[0:00]If you're thinking about trading, one of the most important things you're going to need is a trading strategy, and more importantly, a profitable trading strategy. So in this video, I'm going to show you exactly how to create one step-by-step. So you're going to want to take some notes on this one, get comfortable, make sure you save this video, because you're going to want to watch it a couple of times. This is going to be the only video you need on trading strategies. Let's get stuck in. This is what a trading strategy is. A trading strategy, you're going to write, write this down. A trading strategy is a set of rules that allow you to capture a predictable pattern that happens frequently in the market. Okay? Now, it must be testable. In other words, you have to be able to go the rules have to be so objective that you, you, you could give them to a 10-year-old kid and they will follow the rules. There's no subjectivity whatsoever. So you have to be able to go and test it and it has to be, you know, it has to be testable in a way that it's happened in the past. It has to be testable in a way that it's actually something that you can test, right? It has to be repeatable, which means, you know, it wasn't just a one-off. It needs to be something you can go and repeat that process into live markets and still, um, you know, be able to test those rules. Also, in repeatable, you need to make sure that you are going to be awake. That, because you can go and test something and you find, oh, man, this, this strategy is a killer. It, it returns 80% a year, right? All I've got to do is trade at 3:00 in the morning every day, right? And you don't want to do that, you're asleep, or you're at work, or you're away. You have to be able to repeat it. And then the last one is verifiable, which means you can go into, um, you know, you can go into demo markets, trade it in real time, and it's still produces the goods. It's still produces, you can still, uh, vouch for the results and you're comfortable that there's no human error in being able to do that. So this is the definition of a trading strategy in my opinion, and a strategy, a trading strategy is your board game, like set of rules around that pattern. It's nothing to do with what time frame you trade it on, what market you trade it on, what, you know, that this strategy is then going to be bolted on to your preferable time frames, your preferable markets, and so on and so on, and that all becomes your trade plan. Don't get mistaken with strategy and trade plan, because you might have multiple strategies in your trade plan. You might have one when we're trending, one when we're in consolidation, right, breakout setups, all these kind of setups. This is just a setup, a trading strategy. Who's up for building one of these strategies out right now? When it comes to rules on trading strategies, you can't be half pregnant. It's binary, yes or no, one or zero. That's it. You want a process that allows you to approach the market the same way every time, regardless of the subjectivity, and you have an objective rule set that allows you that tells you if you do A, B and C, you are likely to earn X, Y and Z over so many months. We're going to build a trading strategy, so let's let's do that, shall we? Let's, um, we're going to do it really simple. Our rules are going to be as follows, right? We're going to, um, I'm going to set up a new rule tab here. One, we trade the GBPNZD 15 Min Chart. Two, we trade between 13:30 UK time and 14:30 UK Time. Three, we wait for the market to go oversold or overbought. Four, once the market is oversold or overbought, we wait for the candle to close and enter next bar market.
[4:08]Now, what that means is, is we wait for the candle to close and then we just, we just get in, we just buy at market or sell at market, okay? So number five is, if the market is oversold, we BUY next bar market. If the market is overbought, we SELL the next bar market. This is how this is how objective your rules need to be. Number six, when the BUY/SELL order has been placed, our stop loss is 25 pips behind the entry. Okay? So that obviously means if we're buying, our stop loss goes 25 pips below, and if we're selling, the stop loss goes 25 pips above. And then seven, our target is a, uh, let's go, let's just do three to one. Sort it. Right? So, eight, we either get stopped out or we hit target. We do NOT move Orders!!! Is the are these rules clear to everyone? We're going to look for these together, okay? So, one, we trade the pound New Zealand. Two, 15 minute chart, sorry, on the 15 minute chart. Two, we trade between 1:30 and 2:30, which means we're in our trading time frame now. Uh, we wait for the market to go oversold or overbought. Once the market's overbought, oversold or overbought, we wait for the candle to close and enter next bar market. If the market's overbought, oversold, we buy the next bar market. If the market is overbought, we sell the next bar market. When the buy or sell orders been placed, our stop loss is 25 pips behind the entry, and our target is a three to one. Let's pretend. All right, just quickly, I'm interested to see if you're still watching. So let me know in the comments if you're still here, I want to see who the serious people are. Just type in still here into the comments and I'll reply to each and every one of you. All right, let's get back to it. that we've just opened up our trading zone and we're we're trading, all right? Now, I'm going to ignore all the times at this point. We're just going to pretend that it's between half two and half, half one and half two, okay? And we're going to look at some of these setups. In reality, you could just trade all day, but but I just wanted that rule in there because you want to, you want a rule in your strategy to tell you what times you're going to be able to trade this thing. Let's see what we can see here, right? So, so, look, all we're doing is looking at the RSI, and we only want to see, so this is the market moving in real time, and we want to see when the when the market goes overbought, which means above 80. Whatever candle goes above 80, which is this one here, we want to get in the next bar market, okay? So, we have to wait for this candle here to close, and then once that's closed, as soon as that market's closed, we sell, okay? We place a sell order. Now, our stop loss is going to be this is going to be a short position. Our stop loss is going to be 25 pips above. Where's 25? 