Categorical Trading

this is the strategy I invented called categorical trading and because this is sped up these could be 5 minute or even 30 minute candles a. 1% move or a 2% move try to guess the time frames of these charts because whether you're trading on a 20 second 5 minute weekly or 2minute chart we can use categories to determine logical high probability wins and losses depending on whether price action is consolidating or directional it might be the simplest way to learn price action and to find what style of trading you're best at and I created it through pure experimentation with no outside influence at the time of this video I'm funded by trade day Who currently has the best evaluations in the Futures Trading industry the fundamentals of categorical trading is that all price action exists on a spectrum of extremes somewhere between consolidation and Direction everything else exists along this line and every condition has clearly defined high probability wins and losses in consolidation price is more likely to stay where it has already been in Direction price is more likely to go to a new area it sounds simple because it is but there's a reason this video is so long and remember that all strategies except for algorithms are just perspectives to learn price action through how I personally Implement everything is later before I show you my actual trades in these various conditions I'm going to keep it as simple as possible with just a drawing the high probability win is to have profit targets inside and stop losses outside every trade should be fundamentally based on expecting what's happening to continue the extreme high probability loss is to go long at the top and short at the bottom so obviously the reverse of that is shorting at the top and going long at the bottom the only reason you should be wrong on a trade is if conditions change okay let's see this in action during my live stream now notice that I'm actually following the candles for the most part and I'll get into the various risk reward ratios of how to do this later I'm not timing breaks above or below where price has been I'm targeting the same areas I'm not going long at the top and short at the bottom I'm also not asking much of price action there is no structural change required to make any of these traits work because I'm trading the action within the the action this video is difficult to make because every time I say something I want to talk about 50 other reasons for why I'm saying the things I'm saying but just trust me every topic will be covered when price action is directional we take the opposite approach in these conditions price is more likely to go to a new area than it is to stay where it has already been Direction means flipping your entries to Target new areas and now having the stop loss inside the high probability loss is going against the direction for a pullback we'll cover this later but you might find yourself being naturally inclined to just one of the price action Types on screen you are now looking at a very simple directional trade and this is just an example to illustrate the concepts I'm just following Direction but here's the thing price action doesn't stay as consolidation or Direction forever so this is the toughest part of the approach if Direction turns to consolidation and you're still targeting new areas with stop losses inside of where price has been you're going to lose you would be trading high probability losses no trade will work every time but this approach gives an edge if you adapt correctly with that being said and within reason the only reason and a trade shouldn't work as if Direction turns to consolidation or vice versa that's out of your control but what is in your control is adapting to these changes to make sure you're taking the right trades regardless of what time frame you're trading you will lose all your money if you're doing mean reversion in direction or targeting new areas in consolidation it's easy to forget to constantly be aware of whether price is consolidating or directional but I'll get into the reminders that I use to combat this later as well as how to find which conditions you're best at you don't need to adapt and trade everything you can just wait until you get the conditions you thrive in but more on that later see that chart on the top right pretty good mix between consolidation and direction and you could maybe call it consolid Direction which was one of the first ideas I had for naming the strategy but I quickly abandoned it after realizing it sounded too much like solid erection so where should he actually put the profit Target this is incredibly important because the foundation of this approach is not about predicting anything major you're not trying to figure out where price will be way into the future you're not doing analysis on 70 different time frames with 400 indicators the strategy is to ask the least of price action possible taking the most reasonable and simple possible trade you were using the categories of price action as your Edge to make it so that a trade is more likely to hit the profit Target before the stop loss over a large series of Trades and remember that everything applies regardless of the time frame because trades are based on the current size of the candles so all you do is adjust the Target and stop- loss to match those conditions let's say these are 30 minute candles and each one is 25 points let's go with a 10-point Target and stock loss which means you're targeting just under half the size of the recent candles for a perspective that rectangle I put in the middle is 10 points from top to bottom this visually represents the idea of not asking much out of price action if your profit Target is bigger you need a more aggressive entry and I prefer to not have it be too big so that I can follow consolidation when it looks like it's turning around rather than trying to time mean reversion at the most extreme points by that I just mean not trying to call the tops and bottoms so my stop loss and profit targets are small enough to just play around in the middle however going against the direction inside this consolidation once you start getting to the extremes is an equally valid approach there is no rule like doing a 50% Target based on the size of the previous candle it all just comes down to personal preference and I prefer to lean more on the side of the brackets being smaller and by brackets I just mean the stop loss and profit Target okay now here's the beautiful part about this applying to all time frames nothing fundamentally changes you just change the bracket size let's say these are now 30C candles and 9 points each The Profit Target and stop loss would look exactly the same as before except maybe now they're fourpoint targets and stops the time frame does not matter because we're trading price action and adjusting the Stop and profit Target to fit the structure of the recent candles it's consolidation so we expect price to stay where it has been and you don't try and Target the extremes of each side this is because consolidation is never this perfect I'm just using a drawing to illustrate the basics you can see that in action here but of course it's not uh it's not quite as uniform and probably the best example is this trade here just targeting Four Points going long here with a profit Target there where to put the profit Target in direction is where it gets more tricky it's incredibly obvious in consolidation because you are literally confined to a box direction is where it gets a bit mysterious but at the same time no it's not I drew a blue entry going long green is the profit Target and red is the stop loss just to cover the basics The Profit Target is about half the size of the previous candles so it's still following the same idea as the consolidation trades and again these could be 5 point or 20 Point candles but the trade brackets are going to look exactly the same since we adjust them to fit the structure I'll talk more about Direction and my personal preferences later now in order to assist with all of this I use ATR but not in the traditional way it's used if you add ATR the default period setting is 14 and if you want to see the exact size of each candle from top to bottom set the period to one this is a helpful tool to glance at to see what size the candles are which helps in knowing what your Target and stoploss should be eventually you're going to start memorizing whether vol volatility is normal or higher or lower than usual ATR is just a tool for quantifying volatility and volatility is different throughout the day it's high as that market open slows down and then picks back up a little before the market closes in regular trading hours so each period of time will have its own typical range of volatility which you can read quickly through ATR now the following is exactly how I use it I like a very specific range of candle size for my trades in the morning for now I'll use a 20 second chart if volatility is high a 30 second chart if it's average or a 40-second chart if it's low but why do I do this because I'm artificially changing volatility and the size of each candle until I get the exact size of candles that I want if you really think about it nothing is actually changing but you're filtering out or adding more information on the chart depending if you go higher or lower which makes the candles bigger or smaller since you're lying to yourself if you think you can accurately distinguish between 20 seconds versus 40 seconds or 5 and 10 minutes by only looking at the candles all we did by changing the time frame was 4 forcing the chart to appear with the volatility conditions that we like for trading everything I'm describing here is about adapting as well as controlling the variables you can in order to play to your strengths and specific approach ATR quantifies volatility but we can also make slight adjustments to the time frame of the chart to artificially increase or decrease that volatility this is all just part of being better at adapting the a part of cat trading categorical trading I don't know on the screen you can see a visual representation of how stupid the retail obsession is with finding the perfect time frame time frames are just about how much information you want to see and it changes nothing about how price moved which is particularly obvious if you're watching in real time now here's an amazing cheat code that I thought of just a couple weeks before making this and every time I make one of these breakthroughs I'm always in disbelief that I didn't think of it earlier so I kept scrolling through some charts and zooming in until atrs range down there was exactly where my preferred ATR conditions are about 6 to 14 points for each candle and then I adjusted it just a little bit in order to turn off ninja Trader's Auto adjusting feature by holding the mouse on the axis thingy on the right underneath that F letter this makes it so much easier to see exactly what volatility is this fixes the issue of having some outlier candle completely skew atrs range and make it difficult to see what's actually going on so yeah scrunch that bit up to fit what you like and then you can keep adjusting the time frame when needed to get ATR higher or lower into the conditions you like I'll swap between time frames a few times during my 17-minute trading session and sometimes I won't change anything at all you really have to pay attention to that or else you'll take terrible trades but I'll cover how to make your best reminder document later and if you're wondering why I don't want to see outlier candles that won't show up below or above the ATR range I set I think you'll understand after reading the definition of outlier here's another neat little trick that doesn't necessarily show anything that wasn't there already but it helps reinforce whether price is consolidating or making directional moves these horizontal lines seen here on ninja Trader are just for context and perspective not something I added but I like to use them to determine the bracket size I'll go for your trading platform should have some version of this maybe if candles are going through these Sixpoint intervals pretty easily maybe I'll Target Five Points if they're only going through a little or not at all I'll probably Target Four Points they'll change depending on how zoomed in or out on the chart you are because they'll automatically adjust and if the intervals are 15 points then obviously we've got some serious Direction and SL or high volatility going on the price intervals are a good way of seeing how much you should ask out of a trade ATR is telling you the exact toal size of each candle but that's just a