- 1 year ago
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00:00All right. So firstly, thank you for the response to the question this morning around, you know, kind of educational content and what you would like to see.
00:10It's really good to kind of just hear the voices and the thoughts of people in the haven for what they would like to see representing the content.
00:18And like I said, I would I would love to produce a Renko video, but the charts simply aren't moving because the price action is just so sideways.
00:26So there's there's really nothing I can update on. And I don't want to go back historically to look because the ATR number one will be out of whack on trading view.
00:35So it makes it super difficult. And then secondly, I think that the price action from those periods of time is less important than the current price action.
00:44So that's the Renko stuff and why we can't do it right now. As soon as we get a move, hopefully we can dive back in.
00:49There were a number of really, really good suggestions here. I will absolutely keep some of these as more educational topics that I will cover off.
00:58But the one that I would like to focus on is Mannequin's one. I think it was also the best reacted to as well as Saudis.
01:10But Mannequin's, I think, just takes it, especially given the current price action.
01:15So what Mannequin has asked is asking about stop loss placement on lower time frame setups, usually resulting in large RR trades on these setups.
01:25Is it common to get stopped out, but then try to try the trade a couple more times because the RR is worth it?
01:32So what I'm going to do is I'm going to kind of like take this and phrase it slightly differently, but apply the same concepts and thought process to looking at how you can try and take tighter stop trades for huge returns.
01:49That's the premise that we're looking at here.
01:51And that's really, you know, what underpins Mannequin's question here is how do we how do we get into a scenario where we can take a trade that has a relatively tight stop loss, but has potentially very good upside or downside to it?
02:05And the region that we're currently in for price is actually a really good example area to discuss that in a lot more detail.
02:11So we'll start off with XTT because this is a market I'm kind of focused on.
02:14So when we're trying to identify these setups that have tight stops and large RR, what we are ideally doing, well, not ideally, what we have to do is we have to look at the higher time frames.
02:26So all of our analysis here in this thought process still starts on the higher time frame, regardless of the fact that we will be diving into the lower time frames.
02:34But everything starts on the higher time frame.
02:38And you can use pretty much like the four hour, 12 hour, the daily, three day, whatever you want to, to kind of formulate your plan.
02:45So I'll go through the thought process for XTZ.
02:48And it really falls into kind of the domino effect theory as well that I that I tend to operate on.
02:54But we can then dive down to the lower time frames and think about what that would look like for us.
03:00So first of all, things to acknowledge on XTZ is that there is a really nice three day bullish divergence here between the lows.
03:06So we've got a really good bull div supported both on the awesome oscillator and by the RSI.
03:14So we've got a really nice bullish divergence developed all the way down here.
03:19So obviously, when we have this set up, what we're looking for is the upside play.
03:23We're looking for relatively strong impulse, given it's a three day divergence.
03:26And we would expect this to move considerably to the upside.
03:30So that kind of satisfies the RR side of things.
03:33And what we're then doing is once we've identified a higher time frame setup that we like the look of, like a three day divergence,
03:40we're then diving down to the lower time frames to try and determine, well, where is the entry point?
03:45What's the trigger for moving into this trade, especially on the lower time frames?
03:49And if I really want to try and be tighter with that stop, you know, potentially I want to be more aggressive.
03:54Potentially, I want to use a bigger position size because, you know, I think it's a poor logic to think that all kind of degenerate trades are, you know, a stupid idea.
04:08If you can identify a setup, like, for example, on XTZ, fingers crossed, that has the potential to produce really great upside,
04:17then you can absolutely look at scaling in bigger size, especially if we can get the stop loss tighter.
04:23That's one way that we can utilize being able to increase our size, get the stop loss nice and tight.
04:32So that would be an example of kind of a more degenerate positioning.
04:35The position size may be larger than you're used to, but you're supporting that by having a tight stop loss, right?
04:41So we've got our setup on the three day, the 12, the daily kind of basically just reveals this region through here.
04:48So if we look at XTZ and we can say, okay, well, we know that it's pretty much a breakthrough of 166
04:55that will hopefully be the trigger for further upside on this.
04:59And that would be, you know, what we'd be looking at as our criteria for being in the position.
05:08Now, that's not enough on the daily, obviously.
05:12The stop loss is going to be way too loose, but it gives us another area to focus on.
05:15If we go down to the four hour, again, we can kind of see that level here.
05:19But what we can do now is we can begin to tighten up so we can take the action locally.
05:23And we can say, okay, well, here's our trigger point.
05:26You see how tight we've made this now on the four hour?
05:29Because this is where all the interaction is.
05:31All the interaction is around this 164 level.
05:33So we're constantly now, we're going to be looking against this level here.
05:37And so our play and our thought process is, well, we've got a three day divergence,
05:42which we would expect significant play out from.
05:44And we'd probably be looking at something like, you know, this $2 region here,
05:51tagging back up into the former Hyatt too.
05:53That would probably be a really good sort of 20% move for XTZ.
05:57Attack some of this, break clear of this, move towards our $2 region.
06:03So we kind of got the area that we would like to target for XTZ.
