How To Catch The Highest Probability Setup (FULL GUIDE)

Summary

This video tutorial offers traders a strategy to identify high-probability setups using relative strength analysis. It highlights the importance of trading the strongest currency pair and introduces four methods to determine relative strength: Candlestick Logic, Smart Money Technique, currency pair analysis with EUR/GBP and AUD/NZD, and currency futures. The presenter illustrates these concepts with visual examples, guiding viewers to make informed trading decisions and improve their win rate.

Takeaways

• 📈 Trade the strongest currency pair to maximize profit and avoid getting caught in weak pairs, which is a common issue faced by traders.
• 🔍 Use relative strength analysis to filter for high-probability setups, focusing on the strongest pair between two closely correlated assets.
• 📊 Four methods are discussed for determining relative strength: Candlestick Logic (CSL), Smart Money Technique (SMT), using currency pairs like EUR/GBP and AUD/NZD, and Currency Futures.
• 🕯️ In Candlestick Logic, 'respect' is shown when a large wick is painted off a key point of interest (POI) with the body closing above it, indicating a higher probability for long trades.
• 📉 Conversely, 'disrespect' is observed when a candle body closes beneath a POI, signaling a higher probability for short trades.
• 📌 Smart Money Technique (SMT) identifies divergences between swing highs or lows on correlated assets, indicating a potential shift in relative strength.
• 🤑 Currency pairs like EUR/GBP and AUD/NZD can be used to gauge the relative strength of the Euro, Pound, Australian Dollar, and New Zealand Dollar against each other.
• 🌐 Currency Futures are used to identify the strongest and weakest currencies, and trading the cross pair of the strongest currency with the weakest (e.g., CHF/JPY) can lead to higher probability trades.
• 📝 Traders should avoid pairing two weak currencies together as it can result in unfavorable and messy price action.
• 📉 The script emphasizes the importance of observing price action on higher time frames to determine respect or disrespect for key levels, which can help in choosing higher probability trades.
• 📝 The video provides a comprehensive guide on how to increase win rates by focusing on the strongest currency pairs and avoiding low-probability trades.

Q & A

What is the main focus of the video?

The video focuses on teaching viewers how to filter for and trade the highest probability setups using relative strength analysis in the context of Forex trading.

Why is it important to trade the strongest pair in Forex?

Trading the strongest pair is important because it helps avoid getting caught in the weak one, which can lead to less profitable trades or losses.

What are the four different methods discussed in the video for determining relative strength?

The four methods are Candlestick Logic (CSL), Smart Money Technique (SMT), using currency pairs like EUR/GBP and AUD/NZD, and trading with Currency Futures.

What does 'respect' mean in the context of Candlestick Logic (CSL)?

In CSL, 'respect' refers to a situation where a candle presents a large wick off a key point of interest (POI) and a body closure above it, indicating a strong intention to push higher and a lack of intention to continue lower.

How does the Smart Money Technique (SMT) work?

SMT identifies a divergence between swing highs or swing lows on two closely correlated assets, which is essentially a 'crack' in correlation. It helps to determine the stronger or weaker asset by observing which asset fails to create a new swing in the expected direction.

What role do currency pairs like EUR/GBP and AUD/NZD play in determining relative strength?

These currency pairs help gauge the relative strength between the Euro, Pound, Australian dollar, and New Zealand dollar. A bullish EUR/GBP indicates a stronger Euro over Pound, while a bearish EUR/GBP indicates a weaker Euro and a stronger Pound.

Why is it recommended to avoid trading the weakest currency with another weak currency?

Pairing two weak currencies can lead to unfavorable and messy price action, which is difficult to trade and often results in lower win rates.

How can currency futures be used to determine the strongest currency pair for trading?

Currency futures can be used by identifying the weakest and strongest currencies from the futures list, then pairing the strongest currency with the weakest currency's pair, which results in the highest probability trade setup.

What is the significance of observing price action on higher time frames when using Candlestick Logic?

Observing higher time frames helps to determine how well the price respects or disrespects key points of interest (POIs), which can indicate the strength or weakness of a currency pair in relation to its correlated assets.

What does the video suggest for a trader's approach when they identify a strong currency using currency futures?

The video suggests that when a strong currency is identified using currency futures, a trader should pair it with a weak currency (like the Yen during a bearish phase) to trade the resulting cross pair with a high probability of success.

How can a trader apply the concepts learned in the video to improve their trading strategy?

A trader can apply these concepts by analyzing currency pairs and futures to identify the strongest and weakest currencies, focusing on high probability trades, and avoiding low probability or messy price actions.