In this lesson we look at indicators, nothing but indicators (and a little sneak peek at strategy!). I go through all the indicators that make up my strategy and explain why I use them, how they work and ways to put them to good use and extract money as a position trader.

Day 1 – How The Forex Market Moves & How To Measure Your Trading Success
Day 2 – Multi Time Frame Trading Analysis, Elastic Band Theory & Trading Psychology
Day 3 – Top Trading Indicators To Use For Position Trading Strategies
Day 4 – How To Position Trade, Trading Risks & Managing Your Drawdown
Day 5 – Strategies To Use as a Position Trader Explained In Detail

👉 Download the PDF Presentation

INDICATORS FEATURED IN THIS VIDEO:

Market Reversal Alerts Indicator: https://www.mql5.com/en/market/product/46295

Market Reversal Alerts EA: https://www.mql5.com/en/market/product/65383

RSI Dashboard: https://www.mql5.com/en/market/product/62698

ADR Dashboard: https://www.mql5.com/en/market/product/62756

ADR Reversal Indicator: https://www.mql5.com/en/market/product/62757

123 Gap/Propulsion Candle Indicator: No longer available but a very similar indicator is available from here: https://www.mql5.com/en/market/product/97246

Moving Average Indicators & Template: https://themarketstructuretrader.com/the-indicators/other-indicators-template/

👉 Join me & position trade daily in the live room: https://themarketstructuretrader.com/the-live-room/

👉 Join the community chat on Telegram here: https://t.me/market_structure_trader_chat

Video Transcript

So, position trading bootcamp day three. So today what we’re going to do is we are going to cover indicators. So the whole day today is, so the whole session is dedicated to the indicators that I use basically. Why I use them, how I use them. Some of them are my own indicators I’ve developed. Some of them are standard MT4 ones, some of them are other people’s. So I’m just gonna go through them all, why I use them, what they tell me, and how they fit together in the systems and the strategies that I use for position trading.

So before we go into today’s session, is anybody got any questions from yesterday or from Monday? So any questions you’ve got that have cropped up that I haven’t already been asked in the telegram group and answered. Is there anything anybody’s got that they want to ask quickly before we get on with today’s session? No, that’s good. Excellent. Means everybody’s hopefully understood where we are at this point. So what we’ve covered so far obviously is how the market moves, what makes the market move, and just some basics basically on how, the basics of what you need to know to become a position trader basically.

So, today’s lesson is kind of where it starts to get interesting. So we’re going to look at the indicators. You’re going to get a kind of view into how I trade by seeing the indicators because I’m going to be explaining why I use the indicators and that’s going to give you ideas as to how to trade with them and give you an overview of some of the strategies really. I can’t really show you the indicators without showing you why I’m using them, which kind of gives away the strategies. But most of you probably know the strategies that I use anyway, because we’ve looked at some indicators already, haven’t we, in the first two days.

And then tomorrow, what we’re gonna do is we’re gonna cover in detail how to position trade. So tomorrow’s lesson and course is gonna be very detailed and in depth, it’s gonna be quite a heavy session and we’re going to be covering how to position trade, how to get into positions, how to look at your portfolio and look at your trading in a different way, all about risk management, how to do drawdown control.

There’s tons and tons of content in the essay. So today’s going to be fairly light. It’s fairly straightforward. It’s about bells and whistles and stuff that pings that you want to chart. So it’s very easy, but it’s the exciting stuff. It’s what we all like, isn’t it? So, let’s get started. Let’s talk about indicators. We all love indicators.

So the entire trading community revolves around indicators. We’re all looking for that Holy Grail indicator. So everybody, when they get into trading, is always trying different things. You’ll try Heiken Ashi candles, you’ll try Ichimoku clouds, you’ll try stochastics, you’ll try RSI, you’ll try moving average crossovers, you’ll try candlestick patterns, you’ll try all sorts of stuff. But the vast majority of things that you’re looking for is always something that pins it, you want to chart.

And basically that’s your indicators, it’s telling you what’s going on. The problem with indicators is, there is not one indicator out there that can tell you everything you need to know about market. So one indicator on its own will never be a holy grail. It will never be something you can make money out of. Price action candlesticks are the most important thing. And there’s a lot of bare naked chart traders out there that trade nothing but candlesticks. And candlesticks aren’t an indicator.

Candlesticks are a time-based measurement of price on your chart. So them on their own are very, very useful, but using price action at specific levels is way more effective. And you can do that by simply adding a moving average or a line onto your chart, but they are indicators. Okay, so we have to use indicators to tell us when we should be getting into our trades, but we need a combination of them. So before we look at indicators and strategies, we need to understand what a system or a strategy is. So a system or strategy is basically is made up of multiple parts. So it’s a collection of indicators and or levels within a chart that you’re looking at.

And each of them is critical to the trade that you take to the trade idea. So if you want to learn more about the parts involved in a system or strategy, I’ve already got a video on this, which is basically called, what a trading system or strategy actually is. Very straightforward title, it’s on YouTube. So you can go and have a look at that at any time. Okay, so I’m going to show you the parts to my system or the parts to my strategy and how they fit together.

That video is more in depth as to the different parts of a strategy. So I’d encourage you to go and watch that at some point. You don’t need to obviously watch it now, but try and get over and watch that video as well. It’s on the YouTube channel. You can’t miss it, say, what a trading system or strategy actually is. But to summarize that video, which you’re going to need to know obviously before we look at the indicators is there are typically five parts in any good solid system or strategy that works.

And those five parts are a signal indicator and a signal indicator tells you, it basically tells you that there is a trade idea. So a signal indicator is something that pings at you typically. These are the sorts of things where it draws an arrow on the chart, yeah? Or it pops up an alert, right? That’s a signal indicator. It’s signaling to you saying, get in now.

The trend indicator tells you the direction that you should be trading in. And a lot of people use moving averages, including me. So a trend indicator tells you the idea of direction you should be looking at. And that can be based on multiple timeframes. It could be based on a higher timeframe or you could use some kind of trend indicator based on the timeframe that you’re actually looking at right now.

The third is a market condition or confirmation indicator. This backs up your trade idea. It kind of backs up the signal indicator. So it tells you that the market is in a certain condition that you are looking for if you are looking for something like mean reversion. So this could be something like a Bollinger band, for example. So when the price gets outside of the Bollinger bands, it’s telling you the market condition is extended because it’s managed to get outside of its normal ranges. Okay. So it’s something like that. A condition indicator tells you that there’s a certain condition happening right now in the market. And as I say, it can also be used as a confirmation indicator.

So some people use the market condition or the confirmation indicator to back up the signal. So if you get a signal and the confirmation indicator backs up that trade idea, and it’s in line with the trend indicator, happy days. We’ve got three things that are telling us that this is a good trade. The fourth is a level of interest. This is where price is likely to pull back or reverse from. Typically, this is just gonna be support and resistance or supply and demand.

But I’m going to show you another level of interest that you’ll find is also very, very good. And these are, I like them to be magnet areas. So prices attracted to certain areas on your chart. And that is basically what the levels of interest are. And the last one is a target or an exit indicator. So this is where price is likely to go and where we want to get out of our trades. So you remember we’ve already covered this a little bit, haven’t we, when we’re talking about ADR and how ADR works well for targets, because we know that price moves within an average daily range.

So if we can set our price within an average daily range, it’s more likely to get hit than if we set it 500 pips in the distance on a pair that only moves a hundred ADR in a day. Okay, so you need a target on exit indicator as well. Okay, so those are the five parts that go into a strategy. You don’t need all five, but the more you have, the better. So if you think of a system or a strategy as like a lawyer, you’re laying out a case for taking a trade, okay? So if you’ve got a bit of a rocky case and you’re trying to sue somebody for something and you’ve only got one piece of evidence, that’s not gonna stand up as well in court as if you’ve got two, three, four, or five pieces of evidence, is it?

So the more of these that you can have working together, the stronger your case is gonna be for entering into a trade, all right? So we’re gonna look at basically each indicator I use in detail and what it’s used for. Okay, so this is basically where we’re going to start getting into looking at things on the charts and explaining each one basically in detail. So this is mainly used for trend trading of course but it’s also useful for mean reversion strategies too. So when price gets too far away from your trade direction or your trend indicator it’s a good indication that price may be coming back. So just wanted to quickly cover what the difference is between trend trading and mean reversion just in case people don’t know. I think most people probably know what the difference is, but trend trading and mean reversion are the main two types of trades that you will see people taking.

So with a trend, obviously what we think of as trend is price moving like this, nice and orderly, going up and continuously going in one direction. When price decides to come back down the other way, we see that as a difference in trend, okay? So trend is quite often measured with moving averages because a moving average will basically plot the average price of this particular instrument over a period of time. So these are really good trend indicators.

They show you the direction of price. So if a moving average is going up, price is going up. If a moving average is going down, price is going down. It’s very straightforward. The problem with these is obviously they lag price. So they’re plotting where price has been. We know where price has been because we can see it on the chart, but they give you a good indication of which way price is going. So trends traders quite often will use a moving average, okay? And what they will do is they will wait for price to pull back to a moving average, and then they will take a trade, and then they’ll wait for it to pull back, and they’ll take a trade, because typically that’s what happens in a trend, okay?

But also when you’re in a trend, price gets exhausted. And at that point, when it’s so far away from the moving average, the price can’t move any further, it tends to pull back to the moving average. So these can also be used for what we call mean reversion. And mean reversion is basically where price moves away from its mean, its average if you like, and then it trades back to the average or the mean. Okay, a good example of this is a range. Yeah, you’ve got two levels, the price has moved up and down. The mean is the middle. Yeah, so mean reversion, you’re taking trades at extremes back towards the center.

Trend, you’re taking trades in line with the direction prices moving at the moment and your aim is usually to enter on a pullback, okay? So just for those, just to clarify in case people didn’t know, obviously what the difference is. I think most of you probably know the difference between trends and mean reversion, but that’s what that is, okay? So the trade direction indicator is it can be used for both, okay?

I use multiple daily moving averages, okay? And this is why. So the multiple daily moving averages form a cushion for price. And if one of them fails, the next one at some point will likely work. So by using multiple moving averages rather than just one, it gives you a cushion so that you can see how strong a pullback in a trend is based on whether the first one has been violated or the second one has been violated.

And I’ll show you them in a second. They make more sense. The ones that I use are based on institutional reporting periods. So they fall in line with long-term investor and overall market sentiment. So they fall in line with investor trend and market sentiment. So I use quite long-term ones because the institutions, the big banks and sort of hedge funds, that is large enough to move the market, they will tend to have quarterly and monthly reporting periods that they work to. And what you tend to find is they will move price or price will move with them over a period of a month and over a period of a quarter at a time.

So there’s a lot of profit taking goes on around month end and quarter end. And we saw that last quarter as well. We just had quarter end last week. And you tend to find there’s a big movement in price. So I use those moving averages because those are the ones that plot those time periods for me on the chart. So it helps me to see where the large players are probably positioned.

And I can fall in line with them because they’re the guys that are moving the market. Therefore, I wanna be trading ideally in the way and the direction that those guys are trading as well. And it gives me an idea of where they’re heading as well, which I’ll show you in a sec. They’re super simple to backtest. So moving averages don’t change. They will change on the candlestick that you’re looking at.

And when that candlestick closes, that plot is plotted and they will not move, all right? So historically, when you look at moving averages, those moving averages were in that spot at that point. So they’re really easy for you to back test. You can zoom out on your chart and you can see what happened and how price interacted with moving averages very, very easily. So you can see what the odds are of it doing that again. You can see how many times it got to a certain point and bounced and how many times it blew straight through it. And when it blew straight through it, you can say, right, what happened after it blew through that next? And you can see historically what’s been happening in the past using moving averages.

They work well for trend direction. They also show you signs of potential exhaustion, which I’ve covered as well, which is the mean reversion trades. So let’s take a look at the indicators. So the ones that I use are the 24 and the 72 EMA. It’s what I call the institutional moving averages. So we’ll flick over to the chart and we’ll have a quick look at those now. We switch over to a daily. Okay.

So these are your institutional moving averages. So this top one here, okay, this is the 72 EMA. And this bottom one here, this is the 24. Now the reason I use the 24 and the 72 is because there are 24 trading days in a month and there are 72 trading days in a quarter. So what this is showing me is the monthly average and the quarterly average. And as you can see, as price moves in a trend, what it will tend to do is it will pull back down and then it will push back up into the monthly moving average, pull back down, wait and consolidate until it hits the monthly moving average, move down, pull back to the monthly, move down, consolidate, hit the monthly.