06:08And we've got the region that we now anticipate would be a breakout catalyst
06:11and criteria for us to try and move in on.
06:14And now comes the point of how do we get a stop loss for this?
06:19How do we plan our stop loss?
06:21How do we get a stop loss in for this position?
06:24So we'll go to the 15 minute and we'll start the thought process at the 15 minute.
06:29Because that's ideally where we want to be operating first.
06:31The hourly is still going to be too tight for us.
06:34The 15 minute should give us a good kind of criteria for what we'll be looking at here.
06:39Well, what we know from XTZ at the moment is it's harder to play into this sort of price action.
06:47It's still fine, but it's a little bit harder because the stop loss from here is 4%.
06:55That's too much for us when we want to try and look at being aggressive into these plays.
06:59Now, if we're taking a swing trade, we may say, well, that's fine.
07:02If we're going to be kind of a little bit more relaxed, then we can say that's fine.
07:05But actually what we want to do in this setup is we want to identify the fact that we think this setup is strong.
07:13We think that there's some really good chance of strong impulse away.
07:18And we want to catch that break.
07:20We want to catch that movement out of this region.
07:22So we really want to be looking at having our stop loss a lot tighter.
07:26So at present, the 15 minute doesn't really reveal too much to us that would give us any advantage in a stop loss placement.
07:35We'll dive down to the 5 minute.
07:36You can see here starting to get overextended on the 5 minute time frame.
07:41So starting to, you know, basically show signs of weakening as we approach this resistance region again for XTZ.
07:47But again, it's providing us nothing that would really give us a tight region of a stop loss.
07:57So that means that we have to wait until we have further price action develop.
08:01That isn't necessarily a bad thing.
08:03What we've done is we've identified the setup on the higher time frames.
08:07We've identified and narrowed down the region as we've moved towards the 4 hour.
08:12All right.
08:13So remember, 3 day bull div, daily support resistance level, 4 hour level that becomes a lot tighter in terms of reducing the trigger for entry that we're looking for.
08:26And then the 15 minute doesn't really reveal anything to us.
08:30So what we're waiting for is more action to develop around this level.
08:33Now, ideally, what we'd like to see here is, you know, small pullback, consolidate like this, and then start to impulse.
08:45What we're going to do is we're going to take shots at when we get the impulse.
08:49That's where we're going to take the shot.
08:50All right.
08:51So if I was trading this yesterday, I would have taken a shot here and I would have had a stop loss down here.
08:57This would have been one area I might have looked at trading.
09:01And the reason that I'm doing that is because this is a candle close above.
09:09And you can even see just from this region here, just from the lower time frame regions, this is the strongest candle close we've had above this region, given that this is still our 4 hour level.
09:19It unfortunately would have stopped me out.
09:22However, it doesn't change the thought process of the play we're looking to achieve here.
09:26It doesn't change that thought process.
09:28So this is where Mannequin's point about kind of trying a couple of times because the RR is worth it comes into play.
09:36All right.
09:36We take our shot here.
09:38We have our stop loss at the tightest possible place we can, which in this scenario is just below the level again.
09:44And it's playing into the fact that this area should technically be holding because it generated the strong impulse.
09:50So we're using a little bit of kind of demand thought process here in terms of thinking about where price should be holding.
09:58Now, if you were super aggressive on this, then this reaction here could cause you to close.
10:04That 15 minute candle, basically immediate retrace of that up move could cause you to get out of this.
10:10Now, this whole thought process is really kind of, you know, revolves around the fact that we can be a 4 hour trader here because we know the level is good on the 4 hour.
10:23So we can be a 4 hour trader around this region.
10:25We just wait for a successful breakout of this region and then we get long on it.
10:30So we wait for the close above the 4 hour level that we have determined and then we get long and we set a stop loss.
10:35So it would be below the level somewhere and fine.
10:38What we are looking to do is be more aggressive in the market.
10:42We're looking at anticipating the momentum.
10:44We're identifying the fact that we believe we have good confluence for a breakout here and therefore a strong move to the upside.
10:52And we want to try and time that with the best RR possible in order to squeeze up our position size.
11:00The same is going to apply on ETH.
11:05So we know about the importance of the level on ETH, which is here.
11:09Again, the 4 hour level we can squeeze to here.
11:15That's probably fine like that.
11:17And so what we're doing is we're looking around when the price action is trading at these levels, where the potential move is going to come.
11:27Now, the thing to keep in mind with this is when we're taking these trades, we are typically going to be, especially in the current environment, going counter trend.
11:38We're going to be taking the trades counter trend because if we were swing trading this or higher time frame preference, we would be looking at this and we would be getting short into the higher time frame resistance.
11:46So we say, well, we've tapped up into the resistance again at the 1280s.
11:50It's time to get short.
11:52It's time to target the bottom of the range.
11:53Done.
11:54What we're instead doing is we are looking to anticipate those breakout moments, counter trend that result in a strong squeeze to the upside.
12:03What you're looking for at regions like this is that consolidation.
12:08You're looking for that buildup of price action towards the level and you don't want to see anything start to trade away.
12:14So ETH is another very good example of this.
