The System Behind My 3 Best Trades of the Year

There is one part of my system that created my three best trades from this past year, and that is my protocol around daily consolidations.

And that's what I'll be talking about here in this video. I'll go through each trade top to bottom and explain the three-step process that you can follow to not only avoid unnecessary losses within consolidations,

but also how to anticipate and catch these same trades for yourself in the future.

The first step of this protocol is actually identifying that the market

is trading in a consolidation range, taking a look

here at the daily time frame, what you're going to notice when the market's in a consolidation is when you look left, off the highs, there will be failure swings, and off the lows, there will be failure swings.

When there are failure swings to both sides of the market, that means there is not an established point of reversal to either side that can be traded away from.

This means the market is completely neutral at this point, and this leads me into the second step, which is arguably the most important.

The first thing I do when I notice the market is in a consolidation range is noting the highest high and the lowest low and marking those two points out.

We can call these two points the external high and the external low.

All it is is the extremes of the consolidation range, the highest high, the lowest low. That's where we want to have our focus.

That is what is relevant in this stage in the market. And anything in between these two points, we consider internal range price action.

This is where the part of avoiding unnecessary losses takes place, and this is where you can either make it really simple or really difficult on yourself.

If you want to make it simple and you want to avoid the unnecessary losses, avoid trading in between these two points.

Remember, these are all failure swings to the relevant swing on the external side of the range, so they are not going to offer one very high

likeliness to put in a point of reversal or it's going to give you false signals.

And the other is that when we're in between these two points ranging in a consolidation, you're unlikely to get a directional expansion daily candle.

It's going to make it very difficult to capture a good trade. So we're just going to simply avoid it. We are playing the waiting game.

Mark out this high, mark out this low, and until it reaches one of those points, we are waiting.

And that leads me into the third step. This is where I start to form a bias based on how this daily candle reacts off of the external low of this consolidation range.

And we can also see how these days continue to be indecisive, smaller range, and overall unfavorable trading days.

And that's where we come into the part of avoiding unnecessary losses.

Once it reaches that external low, I start making a judgment call and forming a solid narrative around what should happen here.

And really one of two things can occur. This will be the first example for this trade. The next two trade examples will go over the second type.

But what I see here when the market trades into the external low, it runs down into it and then turns back higher to close back into the range.

That means it's a manipulation of this external low, which is relevant in this context. So I'm building narrative around this consolidation.

I understand that this low does not need to be traded back to.

And the market should then start expanding to the upside into this external high, which is acting as a draw at the opposing side of the range.

You now understand the first two steps of the consolidation protocol. Those remain consistent across every scenario in the market.

You understand the first part of the third step, which is a manipulation of the consolidation. And the second type will be in the following trade examples.

But I want to go through each trade top to bottom. So I'm going to break down how I took a confirmation and my entry on these trades.

Refining this down to an hourly time frame, we can see where the market dropped

down into the external low returned back up and closed

in the range now the confirmation to this bullish bias

is a bullish daily profile on the following

days so this day did not necessarily confirm it

but it opened low and closed higher forming an up close daily candle the bias is still valid but wouldn't have offered an entry we're going to roll over that into the following day.

Still looking for that expansion to this external high. I'm also going to look into the previous day because there is a downclosed candle that was closed above.

That should be respected in this continuation to the upside.

So when I'm looking for this bullish daily profile in the following day, I want to see it remain in respect to this area here as well.

Here on the 30 minute to view the daily profile, we have the opening price of this four hour downclosed candle.

Remember, we want this to be respected in the continuation higher.

And I want to see a bullish daily profile develop alongside that level. The market opens up, drops down into it.

The first signature off the lows, there is a divergence. There is a higher low on NQ. We're at this same point.

ES made a lower low. That is one confluence that this is a reversal taking place.

There is a series of downclose candles closed above here. That is a change in state of delivery.

That means this low intraday no longer needs to be traded back to.