Full Trading Plan using Dealing Ranges - Ep 21

Summary

In this video, the speaker critiques the vagueness in the trading industry and emphasizes the importance of defining and objectifying concepts like dealing ranges, buy/sell liquidity, and fair value gaps. They present a clear, step-by-step strategy using dealing ranges as entry points, combined with context and narrative from higher time frames. The speaker stresses the significance of studying and mastering these concepts while warning against strategy hopping. With consistent application, even a simplified approach can outperform hedge funds, but success requires patience, discipline, and risk management.

Takeaways

• 😀 Vague terminology in the trading industry often confuses traders. Definitions need to be clear and quantifiable to make trading more objective.
• 😀 Many traders become obsessed with finding an algorithm, but the true goal should be making money, not chasing complex systems.
• 😀 A 'dealing range' is defined as a range that takes out buy-side liquidity and then sell-side liquidity, or vice versa.
• 😀 Buy-side liquidity is found at swing highs, while sell-side liquidity is at swing lows. This is essential for defining and spotting dealing ranges.
• 😀 A trading strategy needs to be actionable, step-by-step, and defined clearly for it to be effective in real trading scenarios.
• 😀 Traders should use context and narrative from higher time frames to guide decisions on lower time frames. This helps prevent random, erratic trades.
• 😀 Trading plans should incorporate clear objectives and quantifiable metrics like dealing ranges and fair value gaps, making decisions mechanical and repeatable.
• 😀 Losses are part of the learning process and essential for growth. The first losses help traders move from a losing phase to a break-even phase and eventually to profitability.
• 😀 The 'losing curve' is a critical phase where traders experience losses early on in their trading journey. This is followed by break-even and profitable phases.
• 😀 Successful trading requires focus, risk management, and consistency. It’s not about having a 100% win rate but learning from losses and improving over time.

Q & A

What is the key issue with the trading industry today, as mentioned in the script?

The key issue is the vagueness in trading concepts. Many traders and educators talk about complex strategies or algorithms without clearly defining or objectifying the terms, leaving people confused and unable to apply them effectively.

What does the speaker suggest traders should focus on instead of finding algorithms?

The speaker suggests that traders should focus on making money rather than trying to figure out algorithms. The goal of trading is to make money and gain freedom, not to get lost in the obsession with algorithms.

What are 'dealing ranges' in trading?

A dealing range is a range in the market that first takes out buy-side liquidity (swing highs) and then takes out sell-side liquidity (swing lows), or vice versa. This can be a useful pattern to identify when making trading decisions.

How does the speaker suggest traders can make the concept of 'dealing ranges' more objective?

The speaker suggests defining concepts like buy-side and sell-side liquidity more clearly. For instance, buy-side liquidity is defined as swing highs, while sell-side liquidity is defined as swing lows. This helps to objectify and quantify the concepts in a practical way.

What is a 'fair value gap' and how does it relate to dealing ranges?

A fair value gap is a gap in price where the market has not fully filled in its trading range, typically representing an imbalance. In the script, a bullish or bearish fair value gap can be incorporated into dealing ranges to increase the chances of a successful trade.

How can 'narrative' and 'context' be defined in trading?

Narrative and context in trading refer to the larger market story and environment in which trades are being made. For example, if the price is moving from a daily premium to a discount, this forms the narrative and context that guides a trader's decisions in lower time frames.

What is the importance of using higher time frames in trading?

Higher time frames provide the narrative and context for trading. By understanding the larger market trend, such as moving from premium to discount, traders can make more informed decisions on smaller time frames, ensuring that their trades are aligned with the broader market direction.

What role do kill zones and marked structure play in the trading strategy?

Kill zones and marked structure are used to filter out losing trades. Kill zones refer to specific time periods where the market tends to move in predictable ways, while marked structure refers to key levels in the market that are critical for trade execution.

What is the 'losing curve' in trading, and why is it important?

The 'losing curve' refers to the initial phase in trading where a trader experiences losses after adopting a new strategy. This phase is crucial for building experience, as it helps traders overcome initial losses, reach break-even, and eventually become profitable.

What does the speaker mean by 'strategy hopping' or 'SOS traders'?

Strategy hopping, also known as shiny object syndrome (SOS), refers to traders constantly jumping from one strategy to another when they encounter losses, rather than sticking with one plan and going through the necessary learning curve. This behavior is seen as detrimental to long-term success in trading.