PRO Trader Reveals Super Simple Trading Strategy (How The Markets Really Move)

0:00 welcome everyone back to Chart Fanatics the go-to channel for all of your best strategy and concept breakdowns with the very best traders in the world Talking of which today we have the honor of welcoming back We've done a podcast episode and everyone was requesting the strategy The strategy that is so easy that a child could use it Well today you get to see that strategy firsthand with the man himself the founder of DND Capital a traditional prop firm here in the UK is the one and only Rajan D Thanks for having me I had to come back RZ after all of those questions didn't I i was getting bombarded I can imagine I can imagine You know it wasn't my fault You know I honestly thought that we to be fair we went into it but obviously there's no charts so it's it's hard to visualize So I think people wanted the charts So here we are I fully blame

0:47 you for that It was all about the title but no it's all good I'm happy to come and and explain Well people really enjoyed that episode you know we got to talk about your journey and the common practices of a professional trader and someone who's again leading the way in terms of UK prop trading as well but today we're going to go into that strategy So where where's the best place to begin i think if I just explain the ethos and how how it all began So obviously you you guys know that I've done the STA stuff We've had Axel on and all of that So um I I was um teaching at the London School of Economics for the STA So I was kind of like the teaching assistant I covered some subjects like GAN theory and stuff But what was really good about it was I get I got to watch all of the lectures over and over and over again probably like eight or nine cycles of this at um

1:33 LSSE So I got to know all of the the lecturers like you know Clive Lambert Jeremy Duplexi you know all of all of these guys who were top in their in their field and obviously that that helped me quite a lot as I was going through it But one subject that that really picked me up was the the market profile subject Now I did explain that like I am a statistical analyst but I use technical analysis but the the fact that it went through market auctions was was a key thing for me So if we can break this down to simplest form which is what I like to do all of the time Imagine we're going to a car auction or an auction for a house Um essentially somebody throws in a price right and then they they bid it up bid it down you know then go through it That's exactly the way that I see the markets every single day And uh going back to you know the rice traders in Japan

2:22 and you know how Steve Niss's book on candlestick patterns came about and all of this kind of stuff It was literally that like the market traders used to go there and you know even today there's a price discovery that price discovery mechanism is is how genuinely I trade every single day So that was kind of really what I wanted to explain Love that I love that I'm excited and I know everyone at home is as well And uh well how visual are we going to get today yeah I know To be honest I want to explain uh what what it looks like on a on a on the whiteboard and then bring it up to the charts a little bit later because I think that the visually it makes the most sense like to to kind of draw it out and and kind of see how we go So let's let's get going with that All right So um what I'll do is I'll start with just obviously you know if we look at a a daily candlestick first of all Okay Um and I'm not going to going to make this super basic for for everyone

3:10 because I know everybody's going to be able to find out what candlestick is but obviously you've got you've got the low of the day Yeah you got the high of the day and then this here is the main body where you've got the opening and closing prices So say this is an up candle and it's up for the day You've got the open here and then you got the close here Yeah So literally I look at a daily candle as being my most important information the data in the daily candle is what I really need to know Now if at the opens here and the close is here and let's say we're drawing a line graph it's going to do something like this you know all day to to get to that point That's what that line graph is going to do to give us this information for the candlestick But it's this information in here is where my trades are going to be placed But I I use the information of yesterday's auction

3:57 and the current price action to to make those decisions So as as I get this information every day if something rejects a high or rejects a low that's going to be really really important for me So if again if we look at this like I really look at this really simply like milk handbags shoes sugar whatever you're going in the shops the way inflation is now let's say like in America they're having the issues with eggs or whatever If obviously we're having issues with supply you know we we're going to get auction is going to get higher throughout the day you know orange juice at the moment or what was going on It sold off very heavily We were really really high at the point where the prices are too high People are going to start to produce too much more and then supply is going to kick into the market and then it's going to sell off Right essentially every single

4:42 day this is on my mind And that's the that's the bare bones and the start of the strategy The actual strategy is even simpler than that So I just wanted to explain this is on the daily candle right this this this would be a daily candle And this this gives me my ideas for the following day So like nine times out of 10 and I'll probably say let's say let's maybe put this down to 80% of the time If the previous day is long I'm I'm actually looking for longs the day after I'm not really I'm always going with the flow of what the auction's telling me I'm very rarely looking for mean reversion strategies or something like that unless it's a mean reversion strategy in a larger underlying trend So I'm always looking at this sentiment where is this auction going from the day the week and the month i'm always thinking about that for my next day trade And should you

5:28 be looking at the bigger picture uh yeah I do look at the bigger picture but most most of the time I'll draw down into yesterday's price action Yeah So now we've got this out the way in regards to what the daily sentiment means and what the actual candle means We then look at let's say today for example after yesterday sentiment was really poor in the S&P 500 yesterday We had a huge sell-off isn't it by the end of the day So I'm then going to look at what Europe is telling me what's going on with the data you know we've got inflation data tomorrow and stuff like that Well with that all that new information that I've got coming into the session after a big sell-off day yesterday are we gapping down today is the auction starting lower you see what I mean so then there's always this this is the first clue The first clue for me is like yesterday okay we had a bearish

6:14 auction today our sentiment is already starting really poor where are all of the big stops uh stocks opening up for the session where are the first trades and that's a huge advantage of having the pre-market data that we get We get pre and postmarket data So we can watch the the ticker tape and the the flow of all of this before the market opens to get ready for the market open to see what the feel is So yesterday I was trading Google I had a Google short I believe and um I won the trade but um as I was leading into the session I could see every time I was getting bit up there was a huge seller in there and it was coming down and then like basically even prior to the open cuz I watch it like very very carefully um I was seeing gaps down gaps down into into the and you know I was sitting there thinking and sometimes this is a like this is where the

