamentals as it was more based on sentiments since I felt that the world still needs oil.

I went long around $15 to $20, went to zero, and now it’s pretty much at $7.

Sentiment trading opportunities, I do take part in them. For example, for Bitcoin, I was camping at $13k, but since the price did not get to those levels, I did not get into Bitcoin.

It was more of a sentiments-play, where the price has crashed a lot in a short period, but I don’t think it will stay that low for such a long period. I bought based on the belief that the commodity or that market will continue higher.

But for stocks, if I don’t understand the stock, I won’t buy it if the stock price happens to plunge. For stocks that I understand, let’s say Apple or MacDonald’s, then I might consider buying if the stock plunges by 50% and if I believe that it will still be in business for the next 5-10 years.

In this case, for Alibaba, I have heard of it but I do not know how badly China’s actions will affect these types of Chinese stocks.

Again, since I’m not a fundamentals person, I have doubts about it, I’ll just stay out.

When trading a downward break of structure with buildup, will you hesitate to take the trade if it's at a support point with a distinct bullish pin bar?

If I see there’s a break of structure and then I’m shorting into a bullish hammer on the Daily timeframe, then I would probably skip the trade since I’m selling into support.

What is the difference between trading Spot vs. Futures other than margin size?

For futures, there’s no financing charges but you have such charges for spot.

Why don't you prefer regression trendlines over standard trendlines?

Because regression trendlines are based on math and the trendline could still cut through the price. I go with standard trendlines because I can best fit them in a way for the market to respect the trendline.

In your 2019 July session, you mentioned looking for substantial bearish candles to change the market direction (ES1! on October 10th, 2018). Without hindsight, wouldn't this be considered a clean move into support?

Let’s take a look at that chart.

If there was a bullish rejection, I will be inclined to buy, since the price has come into this area of resistance turned support.

At this point, I’m still bullish on this market, and if I saw this, I’ll think the price has a good chance to retest the all-time highs. But in this case, the market subsequently collapsed down lower and I would have been stopped out at a loss.

If I am already profitable in stocks, does it make sense to trade forex too? What's the advantage other than diversification and 24/7 availability?

You’ll get more opportunities as well. If all the stocks are in a downtrend, you probably can turn to FX during that period as a form of diversification and look for trading opportunities in the FX markets.

As an advanced trader with $500k capital, what's the max position size you will recommend to trade on? Still, 1-2%, or can it increase to 5%? Assuming I can handle the drawdowns.             

I wouldn’t recommend 5% risk. What I’ll recommend is for you to diversify your trading strategies. That will be the best next option available. Because different strategies perform well in different market cycles.

With $500k, I might take $100k to trade mean-reversion in the stock market, another $100k to trade systematic trend following, $100k for discretionary trading, another $100k for momentum trading in the stock market.

This way will give me a shallower drawdown with a much smoother equity curve. That’s what I do and I do recommend that to all traders as well.

Do you suggest trading the Daily or the Weekly timeframe in the forex market if I trade the 4-Hour timeframe?

If you trade the 4-hour timeframe, I do suggest the Daily timeframe as your higher timeframe. Adam Grimes shared this concept of using a factor of 4-6 as your higher timeframe.

If your entry timeframe is the 4-hour timeframe, then if you multiply that by 6, that’s essentially 24 hours which is one day. So your higher timeframe is the Daily timeframe.

You can also multiply by 4, so you’ll get 16 hours. You can use the 16-hour timeframe as your higher timeframe.

I use the MT4 platform at the MacBook; I copied the file.ex4 to the folder [ driver c--> program --> MT4 --> MQL4--> indicator] but cannot load the indicators on the MT4 (I apply a CMC demo account, via MT4 platform connect to CMC broker), is there any solution?

I believe you’re referring to the currency strength meter in the UPAT course. You have to download 2 indicators for that and put that into your “indicators” folder.

To put the currency strength meter in the correct folder:

  • Open your MT4, click on File > Open Data Folder > MQL4 > Indicators

Select the correct profile:

The currency strength indicator will appear on the top left of your charts:

If it’s showing zero for the values, then switch to the Weekly timeframe, since that’s the timeframe we’re getting the data from.

If I trade the 4-hour timeframe in the forex market and enter (Long) with a valid setup (trendline reverse), but the high timeframe chart showed death cross (50 MA below 200 MA), are these trading logically?

If you use the daily timeframe to define your market conditions, then your lower timeframe should align with it.

If your daily timeframe shows a death cross, then you should look for short opportunities in the 4-hour timeframe.

But if the daily timeframe shows a golden cross, then you should look for long opportunities in the lower timeframe.

I would suggest that you use 200MA and not use the 50Ma, because if you use crossovers, this means that you are putting buffers into your trades, which might take you a while to confirm your bias. If you are more conservative, then yes you may like to use crossovers.

About risk management, if the account is $10,000, with 1% risk. For example, I use $2,000 to buy a stock, remaining $8,000, can I use the remaining fund to open a new position? If yes, the 2nd position's risk calculation is $8,000 or $9,900 ($10,000 - $100)?

Your 1% risk is dependent on where your stop loss is. If you were to lose 1% of your capital on a trade, that would be $100. Then based on this $100, you can see how wide your stop loss can be and then buy the appropriate position size based on that.

You can use position size calculators to calculate how much you should spend on your positions based on your capital and risk level.

I would like to understand the false break setup. I know that I need to treat support and resistance as an area but when the price breaks and closes (but inside the area box), can I take it as a false break setup, or should I wait for another candle close to validate it?        

Let’s take Tesla for example.

Let’s say we have the grey area of support and price breaks down but closes back within the grey area, then I will not take it as a false break setup. So I will continue to wait for another bullish candle close above the area of support as a confirmation.

Because the logic of the false break setup is for the price to break below the area of value and then close back above the area of value which indicates price rejection.

I want to confirm: the higher timeframe gives a clear visual of support/resistance etc., but should my entry into a position be done on the lower timeframe?

No, because you can also just trade using one timeframe. You can use two timeframes or one timeframe and be successful as a trader. Go with what you are comfortable with and what has worked for you in the past. 

When using the MA, how many touches are "required" for you to consider as good support resistance?                                                                                                                              

A minimum of two touches for the moving average. If the price touched the moving average once, then I will keep an eye out for the second touch. If you want to be conservative, you can wait for a third touch.

Thank you so much, and I'm so grateful for your teachings! Can one use the support resistance in different timeframes? For instance, when on the daily, do you use the weekly support resistance? If so, can you please explain how that works?

You have to first determine what your entry timeframe is. If your entry timeframe is the 4-hour, then you want to look for support and resistance levels on the Daily timeframe.  However, if your entry timeframe is the 4-hour timeframe, it will not be too relevant to look at support resistance on the Weekly timeframe.

Try to keep it simple, otherwise, you might be overwhelmed with too many support resistance levels.

I miss many trades; any advice on how I can better execute? I pick many setups but do not take these trades as I wait and miss many trades.

If you miss trades, it probably has to do with your:

  • Trading routine
  • Entry trigger

If you’re someone who cannot wait for the candle to close, then just use the market order. You can also use limit orders or stop orders as those orders will help you automatically get into a position.

And if you trade the 1-hour timeframe with a full-time job and without time to check on your charts, then of course you will miss trades.  

Also, no matter how good you are as a trader, there will always be times when you miss a trade. That’s why we try our best to have good trading routines and find entry triggers to reduce this from happening.

How to know when to cut your losses rather than waiting for them to hit your stop loss? Or should we wait for stop loss to invalidate the trade?

Yes, you should wait for the stop loss to invalidate your trade. Because if you manage your trades inconsistently, then you will get inconsistent results.

But instead, what you can do is, after making 20 trades, you can look at your trading journal and look at patterns to improve your results.

For example, 15 out of the 20 trades could have been winners if you had widened your stop loss, then go ahead to make these tweaks. This ensures that you’re not just making tweaks based on one single trade.

If you make a change to your strategies based on one trade, then that’s a recipe for disaster since short term results are random. Whereas basing on more trades will let your edge play out to get more accurate results.

How to know when to take profit and exit trades as there are multiple times where I was in the green till the market did a reversal, and I got stopped out. Is it because of my risk management, or my take profit target is too high?

It’s important to start by determining what’s your trading setup and your trading methodology. Because if you keep hopping from one system or strategy to another, you will get inconsistent results since each of those strategies has different ways to manage risk and to manage the trade.

Also, it depends on whether was this based on 2, 3 trades? If yes, then you should continue trading to let your edge play out while you record your trades in your trading journal. All of us manage our risks differently, and the best way to take reference from would be from your trading journal.

If I use 4-hour and couldn't find an entry but lower it to 2-hour, I could find a bullish engulfing pattern. Should I enter, and what is the difference? Since my support resistance are both drawn on the Daily timeframe.

If the 4-hour timeframe is your trading timeframe but you couldn’t find a valid trading setup nor entry trigger, then don’t enter the trade.

If you go down to an even lower timeframe, it tells me that you might be trying to force a trade there. You don’t want that to happen as it can be a bad trading habit. There are always going to be other trading opportunities out there.

Why do I enter the trade too early and too late? When I enter too early, the price goes against me and hits my stop loss. When the price goes higher, it is too late to enter the trade. How to enter trades correctly?             

If you know your trading setup and you’re a trend continuation trader who trades breakouts. Let’s say you also have a specific entry trigger which is to wait for the candle to close. If you already know your trading plan, then just follow it and keep on executing your trades to let your edge play out.

Once you have collected enough sample size of your trades, then you want to start referring to your trading journal and identify the patterns where the price goes against you and hit your stop loss.

How do we know when a clean move down into support with an entry trigger will not continue moving down? Please see FDX, Daily, 3ʳᵈ August on 200SMA.

Let’s look at FDX’s chart.

We don’t know for sure if it’s going to continue moving down or not, that’s why we always need a stop loss in place.

Also, that is why you’ll need a valid entry trigger. If there’s a bullish candle that closes above the $275.41 support level, then that could be a valid entry trigger to go long. It doesn’t mean that it will go up, but it just means that it validates our trading idea.

Will a better stop loss point be at the last swing low, i.e., $273.95 on 26ᵗʰ April, or 1 ATR below 200SMA at $273.75?               

I can’t answer that because I don’t know which timeframe you are at.

"On trendlines, is it ok for the lines to cut across patterns if you find a better fit than another that doesn't? See KIRK 1Y1D chart, connecting August 31st, 2020 to May 12th, 2021 Swing low. The candles in Nov 2020 are "ignored."

Screenshot #1 here: https://i.imgur.com/XKOygFL.png

Alternative #2 trendline pattern here: https://i.imgur.com/jd4D822.png

Will the alternative be better, and will you short it on the break of trendline?    

The #1 is a much better and cleaner trendline because it has the greatest number of touches and takes into account the break of structure, with lower lows, which means it is a transition into a downtrend.

Now you can see that the price is in a downtrend, so if you don’t want to be short, you can wait for the price to break above the $21 level before going long.

Fibonacci extension vs. projected trendlines - which one holds more weight when we decide on our profit target? (RR ratio aside)

I don’t know because I don’t use both to determine profit targets. Those are 2 different tools, to begin with.

If you are looking to trail your stop loss, then it makes sense to use a trendline to trail your stop loss.

But if you’re using the Fibonacci extension and you want a fixed profit target. You can take profit on the 1.618 level of the Fibonacci levels.

However, these are 2 different tools used in two different contexts so we can’t compare which is better than which. 

Is false break limited to just one candle above resistance, and the reversal candle must come next? At which point (how many candles) do we say the false break has become a real breakout?

 There are also fewer clear-cut cases of false break setups.

In this case, the price closed below the area of support and eventually closed above the area of support after 5 candles. So, I will also consider this as a valid false break setup.

That’s the essence of a false break setup, we’re looking at the rejection of prices, back above the area of value.

Will you give a 52-week low (only one touch) equal weight as a form of support compared to a regular horizontal line touching multiple points?

It depends on the trend. If you’re looking at support with the longer-term uptrend, then yes it can hold more weight than the 52-week low.

But if you’re looking at the 52-week low in an existing downtrend, then the chances of that going lower is probably high.

I suggest looking at the overall trend first and determine what your trading setup is. If you’re a swing trader then the 52-week might be a good point for you to enter if you have a valid entry trigger.                                  

For China Education stocks like TAL, do you think it has entered accumulation mode and thus a good time to get in (since it's trading way below intrinsic value now)?