number and using the price intervals with that helps because you are seeing a visual representation of exactly how much your trades are asking out of the candles again just a helpful thing I like to look at and it makes it easy to choose the right brackets it just reinforces what ATR is telling you in the future when you're ready for a prop firm which is when you pay to take a trading test to get funded and trade on a company's account I'm personally funded by an affiliated with trade day firms are an excellent transition from a SIM account to eventually trading your own money and it's a cheap way to desensitize yourself to trading meaningful size if you use my code I in trading 20 for 20% off the lifetime of your evaluation that supports the work I do at no extra cost to you so thank you there's a link in the pinned comment and I would only ever support a product that I personally use ideally the perfect Trader would have a different stop-loss and target for every trade because they would be making constant adjustments to match which Target stop-loss and risk reward ratio makes the most sense in each individual moment to match the unique conditions for the direction to consolidation Spectrum on which prices located sounds complicated yeah same so I don't do that except I actually did for a while and I only now know that I'm 100% incapable of consistently doing well with that level of adaptation it took a long time for me to finally discover the best risk reward ratio for me and that might change in the future but I'm going to explain why this is an amazing way to initially start doing this strategy or really anything that's just pure price action you will probably end up finding something better for you personally as you progress but starting with a on toone risk reward ratio is something that I've wanted to make a video on for a while this just means the stop loss and profit Target are the same amount of points or percentage away from the entry you were doing a coin flip on if the trade Works meaning there's a 50% chance it'll get stopped out or hit your profit and that means you only need a small Edge to flip that coin in your favor obviously easier said than done but hold on if you want to hear my ideas about how it's possible to achieve consistent unprofitability you might get some great ideas for your own trading if you click the video in the top right because regardless of if you're consistently profitable or consistently unprofitable before fees you are managing to get non-random results from the markets and that's impressive when you pair a coin flip with this system that categorizes price action into objective conditions that can be logically analyzed for high probability wins and losses bang that's the edge obviously remembering everything being disciplined not hesitating switching trades when necessary to adapt avoiding fomo following your rules and every other psychological issue makes it so that knowing what to do doesn't mean you can do it immediately but we'll we'll do psychology later I recommend just starting with a 1:1 ratio because remember risk reward ratios on their own mean nothing until an edge is introduced to make it non-random go to my page in the pinned comment to see every resource that helps with this approach including a video dedicated to this topic and that brings us to maybe the most important part of all of this almost none of you are going to trade like me you're going to use different risk reward ratios prefer different types of price action do well in some areas I sit out do poorly in conditions I do well in and more variations of every single other possible combination of the aspects of this system fundamentally we are just categorizing price action but the way you approach the actual trading is going to vary if you do poorly in directional action for a week and then write a note that says avoid Direction you could ruin your entire chance at ever succeeding without getting boring you cannot make important and concrete conclusions about what you'll do without a representative amount of data now one week is not enough to find your best max daily loss whether you adapt to all price action or wait for specific specific conditions or to set various rules about Target size stop-loss size or your Preferred Risk reward ratio you will never be able to make objectively smart and helpful decisions unless you're basing those decisions on representative data so how long exactly should this experimental phase be and how long is it going to take for you to perfect your own unique approach to the same fundamental concepts that I'm using well it took me about a year to finally know all of the variables I use and guess what maybe in the future something will be different maybe not you definitely don't need a year so here's part of why it probably took me longer than it should have and I bet you will recognize some of my mistakes in your own trading I mean also the part that I had to make all of this but still it shouldn't have taken that much time here's be quiet hold let's continue we want success we want results right now but nobody is consistently profitable longterm in a short amount of time here's another thing for months my max daily loss was too high I knew it was too high and I left it where it was partially due to outside influence which was done by me but also because I just ignored the data since it was suggesting something I didn't want to do every single aspect of how I apply categorical trading is based on objective data and I made a mistake by ignoring the data and having my max daily loss too high for months right now I'm taking less trades in a week than I used to do in a single day and my results have never been better so anyways don't put yourself in a box too early because how else are you supposed to know what you're good and bad at if you don't take enough trades and give yourself the chance to experiment eventually you will have to decide whether you constantly adapt and really focus on one condition change or be like me and just patiently wait until you get the conditions with your Edge you won't even experience fomo while candles go on without you because you'll know that your trading performance longterm is terrible in those conditions and why would you feel fomo if you know you'd be losing money but again you're going to absolutely ruin your chances of success if you set hard rules for yourself too early on that same topic of adapting to everything or waiting keep in mind that you don't have to trade every day or every moment that is a completely irrational decision we make either because trading is fun because you just want to make as much money as possible and so you force trades or a plethora of other reasons that end up doing more harm than good but again before you actually decide which conditions to sit out and to push it in you need to trade in all conditions to determine what you're good and bad at if you trade for a while look back on everything and realize you'd be consistently profitable if you avoided Direction which is what I realized then obviously avoid Direction just make sure all decisions are based on representative data AKA lots of trading sessions overtime overtime so what time should you trade I know most of you want a simple answer but I'm not here to sell you a course with the illusion that you can shortway your cut that you can shortcut your way to profitability personally I trade from 9:33 to 950 a.m. EST at the market open that might change but that's what I'm doing right now oh why so specific I man what if there's a good setup at 963 o00 because I started by trading the entire day then started at 10 then tried the open then went back to 10 traded long short and medium sessions and then I went back to the open and that's that's where I stayed because the data said to I tested everything different charts markets time frames time of day session length risk reward ratios and every other possible variable I've discussed I Implement these Concepts through scalping and if you lived in my head and understood what life is like to me you would too the intensity and pace is where I thrive in college I could get more work done in 2 hours than I could in 20 hours if I waited until the last possible moment of an assignment due date to start the pressure and intensity allows me to concentrate to the ability of probably a normal person you might be best at trading after the first hour of Market open right up until close going the whole day or maybe you like the lunch hours because volatility dies down or maybe pre-market maybe something else maybe you like the so-called chaos of when I trade maybe you like when it slows down so you can be more analytical and patient everyone is different you are bringing a unique biological predisposition to trading and what works for someone else might not work for you you're going to hear robots in the trading world without a single ounce of self-awareness or ability for introspection tell you that you're trading wrong or that you should be doing something different but remember that these people forgot to unlock the ability at 3 years old to understand that other people experience the world differently from themselves so off with your unsolicited advice and keep on taking trades because a prolapsed turkey a Candlestick pattern showed up on the 14-minute time frame showing a Divergence from the chicken wing Market in your 17 trade flawed discretionary back test is telling you to go long anyone who is truly trading this strategy will be following the same fundamentals of categorization where it differs is how you choose to implement everything and that's good don't force yourself to trade exactly the same as someone else unless they're your biological twin or clone I'm terrible with this in Direction and on higher time frames in the same way that you might struggle in areas I excel we are all using the same tool but everyone will have variations in the way that tool is used same Foundation slightly different applications let me ask you something if price action keeps switching from direction to consolidation and you're having a hard time reading it what type of trade should you take none you're guessing how are you supposed to take a trade based on categorizing price action if that category keeps changing too fast and you know I think this is um this is maybe one of the parts that people struggle with the most I'm just yapping Off Script but I got to I got to say this what percentage of people are even willing to go an entire day without taking a trade all right we we force things we want to make money you will know over time whether you're just guessing or if you're actually following the price action category I know because I am you I I still do it every once in a while all right okay back to the script if action is too chaotic you should not be taking a trade because categorical trading has no chance to work if consolidation is turning to Direction and vice versa too quickly again that's easier said than done and it's hard not to take a trade no strategy is going to work in every condition and regardless of your approach forcing trades every day is going to destroy you which I say from personal experience and probably taking too long to realize that and truly implement it so keeping it simple consolidation trades should only fail if it turns to Direction and directional trades should only fail if price pulls back and slor turns to consolidation which it would have to pull back to do obviously nothing will always work so here's the important thing to always remember regardless of your strategy was it a good trade that didn't work a good trade that worked a bad trade that didn't work or a bad trade that got lucky and worked this approach is not just guessing and hoping it works when you look back on your trades you should immediately know if the entry was good if the Target and stop size were good if it was the right trade to take based on the action and more here's something I bet you'll relate to how many times would you have done well if instead of trying to predict when something changed you just followed it I bet many of you are like me and are naturally inclined to want to time reversals time the breaking of consolidation and time pullbacks this is part of how we can achieve consistent unprofitability the desire to time change instead of trading according to the current price action conditions on my website for this thre on my website page for the strategy in the pinned comment I will include videos that are dedicated to some of the topics discussed here I'm man trading. org anyways if price action can't be categorized because it's too chaotic this approach won't have an