Although possibly the big mistake is trading off chart patterns like this in the first place. But I am not qualified to say that absolutely.
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but, nevertheless, you are correct 
I am trying to understand, but…
So, mathematically speaking, how can I measure the market and understand the meaning of a movement without some established patterns??
Formulate your own patterns based on FACT
Trading is basically Statistics, … Likelihood of something occuring or not, which translates into Risk management.
i know you are mate, I UNDERSTAND, i’ve been there, it’s like a brick wall… … right
ok… start like this
the most basic of tasks is to figure out DIRECTION
so… pull out Monthly , Weekly, Daily… H4, H1 M30, M15 , M1
on whatever instrument you want
and DEFINE THE OVERALL DIRECTION
and understand WHY you made this choice
see, here is the thing, Your mind is beautiful thing, the way it works, it will JUST DECIDE what direction it is BASED ON PATTERN RECOGNITION, but not the patterns that are on your sheet.
and it happens so seemlesly that you don’t even know how it happened
GET USED TO UNDERSTANDING WHY YOU DECIDE CERTAIN THINGS
now look
LET ME GET YOUR STARTED OK so you have somewhere to go from here
Rule 1. Piss of those cheat sheets they are useless
Rule 2. Keep things as simple as possible
let’s assume you trade EURUSD
look at this
Step 1. Define direction
you basically have 3 Multiple choices
UP , DOWN , RANGING
see how it changes depending on the time frame that you are on ?
Now here are 2 Basic concepts that you can use they are easy to understand
START HERE AND DEVELOP YOUR OWN TESTED THEORIES FROM THIS
ok… Lesson 1… USE SIMPLE LOGIC TO DETERMINE DIRECTION.
don’t over complicate it,
don’t argue with it
Just use simple logic… LIKE THIS
here is the Weekly chart
Now… Draw a simple conclusion what is the direction overall (keep it to yourself)
now, what is the immediate direction, I’m assuming you’re going to say, Martin it’s going UP.
that’s correct
now
STEP 2.
let’s draw a line under the rally up
and allow for some wiggle room , so don’t draw the trend line… RIGHT UNDER THE CANDLE… hehe ok
Now… is now fair to say that
- if the candle does not break the trend line… IT MUST GO UP… that’s fair and logical… right ?
so… THAT’S A SIMPLE RULE
another rule, ONLY TRADE WHAT YOU CONSIDER TO BE A GOOD DEGREE OF CERTAINTY,
don’t take long shots, trade LOGICALLY
another thing is
WHEN YOU DECIDE ON THE OVERALL DIRECTION, do not trade against that direction.
NOW. if you want to say , Martin what if there is a reversal… well… ok
but if that happens, then YOU RE-DECIDED ON THE DIRECTION. so then dont’ trade against THAT NEW direction… ok got it
now…
LOGICALLY… if it breaks the trend line
DOES IT MEAN IT IS NECESSARILY going down
ANSWER : NO it doesn’t
so for now… just use that concept of … if it doesn’t break the line it MUST GO UP… ok
now let’s look at this
the area in the grey box is A RANGE… a sideways market
when Market is ranging and you draw a box like this
LOGICALLY… ONLY 3 THINGS CAN HAPPEN and nothing else
thing 1. the Market can break out of the top side of the box
thing 2. the Market can break out of the bottom side of the box
thing 3. the Market can keep ranging FOREVER
Now… look at statisical likelihood
is THING 3. Very Likely to occur
ANSWER : NO
so… LOGICALLy it’s only temporary
so really you only have 2 decisions to make
now… should you predict it
ANSWER : NO You’re not a mind reader… ok
let the market do what it wants, and you adapt to it and prepare for both scenario’s
after a while you will find that your brain will identify patterns and how things move, don’t worry about it.