Let’s have a look at TAL.

It’s approaching zero but it doesn’t look like an accumulation stage to me, it does look like a declining stage to me. 

I would say no, this is not a good time to enter long. But if you want to go short in expectation of the stock going to zero then that is a likely trade to take on.

If I want to go long, I will wait for a bullish break of structure before doing so.

When you say tighter buildup is better, do you mean the smaller candles, the better they are in the buildup phase? 

Yes, the smaller the candles, the better.

Is the ATR exhaustion principle only valid for day trading? If not, could you show us how to apply it in a Daily/Weekly timeframe?

I’m not too sure what you mean by the ATR exhaustion principle, so I’ll have to skip this one.

Is it true that swing/position trading usually generates more profit in the long term vs. day trading?

It depends. If you are day trading with a million-dollar account, I think you will be scared to day trade that account. But if you’re day trading on a $1,000 account, then you will be more comfortable.

On the other hand, if you’re swing trading a million-dollar account, you will be more comfortable because you’re managing a huge amount of money and you want returns to be more stable and your wealth to be protected, then it might be better for you.

In terms of returns, day trading could be more profitable, but the question is, is it for you? Will you be comfortable day trading, or do you have the right skillsets to trade the lower timeframe?

Just because day trading is more profitable doesn’t mean it’s more suitable for you.  

If both trendlines and MA lines are equally respected, which level do you give more weight to when planning your entry?

I will prioritize the trendline over the moving average. Because in the price action context, I only use indicators if I’m having a hard time determining the market conditions.

For example, if you can’t read the price action very well, then you can use tools like indicators to help you get more objective information about the charts.

But if you’re more of a systematic trader and you want to use moving average to define your entries objectively, then you will want to prioritize using a moving average over trendlines.

When developing a new strategy for yourself, how do you first know if the system works if it takes at least 30 trades to let the probability play out? Backtesting can only show the past but not the future.

If you are a systematic trader, then you want to test it out in different market conditions. You want your system to survive multiple bearish markets, bullish markets, trending or even ranging markets. If your system comes up net positive in these markets, then it’s a good system.

But for discretionary traders, it could be a little different. I started price action trading without backtests and went straight into trading directly. If you want to spot patterns in trading opportunities that help you make money, then you’ll need to backtest to get more clarity on that.

While backtesting only shows past results and doesn’t guarantee the future, but a strategy that works in the past is more likely to work in the future. If your trading strategy doesn’t even work in the past, then it’s likely not to work in the future as well.

Backtesting is to ensure that your trading strategy can survive different market conditions and that it is robust.

May I confirm that the larger the ranging pattern, the less likely the support resistance level will break?

The more times a level is tested, the more likely it is to break, not because of the larger range.

Is it reasonable to expect to make $10k/month on a $200k portfolio for 5-day swing trading?

I would suggest that you do not treat trading like this because trading is not a job where you can make consistent profits every month.

The reality is that trading is a business. While you may make $10k this month, you may be losing $5k next month as well, the subsequent month you may break even. No matter how good your trading strategy is, you will have losing streaks.

If you expect something consistent from the markets every month, you may end up being disappointed. You should not focus on how much you can earn, but rather focus on how you can get the process right to improve your results.                            

At which point do we decide that the false break setup has turned into a break of structure setup?

A false break has to do with entry triggers and happens around the area of value, like the area of support.

Whereas the break of structure has to do more with the market structure and market conditions.

I want to differentiate between a "clean move down" and a bearish candle with solid conviction. If it's a substantial bearish candle relative to others, will it automatically be considered a clean move down?

A bearish candle is a clean move down on the lower timeframe. Technically, they are the same, just on a different timeframe.                         

If using a long-term weekly line chart to draw trendlines, should I base on CLOSE or LOW?"

The answer is neither. You want to draw your trendlines based on the greatest number of touches. Also, you should be looking at areas, not just lines.

 You can use the Parallel Channels tool on Trading View to identify trendline as an area instead of just a line:

Trendlines, support and resistance should be treated as areas on your chart, so it doesn’t matter if you are using the Close, Open, High, or Low price of the candles. It depends on how many touches you are getting.

I choose Daily as my higher timeframe and Hourly as the lower timeframe for stock trading. Do I have to refer to the Hourly chart? Would you please give more insight on multi-timeframe analysis?                             

Example #1: KIRK

You can first use the Daily timeframe to identify areas of value like support and resistance:

And then you can go down to a 4-Hour timeframe to determine the market condition.

As you can see, we have broken out of the accumulation stage, where it could be a potential advancing stage. Now you can go onto the 1-hour timeframe to look for a bull flag setup.

Example #2: AUDUSD

You can use the Daily timeframe to determine support and resistance areas.

Now you can go into the 4-Hour timeframe to see that it is currently in an accumulation stage.

Then go into the 1-Hour timeframe to look at how to enter the trade.

You can look for a potential false break at 0.73981 level and consider going short:

My broker does not have 8-Hour charts, where can I get them?

Some brokers will have their charts like Oanda has its charting platform powered by Trading View and you can use that.

It’s not a must to trade on the 8-hour timeframe, you can also use the Daily or 4-hour timeframe as well. You don’t have to trade on the same timeframe as Rayner.

Does Interactive Brokers have a similar scanning tool like Thinkorswim?

Yes, I think they do have, but I haven’t used it that much.

Why do you trade stocks and not options?

Because we simply don’t trade options.

When trading on the daily timeframe for swing trading, how do you check if it’s an accumulation, distribution, advancing or declining stage? Do you look at the higher timeframe? Can you show an example using these stocks: LAKE, PLUS?

Based on what I can see on LAKE, it seems like a break of structure and a potential advancing stage.

And now I’ll wait for a breakout to confirm this advancing stage.

Then for PLUS:

It’s a break of structure towards the upside, I’ll look for a long setup. 

I’ll also let the candles consolidate even more to look for a trend continuation setup. You can go down to the lower timeframe and wait for a false break setup to enter long.

Can you show an example of using the Donchian Channel to show a 40-week high?

Select the Donchian Channel indicator and change the length to 40. That’s it.

If the price is moving between the 50 and 200 EMA, or between 20 and 50 EMA, which of these trends should we obey? 

The only way for you to use a moving average crossover is for you to have a trend bias. If the 50 EMA is above the 200 EMA, then you will look for long trading setups.  

If you want to use it to time your entries, then you want to wait for the price to retest the 50 MA and makes a false break setup.

Similarly, if the 20 EMA is above the 50 EMA, then you want to look for long opportunities.

If you want to capture long term trends, then you should use the 50 & 200 EMA combo, but if you want to capture short to medium term trends, then you should use the 20 & 50 EMA combo. You want to ask yourself what type of trend you want to capture.

How do you tell if the resistance is at a major or minor level?

You want to start by seeing which levels are relevant and near the current price.

Major support and resistance levels are when levels at which price has been retested more than 2 times. 

This is an example of a major resistance level:

A minor support resistance level would be something like this, that’s related to one swing low:

They can be useful levels for you to consider profit target levels. For example, if you enter short here, you can look to take profit before that swing low.

How do you check what market cycle stage the stock is in, based on the Daily timeframe?

It depends. You have to use what you’ve learnt in the UPAT course. You’ve learnt that the market goes from declining to accumulation to advancing to distribution stage.

However, in reality, you’ll never know how long the accumulation stage or advancing stage, etc., can last.  It can go from declining to accumulation to declining again, for a long period.

That’s why we try not to predict what the next market condition will be. Rather, we try to determine what we currently see.

Can you share how you interpret the Donchian Channel? I want to see how to see the 40-week high.

Let’s say we have the Donchian Channel here on the Weekly timeframe.

If you want to use this as an entry trigger, then you can look to enter on the breakout of the Donchian Channel and then trail your stop loss.

But if you want to use the Donchian Channels to mark your support and resistance levels, you can do so:

So, these are your resistance and support levels based on 40-week highs and lows respectively.

For me, I use the 20-day Donchian Channels to time my entries for breakout trades.

If I trade on the Daily timeframe, should I ever look at the lower timeframes? For example, if the Daily is in an uptrend but the 4-Hour and 1-Hour charts are in a downtrend.

It depends on you. You can be a successful trader trading in only 1 timeframe. At the same time, you can also be a successful trader trading multiple timeframes. It depends on what you’re most comfortable with.

If you’re a full-time trader with a bit of time to look at your charts, then you can use the Daily timeframe to determine your market conditions and then use the 4-hour to time your entries.

One thing to note is, you do not want to duplicate what you have done in one timeframe onto another. Let’s say you’ve plotted support resistance on the Daily timeframe, then you don’t have to do that again in the 4-hour timeframe. Otherwise, you might end up with too many support resistance levels.

Once you have determined major support resistance levels on the Daily timeframe, you can go to the 4-Hour timeframe to look for trading setups to enter your trades.

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How do you do a trade review of your journal after the trade has been closed? What questions should I ask myself if a trade is a good or a poor trade? Thanks Rayner.

Before we do a trading journal, we must first have a trading plan which includes the market condition, entry triggers, stop loss, managing your winning or losing trades, and risk management.

So your trading journal has to be aligned with your trading plan. You have to record trades in the trading journal according to your trading plan.

Some of the metrics I record down are:

  • Entry point
  • Stop loss
  • Exit point
  • Whether that trade is a winner or a loser
  • Profits & losses in terms of R (if I risked $5 to make $20, that’s a profit of 4R)
  • Type of the trading setup (breakout, break of structure, false break, etc.)

To me, a good trade is one which you follow your trading plan. A bad trade is one which you didn’t follow your trading plan.

When you execute good 100 trades, it means that you’ve executed according to your trading plan 100 times. If you look at the stats, wherever you record them, you’ll know if that particular trade or setup actually yields a positive expectancy in the long run, or after 100 trades.

A good trade isn’t determined by the P&L, it’s determined by whether you’ve followed your plan or not. Because once you’ve followed the plan, then you can have a meaningful trade review.

Hi Rayner! What is the difference between the 4 stages of the market (taught in the Ultimate Price Action Trader) and Elliott Wave Theory?

The 4 stages of the market are for me to access what the current market condition is and where is the path of least resistance.

The first stage is the accumulation stage, which is a range market in an existing downtrend. This is where the smart money is accumulating their position to prepare for the second stage, the advancing stage where the price breaks out higher.

But of course, price doesn’t go up forever. So the third stage is the distribution stage, where the smart money unloads its position and the price forms a range within an uptrend.

When the price breaks below that range, it moves into the last stage, the declining stage.

Here’s the thing:

The 4 stages of the market are not meant to predict what the market will do next. Instead, it helps you classify the current price action of the market and then trade along the path of least resistance.

If I know the price is in an advancing stage now…

Then it’s clear that I don’t want to be selling because it’s an uptrend. I’ll either stay on the sidelines in cash or look for buying opportunities. I’m not looking to predict when’s the market going to decline or go into the distribution stage.

If the price is in a distribution stage…

My mindset would be, the market is in a range now after a rally, I’m not sure whether it will breakout higher or breakdown lower.

So if the price hits resistance on the higher timeframe, then if the price is on a distribution stage on the lower timeframe, I might look to sell at resistance since I have this multi-timeframe confluence.

Alternatively, I could wait for the price to breakdown from the support of the range and look for selling opportunities in the declining stage.

Again, you can see that I’m not looking to predict when the distribution stage is going to be over or when the market is going higher or lower. All I can do is to access the current market condition, read the price action, and then find the right trading setup to trade.

I’m not a pro at Elliot Wave Theory, but I believe that Elliot Wave Theory is something along these lines. It describes the market as wave counts, and when it hits the fifth wave, that’s when the market could reverse.

To me, I find that the Elliot Wave Theory is a lot of subjectivity and predicting what the market could do. So to me, it doesn’t really resonate with me. I would rather use the 4 stages of the market to trade as it’s slightly more objective and easier to define.

What is the best timeframe to trade in Forex, and why?

There’s no best timeframe to trade forex. If there’s a best timeframe, then everybody would be trading that timeframe and the opportunities would have been eroded.

It really depends on your trading objective. If you have a full-time job and you want to trade part-time, then you want to trade on the 4-hour timeframe and higher.

If you are a fresh graduate looking to enter proprietary trading, then the best timeframe is the shorter timeframe like the 1-minute, 5-minute timeframes. Because you need to get large enough number of trades for the law of large numbers to work out in a short period of time.

