The Only Trading Strategy You'll Ever Need

00:08:38
https://www.youtube.com/watch?v=e-QmGJU1XYc

Summary

TLDRThe video outlines a three-step price action trading strategy. Step 1 involves identifying market structure by determining if the market is in an uptrend or downtrend. This requires confirming higher highs and lows or lower lows and highs while validating lows and highs based on their break of previous market levels. Step 2 focuses on identifying supply and demand zones, which act as key levels of market activity. Traders are advised to buy at demand zones during uptrends and sell at supply zones during downtrends. Step 3 emphasizes risk management, requiring a minimum risk-to-reward ratio of 2.5:1 to take any trade, ensuring higher profitability over time. The video claims this strategy, when applied correctly, leads to consistent and profitable trades purely through price action without relying on any indicators or patterns.

Takeaways

  • 📊 Focus on price action without using indicators or patterns.
  • 📈 Determine market structure by identifying uptrends and downtrends.
  • ✔ Validate lows and highs by checking if they break previous levels.
  • 🛑 Only trade in the direction of the trend (buy in uptrend, sell in downtrend).
  • 📍 Identify demand zones in uptrends and supply zones in downtrends.
  • ⚖ Ensure a risk-to-reward ratio exceeding 2.5:1 for all trades.
  • 🚫 Avoid trades with poor risk-to-reward ratios, even if they meet other criteria.
  • 🔍 Mark zones using candles preceding major price moves.
  • 📉 Consolidation zones often signal supply or demand zones.
  • 🔄 Apply this three-step formula consistently for repetitive, profitable trading results.

Timeline

  • 00:00:00 - 00:08:38

    The video outlines a three-step trading strategy that has been consistently profitable when backtested across thousands of trades. The first step emphasizes understanding market structure by accurately identifying uptrends and downtrends, stressing the importance of validating lows and highs through price action. Without this understanding, the strategy will not work effectively. The second step involves leveraging supply and demand zones to time trades, focusing on demand zones for uptrends and supply zones for downtrends. Examples using actual charts demonstrate marking zones and executing precise trades with stop-losses and take-profits. The third and final step focuses on risk-to-reward optimization, requiring a minimum ratio of 2.5:1. The video concludes by showing how to implement this strategy repeatedly for consistent success in trading.

Mind Map

Video Q&A

  • What is the main focus of this trading strategy?

    The strategy focuses solely on price action, identifying market trends, and utilizing supply and demand zones without relying on indicators or patterns.

  • What are the three steps mentioned in the video?

    1. Determining market structure (uptrend or downtrend), 2. Identifying supply and demand zones, 3. Ensuring a risk-to-reward ratio of at least 2.5:1.

  • How is a valid low determined in this strategy?

    A low is only validated if it breaks the previous high. Without breaking the high, it is not considered valid.

  • What is the importance of supply and demand zones?

    Supply and demand zones indicate areas where price is likely to reverse. Traders buy at demand zones in uptrends and sell at supply zones in downtrends.

  • What is the minimum risk-to-reward ratio to take trades?

    Trades should only be taken when the risk-to-reward ratio is above 2.5:1.

  • Why should traders only trade with the trend?

    Trading with the trend increases the probability of winning trades by aligning trades with the market's overall direction.

  • How does the strategy identify areas of demand?

    Demand zones are identified as areas of consolidation or sideways movement before a sharp upward move. The candle before the upward impulse marks the lower and upper bounds of the demand zone.

  • Can this strategy be used in any market?

    Yes, the strategy can be applied to any market, as it is based on universal price action principles.

  • What should traders do if the risk-to-reward ratio is below 2.5?

    If the risk-to-reward ratio is below 2.5, traders should not take the trade, even if steps 1 and 2 are met.

  • What makes this strategy accurate?

    The strategy's accuracy lies in its systematic approach to trend identification, use of supply and demand zones, and strict adherence to risk management rules.