12:18So what we've got here is this is all good.
12:21This is what we want to see.
12:22We want to see price moving towards this level.
12:25Now, diversions traders would be aware of the fact that momentum slowed down significantly when we approached here.
12:31So we'd be cautious about entering into a position here.
12:34We'd be waiting until we had some sort of stabilization in the price.
12:39Once ETH starts to push away from the level like it does here, and we're now trading sort of 5% below the level, we're less bothered about the action.
12:47We're less bothered about staring at the screen and becoming glued to the screen, anticipating this breakout play that we want to get the tight RR trade into.
12:56Because the market has shown that now is not the time.
13:02Here, we may get interested again.
13:04We may start watching the price action more carefully because, again, we want that period where we're doing this.
13:09And then we start to see the strength develop.
13:15And again, once we start to grind here and especially here, we switch off again.
13:20It's not the time.
13:21So this approach is very much about being focused on when we should care about screen time and when we shouldn't care about screen time.
13:30We always want to see consolidation under the levels.
13:32We want to see things like the 15-minute RSI rotating back to 50 while still maintaining the pressure up at the resistance levels we're looking to crack.
13:40And when we get these breakouts, when we get these sort of plays that will move to the upside, we're then looking at having stop losses below our level and below the last consolidation buildup.
13:52So if the price action on ETH goes like this, and it starts getting tighter, and then we see the break, and then our setup is like this.
14:03We take the play here, and we aim for our 1450 targets, so we're super aggressive on ETH.
14:20We're getting like 1450 as a minimum here.
14:23We're taking the play here, and we have our stop loss underneath this last low of the consolidation cluster.
14:28All right, now the great thing about the ETH trade is obviously we know there's this little supply cluster over here at the 14s,
14:35but also this has the potential to be the trade that takes us up here, which is where we start skewing the RR, you know, crazily in our favor.
14:43The other nice thing about these setups is that they often mean that we can move our stop losses quite quickly.
14:49So this consolidation region that we see under here, once we start to establish and break away from these regions,
14:54and we do something like this, right, then we can slide our stop loss underneath the last line.
15:02So they're actually really nice dynamic trades that continue to move with the price action.
15:06But the primary focus is still, where do we get entry?
15:09How do we anticipate these breakout plays?
15:11So, you know, kind of answering Mannequin's question as a whole.
15:15So, the stop loss placement will always be done underneath the last consolidation region prior to the breakout on the lower timeframes.
15:23The anticipation of those setups in order to produce the large RR trades comes from a bit of legwork on the higher timeframes
15:30and the anticipation of the market breakout.
15:33And so that's really important.
15:34That's the key to it.
15:35So these setups cannot just be taken freely.
15:39They cannot just be taken under any circumstance.
15:42They require a specific set of criteria to be present in order to try and time them.
15:47When we talk about getting stopped out, yes, I gave the example on XTZ.
15:51There are times that we will get stopped out attempting this because we're trying to jump the gun, right?
15:55We're trying to be early.
15:56We're trying to move just before that market momentum kicks in and takes off.
16:00So we are trying to be aggressive in that.
16:02And as a result of that, with the tighter stop losses, we're going to find ourselves getting chopped a little bit more.
16:07However, when we catch one of the breakouts, we should do very, very well from the results from it.
16:13So it's about managing risk, making sure that your stop loss is tight enough and you're not going to be taking big losses,
16:19and then continuing to pay attention to the chart.
16:22So not getting put off, not taking two stops, and then giving up on the setup if price action is still here.
16:28All right, let's say this consolidation period goes on for a longer period of time.
16:37Okay, this was a very bad way of doing this.
16:39Let's say this consolidation period goes on for a longer period of time through here, and what it does, it does this.
16:43So it fakes here, we get stopped out, continues doing this, does this.
16:47But it doesn't really give up on this area, right?
16:51Stops us out again, but it just does this.
16:53Now, we should still absolutely be paying attention to this market.
16:57So yes, we've been stopped out twice here and here, trying to attempt the breakout plays.
17:01We had nice tight stop losses, that's fine.
17:03But then, eventually, we will hopefully get paid because the market will make its move,
17:10and we'll be able to cash in on the, you know, hopefully 30% move that it makes,
17:15and as a minimum, the 15% move that it makes.
17:18And we'll have a nice tight stop loss underneath the last consolidation low, and we'll get the nice play out.
17:23So really important to continue going back to these trades as long as the setup hasn't changed.
17:31So if we look at, you know, the prior examples I gave on ETH, if we start trading 5% below that level, that's a rejection.
17:37We care less about that.
17:39We look at other markets.
17:40We don't care about this anymore.
17:42If we push back up to the region and we fail again, like we did here,
17:46then that's another example of where we just get out of the kind of thought process of this trade,
17:51and we'll come back in later on.
17:54So we need to see consistent price action, chopping against the level,
17:59smacking into the level multiple times, no rejections, no divergences,
18:05a cool-off in the RSI, stop loss underneath the last low on the breakout,
18:09and then play the aggression.
18:11That's the best way you are going to find the large RR trades with the tight stop losses.
18:17All right.