7:02 gremlins the trading gremlins get you thinking if I enter that pre-market I would have won it by the time the market opened you know I could have done that But um I obviously waited and it worked out fine for me yesterday But that all came from the auction When you say the auction is that at the market open or is that just throughout as well yeah So the I I will look at it in most trends So like the let's say for example we're heading into Europe uh US open I'll look at the European one first and see how it goes And because we got the futures markets as well we can look at 24-hour charts and stuff leading into it So So I will take that into account as I'm heading into the to US Open But I do only really trade for the first hour of the day Incredible So is that part of the strategy as well first hour timing So So let's let's then simplify it again because obviously that's that's what I said a 5-year-old could do it right so I'm going to use all the colors So So

7:48 um uh essentially because we're going down at the moment I'm going to do it in a downtrend right so if we've got like this nice wave pattern down and then all of a sudden you know we got we got this into heavy Of course in the past I'm going to take I'm going to take a look at the the massive support and resistance levels and round numbers I will I will take that into account but um we we often see them break more often than not So like Tesla have had a massive level recently on the longer term charts the weekly charts and stuff but it crashed through yesterday You know we were down 11% in the end Tesla So um so then we've got we've got this So let's just say that this is the price Okay Then what I've got running through it are like my moving averages but mainly because I don't really use them for for indicators I just use them to smooth out the trend So if something

8:34 on my two time frames which are my daily and and five minute if something's moving below the moving averages I'm only shorting Yeah So you're looking at daily and five Yeah So daily is your sort of bigger picture That's my anchor chart Yeah The bigger picture chart Yeah 100% And then um and then the five minute is where I trade Five minutes is where you trade Yeah Anything in between that you look at or just just from daily down to five I tell I tell you why why I do that Because obviously I use the gaps So um if if the stock market closes at a significant low or something like that I don't want all that muddled up data that comes in everything in between I want to know where the market took it at the close and where the market's going to bring it at the open So that stuff in between um I I actually don't even want to really know about Yeah because um because

9:21 that's sentiment that adds to the sentiment for me So So you think it's beneficial because do you feel like a lot of people they hear top down analysis and they believe that they have to go through each time frame a lot of the time creating conflicting sort of ideas and exactly that I I think that if I was trading a fiveminute chart and I was looking at monthly and weekly levels I could easily win a trade within that parameter So I even even though the monthly level is there or the weekly level's there the the trade that I'm looking for is generally about like$1 or $2 difference in the price most of the time If it's um Tesla and Meta they're high beta so they won't be more than that They'll be five or $6 but that's not going to make a lot of difference to that monthly level Most of the time when you're testing a monthly level or week level it'll trade for it anyway to come back and close above And I'll I'll be I'll be winning the trade in that

10:08 in that portion So it that's why it doesn't make a difference to me Hey guys just a very very quick one If you're enjoying this playbook and you want to get it sent directly to you make sure to go on chart fanfatics.com put your email in and every episode we drop we will send you a direct PDF breaking down this exact playbook or alternatively also the playbooks will be put all together with the rules over on Tradezella That is an incredible collaboration So if you want to actually add the playbook to your trade zella make sure you go check that out as well But let's get back into this episode So going going back to this right so we've got the the moving average which is in the purple We've got the price data that's what would be the that's in the red moving average wise So normally like depending on the time frame it will be between a 50 and a 21 Okay So it's quite

10:54 short It's a short moving average because I I'm a day trader so I trade in and out quite quickly So now we've got this auction So this auction right it looks it looks really simple when it's laid out like that But you know I'm throwing in what I think about that level there is really interesting when you get this because obviously you've come in the price has stopped there You've got an area of congestion here and it's come back to test it before we go down Yeah That's the auction area in theory Okay Okay So we're flowing down We've got the auction area Now anything that kind of comes into there and then we get a bearish candle pattern down I mean when I said it's that simple it really is So this this there the chart on the daily often mimics the five minute chart for me to take a trade They normally have to look quite similar If if the um the daily chart is looking

11:44 like this but the five minute chart is looking like this I'm not tra I'm actually not trading that Okay i'm only trading it if it's got the same kind of you know 45 degree angles on the way down I'm I'm trying to match them as much as possible because when we say like swim with the tide that's what I mean I'm only ever dailies like this 5 minute is like this and then within your time window it starts to then do the 45° Is that when it's then inflating correct Yeah Because then the thing is is that as well if I change the colors on this I'm going to reverse them This is going to happen with that moving average Right And then it will start going like that So then when this price starts to catch up and get underneath the moving average that's when I'm looking at that trade Okay So um so the the indicator isn't an indicator for me to take a trade It's just an indicator

12:31 for me to make sure look I'm on the right side of the tide both directions on the daily and the 5minut Yeah So you want that correlation between the two Correct And then like bringing this all back to how it comes around with the auction is because we get data throughout the day We get price earnings data there may be some news you know things like this like Cisco systems had had um data last night post market this is a picture that's evolving so um this week obviously we got the CPI coming up on Wednesday and then on Friday we got Michigan inflation expectations now Michigan inflation expectations on every calendar is normally quite low on the on the significance but last time it came out we saw one hell of a drop because it came in really high so as this information kicks in that's what that auction's going to do for us if we see like all of a sudden

