This Made Trading Click For Me

Summary

In this video, the speaker reveals how understanding the weekly chart can transform trading strategies, helping traders select high-probability setups. By analyzing the Euro, GBP, and USD on the weekly chart, traders can determine which currencies are stronger or weaker, allowing them to focus on the best opportunities. The speaker emphasizes avoiding choppy pairs like GBP/USD and focusing on strong trends, such as those in Euro/USD, for more profitable trades. The key takeaway is that understanding liquidity, market direction, and using the weekly chart provides an edge in making informed trading decisions.

Takeaways

• 😀 Start with the weekly chart to identify market direction and understand smart money's intentions.
• 😀 The weekly chart provides key insights into long-term trends, essential for all types of traders (day traders, swing traders, scalpers).
• 😀 To identify the strongest and weakest currencies, focus on the weekly chart for currency strength (e.g., USD, EUR, GBP).
• 😀 If the U.S. Dollar (USD) is bullish, other pairs like EUR/USD and GBP/USD will likely be bearish.
• 😀 Use liquidity pools (areas of stop loss orders) as a guide for where price is likely to move next.
• 😀 Liquidity sweeps indicate where stop losses are being taken out, confirming market direction.
• 😀 Avoid choppy, consolidating markets like GBP/USD in favor of more straightforward pairs like EUR/USD.
• 😀 To spot the best currency pair to trade, look for strong trends and clear liquidity zones on the weekly chart.
• 😀 After identifying the trend, wait for confirmation, like a bearish fair value gap or liquidity sweep, before entering a trade.
• 😀 Set realistic stop losses and take profits, aiming for favorable risk/reward ratios (e.g., 2.5:1 or higher).

Q & A

Why is the weekly chart crucial in this trading strategy?

The weekly chart is essential because it shows the intentions of smart money, which refers to institutional traders. By analyzing the weekly chart, traders can understand the overall market direction, making it easier to identify high-probability setups, regardless of whether they are day traders, swing traders, or scalpers.

What does 'smart money' refer to in the context of this video?

'Smart money' refers to institutional traders or large financial players who have the resources and expertise to move markets. They often use the weekly chart to determine market direction, which is why analyzing the weekly chart helps retail traders align with their moves.

What role do liquidity zones play in this strategy?

Liquidity zones are areas where a large number of stop-loss orders or pending orders accumulate. By identifying these zones, traders can predict where price is likely to move. For example, smart money tends to target liquidity zones, and recognizing these zones helps traders align their trades with market direction.

How does the strength of the USD impact other currency pairs?

When the USD is bullish, it forces other major currency pairs like EUR/USD and GBP/USD to move in the opposite direction. Since the USD is the most powerful currency due to the size of the US economy, its movement often dictates the behavior of other currencies in the FX market.

Why does the speaker suggest avoiding GBP/USD in a bullish USD market?

The speaker suggests avoiding GBP/USD because it tends to exhibit choppy movements and consolidation, making it difficult to trade profitably. Even though GBP/USD might be bearish in a bullish USD market, it doesn't show clear direction, unlike EUR/USD, which tends to show more predictable, strong moves.

What is a liquidity sweep, and why is it important in this strategy?

A liquidity sweep occurs when the price briefly moves in the opposite direction to take out stop-loss orders, typically before reversing in the intended direction. It’s important in this strategy because it confirms that liquidity has been cleared, allowing traders to enter trades with more confidence that the market is likely to move in the expected direction.

What is a bearish fair value gap, and how is it used for entry?

A bearish fair value gap is a price imbalance where the market quickly moves away from a level, creating a gap that hasn't been filled. When a bearish fair value gap forms after a liquidity sweep, it provides a clear entry signal for short trades, as it confirms that the price is likely to continue moving in the bearish direction.

What is the recommended approach to stop-loss placement in this strategy?

The recommended approach to stop-loss placement is to position it just above the liquidity sweep high. This is because, after the liquidity sweep, it’s unlikely that price will return to take out this high and then reverse, making it a safer spot for the stop-loss.

Why does the speaker argue against trading only one pair or one market?

The speaker argues against trading only one pair or one market because it limits a trader's flexibility. Focusing on just one pair, like GBP/USD, can lead to long periods of consolidation with little movement, while other pairs, such as EUR/USD, may offer clearer, more profitable setups. Being flexible and trading multiple pairs allows traders to find better opportunities.

How does the speaker suggest managing trades after identifying the best setup?

Once the best setup is identified, such as a bearish EUR/USD trade, the speaker suggests entering on a liquidity sweep, using a fair value gap for confirmation, and setting a stop-loss just above the sweep high. Take-profit targets should be set at clear liquidity zones, with a reasonable risk-to-reward ratio, ideally aiming for a 2.5:1 ratio or higher.