Time & Price Algorithmic Trading: Targets

Summary

In this lecture, the focus is on identifying trading targets using a mechanical approach. Key targets include the original consolidation (OC) and the drawn liquidity (DOL), both determined on higher timeframes. Traders are advised to take more than 50% of their position off at the OC, with the remaining held towards the DOL. Through practical examples of both buy and sell models, the lecture demonstrates the importance of risk management and strategic partial exits. The lecture concludes by emphasizing the importance of understanding the higher timeframe objectives and managing trades with confidence.

Takeaways

• 😀 Targets are defined on higher time frames, not lower time frames, for better clarity on exits.
• 😀 Target 1 is the original consolidation (OC), and Target 2 is the drawn liquidity (DOL), which represents your main exit points.
• 😀 Always take off more than 50% of your position at Target 1 (the original consolidation) and hold the remainder for Target 2 (drawn liquidity).
• 😀 The original consolidation is the most important target since it represents the core of your trade setup.
• 😀 When you're confident your drawn liquidity will be reached, you can avoid taking partial profits at Target 1 and instead hold the full position until Target 2.
• 😀 After reaching Target 1, protect your risk by moving your stop loss to break-even or above, ensuring no losses if the market reverses.
• 😀 The drawn liquidity is often a higher-level price objective that is considered 'extra' once the original consolidation is reached.
• 😀 If price is retracing into an order block or another point of interest, anticipate the next expansion towards your targets, whether it's higher or lower.
• 😀 It's crucial to plan for multiple targets if there are liquidity pools or imbalances between your original consolidation and drawn liquidity.
• 😀 Taking partial profits at logical areas between Target 1 and Target 2 (like liquidity pools or imbalances) is acceptable, but only after reaching Target 1 first.

Q & A

What is the primary focus of this lecture?

The primary focus of this lecture is on identifying and understanding targets in trading, specifically how to define target points on higher time frames and how to approach them when entering a trade.

How should targets be defined according to the lecture?

Targets should be defined on higher time frames, with the original consolidation acting as target one and the drawn liquidity as target two. The original consolidation is your main target, and the drawn liquidity is the additional target.

Why is the original consolidation considered target one?

The original consolidation is considered target one because it represents the key level from which price initially reverses and starts moving towards the drawn liquidity. It's your main point of exit where most of the position should be taken off.

What is the significance of drawn liquidity in the trading process?

Drawn liquidity represents the secondary target that traders aim for after the original consolidation. It's the price level that is anticipated to be reached as the trade continues in the desired direction, and it reflects a further expansion of price.

How much should be taken off at each target?

More than 50% of the position should be taken off at the original consolidation, as this is the main target. The remaining portion should be taken off when the drawn liquidity is reached, which is the secondary target.

What should you do if you're confident in reaching the drawn liquidity?

If you're confident that the drawn liquidity will be reached, you can avoid taking partial profits at the original consolidation. Instead, you can hold your position and adjust your stop loss to break even once the original consolidation is taken.

What is the role of stop loss adjustments in this strategy?

Stop loss adjustments are crucial for risk management. Once the original consolidation is breached, traders should move their stop loss to break even or above, ensuring that no loss is incurred if the price reverses before reaching the drawn liquidity.

What is the importance of using higher time frames to define targets?

Using higher time frames to define targets is important because it allows traders to identify key price levels, such as the original consolidation and drawn liquidity, without getting distracted by the noise and volatility seen on lower time frames.

Can multiple targets be used in a trade? If so, how?

Yes, multiple targets can be used in a trade. For instance, a trader may take partial profits at key levels between the original consolidation and the drawn liquidity, such as intermediate buy/sell liquidity pools or imbalances, before fully exiting at the final drawn liquidity level.

What should be done if an intermediate target is reached but the drawn liquidity is not?

If an intermediate target is reached but the drawn liquidity is not, it's essential to consider taking partial profits at the intermediate target. This can help lock in some gains while still holding a portion of the position for the drawn liquidity, with risk protected by stop loss adjustments.