The BEST “Simple Trading Strategy” For Beginners That Noone Ever Told You… (Beginner To Advanced)

about six years ago after four hours straight of looking at charts my eyes were essentially bleeding and i was on my third cup of coffee i managed to make what most traders would consider the discovery of a lifetime i found a combination of a specific indicator technique and a bit of price action that provided a massive money making edge in every market that i tested and traded it on and this is actually still one of my favorite and most accurate ways of trading it's exactly what caused me to get into the trade you see on the screen that we are currently in on the euro dollar and the reason i still trade this strategy to this day is because it consistently puts me in positions that help me to make massive profits and since that is one of the first steps of you becoming a profitable trader is finding a consistent way to make profits i thought it'd be a good idea to share this strategy with you today so if that sounds good go ahead and click that like button for me go ahead and subscribe if you are new click the notification bell and i will see you on the other side of the intro and disclaimer [Music] welcome back and first off i'm going to be teaching you this entire strategy so this strategy is something that i call rd a r d e and no it's not because i had a childhood friend named artie it's because it stands for aggressive reversal divergence entry and that is a mouthful which is the reason i call this strategy arty party is meant to help us take advantage of reversing markets so markets that have been in a downtrend but have a very high likelihood of reversing heading higher and making massive profits now if you've been around the channel for a while you know that anytime i create or use a strategy it must fall under this acronym c e s t which stands for conditions entries stops and targets rd is no different we have conditions that must be met before we have a reason for entry which is the reason we actually hit the buy or sell button we must have rules for our stop loss and for our target so with that being the case let's dive into all of these rules right now starting with conditions so before we dive into the conditions for arty you will need to put an indicator on your chart that indicator is the relative strength index go up to your indicator tab type in relative strength index it'll be the top one under technicals click that it should be plotted on your chart for the settings on this indicator i delete the rsi based ma because it's not something that i use in the style of the indicator then go to inputs and i change it from 14 to 10 for this specific way of trading now that should be the only indicator you need on the chart other than price itself so let's go ahead and dive into the first condition of ardy the first condition of already is that price must be making new lower lows if we see price making these new lower lows the second thing we're going to do is look down at our rsi indicator and ensure that at some point the rsi has went below 30 which is considered oversold on the rsi the next thing we want to see is while price is creating these consistent lower lows the rsi creates something called divergence divergence is simply when the indicator or oscillator you are using is doing the opposite of what price is doing so when price goes from a low to a lower low and the rsi indicator goes from a low to a higher low we have something called divergence now as a very meticulous rule that is extremely important on our divergence we want to see that in our divergence the second point has come in above 30 meaning coming out of oversold to give you an example of what it would look like if that was not the case we had divergence and it did this both of these are below 30 both in oversold therefore this would not be where we look for an entry you'll know more about that a little later on when we go through examples just keep that in mind for now so in terms of conditions we are all set our conditions for a bullish trade bull is that we need price to be making these lower lows we need the rsi indicator to go oversold at some point we need to have divergence in the rsi indicator based around price meaning price making lower lows the rsi making a higher low and the higher low of the rsi indicator must go above 30 or above over sold those are our conditions in c e s t what comes after our conditions if those are all the conditions we need to see met the next step in trading in general is to have a reason for entry now you want this reason for entry to be as objective as possible which is the reason i like to use the close of candles market orders and candlestick patterns for entries so with this specific strategy once all these conditions we just discussed are met the next thing i'm looking for is the entry and the entry is going to be based on one of two candlestick patterns the first one being the engulfing pattern an engulfing pattern is just when for a bullish example the green candle body is bigger than the red candle body here's an example of that for an engulfing candle in the bullish direction the engulfing pattern itself must come right after a red candle this could not be a green candle but the second type of entry that we're going to be looking for is something called a close above entry this is when the candle that we're entering on closes above the high of the previous candle now in this case we can have a color change meaning going from red to green or the previous candle that's the swing low can be green in both these cases we're