13:17 all of the MAG seven dip below all of the moving averages when the underlying trends are going down Anyway we're we're looking to catch those bearish candle patterns that look a little bit like that in in an across Right so it it is it is really simple And when I mean bearish candle patterns we could be looking at you know shooting star formations bearish engulfing candles anything that can take the price into an underlying trend You say it's less so about the pattern itself in terms of the you know terminology used or how it's presented It's the I think that's where a lot of people get caught up is they focus on that when in reality it's just what that represents Yeah So we call it the candle matrix So like uh like I said to you in the last podcast when you do this so often you you're you're like looking at a one minute chart or a 5minute chart And you can add that puzzle together to make up what a 10-minute chart is doing or what an hourly chart is doing

14:06 You don't after a while you don't you don't need that stuff So essentially if we're looking at the the candlestick pattern itself So let's say that there is the up candle that's coming across and let's use this one for the down candle We've then got this and a small rejection to the upside Yeah Literally right If this down candle breaks the low of the other one you know that's enough for me Something something as simple as that What time frame would that be that would be on my trading time frame like the five or but then from that you know with your experience on the one minute that's a break of structure right without having to go there and get involved in all those emotions and and sort of messes Yeah And then you know even even breaking it down so everybody understands it a bit more because it's such a fluid um kind of trading exercise like you know my stops you know

14:55 are are basically in around the candle structure high Yes So then I'm you know I I always go for positive expectancy So I always go for two to one on every single trade that I'm I'm in So this is the first part The whole the whole part of that is that let's see how we can boost our odds in our favor So if we're looking at a market like Tesla that's just taking a huge dive at the moment it's not going to happen forever but if it's taking a huge dive at the moment on the daily charts right on the five minute charts it's still trending down in that We then come back in to test what what we call like the value area or the area of congestion that we're coming in What's what's the auction area if as long as we're under there and we're getting some bearish candle patterns you know I'm I'm good So just to be clear in terms of the auction is the auction everywhere really

15:41 in terms of every candle but the auction area is where it's as you say most congested meaning the area that seems to be the the mean the average of where price action is interacted for that day or whatever time frame you're on Yeah correct So if we rub this out for a second for for those of the people in the world that may not have seen another chart type because everybody focuses on candlestick patterns right so uh with market profile right so like what what we do with market profile it goes a a a a whatever like that right for the first uh for the first half like for the first set of trades right then what will happen is on depending on your designated time frame would normally do this for half an hour okay if the price goes up from where A finishes So let's say the last let's say for this period for 5 minutes that's where it ends B will be here B and

16:32 if it breaks out B will be up there Okay Okay Then let's say B finishes here and it stops at this it will be then C C like that And then it will carry on D like that So let's say this happens Yeah Um and then let's kick in E like that And let's say the price finishes there for that This area here is the time where price spent the most amount of time Yes Yeah So that price there is where the the price will spend the most amount of time That's effectively the value area If we were looking at this in chart form it then does something like this It goes all the way up there Then it settles down there And that's what the chart would look like with this particular price action That's an auction Mhm We started the day lows Market went up up up It found a high It settled in around the

17:22 middle Yeah So the auction area is this This is the congestion area is this So that's And would these be like would you be seeing orders here like numbers in orders correct Because like with a footprint ch they actually write the orders in the numbers in here of how many how many longs and how many shorts are here Now as an equities trader it's it's a big skill but you can obviously watch the tape and you can watch uh the order book and you can see let's say for example this is like 500 or something like that in spy You could see like a lot of people coming in at 500 or whatever There's a lot of orders there Automatically this will be the volume profile area and it will be the area in which the the participants in the market will place the most amount of trades Yeah And it will become a magnet That's why support and resistance levels exist That's the whole point of them you know is it gets there there's going to be a reaction there because there's the most amount

18:09 of orders there So in my mind then if we're long on spy if we're using this as an example for spy and we're talking about the level of 600 at the moment If we're long and we're trading above 600 this has happened at 600 right as long as we're above 600 and the trends long on both time frames I'm going in that long direction because all I've done is just stack those odds Get that positive expectancy that edge is slightly in my favor That's all I'm trying to do Tip that even if it's 5% 1% 2% That's all I'm trying to do And really what you're doing as well based on this is you're are you scalping would you say day trade um do you know what it's actually not not as much of a scalp as as some of the other guys like Lance etc All of those guys I take one trade a day Mhm So um normally if if my stop on something like Google or or whatever it is is like 60 I'm normally aiming

18:59 for $120 So that could probably take about on average my trades last about 4 to like eight or nine minutes So they're not very long I'd say scalp Yeah Is that Yeah If that's a scalp that's a scalp But I've got another trader like in our trading room like you know who who trades like literally like 10 cent stops to 40 cent targets like all day or a minute or two Exactly So So I see him as a scalper I know It's so interesting and I think it's a really great point actually It's like perspective right um you know someone might sit there and say scalping doesn't work I had that recently to be fair I guess and a lot of people get annoyed when in reality what I've noticed and you really see this when you go into the more professional picture is that people do have very strong opinions more so because of what's worked for them Yeah And uh it's not that

19:45 they sometimes they do say like it can't work like they'll say let's say like scalping can't work but they might be referring to scalping like that like seconds while you know they they understand that's you know minutes or what they would may class as a day trade That's where I guess it's not a problem but it's something to definitely be aware of as a the general audience especially coming into trading if you're in that sort of beginner intermediate I'll bring up something there cuz shout out to Lance on your your podcast because what he was saying about the technology that you have Um also you know that that practicing your game like when you were speeding up and slowing down the charts and all that Brilliant Like we we do that So uh like he's given out all our secrets man But but yeah we genuinely do that So what happens is is that um without with the technology that we have we trade direct market So everything we trade is on an exchange If we're trading um the

