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Finding hidden opportunities

After you have determined the market direction in the beginner strategy, in step 2, you start looking for trading opportunities.

You are instructed to place a line on the last candle and only consider any price action that happens to the right of this line and ignore everything before that line, as the chart to the right shows:

However, just looking at anything after this line is not strictly correct. There may be a trading opportunity as soon as you switch to the 5 minute chart, based on what happened to the left of the vertical line. In other words, you may not have to wait for an opposing fractal to form or break. This may have happened already and so you would immediately have an opportunity to enter a pending order.

In this lesson, we will teach you how to spot those opportunities.

First of all, go to the 30 minute chart and determine the market direction by finding the last broken fractal.

Now place a vertical line on the candle that breaks that fractal.

  1. Last broken fractal
  2. Price breaks the fractal
  3. Line placed on the break of the fractal

Now switch to the 5 minute chart. The vertical line that you drew on the 30 minute chart will also show up on the 5 minute chart – you may have to scroll to the left to find it. You will now look at what happened on this chart, starting from the point in time marked with the vertical line you just drew, until the current point in time.

Use the following instructions depending on the direction you have determined on the 30 minute chart.

  • Market direction is up
  • Market direction is down

Market direction is up

Look for the last broken down fractal on the 5 minute chart. If it is to the left of the vertical line that you drew on the 30 minute chart, there is no trading opportunity and you must wait for a new down fractal to form and break in line with step 2 of the beginner strategy.

If the last broken down fractal is to the right of the vertical line, there may be a trading opportunity.

To find out if there is a trading opportunity, take a look at the one up fractal that came right before the last broken down fractal and all the up fractals that came after the last broken down fractal.

If any one of these up fractals have been broken after the last broken down fractal has been broken, there is no trading opportunity and you go back to step 2 of the beginner strategy.

The following chart demonstrates what this looks like:

  1. Last broken fractal
  2. Up fractal before the last broken down fractal that is not broken
  3. Up fractals after the last broken down fractal that have not been broken
  4. Break of the last up fractal which means that you have missed this trade.

If none of these up fractals have been broken, there is a trading opportunity. Take a look at the example below:

  1. Last broken fractal
  2. Up fractal before the last broken down fractal that is not broken
  3. Up fractals after the last broken down fractal that have not been broken meaning that you can go ahead and enter the pending order. 

After you have found a trading opportunity, you can go ahead and enter the pending order using the high price below the most recent up fractal for your entry, the tip of the most recent down fractal for your stop loss and the next pivot point up from your entry as your profit target.

This lesson is available for you for free thanks to our sponsors:

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Market direction is down

Look for the last broken up fractal on the 5 minute chart. If it is to the left of the vertical line that you drew on the 30 minute chart, there is no trading opportunity and you must wait for a new up fractal to form and break in line with step 2 of the beginner strategy.

If the last broken up fractal is to the right of the vertical line, there might be a trading opportunity.

To find out if there is a trading opportunity, take a look at the down fractal that came right before the last broken up fractal and any down fractals that came after thatl.

If any one of these down fractals have been broken after the last broken up fractal has been broken, there is no trading opportunity and you go back to step 2 of the beginner strategy.

The following chart shows what this will look like:

  1. Last broken up fractal.
  2. Down fractal just before the last broken up fractal that has not been broken.
  3. Down fractals after the last broken up fractal that has not been broken. 
  4. Break of a down pointing fractal indicating that you have missed the trade.

If none of these down fractals have been broken, there is a trading opportunity. Take a look at the example below:

  1. Last broken up fractal.
  2. Down fractal just before the last broken up fractal that has not been broken.
  3. Down fractals after the last broken up fractal that has not been broken meaning that you can go ahead and enter the pending order.

After you have found a trading opportunity, you can go ahead an enter the pending order using the low price below the most recent down fractal for your entry, the tip of the most recent up fractal for your stop loss and the next pivot point down from your entry as your profit target.