edge and you should join me as I stare at the charts with no desire to take a trade because I know I'd be flipping a coin with no Edge on my side or maybe I am taking a trade and then I'll I'll cry later come cry with me since we've already covered that this is just about categorizing price action it's applicable to any Market I like Futures I think they're the best to trade and since I'm personally scalping I trade the NASDAQ but for higher time frame applications of this the S&P 500 is probably a better option for its liquidity and potential to largely scale the size that you're trading but as with everything search for what you like and do some experimentation if you're looking for a full introduction to everything on Futures I made one that's less than 10 minutes long and I'll link it in the top right if I haven't hit the maximum card limit yet it honestly blows my mind at the amount of people who want to succeed at trading yet won't put in just a tiny amount of effort into the most helpful tool that exists to assist with the learning process which is journaling and honestly just recording your trading sessions I journaled like a maniac in the beginning just because I was trying to create all of this but now I hardly do it at all unless I find some new underlying issue or annoying mistake so you know every couple of weeks let's say you traded poorly for a whole week and you're going I don't know what I did wrong well guess what if you took 10 minutes out of your day to organize and make sure you were screen recording your whole trading session it would then take 20 minutes to find out exactly what you were doing wrong by analyzing the trades in your recordings it is an astonishingly small amount of effort with the greatest return possible it's like a 1 to million risk reward ratio with a 99% win rate and if you still don't know what went wrong after analyzing a set of sessions that tells me that the approach isn't fully understood I know I'm unloading a ton of information on you but every trade is either good or bad and that has nothing to do with whether it worked or not for this approach you either weren't trading direction or consolidation correctly or you were taking the right trades that happen to get stopped out due to conditions changing in that case Cas they weren't bad trades they were just part of a normal distribution of losses and if that's not the case then you were probably trading when you shouldn't have been in the recordings you'll also see if you were forcing trades trading in conditions you should have sat out and so much more the only thing that can show you whether you were following your Edge or not is through recording so you can watch everything back looking at each individual trade and overall trading session from that day is where the real learning happens and once you really understand this approach you should be taking the same trades in your head when watching back the recording if you're watching the candles in a recording and you go long but in the recording you go short that disconnect indicates an issue maybe you were taking a trade in chaotic price action that couldn't be categorized or maybe you took the incorrect trade or maybe your entry was bad I don't know this is something I realized when watching back my own recordings months ago I wasn't taking the same trades in my head but now I'm almost always mentally taking the same trade in price action before I see the trade I actually took in the recording of course that's only if I'm following my rules and not just taking a complete guess due to a lack of discipline to wait for my ideal conditions additionally this is a good time to analyze the quality of the entry did you wait a little too long did you get in too early or was the timing great doing this is how I made slight changes to how I implemented all of these Concepts and variables for example I don't take trades when price action is at the low or high of day that seems like a weird rule it's still price action sure but guess what I consistently lose money while doing that so now it's part of my reminder document and I avoid it entirely and once again and all the things I'm saying might be slightly different in the future in fact I can almost guarantee it journaling is the entire reason behind the creation of this system but I explained exactly how I did that in the very long trading guide video in the top right in the journaling section that video is a whole whole Guide to Everything on trading how to learn not how to do it how to learn it which is very different you will have to do that if you want to make your own strategy but if you're following mine then that means a lot less work for you the most recent example I can give of the benefits of journaling and recording is is when I was analyzing some recordings and realized I wasn't trading with the correct bracket size I was asking too much out of price action and I never would have realized that if I didn't have something to look back on and watch play out in real time this is what led to the whole section about adjusting the time frame of the chart to artificially create the volatility conditions you like more on journaling and the reminder document I use that keeps me focused on everything later just remember if you really want to actually solve problems and make real progress record your sessions I use OBS it's free why a 5 minute tutorial on YouTube to set it all up save the recordings by date and how much you made or lost that way you can go through everything later particularly you can go through the worst performances and I almost guarantee that you'll find a common denominator linking them all together that's how you solve your problems and make progress make adjustments to the variables and determine the best max daily loss for yourself that amount is going to be different for everyone think of it as the point of no return that brings us to a very important lesson that you need to remember just because you know what you're doing wrong and just because because you know what you're supposed to do it doesn't mean you'll do it we're humans right we're irrational and trading is unlike anything else in the world I'm getting much better at this but I'll still make mistakes right after reading a reminder that specifically says not to do whatever I did over time we get better at this especially after we've proved that not following reminders makes us lose money in the long run but remember that figuring out a problem and knowing what you're supposed to do is only half the battle it's much easier to follow your rules once You' spent enough time Trading to realize how good at trading you'd be if you stayed disciplined the desire to make money and not lose it then becomes the main motivation to follow the rules that you have a hard time not breaking and slowly over time emotionally based issues are solved with logic why would I feel fomo in this uptrend I know I'd be losing money see what I'm saying anyways nobody's perfect especially not me people want a shortcut and for me to say something that will fundamentally change someone that's not how it works put in the work in the hours and you'll eventually defeat those goblins or at least you know rain them in a little bit keep them lock them lock them up uh put a leash on them you know they're still there they're always going to be there but you'll get better at it better again you figure out a problem through journaling and recording you make a reminder to address it and then comes the difficult part of actually following those reminders on the day I'm adding this particular note which is December 5th I broke my rules about stopping trading at 942 when there are 9:45 news announcements which I check every day on forexfactory.com my rule is to stop there but regardless of the varying contributors as to why I did this I broke my rules and took two losing trades to hit my max daily loss cool just because you know what you're supposed to do it doesn't always mean you'll do it that's what I mean when I talk about the disconnect between awareness of a problem and actually having the discipline to always follow your rules and guess what here I am 2 days later after realizing that making this video has completely ruined my ability to focus only on the very specific price action that I wait for and then trade I have reverted to my old mistake AK of trying to trade every category because explaining all of the ways this system can be implemented has made me lose focus on the way that I personally use it this approach has a ton of ways that a person can personalize it and I only use a tiny portion of its potential because that's what works for me this has been an expensive lesson to learn and I basically wiped out all my progress you know when I was talking earlier about 2 weeks all all green days yeah that was fun so now I'm taking a break from Trading until this is done oh well everything is a Learning lesson some just hurt more than others shout out to those who know the guy who who is the who the guy is in this picture wrong answers only wealthy Kevin all right so like what do I do first remember consolidation or Direction have the rules memorized look at the candle size base targets and stop losses on what's reasonable from the recent candles without asking too much out of price and take some one toone risk-reward ratio trades we've covered everything about the strategy and here's something really important that I only recently realized a lot of people mistake this for just being complete guessing obviously every strategy involves predicting but there's also a very clearly defined approach to take depending on the price action type type and we covered when the edge isn't going to work which is very important you should be focusing almost everything on whether it's consolidating or directional test it out for a couple weeks see if you're naturally inclined towards it maybe you love it maybe you hate it remember everyone's different so you know do whatever take lots of Trades and record everything if you don't record it so you can look back later and determine if the trades were following the system you're depriving yourself with the most beneficial learning tool and you're going to make progress at a faction at a fraction of your potential at a fraction of your potential and I'll have a reminder document for you later that you can copy an approach should be very clearly defined and mine is but there's a lot to remember so that document will help okay so how do you know when you shouldn't trade this is the last section before I explain everything I possibly can about how I personally Implement all of what I've talked about over time once you truly know your strength and weaknesses you will intuitively know when you shouldn't be taking a trade you're going to feel it but to start and this is only after you've determined all of this information through representative amounts of data you should have a reminder document with pictures of the price action you're bad at this is so simple but it removes all of the ambiguity on whether price action is good or bad for you if the current action looks like the pictures you have up then sit it out over time after enough repetition of watching price action and checking that reminder you will just know whether or not your approach has a chance to work as it was for me this will be an exciting realization for you you'll calmly do nothing because you know you'd be losing money long term and there will be no ambiguity on whether you should trade or not of course as I said earlier uh me writing this in the future once I started making this video and getting deep into all the aspects that I don't use anymore that whole thing got completely removed from my brain and now I'm taking a break from Trading until this is all finished so I can go back to trading the only parts that I'm good at but I had to cover everything in this video to show you all the possible ways that it could be implemented which was necessary to do because we're not the same person and could have polar opposite performances which means I got to show you the the whole the whole pie even though I only use a little slice but explaining how to use the whole pie made me start using slices I don't like Beyond identifying types of price action to avoid which is direction for me as you see in this picture you might find yourself noticing specific areas within price action that you lose your Edge or just you know perform poorly in I have poor trading performance at the high or low of day and at pivots so guess what I don't take trades there anymore where whether it's psychological or something else the result in the data shows me being very bad so