so now what you want to understand here is this
it’s useful to divide this box into 2 Like this (the Black Line)
then divide each half into halves again… (The Blue Lines)
Now here are the rules
BUY LOW
SELL HIGH
(no Duhhh hehe)
and there is a DO NOT TRADE area
they are as follows
so… NEVER ENTER A TRADE if you are in the Red Area,
Meaning… Above the Bottom Blue Line
or Below the Top Blue Line
aka… NEAR THE MID LINE
if you think the direction is going UP (as you think it is here) YOU BUY AT THE BOTTOM BLUE ARE
so… Below the Bottom Blue Line
if you think it’s selling, you SELL above the top blue line
Now, assuming you are doing short term trades, you may want to put your TAKE PROFIT here
anywhere in that box
the idea is… IN A RANGE (and you can test this)
price almost always returns to the mid line
if you BUY LOW and set your Take profit near the mid line or just above it (if you want to be gutsy) you are almost guaranteed to be taking in profit
so where does your STOP LOSS go… you ask
ok, it goes somewhere here
the red line
Meaning, if price goes against you. you have to accept your theory was incorrect and cop the loss
in this situation we are assuming that the direction is UP (and stick to your decision)
so if that’s the case
WE BUY LOW
WE PUT A LOWER STOP LOSS
AND WE TAKE PROFIT AROUND THE MID LINE
now if the direction is actually DOWN , then just cut your loss short. and re evaluate
it’s as simple as that
ok… so if it breaks out on the top side, like it is… DO YOU JUMP ON BOARD…
ANSWER : HELL NO… YOU MISSED THE BOAT… don’t try and jump on while it’s leaving, you’ll end up in the water with the sharks
YOU NEED TO PLAN WHAT WILL HAPPEN ok
if you missed it… YOU WAIT FOR THE NEXT ONE
now… what will happen with price where it is now… WILL IT KEEP GOING UP
another lesson
YOU NEVER KNOW WHAT’S ACTUALLY GOING TO HAPPEN, you just take educated guesses
so USING THIS RULE of identifying a range and dividing it into Quarters and understanding that price retraces to the half way line, and certainly to the quarter line
let’s look at the drop before range.
ignore the lines, i’ve just put the up their for now
just look at the box
ok… now lets divide it up again to get this
ok… so what ?? right ?
ok
now… LET’S TAKE A LOOK TO THE RIGHT SIDE WHERE PRICE IS NOW… shall we
let’s look what has happened
DO YOU NOW UNDERSTAND ?
do you think it’s a coincidence that price has returned the MIDDLE POINT OF THE DROP hehe
ok , so let’s apply those rules again of buying and selling
so… where will price go from here
well. IT’S AT THE MID LINE… so WE DON’T KNOW… WE WAIT for now
because the middle area is A NO TRADE ZONE
at this point here is the logic
if you think the direction is UP
you should have bought the trade when it was below the blue line, so you missed it
now, you have to wait for it to come back down again
or
if it doesn’t come down, wait for the next range period and re evaluate from there
if you believe it’s going to go down , then EVEN THOUGH YOU COULD ENTER NOW… DO NOT DO THAT.
wait until it gets above the top blue line, then SELL
WHY
What if it takes off you ask
well… if it takes off, you have a stop loss in place… right, Just outside of the ranging zone
but, HONESTLY… after a while, you will get a knack for picking the direction
and you might find that certain indicators (THAT YOU TEST) will assist you in this
you might also find that certain other pairs correlate with this pair and will help you make your decision
but FOR NOW
to Recap
Use this rule of LOGIC and Trend lines
so lets’ now do this
and now you can conclude the following LOGICALLY
on this time frame
- Price appears to be going up
- you want to BUY, which means you have to wait until it reaches the area below the bottom blue line
- now let’s assume that did buy in that area
you now conclude this
- Ignore all pullbacks UNLESS THEY BREAK THE RED TREND LINE, because unless price drops below that trend line IT IS IMPOSSIBLE FOR IT TO GO DOWN… can we agree on that ?
OK
Now. if you are selling, you wait for it to get into the are above the top blue line, but YOU WAIT FOR IT TO BREAK THE RED TREND LINE and obviously you put a stop loss outside of the grey box
now , lets’ say you didn’t get in on a BUY LOW
and let’s say this happens
imagine the blue line is a bunch of candles NOT A LINE… ok
so then you draw a trend line like this
now LOGICALLY can we agree that
- you would BUY LOW in the area under the bottom blue line
- you would also agree that IF PRICE BREAKS ABOVE THE RED TREND LINE, THEN it’s probably going up
now lets say this happens
ok, so can we agree that now, if price does not go below the top red trend line, then IT MUST GO UP
i guess so… right ? this is logical
now… question
DO YOU RIDE IT ALL THE WAY…
ANSWER : NO
YOU ONLY GO TO THE HALF WAY LINE and then take profit
now there is another way to maximise profit all the way up .