20:34 DAX we're trading on URX If we're trading copper we're trading on CME If we're trading stocks we're trading on NYC right so we don't have a spread on anything that we trade A retail trader can't do that Can't scalp There's no there's no point There's no trying to enter that game if you were playing against somebody like me who's got all this technology and this market access at home I'm going I'm When you say scalper you're talking the second side The second Yeah Because we get in with like 4 500 contracts um with like Tesla Google Apple and all this kind of stuff A scalper of ours has no spread The commission's tiny in comparison to a spread and a commission a broker will charge you They're getting out 20 ticks later They they you know they've made $7 $800 on that when you're you're overcoming your spread on that $7 $800 that we've just made It's pointless So um

21:20 so that's why I would probably say maybe there's that misconception saying oh scalpers don't work They work if you got the right market access Yeah So like the technology will matter and you know the infrastructure you know maybe even who you're trading with and and what uh because as you say the average retail trader nine times or 99 times out of 100 for example won't have access to that sort of stuff Yeah I love it But the auction is is very fascinating So you're looking at that average you're looking at So that auction is everywhere Yeah But the the main focus of that auction or say let's actually break it down Actually that's what came to mind earlier in terms of what's why is that area of interest is because that is where the almost the bidding war is taking place That is where the you're going to see between the buyers and sellers who's in control Yeah So let's look at

22:08 fair value So if we're talking about like you know Canada goose jackets or something like that right so um you know that the price of those went up to like a grand or 800 quid or whatever at some point um and then what we then see is like an increased supply So if for example something gets too popular or there's a lot so the easiest example of this is gold right so if we're trading with gold and gold is auctioning higher like it is at the moment As soon as we get close to to $3,000 right the average cost of production is like $920 to $970 an ounce So they're selling it at 3,000 If they get to 3,000 Newmont Barrack all of these Yumana Gold all of these gold companies are going to produce more because they're making more money at that stage right that's what's going to drive the price down So that's what we mean by this auction is that if we've got a fair value

22:55 area where the market thinks it's fair but also the producers think it's fair and they can make enough sales That's that fair value area that auction area for us That's what that's what we think it is I love that And you know another prime example I just used the word actually but prime a few years ago Yes you know the supply was so small you couldn't get it so then the prices were so high so they created obviously huge amount of supply which then the interesting thing is people don't realize it's not the say the shops who are buying it it's the suppliers who are then ordering it directly from them so they're creating this huge order but then now the the demand has dropped but then the supply is so high so the price has dropped with that uh so yeah I love it and you know um we we also when we got all those questions and stuff that we were

23:40 getting on YouTube and on on our inboxes and all of that Um it was really interesting to see that the focus on the psychology versus the focus on the strategy and how that was all working together This wouldn't work if you didn't have composure and if you didn't let it play out So in the day um you know limiting the amount of trades that you've got making sure you're using the correct money management this is all part and parcel to it I still just genuinely feel that 33 33 33 this is potentially the smallest part of what makes this even possible When I'm sitting there and I'm watching the auction and and I'm watching this happen if it's a day where it doesn't feel like price discovery is going to be made and the auction isn't feeling right there's no problem

24:26 with not trading for that day You know I do try and take what at least one trade a day because I'm trading around the open It happens so fast So that the volatility enables me to make my money because it's moving so quickly I need the volatility for this to work for me Of course What would be an instance or what would it look like in terms of if it's not looking right to you you're not getting that that feeling from the auction Well we've had this recently So um normally when information is coming out So so Trump is an absolute nightmare for me And I I like the fact that he's inspiring volatility So don't get me wrong it gives us more opportunities in the market But but what's happening is he seems to wait until the market open to to to send out all this stuff So we've got all of this going on We've done all our analysis We've set up the room All of the traders

25:12 know sentiment of what everything's going on And then 10 minutes into the session you get these um headlines from Hasset You get these headlines from the economic advisor You get these headlines for defense secretary and all this kind of stuff And it's either a trade war headline a Zilinski headline or something like that or Russia headline that then flips the auction on its head That's where we that's where we're going to have problems because you prefer to have a planned trade rather than a you having to react in the very moment Yeah But think about it So what I said at the beginning was from the daily charts the bigger picture If we're for example long and we're gapping up and everything's looking all fine and everything's good my my lower term time frame chart my 5minute chart it's going to start lining up with that and then all of a sudden those headlines come out and it shifts So then I've not got that synergy between the two and that's when I'll step aside

25:59 when I don't have when I'm not going with the tide I just think there's no point wasting my money Let's take a break for a minute there guys cuz I want to tell you about our preferred prop firm Apex Trader Funding Now Apex is no stranger to the podcast or even chart fanatics because we've done two incredible episode with two record holders in terms of Trader Kane who got a record payout at $2.3 million at Apex And then beating that record in the end was Jadecap aka Kyle who also then has a record payout now of over $2.5 million in a single payout with Apex And that really just shows the infinite possibilities you can achieve at Apex Trader Funding Now what traders love about Apex is that you can get up to 20 accounts So whether you get the 25K account ranging all the

26:49 way up to the 300K account you can get 20 of those So if it's 20 300K accounts that is 6 million in tradable capital which is absolutely incredible Not only that it's only a one-phase evaluation There's no daily draw down and up to $25,000 per account It's 100% yours and after that it's a 90% split in your favor That's right At Apex you can actually trade with Wealth Charts Trade of Ninja Trader So you can choose your favorite trading platform And not only that you will actually get realtime data included when purchasing your evaluation with Apex What I personally love about Apex is that as long as you're trading your day-to-day strategy you don't have to worry about