looking for the swing low that created the divergence to be followed by either a close above candle or an engulfing candle if this candle is in fact red so now we have the conditions and the entry reason met the next thing we're going to do is talk about stops and targets now that we have this entry reason met as i said the close of the candle with a market order is how i normally enter on trades like this so i would be doing something like this have my trade open my stop-loss would go below the swing low by a few pips for the example we're gonna do today we're going to go 10 pips so let's say 10 pips below i'm not going to make that exact just use your imagination and for a target i like to go with at least a 1.4 to 1. and that doesn't mean i'm going to take my target off right at a 1.4 to 1. this is something we're going to use for today's example but a lot of times what i do is once price hits that 1.4 i move my stop loss to break even and i see if i can get at least a 2.5 out of it by following these swing lows and managing the position which is a little more complicated and advanced than what we're gonna go through in today's video but initially for this strategy and for this video we're gonna be using a 1.41 reward to risk based on our stop loss so now we have conditions entries stops and targets for this entire strategy called arty and the next thing we're going to do is take a look at a couple of live examples in the bullish and bearish direction so let's head down some charts and do that now back here on the euro dollar let's go ahead and take a look at how the rules for arty are coming together on real charts if you take a look at price what's our first condition for artie we need to see price itself pushing lower is that happening here are we making new lower lows consistently yes we are so condition one is met what's the second condition for ardy we need to see that the rsi indicator goes oversold does that happen yes it does we go below 30 right here what's the third condition for rd after seeing price make lower lows and after seeing the rsi go oversold we need to see divergence on the rsi indicator and what is divergence divergence is when the indicator or oscillator is doing the opposite of what price is doing when price is making these lower lows and the rsi indicator is making these higher lows than we have divergence and the final condition for arty is that our divergence must come out of oversold or be above 30. is that rule met yes it is so we have all of our conditions met after our conditions the next step is to look for our entry reason what's our entry reason we're looking for either an engulfing or close above candle check it out on the chart with me now that we have all of our conditions met check out what happens right after the swing low that created the divergence we get a nice engulfing pattern and that is the exact reason with all those rules met that i decided to enter this trade here on the euro dollar i did place my stop loss differently on this trade and the only reason is because this trade was in combination with a previous level of major structure as well and i wanted to get below that major structure there's always going to be a bit of discretion with any trading strategies that you have but in this case let's talk about how the trade is going so far we pushed up to that 1.4 to 1 reward to risk ratio i was talking about then i decided to move my stop loss to break even after doing so price began to consolidate and create this little support level right here what i did next is move my stop loss to right below that support level let me explain why the reason i decided to do that if you look where price is right now if price keeps going lower breaking below the previous lows that is a really good indication that we're just going to see a continuation down here on the euro dollar but if we don't do that and instead we break out of this period of consolidation to the up side and have a pretty good chance of hitting my targets that are right here around 1.0347 so that was a little explanation around targets stops and how i manage my position while trading already and that was a look at a bullish version of the strategy on actual price charts let's take a look at a bearish version of this on price chart so i can explain those rules to you as well so to break this down simply and quickly with a bearish version of this strategy we're looking for the exact opposite of a bullish version we want to see price making higher highs we want to see that followed by rsi going overbought instead of oversold we want to see divergence meaning the rsi indicator making lower highs while price is making higher highs and we want that divergence to come out of the overbought area which is above 70 going down below 70 for our divergence once that happens we'll be looking for a bearish version of an engulfing or close below candle for entry now let's take a look at some charts and see if you can spot this pattern look at these charts right here and tell me is this currently where we're at a rd pattern hopefully you said no let's explain why we do have price creating highs and higher highs followed by more higher highs do we have rsi going overbought at some point yes we do do we have divergence the rsi creating a new lower high while price creates this higher high yes we do but what is the problem with this specific trade that meticulous rule i was talking about right that one where the divergence must be below 70. must be coming out of over bolt because that doesn't happen here our conditions are not met and even though we get this