CHAPTER 3 – TRADE QUALITY – FOUNDATIONAL TRADING IDEOLOGY

In this section we will cover the concept of trade quality which is the most important foundational trading ideology you must learn and understand in-depth as you need to use it in every trading decision you ever make

Any attributes & factors that influence the probability of success of a trade opportunity you have identified

You shouldn’t Look at trading as taking right trades or wrong trades, but you should look at trading as taking low quality trades vs. high quality trades.

HOW TO “INCREASE” TRADE QUALITY?

1. The more you learn about price action
   • THE MORE HIGH QUALITY TRAITS YOU c/-w IDENTIFY
2. The more high quality traits a trade opportunity “has” means:
   • The higher the probability it will go in your favour but more importantly…
   • Go in your favour with true “momentum” & “distance” so that you actually make a good return on the trade

HIGH QUALITY TRAITS LIST

• THE MORE TRAITS YOU HAVE FROM THIS LIST WITHIN A TRADE OPPORTUNITY, THE HIGHER THE OUALITY OF THAT TRADE OPPORTUNITY

TREND TRADING

USING THE HIGHER TIME FRAMES

• Things you find on the higher time frames HOLD MORE WEIGHT
  • Higher time frames specifically means = MONTHLY OR WEEKLY TIME FRAME
• WHAT IS “THlNGS YOU FlND”??
  • Key levels, price movement, price patterns, or any form of price action that is “visible” on the higher time frames that influences your directional bias

– Are you combining the fibonacci levels with a key‘ level of support / resistance or on area of confluence?

THE KEY
Price action takes longer to form on the higher time frames but as a result it gives you a more accurate depiction of where price is headed and of what the market is actually doing
( The higher time frames remove all the noise of the lower time frames giving you a clear cut view of what is “actually” occurring )

TIME FRAME CONFLUENCE
[LONG TRADE WITH TIME FRAMES ALL CONFLUENT]
1) Main time frame where entry setup was found = bullish price action = bullish bias
2) Lower time frame = bullish price action again = confirming main time frame bullish bias
3) Entry time frame = bullish price action again = confirms other two time frames = entry long

[SHORT TRADE WITH TIME FRAMES ALL CDNFLUENT]
ll Main time frame where entry setup was found = bearish price action = bearish bias
2) Lower time frame = bearish price action again = confirming main time frame bearish bias
3) Entry time frame = bearish price action again = confirms other two time frames = entry short

FIBONACCI LEVELS

– Are you at a fib level? And if so which fib level?

1. 50% (0.5) fibonacci level:
   • “Great quality” fib level as it represents a “deep pullback”
2. The area between 50% to 61.8% fib:
   • Again a “great quality” fib level as it represents a “deep pullback”
3. 61.8% (0.618) fibonacci level:
   • This is “the best” & “highest quality” fib level because it represents a “very deep pullback” and “best area of value”

CHART PATTERNS ;

• Do you have chart patterns forming?
• Do you have chart patterns that signal a trend continuation?
• Do you have chart patterns that signal a trend reversal?