Sometimes it pierces it and pulls into the quarterly, and then it continues using the monthly, pulls back to the quarterly, again, pulls back down to the monthly, and then we get a change in trend direction. So when the market is trending, in this case here, the monthly is used a lot as a support. And the reason being is because this is measuring where it’s been going over the last month and quarter. It tends to pull back and respect these because this is how the institutional players are measuring their performance and measuring their investments and how long they want to keep them for.

They work on monthly and quarterly averaging. Okay, so basically that is the two that I use and you can see how well they’re respected. But like any moving average, when you’re in a range, they’re pretty useless. Yeah, moving averages when you go into a range, go sideways and they don’t tell us anything. Yeah. So as you can see here, as we went from a big downtrend and a nice pullback into a range, the moving averages flattened out sideways and don’t really tell me anything.

Okay, so they’re not the perfect indicator as any are. Let’s have another quick look at another pair. So Aussie-Swiss. So you see we pushed up. We cracked the 72, the quarterly moving average. We pulled back down into the 24, pushed up, pulled back down into the 24, pushed up, back into the 24. We held the 24. Then we held the 72, pushed up. And here again, we’re on a range.

But you see how it bounces off this 24 constantly, pulls back, bounces, bounces, bounces, bounces, and it keeps supporting price. And then as we move back up into a new trend, we pull back to the 72, continuously bounce off the 24, push up off the 24, off the 24, 72. Now we’re starting to go back into consolidation and downtrend, 24, 24, 24, 24, back into the 72, and we’re into consolidation, okay? So they work incredibly well. And they can give you loads of examples of this, and you can look at any pair you like, use the 72 and the 24, put them on there, just normal moving averages, they’re exponential moving averages, that’s all they are.

But you can see how well they support price. And they tell us when price is starting to weaken or when a trend is starting to weaken. So you remember what I was saying about when one fails, the other one will tend to support price. So quite often what we find is, let’s zoom in a little bit and look at this scenario here. When we’ve got price that’s been trending very nicely in one direction, and it pulls back into the 24, and it continues to do that, when it starts to break the 24, that’s a sign to us that, ah, potentially this trend is now over. So if we’ve got long positions, when we break the 24, we should start to look at opportunities to maybe exit our long positions, if we’ve still got some. Because the likelihood is it’s going to come down and bounce off the 72 one more time before it comes up and goes into a consolidation and potential trend direction in the other way. So as long as this is below the 72, I’m looking for shorts. Yeah. When it breaks the 72, that’s a sign to me that there’s a good chance we’re potentially going to change trend direction, but we can wait for confirmation of that. And you can see obviously here, there’s not really any trend direction. We’ve been going on the chart, okay?

So that’s moving averages. Those are the two that I use and they’re very simple. The ones I’ve got on my chart here are called moving average in color, okay? And if you want these indicators, you can come to the Telegram group. There’s a pinned message, which has got these files in there. I got them years and years ago from somebody, one of my mentors that taught me how to trade.

And I’ve just basically adapted them to the moving averages that I use. But all they do is they draw green when we’re above the 72 and they draw red when we’re below the 72. It’s as simple as that. So on the lower timeframe, remember we’re talking about multi-timeframe analysis yesterday, I would use the daily timeframe to tell me what the current trend direction is.

So at the moment on the Aussie dollar Swiss, I would be saying, right, current trend direction is down because the moving averages are red. So I’ll be looking for short positions. So what I would be doing is moving down into my lower timeframes, whichever timeframes I’m gonna be trading and looking for entries short, right? So that is basically all they are used for. Obviously, when you get things like this happening, this is COVID, as I say, the other reason you can use them is for mean reversion.

So this is a bit of an extreme example, COVID. Let’s just take a normal example. When price gets very, very extended away from the moving average, so the 72 quarterly is my main trend direction one. The 24 is kind of the trend buffer, if you like. When we get really, really, really far away from that moving average at 72, it tells me that what? It’s probably been an awful lot of buying going on, isn’t there?

And what happens when we get a lot of buying going on? Those people have to sell to get out of their positions. Yeah. So the other reason you can use, or the other way that you can use your moving averages is by when they get extended a long way away from the moving average, you can say, right, there’s a good chance because we’ve had so much buying pressure coming in that we’re about to get a sell-off and that happens just there, okay?

But that sell-off doesn’t mean the price is going to do that. What it means is there’s gonna be a profit-taking move and price will come back down, likelihood being to the 24 moving average where it will then get supported and move back in the trend direction. Okay? So those are the moving averages that I use for trend direction. So that’s kind of part one of most of my systems and strategies.

So you can use this, if you want to, you could use this on its own. Every time it pulls back to the 24, take it along. You could use that as a strategy on its own, but on its own, it’s not gonna be very reliable because this is just telling you what the current trend direction is. The problem with trend trading and with using trend-based indicators is they tell you what’s happened in the past.

So they tell you where the trend is currently going or where it has been, but it doesn’t tell you where it’s gonna go. So every time we pull back into that 24 moving average, there is a chance that it’s actually the start of a downtrend and it’s going to collapse. We don’t know. That’s the thing we can’t do, is it? Find out what time things are going to happen. Timing is something that eludes us as traders.

We can only see the past. We can see what’s happened. But we can use these sorts of indicators to tell us historically what has happened in the past. So price has moved up, pulled back to the 24, been supported along the 24, continues to move up until it breaks the 72. That’s when the alarm bells start to ring. We get our final push, which means we can exit any positions and then it pulls back down.

Now I’ve also got on the chart here a 200 daily moving average. This is only really used to give me much longer term trend direction. So this is just over sort of six months worth of trends direction that I’m seeing here. The 200 moving average has an uncanny way of being supportive on all timeframes. You can see an example of it here, but for every time a 200 moving average works, you’ll find another two or three times where a 200 moving average doesn’t work, okay?

So beautiful bounce off the 200, then it failed. Beautiful bounce off the 200 twice, then it failed. Yeah, so no moving average is ever gonna be 100% accurate, but this is kind of my last stand. So the 200 is really, this is the ultimate trend direction. So if my 24 at any time fails, I know there’s a good chance if it cracks the 72, it’s likely to have another push, because if they can push down through the 72, they will have to move very, very hard, which means there’ll be a profit take.

And that allows me to exit any positions. We’re gonna talk about that tomorrow. If then it pushes that back down to the 200 and breaks the 200, I know there’s a strong possibility we may be having a trend change happening. But I can’t tell for sure. The only way I’m going to tell is by what happens next, because no one can read the future, we haven’t got a crystal ball. Okay. So those are my three moving averages, the 200 is very much a backup. Okay, but it’s quite often reactive. So, for things like aggressive drawdown control, which I’m going to teach you about again tomorrow. The 200 moving average can be a very, very reliable level to start aggressive drawdown control to exit any positions that have pushed against us a little bit harder than we want them to.

So that is the 24 and the 72 moving averages. I’m going to do a quick question and answer session at the end of each of these indicator sessions. I’m gonna do one at the end obviously as well, but has anybody got any burning questions right now that have come up about the 24 and the 72? Yes, okay, far away Richard. If your brokers doesn’t show Sundays, could we change the 24 to 20? No. The reason, right, brokers are not the market. Okay. Your broker is your broker. Okay. The market has 24 trading days. The market trades on a Sunday.

Yeah. If you look at something like the commitment of traders report, which is a report of all futures contracts, which is released every week, that has Sunday reporting. Everything has Sunday reporting. Okay. Because Sunday is a trading day. Yes, there’s only two hours in it, but that day there is transactions happening on the futures markets.

All right. And the institutions still use those days to enter and exit positions and they are reported. That’s why I use the 24 and the 72. But you could change it to, if you wanted to, you would go 2060, wouldn’t you? Try it. You’ll find it won’t be a massive difference. Everybody uses the 20MA, don’t they? The 20 is one of the most widely used moving averages in trading.

But these are used, I find these just work so much better. If you stick a 20 on and you do the same exercise, you will find that the 20 doesn’t work quite as well. Okay. There’s logic and there’s reason behind it. Okay. But you could, if you want to, use a 20. Yeah. Yeah, I just use a 24 and 72 because those are the ones that I have found to be the most effective.

Is the moving average connected with your indicator? No, moving averages are moving averages. These are stock moving averages. These are exactly the same as MT4. These are just moving averages, yeah? So trend, moving average. I’ll put, let’s put the 20 on there, yeah? Put your 20 EMA on there in red. So moving average, nothing more, nothing less. Yeah, there’s your 20, there’s your 24.

So there’s very, very little in it. If you wanna use a 20, use a 20. But look at your 20, that worked there. Look at my 24, that worked there. Who got the biggest bearish engulfing? I did. No one’s wrong, no one’s right. It’s a medium and long-term moving average. If you wanna use different ones, you can use different ones. I’m just showing you the ones that I use, yeah.

What is the so-called death cross? And what’s its significance? I don’t know, Peter. I’ve heard of the death cross. I can’t quite remember what it is. I’ve learned about it, but I don’t know. Google. Google that one. I can’t remember what the death cross is. It’s a cross of two moving averages, isn’t it?

The problem with moving average crosses, and I will cover this quickly now, the problem with moving average crosses is when they happen, you’ve missed the move. Okay, the move started here, the cross happened there. Yeah, they’re a confirmation and moving average crosses in a range will get you into 100 positions which will all be a loss. Yeah, I started trading moving average crosses years ago, I stopped trading them after I lost a load of money. Yeah, this is an uptrend, very obvious. So you would have taken a short there and a long there. Yeah, so why would you take that loss?

Because it’s an uptrend. But the moving average cross will tell you to do that, especially on lower timeframes. If you use these on a lower timeframe, obviously you’ll see it happening over and over and over again. But yeah, again, look up the death cross. I can’t actually remember what it is, which ones it is, but anyway, I don’t use them. For the 200 MA, is it simple or exponential?

Exponential. So I use all exponential moving averages. Again, you can, if you want to, use a simple. So you see where that’s plotted? I’ll draw it on for you. Yeah. So that is the EMA. Very rough. That is the simple. Yeah.

Exponential moving averages are adjusted for more recent price action. Therefore, I tend to find them more accurate. or more recent price action. Therefore, I tend to find them more accurate. But again, if you want to play with them, play with them. But the thing you need to understand about moving averages really is they are a trend direction indicator. So they are just a trade idea.

If I get a signal to go long or short at the moment on Aussie yen, what do you think I’m gonna do? Nobody knows, do they? I don’t know, because it’s going sideways. I’m more short than long, but I don’t know, because we’ve sitting pretty much bang on the moving averages. So at the moment, they’re totally useless to me, aren’t they? Let’s look at another pair. Let’s look at something like CAD Swiss.

So if I get a long signal on CAD Swiss now, I’d probably be inclined to take that. Let’s look at something like the Euro pound. If I got a short signal now, I’d be all over it. If I got a long signal, I’d be thinking twice, basically because this has been coming down for months. Yeah. So they’re just an indicator to give you a directional trend. Here’s a beautiful example of the 200. Yeah. And there is a chart pattern that I like. If you’ve seen my videos about chart patterns, this is what I call a three bar reversal. So you get a push up, something like a doji or a shooting star, or a short body candle in this case, and then a push back in the other direction.

So three bar reversal. So push, pause, drop. If that happens at a moving average, I’m all over it. Yeah, so that’s a good example of the 200 there. Change of trend is when candle closes below the 72 EMA, or when new low is created after that candle close. I don’t have one. This isn’t a signal indicator. This is just a trend direction indicator. If this is red, I’m sure, if this is green, I’m long.

Simple as that. Right now, I’m sure. Yeah. One of my mentors used to say to me that use this indicator. When it’s green, you go long. When it’s red, you go short. If you’re long, when it goes red, you get out. Yeah? That easy. It’s that simple. It’s going up. I can tell you it’s going up at the moment because I can see it, but there’s a hell of a lot more green than red there. Yeah. So try not to get too engrossed in what happens when this does that. This is a idea, a directional idea. At the moment, my idea on this is it’s range bound. It’s going sideways. How do I know that? The movement averages are crossing over, they’re close together, they’re going sideways, and it’s red, green, red, green, red, green, and it has been for the last month or so. It’s not got a trend direction, has it? It’s range bound.