Let’s say you should not risk more than 1% of your trading capital per trade for systematic trend following, if I will be spreading my bets to cover 4 markets, does this mean I need to divide my risk to 4? Meaning each trade has a risk of 0.25%? Or it is fine to allocate a 1% risk for each market?

You’ll allocate 1% risk to each market.

Do you trade currency pairs based on their activity/volume in different sessions (e.g. open and close of London & US markets)?

No, I don’t, because I’m a medium to longer-term trader, and I trade the 4-hour and daily timeframes. So the daily opening and closing sessions are quite irrelevant to me.

However, if you’re a day trader trading off the 5-minutes or 15-minutes timeframe, then yes that would matter to you. Because you want to be trading during the most volatile sessions of the forex market.

The open of the London session is when you want to be trading, especially if you’re trading currencies like the Euro and US dollar.

Do you set your lot size differently for the Forex market?

Yes I do, I position size according to my stop loss, and the pip value of 1 pip. All these are covered in the risk management section of the Ultimate Price Action Trader covering things like risking 1% of capital on each trade, how to calculate your position size for different stop loss.

For Power Stock Trading, will a $10,000 capital work if I am trading US markets? Or can I apply the same strategy to other stocks other than the US?

For Power Stock Trading, you’ll be holding 8 positions. So each position is worth about $1,250. So with USD 10,000, yes it’s possible, especially if you have brokers like Interactive Brokers, with commissions for each trade at around $1 or less.

Yes, you can apply the same trading principles for the other stock markets.

However, I can’t tell you how the annual return and drawdown is going to be like if you follow the exact rules. Because I’ve not done any backtesting on those markets. I’ve only done backtesting on the US markets because that’s the most liquid market which most people can access.

At what time (GMT+8) do you normally analyze and scan the market on the daily timeframe?

For me, I like to do my homework on Fridays and over the weekends. When I produce my market analysis for the upcoming week, it’s usually on Friday morning or afternoon.

I create watchlists on Trading View, according to the types of trading setups that are potentially being formed. And out of those markets in the watchlist, I highlight a few that I want to focus on, for the upcoming week.

How do I use price action give me a better and timely assurance of prices having fallen to a bottom instead of catching a falling knife? Pin bar? Volume? I know we can use trend following method (wait for next higher Low, as a trigger) to identify bottom, but then, the price would have definitely moved higher and possibly the next higher low could occur much later. Thank you.

If you want to time your entry and not catch a falling knife, you could look for a false break setup by using candlestick patterns like the bullish/bearish engulfing candles, hammer, shooting star, etc.

You want to see strong price rejection at support or resistance areas, where the range of those candles are large. This allows you to enter the trade earlier.

Yes, the trend following method of identifying higher lows (or the break of structure technique) might not put you in the trade as early as trading off the price rejection directly. But the benefit is that you can have a tighter stop loss by referencing the previous swing low instead of the lows of the price rejection.

Can you explain leading versus lagging indicators? What are they and how reliable are they?

To be honest, most things that you see on your chart, the candlestick patterns, moving average, RSI, these are all lagging tools, because it has already happened after that fact. The market has to close lower before it tells you that it’s a bearish engulfing pattern.

The market has to go up over the last few candles before the moving average slopes up higher. They’re all lagging, and are based on what has happened especially for indicators, which are mathematically derived from the price.

So what about leading indicators? They are tools like trendlines, trend channels, support or resistance, and Fibonacci extensions. Because when you plot those levels or areas on the chart, it can help you identify future buying and selling pressure.

I won’t use the word reliable, but rather, I’ll consider the objective you’re trying to achieve, and then use those tools to help you achieve those goals.

If you have difficulty defining the trend, then you can use moving average to help you define the trend. You can use the 200MA to help you define the long-term trend. Is it reliable? I won’t say it’s foolproof, but it can help you define a long-term trend.

So don’t just look at how reliable it is, because any tool on its own is unreliable. You use technical tools because you have certain needs or purpose that you want to achieve.

If you want to trail your stop loss, you can use the Chandelier Kroll Stop. Is it reliable? Well, it helps you trail your stop loss, but it doesn’t mean it’ll help you catch a good trend. But if you do it long enough, you’ll eventually catch a trend.

Sometimes market trends are not clear cut; it doesn’t consistently follow higher highs and lows during uptrends, nor do they follow lower highs and lows. Similarly, they don’t always follow the conventional market cycle which you talk about. Is there any indicator that distinctively tells us which cycle market is in?

I agree, sometimes trends are not as clear cut as higher highs and higher lows.

For instance, even in a downtrend, there are bound to be higher highs and higher lows being formed. That’s why you must understand the big picture, don’t just pay attention to the microstructure of the market, because you can be misled easily.

If you have difficulty identifying the trend, you could use a tool like the 200MA to help you identify which direction you should be trading in. If the price is below the 200MA, you’ll look for selling opportunities.

Again, back to the 4 stages of the markets, we are not trying to predict the next stage of the market. What we are trying to do is to identify the current stage of the market and trade in the path of least resistance.

If the market is in a declining stage, I’ll look to sell, that’s it.

If the market is in a distribution stage, it’s in a range, I’ll want to be selling the highs and buying the lows of the range.

Lastly, I do not know of any indicator that tells distinctively which cycle the market is in. If it’s not clear which stage the market is in, then move onto the next market that is clearer. There’s no need to force that market to fit into 1 of the 4 stages.

How to find out the long-term momentum and short-term momentum?

First, let’s define what’s momentum. Momentum measures the change in price over a given period.

A useful indicator is the Rate of Change (ROC) indicator. On the daily timeframe, the 9-period ROC measures the change in price over the last 9 days. For instance, if it’s showing -0.77, it means that the market has dropped by 0.77% over the last 9 days.

If you want to define a shorter-term momentum, you can use a 5-period ROC if you deem that to be short term. If you want to define a longer-term momentum, you can change it to 200-period ROC. That’s one way to define momentum.

Do you recommend using technical indicators combined with price action or should we focus on the price action only?

Yes, you can use trading indicators together with price action trading. Because trading indicators help you summarise historical data.

For example, the Average True Range (ATR) indicator shows you how volatility changes over time. It’s very useful to set your stop loss or trail your stop loss. Personally, I do use indicators with price action trading.

But your analysis and biases should be based on price action. Indicators are just tools to assist you with entries and exits. That’s about it. You have to understand what the indicators are for, but the basis is still understanding the price action of the markets.

What’s the best way to determine a change in trend?

I use the 4 stages of the market to detect a change in trend. When the price breaks out of an accumulation stage, that to me is a change from a downtrend to an uptrend.

Similarly, in a distribution stage, if the price were to break below the area of support (the “last line of defense”), I will change my analysis from a distribution stage to a potential declining stage where I will look for selling opportunities.

So to me, understanding the market structure is the best way to determine a change in trend.

Is the 40-week EMA same as the 200-day EMA?

Yes, they are similar. I won’t say they are exactly the same because one is based on the weekly closing price, while the other is based on the daily closing price.

Which indicator do you use the most often and find the most reliable?

As discussed earlier, I’m not really a fan of the word “reliability” in trading, but rather, it depends on the function of the indicator.

The indicators which I used the most often are the moving averages, the ATR indicator and the Chandelier Kroll Stop (another variation of the ATR indicator).

Can you analyse the AUD/JPY?

I’m looking at the daily timeframe here, where the market is still in a downtrend:

I want to look for selling opportunities. Next, I want to find an area of value which I can trade from. Currently, the price is not quite at an area of value.

If you look at the lower timeframe, the latest price action here could be previous support turned resistance to go short, but the move is so choppy that I would rather stay out of it altogether.

But my bias for this market is towards the downside.

Can you give examples of indicators that we can use for different categories like trend, oscillator, volume?

Yes, I’ve made a video about that, and you can find it over here at the Academy.

Can you give an example of how to do a backtest?

You can check out this article I’ve written over here.

What are the moving averages you use?

I use mostly the 20 MA, 50 MA and the 200 MA. I use the 200 MA to define the long-term trend. 20 MA to define a strong trend and the 50 MA to define a healthy trend.

Sometimes the 20 MA and 50 MA act as an area of value where the price could find support or resistance at these two moving averages.

Do you trade using the Currency Strength Meter?

I do use the Currency Strength Meter to have a gauge of which are the strong and weak markets in the long term and short term. I like to see, for example, the last 15 weeks, which currencies have strengthened or weakened the most.

From there, I also like to look for the short term strong and weak currencies over the last 5 weeks. Then, I’ll try to buy the stronger currency pairs against the weaker currency pairs.

Can the strategies here work for trading Dow Futures?

I believe so because price action will work on any market that is liquid. But you have to understand that if you simply trade off the daily chart of the Dow Futures, you might not have too many trading setups on this one market.

But on an intraday basis, say the 15-minute timeframe, then yes those principles of price action trading can be applied the same.

Do you think scalping strategies work?

Yes, scalping works, it’s a form of trading just like day trading or swing trading. But it’s not suitable for most people because you need to be glued to the screen and you need to have a fast reaction. It’s like a full-time trading career to be a scalper.

For most people, I would say that it’s not too relevant especially if you have a full-time job.

But if you’re a fresh graduate looking to join a proprietary trading firm, then scalping is something that you will likely do.

As a scalper, you have to be fluid. You can’t be just trading one setup like the false break setup. Since you can only devote your time to 1 or 2 markets because the markets move so quickly on the lower timeframe. You got to be versatile and willing to trade false break, breakouts, counter-trend, trend continuation, depending on how the market unfolds.

That’s the true ability of a scalper. They can adapt to different market conditions.

In contrast, a trader on the daily timeframe can be picky and choose to only trade the false break setup and look at many markets to find that setup.

What’s the difference between the Ultimate Price Action Trader (UPAT) and the Ultimate Systems Trader (UST)?

UPAT is all about discretionary trading, price action trading, learning how to use support resistance, trendlines, candlestick patterns where discretion is involved. The way you draw support and resistance is going to be different from another person.

Many traders enjoy the intellectual process of reading the price action of the market to time their entries etc.

On the other hand, there’s another group of traders who doesn’t want to deal with subjectivity. They want to deal with objectivity.

So for instance, if the price breaks above the 50-day high, I go long with a stop loss of 5 ATR. If that happens to be you, then that is what the UST course is all about.

You’ll discover the various trading systems, the logic behind it, the backtest results, the rules, why it works, and the exact system.

If you want to trade without discretion, then UST is something you can look at. If you prefer price action trading and have your own analysis on the market, then UPAT will suit you better.

Those are based on the different trading approaches you prefer, depending on your needs.

How do you define higher highs and lows? Is it based on one or two candles?

I don’t have a fixed definition on defining that, be it one or two candles. Because technically, a higher low or low is made when the price makes a new swing point.

I usually use obvious swing points that stick out to me the most as references. Those are the levels I want to pay attention to the most.

April

Hi Rayner, so I know we use the Currency Strength Meter as a guide for our weekly trades, and we pair them accordingly. But in your weekly market analysis, you also trade other setups like USD/IND or USD/ZAR etc. How do you come across those setups and why do you trade them?

Yes, you are right, I trade exotic pairs like those you’ve mentioned. Those are not in the Currency Strength Meter. I could have added more currencies to the Currency Strength Meter, but I just stick to the major pairs.

How I find these other pairs is that, as I do my analysis and homework, I also look for potential setups that I can trade for trend continuation trades, breakout trades and stuff like that.

The Currency Strength Meter just serve as a guideline as to what’s strong and what’s weak. But some certain markets or pairs are not in the Currency Strength Meter which I trade as well.

I need more clarification on advance breakout strategy, where you do the multiple time frame analysis. I have a confusion, you earlier discuss a buildup at support as a chance of market breaking down lower, but you are suggesting to go long with higher timeframe support. I am a little confused.

I assume this question is referring to entering the breakout before the breakout. I usually combine the 4-hour and daily timeframe or the daily and weekly timeframe for this.

On the daily timeframe, let’s say you are looking for a buildup to form at resistance. On the 4-hour timeframe, it will look like a range. And within this range, you can look for a false break at support to go long.

Going through the course I have been interested in swing trading approach, can you share with us more on that topic?

For swing traders, they usually have a pre-determined exit in mind to exit their trades. As a swing trader, you want to be certain that the price has a good chance of reaching that potential target that you’re looking at.