I don't care about why that is a thing exists I don't have to fix every issue to trade every possible second I just need to be good at what I'm naturally inclined towards and to have the discipline to do nothing in price action conditions and specific areas where I lose my Edge I wanted to bring this up as an example of something that you might want to keep in mind within the overall conditions you like it's important for you to keep in mind other smaller additional factors I also avoid taking a trade after a High volatility candle because I find that for me it's just a 50/50 guess on what happens next but in retrospect after writing that it makes a lot of sense because a huge candle is a break of the recent structure and is therefore the start of a new price action category or lack thereof we don't know what category it is until we get a couple candles SO trading at that moment is a 50/50 guess on whether you expect it to continue or pull back okay like yeah obviously but there's no Edge on your side to flip that coin in your favor all right maybe I chose a bad picture for this but if I was following my rules then I shouldn't have taken a single trade on this day does not taking a trade for a couple days suck maybe a little but not really because I know I'd lose money in this and I don't like losing money the reminder document I have up on my left monitor is different than it was 3 weeks ago 1 month ago and blah blah blah reminders are little simplifications of more complex lessons which I'm elaborating on for the first time in this video reminders are personalized the issues you struggle with are different from mine maybe you hesitate too much maybe you overtrade whatever this document is going to change a lot over time as you solve old problems and encounter new ones to start your reminders should be how to trade Direction vers consolidation because you need to really internalize the system I've explained I made I made one of those for you though so it's coming up later I made you a document I love you now here's another amazing tool that took me way too long to get an idea for I found a YouTube video that's completely silent except every 3 minutes a bell goes off when this happens I analyze all of my reminders think about each reminders think about each one a little bit to make sure I'm not just an autopilot and then I look right back at the charts with some reinvigorated focus and attention on the right aspects if my mind is blank I'm just going to take random trades and not follow the system so this is very important for me and it probably will be for you too it will take you some time to create the reminders that address your unique challenges so be patient after you've made some progress and know what you're good and bad at I recently added a picture to my reminders of my best price action type and it's another stupidly obvious thing I should have have done earlier if price action doesn't look like this I'm not trading unless I break a rule of course I also used to have a picture of price action to avoid but now I just know when not to take a trade so I don't have that up anymore that's an example of how your reminders will evolve also just kidding me from the future here guess who will be adding back pictures of action I avoid because my brain can't separate my Approach from the possibilities of all approaches me me it's me if you didn't guess it's me but at the time of writing that I really did that that issue uh well at least temporarily solved until I started working on this video and everything just melted into one thing in my head mistake reversion is the name I've given to the problem of overcoming an issue only to end up doing it again at some point in the future this is where journaling and keeping your old reminder documents comes into play because if you're currently experiencing an issue you might end up finding that you were doing the same thing two months ago I myself did this I myself did this in regards to mov moving profit targets and stop- losses and going for trades that were too big my eyes burn so much right now this is taking forever to record my throat hurts I kept reverting to making the same mistakes which led me to making a separate document specifically for those problems that kept coming up for me this defeated that vicious cycle now my Approach is very rigid without any freedom I do not move profit targets further go for bigger trades try to time when the low or high of day will break or anything else of course you're going to constantly find new mistakes that you repeat just like I do I know the system the hard part is all the little stuff that your brain does to make trading difficult oh God here's a neat little trick that I now use to take advantage of me being inherently bad at trading and internally controlled by a goblin that wants to gamble reverse it bang easy I want to go long at the top of consolidation because timing that break right makes my brain light up like a gambler at a slot machine so I say haha nice try you I will now short the high probability losses based on the different conditions are exactly what my brain ow always wants to do and so I realized hey let's use that to my advantage I'm incredible at being consistently unprofitable so now I focus on what the high probability loss would be based on the conditions and I reverse that for me it's easier to focus on what wouldn't work as opposed to focusing on what would work would work I bet a lot of you were like me in that sense although I bet you didn't buy scratch tickets instead of food when you were 18 for many of you who are like me focusing on what not to do and taking advantage of your brain's idiocy can be a major strength you're still focusing on what to do and how to do it just from a different perspective hopefully that helps the tiny amount of you who are actually still watching this video is a big shortcut on everything I had to find for myself so basically one year of me trading every day but there's still a huge amount of work on your end all the work is about how you're personally going to implement everything my eyes they burn so bad I've already talked about this a lot so I'm not going to linger here but not trading is just as important as trading how many of you would be consistently profitable if you eliminated forcing trades and conditions you don't do well in that was quite a shocker when I realized that myself you don't need to trade every day we've been wired to think that you're supposed to work every day cuz you know that's what normal normal people doing normal jobs do but this isn't a normal job if you don't take a single trade in a session you know you do poorly in you should be proud of yourself come here don't touch me discipline is something you should celebrate more than a green day or maybe the same amount I just I don't know because it doesn't matter how well you do on Monday if you then Force trades and bad action for the rest of the week and lose everything know that when you aren't trading in conditions you've identified as having no Edge for you personally you saving yourself from losing lots of money this is a recent problem I was facing right before making this video because I feel a lot of pressure on my funded account right after making that breakthrough with the time frames volatility bracket adjustments and overall just adapting better in the moment I started doing very well and believe I'm on two weeks without a red day hey it's me from the future ruined all that progress after making this video threw me out of the zone of trading really good and going back to random guesses and conditions I avoid not going to trade until I finish this video anyways I started getting a bit anxious about how I'd perform in the mornings as I laid in bed trying to fall asleep thankfully I almost immediately realized why it literally means nothing one day one trading session that means nothing at all the only thing that matters is how you do over a couple of weeks a month even longer that defeated that part of the pressure for me we all want to do well and it's difficult to not get caught up in the moment but if how you trade today doesn't matter in a year then does it really matter but don't don't think about that too much cuz nothing really matters the answer is no it doesn't what matters is how you do over the long run but again analyzing each individual session's recording after you're done will'll tell you if you're taking the right trades or not because this approach is very clearly defined and a lack of understanding about whether it was a good trade or not indicates a lack of understanding about the approach maybe that's partially my fault in not explaining everything correctly but I do believe that I couldn't be more clear on exactly what I'm looking at so anyways losing a win streak doesn't matter the individual session doesn't matter pressure is a madeup thing by your brain and based on an irrational fixation on short-term results and emotions all right me time reminders change as you solve old problems encounter new ones and then revert to making the same old mistakes every once in a while just to really remind yourself why they exist in the first place so moving from top to bottom I start every trading session by clicking on that video that plays a bell every 3 minutes for me to check my reminders again and I check to see if there's any economic news releases during the session forexfactory.com I do that so I'm not in a trade at the time of a release this document also shows you recently I started adjusting the time frame in order to get the conditions I like since it's still a reminder rather than just a habit I'll always do with no need to be reminded about there's only a few main important focuses which is about ATR price structure and making sure I'm using a bracket size that doesn't require any change from Price action to work with follow Direction and do mean reversion and consolidation and having that note about the high probability loss was explained earlier in the video also what the heck I just adjusted this document to ignore Direction I don't care what I'm supposed to do in Direction cuz guess what I'm not going to do it I wait for consolidation or do nothing hypothetically also it's easier for me to focus on what not to do because it keeps the goblins from taking over in my brain and just going for low probability trades as explained earlier reminders are little simplifications of more comp one trick to make sure you're actually paying attention to these reminders is to think deeply about each one before moving on to the next adding more information and reflection in your head in response to each one that ensures you're actually thinking about it while devoting your attention energy and focus okay oh my God we covered an insane amount of information and there's maybe seven people in the world with freak memories that can actually retain everything to the true extent of each Topic's complexity so unless all of you are one of those seven people you might need to rewatch certain sections here's a little cheat sheet or even a well not even it is here's a little cheat sheet SL reminder document SL starter for your own reminder document about this strategy I made this in like 7 minutes so any updates will be on my website where you you can copy it into your own document and make adjustments it's on my website go go there it's free it's all free it's a good starter that covers basically everything websites in the pin comment I would go through everything here right now but I honestly just never want to have to look at this PowerPoint or script ever again remember to check my website in the pinned comment which has resources for everything but particularly more information about this strategy I live stream every morning during my trading session at the market open on my second Channel IM man trading live thank you to my patrons for helping support my mission and the work I do here on YouTube I appreciate you so much