What do we do in ranges? Take mean reversion trends. Where would I have got in? Down here. Would I have made a profit? Yes. Simple as that. But to answer the question, yes, 72 is my main trend direction. Think of the 72 as the main trend direction. The 24 is supporting the 72. When the 24 starts to break, we’re worried because the trend is starting to weaken. That’s all it’s doing. That’s why we use two moving averages. They’re also smooth.

Yeah, there’s all sorts of moving averages you can use. But I just use standard exponentials. Keep it simple. So the indicator also fills the color. Yeah, so this is what’s called MA in color. Okay, MA in color, this indicator is called. You pick a period and the type and you pick this one here which is called MA in color. So this one’s set to 24. The bottom one is set to 72. And I have another indicator which is called MA ribbon filled 2×14 and this one basically you color in. But don’t get too engrossed in details okay. There I can show you how to set these up. In fact, I’ll show you how to set them up now.

Might as well. So the 72 moving average is the 72 moving average. I just used the MA ribbon filled to put this coloring. So I’ll put these up on the screen now so you can take a screenshot of my settings. Or obviously, in the replay, you can watch this again and take a screenshot. But the bottom one is the 72. Yeah. And the top one is the 24. So those are my settings for main colour. daily chart. Now I also like to look at the daily moving averages on the four hour chart. And the way that I do that is when I flip down to the four hour chart, I change the settings of my indicators so that my 72 EMA is 432. Yeah. And my 24 EMA is 144. Because there’s, this is just basically a simple maths equation.

How many candles are there on the four hour chart in that period on the daily? Yeah. So it’s 20, there’s six candles in a day, six four hour candles in a day. Yeah. So six times 24 is 144. 6 times 72 is 432. Yeah, so what I’m doing is I’m plotting the same moving averages on a lower timeframe.

And you can also do it on the hourly. The calculations would be bigger obviously on the hourly, but don’t worry too much about that in a minute. If you wanna know more about this, you can come in the live room and go through it in more detail. But all you need to know is I use moving averages for trend direction. And I use the 24 and the 72 because they really support price well, because these are what the institutions are working to.

They’re working to monthly targets and quarterly targets for reporting and for generating profit and executing their orders. So therefore it makes sense to use these moving averages because it’s basically telling us the overall direction that the market is moving for the big guys. The big guys are the ones that move the market. Yeah. Okay, so that’s it for moving averages. Okay, so those are my trend direction ones.

And you can use these ones, you can use the MA in color and the MA ribbon filled, okay. And if you want this template, my template with all my indicators in is in my Telegram group. I’ll put in, if obviously, if this is on YouTube, you can watch the, you can look at the description. There’ll be a link in there. Come into the Telegram group. The link’s always in there in the header.

So you can come and access my template and all the indicators that I use, okay? They’re all gonna be there for you to download. So that’s moving averages, covered. Next up, the market condition indicator. So the market condition indicator or the confirmation indicator. This is designed to tell you what stage in a cycle the instrument you are looking at is currently in so that you can look for potential entries into the market.

So the market condition indicator is a little bit like the trend indicator in the fact that it’s giving you an overview of what’s happening right now with this particular currency pair, metal, indice, whatever it is you’re looking at, whatever instrument you’re looking at, okay? And I use the 14 and the 21 RSI, okay? As you’ve probably guessed, if you’ve been watching the first couple of days of this course, the RSI has been cropping up quite a bit, hasn’t it?

As much as it’s got a bad reputation, I find it incredibly useful as a condition indicator. But all it’s doing is it’s telling me that the market is in a particular condition at the moment. It doesn’t mean that the market is gonna turn around or do anything different to what it’s doing at the moment. It’s just measuring the condition of the market for me. So it’s another idea generator, little bit like a trend indicator. If it’s green, it’s giving me the idea to go long.

If the RSI is giving me the condition that the market is extended to the downside, that also gives me an idea to go long. Remember, we’re like solicitors, like lawyers, we’re building a case. We’ve got two condition indicators, a trend indicator and a confirmation or market condition indicator that are telling us to go in the same direction, it’s probably a good thing, isn’t it?

So the RSI, 21 and the 14 RSI I use as my market condition indicator, and this is why. For mean reversion trades, it tells me when the market is due to perform a profit take or a reversal move, okay? So when the RSI gets extended below a certain level or above a certain level, it’s telling me that there’s been a lot of buying or a lot of selling on that particular timeframe and that particular instrument that I’m looking at.

In a trend, it tells me when the market has potentially performed a pullback and it may be ready to continue in its current trend. And if you pair this with the indicators we just looked at, that may give you some ideas on how you could potentially use these two together to enter into trend trades. It can be used on higher timeframes to signal we should pay attention to a particular instrument and get ready to trade it, i.e. a market condition indicator.

So it can be used on entry timeframes also to back up your signal indicator, i.e. it can be used as a confirmation indicator. Okay. So there’s two ways you can use the RSI. Remember we spoke yesterday about higher timeframe, so multiple timeframe analysis, using a higher timeframe for idea generation and using a lower timeframe to enter into a position. So for example, with the RSI, if you had a condition where the four hour chart was extended to the downside, it was below 20, for example, so it’d been pushing down really hard.

And then on a lower time frame, the RSI told you the same thing and the trend direction indicator told you that the market was going up, that’s probably a good idea to take along, isn’t it? Yeah, so you can use this to back up your signal indicator and that’s what we’re gonna look at next, which is showing you when you should be getting into a trade, right? The other reason I use it is it’s super simple to read and back test, like moving averages.

Once it’s plotted, it’s plotted, it’s there. You can go back in time and you could see what happened when this got there and what happened over and over again in the market. So remember, we’re looking for indicators, as I said yesterday, that we can backtest and that we can use to show us things that happen over and over again, things that we can historically backtest and mathematically prove will happen again in the future.

All right. Another reason I like the RSI is you can also fine tune it. Okay. So we’re going to talk about risk tomorrow, but the RSI is a really good indicator to help you fine tune your risk preferences. Okay. Here’s some backtesting results, which will help me sort of demonstrate the point. Okay.

So you obviously know that I’ve got the EA that I built, which executes my strategies for me a lot of the time. And this is a backtesting spreadsheet that I use to test different strategies and find out how profitable they are and find out all the information I need to know about a particular strategy. So this is showing a year’s worth of data on a particular mean reversion strategy that I use. So you can see here, we’ve got the RSI HTF extended.

So this means the higher timeframe RSI was extended. So the condition we’re looking for here is the four hour RSI 14 needs to be extended above the 68 level or below the 32. Now you can see the draw down, the profit and the number of trades taken along the bottom here. And you can see here that these positions here, all these tests here were all taken using the 68 and the 32 level on the RSI.

And you can see that with these, we took 58 trades every time we tested with different criteria in the back testing. With these, with the 75 and 25, we took a lot less trades. We took 23 and 29 trades, because we were waiting for the RSI to get more extended at a higher level, therefore we took less trade entries. But look what also happens to the drawdown. It didn’t go into as much debt, if you like, or as much drawdown, if we waited for the RSI to get extended to a higher level.

And again, with the 80-20 level, our drawdown was again reduced. We took a lot less trades, okay? But with those, you’re obviously gonna make less profit because the less trades you take, the less chance you’ve got of making a profit, all right? But it allows you to fine tune your risk preference. So if you are the type of trader that wants to take very low risk entries with a higher strike rate, you can use RSI levels to help you just get in to trades when those conditions are met. So you can use it if you If you wanted to say use the 6832 level to get in more aggressively, you’ll get more trades, you’re probably going to more drawdown, but your profit taking potential will be higher.

Or if you’re a conservative trader rather than aggressive, you can use higher levels to take less trades and get in and probably make less money, but there’ll be less drawdown on your account and less strain on you as a trader. Okay, so let’s take a quick look at the indicator. So this is the 14 and the 21 RSI. So we go back over to the charts. So we’ll drop down to a lower time frame. So I use the 14 and the 21, and I use the 14 on higher time frames, like the four hour and the daily, okay? So what I’m looking for with the RSI is for the RSI to have shown me that price has moved hard in one direction.

Yeah, we spoke about this yesterday. The RSI measures relative strength, relative strength index, that’s basically what the indicator is called. So as price pushes hard in one direction, the RSI gets extended higher and higher, and we can set these levels to whatever we want them to be. And it will show us how extended that move has been, i.e. how much buying pressure we have had relative to selling pressure.

Okay. So the RSI is my market condition indicator. So when the RSI gets above a certain level, in this case 70, or below a level, in this case 30, it’s telling me that the condition of the market at the moment is extended to the upside, meaning we have more buyers than sellers more recently. Okay, the important thing to understand with the RSI is it will not signal you to get into a trade.

And this is why it’s a market condition indicator. It’s showing you the current condition of the market. It’s showing us that there’s been a lot of buyers. Now that doesn’t mean that there’s not gonna be more buyers coming in. It’s telling us that there has been, again, all indicators are lagging. They show you what has happened in the past. The hard right edge here, okay, neither you, I, or any market participant can tell you what’s going to happen next. We don’t know. No one knows. Maybe some of the guys in the big banks know because they might have a hundred million dollars worth of Swiss franc orders to put into the market. I don’t know. But the fact of the matter is right now, all we know is that the market condition is flat. We can see because it’s not gone anywhere, has it?

Yeah. So that’s what the RSI is telling you. Now the RSI is useful because it tells us that we’ve got a condition met of lots and lots of buyers in the market. Go back to the previous day’s course where we looked at the relationship between buyers and sellers. So after we’ve had a lot of people buying, to be able to take a profit, those people have to sell. So what the RSI is telling us is that the likelihood is at some point very soon we’re going to have a run of sellers because we’ve had a lot of buyers. And then it may well do that and then that and then that. We don’t know, we don’t care, but what we need to know right now is, is this a good time to be taking a long or a short? What’s the condition of the market at at the moment. Right now, it’s flat. Is this a good time to be taking a long or a short?

I don’t know, could go that way, could go that way. I couldn’t tell you, I’m not gonna trade this because my market condition indicator is telling me that there’s not a good opportunity at the moment for a mean reversion trade. Okay, so that’s the RSI. So I use the 14, okay, so the last 14 periods, the last 14 handles on the four hour chart and on the daily chart. Okay, on the lower time frames, like hourly and below, I switch over to a 21. The 21, look at the difference between the 14 and the 21, here and here, and then we kind of touched it there, touched it there.

Okay, so there’s our conditions hit on the 21 moving average. If I change this over now to a 14, you’ll see that we get hit more. Okay, so we got hit there as well. We got hit there as well. And we continuously got hit there as well. All right, we’re just about to hit there. We got hit again there, okay? So the 14 is a little bit too quick for lower timeframes.

It will give you a lot more forced signals. So the beauty of this is you can adjust it for each individual timeframe. So personally, I found that the 21 is a good indicator for timeframes of hourly and below. And the 14 is good for the four hour and above. If you want to, you can use any number you like. And again, backtest this. And the beauty of this indicator is it can be backtested because once it’s drawn, it’s drawn.

We got extended down here. It went up. We got extended down here. It went up. It went up to there. We got extended, and then it came down. We got down to here. It went up. We got up to there, just about touched it, and it went down. We got down to here, and it went up.

We got up to there, and it started to come down. But as you can see, it’s telling us a condition. This is a good example here. We got extended on the hourly here. Did it stop? No, it continued to go. Just because a load of buyers came into the market there didn’t mean that was the right place to be taking a sell necessarily. Okay, it continued to go up, but eventually obviously it did come down.

But this is your market condition indicator and it should really be used on your higher time frame that you use for analysis. So going back to multi-time frame analysis, the RSI is the most important thing to use on your higher time frame. So in this particular case, if we are using the hourly time frame for our market condition, we would wait for this to get extended on the hourly chart somewhere around here and we would start taking short trades on a lower time frame like M15 or M5. If you’re using the hourly, a four hourly, as I do most of the time, I’ll be waiting for this to get extended on the four hour chart and I will start getting into short positions up there waiting for the sellers to come in.

So you can see it’s been telling us that there’s been a load of buying pressure. And right here is where it said, right, we’ve had way too much buying pressure. These guys have got to take profits in. Did they take profit there? No, they took profit there, but we knew it was coming. And this is all it’s telling you. It’s telling you that a condition in the market has been met and you need to start paying attention.