From there, you can backtrack and see how much you’re potentially risking, and so how much you can potentially gain if you’re right, then you can assess your risk-to-reward on the trade.

You can check out this training video on swing trading in the Ultimate Price Action Trader course.

How to predict trend accelerations and decelerations?

To be honest, I don’t really look at trend acceleration or deceleration.

But if you want my take on it, when the trend is accelerating, it’s when the price is showing huge momentum with large-bodied candles. When the price is decelerating, this is when the price goes into consolidation or a range, where the trending move is not as strong as before.

I can’t predict trend acceleration and deceleration. I can only trade what I see and not what I think. And the key thing to understanding market structure is to see how the price reacts at key levels like support resistance.

For instance, if the price comes to a support level on the daily timeframe, you can go down to a lower timeframe like the 4-hour and see how the price reacts on the 4-hour timeframe.

The trend could be decelerating but it might just be a small pullback before it stages another move higher. So I would rather understand the 4 stages of the market, advancing, accumulation, distribution or declining.

Then from there, I’ll trade what I see. I won’t try and predict when the trend is accelerating or decelerating because I just can’t do that.

If a strong trend weakens and becomes a healthy trend with deeper pullbacks, is it better to save profits after the next main move or to trail the healthy trend till the break of previous highs/lows? And opposite, if the trend becomes stronger is it better to trail till the end of the new stronger trend, or to keep trailing after it becomes a weak trend?

Every time you put on a trade, you must know what’s your plan of exit, are you going to trail your stop loss or are you going to capture a swing.

You cannot make plans according to how the market behaves. Because if the market doesn’t behave according to what you want, then what will you do?

If you want to capture a trend, then use a trailing stop loss from the start. If you want to capture a swing, then have a pre-determined target profit ahead of time. Don’t change your mind halfway through the trade.

Because if you do this, you will realise you will give way to your emotions and make the worst trading decisions by reacting to the market.

When you put on a trade, you won’t know if it’s going to be a full-blown trend or will it go in your favour only to reverse against you. You have no idea.

That’s why you’ve got to determine ahead of time how you exit your trade if it moves in your favour and if it moves against you.

The only way to find the perfect answer is to trade on hindsight. But we are not trading on hindsight, we are trading in the current moment. That’s why you have to determine your exits way ahead of time and not adjust them accordingly.

If my higher timeframe is 30-minute and lower is 1-minute, when placing the stop loss, what ATR should I use, 1-minute or 30-minute ATR?

If your higher timeframe is the 30-minute timeframe, I recommend your entry timeframe to be the 5-minute timeframe. Because the 1-minute timeframe is too far away from the 30-minute. Ideally, you want to have a factor of 4 to 6.

You should use the ATR of your entry timeframe. If your entry timeframe is the 5-minute, you should look at the 5-minute’s ATR value. It makes things easier to reference from the ATR value of the entry timeframe of yours.

The first thing that you see is long-term downtrend and then big retracement move comes, so you try to find a break of structure on the lower timeframe to go short. In this case, would you record your trade as trend continuation or breakout?

I would classify this as a trend continuation trade because the big picture on the higher timeframe is in a downtrend.

However, if the price is accumulating after a downtrend, and it starts to buildup and then breakout at the resistance of this accumulation stage, I would consider this as a breakout trade.

What are the pros and cons between trailing stop by 3 ATR and ride momentum candle on higher timeframe?

I would say the 3 ATR method is simper, you can adjust the multiple according to the type of trend that you want to capture.

You can simply use the Chandelier Kroll Stop, if the price breaks and closes below that, then you exit the trade. You can use 4 ATR or 5 ATR if you want to capture a longer-term trend.

For momentum candle on the higher timeframe, you have to go up to the higher timeframe and trail your stop loss from there. But this method is quite fixed.

The easiest way to capture a trend is to just use a Chandelier Kroll Stop, 3, 4 or 5 ATR depending on the trend you want to capture.

If you want to capture a swing, you can use the higher timeframe candle. When the price breaks and closes below the previous candle on the higher timeframe, you can exit the trade.

Hello Rayner, I have completed the lessons which gave me lots of information I didn't have earlier. Let me try to apply the methods. Rayner, I'm not good at computer, so, it would be a hurdle for me how to make a Trading Journal. Please help me.

In the Ultimate Price Action Trader, I’ve covered quite extensively how to build your own trading journal, with things like recording your entries, exits, R-multiples, screenshot of your chart.

You can find that here.

If Fed is buying stocks and bonds, then isn't shorting or put option trading now useless on sorry companies?

The Fed doesn’t buy stocks, they print money which goes into the stock markets.

I don’t trade options, so I can’t comment on that.

For shorting, a lot of exchanges have regulations with regards to shorting. It’s trickier for shorting because sometimes there might not be enough shares to borrow. Sometimes the exchange doesn’t allow you to short. I don’t short stocks as well.

For going long, you can do it as and when you want it.

I think I’m not in the position to comment on this since I don’t really short the markets and I don’t trade options.

Is it possible to use the same concept to prepare the Currency Strength Meter on different types of markets like metals, commodity, energy, index and crypto? How about mixed market strength meter?

Yes, it’s possible, you can use the concept behind the Currency Strength Meter on these other types of markets.

The key thing is, they have to be from the same type of financial instrument. It doesn’t make sense to put oil futures and EUR/USD in the same strength meter.

I trail my positions by moving my stop loss 1 ATR below the swing low for long positions and 1 ATR above the swing high for short positions, and always exit before earnings. In general, I found this to be profitable, however, it gives a lot of profits back. I understand that I cannot avoid giving up some profits with this type of trade management, however, is there anything I can do to reduce the profits I give back?

Let’s say you’re up by 2R, what you can do is to exit half your position to secure those profits. Then you can have the remaining half the position to ride the trend if it continues.

If it goes against you, then the good thing is that you’ve already exited half of the trade at a favourable price, which gives you a better overall average price in total.

This is how you can partially scale out of your trade.

I noticed that the biggest drawdown in my equity curve is due to a market turn. How do I know when the market is about to turn so I can get out early and not open new positions? I find that waiting for the moving average crossover on the SPY is 'late' and gives almost profits back. Thanks Rayner.

I wished I can tell you when the market is going to turn, but I don’t know when the market is going to turn. This is why I choose to keep things really simple.

I have a few stock trading systems. The way I move into cash is by using a trend filter. It’s as simple as using a 200-day moving average. If that stock is below the 200-day moving average, I don’t buy anymore, I take it that the stock is in a downtrend and I am not looking to buy anymore.

You can use a 100-week moving average, you can use a 10-month moving average. Whatever trend filter you want to use, it can work. I have used the 200-day, 100-week, 10-month average. It all depends on the timeframe you’re trading.

For starters, if you’re trading on the daily timeframe, then the 200-day moving average is a good trend filter to use.

For example, if the S&P 500 is above the 200-day moving average, you’ll look for buying opportunities. If the S&P 500 is below the 200-day moving average, you’ll exit all positions you have and look to get back in if it closes above the 200-day moving average.

I’ve come across research which shows that when the market is above the 200-day moving average, it tends to continue going up than going down; when the market is below the 200-day moving average, it tends to continue going down than going up.

When I trade trend continuation (resistance turned support). Do I need to wait for just price rejection (only one candle) or wait for entire false break setup (like a clean move into the level)?

Yes, I look at the overall context of the market, and if that price level is a significant level.

I like to see a strong momentum move into a level because when the reversal comes, it can be pretty swift in the opposite direction.

Then I look at the type of price rejection to see how strong the price rejection is. If it’s not very strong, I’ll go to the lower timeframe and look for a break of structure, like a higher high and higher low, to time my entry.

So I look at the whole picture, not just one part of the equation.

How to create my Currency Strength Meter spreadsheet? I am using Trading View platform for my analysis.

If you want to learn more on that, you can check out my blog post here.

I've been reading that we should trade forex based on the New York session where daily candlesticks open and close at 5 am Singapore time. However, my two Singapore brokers have their daily candlesticks closing at 12 am. Does it make a difference at all?

Visually, it will make a difference. One market that closes at 5 am may look like a shooting star, while the other that closes at 12am may look like a different candlestick pattern altogether.

But in terms of drawing support resistance, trendlines, it will not make much of a difference.

Honestly, after seeing different variations of the candlestick patterns, to me, it doesn’t really matter if it closes at 5 am or 12 am.

But for starters, yes it might make a difference for you. If you want to be in sync with most other traders, you can use a platform like Trading View. I think they allow you to adjust which time zone to look at as well.

What's your view on Gold price, possible to wait for a pullback?

Gold seems pretty overextended at this point in time if you asked me:

I’ll probably look for a pullback before looking for an entry. I don’t really want to be buying at these highs.

Because if you look at the price action of gold historically, it usually goes up and then retraces. So there’s a good chance there could be a pullback.

This is a trend which I consider a weak uptrend, and I’ll just wait for a retracement or pullback before looking for long entries.

When do you use the different MA lines? Is it dependent on the kind of trader that you are? For instance, a shorter-term trader would use a 20/50 MA and a vice versa for a longer-term trader.

It depends on the trend structure. If the market is exhibiting a strong trend, then I’ll use the 20 MA to identify an area of value on a strong trending market.

If the market is in a healthy trend, then I’ll pull out the 50 MA to see where’s the area of value.

So it’s not dependent on whether I’m a long-term or short-term trader, but rather, it depends on the trend structure I’m seeing in the market. If the market is in a range, then I won’t even have any moving average at all because it’s useless in the range market.

Can we use systematic trend following using 4-hour or 1-hour candlesticks with the same indicator settings as the daily candlestick and if so, what they will be?

I have not tested the indicators on the 4-hour and 1-hour timeframe, I have no idea how the results will be like. But gathering what I heard from other veteran traders is that, it won’t work as well compared to the higher timeframe because of the choppiness and noise.

Sticking to the higher timeframe and longer-term trend is a better way to trade.

Again, I’ve not done any testing on it since I don’t trade systematically on the lower timeframe, that’s why I didn’t purchase data for it. So I didn’t do any testing for it.

Hi Rayner, I'm trading STF and MMT (from the Ultimate Systems Trading course) too. May I know how I should portion out my capital if I want to include discretionary trading?

There’s no fixed right answer to this because it depends on what you resonate with.

Do you feel more comfortable with systematic trading than discretionary trading? If that’s the case, you can apportion 70% to systems trading, then the remaining to discretionary trading.

But if you feel the other way, then apportion a higher percentage to discretionary trading instead.

So it depends on your personal preference ultimately.

How often do you adjust your support resistance line to account for the newer prices?

I adjust it at least once a week. I want to see if the level is still holding or if it got invalidated recently. If it got invalidated recently and if I look back in time and see that it got invalidated before, then I’ll remove that level altogether.

The key thing I look for is this, does the market still respect the level that I draw on my chart? If it’s whipping up and down that level, then that level is insignificant, and I’ll remove it from my chart.

Hi Rayner, would you advise that I use tools to determine profit-taking? Fibonacci tools, for example, to determine how far a pullback may go?

For those of you who have followed me long enough, you’ll realise I don’t really use Fibonacci for my own trading.

If you want to determine how far a pullback might go, I suggest to understand trend structure, if the market is in a strong, healthy or weak trend.

Once you can identify the type of trend structure this market is in, then you’ll have a good idea of where the price might pullback into to time your trade.

For the above example on Gold, since it’s in a weak uptrend, these are a few possible areas I’m looking at, to buy at the pullback:

Do you think it is okay to compliment Elliot Wave with price action to especially determine profit levels?

Profit levels are actually one of the easiest things to do, you don’t need Elliot Wave to confuse yourself. Just look and ask yourself, where might opposing pressure come in. That’s where you can take profit.

Looking at the S&P 500:

If I’m long right now, I’ll definitely look to take profit near the highs before it crashed. It’s a good level to take profit before potential selling pressure comes in.

So you don’t need Elliot Wave to determine where to take profit. You just need swing highs or swing lows, and support resistance.

The MT4 currency strength meter only shows 8 currencies (CHF, JPY, CAD, USD, EUR, NZD, AUD, GBP). Is it possible to customise the meter to change the currency pairs and also change the USD as base currency?

The answer is no to both.

I do not understand the concept of Fibonacci number what I found is everything in this world was created by Fibonacci number so It's just a level that a lot of traders take action that is why you can fix target profit near it. Could you please explain in detail why 127, 161.8 are so significant? Thanks a lot.