27:35 trading the news You can actually request your payouts every 8 days and there's actually no cap to your max payout which really shows the infinite possibilities you can have at Apex Thanks to Chart Fanatics you can get the best offer available at Apex They are always running sales so make sure to use the code CF That will automatically give you the best offer available at Apex The link for Apex Trader funding is in the description below So click that link use the code CF and you will get the best offer available Become an Apex Trader today Now let's get back to the episode And if we go back to the the statement right that got everyone interested and probably why a lot of people are tuned in right now The strategy that is so easy a child could do it Is

28:22 this why because it's essentially rather than looking at all these different confluences and different patterns and different strategies and so on and really in-depth you know layers to it too Yeah It's just an auction like focus down to the auction Yeah Because people people then just with all the indicators and the support and resistance levels and the chart patterns triangles penants and then RSI stoastics and all of this stuff you get lost in what the chart is actually trying to tell you It's trying to tell you that it's about price you're you're forgetting that it's about price and you're more thinking it's about indicators or about chart patterns and all of this kind of stuff At the end of the day that's where the simplistic nature of this comes in So just grab the Yeah thank you So if um why I say it's so simple and why you know why I believe

29:08 it is so simple is because if this is the daily chart Yeah So if this is the daily chart going up like this like the weekly or monthly chart on the S&P 500 literally on the lower term time frame if we use this color as a lower term time frame we're getting this every day right that's what's happening in there every single day Yeah So I'll just finish drawing in that So they're they're the intraday waves The big purple one is the daily waves or the higher time frame waves All I'm saying and all I'm suggesting for people to do is only trade this side of that curve Right i think Lance was talking about when he was trying to keep going long against a short market right and he was saying was he was he calling it the right side of the V the right the right side of the V Yes Yeah

29:54 This is what I'm saying So the right side of the V is always going to be that side of the V that side of the V that side of the V That's when the odds are stacked with you So that's why I'm saying it's as simple as you know so simple a 5-year-old can do it Because if the daily time frame is doing this with all the moving averages and that's how it looks and if we draw the moving average it's going to be something like this right going through it What I'm trying to say to you is when the five minute is on the right side of the V you know happy days You're with the bias And that's why that's why it is that simple So trade with your daily on the right side of the V So you're not trying to catch a a you know buying buying the the load because you you're never going to get that right You know you are sometimes but it's a very low percentage And I do understand

30:41 when you get that trade right you got a bigger risk to reward Yeah But it's not worth it because I think psychologically people can't handle only winning 30% of the time but having like nine 10 to ones Yeah Like because then they have to be such a good loser They're going to be they're going to be losing 70% of the time They have to be one of the best losers possible And I think that's quite tough for the human psyche I think when you get better with your trading you can do it On the other side of the scale if you're winning 50% of your trades on this side I I I think you know at 2 to1 I think that's where we want to be What is your mindset when it comes to risk with this because you're put you're already through this process Yeah Putting yourself in a much higher probable scenario Correct Uh so essentially an A+ setup and environment Yeah What is your stance when it comes to risk then are you using static or are you trying to be more dynamic in these

31:30 scenarios this is probably um me being completely open and honest Even with some of my traders that I have at DND they're probably better at than I am I'm not I'm not as good as uh as Lance was saying and a few others that when you really know something's in your favor you're doubling up tripling up you know a compounding and stuff on it I'm not good at that I want an easy life Yeah So honestly so I I rock up every day with the same risk every single day and I compound on my risk in the sense that let's say for example I'm in casino money and I've got 20 trades worth of casino money If that 20 trades of casino money turns up to 40 trades worth of casino money I'll up the risk so it's back to 20 but I've trading a higher sum Okay so that's the way I manage my risk very uh on a quant basis So I do it with maths rather than on my field thinking that oh this today's the big

32:21 one I'm going to go in a bit heavier The reason why is because like Axel said I write down every trade that I take and I put a percentage score on my confidence level And honestly I'd say 75% of the time the ones I'm least confident about win So I'm not trusting that intuition of going bigger when I think it's right I'm not trusting it I just go with what my statistics are telling me rather than my intuition That's why I really do respect some of the other traders that go big when they feel like they're really right because I I'm not that guy I love that How important is that though in terms of knowing yourself you knowing your your habits and your traits It's good And you know when we talk about pros and cons of strategies I would probably say that's maybe a con of the way I trade because I'm never going to be that guy that has that you know 50 60 70 grand

33:08 day I I I'm at peace with that now because I've tried to do it and I've lost the money But do you have so in terms of strategy though do you have people using the exact same strategy who are able to sort of identify that yeah So I'm going to name drop So one of my traders is called Marta We actually call it the Marta method Okay Yeah In our trading community we call it the Martr method So what she does is she trades the same way as me and then um she will drop down to a one minute chart and she'll run her trades as much as possible until the one minute turns So she can on the same trade as me where I'll take two to one She'll sometimes get five or six to one because she'll she'll like microscopically drop down to a lower time frame and wait until she waits for the reversal candlestick pattern on that time frame to get out Which means that if we do have great momentum I'm lying there with my pending orders of my stop loss and my target