nice engulfing and closed below pattern we do not place this trade i say we keep in mind every time i say that i just mean i this is not financial advice but because of that i do not place this trade what do i do i wait i have to see higher highs in price and i have to see an rsi divergence that is below our overbought line or below 70. let's go ahead and see what happens if we click play so now what do we have now we have price that has made a new higher high right this high is in fact higher than this high is the rsi indicator diverging yes it is is the divergence below our 70 line yes it is therefore would this be a trade because of this engulfing candle hopefully you answered that with yes because that in fact would be a valid bearish arty pattern we have our stop-loss we got 10 pips this time so we have 28 up to that high we're gonna go 38 on the stop loss and we're going to go with a 1.4 to 1 reward risk ratio at first let's see what happens close to that stop loss this is the euro dollar which has outrageously small spreads which means this likely would not have been stopped out depending on the time this was hopefully it wasn't 5 p.m right but with that being the case let's click play as you can see price in fact pushed down to our targets so that's a good bearish example and let me point this out too the reason for our rsi divergence needing to come below 70 like we did right here with this divergence and this candle is because a lot of times throughout my testing and trading i have noticed that if we have divergence but the divergence stays above the overbought line a lot of times we make new highs after that therefore waiting for the divergence to come out of overbought is a better indication of that possible reversal i can show you a really good example of this actually on the trade we took so here on the euro dollar the trade we're actually in you can see that price was making new lower lows and that we were oversold that entire time as you can see we do have divergence we have price creating lower lows we've come out of or not come out of but we have been oversold for a while but price just continued to fall until when price continued to fall until we got divergence and the divergence came out of over sold or went above the 30 line on the rsi indicator before we take a look at a ton of examples and i tell you the next steps you should take in order to increase your odds of becoming profitable with artie the trading strategy you're learning in this video i do want to let you know that we have some space available right now in the ttc fx university in it you'll learn more rules-based strategies just like this one that i use on a daily basis you'll also be receiving the pro trader report and a weekly setups video that will show you the setups i'm looking to take the week ahead that comes out every single monday you'll be receiving email analysis three to five times a week which is trades i'm actually placing that are based on the strategies you're learning inside of the university the university is a complete university style course kind of like a glossary to take you from wherever you are to professional trading and the most important part is that while you are involved in the university you will have access to me directly to help guide you and mentor you along your path to becoming a professional trader so if that sounds like something you're interested in feel free to click the first link in the description or go to www www.ttcfxuniversity.com if not that is completely fine too i want to talk about the next steps you need to take to increase your odds of becoming profitable with the trading strategy you're learning right now so most of the time whenever a trader learns a strategy on youtube they go and just start trading that strategy randomly and because of that they end up losing a ton of money every time they learn a new strategy and that is because they didn't take the proper steps so now you've learned the rules of this strategy and we're going to take a look at a ton of examples to ensure that those are engraved in your brain we're going to take a look at examples through the process of back testing so i'm actually going to back test some examples of this strategy with you on the pound dollar this is your next step as well when you learn a strategy like this that's completely rules based write out the rules oh like this on a little checklist write those rules out put them right beside your desk and then go through historic data which we're going to do in just a second and look for every time your rules for this strategy were met throughout historic data write down those results and look at the statistics it'll help you practice it'll improve your confidence and it will also give you the statistics you can expect out of said strategy so with that being the case let's take a look at some of these trades on the pound dollar and do some back testing together right now we are going to take a look at a few more examples of the rd trading strategy and also i'm going to be back testing it with you together now in terms of back testing one thing that you will need is a way of recording the data the best way i have found to do this is with this spreadsheet that i created a long time ago and because i'm a super nice person i'm going to give it to you for free the only thing you have to do is click the link in the description that says spreadsheet or go to dot www.thetradingchannel.org r g slash ttc spreadsheet once you do you'll land on this page check out this short video that'll teach you everything you need to know about the