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  • 00:00:00
    I have a 3 step formula that I  ve backtested 1000 s of times
  • 00:00:03
    And every single month that I tested  it, it was profitable in the long term.
  • 00:00:07
    No indicators, no patterns,  just pure price action baby.
  • 00:00:18
    And by the end of this video,  you too will know this strategy.
  • 00:00:21
    And will be able to take calculated trades just  like this one and make insane amounts of money.
  • 00:00:28
    To jump right into it, the first  step involves market structure.
  • 00:00:31
    Now, this is arguably one of  the most important steps.
  • 00:00:34
    Because if you even slightly just slightly fk  this part up. It will ruin the whole strategy.
  • 00:00:38
    *meme* One of the very first things you
  • 00:00:43
    learn as a trader is uptrends and downtrends. Its almost the sippy cup of trading.
  • 00:00:48
    A chart that makes higher highs  and higher lows is an uptrend.
  • 00:00:51
    A chart that makes lower lows  and lower highs is a downtrend.
  • 00:00:54
    Simple enough. Everybody know this. Now you may be thinking.
  • 00:00:57
    Why are we even going over this?  I already know all of this.
  • 00:00:59
    Well, what if I told you, you re probably  doing all of this completely wrong?
  • 00:01:03
    Let me explain. So going back to our example.
  • 00:01:05
    The chart does this, making  higher highs and higher lows.
  • 00:01:08
    And as we already stated, its an uptrend. Okay.. But then something interesting happens.
  • 00:01:13
    The chart starts heading downwards. Which in the process, price makes
  • 00:01:16
    this low, and breaks right through it. And this exact point, is where I see the
  • 00:01:20
    majority of traders make the mistake. Since price broke this low,
  • 00:01:23
    a lot of traders think we are now in a  reversal and price is in a downtrend.
  • 00:01:27
    So they start looking for short trades because  they now think price is going to head lower.
  • 00:01:32
    But what if I told you this chart is  actually still fundamentally bullish.
  • 00:01:38
    *crowd gasp* You see, sure price made this low.
  • 00:01:40
    But this low is actually not a low  at all, or at least a valid one.
  • 00:01:44
    Why? Because price never broke
  • 00:01:46
    the valid low which is right here. *switch up*
  • 00:01:47
    You see, the only way you can get a valid  low is by breaking the previous high.
  • 00:01:48
    If price did something like this, where  price didn t break the previous high.
  • 00:01:48
    This would not be a valid low. I want to make this clear
  • 00:01:49
    In order for a low to be validated.  It needs to break the previous high.
  • 00:01:53
    If you do not understand this part of the  strategy. The strategy will not work.,
  • 00:02:02
    So say if price does breaks this high, we  now know this is the valid low. Okay good.
  • 00:02:08
    So now price is in an uptrend. Which means,  we should only look for bullish trades.
  • 00:02:12
    The only time we should start looking for  short trades is if price breaks this low.
  • 00:02:16
    It can do anything right here. It can go up, down, sideways.
  • 00:02:19
    Literally anything as long as it doesn  t break this low. We are in an uptrend.
  • 00:02:23
    So if price did this. What are we in?
  • 00:02:23
    Well a lot of people would say downtrend,  because we broke this low right here.
  • 00:02:23
    But like I said before, a low is only  validated if it breaks the previous high.
  • 00:02:23
    Which this low did not break the  previous high. So its not validated.
  • 00:02:23
    So we are still looking at our  previous low. Which price hasn t broke,
  • 00:02:23
    so we are still in an uptrend. Now say if instead of doing this,
  • 00:02:25
    price did end up breaking upwards. Since price did break our previous high.
  • 00:02:28
    Our new low will be transferred  from this point, to this one.
  • 00:02:32
    I know it can be slightly confusing But the main thing you have to remember
  • 00:02:32
    is the only way a low is validated  is if it breaks the previous high.
  • 00:02:32
    If you remember that one simple rule,  you will easily be able to identify
  • 00:02:32
    if we are bullish trend or a bearish one. So that s the first step. Identifying if we
  • 00:02:34
    are in an uptrend or a downtrend. So whats next?
  • 00:02:37
    That would be step 2 in the formula. Step 2 is identifying supply
  • 00:02:41
    and demand in the markets. Demand zones take place in uptrends.
  • 00:02:44
    Supply zones take place in downtrends. A good style of thinking is you want to buy from
  • 00:02:49
    demand zones and sell from supply zones. The reason why you want to
  • 00:02:51
    buy from demand zones is this. Here if we look closely. The market is going up.
  • 00:02:54
    Since we saw a large push from  the beginning of this move.
  • 00:02:56
    It simply shows us that a lot people  wanted to buy from this point onwards.
  • 00:03:01
    So we can assume, if price  comes back down to this area.
  • 00:03:04
    Traders will have the same style of thinking  and want to buy in this same area again.
  • 00:03:11
    A supply zone is the exact opposite.
  • 00:03:14
    Since we saw a large downwards  move from this point on.
  • 00:03:17
    It shows us that a lot people  want to sell at this area.
  • 00:03:20
    So if price ever retests this zone we can assume  price will again move downwards from this point.
  • 00:03:26