33:56 and I'm just then I'm just chilling out right genuinely I'm I'm so relaxed when I trade But but whereas what what she'll do is she'll zone in on this chart and she'll she'll try and push it and push it and push it and be aggressive with it She's more micromanager Yeah And she's she's a really good trader So uh it suits her and um her composure makes her handle that I don't have that same composure How important do you think that is though to really cuz let's say if she carbon copies you do you think she would still perform well or do you think it would go against you know her sort of personality and therefore could end up not getting positive results because it's not really suited to her does that make sense because it's the same strategy just managed in a way that suits her Correct Versus you manage the way that suits you Yeah That's why we always have why why I can't teach everybody the same way and why they can't teach me the same way because we we adapt it

34:43 to our own characters Like you know I I'm very much of a Buddhist mentality of a Buddhist Zen kind of guy So like I'll meditate every day I'll chill out every day And you know so um I you know I'm not that guy that wants to be staring at a chart for 8 n hours And that sounds strange because I love it when somebody's so passionate that they're going to stare at a chart a chart and do all of their learning I think maybe I've been through that phase of course and I don't need it in my life So I like cuz the stress levels and whatever you're going to do is going to be much higher So I'd rather look trade for the first hour and I'll monitor the market and I'll talk to the guys But when I'm trading the cortisol levels and the stress levels are high and then as soon as I finish trading and I'm talking to everybody about their trades in the chat room I'm just I'm down on just like oh look you know my uh levelheadedness or advice then becomes less uh less biased on

35:33 what's going on in the markets You know I can I'm done now So like my you know what I can say to them has no connotation of what's actually going on It's 100% objective Love that And should we go through in terms of like trade management how we're looking uh using these methods Yeah great That's a that's that's a good point because I think that's that's actually a big part of being uh being a profitable trader actually the trade management So um so let's say for example and I'm just going to draw the candle of what would have happened yesterday So let's say for example we've got this big bearish candle and we're like kind of closing near the low So a little bit of a marabosu close Right Now this next uh part I'm just going to draw with a line graph So let's say for example this is yesterday So let's just write it So that's yesterday and then today we're

36:20 coming in and we're gapping down here So this is this is before we start We know that the market is gapping from there to there And let's just call that let's write dollars and let's say it's $1.2 down Okay So $1.2 down Now from this point I'm then thinking on a really good day and this probably I would say happens maybe 50% of the time Our research shows that it's about 64% of the time but it's not it at the moment it doesn't work that way I'm straight away let's change the color for today's price action I'm then thinking that look I'm hoping that we've got a smooth day going down first of all right the first resistance lines that are going to be in my chart are going to be this one Yeah And then I'm also going to have the gap level in there as well So I've got two levels that

37:08 one if we gap fill and we get to there that's an auction area Yeah Yeah Because we want to see what happens at yesterday's low And then if we break through there we've then got that level there that we can potentially look at this So this whole area has a chance to either be rejected because the market you know hopefully hypothetically at the first trade could start doing this come back and test there and then go that way and this would then be my ideal scenario but then sometimes obviously this can happen or this can happen So so I'm short already in my mind because the daily chart's telling me that I'm short Yes And then I've got three or four different scenarios in which an A+ short setup's going to come in for me So if this doesn't happen I'm just not

37:55 bothered with it Um so price just continue to sell off without any sort of retest of any of the zones Yeah correct You know stepping away If let's say price just comes in and just stays in that zone Yeah you're stepping away Now the issue is is that at this part here right at the open it can happen really quickly Yes it can happen really really fast And that's normally what what I'm in So as soon as we're in 10 15 seconds into the open you know really you're you're going to see a lot of orders coming like that And if it gets below here normally you get like quite a big tank And um so that's why like my stop losses are generally 60 70 cents aiming for 1.5 target most of the time something like that It happens super fast And in that in context of the range of the day when I show the charts a little bit later I'll show you range of the day in stocks you know if we're

38:41 looking at the big ones uh Nvidia Apple Google we're talking maybe about $3 ranges something like that on on an average day So I'm I'm I'm trying to capture like $1 of it $1.2 of it So not a lot of that big range Would you say because of the speed do you at all micromanage or manage your trade once you're in it in terms of break even or anything like that or because of the speed it's not really something that needs to be focused on We have a massive debate about this and this is the good thing about being in a prop trading community because we do studies So um there's a couple of traders So I describe myself as a gap trader uh other ones we call them candle breakers because they look for the specific candle patterns when they're at 1.75 to1 most of the time they'll move to their stop to break even I'm wondering is that emotionally or is it statistically and then

39:31 uh Felicia who trades with us she she goes through all of our stats meticulously So does Rob Um they've they've told me categorically from going to 1.75 to one If they move their stop to break even that's statistically viable for me because I'm so close to the open and I'm trading around the gaps It's not because the the whip saws are so high Mhm I've got a trader called Anton who's doing this at the moment and um while volatility has been so crazy with all these Trump headlines he's hit break even like you know I would say over the last seven days maybe about four times because it's come down so far he's got to 1.75 to1 he's moved his stock to break even it's stopped him out some of them go on to win so um statistically I would only take the data from this moving stop to break evens over 100 or so trades I think if we're in a really I'll call it a dark time like we

40:20 are now Honestly man it's tough Uh um if we're in this time I I would say moving stops to break even isn't a good idea at this at this present moment in time because the volatility of the candles the individual candles are so volatile it'll stop you up before it goes in your direction Yeah Um and that's where we were talking about pros and cons That's where I see a big con of what I do We're setup traders We're systematic traders We can't all of a sudden think oh like you know today's a really really good short day and this headlines come out and I'm going to run with it and make a shitload of money We don't think like that We we we trade specific setups every day because we keep a track of the statistics And I think if you're a new trader or a beginner trader that's the better place to be Yeah Um I have one trader called Darren who I just leave him his risk and

