TRADING TACTICS EXAMPLE 1

You have probably just spent several days or weeks reading through this price action trading course, you have seen
the various concepts I put forward, I have disclosed my trading mindset, all my wisdom and knowledge, you know all
my tools and all my price action entry method. Now you have one of the most powerful trading methods based on
how banks and financial institutions trade the market.

In this lesson, we will try to apply all the knowledge that I shared with you, so you will understand how to approach
your trade step by step by following rules and strategies we discussed in previous lessons. Let’s start by the first
trade’s example below:

Look at the AUD JPY H1 chart above, as you can see there is a very strong move that attracts our attention, this
move cannot be made by retail traders, this move is certainly the result of a bank or a financial institution order. So,
we are in front of a powerful demand zone. The first thing that we should do is to draw the zone. Look at the chart
below:
As you can see on the chart above, we identified the beginning of the move to spot the basing candle, in this
example, the tweezer bottom was the basing candle.
So, we draw the proximal line which is the closest line to current price at the close of the bullish candle, and the
distal line at the close of the bearish candle. The result, we get a nice demand zone.

This is not quite enough to take our trade, this is only the first step, the next step is to evaluate the zone and see if it
is worth our hard-earned money or not. Look at the chart below:

This is the AUD JPY H1 same chart, as you can see, we identified a good demand zone. But we need to evaluate it
and see if it is a valid zone or not. These are the following factors that we took into consideration:

-The beginning of the move: as you can see the move was strong and quick, and the market didn’t spend too much
in the zone. This indicates that the order was placed by a big bank or a financial institution.

-The candle size of the zone: the candle size is big and showed that the buyer invested too much quantities to push
the market to go higher in a very short period of time.
-The breakout of previous resistance level: the strength of the move was confirmed by the breakout of the previous
resistance level.

-The freshness of the zone: as you can see the zone is fresh, and it will be tested for the first time.

These factors help us evaluate the strength of the zone, because we can’t trade any zone that we find on our chart.
But what about the risk to reward ratio? Let’s see how we calculate our risk to reward ratio:
As you can see on the chart above, by comparing the risk and the reward, we can clearly see that the trade has a
good potential and provides us with a good risk to reward ratio. This is only the first impression that we got from
looking at the chart. But to be able to calculate the risk to reward ratio, we need to wait for a confirmation pattern
that forms in the demand zone.

Another factor of confluence that makes the trade setup more attractive is the 61.8 golden ratio, if we use the
Fibonacci retracement, we can see that the area is a golden zone that holds the magic Fibonacci ratio. See the
illustration below:

As you can see on the chart, by using Fibonacci retracement, we found that the area of demand is a golden zone
because it holds the golden ratio. So, this factor of confluence will give us more confidence in this trade.
Now let’s move to the top down analysis and see if the zone is in line with the trend or against it, let’s see the daily
chart below:
As you can see on the daily chart, which is the higher time frame of the hourly, the market is trading down, so the
trend on higher time frame is against our trade on the H1 time frame.

What should we do in this situation?

In this situation we have two options:

-To ignore the trade if the zone is not strong enough

In this case we should take this trade even if it is against the trend because the zone is very strong, look at the move
and the candle size the both shows the strength of the zone. And the risk to reward is attractive as well. Besides, the
zone holds the 61.8 golden ratio which makes it stronger. But we need to wait for an obvious candlestick pattern
signal to confirm our entry. Let’s go back to our trade to see what happened:
As you can see, when the market approached the demand zone, we noticed that the price was rejected from this
area, this means that sellers found a powerful level and couldn’t break it. The tail of the both candlesticks show us
how sellers were rejected from the demand zone.

-The first breakout of the demand zone was another indication that shows us that sellers were a victim of a bear
trap. And this manipulation or what we call it “false breakout” is always made by banks and financial institutions to
trap traders, hit their stop loss and then go in the opposite direction. This is what happened in the chart above.

-We have a pin bar candlestick pattern that formed in the demand zone and indicates the beginning of a buying
pressure. That’s what we were looking for. This candlestick pattern confirms our entry. See the chart below:

As you can see on the chart above, the formation of this candlestick pattern confirms our entry and encourages us
to place a buy order. So, we place our entry at the close of the pin bar. The stop loss should be placed below the tail
of the red candle. And the profit target is the next supply zone. See how we calculate our risk to reward ratio below:

As you can see in the chart above, we use this simple formula to calculate our risk to reward ratio:

The risk = The Entry Value -The Stop Loss Value

Let’s say you have a 10,000-dollar trading account, and you risk only 3% per trade. That means, your risked amount
of money per trade is 333 dollars which is 3% of your trading account.

Now let’s adjust the 25 pips risk to 300 dollars to see how many dollars we will risk per pip, so let’s do the math 333
dollar /25 pips = 13.32 dollars per pip. Let’s say 13 dollars.
So, in this case, you will risk 13 dollars per pip, and in case your stop loss is hit by the market you will lose 25 pips
which is 300 dollars. That means 3% of your account.

If your risk is more than 25 pips let’s say 100 pips stop loss, so you will adjust it to the 300 dollars, let’s do the math:
300 dollars /100 = 3 dollars per pip. So, if the market hits your 100 pips stop loss you will lose 300 dollars which is
3% of your account.

You need to adjust the number of pips you risk to the 3% or 2% of your trading account that you will risk per trade,
this way, you will not need to tighten your stop loss in order to avoid losing too much, because your risk will always
be 3% no matter how many pips your risk.
Now let’s go back to our AUD JPY chart to see what happens next:

As you can see in the chart above, the market goes in our direction and makes us 83 pips profit and provides us
with 1:3 risk to reward ratio. Let’s suppose that you have 10.000 dollars account, and you risk only 3% of your
trading account per trade. Let’s say you took 10 trades this month with 1:3 risk to reward ratio.

That means when the market goes in your direction, you win 9% of your account which 333*3 = 999 dollars. and
when the market hits your stop loss you lose 333 dollars.
Let’s say you took 10 trades this month, and you lost 7 trades, you only won 3 trades, so let’s do the math to see the
magic of the risk to reward ratio.

7 losing trades*333 dollars = 2331 dollars loss.

As you can see, even in the worst scenario when you lose more than 70% of your trades, you finish the month with
over 2997 profit -2331 loss = 666 dollars.
This is the power of the risk to reward ratio, and when it is combined with supply and demand zones, the results will
be just amazing, because the win rate of this strategy is more than 80%.