Hey hey, what's up my friend, so in today's training i want to share with you three right common price action trading mistakes that almost all new traders make. I'm pretty sure that if you have been trading for less than a year, you would probably be making. You know one of these mistakes that i'm about to share with you, but the good news is, i will you know, give you the solutions right to this mistake. So in the long run you can, you know, avoid losses and make more money.

You know in the grand scheme of things, so let's get started mistake number one. You have a ridiculous right, take profit level and when you have, you know, take profit level which are not realistic. What's going to happen is that you will realize that the price moving in your favor right near to your take profit level before it reverses and then hits you for a loss right. If that happens to you right, then let me explain why that occurs and how you can prevent it.

So, let's say, for example, someone looks at this chart of netflix right. This is a stock right. I decided to add some stock examples, because i want to share with you that price action trading can be applied to the stock market as well. So someone might see oh reyna, this is an uptrend right market is bullish, it's time to buy, so they go long.

Okay, so they go long. Let's say they go along at this price. Uh. 520 level.

520 right to make my life easier. Let's say we go with the green color for the entry price, then stop loss. They know got to be below support. Let's say it's at 450: all right: let's go with uh.

This pink color stop loss at 450.; okay! Now what about take profit level? Okay, so they know right now you know uh the textbook says the guru says that i need to have a minimum of a one to two risk: reward ratio. So right now my entry price to my stop loss is seventy dollars. So i just take 520 minus 450.. It's 70, so a minimum of a one to two risk reward ratio means i need a target of 140 dollars.

So 520, you plus 140. You have a target of about 660.. So that's your target right. 660..

Let me just change the target here to 660 and the color: let's go with blue okay. So that's your target there. You have it right right now. Look at this amazing trade right.

I risk 70 over here to make a potential profit of a hundred and forty dollars. This is a one to two risk: reward ratio - rainer amazing trade. This is a good trade. Now, what's gon na happen is that uh okay, this is just my wild guess, is that market would probably know hit up higher and then reverse, and maybe you might get stopped out of your trade or not.

But the key thing is that you realize that the market doesn't move up so swiftly to the 660 point that you have. You know identified ahead of time. It might get there eventually, but you know not after a lot of you know, swinging up and down a lot of emotional stress and trauma on you. So what's the problem with this take profit level? Well, here's the deal right.

The market doesn't care. What your target is, yes, you can aim for a minimum of a one to two risk reward ratio, but ask yourself why not a one to five freeze reward ratio? Why not one to ten? Why not have your risk reward ratio target on jupiter planet itself? Well, pluto pluto doesn't exist anymore, but anyway you get my point right. Why do you have this type of you know: uh constrain right on the market that you must have a minimum of a one to two or one, two, three one to five. What's the reason behind it, because here's the deal the market doesn't care about your target, it goes where it wants to go, and the only thing that you can do as a small, tiny trader in the ocean is to identify the price structure right.

That is being left by the market and use them right as possible targets. So, for example, let me see - let's see, let me just get rid of all these lines for now. Okay, so if you look at this chart right, i'm just going to reset this. Ask yourself where might opposing pressure come in where my selling pressure come in right to push the price load? So if you ask me, i would say it's probably at this area of resistance over here.

So if you're a price action trader, if you're a swing trader, then this is an area where you want to be paying attention to, because the price will come up: fine selling pressure resistance and then reverse down lower. So if you just want to capture one swing in the market, you cannot have all those fancy, pantsy aggressive targets from one two, five one to ten one to twenty one to jupiter risk reward ratio. The market doesn't care, it goes where he wants to go. You all you can do is to observe, like the clues that are left behind by the markets and use those clues right to set a proper target.

So what are some of the clues that is given by this market netflix? It tells me that around the 560 to 580 area from the 58 570 level tested once bounced off, came back close time near 560 bounce off lower, i'm guessing it could come back for a third time and might get a pullback or a reversal from their lower. So if you are a price action trader, a swing trader, a good conservative target would be at this area of resistance. Now i don't deny this market is an uptrend. The trend could explode up higher, but here's the deal right.

We are trying to capture a swing down here, not taking a trend following approach right. So the context here is that if you want to capture a swing right, your target right must be of reserve reasonable level. Okay, so that's the key thing i'm trying to bring across another example right: let's look at the new zealand dollar same thing, okay, so again, right a trader might look at this right. Let me ask you: where do you want to set your target? Is it over here here or here? So let's call this a this is b, and this is c now take five seconds right and ask yourself: where is a reasonable play reasonable place to set your target a b or c one, two, three, four: five: okay, so the answer is again for me personally, I would go with somewhere along c, because again i know market tests at once had a pullback.

