Many traders struggle because they mistakenly believe they have an edge, often due to oversimplified trading advice, when in reality, true trading success hinges on understanding market fundamentals and using technical analysis for precise entry and exit timing.
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If I had to show one image to explain
why so many traders struggle, this would
be it. Right here is where most traders
get stuck. And the interesting thing is
most don't even realize it. The reason
I'm making this video is because
literally no one talks about this. And
it's crazy because it's one of the most
important things in trading. Now, this
video is not going to feed you a
fantasy. It's not going to pretend that
trading is easy. It's not going to waste
your time on things that just don't
matter. What this video is going to do
is it's going to show you the real
reason so many traders struggle. and
it's probably not what you might think.
It's going to show you how to trade
based off reasons, how to make informed
decisions, and then walk through my past
trade that you can actually learn from.
This video is exactly what I wish I had.
So, if you're serious about trading and
genuinely want to learn, let's get into
it. Okay, so section one, thinking you
have an edge does not equal actually
having one. This is probably one of the
biggest roadblocks so many traders face
because they're trading thinking they
have an edge when in reality they don't.
Right now, there is a reason for this.
If you go online and you search up
trading, you are going to get absolutely
bombarded with all of these types of
trading videos that tell you that
trading is so easy. It's so simple. All
you need to learn is some simple
candlestick formation. You can become
profitable when in reality, this stuff
isn't real. Okay? This is basically just
the McDonald's of trading, right? It's
super easy to consume. It's very tasty,
but it doesn't give you anything. It's
not really worthwhile your time, right?
I'm sure you can learn a few things, but
if you want to genuinely become
profitable and make consistent money,
these videos are just not enough. Right
now, they break down basically just
technical analysis, more specifically
candlestick analysis. And you may be
thinking, okay, candlestick analysis,
technical analysis. I've just said that
those videos are bad. So, is technical
analysis even important right now?
Absolutely yes. Okay. Yes, absolutely.
Technical analysis is super important. I
use technical analysis basically every
single trade I take, but I use it in
conjunction with something else. Now,
how much you use technical analysis,
like the emphasis you put on your
trades, can actually depend on what
market you're trading in, right? So, we
can basically break off the markets into
centralized and decentralized for the
most part. Centralized means that all
orders are routed through one central
exchange. Okay? So let's just say here
we have one central exchange and we have
some participants. All of their orders
are going through the exchange. Okay?
Because they're also going through the
exchange. We have access to more
information. So if you're a trader
trading on a centralized exchange, you
have access to things like true volume,
right? You have access to things like
orderflow, which means you can access
the footprint charts, um, heat maps, all
these other different things that come
with having everything traded in a
centralized place, right? Everything can
be recorded and you can use that to your
advantage. That's right. You'll see that
most traders that only trade technical
analysis, they trade on centralized
exchanges because they have access to
all of this data, right? is for example
things on trader on centralized
exchanges like um stocks and futures
right just to name a few. Now most
traders like I said centralized exchange
only technicals because they have all of
these other things. Now if you come over
to decentralized which means there is no
central exchange and the participants
direct I'm sorry deal directly with each
other. So basically means like this
let's say we have those four
participants from the last one. Actually
let's just draw this for the sake of it.
instead of going through a central
exchange, they go directly to the other
participant, right? They deal directly
with each other. Now, in this instance,
because we have no central exchange, we
don't have access to some of the things
that the centralized exchange does,
right? So, for example, true volume, we
don't have access to that. Now, if you
go on trading view and you go on, for
example, uh EuroUSD, right?
Decentralized for an exchange
decentralized, and you search up the
indicator volume, that is not accurate
volume. Okay, that volume is based off
ticks. So basically how many times the
candlestick is ticking. Um if it's going
up or if it's going down, just how many
ticks that candlestick in the lifespan
of that candlestick has a tick is going
to reflect on the volume indicator.
Right? So that's not very accurate and
can be very very inconsistent. Right? So
we don't have true volume. We don't have
footprint charts. We don't have order
flow. We don't have transparency. We
don't have all these things that the
centralized exchange does. So if you're
trading decentralized, you're going to
need to rely on something else. Right?
So, I've just put this um little chart
together here. You can see centralized,
yes, order book, true volume, footprint,
order flow, transparency. Then
decentralized, we don't have any of
these things, right? So, if you're
trading decentralized, you're probably
going to need something more than just
the candlesticks, right? And what is
that? That is the fundamentals. This
moves absolutely everything. Okay, the
fundamentals are absolutely fundamental.