25's up here somewhere. There we go. 25 pips above, and our target is going to be a three to one. right down here. So we get in, we sell the next bar market. RSI's gone overbought, we've confirmed that, we've waited for that candle to close, we've then gotten on the next one, we've placed the stop loss 25 pips away, and then bang, three to one, we're out of the trade. So in this particular setup, let's just say we risked 1%, we've gained 3%. This is a 3% winner. What we do is we put that in the old journal, and we bank the old, uh, 3%, which is very nice. Now, what are we looking for? Well, let's go back to the rules. We just start again, we're waiting for the overbought oversold condition, very, very simple. Now, we're not overbought here, we're not oversold here. Look at the RSI. We we're not oversold here, and then bang, down here, this candle, this red candle goes oversold. We wait for it to close. What do we do? Enter next bar market, right? So we wait for this candle to close where the RSI went oversold. It crossed that 80 that the 20 threshold, we get in next bar market, which means we're entering a long position, right here. 25 pips again, exactly the same, we only we never change. 25 pip, uh, stop loss, so stop loss is going to be, here we go, 25 pips down here, and we got a three to one reward to risk profile. So we're going to go up till we hit three to one, there we go, right, and there's our next trade. We risk 1%, we win 3%, another little 3% in the bank. So in this case, uh, this is the 15-minute time frame, and between these two trades is, I mean, going away from our, uh, our setups. This is 6:45 in the morning till 12, uh, we we would have come out of this one here, here or here, which would be about 3:00 in the afternoon. So in one day, in one day of trading from 6:00 in the morning, 6:30 in the morning to to 3:00 in the afternoon, we've got 6%. I mean, who would be happy with that? Let's see, let's see if we can see another one, right? So this one here, the RSI doesn't quite go above 80, okay, but this one does. So this candle here goes below 20. This one right here. So we don't have a trade for a couple of days. Boo hoo. And then we get in right on this candle here where we, where we confirm an oversold condition right here on the close of this red candle, and it's time to get in again. And that's another long position, okay? So we're going to go 25 pips from the entry. I want to drill this in so you guys know it and you can see how simple this stuff is. Uh, and then we want to three to one. And there's our next setup. Now, how does it play out? Well, we need the market to hit this line here, right? So as we go out, let's see what happens. Oh, there you go, so we go out. So we're in this one for 11:15 on the Monday, and we get out at 5:00 a.m. on the Tuesday. So another day goes by, another 3% in the old kitty. One thing that's great about this, guys, there's no hiding this, there's no if. I can't skew these results. This is historic data that is available to everyone. I can't lie to you. This really happened, and that should get you excited. Okay. Now, one thing to to to notice here, right, guys? So the the length of these things is the time we were in the trade. Why is that important to know? Here's why it's important. All right, if YouTube's just shown you this video because it thinks you're interested in it, then make sure you subscribe to the channel, because most of the people that watch this channel aren't subscribed to it, and that's how the algorithm works now. So if you want more videos like this, hit the subscribe button right now. You can't get in another trade. So when you're testing this stuff, the what you want to do when you're testing is you want to lower your expectations of the system, which means you want to make sure that you're finding all the losers, okay? Or not skewing them so they're overly optimistic. So take this for instance. Let's just say I was in this trade from Monday morning till, uh, Tuesday morning. If another setup came out in time and I tested that and added it to my results, reality, I wouldn't be in that trade, would I? Because I'd already be in a trade. So you're doubling up your win, and you go, oh, I took another trade in here as well. Oh, look, let's add that to the results, there's another one in here. Um, and you add that in, but guess what, in real life, in real time, you wouldn't be in both of those, you'd only be in the first one. And what that will do is it will make your results look better than they actually are, and guess what you're going to struggle with when you go into the live markets and you start underperforming your back testing results. Do you think you're going to have a problem? Yes, because I tell you what, we can cope with doing better than our results, but we can't cope with doing worse than our results. And that is the number one thing that the traders come to us and go, I tested this system and it was great. And now I'm trading it and it's just I'm just not getting the results, you know, it's not the same. So you did your testing, yeah? Yeah, yeah, all perfect, all