The Three Essential Trendline Trading Strategies that You Need to Consistently Trade Any Market

In this video I’m going to go through the three essential trend line trading strategies that you only need to consistently trade any Market. These strategies come from three setups that we use in the Price Action Algo Trading system and have different win rate and win to loss ratio that provides Edge, so based on the macro structure that can be used in a specific market condition to take advantage of them.

We teach mainly the setup T which is a trend following setup in the first 11 module which is suitable for the novice Traders because of the higher win rate but we also teach other setups such as C and B in the advanced PAAT which might be useful for other traders based on their psychology and time frame and risk tolerance

setup T
Dynamic Support and Resistance

So, before we begin and discuss these in detail you have to know these four facts that are listed here, and I go briefly through each of them. First you need to know price action psychology of trend line trading and understand how the support and resistance works, whether it is a static or dynamic, you have to know the four major players that move the price and create a pattern that these trend lines become reliable and price respond to them. And this psychology of price action is the basis that trend lines work. Then you have to know how to draw the trend lines, therefore please go through the lessons and also the drills that we have on YouTube and we explain in detail how to draw the trend lines that creates Dynamic Support and Resistance and eventually you learn how to draw Dynamic support and resistance on the price chart and that creates Dynamic Channel which in fact provide you with the information on the price pattern that you see.

So, from the price turning points we go to the trend lines and with two trend lines we recognize the patterns and also, we can do analysis of momentum which is important. So, I recommend you go through all these theoretical lessons that are provided for you for free on the YouTube. Also, we have example of PAAT smart drills that I highly recommend you go through them to practice and trust the trend line trading system. The other important topic is to recognize the differences between signals patterns setups and strategy that I covered in an earlier video and you can refer to that and the important information that you eventually need to turn a setup to a strategy and only a personalized profitable trading strategy is what you need for consistency in the market. And the last point is that as I said mastering comes with the practice using a smart drill similar to flight simulator that is used to train pilots. And the best way to get mastery in trading, we provide PAAT trial free of charge that covers basic to Advanced Dynamic price action lessons and includes these essential drills and you not only gain theoretical knowledge about the dynamic price action but by doing the smart drills yourself, you will gain mastery which is needed to understand and be able to use these setups that I’m going to explain for you in the next few slides.

dynamic price action

So, with this introduction, let’s get into the setup T that stands for Trend following and the edge from these setups comes from its higher win rate with moderate win to loss ratio. And to catch these setups we go to our structural chart and find the core of the trend in the center of the price swing of the structural chart, so you can clearly see a downtrend or uptrend channels on the trading chart. So, your structural chart which is going to be three to ten times higher than trading chart should be in uptrend or downtrend and also your trading chart need to show a clear uptrend channel that is aligned with the uptrend channel of the structural chart with good momentum. And using the center of the trend on the structural chart you’re trying to find these small pullbacks on these candles using the smaller trading chart in the right oversold and overbought area with good win to loss ratio.

 Therefore, this setup uses the structural chart to make sure the higher time frame is trendy with good momentum so when these Algo one to three pass, then you’re looking for the overbought oversold area and good to risk to reward ratio and entry signals to enter a trade in a high probability Trading area.

So, this was briefly the setup T and we discussed in previous video how to turn a setup T to setup T strategy. For that we need to consider five other factors. The first one is when we consider the macro market risk and with that knowledge you learn in theory how to find the best setup T area that has lowest risk to adjust your expectation, your risk, and your lot size and money management. But there are four other personal elements that we discussed during mentoring and coaching and need to be personalized based on Trader’s experience, personality, patience, and time frames and risk tolerance. And be journaled and monitored continuously under a coach’s supervision till you develop the right habits and gain proper execution skills.

So, in all three setups, we have a macro market risk evaluation.  I use with many other traders personally a higher micro chart time frame to be able to see clearly all risky areas. And when you understand the three patterns of the macro, structural, and trading charts and combine it together, you will get 27 scenarios that based on alignments of the price on different areas of these three charts, you will see areas that set up T form within the uptrend or downtrend or sideway macro conditions. So, from the 27 conditions we have six setup of T conditions and that defines profit expectation and lot size that varies based on the macro risk condition. So, if I overlap all these three macros, structural, and trading charts on one single chart you will see that setup T is formed in the core of the macro and a structural Trends.

So, when a novice Trader finds a good area of pullback on the trading chart in the center of the major macro uptrend, the buying pressure in uptrend from the macro and the structural major players push the price easily to reach the target with high win rate and also with good win to loss ratio that leads to good runners. So here you see another example that the macro chart is in uptrend forming a wedge but on the structural chart we see an uptrend with good momentum and using a smaller trading chart one can identify area that pullback got completed and enter multiple positions here with higher win rate and good win to loss ratio. And these are the area we consider it very low risk, because the macro and structural charts are aligned and we are away from the static and dynamic macro support and resistance areas.

And about the four other factors that turn a setup to a strategy the Trader’s experience for setup T is important as the novice Traders cannot trade the high-risk areas when the macro chart pattern is in sideways or is against the trend and only advanced traders can trade all those six scenarios whether the macro is in sideways, uptrend, or downtrend.

About the setup C, that stands for counter trend. This setup has a lower win rate of about 60% but it compensates for its edge by having a higher win to loss ratio. And if you look at the structural chart, we see that the price is reversing but in the trading charts we can see that the price is in uncertain sideways area and in fact it’s the first wave of the established uptrend. And because of that, it has a lower win rate because as you see the price has to pass here and stay above this line which is the previous swing high on the structural chart. And before it crosses this point and establish itself, the price is still in a sideway and it may reverse very well and establish these sideways patterns or it may totally reverse and form a lower low and lower high or it may form this wide range sideways pattern. And therefore, is an uncertain sideways area. So, this kind of sideways pattern, happen more frequently and if we want to adapt it to the setup C strategy based on the trader’s personality, time frames, and risk tolerance, it is suitable for traders who are less rule follower and less patient and have a fear of missing out to lose the first wave of the trend, so it is suitable for the higher risk tolerance individuals.

About setup B, which stands for breakout failure. This setup has a much lower win rate, less than 50%. So, the edge for this setup is coming from the high win to loss ratio. And as you see on this structural and macro charts, it is at the extreme area of the price turning points that the price often passes and penetrate these important support and resistance areas and fail to continue. And you can see on the trading chart as a spike often that happens and get rejected and that’s the area, we recommend the novice traders do not trade because it has much higher risk and potential to trap the traders because of the lower win rate. And as you saw on this table before, when the win rate is about 50% or lower, you have much more chance of having consecutive losses in a row and that triggers the flight and fight response of many novice traders to overtrade and fight with the market. So, to make sure that this setup works, you have to wait for the major macro chart supports and resistance, where there are a lot of pending orders from the market makers to get the best price and risk to reward ratio and they have money and patience to take a chance and buy at low and sell at high. While retail Traders have limited funds and patience, so this setup is still might be suitable for some traders because they have a warrior personality and they’re impatient and they’re seeking much higher risk. 

And we recommend to take these trades when you use higher time frames, so you can patiently wait for the price on the macro chart to reach a major static or dynamic support or resistance that often get rejected and you see large shadows and quick price reversals at this point. So, you’re also better to enter with limit orders at the extreme points of the price extension and have a wider stop loss and a smaller position size and have a larger target to compensate for the low win rate.

So, this was the summary of the three common setups that we teach in advanced PAAT and work with the traders in order to turn them to a profitable strategy and take advantage of them if they have suitable personality and risk tolerance.

Thanks for your attention and hope this information is useful for you and let us know if you have any questions. Have a wonderful day!

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