I took advantage of the free week offered on the Trading Decoded Discord channel to observe their trading style in live sessions. It was extremely useful, hearing the decision making as it happened rather than in hindsight.
Here are some of the things I picked up, they’re not all new but I think the more I hear and repeat them the more likely I’ll be to apply them in future trades:
Base Hits not Home Runs
Which is to say don’t always go looking for the huge wins, instead accumulate lots of small ones. Of course riding on a trend is nice but so often I’ve let a small profit turn to loss because I’ve been greedy and hung on hoping to make much more.
Support and Resistance Lines
So very important when it comes to interpreting price action and the direction price will take, for some unknown reason I haven’t been paying them as much attention lately. Don’t forget to:
- Buy puts (go short) at resistance
- Buy calls (go long) at support
Channels and Trend Lines
Plotting these out on the chart can help confirm an idea for a trade.
Follow the Trend, Don’t Counter Trend Trade
I try and do this anyway but there are times when the counter trend goes on for a while and it might be worth the risk for a few points.
Don’t Buy at the Top or Bottom of the Day
This was a new one for me. The thinking is it’s less certain the price will go to a level it hasn’t yet reached, it’s better to wait for the price to pull back to a previously tested level before placing a trade in the direction of the top/bottom.
Break and Retest
Used as a trade entry when the price breaks through a resistance (or support). If it comes back to test the support (which was previously a resistance) and then continues upwards then the probability of a profitable trade is increased. Trading Decoded’s rules stipulate that:
- The breaking candle should close above the resistance line
- The breaking candle should be green
- The retest candle should be green
- The retest candle may be the 2nd candle after the breaking candle
- A conservative trade enters at close of the retest candle
- An aggressive trade enters before the close of the retest candle
The Orange (Consolidation) Box
If the price enters into a consolidation Trading Decoded like to draw a box around the area. There is a high probability that if the price breaks out it will continue in the breakout direction.
They don’t recommend placing a trade within the box, they like to use it as a confirmation if a trade had been placed prior to the consolidation. E.g. if the price had been trending down before consolidation and then breaks out to the down side of the box it is likely the downwards trend will continue. If it breaks out to the top of the box it’s a good idea to stop out of the trade.
Wedges
Like flag and triangle patterns and the consolidation box above, wait for the price to break out from the top or bottom before placing a trade.
Fibonacci Pivot Points
Use these to create target support/resistance lines in areas where there aren’t any. NB IG don’t have Fibonacci as an option on their pivot points.
ADD and Heat Map
ADD, the advance/decline line (or A/D line) is a technical indicator that plots the difference between the number of advancing and declining stocks on a daily basis.
The A/D line is used to show market sentiment, as it tells traders whether there are more stocks rising or falling. It is used to confirm price trends in major indexes, and can also warn of reversals when divergence occurs.
The stock Heat Map gives a visual display of the direction individual stocks have traded in the past day, 4 hours or hour.