this is the strategy I invented called categorical trading and because this is sped up these could be 5 minute or even 30 minute candles a. 1% move or a 2% move try to guess the time frames of these charts because whether you&#39;re trading on a 20 second 5 minute weekly or 2minute chart we can use categories to determine logical high probability wins and losses depending on whether price action is consolidating or directional it might be the simplest way to learn price action and to find what style of trading you&#39;re best at and I created it through pure experimentation with no outside influence at the time of this video I&#39;m funded by trade day Who currently has the best evaluations in the Futures Trading industry the fundamentals of categorical trading is that all price action exists on a spectrum of extremes somewhere between consolidation and Direction everything else exists along this line and every condition has clearly defined high probability wins and losses in consolidation price is more likely to stay where it has already been in Direction price is more likely to go to a new area it sounds simple because it is but there&#39;s a reason this video is so long and remember that all strategies except for algorithms are just perspectives to learn price action through how I personally Implement everything is later before I show you my actual trades in these various conditions I&#39;m going to keep it as simple as possible with just a drawing the high probability win is to have profit targets inside and stop losses outside every trade should be fundamentally based on expecting what&#39;s happening to continue the extreme high probability loss is to go long at the top and short at the bottom so obviously the reverse of that is shorting at the top and going long at the bottom the only reason you should be wrong on a trade is if conditions change okay let&#39;s see this in action during my live stream now notice that I&#39;m actually following the candles for the most part and I&#39;ll get into the various risk reward ratios of how to do this later I&#39;m not timing breaks above or below where price has been I&#39;m targeting the same areas I&#39;m not going long at the top and short at the bottom I&#39;m also not asking much of price action there is no structural change required to make any of these traits work because I&#39;m trading the action within the the action this video is difficult to make because every time I say something I want to talk about 50 other reasons for why I&#39;m saying the things I&#39;m saying but just trust me every topic will be covered when price action is directional we take the opposite approach in these conditions price is more likely to go to a new area than it is to stay where it has already been Direction means flipping your entries to Target new areas and now having the stop loss inside the high probability loss is going against the direction for a pullback we&#39;ll cover this later but you might find yourself being naturally inclined to just one of the price action Types on screen you are now looking at a very simple directional trade and this is just an example to illustrate the concepts I&#39;m just following Direction but here&#39;s the thing price action doesn&#39;t stay as consolidation or Direction forever so this is the toughest part of the approach if Direction turns to consolidation and you&#39;re still targeting new areas with stop losses inside of where price has been you&#39;re going to lose you would be trading high probability losses no trade will work every time but this approach gives an edge if you adapt correctly with that being said and within reason the only reason and a trade shouldn&#39;t work as if Direction turns to consolidation or vice versa that&#39;s out of your control but what is in your control is adapting to these changes to make sure you&#39;re taking the right trades regardless of what time frame you&#39;re trading you will lose all your money if you&#39;re doing mean reversion in direction or targeting new areas in consolidation it&#39;s easy to forget to constantly be aware of whether price is consolidating or directional but I&#39;ll get into the reminders that I use to combat this later as well as how to find which conditions you&#39;re best at you don&#39;t need to adapt and trade everything you can just wait until you get the conditions you thrive in but more on that later see that chart on the top right pretty good mix between consolidation and direction and you could maybe call it consolid Direction which was one of the first ideas I had for naming the strategy but I quickly abandoned it after realizing it sounded too much like solid erection so where should he actually put the profit Target this is incredibly important because the foundation of this approach is not about predicting anything major you&#39;re not trying to figure out where price will be way into the future you&#39;re not doing analysis on 70 different time frames with 400 indicators the strategy is to ask the least of price action possible taking the most reasonable and simple possible trade you were using the categories of price action as your Edge to make it so that a trade is more likely to hit the profit Target before the stop loss over a large series of Trades and remember that everything applies regardless of the time frame because trades are based on the current size of the candles so all you do is adjust the Target and stop- loss to match those conditions let&#39;s say these are 30 minute candles and each one is 25 points let&#39;s go with a 10-point Target and stock loss which means you&#39;re targeting just under half the size of the recent candles for a perspective that rectangle I put in the middle is 10 points from top to bottom this visually represents the idea of not asking much out of price action if your profit Target is bigger you need a more aggressive entry and I prefer to not have it be too big so that I can follow consolidation when it looks like it&#39;s turning around rather than trying to time mean reversion at the most extreme points by that I just mean not trying to call the tops and bottoms so my stop loss and profit targets are small enough to just play around in the middle however going against the direction inside this consolidation once you start getting to the extremes is an equally valid approach there is no rule like doing a 50% Target based on the size of the previous candle it all just comes down to personal preference and I prefer to lean more on the side of the brackets being smaller and by brackets I just mean the stop loss and profit Target okay now here&#39;s the beautiful part about this applying to all time frames nothing fundamentally changes you just change the bracket size let&#39;s say these are now 30C candles and 9 points each The Profit Target and stop loss would look exactly the same as before except maybe now they&#39;re fourpoint targets and stops the time frame does not matter because we&#39;re trading price action and adjusting the Stop and profit Target to fit the structure of the recent candles it&#39;s consolidation so we expect price to stay where it has been and you don&#39;t try and Target the extremes of each side this is because consolidation is never this perfect I&#39;m just using a drawing to illustrate the basics you can see that in action here but of course it&#39;s not uh it&#39;s not quite as uniform and probably the best example is this trade here just targeting Four Points going long here with a profit Target there where to put the profit Target in direction is where it gets more tricky it&#39;s incredibly obvious in consolidation because you are literally confined to a box direction is where it gets a bit mysterious but at the same time no it&#39;s not I drew a blue entry going long green is the profit Target and red is the stop loss just to cover the basics The Profit Target is about half the size of the previous candles so it&#39;s still following the same idea as the consolidation trades and again these could be 5 point or 20 Point candles but the trade brackets are going to look exactly the same since we adjust them to fit the structure I&#39;ll talk more about Direction and my personal preferences later now in order to assist with all of this I use ATR but not in the traditional way it&#39;s used if you add ATR the default period setting is 14 and if you want to see the exact size of each candle from top to bottom set the period to one this is a helpful tool to glance at to see what size the candles are which helps in knowing what your Target and stoploss should be eventually you&#39;re going to start memorizing whether vol volatility is normal or higher or lower than usual ATR is just a tool for quantifying volatility and volatility is different throughout the day it&#39;s high as that market open slows down and then picks back up a little before the market closes in regular trading hours so each period of time will have its own typical range of volatility which you can read quickly through ATR now the following is exactly how I use it I like a very specific range of candle size for my trades in the morning for now I&#39;ll use a 20 second chart if volatility is high a 30 second chart if it&#39;s average or a 40-second chart if it&#39;s low but why do I do this because I&#39;m artificially changing volatility and the size of each candle until I get the exact size of candles that I want if you really think about it nothing is actually changing but you&#39;re filtering out or adding more information on the chart depending if you go higher or lower which makes the candles bigger or smaller since you&#39;re lying to yourself if you think you can accurately distinguish between 20 seconds versus 40 seconds or 5 and 10 minutes by only looking at the candles all we did by changing the time frame was 4 forcing the chart to appear with the volatility conditions that we like for trading everything I&#39;m describing here is about adapting as well as controlling the variables you can in order to play to your strengths and specific approach ATR quantifies volatility but we can also make slight adjustments to the time frame of the chart to artificially increase or decrease that volatility this is all just part of being better at adapting the a part of cat trading categorical trading I don&#39;t know on the screen you can see a visual representation of how stupid the retail obsession is with finding the perfect time frame time frames are just about how much information you want to see and it changes nothing about how price moved which is particularly obvious if you&#39;re watching in real time now here&#39;s an amazing cheat code that I thought of just a couple weeks before making this and every time I make one of these breakthroughs I&#39;m always in disbelief that I didn&#39;t think of it earlier so I kept scrolling through some charts and zooming in until atrs range down there was exactly where my preferred ATR conditions are about 6 to 14 points for each candle and then I adjusted it just a little bit in order to turn off ninja Trader&#39;s Auto adjusting feature by holding the mouse on the axis thingy on the right underneath that F letter this makes it so much easier to see exactly what volatility is this fixes the issue of having some outlier candle completely skew atrs range and make it difficult to see what&#39;s actually going on so yeah scrunch that bit up to fit what you like and then you can keep adjusting the time frame when needed to get ATR higher or lower into the conditions you like I&#39;ll swap between time frames a few times during my 17-minute trading session and sometimes I won&#39;t change anything at all you really have to pay attention to that or else you&#39;ll take terrible trades but I&#39;ll cover how to make your best reminder document later and if you&#39;re wondering why I don&#39;t want to see outlier candles that won&#39;t show up below or above the ATR range I set I think you&#39;ll understand after reading the definition of outlier here&#39;s another neat little trick that doesn&#39;t necessarily show anything that wasn&#39;t there already but it helps reinforce whether price is consolidating or making directional moves these horizontal lines seen here on ninja Trader are just for context and perspective not something I added but I like to use them to determine the bracket size I&#39;ll go for your trading platform should have some version of this maybe if candles are going through these Sixpoint intervals pretty easily maybe I&#39;ll Target Five Points if they&#39;re only going through a little or not at all I&#39;ll probably Target Four Points they&#39;ll change depending on how zoomed in or out on the chart you are because they&#39;ll automatically adjust and if the intervals are 15 points then obviously we&#39;ve got some serious Direction and SL or high volatility going on the price intervals are a good way of seeing how much you should ask out of a trade ATR is telling you the exact toal size of each candle but that&#39;s just a number and using the price intervals with that helps because you are seeing a visual representation of exactly how much your trades are asking out of the candles again just a helpful thing I like to look at and it makes it easy to choose the right brackets it just reinforces what ATR is telling you in the future when you&#39;re ready for a prop firm which is when you pay to take a trading test to