41:08 he decides what he does with his risks every day He does my head in and he knows that in the chat room honestly I say to him "Are you going rogue again today?" And we got a wall of shame as well So yeah if anybody makes mistakes they go up on the wall of shame Uh so he's normally on the wall of shame but literally he doesn't over risk every day So he does whatever he wants but he has a he has a set risk and he has a set target for the day If he hits his risks he walks off If he hits his target he walks off Everything in the middle is a chaos So um but but he's he's a very very good trader He's a profitable trader as well That's what we were saying about each to their own Let's take a break for a minute there guys cuz I want to tell you about our incredible sponsor Tradezella Tradezella is the number one trading tool in the entire trading industry Tradezella allows you to become a more profitable trader Allows you to make immense progress as a trader no matter if you're a

41:55 beginner or an advanced level trader because it makes journaling easy It makes journaling something that is fun and enjoyable and something that is interactive So no matter if you're a crypto trader no matter if you're a futures trader no matter if you're a forex trader no matter if you're a stock trader all you have to do is select your broker your platform of choice and connect it to Tradzella and it will automatically sync your trades and pull all of that data onto the dashboard making journaling and finding your edge and adapting your edge so easy In collaboration with Tradzella and Chart Fanatic specifically we are actually getting the playbooks from the episodes that we're filming with these incredible verified traders and adding them as playbooks onto Trade Zella So you can actually go on there and see the rule sets already predefined So make sure

42:45 you check that out as well Now you can actually get 10% off your monthly subscription using CF10 on Tradella right now But more importantly I would say CF20 for 20% off your yearly subscription with Tradezella The links for Tradzella are in the description below So make sure you go check them out Use CF20 get 20% off your yearly subscription become a better trader today Now let's get back to the episode Yeah definitely And is there anything more that we need to expand on in terms of strategies but we'll move on to the pros and cons I will go to the to the chart to show you this in a live scenario a little bit later on But really the only thing that everybody needs to think about is um depending on your time frame the moving average is important So if we're looking at big

43:32 macro trades like monthly weeklies I I'm obviously using a lower moving average cuz I'm day trading right uh so if uh if for example I I'll draw it so they're both alike and we're still in uptrends for a lot of things So if we look at a UK stock like Rolls-Royce or something right so Rolls-Royce has gone like really really smooth like that right now the moving average that I would want to use might not be the the 21 for something like this It may be the 50 or something like that or something that's a little bit slower Um because because as long as we're trading above that So let's get this in So like basically as long as we're trading above that and the moving average is doing this it's these areas on the weekly or potentially the daily are the ones that I'm looking at the retest

44:18 areas of the moving average because then if this is the the monthly let's say this time frame and I'm going down to the daily So let's say let's completely change the colors and use the daily in red So and I've got that similar type of pattern and like it does something like that That's the area right that I'm interested in for the long on that lower time frame because that's the auction retest before we get the breakout Yeah So that's why the moving averages have to match the time frames quite nicely because you know I want the break into the moving average and the breakout Um because the moving average isn't what I'm using to trade It's making sure that the edge is in my favor on both time frames So so literally using that alignment That's it So so I'll write down the time frame so this is clear right so this is the month and then

45:08 this one is the day So that's what that's what I would want to see between them I want to see the month looking really smooth nice flow looking like a river swimming in that tide that direction This one is going to be the more volatile one So when we get that auction area test and that breakout of the auction area test it's so simple because this here gives our natural stop Yeah And then we're looking for that 2:1 target to the upside It's giving you it the market's giving you where the significant low point is if it rejects that auction Would you say this is primarily a strategy for stocks or can it be can it be used elsewhere i'll explain why So again I I agree with um with some of the other guests that you've had on about the marketplace for FX trading and for

45:53 the indices Now they're very efficient markets So the FX market and this let's go back to the summer before COVID We used to when I was growing up in the FX markets because I used to work as an FX broker selling forwards and options in in that in that we used to see swings in Euro dollar and cable of like 120 150 pips a day Mhm The summer before COVID it dropped down to 30 pips a day I don't know if anybody remembers that The summer of 2019 all of the FX traders options traders and stuff were leaving the market I had mates at JP Morgan and stuff going to work for sports betting companies like genuinely like quants going into different different um sectors and stuff because FX was dead They were they were just like what's the point of trading this and that was that thing about algorithms coming into markets high frequency trading coming market smoothing

46:40 out the price data It's good if you're a trend follower Um so there that volatility traders need it So if a market starts to smooth out like that very hard to do something like this So if you're trading the the S&P 500 E- Minis right uh the the daily ranges on the E- Minis is is is a lot smaller than it is on stocks So if you're trading the mid to large cap stocks like Tesla will move $10 a day Yeah You know that's a lot of alpha to be captured within that $10 Um the DAX I quite like it Um it's it's got enough range in the in the morning and stuff to to go through So on the DAX we're working at like 50 cents of a stop loss on average in terms of the volatility rating with a one one euro target and it meets that every single day So that's all right So um FX there's

47:30 the other thing about it's two-way flow right so you can buy euro sell euros You can buy pound and sell pound every day And then you've got two opposing fight Yeah With gold you're either buying gold or you're selling gold That's two variables With stocks you're either buying Apple or selling Apple Two variables So there's four variables in FX markets There's two variables in most other markets So I find that hard as well Lastly I'm just going to throw this in there If a currency gets too strong it affects somebody negatively If a commodity gets too strong it affects somebody negatively That doesn't happen with a stock Yeah A stock everybody's happy if they go up to the moon right everybody's making money right but if a if the pound goes up too much then nobody's going to be able to buy our exports If if oil goes up too much we can't afford to put petrol in our cars So there's an economic impact to this for currencies and commodities that there isn't in stock I love