The most important thing in trading in
my opinion, right? Because this moves
absolutely everything. The news, the the
geopolitics, central bank speakers, the
market reacts to new thing. It reacts to
news. Literally news, right? The word
here, new. The market wants new
information. The market moves because
it's trying to price certain things in.
So, for example, let's say that you tell
someone something they already know.
They're probably not going to have much
of a reaction. If you tell them
something that they don't know, they're
probably going to have a reaction. Right
now, if you tell someone something that
they don't know that is absolutely
insane, they're probably going to have a
pretty insane reaction. And it's the
same thing with the markets, right? If
the markets already know something,
they're not going to react. If they
don't know it and it's a really big
deal, well, the markets are going to
move like crazy, right? That's why if
you have a crazy news release, the
markets are going to move like crazy
because it's new and they didn't expect
it. Now, this is just basically the most
important thing that you need to learn,
right? For some reason, no one talks
about this. I don't know why because
like I to be honest I just don't know
because this is like like I said the
most fundamental thing in trading. So
I'm going to go over a trade that I took
and basically break down everything how
I thought about it and it's going to be
really informative trying to make it as
informative as I can as much value as I
can. So let's get into section two.
Okay. So section two this is exactly how
I caught this trade here on AUDUSD and
it was taken based off the RBA interest
rate decision. So first we have to start
off with what actually are interest
rates. Right? So interest rates in the
simplest way you can put it are just the
cost of borrowing money. Right? When the
interest rates go up, the cost of
borrowing is going to be more expensive.
When it goes down, the cost of borrowing
is going to be less expensive. Right?
Very straightforward, very easy. Now,
why do central banks change their
interest rates? Right? What does it do?
What's what's what's it for? Right? Now,
the main reason central banks change
their interest rates is to control
inflation. Right? Now, the key word here
is inflation. inflation. If you're
trading currency specifically as well,
it is super super important. So, how do
interest rates even impact inflation?
Now, let's get to this. So, let's say
here that we have our pretend economy,
our little kind of civilization in here,
right? And in this economy, the
inflation is getting a little bit out of
control. So, what the Reserve Bank of
this economy does is they decide to hike
rates. Now, what this is going to do is
it's going to make mortgage repayments
more expensive, going to make credit
card interest rates higher. It's going
to make business loans more expensive.
It's going to give the currency
strength. And it's going to lower
consumer confidence. Right? Now, what
all these things are going to do is it's
going to make people of this economy
spend less money. Right? So, it's going
to spend less and what it's going to do
is it's going to slow down the um the
economy, right? It's going to slow
everything down. Inflation is getting
too high. Let's just slow it down, hike
everything, make it expensive, and let's
slow things down, right? What this is
going to do is it's going to cool off
spending, right? Cool down spending.
Now, when spending cools down, that is
going to cause inflation to lower,
right? Now, on the flip side, let's say
this economy um has had rates quite high
for a certain amount of time, right?
They feel like they've had a tackle on
inflation. Now, one of the things that I
was saying just in the previous slide is
that when you have rates high, it's
going to slow down the economy, right?
And you cannot have the economy slow
down too much. Otherwise, it's going to
cause uh you know some serious serious
problems, right? So, let's say they've
had to tackle an inflation and now they
need to cut rates to stimulate the
economy, right? So, when they cut rates,
mortgage repayments lower, credit card
interest rates lower, business loans
lower, and the currency is going to
weaken and the consumer confidence is
going to go up. Right? Now, what this is
going to do is it's going to encourage
people to start spending. Business loans
are cheaper. Business is going to start
expanding. They're going to hire new
people. They're going to do this. Right?
and the currency strength is going to
lower. Right? So basically what this
does stimulate the economy, right? So if
you're a central bank that you have to
kind of weigh all these different things
in play when changing interest rates,
right? If you put interest rates really
high, yes, you're going to not have
barely any inflation and you can combat
inflation really quickly, but it's going
to put serious pressure on the people in
that economy. So why does the currency
strengthen or weaken? Right? This is
what we want to know because this is how
we can trade it. So for a general rule
of thumb, if the Reserve Bank hikes
interest rates, that currency is most
likely going to gain strength. Just like
I said before, and then if they drop
interest rates, the currency is most
likely going to weaken. Now, I put here
for the most part because there are
exceptions to this. I'm not going to go
through it in this video because it'll
make this video way too long, but this
is just for the most part just to keep
it nice and manageable, right? Why does
the currency gain strength? So let's say
in this case, we have the RBA. They have
just raised interest rates, right? What
that's going to cause bonds. You're
going to make more money from bonds.
