Everybody likes to have enjoyable with hypothetical “Desert Island” questions. You realize those the place you’re sitting round with your pals asking one another what you’d take with you or maybe who you’d take with you should you solely had ONE selection and needed to be banished to an uninhabited / desert island for the remainder of your life?

In right this moment’s lesson, I wished to have a little bit of enjoyable but in addition focus on with you what I’d take with me if I may solely decide ONE buying and selling method for the remainder of my life. If I used to be going to a desert island (that had wonderful web connection lol) these are the buying and selling instruments that I’d take with me…

Right here’s how I’d enter the market…

If I needed to solely search for ONE value motion sample to enter the market from, it could be a really apparent and highly effective one, one thing that when you perceive, is difficult to overlook…

What I’d be searching for is a pin bar or tailed bar, ideally a long-tailed pin bar. These are patterns with an clearly lengthy tail (or shadow), it doesn’t must be a “pin bar” per say, though it’s higher whether it is, however a easy tailed bar positioned correctly will work too.

Let’s take a look at some examples of what I’m searching for on a day-to-day foundation out there relating to tailed bars and pin bar reversals:

Right here’s an instance of a long-tailed pin bar (promote sign) inside a down-trending market:

Right here’s one other instance of a long-tailed pin bar. This time, it’s a bullish long-tailed pin bar (purchase sign) that fashioned at a key assist stage out there:

As we will see within the subsequent instance, pin bars typically give us very simple to identify entries into highly effective tendencies. In actual fact, a pin bar after a pull again inside a development might be my favorite value motion entry setup:

Subsequent, let’s take a look at a tailed bar; a bar that’s not fairly a “pin bar” however nonetheless primarily portrays and implies the identical factor. The primary distinction is the physique (distance between open and shut) of the bar will not be fairly as small as a pin bar’s in relation to the whole size of the bar:

From the examples above, it ought to be obvious what I’d be searching for if I may ONLY decide ONE entry sign to make use of for the remainder of my life. It also needs to be obvious WHY I’d select pins / tailed bars; they convey a vital message about what’s more likely to occur subsequent out there, in a really clear and highly effective means.

For a extra detailed tutorial on tailed bars, see my tailed bar buying and selling tutorial

For a extra detailed tutorial on pin bars, see my pin bar buying and selling tutorial

Cash administration

It’s at all times amusing to me that the majority starting merchants appear nearly solely involved with their commerce entries when in truth the extra essential a part of buying and selling is cash administration. Cash is made or misplaced relying upon how nicely you handle your trades and your cash, not a lot on how nicely you enter the market (though entries do play an essential position).

No commerce entry technique or buying and selling methodology could be full and not using a cash administration plan. Crucial facets of cash administration for a dealer, are place sizing and danger reward. These are the cash administration elements I’d be anxious about for my “desert island” method.

Once I discuss place sizing, I’m referring to the variety of tons (in Foreign exchange) or the commerce quantity / variety of contracts / shares (shares) and many others. We’re speaking in regards to the SIZE of the place you might be buying and selling. Why is that this so essential? Effectively, as a result of it determines how a lot cash you might have in danger; the bigger place, the extra money you might be risking. The opposite purpose it’s so essential is as a result of correctly adjusting your place dimension to keep up your total 1R danger per commerce, is important to long-term buying and selling success.

To learn extra about place sizing, take a look at my lesson on place sizing.

Danger reward is the opposite crucial cash administration part. This refers to discovering a commerce’s danger vs. its potential reward, which you sometimes need at 1 to 2 or extra (Reward at 2 occasions danger). It’s essential to contemplate the potential danger / reward of any commerce earlier than you enter it, as a result of whether or not a great danger / reward is attainable could influence your determination to take the commerce or not.

Discover within the instance under, the danger is 1R, the place R = the greenback quantity you might have in danger on the commerce. On this case, the danger is the gap from the entry (pin bar low) to the cease loss (close to pin excessive) and the reward is about at 2R or 2 occasions danger. It’s essential to attempt to get reward of at the very least double your danger so that you just make the most of winners after they come alongside and so they’re large enough to offset your losers and nonetheless provide you with a revenue.

Within the instance under, we will see what it seems prefer to plot out the potential danger reward of a pin bar commerce. Discover I’ve personalized the MetaTrader 4 Fibonacci instrument to point out danger vs. reward of any commerce setup. I’ve detailed how to do that in an article on the danger reward instrument, so examine that out to study extra. Discover, this pin bar sign set off a possible 5R winner…

Each day time frames and low-frequency

A buying and selling technique wouldn’t be full with out one thing to carry it altogether, the X-factor, so to talk. For me, that’s buying and selling each day chart time frames in a low frequency buying and selling method.

One of these buying and selling primarily signifies that we’re targeted on the each day charts and we’re not trying to commerce typically, as an alternative, we’re searching for high-quality setups (which are typically considerably uncommon). What this does is will increase our potential win-rate per commerce and thus offers us a greater likelihood of earning money over the long-run. It additionally permits us to extra simply hold our feelings in examine and largely eliminates the potential to over-trade, which is usually the primary factor that kills merchants’ accounts.

Within the instance under, discover the pin bar entry alerts that fashioned at a key assist stage, what I would like you to actually discover is that this was the each day chart (as are all the opposite charts on this lesson and most of my classes). If I used to be stranded on a desert island, I may enter this commerce lengthy and let it set for 1-2 weeks and spend that point…making an attempt to construct shelter and collect meals…and are available again to an enormous revenue. Maybe a bit too hypothetical of an instance (what would you do with cash stranded on an island? Pay pirates to save lots of you possibly?!), however the level remains to be legitimate – Finish-of-Day buying and selling lets you cut back your time dedication and helps to subdue / tame your emotional responses to the market so that you’ve a greater likelihood at long-term buying and selling success, it’s a win-win!

If I used to be stranded on a desert island and will solely use one buying and selling method, it could be:

• Pin bars / tailed bars
• Cash administration
• Each day charts / end-of-day method

It actually is so simple as the three-point plan I outlined above, so cease over-complicating it.

To study extra about each day chart buying and selling and end-of-day buying and selling, take a look at these tutorials:

Learn how to commerce ‘finish of day’ buying and selling methods

Each day chart timeframe buying and selling tutorial

Conclusion

Whereas right this moment’s lesson dealt in a hypothetical state of affairs of being pressured to choose one buying and selling technique to take to a desert island for the remainder of your life, the knowledge and methods mentioned should not hypothetical in any respect.

The methods I mentioned above are how I commerce 90% of the time in my day-to-day buying and selling. The ideas are transferable throughout all varieties of markets, from Foreign exchange to futures, shares and anyplace in between. They’re most relevant to the 1-hour timeframe and above, however as mentioned, I drastically favor the each day chart timeframe to all others. So, irrespective of the place you find yourself, on an island or a buying and selling desk, keep in mind that the ideas mentioned right here and which are expanded upon in my superior value motion buying and selling course, have stood the take a look at of time and can serve you nicely in not simply surviving… however in thriving in all buying and selling environments.

What did you consider this lesson? Please share your suggestions within the feedback under!