And there’s different levels obviously that you could set. Now, the vast majority of the time, the four hour RSI, which I use a lot in my strategies, will only ever get to around about 20, okay? If you get to the 20 level, it’s rare that it goes any further, yeah? I mean, this, looking on the screen here, we’re going back to July. We only had two conditions where we hit 20, and what happened straight after.

We had multiple conditions where we hit 70. So we hit the 70 up there. We hit the 70 down there. We hit the 70 down there. We hit the 70 down there in this horrible consolidation period before it pushed up. So you can see how it works and how it signals to me that there’s a condition. So the condition indicator is used to tell you that a certain condition is hit in the market and we now need to start paying attention.

So this is not telling us to get into the market. Okay, same way as the moving averages are not telling us to get into the market. They’re telling us currently where the trend direction is going and what the current state of play is in this market at the moment. Now, looking at a trend, let’s pick Euro pound. Just because I know it’s been trending for a while. You can see that the RSI can be used for mean reversion, i.e. when it gets really extended, we expect some kind of profit-taking move to happen. But used in conjunction with the moving averages, the RSI can tell you when there’s a pullback happening and trend continuation. Yeah.

That one’s played out, but it’s not obviously perfect. You would have had alarm bells ringing because we’d have gone above the 72 there. But you can reset these levels to different levels to use with trend continuation. So rather than using the 14, sorry, the 70 and 30, which would be used typically for mean reversion, you could use something like the 40 and the 60 and use these for trend trading. So when you see the market trending, every time we pull back above 60, for example, you could start looking for short trades.

Yeah, so we can start taking shorts. Okay, so that’s RSI and that’s how I use it and why I use it. We’re gonna talk about the RSI a lot more in when we look at strategies on day five, but that’s an overview of my market condition indicator. Now you can also use another indicator that is an oscillator as a market condition indicator. So there’s lots of them like the CCI, the stochastics, Arun Up Down. I mean, there’s loads of them.

The ones you wanna look at basically are here in oscillators, yeah? So average true range, not so much. CCI, MACD, everybody loves the MACD, don’t they? MACD is a condition indicator. It tells you the condition of the market at the moment. Momentum, moving average of oscillator. I never, I’ve probably looked at these in the past, never used them. Relative vigor, stochastics, obviously, Williams percentage.

So anything that moves up and down and has a condition where it gets to 100%, 0%, and typically will have a line in the middle, you can use those as market condition indicators. You can use the RSI like I do, or you can use any one that fits your needs. But I would encourage you to go and have a look at different ones and see how they work and backtest them. See what happens when conditions were met.

Remember, this is a condition indicator. So what happened the last time this condition was met? Did it give me a good area to get in. Remember, we’re looking for rough areas as position traders. We’re not looking for pinpoint accuracy. We’re gonna use our signal indicators to get us into the market, but we need a condition indicator to tell us roughly now is where we need to start looking.

Okay, and that’s that job. Now, this is obviously the RSI, comes bog standard with MT4. There’s nothing special about this. This is just a stock RSI. All I’ve done is customized it. So I’ve changed the color of it and I’ve put some text descriptions on the levels and I like mine to have dotted lines. So there’s nothing, this is a bog standard RSI.

I have also developed an indicator, okay, that will help you with the RSI, okay, and which is called the RSI dashboard. So this is obviously my market condition alert system. So I use this all the time, every single day to tell me when certain conditions are met. So I’m going to quickly show you this now, and this is just based off of the standard RSI. So this is the RSI dashboard.

Okay, so you can get this from MQL5, okay. And all it does is it allows you to monitor every single pair that is tradable, or every instrument. So you can monitor indices, you can monitor Forex pairs, you can monitor crypto. If you want to monitor stocks, you can monitor those as well. So basically you can put any pair you like into this dashboard, okay? And you can set alerts for each individual RSI column you’ve got.

And you can set what you want to see on every column. So if you wanted to, you can set this up as I have it now to show just the four-hour RSI. Okay. And it shows me different levels of RSI. So let me just move this out the way so you can see. Okay. So I have my dashboard set up so that it shows me the four-hour RSI 14, 68 and 32 levels.

It also shows me the 70 and 30 levels, 75, 25, 80, 20, 85, 15, and 90, 100. It rarely gets there. If it’s getting there, something fundamentally has gone wrong, typically with the market. But when it gets up to these levels, I start paying attention. The way that I have my RSI dashes set up, it’s a bit like a strength meter.

So as RSI gets more and more extended, these will light up further across the dashboard. So I can tell at a glance right now the most extended currency pair we have is the Euro US dollar. That has hit the 25 level to the downside. So the Euro US dollar at the moment, I can tell you, has been doing that. It’s been pushing really hard down. And RSI has got extended down below the 25 level.

If that gets down to the 80, we’ve got a very, very high probability of what? Profit take. Right now, we’ve got a very high probability of a profit take. So we should be looking for longs. Yeah? Same with these. So this is basically showing me how stretched, remember the elastic band theory we talked about yesterday.

This is telling me how stretched the market is, what the current market condition is for every current pair. You can also set this up to monitor multiple timeframes. So what you could say is instead of using this as a sort of strength meter to show you one timeframe, you can also set it up to show me the five minute, the 15, the one hour, the four hour, and the daily. Okay, and obviously on the daily, I’ll probably want to use the same levels.

Let’s go with the, let’s go with 70, 30 on all of them. These are nice levels to use. But on the one hour, I’m gonna need to use the 21. I’m gonna use the 21 on that level, on that time frame. I’m gonna need, oops, use the 21 there on the five. Okay, so if I hit that now, go through the alert sequence and obviously it pings up alerts when the conditions have been met. Okay, so now I’m monitoring the five minute, 15, one hour, four hour, daily and four hour.

So I’ve got the four hour, that should be weekly, should be monitoring on the last one. But I can monitor different timeframes, and I can monitor different levels as well. So what this is showing me now is that the Euro Swiss at the moment has had a recent strong push because it’s extended on the four hourly, but I can tell it’s also been strong recently because it’s been extended in the last hour and also in the last 15 minutes.

So this shows me that there’s been a recent push, rather than just the strength of the push, which I had it configured to before. This is now showing me how recent that move is. So I can tell you that this move here on the pound New Zealand hasn’t been as recent because it’s not lit up on these timeframes. If this was lit up as well as this, this and this, it would show me that this move is happening right now. And if it’s pushing down right now across multiple timeframes, it means we’ve got a profit take move due very, very shortly.

Okay, so there’s two ways that you can use the dashboard. But my preferred way is to have it set up as a strength meter. So it tells me the strength of move that we’ve got on particular pairs. And as I showed you previously, one of the reasons I like the RSI is that you can configure it to trigger alerts for you at specific levels. So if you’re a conservative trader, you want to get in and out as fast as possible with the lowest drawdown possible as a position trader, you would want to be looking to take your trades probably around the 70, 30, 75, 25 or 80, 20 level.

If you’re an aggressive trader, you’d probably wanna be getting in at the 68, 32 level or maybe even 60, 40, entirely up to you. But by using it as a strength meter, you can say, right, I only want to get alerts when we get here. Yeah. And you will get the best possible entries. Yeah. So when we talk about timing, the more extended your RSI is, the more likelihood of your timing being correct is, but it is no guarantee that that is going to happen.

But obviously when we do get to these levels where the 80 is hit here, we had a tiny bit of drawdown before that happened. 80, virtually instant isn’t it? Yeah, 80, boom, it came down. Yeah. Okay, so that is the RSI dash. As I say, that is available on MQL5 if you want it. You don’t have to have it. You don’t need it to trade using the RSI.

The RSI comes bog standard with MT4. So you can just use it yourself. But the reason I like this is because my market condition indicator is my first port of call for looking at interesting trades, okay? So I can sit here all day long with my RSI dashboard set up and I set my dash up to say, alert me only when the four hour chart gets extended above the 70 level or below the 30 level.

And I’ll sit here all day and I won’t have to look at charts. And all of a sudden it will go, ping, pound US dollar has just hit below 30 or above 70. So I’ll go and look at that and I’ll think, right, do I want to start getting into a trade? And I’ll start my analysis. So you can use it as an alert system so that you don’t need to spend time in front of your charts. And obviously, it will email you and send you push alerts as well.

So if you’re not at your phone and you’re working all day long, not your computer and you’re working all day long, you can set the RSI dash up just to ping you an email so that you can quickly go and have a break, take a trade if you want. So that’s why I use the dash, just because it automates the process of not having to check the RSI every hour, four hours, daily, whatever higher time frame you’re going to use for market conditioning. Okay. So that’s the RSI covered. Any questions on the RSI? Or the RSI. I mean, it’s not going to be a shock. I use the RSI. I’ve been talking about the RSI for the last two days. Okay. But it’s a brilliant condition indicator for position trading. For stop loss trading, it’s very, very useful. But for position trading, I find it’s my holy grail, put it that way.

After you’ve noticed the RSI hit H4, then you start your analysis and trigger at lower time frame, correct. So the RSI is my alert. Come and have a look at me, something’s going on. This market has been flying. You need to look at me because the chances are, because it’s been flying, these guys are going to want to take profit soon. Okay, I’ll go and have a look at a lower time frame and let’s see if we can get a trade entry. Yeah, that’s exactly what it’s for. Okay, so that’s the RSI and RSI dash. Next, we’ve got target and exit indicators. So these will usually be a level or a measurement, okay? So you must have a target in order to know if price has somewhere to go.

Remember we spoke yesterday about risk reward and the problems with risk reward. So you’ve got a trade that you take with a 20 pip stop loss, you want a three to one risk reward on it, so you put a 60 pip TP on it, but that pair only moves 30 pips a day. Highly unlikely it’s gonna get there, is it? But if you use a target indicator or exit indicator, whichever one you want to call it, that measures price or is a level that price is attracted to, it’s much more likely to get hit.

And it doesn’t have to be a specific risk reward. Because we’re position trading, if our initial entry isn’t right, we can move our initial entry to a more suitable level and adapt to market conditions, again, which we’ll cover tomorrow, and we can use the same target, or we can change our target, okay? But we need to find something that we can use that is adaptive with the market conditions and the positions that we’re entering with or into on a daily basis.

So these are useful for planning entries and also helping with positions that go against you, but we’re gonna cover that more later on. So I use, I’ve put there four different indicators. There’s really only three actually. And they are all important to measure where price is likely to trade to next. The reason I put four there is because I also use Fibonacci. But Fibonacci is less important, I think, because what you will tend to find is Fibonacci levels will always coincide, usually, with one of these three that I’ve got on the screen here. But we’ll have a look at Fibs as well. So these three that I’m going to cover are support or resistance, which is basically lines on the chart.

And you can use supply and demand. If you want to use supply and demand, which is very much the same as support and resistance, you can use that. 1, 2, 3 gaps, or propulsion candles. And there’s an indicator I can show you that will draw these on the chart for you. But these are basically propulsion candles where we’ve had a sharp move in one direction and these tend to act as magnets for price to move back to.

And ADR, average daily range, okay, which we’ve covered a little bit in the previous days, but the average daily range of a pair is also very useful for targeting. Okay, so this is why I use them. Support and resistance, one, two, three gaps and ADR all act as magnets for price. Okay, so we can see this happening in backtesting over and over again. So all three of these are levels in the market on any instrument you look at that price will be drawn to, okay?

So we can use them as targets because they historically always act as magnets for price. So when we’re looking for an area that we wanna exit our positions, we need to know where price is likely to go. Remember, we can’t predict the future. No one can tell you from that hard right edge of your chart where price is gonna be going next. We can only see what’s happened in the past. So we can use that information to extrapolate where price is likely to be going in the future.

Okay, and there’s three different ways we can do that. They are dynamic. So they can change as the market moves with or against you and you can re-evaluate your trades. So if you were to enter a position and as the market was coming down, you entered a position long, okay? And you saw a support and resistance level from back here somewhere that you thought that looks like where the market is likely to head to, because it’s hit that multiple times, so it looks like a really strong level. It’s likely to be drawn towards that. But then if price moves back down further and you get into maybe a couple of extra positions and then starts to move up, you might find that there was a massive propulsion candle that you could target there.

