Welcome to Daizanfx! I’m here to guide you through the essentials of trading, focusing on discipline and high-probability setups. If you want to succeed, you need to understand that this isn't a quick fix. To fully apply what you’re going to learn, you must stay patient and wait at least six months to fully understand and experience price movements. Stay disciplined, and you will see the light at the end of the tunnel.
Here are the foundational elements we must master:
1. Risk Management: The Golden Rule
The first concept we tackle is risk management. This is non-negotiable, because the number one rule is: you have always to be ok with how much you could possibly lose. At the end of the day, the most important thing is to accept our losses with a solid trading plan.
Remember this crucial fact: You can’t control the amount of money you’re going to win, but you can control the amount of money you’re going to lose. We must concentrate on reducing our losses because that’s the only way we can make money out of the market.
We subdivide risk management into two types:
A. Static Risk (The Beginner’s Choice)
This is the basic type you’ll use most often at the beginning, managing risk on just one position. You should use a maximum of 1% or 2% risk per trade. For example, on a $1000 account, risking 1% means your maximum loss is $10. Remember, 2% should be the maximum percentage you should risk per day.
B. Dynamic Risk (For the Experienced)
This is a bit more complicated and requires intuition. Dynamic risk is where you add multiple positions on the same trade. Instead of risking a full 1% position at once, you might divide it into two 0.50% positions. You’re still only risking 1% total, but you potentially secure the second position at a better price. This second position is mainly added as price goes against you but still hasn’t hit your stop loss (SL), giving you potentially less risk and more reward.
2. Market Structure: Sessions, Zones, and Ranges
We need to understand when and where to trade.
Timing Your Entries
Market volatility is heavily influenced by sessions. Big candles usually form during the main, most volatile sessions: London open and NY open. In other frames of the day, the candles that form are statistically less volatile and much smaller. Focus your attention between London and New York sessions.
Identifying Zones and Ranges
Before taking any trade, we must always measure the range. A range is the distance between a support and a resistance. Critically, support and resistances are not a specific price, but a range of prices—they won’t always be round numbers.
A good range is key to a high-probability trade. Trading a 10-pip range offers very low probability. A good range should be at least 20 to 25 pips.
Trading the Zone
Only take trades when price is still near the zone. For example, if price breaks a resistance and closes above, making the old resistance a new support, and then shoots straight up, do not chase it. The higher price goes after a break, the more probability there is for price to come down and have a retest. We only want high probability trades.
For trend trading, wait for support to form in a bullish trend, and resistance in a bearish one. The basic idea is to expect a trending price to retest its own highs and lows, and we should capitalize on this.
3. Advanced Concepts: Impulse Entries
Impulse entries address the frustration of missing a trade when price suddenly rallies or drops in your direction. These setups work perfectly on all timeframes.
To execute an impulse entry, look for three main confluences:
- Exhaustion Candle: A candle that has wicks bigger than the body.
- Location: Formed on a resistance (bearish trend) or a support (bullish trend).
- Volume: Confirmation that volume is present.
In this scenario, price usually goes in the opposite direction of the big wick, continuing the trend—this happens usually 90% of the time.
We want the candle that breaks the zone to first go against the trend, creating a wick. This movement allows the price to "breathe" and grab some liquidity, enabling a bigger move in our desired direction.
- If the wick is large, use a regular lot size because the probability is high.
- If the wick is smaller, or if there is no major wick created in the opposite direction, the risk raises, and you should use a smaller lot size or let the trade go.
The hardest thing about impulse entries is learning to just sit there and watch them play out without us being in the trade.
The Discipline of the Trader
Finally, understand the mental game. You must wait for candles to print something that we can recognize. There is no rushing or hoping for trades to play out.
Impulse entries can really test your psychology. Don’t think or have remorse on trades you are missing. There is nothing you can do about missing a move.
Once we master our minds to act based only on the rules we’ve learned, without trying or hoping, this is where trading gets easier, and we can take advantage of these kinds of setups.
We are trading with real money, so be very careful. Stay concentrated, control your emotions, and do not change your bias after a loss. If you hit your stop loss, but price starts moving in your favor, and you still have enough confluences and risk percentage left, you can consider giving the trade a second chance.
Stay fluid, adapt to what’s happening in the market, and always be patient.
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