get funded and trade on a company&#39;s account I&#39;m personally funded by an affiliated with trade day firms are an excellent transition from a SIM account to eventually trading your own money and it&#39;s a cheap way to desensitize yourself to trading meaningful size if you use my code I in trading 20 for 20% off the lifetime of your evaluation that supports the work I do at no extra cost to you so thank you there&#39;s a link in the pinned comment and I would only ever support a product that I personally use ideally the perfect Trader would have a different stop-loss and target for every trade because they would be making constant adjustments to match which Target stop-loss and risk reward ratio makes the most sense in each individual moment to match the unique conditions for the direction to consolidation Spectrum on which prices located sounds complicated yeah same so I don&#39;t do that except I actually did for a while and I only now know that I&#39;m 100% incapable of consistently doing well with that level of adaptation it took a long time for me to finally discover the best risk reward ratio for me and that might change in the future but I&#39;m going to explain why this is an amazing way to initially start doing this strategy or really anything that&#39;s just pure price action you will probably end up finding something better for you personally as you progress but starting with a on toone risk reward ratio is something that I&#39;ve wanted to make a video on for a while this just means the stop loss and profit Target are the same amount of points or percentage away from the entry you were doing a coin flip on if the trade Works meaning there&#39;s a 50% chance it&#39;ll get stopped out or hit your profit and that means you only need a small Edge to flip that coin in your favor obviously easier said than done but hold on if you want to hear my ideas about how it&#39;s possible to achieve consistent unprofitability you might get some great ideas for your own trading if you click the video in the top right because regardless of if you&#39;re consistently profitable or consistently unprofitable before fees you are managing to get non-random results from the markets and that&#39;s impressive when you pair a coin flip with this system that categorizes price action into objective conditions that can be logically analyzed for high probability wins and losses bang that&#39;s the edge obviously remembering everything being disciplined not hesitating switching trades when necessary to adapt avoiding fomo following your rules and every other psychological issue makes it so that knowing what to do doesn&#39;t mean you can do it immediately but we&#39;ll we&#39;ll do psychology later I recommend just starting with a 1:1 ratio because remember risk reward ratios on their own mean nothing until an edge is introduced to make it non-random go to my page in the pinned comment to see every resource that helps with this approach including a video dedicated to this topic and that brings us to maybe the most important part of all of this almost none of you are going to trade like me you&#39;re going to use different risk reward ratios prefer different types of price action do well in some areas I sit out do poorly in conditions I do well in and more variations of every single other possible combination of the aspects of this system fundamentally we are just categorizing price action but the way you approach the actual trading is going to vary if you do poorly in directional action for a week and then write a note that says avoid Direction you could ruin your entire chance at ever succeeding without getting boring you cannot make important and concrete conclusions about what you&#39;ll do without a representative amount of data now one week is not enough to find your best max daily loss whether you adapt to all price action or wait for specific specific conditions or to set various rules about Target size stop-loss size or your Preferred Risk reward ratio you will never be able to make objectively smart and helpful decisions unless you&#39;re basing those decisions on representative data so how long exactly should this experimental phase be and how long is it going to take for you to perfect your own unique approach to the same fundamental concepts that I&#39;m using well it took me about a year to finally know all of the variables I use and guess what maybe in the future something will be different maybe not you definitely don&#39;t need a year so here&#39;s part of why it probably took me longer than it should have and I bet you will recognize some of my mistakes in your own trading I mean also the part that I had to make all of this but still it shouldn&#39;t have taken that much time here&#39;s be quiet hold let&#39;s continue we want success we want results right now but nobody is consistently profitable longterm in a short amount of time here&#39;s another thing for months my max daily loss was too high I knew it was too high and I left it where it was partially due to outside influence which was done by me but also because I just ignored the data since it was suggesting something I didn&#39;t want to do every single aspect of how I apply categorical trading is based on objective data and I made a mistake by ignoring the data and having my max daily loss too high for months right now I&#39;m taking less trades in a week than I used to do in a single day and my results have never been better so anyways don&#39;t put yourself in a box too early because how else are you supposed to know what you&#39;re good and bad at if you don&#39;t take enough trades and give yourself the chance to experiment eventually you will have to decide whether you constantly adapt and really focus on one condition change or be like me and just patiently wait until you get the conditions with your Edge you won&#39;t even experience fomo while candles go on without you because you&#39;ll know that your trading performance longterm is terrible in those conditions and why would you feel fomo if you know you&#39;d be losing money but again you&#39;re going to absolutely ruin your chances of success if you set hard rules for yourself too early on that same topic of adapting to everything or waiting keep in mind that you don&#39;t have to trade every day or every moment that is a completely irrational decision we make either because trading is fun because you just want to make as much money as possible and so you force trades or a plethora of other reasons that end up doing more harm than good but again before you actually decide which conditions to sit out and to push it in you need to trade in all conditions to determine what you&#39;re good and bad at if you trade for a while look back on everything and realize you&#39;d be consistently profitable if you avoided Direction which is what I realized then obviously avoid Direction just make sure all decisions are based on representative data AKA lots of trading sessions overtime overtime so what time should you trade I know most of you want a simple answer but I&#39;m not here to sell you a course with the illusion that you can shortway your cut that you can shortcut your way to profitability personally I trade from 9:33 to 950 a.m. EST at the market open that might change but that&#39;s what I&#39;m doing right now oh why so specific I man what if there&#39;s a good setup at 963 o00 because I started by trading the entire day then started at 10 then tried the open then went back to 10 traded long short and medium sessions and then I went back to the open and that&#39;s that&#39;s where I stayed because the data said to I tested everything different charts markets time frames time of day session length risk reward ratios and every other possible variable I&#39;ve discussed I Implement these Concepts through scalping and if you lived in my head and understood what life is like to me you would too the intensity and pace is where I thrive in college I could get more work done in 2 hours than I could in 20 hours if I waited until the last possible moment of an assignment due date to start the pressure and intensity allows me to concentrate to the ability of probably a normal person you might be best at trading after the first hour of Market open right up until close going the whole day or maybe you like the lunch hours because volatility dies down or maybe pre-market maybe something else maybe you like the so-called chaos of when I trade maybe you like when it slows down so you can be more analytical and patient everyone is different you are bringing a unique biological predisposition to trading and what works for someone else might not work for you you&#39;re going to hear robots in the trading world without a single ounce of self-awareness or ability for introspection tell you that you&#39;re trading wrong or that you should be doing something different but remember that these people forgot to unlock the ability at 3 years old to understand that other people experience the world differently from themselves so off with your unsolicited advice and keep on taking trades because a prolapsed turkey a Candlestick pattern showed up on the 14-minute time frame showing a Divergence from the chicken wing Market in your 17 trade flawed discretionary back test is telling you to go long anyone who is truly trading this strategy will be following the same fundamentals of categorization where it differs is how you choose to implement everything and that&#39;s good don&#39;t force yourself to trade exactly the same as someone else unless they&#39;re your biological twin or clone I&#39;m terrible with this in Direction and on higher time frames in the same way that you might struggle in areas I excel we are all using the same tool but everyone will have variations in the way that tool is used same Foundation slightly different applications let me ask you something if price action keeps switching from direction to consolidation and you&#39;re having a hard time reading it what type of trade should you take none you&#39;re guessing how are you supposed to take a trade based on categorizing price action if that category keeps changing too fast and you know I think this is um this is maybe one of the parts that people struggle with the most I&#39;m just yapping Off Script but I got to I got to say this what percentage of people are even willing to go an entire day without taking a trade all right we we force things we want to make money you will know over time whether you&#39;re just guessing or if you&#39;re actually following the price action category I know because I am you I I still do it every once in a while all right okay back to the script if action is too chaotic you should not be taking a trade because categorical trading has no chance to work if consolidation is turning to Direction and vice versa too quickly again that&#39;s easier said than done and it&#39;s hard not to take a trade no strategy is going to work in every condition and regardless of your approach forcing trades every day is going to destroy you which I say from personal experience and probably taking too long to realize that and truly implement it so keeping it simple consolidation trades should only fail if it turns to Direction and directional trades should only fail if price pulls back and slor turns to consolidation which it would have to pull back to do obviously nothing will always work so here&#39;s the important thing to always remember regardless of your strategy was it a good trade that didn&#39;t work a good trade that worked a bad trade that didn&#39;t work or a bad trade that got lucky and worked this approach is not just guessing and hoping it works when you look back on your trades you should immediately know if the entry was good if the Target and stop size were good if it was the right trade to take based on the action and more here&#39;s something I bet you&#39;ll relate to how many times would you have done well if instead of trying to predict when something changed you just followed it I bet many of you are like me and are naturally inclined to want to time reversals time the breaking of consolidation and time pullbacks this is part of how we can achieve consistent unprofitability the desire to time change instead of trading according to the current price action conditions on my website for this thre on my website page for the strategy in the pinned comment I will include videos that are dedicated to some of the topics discussed here I&#39;m man trading. org anyways if price action can&#39;t be categorized because it&#39;s too chaotic this approach won&#39;t have an edge and you should join me as I stare at the charts with no desire to take a trade because I know I&#39;d be flipping