And if you got out there, that would also give you a nice profit. Okay. So these can all be used as targets, but as price moves, that’s going to create new targets. So there’s new propulsion candles going to be drawn. There’s new support and resistance going to appear in your chart. And the average daily range lines, which I’m going to show you in a minute, will change every day and give you a new potential target to hit. So the beauty of these is, as we enter the market in a position and we take potentially multiple entries to get in at different pricing in the market, in our position, with our idea, we can use these three targets and change them and adapt them as we need to as we enter into our positions.

Third reason I use them is they’re super simple to back test. Again, like most of my indicators, you can see historically what’s happened. Support and resistance. Again, I’ve got a video. I said in day one, I pointed you towards a video on support and resistance that I have on YouTube. If you don’t know much about support and resistance, go and watch that video. But support and resistance, once you’ve drawn it on a chart, is really, really easy to backtest. You can see it bouncing off of support and resistance lines over and over again. One, two, three gaps, or propulsion candles, as they’re called as well.

Those you can see on your charts. You can see price pulling back to them like a magnet over and over again. An average daily range, I’ve got historical backtest data that shows me for the last 15 years, average daily range acts as a magnet for price. And usually when it gets there, it stops. So we can use all of these and change them as we go. The other thing about average daily range is it allows me to see how realistic and easy to achieve my targets are.

So when we look at the ADR indicator, you will see that there’s lines drawn on the chart. And these lines indicate the averages that price will move to. So if I can find a target that is within the average daily range of any particular currency, it’s got a very high probability of hitting. If the support and resistance is three ADR away up there, or the last propulsion candle, the last strong move we had in one direction is all the way up there, the chances of me hitting that are very, very remote.

But if that support and resistance is within the average daily range, i.e. within reaching distance of this currency pair, instrument or whatever you’re trading, it’s very likely to be hit, okay? So let’s take a look at the indicators. So this first one isn’t really an indicator. This is support and resistance, right? Really, really, really simple. So all support and resistance is, is a line on the chart, okay?

So let’s go out to the daily and we’ll have a look at some support and resistance levels. Okay, so support and resistance is just where price has been recently, yeah? So you can see as price on this chart here pushed down It got to a point where it rejected it pushed up then it pulled back down to it again and it pushed up. So That’s roughly a support resistance. Remember we don’t need to be accurate pinpoint roughly when it got here It didn’t like to go any lower so it pushed off Yeah, so that’s a support and resistance level. Look what happened after it pushed down here. Pop, pop, no, it didn’t like it.

So this was a previous support, which acted as resistance. Support becomes resistance in the future. So if this pushes up now to here, there is a chance that is where it’s gonna turn, isn’t it? Yeah, if it doesn’t turn there, i.e. if price pushes up above that level, where do you think it might turn next? Let’s have a look. Well, it’s bounced down there, hasn’t it? Quite a few times, didn’t like to go down through there and it hit it again there and it hit it again there and it hit it again there and then it finally cracked it.

So if price is gonna push up to this level, it’s either gonna do that or it’s gonna push through it. And if it pushes through it, where’s it likely to turn next? Well, highly likely here because it bounced there loads of times in the past. So that is potentially our next move, isn’t it? Okay, if it decides, no, I’m not happy with that, I’m gonna break through that level, where’s it gonna go to next? Well, let’s have a look, probably somewhere up here.

So it didn’t like that quite a few times, whipped into it lots, rejected it, tried to get through it, failed, tried to get through it again, failed. So that’s a pretty good support and resistance isn’t it? So if it cracks through that level and does that, you see you’re going to do that or potentially that. Okay, so what we can use support and resistance for is for if we’re taking a position long, targets, where is it likely to go to? If we push through here and bounce off, that is a great target because it’s likely to be attracted to that level because it’s been attracted to that level over and over and over again in the past.

It likes this level for some reason. We don’t need to know why, but quite often you’ll find these coincide with round numbers and things like that. So if we are long, that’s a good position for us to be targeting. If it cracks through those two levels and bounces off of that one, that’s potentially a good level. So it’s got a high probability of going there because it’s been attracted to that level many, many times in the past, like a magnet.

Yeah, it likes that level. So we’re always just looking for areas where price is likely to head to next. We can also use these as reaction points. So when price gets up to these levels, we could use them as entries as well. Okay. And if we’re taking multiple positions, again, this is something we’re going to cover tomorrow, we use support and resistance also as entry positions. So if we get into a short trade here, and that short trade doesn’t work and price pushes against us, where do you think would be a good spot to get into another one?

Probably where it’s likely to react, isn’t it? Because we’ve got a high probability of it reacting there because it’s done it many times in the past, okay? So I’m not gonna go into detail about support and resistance here. There’s a video on YouTube I’ve got about drawing support and resistance in detail and how to do it. And it works on all timeframes, okay? So you’ve got four hours support and resistance.

So there’s a good one there, yeah. And it doesn’t have to be pinpoint, it’s roughly an area. Remember, we’re position trading. We’re not using a stop. We don’t have to be pinpoint accurate. We don’t have to tie my entries to the pip. Roughly somewhere around here in the past, price has reacted multiple times. That’s a good support and resistance level. Roughly up here, price has reacted multiple times.

Roughly down here, price has reacted multiple times. I’ll draw the line in for you. Draw it where you like, somewhere around there. Yeah, support and resistance. So it’s very easy to draw on your charts, but it’s used as a magnet for price. You can see it happens over and over again, but there’s lots of instances where it will blow through it and ignore support and resistance. Yeah, so we can’t use it as an accurate entry point unless we get price action there, then that would be something useful.

But we can use it as a target, as an area to aim for. So that’s support and resistance. The next one is one, two, three gaps or propulsion candles. Okay, now there’s a product on the marketplace. You can get the product on the market, on the MQL5 market, you can get this indicator I’m gonna show you. I’m gonna show you what these are, but this indicator draws them for you, so you don’t need to worry about manually identifying them.

Now, the 1-2-3 gap theory was not so much invented, but there’s a guy came up with it many, many, many, many years ago. I can’t remember the name of him. He’s got a very, very old fashioned website. But you can you can look it up if you want to but basically what a 123 gap is, is a propulsion candle and if you don’t know what a propulsion candle is. Okay. A propulsion candle is simply a big long candle. Yeah, can have a wick at the top of the bottom but it’s basically one big long candle. Okay, so you can see an example here. Let me zoom in and we’ll look at an example in a bit more detail. Okay, so this one here.

There we go. Okay, so that is a propulsion candle, right? So it’s a big, long move. So it’s a strong move in one direction or up. Doesn’t matter, you get propulsion candles in both directions or one, two, three gaps. The reason some people call them a one, two, three gap is because they are made of three candles. So you have candle one, you have candle two, and you have candle three, okay?

And the gap part comes where there is a gap where between those three candles, the market has only traded in one direction. Yeah, this is your propulsion candle and it only went down, okay? And then the next candle after that, it traded up to there and then carried on to the downside. So what it left was what I call a propulsion gap, okay, or a one, two, three gap. Now this indicator I’ve got, I got it from MQL5.

It’s called Gap Indicator. It’s by a guy called Jacob, I can never pronounce his surname, Bezdikovsky. Okay. And it’s basically just called Gap Indicator. One word, all right? One, two, three gap is the icon because it’s identifying one, two, three gaps for you. And I like to use one, two, three gaps on the 15 minute chart. Okay, so what this is doing is it’s showing me strong moves in one direction on the 15 minute chart.

So within 15 minutes, there’s been a big strong price move in one direction and it hasn’t come back up. So that is indicative to me that there’s been sellers in the market, okay? And there was lots of selling, but there was no profit taking, there was no buyers, okay? So there’s lots more selling. So there’s a big gap here where people got in short and they haven’t been able to exit their positions because they haven’t been able to take along.

They haven’t been able to buy. They were sellers, but they weren’t buyers in this particular case. So I like to look back two and a half thousand candles using the 15 minute timeframe. And my minimum gap size I like is three pips. So I set that to 0.003. I’m not quite sure why it’s that, it’s three pips basically. So what that does is it draws on the chart these gaps. So you can clearly see them identified on basically any time frame.

So let’s have a look at another pair like the Aussie Swiss. So something, it doesn’t matter which really pair you look at, but you can see these gaps are clearly drawn on the chart. And these act like magnets for price. So we’ve got one here where we pushed up. Let’s start from here. So starting from this point here, price pushed down hard, we had a propulsion candle, and then we had another propulsion candle, and then it continued to consolidate and push down, it had another propulsion candle.

So what we’ve got here is loads and loads and loads of sellers, okay? What are all these guys got to do now to get out of their positions? They’ve got to buy, okay? Because they’ve been selling and selling and selling, now they wanna make a profit. So they hit the sell button, now they’ve got to hit the buy button. So what the market tends to do is come up and it fills these one, two, three gaps.

Yeah, when it gets to the top and it’s filled the gap, it goes brilliant, sorted. Okay. So they tend to get filled because they’re acting like magnets. And the reason they’re acting like magnets for price is because a load of people sold here. And when I say people, I mean institutional players, people dumping a hundred, 500, a thousand lots into the market to power the market and move it down. These guys have hit that sell button. To get back out at this price, they’ve got to hit the buy button. Okay, and what they want to do is make sure that their books are balanced, which means that the price has to trade in both directions at the same level.

And these gaps indicate an area where price has only gone down. There was no buyers here. Yeah, so it automatically acts as a magnet for price to come back to. I’m just gonna quickly go back and look at this one as well here, because you can see this gap here. One, two, three gap filled. Yeah, so let’s just quickly scroll back and look at that one.

This one was from back here. And this one took days to come back to, like one, two, three days, four days to come back up to here, and then five six days it filled it. Okay. So, we’ll just quickly go through this one as an example, but you get the idea, pushed up really hard, very strong push push that really hard against strong push you often find you get a few of these next to each other, then it pushed up and collapsed down, filled it, filled it, came all the way back down here. And as it came down, it put a big propulsion candle in, big strong selling move at the top there. And it left this gap, which it then came back up and filled, acted like a magnet for price. So we can see that when price pushes down very hard and leaves one of these one, two, three gaps, or these big propulsion candles, where there’s too much selling power or too much buying power in one direction, price will quite often come back and complete them.

Now it doesn’t work 100% of the time, but it’s as close as you can get. So the reason I use these is as targets. So let’s look at an example here. For example, we’re on an M15 chart now. If we were to look at the hourly chart somewhere, I don’t know, let’s look at somewhere down here, yeah? So let’s look at the hourly chart there. Look where RSI was on the one hour, just about tapped into the 30, okay?

So when we got that RSI alert down here, we’d be going, it would be saying, hey, we really, really extended on the one hour timeframe. There’s been loads and loads of selling pressure. What we can do is analyze our chart, flick down to our lower timeframe. We could use M5 or M15 and say, right, we’re down here. Is there any targets? Yeah, there is, look. There’s a whacking great one, two, three gap up there.

So we enter our position when the market shows signs of strength, like a W pattern or a market reversal alert, which we’ll look at in a second. And we target that. So we don’t target that because it is a three to one risk reward. We target that because it acts as a magnet for price. It’s a level we know historically over and over again, price is likely to head for.

So there’s a big one. Pushed up, came back down and filled it. We’ve got one down here at the moment. Where do you think this is probably heading? Down there. If it’s not headed there, it’s probably heading up there, isn’t it? It’s going to do one or two. I don’t know. Pushed up, hard, propulsion gap.

Came back down, filled it. And you can look at this on any pair you want to. Up to the top, big strong push, propulsion gap, propulsion gap, push down, left one there, pushed up, filled it, pushed up, push back down, up there, left one there, came up to fill those, where do you think we’re heading? Down there, okay? Over and over and over again. These one, two, three gaps are fantastic, especially for low timeframes.

So these are particularly useful for entering, for targeting, okay? But you can also, as you can see, use them for entries. So here, quite often you will find they will fill almost to the pip because the market has left an area here where it’s just done loads and loads of selling and the institutions are sitting there going, we sold loads up here, we need to buy, buy, buy. And we need to get back up there to complete that order.

Because remember, every buyer has to have a seller. So if there’s too many sellers and not enough buyers, meaning a propulsion candle is built because there wasn’t enough liquidity of buyers and they had to push down harder to find more buyers, there’s a big gap there left there in the market that they have to come up and sort out. Okay, so these are called one, two, three gaps, or I call them propulsion candles or propulsion gaps. You know, pick whatever you want, whatever you wanna call them.