Term deposit. They're going to pay more.
Cash holdings. The interest rates are
going to increase. So, what's this going
to do? Foreign investors are going to
come in and start putting money in the
Australian dollar because they're going
to get more out of the Australian
dollar, right? And then that's going to
cause Australian dollar strength, right?
The flip side, if you have the RBA
lowers interest rates, it's going to do
the opposite. the bonds, term deposits,
and cash holdings. And there are many,
many other things like, you know, bond
yields and capital flows and all the
other things, but I'm not going to go
through that, right? So, just for the
most part, we got these three here. And
then what's it going to do? It's going
to not really spook off, but investors
are going to leave. Okay, maybe this
guy's a little bit too scared, but
basically, investors are going to think
about putting their money elsewhere
because they're not going to get that
high of a return if they put their money
in the Australian dollar. Right? So, now
to the um AUDUSD trade breakdown, right?
So, we've got that out of the way.
That's kind of the basics of interest
rates, how it works, what I'm what I'm
kind of thinking of, right? Obviously,
it's very very simple. I'm leaving, you
know, many many things out. But that's
just to keep it kind of manageable and
easy to watch. Right? So, the first
thing that I want to think about um
leading into this print is am I going to
see a hike? Am I going to see a cut? Or
am I going to see a hold? Right now,
what I want to see for this print was a
cut. The reason I was expecting to see a
cut is because, like I said, I don't
really want to go too in depth here
because I could, you know, talk about
this for a long time. But basically, we
had the big world event that made
everyone get quite sick. Um, all the
central banks started hiking rates after
a while because they needed to combat
inflation. As you can see right here,
this is the um, RBA. They held rates the
same for quite a while around this area.
they were a little unsure about what's
going to happen if they had a tackle on
inflation if their rates were high
enough to actually tackle inflation.
Then through here they said okay maybe
we're getting towards there and they cut
rates and then this is right here the
rate decision that I traded. Okay so
what I'm expecting is a cut. The reason
that I took a sell here because you may
be thinking before in the first section
I said that if the markets are already
expecting something and that thing
happens well nothing's really going to
happen right the markets aren't really
going to react. Now the reason that I
did take this trade was because of this
CPI print before the rate decision.
Okay, so CPI right here, as I said, is a
leading indicator of inflation. And
right here in these little um arrows,
this displays the last um CPI prints
leading up before the rate decision.
Okay, so we had as expected, lower than
expected, lower than expected, and then
right before the rate decision, we had a
CPI print come out higher than expected.
Now, if this was lower than expected, I
probably wouldn't have traded this print
because it is so clear that we are going
to get a cut, right? If the CPI is
coming in lower back to back, then most
likely we're going to see a cut and the
market's already expecting it. So, not
much of a reaction is going to happen.
It's like, okay, well, of course, this
happened, right? But this right, this is
the print right here. You see come out
higher than expected. This is almost be.
So, as you can see, it's come out before
and it's almost said, okay, hold on. Few
analysts were thinking before it was
like, okay, completely, completely
completely is going to be a cut. But
then we saw this green print and it's
like, hold on. Obviously, it's still
going to be a cut like most likely, but
it just leaves the d the um the door a
jar open to say, "Hold on, maybe
something could happen here, right? It's
super super small chance, but there is a
chance now, right?" So, basically,
that's what I wanted to um trade. I
wanted to I was still expecting a cut,
but because we had the CPI print come
out higher than expected um just before
the rate decision, like the closest one
before the rate decision, I was
expecting, you know, we could actually
see some weakness come in from here,
right? So, like I said, what I'm
expecting is a cut. If we got a hike, I
would have seen expected to see ab super
aggressive um strength. If we're to see
a hold, I would see expect to see
strength as well, but not as much
strength as a hike. But mainly what I
want to see is a cut, right? And a cut
by 0.25 basis points. That is what it's
expect. If it cut by more, we would have
got much more aggressive weakness. But
um what I'm expecting point god that's a
terrible two.25 basis cut. For that,
let's get into the charts to show you
how I actually enter this trade. Okay,
so we're on the charts. Let's break down
exactly how I enter this trade. So the
first thing I'm doing is I am coming up
to either the 1 hour or the 4 hour. In
this case, I'm up to the 1 hour, right?
