INTRODUCTION Mastering trading is something that took me a very long time to do, I was spending 18 hours a day for years trying to understand the behavior of the markets, who was in charge? Who was making it move? How could I predict it? This led me to reading countless of books. I used to read all kind of books, how to invest in real estate, how to trade the financial markets, how to become a successful person, how to get rich… Well you name it… And I was obsessed, I loved reading, after each book I felt more clever, I had more tools in my tool box and I was now ready to apply it to everything in my life. The problem was only that what the books told me, was never applicable to my life, because every life situation is different, we all come from different backgrounds, we all have different struggles and different pre-conditions. I came from a very poor background with a hard working family who was so obsessed paying the bills and getting by that we lost the family love that I find today to be the most valuable thing in life.
Because no matter how much money you accumulate, real friendship, real family, real love is something money never can buy, and that is what truly makes us the happiest. I have bought everything I ever wanted, and none of that made me happy. But what made me happy was always improving myself, challenging myself, giving myself new goals, trying new things, failing, getting back up and trying again. Providing value to others, seeing others achieve greatness and being there with them, seeing every step they take, every failure they go through and help them continue going without loss of vision or belief.
Because one thing is true in this life, no matter how many times you fail, no matter how many times you try, you always… I repeat ALWAYS get one step closer to achieving greatness. Failure is the way life helps guide us to the right direction that we are supposed to follow deep down. So whenever you feel down, or feel that life is hard, remember that life is just guiding you to the right way. Life wants you to be hurt, because that is when you THINK, when you THINK that is when you understand what to IMPROVE.
When you IMPROVE you become better. Once you get BETTER and repeat the process you will become GREAT. That is what built my character and my success today. I wish this book will provide you with enough information about how to trade the financial markets, the right way to do it, and skip all the information that is not needed while trading.
I only provide the highest probability techniques, this is not a book to tell you what a support is, or what a candle does. This is my way of trading. This is your handbook to use. This is your step by step guide to taking great trades.
This is your book to find all the information that you need, without having to try everything out there to find what works or what does not work. This is simply 7 years trading experience put together in a simple, step by step book. MARKET STRUCTURE So let’s start with the most important, I want you to study this over and over again. Understanding the underlying factors of market behavior and movement is crucial to your success as a trader.
Reading market structure is like learning a new language. Once you learn it, you will be able to communicate fluently. The market will talk to you every single minute, and it is up to you to listen to it and make a decision based on the conversation. Sound confusing? Let me explain… If you open up a chart to a complete beginner and ask him/her to tell you what they are seeing, they will tell you that the market went up there, and fell over there.
Basically they see what the market is doing, it is moving either up or down, even when the market is moving “sideways” it is still moving up and down. Makes sense? YOUR job as a trader, is to understand why does the market move up, or why does it move down? What are the rules of the market that makes it behave the way it does? Thanks to high frequency computers dominating the markets today…. Basically algorithms run by a set program, with insane amounts of money behind them, they are the ones moving the markets. And because they are programmed to follow a set amount of rules.
We are able to capitalize on that easier than ever. UNDERSTANDING YOUR SOFTWARE Every chart software that you are using today, will come with different bells and whistles. Letting you change the color of your chart, add indicators, make it look appealing and fun. Almost like a video game… Do you know why? Have you ever went in to a casino? Do you see how colorful it is? Showing you a lot of different bright colors.
This will change the chemical response in your brain to feel happy and excited, basically makes you want to gamble and not stopping, because it will get addicting and it will give you a rush. Not only the money part, but the colors which your brain is reacting to subconsciously. This is unfortunately same with trading, and the brokers and software providers want you to over trade, and get addicted. So it is highly important you become systematic and only use the charts as a reading tool.
IMPORTANCE OF TIME FRAMES Ok so the most important thing to read market structure, is by utilizing all the time frames you have available. A rule of thumb to ALWAYS follow is that, the HIGHER TIME FRAME the better. My favorite time frames to use at the start of my analysis is in the following order. Monthly Weekly Daily 4 Hour 5/15 minutes These are my go to time frames and we will discuss each one and how they will be used.