spreadsheet and go to click here for your free spreadsheet once you do you'll need to enter your first name and your email address click yes i want the spreadsheet and it will download automatically and send you an email with the spreadsheet attached once you've done that we can actually get started back testing so let's take a look at a few other examples while i back test this with you so that you can have a better understanding of what back testing really is so here is our first example this is a bullish rd pattern why is that the case well we have price pushing lower we have a low followed by a lower low on price that should be pretty easy to see at that point of the first low we do in fact go oversold an easy way to do that is just hover over where that candlestick is and again if you look right over here once i hover over that you'll see that this is below 30. that means oversold so once i hover over it look to your left 29.85 is the number you see that means we are in fact oversold when price has its first low we then get that lower low we get divergence on our rsi indicator and our second low that's lower than the first low is in fact coming out of oversold and above the 30 line that means we so far have the first two conditions as valid with lower lows rsi divergence excuse me three conditions and rsi diverges coming out of oversold next up we look for what we look for one of our entries c e s t means that conditions are met now we want to see one of those entries either engulfing or close above we actually get both here with this engulfing close above candle right here at that point after e we want to look for s and t which is stops and targets and this is where we're going to start plugging in these numbers to our spreadsheet so for stops we're going to go with 10 pips below right here it's 113 pips down to our low we got to add 10 pips to that which is going to be 123. now for the sake of this video we're going to go with a 1.4 to 1 reward to risk ratio so now is when you would go ahead and plug this into your spreadsheet let me show you how to do that first off we're going to put the pair that we're trading which is the pound dollar in this case we're gonna go ahead and put the time of this trade if you look down here the reason i use vertical lines like this green one you see on the screen is because if you look down it actually puts the um the time and date in a really clear area to make it easy for you to transfer that data over to a spreadsheet so in the time you would just put one then on your date obviously you go for 720 for your stop loss what's our stop loss we had a 124 pip stop and on our target since we're doing a 1.41 it was 174 pips since we're only trading with one position right now we can leave position 2 completely blank and you would essentially do this for all the trades that you see but i'm gonna go ahead and do a few other trades with you right now this way you can get some more examples of this strategy to be sure it is engraved in your brain so here on the chart we have a bearish version of artie let's talk about it what do we have well first off we have higher highs in price right that's our first rule we know that because here's a high here's a higher high here's a higher high now why is this not a trade we have our engulfing clothes below candle right here well if we look at that divergence from overbought yeah we go over ball we did that right here to this divergence which is this high what we notice is that it's still above the overbought line remember we want to make sure that divergence comes in below over bulk which is exactly what happens right here we have divergence with prices heading higher we have divergence on the rsi with the rsi going lower and we have the rsi below the 70 line all that coming together to equal conditions are met next up we need that entry do we get an engulfing candle we sure as heck do so with that being the case we're gonna take a short position to place it on the screen we're gonna go with a stop loss of 10 pips above our swing high up to the swing high we have 46 pips that means we're having a 56 pip stop loss and a 1.41 reward risk ratio what do we do next we bring up our spreadsheet easy enough then we check out the time of this trade which was 1300 or 1pm we check out the date which was 6 10 20 and we go ahead and plug in our numbers our stop loss was 56 pips and our target was 78 pips second trade down let's go ahead and move on to the next trade which is pretty easy to spot it is right here with price pushing lower we have a low we have a lower low do we have divergence we have rsi oversold as well then we do in fact get divergence and if we look at this low it's actually all the way over here so does that divergence because we're looking at the lowest low by the way when we're looking for divergence we wouldn't go here we would go from the low to the next lowest low then we would go from our low on the rsi that went over sold to that low is this low higher than this one yes so we have divergence is it above 30 yes so we have that rule met with us having lower lows on price and we do in fact get a close above candle as i said the previous candle can be green if we get that close above meaning the close of this candle is higher than the high of the previous candle after that we're putting on our position tool 10 pips and a 1.4 1 reward to risk ratio which is in fact hit here on the pound dollar very small spreads so even though this looks like it's only a couple of pips above our target it would have in fact closed that position for profit let's go ahead and move on