I personally don’t use Fibonacci much in my trading and so I think Google will be your best friend to find out how Fibonacci numbers are derived to find out why it’s significant.

How do you trade range using price action?

The straightforward way is to trade the false break. What I like to do is to let the price reach above the highs of resistance, and then reverse lower which forms a false break setup for me to go short.

Why is the price fluctuation for currencies like USD/ZAR and USD/TRY greater than other major currencies (USD, EUR, GBP)?

It’s because those markets have less liquidity, and it’s easier to push the price of those markets up and down.

They have less liquidity than the major currencies because most people do businesses in the developed economies, so there’s a greater demand for major currencies in these developed countries.

Whereas the exotic pairs do not have as many businesses demanding those currencies, that’s why liquidity is lower and it makes the currencies fluctuate more.

Please also explain why the spread is larger for the exotic currencies. Is it to scare speculators away from trading these currencies? I have tested and found that the earning potential is huge if the price moves in my favour.

The spread is larger because of lower liquidity. It’s definitely not to scare speculators away. If you look at the order flows of the exotic pairs, you can see that there are less bid and offers, that’s why the spreads are wider.

Whereas for the major currencies, the order flow is thicker, with lots of bids and offers. This means there is higher liquidity and so, the spread is much tighter.

Hey Rayner, your UPAT material is excellent. I studied in a private channel that for trading, we have to follow any one of two sets of time frames, as follows: (5-minute, 30-minute, 4-hour, 1-week) and (1-minute, 1-hour, daily, monthly) i.e., usually, I use to follow the 4-hour timeframe, to know the reversal I have to verify 30-minutes and not the 1-hour chart. Please, let me know your explanation regarding this.

I’m not sure what you refer to those as two sets of timeframes. I hope not, if not you’re looking at like 8 to 10 timeframes.

Let’s say keep it simple. Ask yourself, what’s your entry timeframe?

If you’re entering your trade on the 4-hour timeframe, then your higher timeframe can be the daily timeframe, using a factor of 4 to 6. If you take 4 hours multiply by 6, you get 24 hours, which equals to 1 day.

If your entry timeframe is the 1-hour timeframe, your higher timeframe can be the 4-hour timeframe. That’s how I would define my entry and higher timeframe. I don’t look at 10 different timeframes.

What are the differences between trading equities and forex that I should take into account from a UPAT perspective? For example, forex is a 24/7 market so there are no gaps like you find in equities. Are there any other differences like this to keep in mind?

When it comes to candlestick patterns, the forex markets will not have gaps in the candlestick patterns.

For the bullish engulfing pattern, traditionally, the second candle has to gap lower and close higher than the previous day candle.

For the forex markets, you won’t see the gaps at all. Whatever candlestick patterns that require gap, it won’t happen in the forex market. You can just remove the gap element to redefine the candlestick pattern for the forex market. That’s the key difference to bear in mind.

For equities, they are usually traded only 7 to 8 hours a day, so it’s important to know the opening and closing hours of your trading session.

For forex, there are 3 different sessions, the Asian, the US and the UK session. And the most volatile session is the London session and the New York session overlap.

For equities, the most volatile is usually the first hour and the last hour of the trading day.

How can one apply the Law of Large Numbers to UPAT based trading? Because it requires a very systematic or uniform approach for it to be valid but UPAT style trading can be highly discretionary in terms of the patterns, setups, based on what one "sees".

You want to first define the setup you want to trade. Let’s say you want to trade the false break setup. Then you need a sample size of about 100 trades just for false break setup. Likewise for the other setups like breakouts, etc.

You don’t want to have 10 false break trades, 10 breakout trades, and alternate until you add up to 100, because those are different setups and patterns.

When you trade a trading setup, you want to have a large sample size of it before you analyse it and see whether you have an edge in the markets and whether it works or not.

This question has to do with the business of trading. I sometimes track up to 30 different markets (but might only have 8-10 positions open at one time) and I find taking technical analysis notes, entry/exit strategies and risk/money management calculations, equity tracking across 20 to 30 stocks can get overwhelming. I like keeping good notes because I can come back later and review my thinking and learn from mistakes. Let's just call all of this "trade admin". How do you manage the burden of trade admin? For example, how many issues do you track / trade on a daily or weekly basis? Do you keep daily notes? Weekly notes? I'm asking this question from the perspective of a medium swing trader who uses daily and weekly charts. Thanks.

This goes back to the trading journal module we spoke about in the Ultimate Price Action Trader module. The key things to record are your:

  • Entries
  • Exits
  • Stop loss
  • R-multiple
  • Winning or losing trade
  • Type of trading setup

I like to first have a higher timeframe chart. Let’s say you are a swing trader entering on the daily timeframe, you’ll want to screen capture the weekly chart of the stock you’re trading just to see where you are in the big picture.

The second chart that you’ll want to save is the daily timeframe which you used to enter the trade. You’ll want to mark out the entry point and the setup of the trade.

The last chart to screenshot is the exit of that trade. I like to screenshot a chart to see if it’s a winner or a loser.

Once you’ve collected a sample size of chart screenshot, you can see if there are familiar patterns that lead to your winners or losers. From there, you can tweak and improve things.

What is your view of the stock market in the near future? Do you expect a rally or a reversal coming soon?

These types of questions are kind of difficult for me because I try not to have a strong bias in the markets, and to just trade what I see.

From the looks of things, the S&P 500 has staged a strong rally from its lows and I’ll go with the path of least resistance.

If you asked me, I would say that I expect to see strength in the equities market over the next few days and weeks. I’m simply trading what I see.

I don’t know if there will be a reversal or it will be a breakout of the all-time highs. I’m just telling you what I see and I’m just going along with it. That’s how my trading has been like.

For price action trading strategies, what do you recommend to trade? Stocks, commodities, or forex?

There are really no best strategies. If you have been trading stocks all along, you can apply price action trading techniques to it.

You can buy breakout stocks that are near their 2-year high. You can look for trend continuation patterns like ascending triangle pattern to buy the breakout. You can apply price action technique as long as they have sufficient liquidity.

Price action trading can be applied to stocks, forex, or commodities.

How can I manage my time and trade if I work a 9 to 5 job?

I recommend you trade on the 4-hour, daily or even the weekly timeframe. Because when you trade on the higher timeframes, you don’t have to monitor the charts as often.

Let’s say you trade on the daily timeframe, then before you leave for work each day, you can look at the markets to see if there are any valid trading set up that occurred after the markets have closed. If there are, then put in your orders. It shouldn’t take you too long.

During lunch, you can check if your orders got filled. Then when you come back from work, you can see how that position is like.

What would you look for in a pullback to make it a higher probability trade?

When the price pulls back, and retests previous resistance turned support and is aligned with the upward trendline, that to me has a higher probability.

Like the S&P 500’s bullish reversal:

It has the confluence of the upward trendline and the area of support. This is a powerful combination.

What’s your trading routine like?

My trading includes price action trading and systems trading.

For price action trading:

In the weekends, I analyse the markets for potential trading setups for the coming week. I look at mainly the 4-hour, daily and weekly timeframe charts.

Once I have that, I’ll highlight those markets I want to focus on my Trading View watchlist.

For systems trading:

Each day I would download the overnight data, feed it into the platform, and it will give me the orders for today, and I’ll input those orders into the broker that I use.

That’s how my trading is like each day.

What’s the biggest “Aha!” moment for price action trading?

There really isn’t one big moment, it’s a combination of many such moments.

Here are a few:

  • Not trading when the market is over-extended from the area of value.
  • Not trading when the market is over-extended from the area of value.
  • Don’t set stop loss right below support or resistance. Set a distance away from it.
  • Learn how to read market structure and the different type of trends.

I find that there are many support and resistance, so which lines would you consider significant?

The levels that I consider significant are the ones that are obvious.

For example:

At a glance, you can see these 3 levels stand out and are significant levels to look at.

Yes, there are minor swing highs or lows, but they are not as obvious as the ones I have over here.

As a price action trader, do we have to pay attention to and react to the news?

If you’re trading on the 4-hour, daily timeframe, you don’t have to pay attention to the news.

I believe that the price takes into account everything that would be in the news. Of course, there are times when the news comes out and the price would react violently.

But I choose to keep things simple, I believe the price contains all you need to know. And if you’re trading the higher timeframe, your stop loss will be wider and should be able to accommodate all the swings from news release.

The key thing about price action trading is identifying the market structure, if the market is in accumulation, advancing, distribution or declining stage, then you’ll know what you need to do.

For example, if a market is in a declining stage, then I’ll look to sell at an area of value like previous support turned resistance or a trendline.

And have a plan for an exit if the trade goes right and if it goes wrong. That sums up price action trading.

What are some brokers that you would recommend?

If you want to trade stocks, I will recommend Interactive Brokers. If you want to trade many markets, you can try CMC. If you only want to trade forex, you can try IC Markets. If you are a newbie and don’t want to pay commissions, you can check out WeBull.

So it depends on what you trade and looking for the right broker to meet your needs.

Do you use any filtering or auto-notification on Trading View?

No, I don’t use any of it since I’m in front of my screen most of the time, I scan and create my watchlist manually.

The turtles used 20-day breakout initially and moved on to 40-day breakout when there was a bull-bear trap. What are your thoughts on this?

Yes in the earlier days of trend following, it’s relatively shorter-term and as time goes by, most of the trend following hedge funds are now trading off the longer-term trend with less noise and a higher chance of the trend being the real move.

That’s why for trend followers for systematic trend following, we’re trading off the 200-day breakout and that’s the reason for it. It tends to have less of a false breakout than trading off the shorter-term breakouts.

In volatile times like these when trends are changing, how do you know when is a trend reversal and not a large false break?

I have no idea, to be honest. I simply trade what I see and not what I think.

For example on the S&P 500:

At a glance, you can see these 3 levels stand out and are significant levels to look at.

Yes, there are minor swing highs or lows, but they are not as obvious as the ones I have over here.

As a price action trader, do we have to pay attention to and react to the news?

If you’re trading on the 4-hour, daily timeframe, you don’t have to pay attention to the news.

I believe that the price takes into account everything that would be in the news. Of course, there are times when the news comes out and the price would react violently.

But I choose to keep things simple, I believe the price contains all you need to know. And if you’re trading the higher timeframe, your stop loss will be wider and should be able to accommodate all the swings from news release.

The key thing about price action trading is identifying the market structure, if the market is in accumulation, advancing, distribution or declining stage, then you’ll know what you need to do.

For example, if a market is in a declining stage, then I’ll look to sell at an area of value like previous support turned resistance or a trendline.

And have a plan for an exit if the trade goes right and if it goes wrong. That sums up price action trading.

What are some brokers that you would recommend?

If you want to trade stocks, I will recommend Interactive Brokers. If you want to trade many markets, you can try CMC. If you only want to trade forex, you can try IC Markets. If you are a newbie and don’t want to pay commissions, you can check out WeBull.

So it depends on what you trade and looking for the right broker to meet your needs.

Do you use any filtering or auto-notification on Trading View?

No, I don’t use any of it since I’m in front of my screen most of the time, I scan and create my watchlist manually.

The turtles used 20-day breakout initially and moved on to 40-day breakout when there was a bull-bear trap. What are your thoughts on this?

Yes in the earlier days of trend following, it’s relatively shorter-term and as time goes by, most of the trend following hedge funds are now trading off the longer-term trend with less noise and a higher chance of the trend being the real move.

That’s why for trend followers for systematic trend following, we’re trading off the 200-day breakout and that’s the reason for it. It tends to have less of a false breakout than trading off the shorter-term breakouts.

In volatile times like these when trends are changing, how do you know when is a trend reversal and not a large false break?

I have no idea, to be honest. I simply trade what I see and not what I think.

For example on the S&P 500:

At a glance, you can see these 3 levels stand out and are significant levels to look at.

Yes, there are minor swing highs or lows, but they are not as obvious as the ones I have over here.

As a price action trader, do we have to pay attention to and react to the news?

If you’re trading on the 4-hour, daily timeframe, you don’t have to pay attention to the news.

I believe that the price takes into account everything that would be in the news. Of course, there are times when the news comes out and the price would react violently.

But I choose to keep things simple, I believe the price contains all you need to know. And if you’re trading the higher timeframe, your stop loss will be wider and should be able to accommodate all the swings from news release.

The key thing about price action trading is identifying the market structure, if the market is in accumulation, advancing, distribution or declining stage, then you’ll know what you need to do.