    This supply and demand theory  is the core of our strategy
  • 00:03:28
    But We still have one more  step in our 3 step formula
  • 00:03:32
    But lets put all that we learned so far  to the test on a real life chart example.
  • 00:04:30
    So looking at a real chart. We see price moved upwards
  • 00:04:33
    Came down, and then broke this previous high. Which means we have higher highs and higher lows.
  • 00:04:38
    Meaning we are in a . uptrend. Since we are in an uptrend.
  • 00:04:41
    We only look for long trades. WE DO NOT look for any sell positions
  • 00:04:45
    As shorting in a uptrend is just silly. *meme*
  • 00:04:48
    Since this low broke the previous high,  this is our valid low and price will only
  • 00:04:53
    be in a downtrend if it breaks this point. So now that we know we are in an uptrend,
  • 00:04:57
    we want to look for demand zone opportunities. We can find our demand zones by finding an area
  • 00:05:02
    of consolidation or a point where price moved  sideways before having a sharp move upwards.
  • 00:05:07
    As you can see from this chart  we had some consolidation right
  • 00:05:10
    here. The price shot straight upwards. How I like to mark my demand zones is marking
  • 00:05:15
    the candle right before the impulse move. So grab your rectangle tool on the side.
  • 00:05:19
    Find the area of consolidation  before the big move.
  • 00:05:22
    Then mark from the low to the high of  the previous candle before the big move.
  • 00:05:27
    This is our area of demand. Again, we are not even considering areas
  • 00:05:31
    of supply because we are in an uptrend. So we don t need to worry about that.
  • 00:05:37
    We wait for price to re-enter into this  zone and this is where we would enter.
  • 00:05:41
    Set your stop loss right below the demand zone  and set your take profit at the recent highs.
  • 00:05:46
    Boom we got an easy trade. So that s an example of one winning trade.
  • 00:05:51
    But I want to show you just how  accurate this strategy really is.
  • 00:05:54
    So lets break it down with a real chart example. Here we get an uptrend, because price is making
  • 00:05:59
    higher highs and higher lows. As we can this low is what
  • 00:06:03
    broke the previous high. So, this is where price need to
  • 00:06:05
    break in order to be in a downtrend. Which is exactly what happens.
  • 00:06:10
    So now we are in a downtrend and we only  look for areas of supply or short trades.
  • 00:06:15
    So we mark our areas of supply. Price comes back up this area of supply. We
  • 00:06:20
    enter. Set our stop loss above the area of supply.  And set our take profit at the recent lows.
  • 00:06:25
    Boom easy winning trade But wait! we re not done
  • 00:06:29
    Price created another area of supply up  here and we re still in a downtrend.
  • 00:06:33
    So we wait for price to come up to this supply Enter
  • 00:06:36
    Set our stop loss above the area  of supply and target recent lows.
  • 00:06:40
    Another winning trade. But again, we re still not done.
  • 00:06:43
    Price created another area of supply. Wait for price to come up to it.
  • 00:06:47
    Set stop loss above the area of supply. Set take profit at recent lows.
  • 00:06:51
    And again we got another winning trade But wait theres more
  • 00:06:54
    We got ANOTHER area of supply Wait for price to come up here again
  • 00:06:58
    Set you stop loss and take profit. And we got another winning trade.
  • 00:07:02
    That s the power of this strategy. Its extremely accurate for one.
  • 00:07:05
    And two, you are only trading  in the direction of the trend
  • 00:07:08
    Which raises the probability of  you winning a trade by a lot.
  • 00:07:11
    So now that you know just how  powerful this strategy really is.
  • 00:07:15
    Lets go to the third and final step on  how to improve this strategy even more.
  • 00:07:19
    Our last step involves risk to reward. Sometimes while using this strategy,
  • 00:07:23
    you ll get a trade that checks all of the boxes. But when you setup your stop loss and
  • 00:07:27
    take profit. Its has a low
  • 00:07:28
    risk to reward like in this example. We only want to take trades if the
  • 00:07:32
    risk to reward is above 2.5:1 Mean for every $250 we re
  • 00:07:37
    getting back we re only risking $100. So even if the chart follows both step 1 and 2.
  • 00:07:43
    But the risk to reward is under 2.5. We do not take this trade.
  • 00:07:47
    This one rule increases the profit  rate of the strategy by a ton.
  • 00:07:52
    So for our final example we have price  making higher highs and higher lows.
  • 00:07:56
    Meaning we are in an uptrend so  we only mark our areas of demand.
  • 00:07:59
    Price consolidated right here before  shooting upwars. So we mark this area.
  • 00:08:04
    We wait for to come to this area again. Enter.
  • 00:08:08
    Set our stop loss below the demand zone. Set our take profit at the recent high.
  • 00:08:13
    Last step is to check our risk to  reward and make sure its over 2.5.
  • 00:08:17
    Which in this example its 3.  So we re good to go there.
  • 00:08:20
    If its anything under 2.5,  we do not take the trade.
  • 00:08:23
    Wait for price to play out and we  get a beautiful winning trade.
  • 00:08:27
    Then we just repeat the process Forever ..
Tags
  • Trading strategy
  • Price action
  • Market structure
  • Supply zones
  • Demand zones
  • Risk-to-reward ratio
  • Trend identification
  • Uptrend
  • Downtrend
  • Profitability