to take a look at our spreadsheet and plug these numbers in now i'm just trying to give you guys a brief lesson here on back testing we have that candle is a 5 a.m candle it is on 6 15 of 2020 and what are our stops and targets we had 98 pips on our stop loss we had 137 on our target let's move on let's take a look and do this for one more trade then we'll take a look at the overall results of this trading strategy from 2020 to today's date on the pound dollar here's our next trade as you can see we have prices pushing from one high to a slightly higher high we have the rsi going overbought we then have the rsi pushing down and creating divergence right here at this high as you can see we also have that divergence coming below this line which is overbought or below the 70 line here on the rsi so that is our third rule and we have all of our conditions met next up we look for either engulfing or closed below candle and we get an engulfing candle putting a short position on you can see that unfortunately price just continued higher and stopped us out on this trade for 49 pips now what's our next step after that we know that's 49 pips we'll delete that we just come to our spreadsheet and continuously do the same thing that trade happened at one o'clock that trade also happened on 7 24 2020 that trade also had a loss that i completely forgot let's go ahead and check that one more time what was the loss of 50 pips so in this case when you lose a trade you will put your stop loss in the spreadsheet and then you will put a negative whatever your stop-loss was on your position so that's how that would look in the spreadsheet and how you would plug in the numbers and that is a brief lesson on back testing now let's take a look at the results throughout 2020 2021 and 2022 using arty on the pound dollar all right so let's take a look at what the steps you need to take are for you to become a professional trader using this strategy and these are the steps you need to take for any strategy that you learn or create on your own right before we do that though check out the results of the arty arde strategy here on this spreadsheet you can see the results over the past two and a half years it produced 19 trades with 12 those being wins 7 being losses that's a 63 win rate with that 1.4 to 1 reward to risk ratio bringing us to a grand total gain of 20.92 percent with a max drawdown of around six percent for this strategy over the past two years now 19 trades is not enough of a sample size to validate these specific results but it is enough to continue taking a look and testing this strategy and again this is a strategy that i've used for years in order to take advantage of big reversals in price so definitely worth taking a second look and testing especially if you're a trader that trades on smaller time frames it only produced 20 trades or so over two years span on the four-hour chart but if you trade down the hourly or even lower than that then you're going to get a lot more trades than just 20 trades per pair and remember this is just on the pound dollar so if you had like five or six currency pairs you used this with then it would create a lot more trades right but let's go ahead and go to the blackboard and talk about your next steps you've already learned the rules of the strategy so step one anytime you are trying to become a profitable trader is to learn a strategy right or either create one on your own which is what you just did so that is like xed off you're good to go there you just learned how to back test properly using a spreadsheet remember the link in the description is how you can get that spreadsheet for absolutely free after doing this you're going to start plugging in all the information about the entry stops targets the time and date of the trades the pair you're trading on and the reason we're doing this is one so you can practice you need to practice the strategy and train your recticular activating system to see this pattern really really quickly but also it's so we can take the next step which is to optimize this trading strategy you can optimize for a infinite number of things right but in this specific case the main things i like to optimize for are stop and target placement along with the different currency pairs that a specific strategy works best on so you may want to look at like 10 different currency pairs or 20 different currency pairs test all of them and then after testing all of them pick the top 5 to 10 that this strategy works best on this is going to help you minimize that maximum drawdown so that you can trade in the safest way possible and it'll also help you to only trade currency pairs that this strategy works on you don't want to be trading any strategy on a currency pair that over the past 100 trades it hasn't worked on or it's produced a negative return that's just gonna add to your max drawdown and cause your trading to be less efficient after optimizing your next step is to create a risk management plan see after we optimize we can get an idea of what the max drawdown of a strategy is likely to be to give you an example of that if we continue to back test this and we looked at 100 trades we would have the potential max drawdown now this number is not set in stone we can't predict exactly what's going to happen in the future with historical data but it does give us an idea of what the average drawdown of this strategy will be so after your optimized results are all plugged into your spreadsheet you'll see this max drawdown number and that's going to help you create a risk management plan that you can easily follow