I’M NOT GOING TO SPOON FEED YOU (don’t take this personally)
I WANT YOU TO FIGURE IT OUT
so use these concepts as a starting point
forget the bats and the cheat sheets
Use Logic
apply the box to Break outs up or down
and apply them to range period
find the half way point
find the quarter points
decide the direction
BUY LOW
or
SELL HIGH
never enter in the middle
the reason is … if you are wrong, you will very likely get a chance to break even
however
if you were to sell just before the breakout to the high side, and YOU WERE WRONG, you’d now be in a lot of SHYTE and be trying to figure out WILL PRICE COME ALL THE WAY BACK UP
No, it probably won’t until you go broke
so… start there mate
this is basic stuff, i assure you
but, Put your stop losses outside of the box and whatever the pip count is… MAKE SURE YOU ARE NOT EXCEEDING 1% OF YOUR ACCOUNT BALANCE…so Adjust your Lot size accordingly
remember, DON’T PUT YOUR STOPS BASED ON A NUMBER, PLACE THEM LOGICALLY FOR LOGICAL REASONS. regardless of the pip distance
when you place a stop somewhere KNOW WHY YOU PLACED IT THERE
so… what do you think
IS THIS SOMETHING YOU CAN WORK WITH ?
can you build on this… ??
doing this creates safety and management
after a while, you will start to recognize patters and your cheat sheets will mean nothing… trust me
have a nice day.
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I haven’t read Martin’s post but full marks for commitment and detail.
@tommor
LOL…
Mate, … shows a total lack of commitment on your part… I’m dissapointed mate
nah… it’s just basic stuff really
no need to really go through it all if you already know it
if you don’t however, it’s very useful
simple, but very cool and works a hell of a lot of the time, so much so that you can pretty much base a strategy of it and develop something that gives you a high win rate
it may not always follow 1:1 Risk vs Reward, but who cares, because probability comes into it and then gives you a win rate so when you cop a loss, it’s not that big and you turn a profit anyway.
when i teach students, this is the first bunch of stuff we go through and they usually get a lot better in the next 2 weeks that follow
so… let’s see what happens
I know, I know, I know.
Its Sunday. I can’t do difficult stuff on Sundays.
@tommor
hehe
well. don’t do it monday, because Monday is Monday
wait at least until Hump day, but mate, if it’s not done by THURSDAY… oh mate, there’ll be hell to pay
on another note…
funny how that happens huh
i made this big post explaining the basics of high . low. mids and price action and then you have that bloke talking about that Nicola system thing which is basically the same thing.
how convenient that that post just showed up after i wrote this post… hehe
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Basically what @Martin is saying is that on the weeklies it is in a good solid uptrennd, but on the monthlies - it is smack in super - high resistance !
Likely outcome - who knows but with dollar having been pushed artificially high for years - maybe it’ll pough through - eventually.
I’d be looking for a period of congestion around here, but probably tradable sized congestion.
What I’d also add is that the last 5 bars on the 4H chart relate to a Friday after a biggish up-week, so I tink some of that will be “The boyz” closing out for teh weekend with a decnt profit and maybe a few shorts in anticipatin of exactly that.
Where will “they” push it next week ?
Well working on “Max-pain” hypothesis, Bang it up, then brief congestion then drift it down a bit, up again and finally drop it like a red hot stone. (or a dead bat ? )
What news do we have next week ? 
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Yeah… Basically
but it was more a place to start to experiment with instead of standing in front of a brick wall that you can’t get beyond because you’re out of ideas
but yeah… basically that was it
let’s now see where he goes from here ?