For example, if a market is in a declining stage, then I’ll look to sell at an area of value like previous support turned resistance or a trendline.

And have a plan for an exit if the trade goes right and if it goes wrong. That sums up price action trading.

What are some brokers that you would recommend?

If you want to trade stocks, I will recommend Interactive Brokers. If you want to trade many markets, you can try CMC. If you only want to trade forex, you can try IC Markets. If you are a newbie and don’t want to pay commissions, you can check out WeBull.

So it depends on what you trade and looking for the right broker to meet your needs.

Do you use any filtering or auto-notification on Trading View?

No, I don’t use any of it since I’m in front of my screen most of the time, I scan and create my watchlist manually.

The turtles used 20-day breakout initially and moved on to 40-day breakout when there was a bull-bear trap. What are your thoughts on this?

Yes in the earlier days of trend following, it’s relatively shorter-term and as time goes by, most of the trend following hedge funds are now trading off the longer-term trend with less noise and a higher chance of the trend being the real move.

That’s why for trend followers for systematic trend following, we’re trading off the 200-day breakout and that’s the reason for it. It tends to have less of a false breakout than trading off the shorter-term breakouts.

In volatile times like these when trends are changing, how do you know when is a trend reversal and not a large false break?

I have no idea, to be honest. I simply trade what I see and not what I think.

June

You have said to use a position size calculator on all trades, does that includes 5-minute/ 15-minute/1-hour/4-hour/daily timeframe?

If you can do the math and don’t wish to use the calculator, feel free to do that. But it makes your life easier if you could use a position size calculator.

Market maker brokers like CMC or Oanda have in-built position size calculator, where you can put your entry and stop loss, and you can manipulate the position size to your desired risk level.

I always trade on the higher timeframe, but after a trade is entered, can I trade in the lower timeframe to take profits or losses?

Higher timeframe and lower timeframe are kind of subjective because your higher timeframe might be someone else’s lower timeframe.

The general guideline is this, if you enter your trade on the 4-hour timeframe, then you want to manage your trades on the 4-hour timeframe.

You don’t want to go down to 1-hour or 15-minute timeframe to manage your trades. Because your trade is based on the 4-hour timeframe.

So whichever timeframe you based your setup on, that’s the timeframe you want to manage your trade on.

On MT4 platform can you trade stocks/futures?

I’m not very familiar with it, but it’s probably for CFDs. I don’t think it will be directly routed to the stock exchange. I don’t think you can trade futures as well.

Where can I get the Chandelier indicators, and how to install it in MT4?

I primarily use Trading View, so I don’t have an idea on this one. Google will be your best friend for this question.

I lately found myself as a discretionary short-term swing trader. I mostly trade breakouts and pullbacks. I also know trading is not an overnight get-rich-quick scheme but a game of patience, probability, and risk management. Is there any more to learn so that I can be more successful in my trading (as my goal is also to make 50% of my living as a trader)?

The thing about trading is that it’s not about acquiring more knowledge to become profitable. It’s about mastering a specific trading methodology, mastering a certain setup and make it work for you, especially coming from a discretionary standpoint.

If you’re focusing pullbacks and breakouts, then master these types of trading setups. When you’re good at it, you can trade across different timeframes and more markets. That’s how you find more profitable trading opportunities.

I suggest journaling down your trades, identifying your pullback and breakout trades, find out which ones make you money.

Yes, you can adopt different trading methodologies like trend following and systematic trading. But again, from a discretionary standpoint, my take is to master those few setups and learn to trade it across more markets.

I mostly trade the US and Australian stock market. I am confused when are the times to stay out of the market even though I find the setups that I often trade.

It’s hard for me to say when are the times to trade because it depends on your trading style if you’re a day trader or a longer-term trader.

Because if you’re a day trader, you’ll want to focus on the opening and closing session when the volatility is higher.

If you’re a longer-term trader, trading on the daily or weekly timeframe, then there’s no reason to stay out of the market as long as your trading setup presents itself.

So I can’t really give the right answer here without knowing the type of trader you are.

Do you believe the performance of industry affects the stocks under that industry? Will it be a good idea to trade according to industries momentum?

Yes, I do believe that if a sector is strong, and if a stock is in that sector, then the rising tide will lift all boats. The stock will be affected by the sector, it floats up with the sector if the sector is doing well.

In the stock market, it pays to focus on the strongest stocks out there, like those which have moved the most over the last 6 or 12 months. These will outperform the market.

For example, Amazon and Tesla are strong stocks that have moved the most in price over the last 50 weeks. Even now, they’re still the leaders of the market. If the market goes up 1%, these stocks will go up maybe 1.5%.

So yes, follow the leaders in the stock market.

Do you believe that a discretionary trader can be successful in the long run?

Definitely. But discretionary trading is not for everyone. If it fits you, definitely you can find success in it. George Soros and Paul Tudor Jones are famous macro-traders, they are mostly discretionary in nature.

There are also systems traders who find success out there as well. It depends on what suits you best and then going all in, in that trading approach.

For beginners looking to trade in forex, Would you recommend them to focus on 1) one currency pair, 2) a few currency pairs 3) trade whatever strong-weak, weak-weak, strong-strong currency combinations that might change weekly based on the weekly Currency Strength Meter?

Without context, I can’t really give the right answer for this. But if you’re a beginner, and you’re trying to be a day trader, then it makes sense to focus on only a few currency pairs. Because for day trading, you can’t be watching 30, 40 currency pairs, it’s not possible.

But if you’re a longer-term trader, trading the 4-hour, daily or weekly timeframe, then yes you can take a look at more currency pairs for more trading opportunities.

I don’t recommend looking for strong-strong or weak-weak combination using the Currency Strength Meter. How I use it is, more of getting a feel of which currencies are strong or weak in the long run and short run. I don’t use it to find the best currency combination.

Ultimately, it’s the trading set up that comes along with it, if it’s a valid trading setup or not. Then if I can pair a strong currency with a weak one, then I could look to ride the trend. If that’s a medium-medium currency pair, then I’ll look to capture one swing in that market.

For me, the Currency Strength Meter is just to get a feel of what’s strong or weak in the long run and short run.

How do you know when the trend has reached its exhaustion zone and it's ready for sideways action or market reversal?

For example, if the trend has been going up and respecting the 50 MA, but it starts to break the 50 MA and is no longer respecting it, then it signals to me that the dynamics of this market is changing.

This tells me that this market could go into a sideways action for a while. Whether it breaks out higher or down lower is anyone’s guess. But if it breaks out higher, then my bullish bias remains. If it breaks down lower, then that’s where I will take a bearish bias and possibly hold onto cash.

If a key zone or a key moving average that was previously respected gets invalidated, that’s usually the signal that this trend is having difficulty heading higher. Doesn’t mean it will reverse, but maybe it will need some time to pause before making the next move higher.

You mentioned a lot about having an edge, what defines an edge? For e.g. Price comes to a major area of support with a clean move and does a false break and reverse back up higher, and suppose if I trade that same setup over and over again and get success is that an edge? And many more trading strategies that you teach do they have an overall edge? Can someone's edge work for someone else? Or it's just a matter of consistency?

An edge for a discretionary trader can be split into 2 parts. A hard edge and soft edge. A hard edge is about the setup itself, does it give you a statistical advantage in the market?

When it comes to price action trading, there’s an element of subjectivity, because one person might think it’s a valid setup whereas another person might not. It’s only through your trading journal, that you know whether that trading setup works for you or not.

The soft edge is your psychology and discipline, whether you have the ability to adhere to your rules.

Yes, many trading strategies that I have taught have an overall edge, if not I would not be teaching them. But again, just because it has worked for me doesn’t mean it will work with all traders.

Some of them might not be comfortable trading the setup. Some of them, if I tell them to trade trend continuation, they might feel the price is too high and can’t bear to buy or pull the trigger.

Coming from a price action perspective, you got to take the concepts that I teach and tweak it and make it your own.

Someone’s edge can work for someone else, they can find similar success with it, but at the same time, they can take the same strategy and concept and find no success with it.

Price action trading is one way to trade the markets, and there’s this element of subjectivity that some traders cannot handle. They might want something quantitative. If that’s the case, they might want quantitative trading with no subjectivity, and just let the edge play out.

How profitable is your price action method and how’s your account growth like?

How profitable your trading method is, depends on a few factors:

  • The timeframe you’re trading on
  • Amount of risk you put on each trade
  • Account size
  • Number of markets traded

So it generally depends.

I have a trader, who has been one of my earliest students, been with me since 2015 or 2016. Recently I spoke with him, and he told me that he has been consistently profitable over the last few years. So, clearly, price action trading methodology has worked for him.

Then there’s another guy, CEO of Investagram, he’s not a student of UPAT, but he reads my blog and tells me that he follows similar trading strategies as I do and trade in a similar manner. He trades the Philippines stock markets. From what I last heard, he does about mid to high double-digit returns each year in the Philippines stock markets.

And of course, there are students who take my course but don’t find success with it.

Really, there are too many variables here to say how profitable the price action method is.

As for my account growth, to be honest, in my earlier years of trading, I had triple-digit account growth. But it wasn’t because I was a better trader back then, but it was because I was risking a higher percentage of my account per trade.

Over the years, my returns have mellowed down, and if I get 10% to 15% a year, I’m happy with it. It’s not because the trading strategies have stopped working, but to me, now price action trading is just one strategy that I use in my portfolio because I also use systematic trading.

There are many variables at play here and I wished I could give a definite answer, but it’s not possible in the realm of discretionary trading.

If you want something more definite, then you might want to look at quantitative trading where you can do backtest on a fixed number of markets, with a fixed risk, a fixed account size, so you can breakdown the numbers on a month on month basis. That will give you a good idea of how profitable a trading strategy is because there is no discretion.

Hi Rayner, I have finished developing and testing a trading plan and am so excited. The problem is I keep missing trades that meet my setup. How do you avoid this?

Every week, I publish market analysis on the potential setups that I’m going to trade for the week. I will list down possible trend continuation trades or breakout trades etc.

I also go to my Trading View platform and create a watchlist, and bookmark in red those few markets I want to focus on.

Some of you might be working, so what you can do is set alerts on Trading View or MT4 and get notified when the price has hit the level that you’re watching.

I read about the concept of demand and supply zone trading. Is that similar or different to your teaching on price action trading?

I have read about supply and demand, but I find it very similar to support and resistance. I find that support and resistance, there’s no need for me to incorporate supply and demand because they are so similar.

It’s like me using a 50 EMA, while another trade is using the 50 SMA, I just need to use one of them because they are so similar.

Again, I could be wrong, because I haven’t dived deep into supply and demand, and I have not really taken much of that into consideration.

For forex, many pairs correlate, some strongly, some non-related and some weakly correlated. How do you go about managing trading multiple pairs when some of them are strongly related? For instance, if you spot 10 trade setups, do you just choose to say like 5 and forgo the rest (assuming they're correlated)?

So for example, this week we have several correlated pairs like the Aussie pairs.

From a discretionary standpoint, I will not want to take more than two setups of a similar currency pair. So if I took a trade on AUD/JPY and AUD/USD, I would not take another Aussie pair.

Another way to go about it is if you want to take more pairs and you usually risk about 1% on each trade. If you have 3 setups, you can take all 3 but risk 0.5% of your trade each instead. So in total, you will be risking 1.5% to the Aussie pairs.

What do you think about Quasimodo setup fail became diamond?

To be honest, I don’t know about this so I can’t comment on this one.

Hey, Rayner let say the price is in a downtrend respecting 50MA, I saw most of them you willingly short when the price break below the previous swing low. Why you don't just short when there is the price rejection at 50MA? (I think you willingly do this when it is the mean-reverting market because you try to find false break setup near previous swing high).

Usually, if the price comes nicely into the 50 MA, and gets a nice price rejection, I have no issues selling at that area as well, especially if the 50 MA also coincides with the previous swing high.

Do you give more weightage to the 15-week ROC or 5-week ROC Currency Strength Meter, as sometimes the currencies do not line up?

Yes, you’re right, quite often, they will not line up. For me, the one that you should give more weightage to depends on your trading timeframe.

If you trade the lower timeframe, like the 1-hour or 4-hour timeframe, I would say the 5-week ROC would matter more to you. If you trade the higher timeframe like daily or week timeframe, I would say the 15-week ROC matters more to you.

Mainly, I use this as a feel for the market. If according to the 15-week ROC, the Aussie is the weakest, while the 5-week ROC shows Aussie being on top, and you might wonder what’s going on.