great, great returns. Are you trading it exactly the same way? Yeah, I'm sure I am. I'm sure I am. Let's take a look. Always we find this or we find mistakes that they've made or trades that they've missed, and get this, as a trader, your edge is tiny. You cannot afford to make mistakes, which is why we need to journal and track our trades and review them and optimize them, because we don't want to slip. Should we look for another one? Let's let's let's look for another one, right? So we're up 9% in, where did we start trading? So we started trading this on the 13th of March. By the way, this is this month. So this is like recent data, by the way. Um, 13th of March, and we got out on the 17th of March. Right? Four and a bit days, five days, and we're up 9%. I don't think that's too bad. All we do now, it's come into the market. Check for RSI. Uh uh uh uh, oh, here we go. Here's one, right? Now, I'm not going to show you the other side of the screen here. I want to, let's do this in not in hindsight. Let's do this one in real time. So we've just gone overbought. This candle here went overbought right here. This one, this one, okay? So we're going to place a sell order, short position. We're going to get in at next bar market. Uh, I can't see the flipping thing. So let's drag this out just so I can see this quick. Uh, 25 pips. So we're going to go 25 pips, which is going to be here, and we're going to go three to one, uh, which I can't really see at the moment, but I'm going to guess it's about there. Right? Let's close that in, okay? And let's see what happens. Ah, this one's in play. I want you guys to go away, and I want you to follow up with this setup, and watch it, and see what happens. Because this is a live trade at market. You would have gotten in on the close of this candle here, so you would have been in some pain because we went up a little bit towards our stop loss, which is set up at 25 pips above the entry. Another three to one set up here, and, uh, we'll see. Now, just in that example that I've given you over the last, what are we today, the 18th? So the last week, we've had we're up 9%, we're in another trade, there's lots of opportunity. There's it's a high probability setup according to this week, although we might be in a winning streak at the moment. Um, and we're in one right now. I think it's a great example, great strategy to to show you guys. If you're using trading view, one of the great things you can do is use replay, okay? And what you can do is you can select in real time where that setup was. So you see we're in this trade right now. This is a real-time trade, okay? So that's just playing out right now. But we can go back, and we can look and test this in real time, like it's just happening, okay? So, if we press play here, you can see that these candles are playing out, right? Now you can see, oh, RSI went overbought here, so I'm going to stop, I'm going to get in, then I'm going to see what happened. Look at this, and it'll just play, it'll play out in real time. It's a great thing to do, this is a phenomenal, phenomenal tool. And you can speed this up and all that kind of stuff, but it's a great tool to start seeing what's happening in the market, in this story, as it's playing out. Go back and test this strategy or test a strategy, and for recommendations on testing, you want a great sample size. Get a good sample size of data, and for that, we recommend at least 100 trades, or five years, whatever comes first. So go back five years or or 100 trades, whatever comes first. There's things called maximum favorable excursion, maximum adverse excursion, which basically sees how much you're leaving on the table. So we might come back to this system and go, I wonder if we did a five to one or a four to one instead. Or, I wonder if we could tighten up our stop loss a little bit. But just on the four to one, let's just go, look, let's just go, uh, four to one. Bang, bang, right? Four to one, right? Now, all of a sudden, instead of 9%, we're 12% up. Right? So you you analyze your data and you go, you know what, I left money on the table. I could I could push this to, I could push this to, uh, to four. Then you're tightening your risk, you're getting better reward to risk profiles. You can do all this kind of great stuff, okay? Um, and these are questions that you can then start to apply to your test. I want you to focus on the process of creating a trading strategy. I want you to be familiar that patterns, strategies are, what are they? A set of rules that allow you to capture a predictable pattern that happens frequently in the market. It must be testable, repeatable, verifiable. Is it testable? Yes, we've just tested it, okay? So is it testable? Is it repeatable? Yes, we've repeated it. Is it verifiable in real live markets? We will let you know. And what will make it not verifiable is if RSI never goes overbought or oversold again. And that's that's really it. You know, because as soon as it does, that's when we're getting in. All right, so I hope you enjoyed that. I'm just going to give you a little update on how this most recent trade played out. So as you can see here, this one also hit targets just a few minutes after we finished recording this particular video. What a great system. I'm going to go and test this myself, and I recommend you guys do too. You're going to learn way more about trading by going through that initial process of testing a strategy than you will searching for months and months on YouTube, I promise you. And if you want to learn more about this and you want to learn more strategies and you really want to take your trading seriously, then there's a couple of resources in the description. One I recommend is the 30-day trading challenge, and the second one is tier1trading.com.