That's it twice. A pullback might come back for a third time and make a pullback or reversal. I have no idea right. It's not reasonable to set it at a or b because, again right, you know it's just you know wishing for the stars right wishing for, for you know, god knows what right so have your target at a reasonable level.

Okay, so this is how you set proper targets, and this is how you can avoid right market no moving in your favor and then reverse all the way back down and hit your stop loss. So yep point number two: bad stop-loss placement, okay. So, by the way, if you're enjoying this video smash the thumbs up button and if you're not right, then hit the subscribe button. Okay, so moving on bad stop-loss placement, what happens is that the market stops you out of your trade right before moving back in your favor hmm familiar, so let me explain to you what is it and how it works.

So if you look at this trade, aussie, canadian, okay, so many traders would see that oh okay, this is an area of support, rainer okay, the market comes into this area of support and then we have a bullish engulfing pattern. Price close, you know higher uh. For this time period, then, where would they set their stop-loss? Many traders would say: oh rainer, the textbook says it'll set your stop-loss below the low of support, so they go along on the next candle open, stop-loss below this low and they go long next thing. You know market heads down lower, stop that route for a loss and then reverse up higher.

So what's the solution all right, let me just give you more example. First, before we talk about the solution, if you look at this one here, okay same something, similar, okay market comes into this area of resistance. Let me just zoom in the charts, okay area of resistance. Okay, then, we have a price rejection, a shooting star pattern like this traders see.

Oh, this is bearish right man rainer time to go short, so it goes. They go short on the next candle open, aha, look rainer! The market is dipping down lower, so they grab their stop loss above this highs. Then what happens market somehow seems to know right where your stop-loss is right, so it spikes up higher right, triggering your stop on this candle before it closes down lower for the day. Okay, so here's the lesson right when you set your stop-loss right, don't set it where everyone else sets it right.

Where does everyone's else set it right. So just ask your friend as your neighbor as your cat, your dog and they'll, tell you. They probably set it below support or above resistance, and when everyone sets their stop-loss right at a very common level. It there's an incentive right for the smart money right to you know rate those levels.

So that's why you have you know reversals happening right just below the lows of support or above the highs of resistance. So what's the solution, it's not difficult! Really what you want to do is don't set your stop loss, just above the highs or below the lows, give it some buffer. Now the question is: how much buffer should i give rainer so again use the volatility of the market right and then uh? Let it act as a buffer, so very simple technique that you can do is just pull out the atr indicator that stands for average. True range, it measures the volatility of the market.

This video won't cover the math behind it right. If you want, you can google and learn more uh? This is the settings. I use a 20 period sma because there's about 20 trading days in a month i go with 20.. Just click.

Ok, so once you've done that what you want to do is to identify the current atr value, and it's quite simple because it's shown over here on this chart. So it tells you that the current volatility of this uh crude oil market over the last 20 days is about a dollar and 20 cents. So this tells you that crude oil on average over the last 20 days moves about 1.20 each day. So with that in mind, okay, what you want to do is identify the highest rate of resistance.

So in this case this is the highs right, that's being formed by this shooting star pattern. So let's say you have to keep things simple. Let's say the heist is at 72 dollars, so you're gon na give it some buffer how much buffer just one atr will do right. So you know that one atr is about a dollar twenty cent right now, so it takes seventy two dollars and you add, on by one atr, which is about a dollar twenty cents, and your math right should give you seventy three twenty okay, so your stop-loss will Be around 73-20, if i just throw it over here: 73-20: let's go with uh, stop losses rate.

Okay! So that's where your stop-losses, so it's not foolproof. It doesn't mean that you will never get stopped out of your trade, but you give your trade more breathing room to breathe, and this, you know, puts the odds in your favor that the market can at least have a chance to move in your favor right rather Than you know, stopping you out for a loss prematurely before going back in your favor okay. So this is what you want to do right. This is how you set your stop loss so same for aussie, canadian right, just just uh just go and find out.

What's the one atr value? Okay, let me just find it this one over here, so at this point, what you want to do is find out what is the atr value just find out? What's the extreme low at support, which is this level over here? Okay find out the current atr value and then just you know minus it accordingly. So let's say, for example, uh. Let's say this is x right, just simple algebra. This is x and let's say the current atr value is y, so x, minus y and answer.

Let's call it z, so z. Is your stop loss? Okay? If this confuses you, then just you know skip to the earlier part of the video where i use the real numbers. Okay, so that's the mistake. Number two right now: bad, stop loss placement and, finally, number three poor risk to reward right.

You know risk three dollar to make. One dollar, you know risk five dollars to make one dollar and you might be wondering you know why do people do that right? Now? That's a good question. I i'm i'm puzzled myself right, so let me explain, you know how this works and and what you should do instead. So, if you look at this right, uh dollar sign right many traders.