C’mon mate - I’ve had my guess - what’s yours ? 
ok,
well. it depends if he has initiative or not
if he’s willing to put in effort and pump a few ideas and experiment , he should notice a small improvement in his trading and less losses say out of every 30 trades
i think (Based on gut feeling and what i’ve read so far) yeah… i reckon he probably will get something positive out of this and improve to a degree
but as i asked him that question, after i said, i’m not going to spoon feed him, i’m interested to see if he figures it out. now… i’m not going to tell him, i want HIM TO WORK IT OUT, but if he doesn’t , it’s not really a biggie, because intially he needs to learn to be safe, and i think this will educate him on that to a degree and make him understand that he was upside down and that’s why he loses at times
yeah, i think he’ll get something out it and i think i’d like to check back in a week and then a fortnight to see his thoughts and progression on the subject
but i think he’ll do something with this, that’s my gut feeling.
and also thank you for letting that one out of the bag HEHE
i was purposely putting emphasis on the weekly and trying to trap him into focussing on weekly to see if he would be smart enough to look on monthly
so yeah, basically super high resistance on monthly
Exactly
and they need to learn that
and they need to learn what to do in those WHO KNOWS Times
i would say they would go Short in anticipation of a rally up , but , that’s a guess and i usually don’t like to do that,
also i really trade more US2000 and EUR AUD than i do EUR USD, but i do dabble in EURUSD if i see opportunity
LOL Roadkill bat
yeah… and then he can test those cheat sheets and see how far that gets him… right
I agree with that - Publishing your trades and logic ahead of time is a great way of creating a lasting journal.
Also @Hikaros, There are a zillion ways of trading and “Patterns” are one of them, which some use to good effect.
If geometry is your thing, try looking up “Sacred geometry” - That as I remember from 15 years or so ago had some quite impressive results.
There was also a book called PAttern price and time which came out 15-20 years ago, which was quite good - but I can’t find it on Amazon. There is one there, but it’s not the one I mean and the one star review seems to be from someone who DOES know his “Gann” - I’ll diig it out of my “library” and give you the author later. 
[Edit - sorry it WAS by the same author, just the earlier version with the blurred “clock” on the cover - I just had a flip through it and it Does talk about “Squares” - Whether it is quite suited to your wants tho’ I’m not sure, but if you can get it cheap, it may help some. ]
sorry you meant EURUSD not what the newbie will do hehe
ok give me a second… let me give you a proper answer
i mean it’s 6am and i haven’t slept all night, BUT OK… PREDICTION TIME hehe
well. looking that Monthly
Pretty self explanatory… huh
now here is how i would view it
my BB’s are telling me this is A POP to the high side
My HA’s are telling me there is no sign of slowing down just yet
but we have not exceed that Downtrend line yet… BUT IF WE DO i expect to see it go to around 1.3957
then perhaps a retracement to this level again
as for the H4 i’d be saying the following
it broke the upper trend line. so now My H.A.s are telling me that there is a pull back,
i’d be waiting until they slow down and also i would want to see if it breaks the lower trend line, although i doubt it
on this H4 however
one could be gutzy and rack in around 40-50 pips if they short it from here
although i wouldn’t recommend a sell at this point
my feeling is , it hasn’t popped through the top of the box, but it has reached the top and has turned around
now,it’ll be interesting to see where it opens at on monday, but i think the overall direction is headed up.
My HA’s on the H4 are giving strong indication that it’s going down now, so sell possibility
i would personally be waiting for it to break the bottom trend line and then enter below the blue line and i would BUY and rid it up to the mid line or between the mid line and the blue line and rinse and repeat hehe
i don’t think it’ll go as low as to break the bottom trend line though, but i do think it’s going up and this is just pull back on the short term.
that’s my 6am Assessment of it ok 
now i need some sleep
Now
@Falstaff
was that to your liking or shall i have the full report on you desk by monday morning with a Latte beside it
secondly
WE HAVE COMPLETELY TAKEN OVER HIKAROS TRADE JOURNAL… HEHE
i feel bad for the bloke
it has become… Martin and falstaff prediction of what will happen on monday
@Hikaros Sorry dude, it sort of got out of control
FEEL FREE TO TAKE IT BACK
Thank you guys for your time.
You really opened my mind.
I would never have seen the Monthly resistance there. I used to look max to D1.
Lesson learnt!
ALWAYS check ALL timeframes.
Really useful material Martin.
I will read again and again to make sure I get everything!
Thanks!
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JOURNAL UPDATE
MONDAY 19/02/2018 TRADE OVERVIEW
I bought EUR/USD at 1.23800 and just closed it at 1.2450.
I was waiting for it to go 1.24200 but US market is closed today so there is no movement at all.
25 pips not bad.
