Everybody likes to have enjoyable with hypothetical “Desert Island” questions. You understand 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 in the event you solely had ONE alternative and needed to be banished to an uninhabited / desert island for the remainder of your life?

In at the 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 might solely choose 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 worth 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 on the lookout 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 should 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 on the lookout for on a day-to-day foundation available in the market 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 shaped at a key help stage available in the market:

As we are able to see within the subsequent instance, pin bars usually give us very straightforward to identify entries into highly effective tendencies. In truth, a pin bar after a pull again inside a pattern might be my favorite worth motion entry setup:

Subsequent, let’s take a look at a tailed bar; a bar that isn’t 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 isn’t fairly as small as a pin bar’s in relation to the whole size of the bar:

From the examples above, it needs to be obvious what I’d be on the lookout for if I might ONLY choose 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 an important message about what’s prone to occur subsequent available in the market, in a really clear and highly effective method.

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 all the time amusing to me that the majority starting merchants appear virtually fully involved with their commerce entries when in reality the extra vital a part of buying and selling is cash administration. Cash is made or misplaced relying upon how properly you handle your trades and your cash, not a lot on how properly you enter the market (though entries do play an vital function).

No commerce entry technique or buying and selling methodology could be full with no cash administration plan. A very powerful points of cash administration for a dealer, are place sizing and threat reward. These are the cash administration parts I’d be apprehensive about for my “desert island” method.

After 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 so forth. We’re speaking concerning the SIZE of the place you might be buying and selling. Why is that this so vital? Nicely, as a result of it determines how a lot cash you could have in danger; the bigger place, the extra money you might be risking. The opposite cause it’s so vital is as a result of correctly adjusting your place measurement to keep up your general 1R threat 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 threat vs. its potential reward, which you sometimes need at 1 to 2 or extra (Reward at 2 occasions threat). It’s vital to contemplate the potential threat / reward of any commerce earlier than you enter it, as a result of whether or not a great threat / reward is attainable might impression your choice to take the commerce or not.

Discover within the instance beneath, the danger is 1R, the place R = the greenback quantity you could have in danger on the commerce. On this case, the danger is the space from the entry (pin bar low) to the cease loss (close to pin excessive) and the reward is about at 2R or 2 occasions threat. It’s vital to try to get reward of at the very least double your threat 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 beneath, we are able to see what it appears to be like wish to plot out the potential threat reward of a pin bar commerce. Discover I’ve personalized the MetaTrader 4 Fibonacci device to indicate threat vs. reward of any commerce setup. I’ve detailed how to do that in an article on the threat reward device, so verify that out to be taught 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.

Such a buying and selling primarily implies that we’re centered on the each day charts and we aren’t trying to commerce usually, as a substitute, we’re on the lookout for high-quality setups (which are usually considerably uncommon). What this does is will increase our potential win-rate per commerce and thus provides us a greater probability of making a living over the long-run. It additionally permits us to extra simply hold our feelings in verify and largely eliminates the potential to over-trade, which is often the primary factor that kills merchants’ accounts.

Within the instance beneath, discover the pin bar entry indicators that shaped at a key help 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 might enter this commerce lengthy and let it set for 1-2 weeks and spend that point…attempting 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 perhaps?!), 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 got a greater probability 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 be taught 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 time-frame buying and selling tutorial

Conclusion

Whereas at the moment’s lesson dealt in a hypothetical state of affairs of being compelled to select one buying and selling technique to take to a desert island for the remainder of your life, the knowledge and methods mentioned are usually 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 kinds of markets, from Foreign exchange to futures, shares and wherever in between. They’re most relevant to the 1-hour time-frame and above, however as mentioned, I significantly favor the each day chart time-frame 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 worth motion buying and selling course, have stood the check of time and can serve you properly 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 beneath!