a coin with no Edge on my side or maybe I am taking a trade and then I&#39;ll I&#39;ll cry later come cry with me since we&#39;ve already covered that this is just about categorizing price action it&#39;s applicable to any Market I like Futures I think they&#39;re the best to trade and since I&#39;m personally scalping I trade the NASDAQ but for higher time frame applications of this the S&amp;P 500 is probably a better option for its liquidity and potential to largely scale the size that you&#39;re trading but as with everything search for what you like and do some experimentation if you&#39;re looking for a full introduction to everything on Futures I made one that&#39;s less than 10 minutes long and I&#39;ll link it in the top right if I haven&#39;t hit the maximum card limit yet it honestly blows my mind at the amount of people who want to succeed at trading yet won&#39;t put in just a tiny amount of effort into the most helpful tool that exists to assist with the learning process which is journaling and honestly just recording your trading sessions I journaled like a maniac in the beginning just because I was trying to create all of this but now I hardly do it at all unless I find some new underlying issue or annoying mistake so you know every couple of weeks let&#39;s say you traded poorly for a whole week and you&#39;re going I don&#39;t know what I did wrong well guess what if you took 10 minutes out of your day to organize and make sure you were screen recording your whole trading session it would then take 20 minutes to find out exactly what you were doing wrong by analyzing the trades in your recordings it is an astonishingly small amount of effort with the greatest return possible it&#39;s like a 1 to million risk reward ratio with a 99% win rate and if you still don&#39;t know what went wrong after analyzing a set of sessions that tells me that the approach isn&#39;t fully understood I know I&#39;m unloading a ton of information on you but every trade is either good or bad and that has nothing to do with whether it worked or not for this approach you either weren&#39;t trading direction or consolidation correctly or you were taking the right trades that happen to get stopped out due to conditions changing in that case Cas they weren&#39;t bad trades they were just part of a normal distribution of losses and if that&#39;s not the case then you were probably trading when you shouldn&#39;t have been in the recordings you&#39;ll also see if you were forcing trades trading in conditions you should have sat out and so much more the only thing that can show you whether you were following your Edge or not is through recording so you can watch everything back looking at each individual trade and overall trading session from that day is where the real learning happens and once you really understand this approach you should be taking the same trades in your head when watching back the recording if you&#39;re watching the candles in a recording and you go long but in the recording you go short that disconnect indicates an issue maybe you were taking a trade in chaotic price action that couldn&#39;t be categorized or maybe you took the incorrect trade or maybe your entry was bad I don&#39;t know this is something I realized when watching back my own recordings months ago I wasn&#39;t taking the same trades in my head but now I&#39;m almost always mentally taking the same trade in price action before I see the trade I actually took in the recording of course that&#39;s only if I&#39;m following my rules and not just taking a complete guess due to a lack of discipline to wait for my ideal conditions additionally this is a good time to analyze the quality of the entry did you wait a little too long did you get in too early or was the timing great doing this is how I made slight changes to how I implemented all of these Concepts and variables for example I don&#39;t take trades when price action is at the low or high of day that seems like a weird rule it&#39;s still price action sure but guess what I consistently lose money while doing that so now it&#39;s part of my reminder document and I avoid it entirely and once again and all the things I&#39;m saying might be slightly different in the future in fact I can almost guarantee it journaling is the entire reason behind the creation of this system but I explained exactly how I did that in the very long trading guide video in the top right in the journaling section that video is a whole whole Guide to Everything on trading how to learn not how to do it how to learn it which is very different you will have to do that if you want to make your own strategy but if you&#39;re following mine then that means a lot less work for you the most recent example I can give of the benefits of journaling and recording is is when I was analyzing some recordings and realized I wasn&#39;t trading with the correct bracket size I was asking too much out of price action and I never would have realized that if I didn&#39;t have something to look back on and watch play out in real time this is what led to the whole section about adjusting the time frame of the chart to artificially create the volatility conditions you like more on journaling and the reminder document I use that keeps me focused on everything later just remember if you really want to actually solve problems and make real progress record your sessions I use OBS it&#39;s free why a 5 minute tutorial on YouTube to set it all up save the recordings by date and how much you made or lost that way you can go through everything later particularly you can go through the worst performances and I almost guarantee that you&#39;ll find a common denominator linking them all together that&#39;s how you solve your problems and make progress make adjustments to the variables and determine the best max daily loss for yourself that amount is going to be different for everyone think of it as the point of no return that brings us to a very important lesson that you need to remember just because you know what you&#39;re doing wrong and just because because you know what you&#39;re supposed to do it doesn&#39;t mean you&#39;ll do it we&#39;re humans right we&#39;re irrational and trading is unlike anything else in the world I&#39;m getting much better at this but I&#39;ll still make mistakes right after reading a reminder that specifically says not to do whatever I did over time we get better at this especially after we&#39;ve proved that not following reminders makes us lose money in the long run but remember that figuring out a problem and knowing what you&#39;re supposed to do is only half the battle it&#39;s much easier to follow your rules once You&#39; spent enough time Trading to realize how good at trading you&#39;d be if you stayed disciplined the desire to make money and not lose it then becomes the main motivation to follow the rules that you have a hard time not breaking and slowly over time emotionally based issues are solved with logic why would I feel fomo in this uptrend I know I&#39;d be losing money see what I&#39;m saying anyways nobody&#39;s perfect especially not me people want a shortcut and for me to say something that will fundamentally change someone that&#39;s not how it works put in the work in the hours and you&#39;ll eventually defeat those goblins or at least you know rain them in a little bit keep them lock them lock them up uh put a leash on them you know they&#39;re still there they&#39;re always going to be there but you&#39;ll get better at it better again you figure out a problem through journaling and recording you make a reminder to address it and then comes the difficult part of actually following those reminders on the day I&#39;m adding this particular note which is December 5th I broke my rules about stopping trading at 942 when there are 9:45 news announcements which I check every day on forexfactory.com my rule is to stop there but regardless of the varying contributors as to why I did this I broke my rules and took two losing trades to hit my max daily loss cool just because you know what you&#39;re supposed to do it doesn&#39;t always mean you&#39;ll do it that&#39;s what I mean when I talk about the disconnect between awareness of a problem and actually having the discipline to always follow your rules and guess what here I am 2 days later after realizing that making this video has completely ruined my ability to focus only on the very specific price action that I wait for and then trade I have reverted to my old mistake AK of trying to trade every category because explaining all of the ways this system can be implemented has made me lose focus on the way that I personally use it this approach has a ton of ways that a person can personalize it and I only use a tiny portion of its potential because that&#39;s what works for me this has been an expensive lesson to learn and I basically wiped out all my progress you know when I was talking earlier about 2 weeks all all green days yeah that was fun so now I&#39;m taking a break from Trading until this is done oh well everything is a Learning lesson some just hurt more than others shout out to those who know the guy who who is the who the guy is in this picture wrong answers only wealthy Kevin all right so like what do I do first remember consolidation or Direction have the rules memorized look at the candle size base targets and stop losses on what&#39;s reasonable from the recent candles without asking too much out of price and take some one toone risk-reward ratio trades we&#39;ve covered everything about the strategy and here&#39;s something really important that I only recently realized a lot of people mistake this for just being complete guessing obviously every strategy involves predicting but there&#39;s also a very clearly defined approach to take depending on the price action type type and we covered when the edge isn&#39;t going to work which is very important you should be focusing almost everything on whether it&#39;s consolidating or directional test it out for a couple weeks see if you&#39;re naturally inclined towards it maybe you love it maybe you hate it remember everyone&#39;s different so you know do whatever take lots of Trades and record everything if you don&#39;t record it so you can look back later and determine if the trades were following the system you&#39;re depriving yourself with the most beneficial learning tool and you&#39;re going to make progress at a faction at a fraction of your potential at a fraction of your potential and I&#39;ll have a reminder document for you later that you can copy an approach should be very clearly defined and mine is but there&#39;s a lot to remember so that document will help okay so how do you know when you shouldn&#39;t trade this is the last section before I explain everything I possibly can about how I personally Implement all of what I&#39;ve talked about over time once you truly know your strength and weaknesses you will intuitively know when you shouldn&#39;t be taking a trade you&#39;re going to feel it but to start and this is only after you&#39;ve determined all of this information through representative amounts of data you should have a reminder document with pictures of the price action you&#39;re bad at this is so simple but it removes all of the ambiguity on whether price action is good or bad for you if the current action looks like the pictures you have up then sit it out over time after enough repetition of watching price action and checking that reminder you will just know whether or not your approach has a chance to work as it was for me this will be an exciting realization for you you&#39;ll calmly do nothing because you know you&#39;d be losing money long term and there will be no ambiguity on whether you should trade or not of course as I said earlier uh me writing this in the future once I started making this video and getting deep into all the aspects that I don&#39;t use anymore that whole thing got completely removed from my brain and now I&#39;m taking a break from Trading until this is all finished so I can go back to trading the only parts that I&#39;m good at but I had to cover everything in this video to show you all the possible ways that it could be implemented which was necessary to do because we&#39;re not the same person and could have polar opposite performances which means I got to show you the the whole the whole pie even though I only use a little slice but explaining how to use the whole pie made me start using slices I don&#39;t like Beyond identifying types of price action to avoid which is direction for me as you see in this picture you might find yourself noticing specific areas within price action that you