But basically all they are is a strong moving one direction in the market. And we know that price comes back and targets them. Okay, so they’re brilliant for targets. Okay, any questions on those? I could go on all day. Yeah, very, very simple. This isn’t rocket science. This is just, I can see this happening in the history, so therefore I use it. It’s fact. It happens over and over again. Okay? A bit hard to digest. Not used to this. Okay, that’s fine. It’s all new. Yeah, this is free to download this indicator. As I say, it’s called 123GAP. It’s called GAP indicator.

Yeah, it’s freebie on MQL5 by this guy. Take a screenshot of this if you want. But it’s obviously in the replay. If you’re watching this thing on YouTube, pause. But it’s called GAP indicator, version one by this guy. Brilliant indicator. Okay, and it’s the one, two, three gap concept. If you want to Google it, one, two, three gap, go Google it, okay. But I found this years and years and years and years ago.

I’m talking like six or seven years ago, maybe more. I stumbled across a website and I forget the name of the guy. He basically came up with this concept and he built his entire trading career around this on low timeframes using stocks. Yeah. So he would, he would look at it and say, right, this is, this is moved too fast. Likelihood is, it’s going to come back up here because there was a load of people trading in one direction, and they’ll need to fix it. So they do. And it’s free. Hey, free indicators. So here you can see this, this is where the gap is. Yeah, here, including the wick and the body ends there.

We’ve got a big propulsion candle, which closed there. And then it continued to trade down from there. It never came back up and traded in this section. So this is what they call the one, two, three gap. This is what I call a propulsion candle. And this is what is called the one, two, three gap. So I kind of call them a propulsion gap, because it’s a propulsion candle with a gap in the middle. Same thing, but I mean it’s a one, two, three, whatever you want to call them. But this is well documented on on the web, one, two, three gaps they’ve been around for a long time this old stock trading if you like, it was originally, and like a lot of these strategies and indicators you will find, they originate from stocks because stock trading was around before Forex trading.

And the problem with Forex trading is, specifically indices trading to a certain extent, is a lot of people use indicators designed for stocks. And they try and use them on Forex, but they’re not designed to measure the way that Forex works and they’re not designed to measure concepts used in Forex, because they’re using concepts from stocks like high can actually candles and things like that candlesticks were created by the Japanese, Japanese, Chinese, oriental candlesticks were created a long time ago. But we use them today. In the same way as they were used hundreds and hundreds of years ago. But all they are is a measurement of time. So it’s a measurement of price movement through time.

That is literally all a candlestick is. So when you see a bullish engulfing like this, all that is, is this 15 minute period, okay, price moved up, this 15 minute period, it moved down. Okay, it doesn’t tell you anything more than that. But when it moves down really fast, it means that there wasn’t enough trading done in both directions. Therefore we get a gap where there should have been more buyers and there wasn’t.

So what happens is the buyers try to get back to fill it. So that’s literally all it is, one, two, three gap. Okay, so that’s a great target indicator to use. Okay, and you say, you get that on MQL5. And a lot of scalpers use this, okay? And a lot of people use this in conjunction with the market reversal alert indicator, which you can see on the screen here. Okay, we’re gonna look at this in a second. But when you get a market reversal alert, it’s showing you a sign of potential turn in the market, market structure change, weakness, strength, whichever it is. So when you see one of these alerts and you see a target down below, that’s where you get in. There’s all sorts of ways of using, okay, but they are just indicators and I use it as a target. Okay, so that’s one, two, three gaps or propulsion candles. So next we’re going to look at ADR, but here are some facts about it first.

So ADR is specifically used to calculate entry points in my strategy and to manage risk. It’s also used to get into trades if they fall in line with the expected market direction I’m looking to trade. So I use ADR and extensions of ADR because it basically tells me price has probably moved as far as it wants to go today or it is approaching a level where it will become exhausted. Okay, we’ll look at ADR, the ADR indicator in a minute.

So when price gets to ADR extensions, it’s likely to stall because it’s run out of basically power and you can also, when you see the ADR getting extended, you will also find on the time frame that you’re looking at, which is usually a lower time frame, RSI will also be extended and telling you that we’ve probably run out of power at this point. The reason I use it and I like it is because it’s a mathematical fact based on historical data. So it provides a real measurable edge.

It’s not a bell or a whistle or a flashing light or an arrow drawn on your chart. Okay, ADR has been mathematically back-tested by me for 15 years worth of data. And I can show you that this particular concept works because price always has an average price it moves in. Why we have moving averages, yeah? But the reason I like ADR is because it helps with position trading, particularly because it allows us to keep our entry price within a day’s reach of where we are at the moment. And this will become more clear tomorrow when we look at position trading concepts.

And so it often shows the market has reached for a level that it wanted to trade to as well. And these are usually turning points. So quite often the market will move to support and resistance levels and will like to turn there. And a lot of the time you will find when ADR is reached, average daily range of that particular instrument is reached it will stop at a support and resistance level. Okay, and then it will either pull back or reverse because to get to that average daily range extension it’s likely had a lot of buying or a lot of selling pressure. Therefore, it would tend to do a U-turn. And it also shows me what the norm is for each pair or instrument.

So I can calculate my backup plans for additional entries without getting over-leveraged or overexposed. And again, I will show you that as well. So let’s look at the ADR reversal indicator and dashboard. So again, there’s a dashboard for this because rather than me having to look at every single pair on a regular basis or have every single pair open on my charts, I like to have a dashboard which just monitors everything for me. So this is partly my way of automating my life, yeah? You can either have 28 pairs open and have an ADR indicator running on all of them and use up all the resources of your machine.

We can have one dashboard open that monitors everything. Yeah, so let’s have a look at these now and I’ll show you the different ways that I use ADR. So ADR here, prime example on the screen right now. Okay, Euro Yen. So this is the ADR indicator. Let’s move this over here. Okay, this again, you can get this on mql5 there are other indicators out there that do ADR measurement, there’s some freebies out there. But I couldn’t find one that did exactly what I wanted to do in the way that I wanted to do it, which is why I came up with my own indicator. average daily range of a pair over a period of time.

So I use ADR 10. And again, if you want to know more about ADR and how I came up with all of these concepts and all of this data, there’s a video on YouTube about how to trade ADR. And I go into the data research that I did by downloading 15 years worth of historical data and analyzing that to come up with the concepts that I came up with. But for now you need to know that I use the ADR10. So this is measuring the average daily range of the last 10 days, the last two real full weeks trading. Okay, forget Sundays for the moment, we’re looking at the last 10 days of trading. So what this is showing me is in the last 10 days price has moved on average 76.3 pips.

So I know that in any one day, it’s likely that price is going to move somewhere around 78 pips or less than that. And the data that I did, the research that I did, you see the levels here, the extension levels going up, showed me that on all instruments, regardless of whether they are Forex pairs or indices or anything, I didn’t test crypto, but on normal tradable instruments, 42% of the time price would stay within its average daily range.

Okay, when it broke out of that, it would not exceed this level by more than 23% of the time, and so on and so forth. So you can see that the more extended price gets, the less chance there is of it going any further. Now, that does not mean that it’s going to do that. It means that the likelihood of it pushing further is 3%. So there’s a 97% chance we are going to do two things here, stop or reverse. OK, and that is what the ADR is used for. But it’s also used as a measurement for the positions that I get into.

So, for example, at the moment, I’m on a US dollar yen pair. with a short position. Let me just scale out so you can see it. So you can see here, the average daily range is there and there. And the way this is measured is it takes the high of the day and it measures the average from there and draws a line. Okay, it now measures the low of the day and draws a line there. So this is 66.

So what that will be is 66 pips away from the low. That will be 66 pips away from the high. And these will move dynamically during the day. Okay, so as price pushes down, this ADR line will come down with it, okay? Because the average daily range is what we’re measuring, not the high or the low from the open, okay? We’re measuring how far it moves in a day. So when price gets to one of these levels, this indicator will ping you an alert, okay?

And it will tell you that there has been a hit of the average daily range. So this has moved 66 pips in this case in one direction today, okay? And you can set alerts at each individual level and you can obviously get pop-ups, emails, or pushes for this one. And basically you’ll get an alert at the levels you select. So I set mine to just alert me at all levels basically. But you could say, I just wanna know when something gets really, really extended to 150.

But you probably know that anyway because your RSI will be telling you as well. Okay, so the reason I use this is for a scalping strategy which we will cover on Friday. But what happens a lot of the time when price gets down to ADR is it will bounce because on average it can only move that far in a day in one go before a profit taking move happens. Remember the market moves like this a lot of the time or it moves like this or it could move like this. Yeah but these moves will typically be most of the time within a certain pip count. So when price gets beyond that pip count, we know there’s a high probability of a stop or a profit take, because to get down to here, what’s gonna happen?

There’s gonna be a load of selling pressure. What happens after selling pressure? We get buyers, profit takes. Now, these moves will be one of two things when they happen. So they will either be a hit to the high and then a pullback and continuation in the trend, or there will be a hit to the high and a reversal, what I call an A-shaped recovery or a V-shaped recovery, depending on whether it’s a low or a high hit. But to use this as a scalping tool, what you can do is when it gets down to there, you can say, right, I’ll just target a quick scalp for maybe a quarter or a half of its normal daily movement.

If you were to stick a fib, for example, on that move, you would play it back to maybe the 50% of the tracement level or something like that. So there’s lots and lots and lots of uses for it. But the way that I use it for position trading, particularly is, and I will cover this in much more detail tomorrow. I like to keep my average price, which is indicated by this orange line, as close to 100% ADR as I can.

Reason being is when we get a pullback in price, it will typically move roughly an ADR. Yeah, so if we get a strong push for three days in one go, what will happen most of the time is you will get a minimum of a one day push in the opposite direction if it’s gonna continue doing that. Yeah, quite often you’ll get a two day push and then it might come back down there. You may get a V-shaped recovery and it moves down for three days and moves up for three days, okay?

But a lot of the time after a big selling move or a big buying move, you will get at least an ADR move in the opposite direction. So by using ADR as a measurement for targets as a position trader, we can make sure that we’ve always got an easy exit on our positions. And again, we’re gonna talk about this in more detail tomorrow. But if I got, let’s quickly run over to another pair, like you’re right, yeah.

So if I was gonna take an ADR reversal trade right now, yeah, have I got a target to reach for? Okay, so we’re just taking these lows out here. Remember from day one, what the market does, it comes down, it gets everybody to go long, everyone goes long and puts their stops under there. Then it comes down and says, thank you very much, I’ll take those stops and I’ll go back the other way. Yeah, which is exactly what’s playing out now. Have we got targets above?

Yes. Okay, so we can use ADR and a combination of the 1, 2, 3 gap to take trades, scalp trades on lower timeframes. Yeah, so there’s lots and lots of uses for it, but it’s a mathematical calculation based on historical fact. We know factually, because I’ve tested the data, that pretty much 60% of the time, price will stay within its average daily range, which in this case is 76 pips. So if we can keep our positions, our average positions and our targets within average daily range, we know they’re going to be really easy to hit. Yeah. So look at this big push. This was an ADR push here. This is a good example here. Let’s just scroll I’ll scroll back a little bit.

Okay, so the average daily range is 76 pips. It might have been 75, 74, whatever here, but you can see what it was doing. Obviously it was coming down and doing what? Filling in all the one, two, three gaps. Yeah, but regardless of what it was doing on the way down, there’s a massive amount of selling pressure. This was way over ADR, okay? What it did when it got down here was it stalled and then it pulled back.

Okay, but look at the measurement that it pulled back to. Roughly an ADR, 76 pips. Let’s measure what this is actually. 80, yeah, so it pulled back an ADR. So if I’d have got in with a long position on this alert here and it didn’t work out and I decided to get in with another position here, okay, where would my target be? This propulsion candle or one, two, three gap and it’s within one ADR out.

Yeah, so that’s how it’s used and why it’s used and why it is so useful. Okay. Now ADR is a strategy in itself. The reason I built the indicator was to trade ADR reversals. Okay, but I position trade ADR reversals. And we’re gonna look at strategy on Friday. But what I found again, same thing was with this particular indicator, you have to have it running on every chart and you have to wait for ADR to get hit.