We are going to use each time frame one by one, to build our confluence report to finalize our trading decision. We are looking for the course of event. Basically like watching a movie or reading a book. Trying to figure out what is the common subject appearing over and over again? Who is the bad guy? Who is the good guy? THE MONTHLY TIME FRAME The monthly time frame is used to read price action most of all, to see where the momentum is.
We are looking for big candles that are indicating huge orders. We will then move 1 time frame lower, to build up our confluences. Monthly time frame will summon up all the importance of the month and show us, who was dominating the market for the month, was it the buyers or the sellers? This will tell us who is really in charge of the bigger picture and it is something we should always keep in the back of our head. THE WEEKLY TIME FRAME The weekly time frame is great to look at structure, premium price areas and where price has strong bounces, it will give us 4 more candles so we can understand better what led to the price action on the monthly.
Did the last two weekly candles close very strong, or does it look like we are loosing momentum? ( Even thought monthly close was very strong, the weekly can many times tell us if that will hold or not for the coming days ) We also use weekly to find the strongest support and resistance areas, basically the strongest areas where price could potentially reverse and change direction. THE DAILY TIME FRAME The daily time frame is our go to time frame We will use this every day to hunt the trades we are looking for, and it will be our king every single day. We are going to look for direction, momentum, premium price areas, wicks, and it will also be used to pint point our stop losses, entries, take profits and our exits. THE 4 HOUR TIME FRAME The 4 hour time frame is our go to time frame to put the puzzle pieces together so it will line up with the daily time frame.
Don’t worry I will explain all of this later in the book, just make sure you read this and write notes down so it will stick in your head. This is SUPER important. 4 hour will tell us exactly when it is time to enter or when it is time to exit a trade, as well as minimizing our stop loss, have a more accurate take profit but most important, to monitor the momentum of our trades. THE 15 minute TIME FRAME This time frame will ONLY be used to monitor our trades that have been executed.
We will use it to follow our trades and make sure that the movements are moving in our direction, if we are in buys, we want the 5/15 minute to show us bullish structure and not starting to break previous low, thus indicating that the price action on the higher time frames are not holding yet and we should exit immediately. This is something you will have to practice a lot on and it will be talked a lot of about in the chapter The Importance Of Chart Time later in this book. Top down analysis Combining the different time frames to build a confluence. CONDUCTING A TOP DOWN ANALYSIS IS PROBABLY THE SINGLE MOST IMPORTANT THING 99% OF TRADERS FAIL OF DOING.
IT IS ALSO ONE OF THE BIGGEST FACTORS WHY THEY ARE NOT BEING CONSISTENT PROFITABLE BESIDES RISK MANAGEMENT AND SYSTEMATIC APPROACH TO TRADING. TOP DOWN ANALYSIS IS WHERE WE PUT EVERY SINGLE PIECE OF INFORMATION TOGETHER TO BUILD OUR EXECUTION PLAN. WHEN WE HAVE OUR EXECUTION PLAN, WE SIMPLY EXECUTE THE TRADE BASED ON THAT, AND ONLY THAT. LET ME REPEAT MYSELF ONCE AGAIN, TOP DOWN ANALYSIS IS ONE OF THE BIGGEST REASONS FOR YOU TO BECOME PROFITABLE, IF YOU DO NOT FOLLOW THIS APPROACH EVERY SINGLE DAY, YOU WILL FAIL.
This is how I want you to do your top down analysis by utilizing what the markets are telling you, basically showing you how to see and use MARKET STRUCTURE to identify high probability trade set ups. It is important that you really pay attention to this chapter and really take notes and look at your own charts at the same time and try to dissect it the same way I am showing in this chapter. It will ease up your learning process and make your learning speed increase drastically, remember you have to put everything written in this book to practice to make it work, and you need to repeat it over and over again. Here we can see the monthly chart, this is how every trader would see their charts, what many do in this scenario is that they over complicate the analysis process by trying to use indicators or asking others about their opinion, basically looking elsewhere but the charts that are right in front of you.
If we now try to understand where the market is heading simply by looking at it, is there something you can identify right away? I want you to think about that question while I am showing you every different time frame, try to see if you can see something right away, if you can not it is totally fine. Just do your best. Go through each picture and see if there is something you can put together right away.