that'll keep you from going really deep into your emotions to give you an example of that here we have six percent let's say we tested over a hundred trades on the pound dollar and it was still at six percent well if you're comfortable with that six percent draw down you wouldn't need to change anything and you would know that you should be risking somewhere around two percent per trade or that's what i would do again this is not financial advice do whatever you want to it's your money right but for me if i'm comfortable with a six percent drawdown then risking two percent per trade is what i'm to do whereas maybe i'm uncomfortable with that i need it to be a smaller max drawdown all i'd have to do is change my risk per position this sheet allows you to do that really quickly so you can always see what your risk per position should be from a percentage basis in order to get a max drawdown that you're comfortable with you may be someone that's like yo six percent that's nothing i'm cool with dealing with 20 or 10 let's say 10 well in that case you may want to look at using four percent per trade when with your risk management plan which is going to dramatically increase your total percent gain you can get over whatever span of time that is and it's also going to increase your max drawdown so those are the two things you do need to pay attention to while going through this optimizing process or excuse me going through this risk management creation process once you have your risk management plan created the next step is to create a full trading plan a full trading plan all it really consists of is all the rules for your strategy including stops and targets that you've optimized for the currency pairs you're gonna be trading on essentially this is your whole plan of what you're gonna do every single day when you get behind charts it also has your risk management plan it may say something like i never risk more than two percent per trade this is very simplistic version but this is essentially what a trading plan is you also want to have the times you're going to be behind your computer you won't be able to catch every trade but what are the times you are actually behind your computer every single day executing this trading plan you've created that needs to be in your trading plan as well and because most traders stop at strategy and don't do any of the back testing optimizing no risk management they don't create a trading plan at all this is the reason you see traders switching strategies so much this is the reason if you're someone doing this that you're having a lot of trouble handling your emotions whenever a certain strategy goes through a drawdown the reason we do this bag testing is because over the past blank amount of trades right we can see that we had three losses in a row right here on the pound dollar well if we were trading let's say five or six currency pairs this three losses in a row might be like seven losses in a row and so what if you started trading this strategy and it had seven losses in a row and although it showed a positive expectancy and it showed a max drawdown that you were comfortable with over a large sample size of trades what have you started this strategy and you lost seven in a row well if you had done all the other work if you had already back tested and you knew that that was a very average amount of losses in a row for this strategy then you would be fine with that seven losses in a row you'd have the confidence to make it through that drawdown but if you'd never done any of that work in terms of back testing if you had a risk management plan that almost blew your account because of seven losses in a row because you never did the back testing so you didn't know that that was normal then you wouldn't keep trading the strategy right but if you put in the work to do the back testing to gain confidence to create a risk management plan that keeps you out of your emotions during losing streaks and to create that full trading plan that you diligently follow on a daily basis then your chances of becoming profitable and a professional trader go up dramatically and if you skip those steps your chances of losing either some or all of your initial investment are nearly 100 percent it's gonna be nearly impossible for you to become profitable even with a profitable strategy unless you take those steps so get started with those steps by first off back testing optimizing creating a risk management plan and creating a full trading plan you can follow with artie here let me know how it works for you in the comment section below if you enjoyed this video please click that like button for me go ahead and subscribe if you are new and click the notification bell don't forget to get the free spreadsheet by clicking the link in the description and also don't forget we still have some space available in the ttc fx university that is going to be the top link in the description with that i'm going to end this video and i'll talk to you guys in the next one see you soon

Channel: The Trading Channel

Views: 185,020

Keywords: indicators, indicator, technical indicators, technical indicators stocks, technical indicators analysis, technical indicators charts, technical indicators beginner, technical indicators options, technical indicators price, technical indicators volume, technical indicators sma, technical indicators moving averages, learn to trade, how to trade, stock market, technical analysis, rsi indicator, indicator trading strategy, rsi trading strategy

Id: Qi2_xCD8pOg

Length: 32min 38sec (1958 seconds)

Published: Tue Jul 26 2022