So what I developed was the ADR dashboard and this does exactly the same thing as the RSI dashboard. Okay, it measures average daily range. And what it does is it pings an alert at you and shows you how strong the move is today. Okay, so the New Zealand CAD, New Zealand Swiss, New Zealand Yen have all moved to 150% of its normal daily ranges. So what do you think we should be doing with these? Probably looking for reversal trades because these have gone way over their normal level.

But there’s a caveat. A lot of the time when the average daily range is exceeded, it’s because of something we covered yesterday, fundamental news events, okay? This morning, we had the rate announcement for the New Zealand dollar and this is why these ADRs have been hit. So when you’re looking at ADR and using it as an entry indicator or as a target indicator, you also need to be aware of market conditions, aware of the news. Why has ADR been hit today? Let’s have a quick look at the news. Ah, the news this morning was the rate announcement. That’s why New Zealand dollars extended. Maybe I’ll give these a miss today and look at some of the other pairs that have got extended instead.

Okay, so that’s the ADR dash and the ADR dash is exactly the same, right? So I use this to monitor average daily range. And again, I sit here and do nothing all day long waiting for my dashboards to ping at me, okay? This is a condition, market condition as well. The condition today is that the New Zealand dollar has got extended above its average daily range. If I’m looking to scalp today, I’ll be looking at these pairs to get into my scalps.

Same inputs, put in whatever pairs you want. It obviously measures average daily range, so it doesn’t measure time frames, it’s measuring the range today. And you can set individual alerts. And you can set the different ADR number. And this also measures weekly range and monthly range. So the same concept with average daily range applies to weekly and monthly ranges. I won’t go into this in too much detail now because it’s covered in another video anyway.

But we have the average weekly range. So if you hit the average weekly range of a currency pair by Tuesday lunchtime, there’s a high probability that isn’t gonna go much further because on average, it only moves 244 pips. If we’ve hit 244 pips or gone beyond it by Tuesday afternoon, there’s a high probability of what? Pullback or reversal, which we covered yesterday. The buyers gotta get out.

So if they get all the way to where they were aiming to get to on the second day of the week, it’s a high probability they’re gonna wanna come back down on them. So, and the same for the monthly, right? So that’s average daily range and average daily range dashboard, okay? So does everybody understand that concept and how it can be used? And we will go into this in more detail tomorrow when we look at position trading and how to position trade in detail and the strategies used in position trading.

But one of the main reasons this is used is for making sure that our positions that we have, so I’ve got three positions on this one at the moment, little ones. I’m trying to get down to here so that I can start exiting positions and doing, well, I’m not gonna do draw down control, I’ll cover that again tomorrow, but I wouldn’t do it at this stage. But I’m looking basically to keep this line, my average price, my entry that I’m changing, my entry price that I’m changing, I’m trying to keep it as close to within this range as possible.

Because when we get that big down day, it’s gonna be really easy for me to get out and make a lot of money. Okay, so that’s average daily range. Any questions on ADR? I should imagine probably quite a few of you will know about ADR because the ADR indicator has been around for a while and there’s videos on YouTube already about it. But on big news day, ADR, not that important.

Sometimes it is, sometimes it isn’t. On big news days, much less so, which is why you need to be aware of fundamental news. I covered this yesterday. Every single morning, the first thing I do is open up my browser, I go to Forex Factory, and I look at what the news is today. When am I expecting the market to move today? Remember, we can’t time the market, but we know when the market is likely to move because they do it on news announcements. Now, when there is a big news announcement like there was this morning, you’ll find that ADR will get hit a lot. Non-farm payroll on Friday.

Okay, we’ve got non-farm payroll coming up on Friday. That ADR dashboard will be lit up like a Christmas tree. Everything will hit ADR on Friday because they will be dumping money left, right, and center all over the market, taking people’s stops out and their pending orders out. They’ll be hoovering up cash. And then when it’s all settled down, they’ll go off in whatever direction they want to do. So that day, Friday, I wouldn’t even look at ADR reversals because I know everything’s just gonna get lit up and hit anyway, because it’s an abnormal day.

So you do need to be aware of it. You need to be aware of news and how ADR affects it. But ADR is the same, even on a big news day. If there’s been a big news day and it’s done that, and we’ve hit 200% of ADR, yeah? What condition are we in? Huge amount of buying. What are all these guys now? Sellers, okay? Regardless of whether it’s a news event that’s caused this, these guys have got to get out of their positions.

To get out of their positions, they’ve got to hit the sell. When they hit the sell, we can take advantage. The difference is with a fundamental news event, you can’t really tell how far it’s going to go. This could go to, we’ve seen many times before, 300% ADR extensions on fundamental news. I don’t go above 225 because the chances of it going above 225 historically is 1%. But 1% of the time, it does go above 300%, 200%. You know, it goes crazy.

There’s nothing you can do. But as position traders, that’s not necessarily a bad thing for us, is it? Yeah, so if we get into a position at 100 ADR, sure, because it’s pushed up really hard today, and it does that and pushes up to 150, yeah. Now, what’s the chances of it going like that? Much higher. So what should we do? Take another position.

Yeah, if it pushes up to 200, brilliant. Let’s take another one because what’s gonna happen? It’s gonna come down, it’s gonna come down hard. Our average on these three positions is here. So if it retraces 50%, we’re gonna make a fortune. So ADR extensions are not a bad thing. If they get way beyond, it just means that the market is more stretched. Remember that elastic band we spoke about yesterday. The more stretched it gets, the harder it’s gonna ping back.

We just don’t know when that guy’s gonna let go of the elastic band and when it’s gonna ping, but we know it’s gonna ping, because it’s gotta ping, because these guys have got to take profit on their positions, okay? So that’s how ADR helps you in many, many, many ways. It’s my core of my trading is ADR, knowing ADR, knowing how the market moves. Market moves in average daily ranges, always has and it always will.

Okay, and those are also dynamic measurements. Okay, the average daily range for the last 10 days will change regularly. The ADR on the pound New Zealand used to be 350, 400. The ADR on the pound New Zealand at the moment is about 130. So we can adjust our targets dynamically based on how that particular currency is moving at the moment and in the last couple of weeks. I don’t care if it hit 350 ADR a year ago. Right now it’s not.

So my targets at the moment are 130, not 350. So you can adjust it. That’s why it’s so important. And from Sir Richard just asked, from the indicator screen, I notice three dashed lines that looks ranging. What does that mean? Right, okay, you’re talking about this. Okay, we’re coming on to that. That was almost good timing. We’re coming on to that in a minute.

Okay, so that’s average daily range. And again, you can get these on the MQL5 marketplace. These are my indicators. As I say, there are other ADR indicators out there you can get. Mine is just exactly as I want it to be. If you don’t care about ADR extensions and seeing those extensions, and you don’t need those figures on there, you don’t need the alerts, there’s other free ones out there you can use, but I use that one because I like to see how far extended we are.

The more extended we are, the more I want to get into that position. Okay. And the dashboard obviously just automates the entire thing. So I don’t have to watch the charts, I just wait for a ping from my dash and I’m done. I’m in, I’m out, make money. Okay. So signal indicator. This is the last indicator really that we’re going to look at.

This will typically be a price action or price movement indicator. So it will draw arrows, it will ping alerts, or it will do both. And it will signal you there is an opportunity to trade happening right now. So we’ve got a trend indicator that tells us roughly which direction we should be trading. We’ve got an RSI, a condition indicator that tells us what the current market condition is, how stretched is that elastic band right now. We’ve got ADR indicators, one, two, three gap indicators and support and resistance that help us see where price is likely to be going next. So we’ve got an idea which way to go. We’ve got an idea roughly that we should be getting in, and we’ve got an idea roughly where we should be going. Now we need to know when, our timing.

This is the hard bit, the little bit that we all get wrong. We need to know when to get into the market. And this is what your signal indicator does. It shows you that there is a condition happening right now that means that this could be the moment. It might not be, but it could be, okay? And for that, I use the market reversal alerts indicator. And this is the first indicator I built. And the reason I built it was because there was nothing else out there that did what I wanted to do, okay?

So what the market reversal alert indicator does is it tells me that price is starting to turn or run out of buyers or sellers. So if we’ve had a big strong push in one direction. The market reversal alert indicator tells me that it looks like that’s stopping and reversing. So that’s when I wanna get into the market. I don’t wanna get into the market when it’s plowing ahead, flying up at 300 miles an hour. I wanna get into the market when it’s flown up 300 miles an hour, stalled and is starting to turn around the other way.

Yeah, so think of it like catching a falling knife. If the market is doing this, yeah, and you’re taking longs all the time, what you’re doing is you’re trying to catch this falling knife, yeah. So it’s unlikely you’re gonna catch it without getting hurt, yeah. You’re gonna get in when it pushes up like this, you’re gonna put a stop, you’re gonna get stopped out. It’s gonna get up, when it pushes up, you’re gonna get in, get stopped out.

Push up, get in, get stopped out. The market reversal indicator tells you when there’s a little bit more strength coming into the market. So when it’s done something like that. So we’ve stopped, think of it like a car screeching the brakes on and then turning around and flying the other direction. What’s that? W, on the opposite direction, and M, market structure paths.

So that’s basically what it’s telling me. Using this in conjunction with my other indicators that set up my trades gives me a good tight entry on a lower time frame. So the market reversal alert indicator I use on my lower time frame. So my trend indicator is on a higher time frame on a daily. My market condition indicator typically is on a high time frame. In my case, I like to use H4, but you could use any higher time frame, depending on what you use as your entry time frame. The market reversal alerts indicator is used on my lower time frame, my M15, my M5, not M1, because I’m not that crazy, but if you want to, have a go. But lower time frames, hourly, you can also use it on as well. It’s fully automated, so I don’t need to watch the charts. It will ping alerts at me, so I don’t have to be tied to the screen 24 seven watching for weakness or strength, okay?

So we’ll have a look at the market reverse alerts indicator. There is also an optional dashboard for this. This dashboard that I built was more to do with another stock loss based strategy, which I started, which kickstarted my basically move into position trading. So the dashboard is available. I don’t personally use it anymore because it suits position trading less, but it is useful for finding reversal alerts on higher timeframes, because some people do use market reversal alerts indicator as a directional bias indicator.

And I’ll show you how you can use that as well. Okay so let’s have a look at this one and then finally after this we will look at the other indicators on my chart, one of those that somebody’s just pointed out, Richard’s just pointed out. Okay so the market reversal indicator what this is is this box here and this rectangle that you see on the screen. So what this is doing is showing you when there are signs of weakness, basically in the market. Just gonna, oops, just gonna quickly fine tune this so just to explain better how it’s working. So what this is designed to do is when price has pushed hard in one direction, okay, it will draw a rectangle on the chart.

So in this case, we’re pushing down. So it’s drawn a rectangle there. Yeah. And what it will do is when price has managed to push above this rectangle, it will ping you an alert. It will signal that there is strength in the opposite direction. So you can see as price moves down, what it tends to do is it pushes down, pulls back slightly, pushes down, pulls back, down, up, down, up. We see this happening on all time frames. This is what we call market structure. Okay, so market structure is a series of new highs and lows in one direction. What happens when it turns the other way is we have a shift in market structure.

Okay, so where we get a high, we put in a lower high and then a lower low. All right, so market structure is movements of a high, low, higher high, higher low, higher high, higher low, just about. And then when it shifts the other way, we go back in the opposite direction. The market reversal alerts indicator is designed to tell you when this condition is happening, i.e. there’s a good chance that this move up is now failing.

Okay, and the way it does this is, whenever there is a new low formed in the market, so right here, this is a new low, it’s just been formed. It draws a rectangle, okay, on the last candle of the opposite color. So in a downtrend, it will use the last green candle and it will draw the rectangle there. And what we’re doing is we are saying to the market, if you continue to do this, I don’t wanna know. If you go down there, no problem, carry on.

But if you break above this previous high, I want you to alert me and tell me. Okay, so this is where we’re getting our market structure shift happening, going back in the opposite direction. So that’s basically what the market reversal alerts indicator does. So it’s an alert indicator to tell you that a condition is being met where we may want to get into a trade.

Okay, and when that candle closes, that’s your entry. So that’s where we get in. Now, typically what you would do is you would put your stop above the high, okay? And then you would put your TP somewhere around a two to one or higher away from where your entry was, yeah? So that’s a typical trade that you would take. Now as position traders, what we’re using this indicator for is to get us into our first entry.

