Everybody likes to have enjoyable with hypothetical “Desert Island” questions. those the place you’re sitting round with your folks asking one another what you’d take with you or maybe who you’d take with you when you solely had ONE selection and needed to be banished to an uninhabited / desert island for the remainder of your life?
In at this time’s lesson, I wished to have a little bit of enjoyable but in addition focus on with you what I’d take with me if I might solely decide ONE buying and selling strategy for the remainder of my life. If I used to be going to a desert island (that had glorious web connection lol) these are the buying and selling instruments that I’d take with me…
Right here’s how I’d enter the market…
If I needed to solely search for ONE value motion sample to enter the market from, it could be a really apparent and highly effective one, one thing that after you perceive, is difficult to overlook…
What I’d be in search of is a pin bar or tailed bar, ideally a long-tailed pin bar. These are patterns with an clearly lengthy tail (or shadow), it doesn’t must be a “pin bar” per say, though it’s higher whether it is, however a easy tailed bar situated correctly will work too.
Let’s have a look at some examples of what I’m in search of on a day-to-day foundation out there concerning tailed bars and pin bar reversals:
Right here’s an instance of a long-tailed pin bar (promote sign) inside a down-trending market:
Right here’s one other instance of a long-tailed pin bar. This time, it’s a bullish long-tailed pin bar (purchase sign) that shaped at a key assist degree out there:
As we are able to see within the subsequent instance, pin bars typically give us very simple to identify entries into highly effective traits. Actually, a pin bar after a pull again inside a pattern might be my favorite value motion entry setup:
Subsequent, let’s try a tailed bar; a bar that isn’t fairly a “pin bar” however nonetheless primarily portrays and implies the identical factor. The principle distinction is the physique (distance between open and shut) of the bar will not be fairly as small as a pin bar’s in relation to the whole size of the bar:
From the examples above, it ought to be obvious what I’d be in search of if I might ONLY decide ONE entry sign to make use of for the remainder of my life. It also needs to be obvious WHY I’d select pins / tailed bars; they convey a vital message about what’s more likely to occur subsequent out there, in a really clear and highly effective means.
For a extra detailed tutorial on tailed bars, see my tailed bar buying and selling tutorial
For a extra detailed tutorial on pin bars, see my pin bar buying and selling tutorial
Cash administration
It’s at all times amusing to me that the majority starting merchants appear nearly fully involved with their commerce entries when actually the extra necessary a part of buying and selling is cash administration. Cash is made or misplaced relying upon how effectively you handle your trades and your cash, not a lot on how effectively you enter the market (though entries do play an necessary function).
No commerce entry technique or buying and selling technique can be full and not using a cash administration plan. A very powerful facets of cash administration for a dealer, are place sizing and danger reward. These are the cash administration parts I’d be frightened about for my “desert island” strategy.
Once I speak about place sizing, I’m referring to the variety of tons (in Foreign exchange) or the commerce quantity / variety of contracts / shares (shares) and so forth. We’re speaking concerning the SIZE of the place you’re buying and selling. Why is that this so necessary? Effectively, as a result of it determines how a lot cash you could have in danger; the bigger place, the extra money you’re risking. The opposite motive it’s so necessary is as a result of correctly adjusting your place measurement to take care of your total 1R danger per commerce, is significant to long-term buying and selling success.
To learn extra about place sizing, try my lesson on place sizing.
Danger reward is the opposite vital cash administration part. This refers to discovering a commerce’s danger vs. its potential reward, which you sometimes need at 1 to 2 or extra (Reward at 2 instances danger). It’s necessary to contemplate the potential danger / reward of any commerce earlier than you enter it, as a result of whether or not a very good danger / reward is attainable could affect your determination to take the commerce or not.
Discover within the instance under, the chance is 1R, the place R = the greenback quantity you could have in danger on the commerce. On this case, the chance is the space from the entry (pin bar low) to the cease loss (close to pin excessive) and the reward is about at 2R or 2 instances danger. It’s necessary to attempt to get reward of at the very least double your danger so that you just make the most of winners after they come alongside and so they’re large enough to offset your losers and nonetheless provide you with a revenue.
Within the instance under, we are able to see what it seems to be wish to plot out the potential danger reward of a pin bar commerce. Discover I’ve personalized the MetaTrader 4 Fibonacci software to point out danger vs. reward of any commerce setup. I’ve detailed how to do that in an article on the danger reward software, so verify that out to be taught extra. Discover, this pin bar sign set off a possible 5R winner…
Every day time frames and low-frequency
A buying and selling technique wouldn’t be full with out one thing to carry it altogether, the X-factor, so to talk. For me, that’s buying and selling every day chart time frames in a low frequency buying and selling strategy.
Such a buying and selling primarily implies that we’re targeted on the every day charts and we aren’t trying to commerce typically, as an alternative, we’re in search of high-quality setups (which are typically considerably uncommon). What this does is will increase our potential win-rate per commerce and thus provides us a greater probability of making a living over the long-run. It additionally permits us to extra simply preserve our feelings in verify and largely eliminates the potential to over-trade, which is usually the primary factor that kills merchants’ accounts.
Within the instance under, discover the pin bar entry indicators that shaped at a key assist degree, what I need you to essentially discover is that this was the every day chart (as are all the opposite charts on this lesson and most of my classes). If I used to be stranded on a desert island, I might enter this commerce lengthy and let it set for 1-2 weeks and spend that point…making an attempt to construct shelter and collect meals…and are available again to an enormous revenue. Maybe a bit too hypothetical of an instance (what would you do with cash stranded on an island? Pay pirates to save lots of you perhaps?!), however the level continues to be legitimate – Finish-of-Day buying and selling lets you cut back your time dedication and helps to subdue / tame your emotional responses to the market so that you’ve a greater probability at long-term buying and selling success, it’s a win-win!
If I used to be stranded on a desert island and will solely use one buying and selling strategy, it could be:
- Pin bars / tailed bars
- Cash administration
- Every day charts / end-of-day strategy
It actually is so simple as the three-point plan I outlined above, so cease over-complicating it.
To be taught extra about every day chart buying and selling and end-of-day buying and selling, try these tutorials:
Learn how to commerce ‘finish of day’ buying and selling methods
Every day chart time-frame buying and selling tutorial
Conclusion
Whereas at this time’s lesson dealt in a hypothetical state of affairs of being pressured to choose one buying and selling technique to take to a desert island for the remainder of your life, the knowledge and techniques mentioned will not be hypothetical in any respect.
The methods I mentioned above are how I commerce 90% of the time in my day-to-day buying and selling. The ideas are transferable throughout all forms of markets, from Foreign exchange to futures, shares and anyplace in between. They’re most relevant to the 1-hour time-frame and above, however as mentioned, I vastly want the every day chart time-frame to all others. So, regardless of the place you find yourself, on an island or a buying and selling desk, do not forget that the ideas mentioned right here and which can be expanded upon in my superior value motion buying and selling course, have stood the take a look at of time and can serve you effectively in not simply surviving… however in thriving in all buying and selling environments.
What did you consider this lesson? Please share your suggestions within the feedback under!