48:16 that So it's really understanding volatility is a huge part of it in terms of you know where you can get edge cuz you're not trying to I think a lot of people look at say for example the average pip move on on euro let's say if it's 70 80 pips right a lot of people are like I need to get that 70 80 pips versus as you mentioned earlier let's say with stocks if a stock moves on average $3 in a day for you you're just trying to see if you can capture a dollar of that dollar 20 of that maybe um so by knowing that you have larger ranges on certain assets it allows you then to have a lot more comfortability of what you're trying to capture How large is the slice you're trying to capture yeah correct And uh you know we we measure this um all of the time I say to a lot of my traders for the average range of a candle of a daily candle don't trade in the top 25% or

49:07 the bottom 25% You want to be trading in the middle portion of that candle because if we do get to extremes and that's auction right you're going to make a lot of money Yeah So that's that's the point Know where your trade is Work out what you're looking for from it Something like this You know you got two moving averages one on a higher time frame one on a low time frame If you're trading above them on both you're going to win If you're you know if you're going long if you're short you're trading below them You only need to win 50% of the time That That's what I say like a 5-year-old could do it Especially if you color them the way I color them So I color I color them yellow for down and blue for up So if we're under all the yellows we're shorting If we're above all the blues we're going long and we'll win 50% of the time and we've proved that you know So it really is that simple The rest is in the mind right i love that I love that Cool Let's go

49:53 over the pros and cons quickly and then pull out the charts for the people You already mentioned uh some of the cons If you want to do the con side I'll do the pros side for you Okay cool So um if we start on the pros I would say it's the simplicity of that right is is a huge pro It's it's not something that's difficult you know trading above both moving averages trading below both both moving averages if you're short So that's that's fine Um a con for for me is what I was talking about in terms of the restrictive nature of the risk-to-reward right so um I don't know how how would we describe that it's systematic So so you can say limited in in its uh in its risk-to-reward but equally you've also highlighted how depending on the trader you could

50:42 increase it So like uh I can't remember the name you said Martr Mart that's the Mart method right um so they've found a way but obviously we're taking exactly how you do it then Yeah But also on the other side it's mechanical rule based I would say Yeah it is It is very rule based So this is um this is the thing So I deal with at the ND we mainly want intermediate traders that have been trading let's say for two three years but haven't managed to turn the corner into going profitable because we don't we we do teach beginners we do have a beginner's course and everything so we teach people who are brand new but really the ones that like have floated around to different funded accountant firms have tried trading with brokers and they're not sure like why they can't turn that

51:28 corner we turn that corner for them we really help them Um in terms of the beginners uh like we know the trader like Jud for example um we we want to get them fresh so they learn the good habits as as they grow up rather than coming with bad habits having to turn them if they're a new Like for example I don't know what it is in people's heads that always want to trade mean reversion against the they always say "Oh the stock market's at alltime highs I'm going to short it." Like every single day people that do that just I I don't understand it Right so um that that's you know the rulebased thing is 100% imperative for a beginner I would say that so that's good Um in addition on the con side um for this strategy I would probably say for that reason it probably does take a bit of courage and a bit of bravery right I'd definitely say that So I'd say cuz even the cons just to bear

52:19 in mind for the audience as well the cons aren't saying these are bad things These are more things that you have to be aware of things that could be a hurdle when trying to learn or try and actually apply this So it's not necessarily saying it's bad It's just more so something to be aware of or in comparison to another strategy um could be the bad side if you will in comparison to to the good because I believe every strategy has its own pros and cons and it's actually being aware of them that helps you to understand what you're doing Yeah So the the reason why I said actually courage is is because something could be going down like Tesla for so long and you know I I have traders in my room who said like how how far can that keep going the thing is is that you know over the last seven or eight days I've shorted four times and I don't know where it's going to stop I'm the first person to turn around and say I don't know where the bloody markets are going to

53:06 go I'm just following those rules and keep keep on trying to go short and I I've won three out of those trades So yeah I've lost one absolutely fine but but this is it Like that's one of would you say patience is another one in terms of yeah the as you said earlier there may be times where you have to sit on your hands especially as we talked about if the alignment isn't there again you have to sit on your hands and I know a lot of people would probably that is a hurdle that some people would struggle with because they're so used to just being active Yeah they're definitely and then you know that's why um I think that one trade a day or two trades a day is is is right So across our um data bank from our traders at DND So I go over the reports of every trader every Friday And um and I don't know why and this this is just how it happens The traders that take

53:53 three or more trades a day are currently less successful than the ones that take under three trades a day And I don't know why I have no clue because our strategies are 50/50 right so um you know we're 50% win rate most of the time but it just works out that way The people that overtrade I think it's because the emotions or the fatigue of getting to that point you know is is what makes them lose trades at that point But on average our traders who trade under three trades a day are more successful for some reason There's an interesting saying that people say is that you can only make you know I think it's like two really important highquality decisions a day Yeah And you know the fact of because at the end of the day you're trading you're making you're trying to make a very strong informed high quality decision when you're placing that by yourself Yeah And therefore

54:42 you know trying to say that you're going to get five high quality decisions Yeah Uh you know one making sure they're high quality when in reality that's very hard to do and then secondly them being right as well on top of that Um I think that's where it comes from And I think as you say like the more trades you take whether positive even if let's say you've taken five and they're all positive so far the euphoria the emotion of the positive side is still just as strong and just

…