They will look at this chart all right. Let me just uh atr not needed for now. Okay and you look, our market is bearish right. We should sell in a downtrend, so they go short on next candle open.

Let's say here: okay, let's say we go with green. It's entry, stop loss right! Right now say sets it: uh 180 are above the high, so let's say 180 somewhere here: okay and then targets reynolds say: don't set it at the uh at a ridiculous price point set it at a reasonable level. So, let's see this is your target. So at this point you can green is entry.

This is your entry. This is your stop loss. This is your target and if you do the math right, you will see that your risk to reward is quite bad. Actually, this is your risk and this is your reward.

This is your risk and your reward is to this blue line over here. So you can see that if you were to take this trade right, you are pretty much risking a dollar to make 17 cents. Okay, not a good trade. So why do people do this? Why do people have to know such white stop loss and small targets? Couple of reasons number one? They have the fear of missing out.

They see the market right. Such bearish momentum right bam, bam bam right. Every day has been heading lower, they don't want to miss the move. They quickly change the market, enter the market and and then right what they have.

You know they said, stop loss in a way there. You know to help them avoid getting stopped out right, so they said that stop loss. Maybe they know how to set it. They set it 180 above this highs, and then they are afraid of losing their profits.

The market moves slightly in their favor. Okay. They want to quickly book their profits right for the fear of you know missing, or rather for a fear of losing those profits. So this is how you get you know: white, stop, loss and small profit target white, stop loss because you fear getting stopped out and small target profit because you fear of losing those profit and that result in a very poor risk to reward on your trade.

Of course, not everybody thinks in this similar manner, but that's largely the reason right why traders they tend to have larger, larger losses right compared to their profits. So what's the solution? Okay solution is simple: right: don't chase the market, let the market come to you. When the market come to you, you realize that your risk to reward right the equation right will be in your favor. So instead of chasing the market, let's say this time around you.

Let the market come to you so again right. We, let's not change the target, let's not change our stop-loss level, because we know that those are pretty appropriate levels right, you know being having a target which is uh uh before the price structure and having a stop-loss right beyond the price structure. So the only thing left to do is to get a better entry point right to let the market come to us. So at this point let's say you know, this is an area of resistance that we both can agree on.

So let's say our entry price. We let it the market comes to us, come to closer to our area of resist resistance and we go short near the highs. Maybe there's a bearish candlestick formation, like a shooting star, bearish engulfing pattern, to kind of confirm our our hypothesis when we enter the trade. So now, when you measure your risk to reward you'll, see that things change dramatically, bear in mind your stop-loss is at the same level.

Your target is at the same level. The only thing that's changed is that you let the market come to you, thereby you know giving you a more favorable entry price. So now your entry and your stop loss right entry is here, stop losses here. Your target is at the same level.

If you measure your risk to reward right now, you would see that you are risking a dollar to make two dollar 80 cents and the only difference that you did is to let the market come to you. Can you see what a big change this is? Well, it's not really much of a change, but it's just by being patient just by letting the market come to you you dramatically right. You know change the equation right of the risk to reward ratio instead of having a very poor risk to reward ratio like risking a dollar to make 20 cents or 10 cents. Now, by being patient, you can risk a dollar to make two dollars or more and at the same time, right having a proper stop-loss level and a conservative target level makes sense.

Okay, so so this is how you know you want to do things right. Let the market come to you. Let it come closer to your area of value could be that support could be a resistance, could be an upward trend line right. So that's the third thing right, uh, the poor risk to reward ratio and oh by the way, if you are enjoying you know this, this training, you want to learn more about price action trading.

Then i actually got this a new book out. It's called price action, price action trading secrets where you can get it in my website over here pricesectiontradingsecrets.com. This is a physical book over here, as you can see, okay, and we cover basically right the essence of price action trading. So you can see a glimpse over here.

It's a it's a color trading book right, so we cover you know: uh, support resistance, candlestick patterns, right reversal trading strategies, uh breakouts, uh risk management. So you don't blow up another trading account and stuff like that. So, if you're interested right and to get a physical copy, all you need to do is just cover the shipping and printing costs and i'll get it to you as soon as possible and a few bonuses along the way. If you want it right, i will also send you a soft copy for those of you who wants to read it immediately.

I will you'll get a digital edition. I also send you a position: sizing calculator. Okay, so you never blow up another trading account and last one right also send you another special training webinar that i did some time ago, called part-time trading secrets. So if you're interested in the book price action trading secrets i'll put the link below this video uh, you can get access to it, and with that said, i wish you good luck and good trading.

I will talk to you soon.