And what’s gonna happen is, it’s either gonna go down and it’s gonna hit our TP and we’re gonna get out and we’re going to get out and we’re going to walk away and go brilliant, one, one, or that is going to fail. And it’s going to push back in the other direction. As it does that, it will then start to draw new market structure. Okay, so for example, if this now pushes above there and the candle closes above that high there, we will get an alert.

This will get colored in. Okay, and it will look like that one there. If then price pushes back down and makes a new low, lower than this low here, it will draw a new rectangle on the last up candle before this low is drawn, okay? So that now becomes our new alert box. And we will then get alerted the next time that condition happens. So what this allows us to do as position traders is, is when we get our conditions met on a higher time frame, so on H4 when our RSI is extended above the 80 level, for example, and our trend indicator tells us that the trend is coming down, we switch down to our lower time frame and the market reversal alert indicator, the first time it says it looks like we’re starting to go short, we get into the market.

That’s our entry. So this is our signal indicator. Now you can use any signal indicator you want. There’s loads out there. In fact, most indicators you find that are available commercially are signal indicators. They’re designed to signal you to get into a trade and they’ll usually draw an arrow on the chart or they’ll ping an alert or they’ll do something, okay? So that’s basically what the market reversal alert indicator does, it tells you that price is starting to fail and starting to come back in the opposite direction.

There is also the dashboard which signals this condition and again, you can monitor all pairs and all timeframes for that condition happening. I haven’t got the dashboard here because I said I don’t personally use it anymore myself, but you can also use this as higher timeframe directional bias too. So if you wanted to, you could use the H4 timeframe. Okay, and you could say, right, we’ve had a market reversal alert, okay, happen on H4.

So I am gonna say, I’m short the market. And you could drop down to the M15 timeframe and say, right, from this point onwards, every time I got a signal to go short, I would have taken. Okay, so you could use it in that respect as well. But personally, I like to wait for the market to get extended in one direction and wait for that profit taking move to start coming into play. Okay, so that is my signal indicator.

There’s a lot to it. Okay, this indicator has developed over the years and has become incredibly powerful, right? And it forms the basis of the EA. So the EA that I use to completely automate my trading or not automate it completely, but automate as much as I can around 90% of my entries is based on this. So it takes trades based on when the alerts are signaled from my signal indicator, okay?

There’s lots and lots of settings in here. You can use it for multiple timeframe analysis and all sorts of things. There are videos on YouTube to find out more about the market reversal alerts indicator. You can Google that. If you go to my YouTube channel, there’s tons and tons of videos with strategies, but most of those revolve around stop loss strategies and they all work well.

But going back to what we looked at yesterday, stop loss strategies work, but the problem is 95% of us are not psychologically built to use stop loss strategies, okay, which is why position trading works for the vast majority of traders when they try it. But that is the signal indicator, okay? So you can go and have a look at more videos about how this works, but that is the final piece of my puzzle, all right? So the signal indicator, when that triggers on a lower timeframe is my entry, when my higher timeframe conditions are met.

And there’s lots and lots of strategies that you can use as position traders, utilizing signal and market condition indicators. Okay. So that’s that indicator. I’ve covered that. You can also get that from the MQL5 marketplace. So I’m gonna cover the other indicators next, but are there any questions on the market reversal alerts indicator before I move on to look at the last couple of indicators that I use.

Okay. So that’s the signal indicator. So we’ve covered trend indicator, direction indicator. You can also use the market reversal alerts indicator for direction on a higher timeframe. You can wait for the reversal on a higher timeframe and trade in that direction. You can use it as mean reversion indicator. We’ve using RSI as a condition indicator. We’re using trend as a condition indicator.

We’re using target indicators of ADR and one, two, three gaps. Okay, and support and resistance levels. We can also use FIBs, but as I said, you can use FIBs for targets. So when price has moved a certain amount in one direction, yeah, you can use a FIB to measure that move, and that will give you a 50% line, and it will give you a 68 and a 23. So you can use these levels as targets as well. But what you will usually find is that there will be a support and resistance, a 1, 2, 3 gap, or a propulsion candle at one of those levels anyway.

So the FIB is kind of an extra confirmation. So if you put, let’s say for example, there’s a one, two, three gap there, you draw your FIB on that move and 50% of it falls in line with that one, two, three gap. Yeah, I’ll have that please. It’s confluence, isn’t it? It’s just confluence of indicators telling you the same thing. So that’s the market reversal indicator.

I’m just wary of time because it’s 20 past three. We’ve been going for quite a while. So the other indicators you see on my chart, yesterday’s high low, this plots the previous day’s high and low as a blue line. So we can see where price traded and turned in the past. I use a market sessions indicator and this plots the Asian, the London and the New York sessions. So you can see where the majority of trading happened.

So both of these are used by me personally to spot levels the market uses to gather traders stops to power up the moves. So remember when we spoke yesterday about the types of orders in the market, or was it Monday? I can’t remember now, where we have stock orders and we have pending orders that people place into the market. And not just us, retail traders, institutions use those types of orders as well. So these are placed typically at highs and lows and these act as magnets for price to either come and sweep and reverse or return to and bounce from. They’re just support and resistance or supply and demand areas in the same way as more historical levels are as well. And these are mainly used by traders who trade intraday on lower timeframes, but they are key levels to be aware of, okay.

There are lots of these out there. So just go on to Google and find ones you like, but ideally you want to have some kind of indicator that shows you what yesterday’s high and low was and where the market sessions have begun and ended. Okay, so we’ll have a quick look at those ones that I use on the chart now. So you can see I use this one here, let me just zoom out a little bit so you can see it. It’s a little bit difficult to see because it’s a light blue color, but it’s this one here, this dotted line.

Okay, so what this is doing is it’s showing me yesterday’s high. Okay, so there’s yesterday’s high. So today it draws a dotted line for me where yesterday’s high was. Okay, this one here drawn on the chart is the previous day’s high. This one here is that one and so on and so forth. And we also have yesterday’s low, which is there. And this is yesterday’s low here. Okay, so what these are designed to do is show me levels where price has stopped. Okay, so price moved up and it stopped and then it came back down again. So what is this? When we stop, what is it? It’s level of resistance. So all this is doing is drawing in recent resistance.

So what did it do the next day? Popped up and grabbed everybody’s stop there and jumped back down the other way because that’s what the market does. So as we got to that high, it came back down and everybody went, I’ll take a short because I think market’s coming down now. They go, I’ll put my stop there in case it pops up. So what did it do? Of course it did, popped up, came back down again. So then everybody got in short again because it made a double top. Everybody that saw this move going on here got in long and they put their stocks under there. So the market came down, took out their stops, and then popped off the other way to grab these people’s stops, okay?

So the reason I use yesterday’s high and low is purely because it draws in very recent support and resistance on the chart. There’s lots of different indicators that do this, okay? Again, I’ll put a link on this video for YouTube to my template folder, if you like, which will have my ones that I use in it. But any day, any yesterday’s high, low indicator that you want to use is fine. These indicators are available in my Telegram group as well.

Okay, so that’s yesterday’s high and low. And it’s just an area that we know Price likes to move to. Today’s a prime example, okay? We got up to there yesterday and then it pushed up and then it pulled back down again. Everybody’s short on this at the minute. So there’s likely to be some people stops under there, but these will also act as pending order levels as well. Okay, so what people will also do is they will see that this level here, yesterday’s high, and this level, where was yesterday’s low?

Yesterday’s low down here, okay? These are areas that people who are breakout traders will place their pending orders at. So what the market does is it comes and triggers their pending orders, which automatically then triggers their stocks. Wherever they put their stocks, the market then comes back down and takes those out. So there’s a pending order here. So someone would have put a pending order there because it’s that low, thinking we’ll break it.

They come down and they take that out. So that’s all those are used for. They are just automatic, think of them like automatic support and resistance. I know that price is attracted to them. So if I see an entry signal happening just after that, it just gives me that extra little bit of confidence in that trade, that extra bit of confluence of multiple indicators coming together to tell me the same thing.

The sessions indicator is basically these boxes you see drawn on the chart that somebody spotted a moment ago. So this green box here, this sand coloured box here and this blue one here. So these are the sessions. This is the Asian session. This is what happens while I’m asleep. This is the London session. This is what happens from when I wake up until just after lunch. And this is the New York session, which happens from just after lunch until about dinner time. And it carries on a little bit beyond that. Okay, so the reason I have these on my chart is so that I can see where price has traded in each individual session.

So you will find a lot of the time, if you have three strong sessions in a row where price has pushed and pushed and pushed, that’s a good indicator that all of these guys have got to do what? Sell. If they push the next day, that happens. Okay, so all it’s doing is it’s showing me when the price action was happening. When was everybody dumping their money into the market?

Okay, so the London session today for the US dollar yen was way bigger than the Asian session. We’ll see what happens in New York, okay? We had a big London session and a big New York session, but price didn’t really go anywhere, did it? Okay, so it’s just breaking the day down into segments. Another reason people use these indicators is also to identify where the Asian session was. And this is what these dotted lines are. So this particular one that I use draws dotted lines at the Asian session, high, low and midline, okay?

And what you will often find is in the day, price will push outside of the Asian session and then come back into it, okay? So these are zones where you can take trades from. I personally don’t do this. It’s a stop loss strategy a lot of people use. But for me, I just like to see what’s been happening. So I can instantly open my charts and go, we had a big New York. Okay. So if we have a big Asian and London, it’s a good chance we’re going to get exhausted. Sometimes it works, sometimes it doesn’t. But it just shows me where the price action’s been happening. And again, you can get lots and lots and lots of those indicators from Google. There’s loads of free ones out there. But if you want those ones, they’ll be linked in the video on YouTube and they’re available in the Telegram group. You can get to the Telegram group from the website, marketstructuretrader.com.

Okay, end of part three. Tomorrow, we’re going to cover how to position trade, finally. Okay, so tomorrow is the big one. Big one, where you turn it all around. We’re going to figure out how we put all this together and how we position trade. And the entire theory behind position trading and how to do it. And then on Friday, we’re going to cover the strategies that are used to get into the market. We’ve covered a lot of them in very brief detail today and over the previous days as well. But on Friday I’m going to go through every one step by step, breakdown of exactly what I’m looking for, what indicators I’m using, how I’m trading them, what alerts I’m acting to and exactly the process that I go through. But for the moment, any questions on what we’ve covered today or so far during these three days. No questions, really. This is amazing. Everybody is either hyper intelligent and it’s all sinking in, or I’ve confused the hell out of everybody. And it’ll all become clear tomorrow. Don’t worry. Okay. So it doesn’t look like there’s any questions.

Everybody’s just saying thanks and good night, which is fantastic. But if you do have any questions or anything crops up while you’re rewatching this, I will try and get this mastered and put up for you today. If you do have any questions that come up and you want to ask them, either ask me in the Telegram group or save them up for tomorrow. And we’ll do the same thing tomorrow. We’ll do a quick Q&A session at the beginning of tomorrow’s session. And we will obviously have a Q&A session at the end tomorrow, okay?

Because obviously there will be things that will probably come up. But this is what we’re covering tomorrow, day four. So we’re gonna start off with a little bit of a recap of everything that we’ve covered so far. We’re gonna look at why you’re not successful yet. We’re gonna summarize why you’re not successful at the moment. You might be successful, don’t get me wrong, okay? Some people may well be successful stop-loss traders.

I was a successful stop-loss trader for years. I just found a better way and I prefer this way of trading. But if you’re not successful, we’re gonna look at why you’re not successful and just recap it, hammer it home, because tomorrow we’re gonna show you how to become a position trader, how to take multiple trades, how to space them out, how everything works, how to scale in and scale out using a flexible stop loss.

We’re gonna look at how to manage your drawdown control, how to keep on top of it. We’re gonna look at how to stop yourself getting overexposed, currency exposure, and we’re gonna look at risk in detail and how to manage risk and how to look at risk and draw down as a positive. Everybody looks at risk and draw down as a negative thing. Oh, I’ve got into draw down by 3%. That just means you’ve got risk on the table.

That’s a good thing. Okay, so we’re gonna look at all of that. Tomorrow, a lot of things are gonna fall into place and suddenly make sense. So, and as I say, I’ll give you a sneak peek of the first slide tomorrow. This is the big one. This is where you turn it around hopefully okay so that’s what we’re going to cover tomorrow