

Categorize
 If price action is consolidating
o Expect it to stay where it has been rather than going to new areas
o Trade mean reversion
 Following it back and forth in the consolidation zone
 Shorting at the top, going long at the bottom
 The high probability loss would be to try and time breaks to the
upside or downside
 If price action is directional
o Expect it to continue moving in that direction until proven otherwise
o The high probability loss would be to go against it
 If price action can’t be categorized because it’s too chaotic
o Don’t trade
 Adapt
 Focus on when conditions change
o If directions starts consolidating, don’t forget to switch the way you trade
o If consolidation turns to direction, don’t go against the direction expecting it to
come back
 Timeframe and ATR (set ATR’s period to 1)
o Adjust the chart’s timeframe to get your desired trading conditions
 Lower the timeframes in high volatility
 High timeframes in low volatility
o Is ATR itself volatile? Is it all over the place?
 Be very cautious, because inconsistent volatility makes it hard to
categorize price action
o Choose the right bracket size (your target and stop loss)
 If you’re trading a 1:1 risk:reward ratio, make sure the target and stop loss
looks good based on the current structure of the recent candles
 Know your strengths and weaknesses
o Are you good at this price action?
 Go for it
o Are you bad at this price action?
 Sit it out
  Have pictures of bad and good price action on your reminder document so
that you quickly determine whether you should trade or not
 This can only be determined after many trading sessions, and
setting rules like this too early could ruin any chance of success.
Don’t put yourself in a box too early.
 Trade
 It’s either consolidating, directional, or too chaotic to trade
 Only get stopped out due to a change in structure and/or price action category
 After the trade is over, was it a:
o Good trade that won = nice job
o Good trade that lost = nice job
o Bad trade that won = bad job
o Bad trade that lost = bad job