What it’s telling you is that, over the past 5 weeks, Aussie is probably having a pullback, that’s why it’s staging such a strong rally and the 5-week ROC is strong. But overall in the big picture, the last 15 weeks’ ROC for Aussie is still the weakest.

For this kind of condition, I will look for the retracement to end before going short, in line with the 15-week ROC.

This is how I use the Currency Strength Meter, to really have a feel of the different currency pairs out there. To me, this is secondary.

What matters most is:

  1. The trend
  2. Trading from an area of value

If the Currency Strength Meter complicates your trading, then just take a step back and go back to fundamentals. The trend really comes first.

Does price action trading ignore the fundamental aspect of a stock? For instance, Hertz (a company that is going bankrupt) is being traded heavily by some of the retail investors. If the price action trend of Hertz matches a strategy, will you execute the trade or will you avoid because the company is junk?

I’m a believer that the price leads the news. I’ve not looked at the shares of Hertz, so I’ll look at it now.

Let’s look back in time and assume that Hertz was one of the strongest stocks out there and I want to buy at that point.

At that $14.95 area of support is where I will look for a potential false break of that level. But that didn’t happen and instead, the market gapped down lower. So I’ll stay out and re-evaluate.

I’ll stay on the sidelines because the price has broken below the area of support and there’s no reason to be buying.

Even at this $12.55 area of support, the price managed to breakthrough after a small consolidation.

If you zoomed out the chart, Hertz has already been in a long-term downtrend. So really, the path of least resistance is actually already to the downside.

From a trend trading perspective, your trade should already be leaning towards the downside already.

So to answer your question, most likely I would take a short trade if I traded with the existing trend.

Take note that when a stock gets a lot of press release, it can get tricky because it can gap massively against you if there is news of privatization or acquisition. The stocks can gap up crazily. This is when your stop loss would have to be wider to consider those wild swings.

If you’re not comfortable, then just stay out of the market.

Again, the key thing I want to share is that the price leads the news. Even before the bad news came out, Hertz was already in a long-term downtrend.

What is the best way to set trade targets (take profit levels)?

If you’re a swing trader, you want to take profit before opposing pressure sets in. If you’re buying at support, then resistance or the previous swing high is where you want to take profits.

Hi Rayner, should we draw our support and resistance level/trendline from monthly to 4-hour timeframe even though I am trading off 4-hour timeframe as my entry timeframe and daily as my higher timeframe?

You can ignore the monthly timeframe because if you’re entering on the 4-hour timeframe, then drawing on the 4-hour and daily would be sufficient.

If you draw the area of support or resistance on the monthly timeframe, it could be a few hundred pips of difference compared to the ones drawn on the 4-hour timeframe. It’ll be difficult for you to trade off these areas if the difference is a few hundred pips wide.

Can I draw my support resistance on the higher timeframe either daily or weekly if I'm working off of 4-hour timeframe?

Yes, as I’ve mentioned above. The daily and 4-hour timeframe will be the most important ones to you.

Do you fund your accounts equally for both discretionary and systematic trading?

I have more funds in my systematic trading because of the circumstance that I’m in right now. For me, systematic trading is much easier for me because it doesn’t require much time and it allows me time to manage TradingwithRayner business. So for me, systematic trading eased the workload on me.

I still trade discretionary trading because I teach discretionary trading. I feel it’s only right for me to trade it and put money where my mouth is. It’s very difficult to do market analysis if I don’t have money on the line. That’s why I still do discretionary and answer to the price action students here.

What are the differences between those black and red level in weekly trading alert?

The black level is support and resistance drawn on the daily timeframe, the red level is support and resistance drawn on the weekly timeframe.

How do you screen for stocks or futures or currency pairs daily?

I do it on the weekly timeframe. I primarily trade on the 4-hour timeframe and above. A lot of my homework and planning is done on the weekends.

So when the market opens, I already know the setup that I want to be trading for the week. I draw the levels on Trading View platforms over the weekends.

How do I screen for it? I do it manually and eyeballing, since I know the setups I’m looking for, whether is it trend continuation trades or potential breakouts or false breaks, etc.

When to take profit or exit when the market didn't do as you expected? For example, if it goes on your favour but suddenly it comes back, do you take the profit or not, or still wait? In stop loss is also the same, are you gonna exit the trade even if the price is still not hitting the stop loss?

From what I’ve just read, it seems to me it’s about getting emotional about your trade. When you have a plan set in place, a pre-defined target, almost like a set-and-forget approach, then you shouldn’t be doing anything about it. It’s either going to hit your stop loss or take profit level.

However, I usually take an active approach like using a trailing stop loss.

For example, for swing trading, I have the first target. Then the second target is achieved through a trailing stop loss. If the price doesn’t hit my first target and then reverses against me, then I’m not going to do anything because my stop loss is already in place.

Let’s say the price has hit my first target, then I’ll exit my position partially and I will trail my stop loss for the remaining of my position. Then if the price hits my trailing stop loss, I’m out. If it continues to move in my favour, I will hold the trade until it hits my trailing stop loss.

Everything is planned ahead of time, so I’ll follow the plan. Don’t make decisions while in the trade because those decisions tend to be poor.

Hello Rayner! Regarding the risk management, we are advised to trade only with 1% of our capital for each trade. But what we do when we have, imagine 10 trading opportunities, if I enter these trades I will risk my capital 10%, that is correct? I can enter these 10 trades, or just enter one trade and wait to close the trade or eliminate the risk, and then I enter in the next trade opportunity? I'm asking this because in term of long term trading the probability to have more than 5 or 8 open trades is high, and I would like to know how to manage when we have a lot of trades opened and our account are exposed than more 1% of our capital.

You can split the risk among the few setups and so now you’ll have a reduced risk per trade.

Talking about trading timeframes, the lower timeframes, like 1-hour, 30-minute, or 15-minute, these timeframes aren't worth to trade due to the broker commission and spread or we just have too much noise and the strategies (like, false breakout, breakout, trend continuation etc... ) don't work so well?

For most major currency pairs, you can trade the 1-hour, 30-minute or even the 15-minute timeframes.

For example, you’re trading EUR/USD. Let’s say your stop loss is 25 pips and the spread is 1 pip. 1 pip out of 25 pips is just 4% of your stop loss.

As long as the spread that you’re paying is not more than 10% of the size of your stop loss, I would say it’s fair enough to take the trade.

Let’s say you have a 30 pips stop loss. Then that means the spread you’re paying cannot be more than 3 pips. So if the spread turns out to be 4 pips, I won’t take the trade as it’s more than 10% of my 30 pips stop loss.

This is one way to see which trade you won’t suffer too much due to spread.

For most major currency pairs, the spread is quite reasonable. And of course, you have to take into consideration your stop loss size. If you’re trading the EUR/USD, it can be a 1 pip spread. But if your stop loss is 5 pip, then that 1 pip spread is about 20% of your stop loss.

Anything more than 10%, I would usually skip the trade.

For exotic currency pairs, it’s usually worse as the spread is even wider. It’s hard to trade the exotic pairs on lower timeframes because the spread will eat up a huge chunk of your stop loss already.

So it’s not too much about the noise, but more because of the spreads that you end up paying that makes it less worthwhile to trade the lower timeframes.

Commissions, how we can handle the broker overnight rollovers swaps etc.? Sometimes we need to stay in the trade for several days, and our profits will be eaten every day by this swaps and rollovers, how do we handle this? Do we trade futures to avoid this? (Of course, sometimes we can go long and short and the swaps/rollovers are in our favour and that is good.)

If you trade forex, there’s really no way around it. It’s the cost of doing business.

Unless you pick trades that favourable rollover for you.

For futures and forwards, you can avoid this, like forwards on CMC, you don’t have to pay the rollover charges.

I want to know about best entries and exits, times to make money and which timeframes are the best to use.

There are no best timeframes or best exits. It really depends on your goal as a trader, if you’re looking to make a consistent income or to make a swing, capture a trend, etc.

From there, then you can choose the right tools and techniques to meet your needs.

There’s no such thing as the best one out there.

If I'm trading on the 1-hour timeframe, do I look at the 15-minute chart or 1-hour chart for entry? Which timeframe to draw support and resistance if trading off 1-hour timeframe, on the 1-hour or 4-hour chart?

If you’re trading off the 1-hour timeframe, then it will be your entry timeframe. What you can do is to use the 4-hour timeframe as your higher timeframe to get your bias.

You can draw support resistance on both the 1-hour and 4-hour timeframes, with the 4-hour acting as your higher timeframe, 1-hour timeframe as your entry timeframe. You can use different colours to mark out support and resistance

What is an appropriate timeframe for traders who would like to close the position before the end of the session?

Definitely below the 1-hour timeframe, probably the 5-minute or the 15-minute timeframe.

If you had to choose just 1 indicator, what would you use?

I will have to choose two, the moving average and the ATR. Because this is something that I use for my trading.

I use ATR to define the stop loss and the moving average to define the area of value, so I have to use both.

What are the preparations you do before the start of the trading week and how do you wrap up the trading week?

Identifying my setups for the week and create a watchlist on Trading View.

I wrap up my week by reviewing my positions, how did I trade, did I follow my plan, journal all these down, and that’s pretty much it.

Gaps on weekly charts vs daily charts: if I see a gap on a daily chart but not on a weekly chart, will the market still try to close the gap on the daily chart? - if the situation was reversed (cap in weekly, no gap daily), will the market try to close the weekly gap with ‘greater force’ because the gap is on a higher time frame?

The answer is, I don’t know. I have no idea whether a gap is going to be filled or not. I know there are textbooks that say that gaps have a 70% or 80% chance of covering, but I don’t find that to be true. That’s my honest answer.

I haven’t come across any reliable statistics that say a gap will be filled a certain percent of the time. A lot of it depends on the context.

Because if the overall market is in a strong uptrend, then it’s unlikely that the gap will be filled over the next few days, it could gap and go, and never come back.

Whereas, if the market is in a downtrend, and there’s a sudden gap up maybe due to short squeeze, then there’s a good chance the gap is going to get filled because the overall trend is towards the downside.

But again, I haven’t come across any statistics to say for a certain percentage of the time a gap gets filled.

Sure, people say the gap gets filled 80% of the time. But what if the gap gets filled only 10 years later? By then, you could have already blown up multiple accounts.

Multi-day engulfing patterns situation: the stock is in a downtrend and a series of large red daily candles have taken price into an area of support. Over the next three or four days after the last red candle, we see a series of small green candles with tiny wicks. If you visually consolidate the green candles into one large green candle, it looks like they push into 60% of the last red candle. On a daily basis, the reversal looks weak because each green candle is small (bulls lack conviction). But on a consolidated basis (higher timeframe), the reversal looks strong because the three candles have pushed into 60% into the last red candle. Questions: What’s the right way to interpret this, e.g. who’s in control bulls or bears? What are the trade strategy implications? For example, on the third small green candle open a long position (because one could expect a full engulfing pattern to emerge if two more small candles occur on days four and five? If so, should one the set stop loss at 1 ATR below the bottom of last red candle?

To determine who’s in control, it depends on the size of the wick. If the size of the lower wick is very long, then I would say the buyers are in control since they have already moved quite a long distance and pushed beyond the previous day candle by 60%.

Since the range of the candles is very small on the daily timeframe, then I wouldn’t trade it on the daily timeframe. If you want to trade this as a false break, then on the higher timeframe like the weekly, I want to see the price taking out the prior lows and then rejecting it strongly and then closing near the highs of the week.

If you’re unsure, then on the daily timeframe, you can watch how the price comes down lower, since you’ve mentioned that it has formed three green candles already. You want to see if the sellers have difficulty pushing the price lower or not, if yes, then it will look like a bull flag pattern where the pullback is relatively small.

That’s a good sign that buyers are coming in and taking control. I want to see the depth of the pullback, whether are they large or small candles to give me further clues.

But for your question, it depends on the setup you’re trading. If you’re trading a false break on the weekly timeframe, then you’ll just reference your stop loss using a swing low, using the lowest low at that point and set it 1 ATR below it.

When computing “strong” price rejection using the ATR method, do you include the wicks?

Yes, you want to consider the whole range of candles from the highs to the lows, including the wicks.

Counter-trend trading setup: how is this different to mean reversion setup?

If you’re referring to the mean reversion setup in Pro Traders Edge, it has statistical evidence behind certain markets that tend to revert at previous week’s highs or lows, or previous day’s highs or lows.