lose your Edge or just you know perform poorly in I have poor trading performance at the high or low of day and at pivots so guess what I don&#39;t take trades there anymore where whether it&#39;s psychological or something else the result in the data shows me being very bad so I don&#39;t care about why that is a thing exists I don&#39;t have to fix every issue to trade every possible second I just need to be good at what I&#39;m naturally inclined towards and to have the discipline to do nothing in price action conditions and specific areas where I lose my Edge I wanted to bring this up as an example of something that you might want to keep in mind within the overall conditions you like it&#39;s important for you to keep in mind other smaller additional factors I also avoid taking a trade after a High volatility candle because I find that for me it&#39;s just a 50/50 guess on what happens next but in retrospect after writing that it makes a lot of sense because a huge candle is a break of the recent structure and is therefore the start of a new price action category or lack thereof we don&#39;t know what category it is until we get a couple candles SO trading at that moment is a 50/50 guess on whether you expect it to continue or pull back okay like yeah obviously but there&#39;s no Edge on your side to flip that coin in your favor all right maybe I chose a bad picture for this but if I was following my rules then I shouldn&#39;t have taken a single trade on this day does not taking a trade for a couple days suck maybe a little but not really because I know I&#39;d lose money in this and I don&#39;t like losing money the reminder document I have up on my left monitor is different than it was 3 weeks ago 1 month ago and blah blah blah reminders are little simplifications of more complex lessons which I&#39;m elaborating on for the first time in this video reminders are personalized the issues you struggle with are different from mine maybe you hesitate too much maybe you overtrade whatever this document is going to change a lot over time as you solve old problems and encounter new ones to start your reminders should be how to trade Direction vers consolidation because you need to really internalize the system I&#39;ve explained I made I made one of those for you though so it&#39;s coming up later I made you a document I love you now here&#39;s another amazing tool that took me way too long to get an idea for I found a YouTube video that&#39;s completely silent except every 3 minutes a bell goes off when this happens I analyze all of my reminders think about each reminders think about each one a little bit to make sure I&#39;m not just an autopilot and then I look right back at the charts with some reinvigorated focus and attention on the right aspects if my mind is blank I&#39;m just going to take random trades and not follow the system so this is very important for me and it probably will be for you too it will take you some time to create the reminders that address your unique challenges so be patient after you&#39;ve made some progress and know what you&#39;re good and bad at I recently added a picture to my reminders of my best price action type and it&#39;s another stupidly obvious thing I should have have done earlier if price action doesn&#39;t look like this I&#39;m not trading unless I break a rule of course I also used to have a picture of price action to avoid but now I just know when not to take a trade so I don&#39;t have that up anymore that&#39;s an example of how your reminders will evolve also just kidding me from the future here guess who will be adding back pictures of action I avoid because my brain can&#39;t separate my Approach from the possibilities of all approaches me me it&#39;s me if you didn&#39;t guess it&#39;s me but at the time of writing that I really did that that issue uh well at least temporarily solved until I started working on this video and everything just melted into one thing in my head mistake reversion is the name I&#39;ve given to the problem of overcoming an issue only to end up doing it again at some point in the future this is where journaling and keeping your old reminder documents comes into play because if you&#39;re currently experiencing an issue you might end up finding that you were doing the same thing two months ago I myself did this I myself did this in regards to mov moving profit targets and stop- losses and going for trades that were too big my eyes burn so much right now this is taking forever to record my throat hurts I kept reverting to making the same mistakes which led me to making a separate document specifically for those problems that kept coming up for me this defeated that vicious cycle now my Approach is very rigid without any freedom I do not move profit targets further go for bigger trades try to time when the low or high of day will break or anything else of course you&#39;re going to constantly find new mistakes that you repeat just like I do I know the system the hard part is all the little stuff that your brain does to make trading difficult oh God here&#39;s a neat little trick that I now use to take advantage of me being inherently bad at trading and internally controlled by a goblin that wants to gamble reverse it bang easy I want to go long at the top of consolidation because timing that break right makes my brain light up like a gambler at a slot machine so I say haha nice try you I will now short the high probability losses based on the different conditions are exactly what my brain ow always wants to do and so I realized hey let&#39;s use that to my advantage I&#39;m incredible at being consistently unprofitable so now I focus on what the high probability loss would be based on the conditions and I reverse that for me it&#39;s easier to focus on what wouldn&#39;t work as opposed to focusing on what would work would work I bet a lot of you were like me in that sense although I bet you didn&#39;t buy scratch tickets instead of food when you were 18 for many of you who are like me focusing on what not to do and taking advantage of your brain&#39;s idiocy can be a major strength you&#39;re still focusing on what to do and how to do it just from a different perspective hopefully that helps the tiny amount of you who are actually still watching this video is a big shortcut on everything I had to find for myself so basically one year of me trading every day but there&#39;s still a huge amount of work on your end all the work is about how you&#39;re personally going to implement everything my eyes they burn so bad I&#39;ve already talked about this a lot so I&#39;m not going to linger here but not trading is just as important as trading how many of you would be consistently profitable if you eliminated forcing trades and conditions you don&#39;t do well in that was quite a shocker when I realized that myself you don&#39;t need to trade every day we&#39;ve been wired to think that you&#39;re supposed to work every day cuz you know that&#39;s what normal normal people doing normal jobs do but this isn&#39;t a normal job if you don&#39;t take a single trade in a session you know you do poorly in you should be proud of yourself come here don&#39;t touch me discipline is something you should celebrate more than a green day or maybe the same amount I just I don&#39;t know because it doesn&#39;t matter how well you do on Monday if you then Force trades and bad action for the rest of the week and lose everything know that when you aren&#39;t trading in conditions you&#39;ve identified as having no Edge for you personally you saving yourself from losing lots of money this is a recent problem I was facing right before making this video because I feel a lot of pressure on my funded account right after making that breakthrough with the time frames volatility bracket adjustments and overall just adapting better in the moment I started doing very well and believe I&#39;m on two weeks without a red day hey it&#39;s me from the future ruined all that progress after making this video threw me out of the zone of trading really good and going back to random guesses and conditions I avoid not going to trade until I finish this video anyways I started getting a bit anxious about how I&#39;d perform in the mornings as I laid in bed trying to fall asleep thankfully I almost immediately realized why it literally means nothing one day one trading session that means nothing at all the only thing that matters is how you do over a couple of weeks a month even longer that defeated that part of the pressure for me we all want to do well and it&#39;s difficult to not get caught up in the moment but if how you trade today doesn&#39;t matter in a year then does it really matter but don&#39;t don&#39;t think about that too much cuz nothing really matters the answer is no it doesn&#39;t what matters is how you do over the long run but again analyzing each individual session&#39;s recording after you&#39;re done will&#39;ll tell you if you&#39;re taking the right trades or not because this approach is very clearly defined and a lack of understanding about whether it was a good trade or not indicates a lack of understanding about the approach maybe that&#39;s partially my fault in not explaining everything correctly but I do believe that I couldn&#39;t be more clear on exactly what I&#39;m looking at so anyways losing a win streak doesn&#39;t matter the individual session doesn&#39;t matter pressure is a madeup thing by your brain and based on an irrational fixation on short-term results and emotions all right me time reminders change as you solve old problems encounter new ones and then revert to making the same old mistakes every once in a while just to really remind yourself why they exist in the first place so moving from top to bottom I start every trading session by clicking on that video that plays a bell every 3 minutes for me to check my reminders again and I check to see if there&#39;s any economic news releases during the session forexfactory.com I do that so I&#39;m not in a trade at the time of a release this document also shows you recently I started adjusting the time frame in order to get the conditions I like since it&#39;s still a reminder rather than just a habit I&#39;ll always do with no need to be reminded about there&#39;s only a few main important focuses which is about ATR price structure and making sure I&#39;m using a bracket size that doesn&#39;t require any change from Price action to work with follow Direction and do mean reversion and consolidation and having that note about the high probability loss was explained earlier in the video also what the heck I just adjusted this document to ignore Direction I don&#39;t care what I&#39;m supposed to do in Direction cuz guess what I&#39;m not going to do it I wait for consolidation or do nothing hypothetically also it&#39;s easier for me to focus on what not to do because it keeps the goblins from taking over in my brain and just going for low probability trades as explained earlier reminders are little simplifications of more comp one trick to make sure you&#39;re actually paying attention to these reminders is to think deeply about each one before moving on to the next adding more information and reflection in your head in response to each one that ensures you&#39;re actually thinking about it while devoting your attention energy and focus okay oh my God we covered an insane amount of information and there&#39;s maybe seven people in the world with freak memories that can actually retain everything to the true extent of each Topic&#39;s complexity so unless all of you are one of those seven people you might need to rewatch certain sections here&#39;s a little cheat sheet or even a well not even it is here&#39;s a little cheat sheet SL reminder document SL starter for your own reminder document about this strategy I made this in like 7 minutes so any updates will be on my website where you you can copy it into your own document and make adjustments it&#39;s on my website go go there it&#39;s free it&#39;s all free it&#39;s a good starter that covers basically everything websites in the pin comment I would go through everything here right now but I honestly just never want to have to look at this PowerPoint or script ever again remember to check my website in the pinned comment which has resources for everything but particularly more information about this strategy I live stream every morning during my trading session at the market open on my second Channel IM man trading live thank you to my patrons for helping support my mission and the work I do here on YouTube I appreciate you so much

Transcript for:Categorical Trading

Transcript for:
Categorical Trading