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All trading can be summed up in the following manner, and this is super exciting for me, I love, I’m really, okay, just going to shut up now. All trading can be reduced to two things, this happens, then this happens and let me explain what I mean by that. Suppose that price on your favorite stock, or currency, or whatever else, has crossed a 23% fib retracement level. I don’t know if that’s a system or whatever, we’ll take a look at this in the member video today. Excuse me. We’ll take a look at this in the member video but let’s say the price crosses the 23%. So this happened, price crossed the 23%.
Then, your job as a trader, our job as traders, is to then say, this usually happens next. Price continues to the, let’s say 50% retracement level. All trading can be reduced to the following observations. You identify that something has occurred, some event has taken place, like a fib crossing, price crossing a 23% fib retracement level and then you answer the question, what usually happens next and most people don’t know the answer to this. Most people focus everything on, hey this just happened and then they’re like pressing buttons all over the place and that’s ridiculous. That’s absolutely ridiculous.
A trading system, or a trading lifestyle, or success as a trader is reduced to this. This just happened. Now, I’ve identified that over the grand, historical price action that I’ve looked at, this usually happens next. I’m going to put the word next in there. This usually happens next. Price continues to 50% and then that’s a system and your job is to wait for this to happen, price to cross the 23% and then continue on. That’s all you have to wait for. Then, you start to wait for a bunch of catalysts to occur that lead you to make decisions, and then you can even automate your system or start to semi-automate your system.
Once again, what most people focus on and they get wrapped up in this and they get obsessed by it, is learning everything, this just happened, oh this news event just came out, or this economic report just came out, or Apple just announced a new toilet, the iPod or whatever, and everybody just goes absolutely bananas about everything that happens. But you can’t be interested in everything that happens. You’ve got to reduce it down to a few things that you’ve identified are cause and effect or have a relationship. Maybe it’s not cause and effect, but usually price moves in a certain direction for a certain time and distance, when something happens.
So another example would be, down here, another example would be, let’s say that there are five timeframes that are divergent all at the same time. Let’s say a one minute, five minute, 15 minute, 60 minute and 240 minute chart are all divergent at the same time and the stars are aligned and the planets are lining up, right? Okay, so this happened. It’s not going to happen all the time and your job is to identify things that aren’t going to happen often, that are going to have a high probability of leading to something else.
So let’s say that five timeframes are divergent at the same time, then you get a reversal of X percentage, a retracement. So you identify that something happens and then you identify or you observe that a reversal usually happens. Everything comes down to this, and you might be asking yourself, what’s the big deal? I already knew that. Well, here’s the big deal. Nobody does this. Almost nobody does this. Even if some people sometimes get a cause and effect between something that happens here and then what usually happens next, then they don’t follow it. They say, “Well, that doesn’t make me enough money, or that’s just one simple system. It only fires off once a month.” Or whatever, and then they just blow up their trading account focusing on all kinds of new things that are happening and that’s ridiculous, and that’s stupid and I want to encourage you to not do that.
Successful trading (and business for that matter) is really a matter of following a simple 2-step formula: 1) Something just happened; 2) This is what usually happens next. It’s easy to make stuff complicated – but the real success (for traders) comes when you simply decide what events you’re going to focus on, and then what you’re going to do about it. #trading #daytrading #forex #stocks #technicalanalysis #money #success
So what I want to encourage to do is, get into the habit of making notations and observations about this happened, and then this usually happened next by doing back testing or observing or scrolling back through your charts over hundreds of examples. And you want to have for any given setup or whatever, you want to have 100 to 200 examples of what can happen and then show what usually happens next. It’s all about probabilities, it’s not going to happen every single time but a trading system and trading success, can be reduced to those two elements.
Thanks for watching, I’m glad you’re here. Don’t forget to click the subscribe button if you’re on YouTube or down below if you’re watching on my blog and subscribe to my YouTube channel for videos like this every single weekday. I’ll see you next time. Bye for now.