And I'm going to mark off the most
significant key levels, right? I want
this to be as simple as possible. And I
want the levels to be so significant
that you can almost see them without
having to draw the lines, right? So for
example, if I get rid of this line here,
level, um, you can see that you can
almost eye a level, right? You can
almost see it without having to draw the
level onto it. Okay? So that's what I
want. Super simple. I'm not really going
to rate this down much because it's just
yeah, super simple. Right after that,
I'm coming down to either the five or
the 15 minute. And why is my computer
frozen? Did I just spend five grand on a
computer that freezes? Nope. Okay, we're
back on. So, what I want to see is a
range, right? That's the ideally a
perfect little range that we could break
out of and then enter because remember,
I want to see the fundamental bias Y and
then I want to have my technical entry
when. Okay. So, if I'm skipping a few
just before the print, here we go. We
can see that we're actually forming
quite a nice small little range, right?
This is perfect, right? Because I know
that we can break out of this range if
we get the cut in rates. We're going to
get that Australian dollar weakness come
in and I'll be able to take a sell right
here. So, what actually happened? Of
course, as you may already know,
weakness came in. We got that rate cut
just as expected. Right now, this trade
looks like it uh happened very quickly,
but actually the first few seconds it
moved extremely slowly, right? And this
actually caught me a little bit off
guard because as you can see, I didn't
enter as it broke structure. I almost
Let me just zoom in here. I entered
before it broke structure, right? So, I
make mistakes, too. I'm human. Ideally,
I would have wanted to enter here,
obviously, as we're breaking this
structure, but I got a bit of ahead of
myself because I was expecting it to
move so fast. So I entered a little
early but nevertheless it played out
right. So for me personally I would have
to you know make sure I don't do that
again. Right now in terms of my stop
loss I'm placing my stop loss above the
impulse. Now usually I would place my
stop loss above the range. But in this
case I was so confident that I wanted to
see um Australian dollar weakness from
this print um that if I saw any strength
at all I didn't really want to enter the
trade, right? Because it's something
maybe that I haven't been paying
attention to. Something's come up. So I
just want to be out straight away. So if
I come over here, this is just the
spreads. This is the value of the
Australian dollar. We can see at 230 we
get that immediate strength come in
straight off the print. Right? So AUD/USD
AUD/USD
I'm entering. Like I said, entered a bit
early but that is fine. Now if we skip a
bang. So what I'm doing is I'm going to
target my key levels that I've set. For
example, if I were to be a buy, this
would be my take profit for here and
this would be my take profit for a sell.
Right? So, I want to take off 75% of my
position at one of these key levels.
Right? As you can see here, this green
line, that signals me taking 75% of my
position. After that, I'm going to move
my stop loss to break even. And then I'm
going to let the trade run to see if I
can catch a runner after um trading my
stop loss. Right? So, for example, we
come back up.
Now, also at 3:30, an hour after the
print, we have the press conference.
Right? So, it's always a bit sketchy
trading in the press conference because,
you know, Michelle Bullock, which is the
the head of the RBA, she can say one
thing, she can say the other thing and
make price move kind of everywhere. So,
I really tried to avoid trading
speeches. Um, in this case, yeah, I
wasn't entered. I was entered in the
trade, but I don't like to actually be
entering while the speech is happening.
So, basically, I didn't really say
anything crazy. I do have this one thing
here. It says that the board assesses
that this move will make monetary policy
somewhat less restrictive. it
nevertheless remains cautious about the
outlook particularly given the
heightened level of uncertainty about
both aggregate demand and supply right
so basically what the markets already
know so now the markets most are going
to continue
with some of that bearish pressure right
so as we break structure I'm moving my
stop loss quite aggressively here and as
you can see if I skip forward I move my
stop loss aggressively aggressively and
then it just takes me out right here so
75% of my position taken out here and
then about 25% of that position is taken
out right here. So that's the trade. As
you say, technicals quite simple. The
importance of the fundamentals basically
made this whole trade. It's the
fundamentals that give you the reason
why. And it's the technicals that give
you the reason when, right? You put them
together, everything starts to make
sense. So if you have any questions,
anything you want to ask, drop it in the
comments. Happy to answer. And I will
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