Whereas for counter-trend trading setup, it’s just simply trading against the trend when the price does a false break at the previous swing high or the previous area of resistance.

There's a line in the UPAT course that says, "look for clean moves into the market structure to avoid liquidity gap reversals". What do you mean by "liquidity gap reversals"?

Liquidity gap occurs when you see big moves in the market, where it swings up and down. Sometimes it’s due to lack of people participating in the markets, that’s why just a little bit of volume is enough to push the market higher or lower.

This spike is what we call a liquidity gap. There are not many transactions occurring at the point in time.

In a strong selloff, it could be due to a lack of buyers that caused the price to collapse into support. And if there’s a bullish price rejection or a false break setup, and you go long, then there’s a chance that the liquidity gap that caused the price collapse could be filled up as the price reverses up higher. This means the reversal could be equally swift to the upside.

This explains why I’m always looking for a strong power move into a level when I trade false break setups. Because the reversal could be equally swift in the opposite direction.

I tend to avoid stair-stepping price action into support. I rather see a strong bearish move, like what you see on Hertz earlier.

Does Heikin Ashi provide a greater advantage over candlesticks? Heikin Ashi makes the chart more readable. Will either of these two helps provided better technical analysis?

My honest answer is that I don’t use Elliot Wave or Heikin Ashi, I just have a very vague understanding of what it is. I wished I can comment more, but I can’t because I don’t use it.

I have quite a number of feedbacks from traders asking me to do videos on Elliot Waves or Fibonacci, but I’m not a trading encyclopaedia, so what I can do is to only share what has worked for me.

Should we ignore forex news in making our trading decisions because sometimes the expected outcome of the news does not necessarily reflect the movement of the pair?

Yes and no. If you’re a short term day trader, then the news is important to be aware of, because you want to get out of position before the news comes out, before the spread widens and you get stopped out of your trade for nothing. I think it’s applicable if you’re trading on the lower timeframe.

But if you’re a longer-term trader, trading off the daily timeframe, week timeframe, then you can just ignore the news. Because as mentioned, I believe the price leads the news, and everything is already embedded in the price.

And since you’re trading off the higher timeframe, your stops are wider, they will be more than enough to accommodate the swings that are created from news release.

Based on your experience, can you elaborate more on how the "bankers" manipulate the forex market? How do we identify and follow the banker's movement?

For those people whom I know, who trade for the banks, they trade as a market maker and provide liquidity to the institutions. I have no idea how they manipulate the forex markets.

Because for banks, their primary role is to provide liquidity to the institutions, the hedge funds. If the hedge funds want to buy a billion-dollar worth of EUR/USD, the bank trader has got to give them a price and see if the price meets the hedge funds’ needs for them to take up the offer or not.

That’s pretty much what bank traders do.

Do you recommend incorporating indicators into price action trading? If yes, what are the examples of indicators do you recommend?

Yes, I use moving average to define an area of value. I use the ATR indicator to help me set my stop loss. I also use the Chandelier Kroll Stop to help me trail my stop loss.

All these are part of my price action trading. They are just tools to help me manage my trade and define my area of value. They are not tools that form the basis of my trade.

Do we have to trade different pairs at a different time of the day (e.g. when the particular market is most active)?

This would be most applicable if you’re a short-term day trader. If you’re trading the Asian session, then the Yen pairs will move more compared to the EUR/USD or the GBP/USD.

If you trade the London, New York sessions, then you want to focus more on the volatile pairs like EUR/USD or GBP/USD which tend to move the most during those sessions.

But for a longer-term trader using the 4-hour, daily or weekly timeframes, it would be irrelevant.

In Chapter 6, to determine whether a market tends to trend or range-bound, the test was as follow: buy the breakout of previous day high, hold the long position until the price hits the previous day low and go short, then hold the short position until the price breaks above the previous day high and go long. I am trying to re-create this test and would like to clarify when you mention buy the breakout of previous day high, do you do so after the close of the next candle? E.g. Day 1 high is $10, day 2 high was $10.50, close was $10.30. 1. Do you buy on day 3 market open? 2. Do you buy on day 2 (intra-day) the moment it breaks $10? Thank you.

This test was done on an intraday basis, so the moment it breaks the previous day high, it will automatically go long. I believe the backtest was done on Multi Charts or Trade Station. I got a developer to help me with that one.

Hi Rayner, can you explain a bit about your trailing stop loss? Sometime back you used to base on the previous high/low, and sometimes it's the chandelier exit. Just wondering whether there is a particular reason for using different trailing stops.

I’ve now lean towards the Chandelier Kroll Stop because I find that it’s more objective based on the volatility of the market.

Previously I was using previous days’ highs or lows, but sometimes, the range of the candles of the previous day can be really large or really small and that’s not really very objective.

Because if the range of the candle is small, there’s a high chance you will exit your trade earlier. Or if the range of the candle is large, then your stop loss will be higher.

So I went with the Chandelier exit because it’s more objective as it takes into account the average true range of the market, I can use 3 ATR, and for me, it makes more sense.

Which is true: the more the price touches support resistance, the stronger it is? Or the more the price touches support resistance, the likelier it is to break?

My take is that the more times support resistance is tested within a short period of time, the more likely it is for support resistance to break.

In other words, if you see a descending triangle coming into support, there’s a good chance that support will break. If you see an ascending triangle going into resistance, there’s a good chance that resistance will break.

When doing a false break, is a price rejection of 1.5 ATR necessary?

It’s a good filter to define a strong price rejection. Ideally, I want something that is strong and my false breaks to be of 1.5 ATR.

It’s good to have it, but if not, I also look at other factors in play to see if I want to the trade. Especially if the higher timeframe is in an uptrend, and volatility is contracting in the higher timeframe, then I will still take the trade anyway.

Do we refer to your ranking.xls in future for trending markets to be used in the systematic trend following system?

No, I don’t use that, that’s a separate thing altogether, so don’t confuse the two.

How would you recommend systemizing the Ultimate Price Action Trader?

For price action trading, there’s only so much that you can do to systemize it and make it objective, like defining the 4 stages of the market, identifying the area of value.

But it’s not possible to make it 100% quantitative, because there’s an element of subjectivity over there. Because there’s no way to draw support and resistance, or trendlines objectively.

That’s why quantitative trading and discretionary trading are separate fields. If you want to learn more about quantitative trading, then that’s where the Ultimate Systems Trader (UST) comes into play.

There are different needs for different traders.

What system do you use to record your trades?

I use Excel to record my trades. Primary metrics that I use are:

  • Currency pair
  • Entry
  • Stop loss
  • R-multiple on the trade
  • Type of trading setup
  • The profit and loss

Have you done any backtest on the best way to exit a trade: to let winners roll or taking profits at set levels?

The similar testing that I’ve done are the ones on market behaviour. So certain markets have certain characteristics.

For example, GBP/JPY is a trending market. So whenever the price breaks above the previous day highs, there’s a good chance that it will continue. So in such markets, it makes sense to trail your stop loss because it has a trending behaviour.

But for markets like AUD/CAD, GBP/CAD which have a mean-reverting behaviour, where they tend to reverse after reaching its previous day highs, I recommend not to trail your stop loss, but to capture a swing instead.

I have not done any backtesting on the best way to exit a trade. Because different markets have different behaviour. If you want to take statistical analysis into consideration, you want to consider your trailing stop loss on markets that tend to trend, and then capture swings on markets that tend to reverse at previous day or week high and low.

I’ve just completed the course, and one of the things I’ve learnt is that the previous day high or low can be used as an area of value if I’m trading on the 1-hour timeframe. I’m wondering if relying on those levels is enough, or should I draw my own levels?

Yes, I would say, still draw your own levels as well. It’s good to have confluence, where your own support and resistance levels are aligned with the previous days’ highs or lows.

The previous day high and low are useful for those markets with mean-reverting behaviour, like AUD/CAD, GBP/CAD, GBP/NZD. Have a look at the market behaviour module where I shared which markets have a mean-reverting behaviour and which has a trending behaviour.

What happened to the Trend Following Mentorship Program? Is the system still valid for today’s markets?

I still trade the systematic trend following system, the breakout of the 200-day highs, with 6 ATR trailing stop loss. It hasn’t been performing well over the last few years, and that’s only one of the systems that I do trade.

The reason why it hadn’t been performing well is because systematic trend following tends to do well in a crisis period when the market is in a recession when the stock markets are not doing well, this tends to provide a buffer or a hedge during those times.

But over the last 10 years, the stock market has been in a huge bull run. This year, we had a 30% drop in the equities market and the systematic trend following did brilliantly during that period, I think it was up double-digit during the market collapse.

Now the markets have reversed into the all-time highs, and so the systematic trend following has given back quite a bit of the gains. That’s why I say it tends to do well during markets turmoil.

For mean reversion, do you still trade it if the market is trending?

What you can do is to look to buy the previous day low or the previous week low. You’re still trading the mean reversion element but you’re trading in direction of the longer-term trend.

When drawing trendlines on different timeframes, does the higher timeframe carry more weight? Once the trendline is broken, do you generally disregard the trendline?

Yes, the higher timeframe one carries a higher weighting because it will have a stronger price reaction.

Once it’s broken, I’ll try to adjust it. But if it’s really broken and destroyed, I’ll just remove it from the chart.

Can you recommend the best forex broker for people in India?

I wish I could, but I think forex is banned in India, so I think my recommendations will be limited.

But the ones I usually recommend are IC Markets or Blueberry Markets, these are reputable ones. I’m not sure if you can open an account in India.

Do you have the Mac version of the risk management application?

I think you’re referring to the risk management calculator Expert Advisor on MT4. Based on the programmer, she said it should work on Mac. If it doesn’t, could you write a ticket to support@tradingwithrayner.com and let’s see how we can work things out.

Any YouTube video on how to use the Chandelier Exit?

The Chandelier Exit is just a trailing stop loss tool, I think you can just do a search and see what comes up. I don’t have any video on it, so some other trainer might have to fill the gap on that one.

What’s the best strategy for Gold?

There’s really no best strategy out there, but what I can say is that Gold is a trending market based on our statistical analysis. This means that whenever Gold price breaks the previous day high, it tends to continue in that direction.

So that market is suitable to be trading trend continuation, breakouts, false breaks in the direction of the trend.

What do you think about the ADX indicator?

All I know is that the ADX is a trend indicator, but I don’t really understand the math behind it. So my comments on that are limited as well.

I wish I can comment on that, but my niche is really on price action trading and systems trading.

There are a lot of things I do not know, like for example, people asked me about Elliot Wave and Supertrend indicator, ADX, these are stuff that I do not know since I didn’t study them in-depth as they were not really relevant to my trading.

I believe there are materials out there to answer your questions, so have a look and see if that makes sense to you.

Do you trade the Singapore markets? If no, why?

I trade mainly the US markets for stocks and ETFs because US markets are more liquid, and I can semi-automate my trades using Interactive Brokers for the US markets.

US markets data are more readily available compared to Singapore markets, where getting accurate historical is something difficult.

What’s the best strategy for systematic trading?

There is no best trading strategy because no one strategy works all the time. Some strategies like systematic trend following favours crisis periods. Whereas momentum trading strategies will do well in a bull market, and it’s going to get crushed in a bear market.

So there isn’t the best trading strategy out there. Different trading strategy seeks to exploit certain behaviour of the market.

This is why I trade multiple strategies because there is no way to tell which strategy will perform well next year. I do not know, that’s why I diversify across different systems and strategies, and price action trading is just one of them.

Is the Trend Following Mentorship Program similar to the Ultimate Price Action Trader?

Yes, it’s similar, the TFMP actually came out first, before the UPAT. The materials are very similar.

For TFMP, I had a closer mentoring approach where I took in a small group of traders and we had more communication and group coaching sessions. But afterwards, I couldn’t find time to mentor and that’s why I branched off to UPAT, where it’s more of an online trading course.

But in terms of the materials, they are largely similar.

Which broker do you recommend for US traders?

It depends on what you’re trading. If you’re trading stocks, then I would say Interactive Brokers. Thinkorswim is pretty decent too.

For forex, I think the US has its restrictions as well, so, I have no idea. I usually recommend IC Markets and Blueberry Markets. These 2 are the better ones in forex and more reputable in terms of reviews. I’m not sure those work in the US.

I think you can open IG markets in the US, but their spread seems to be wider than the competitors.