in this video here I'm going to show you an approach that's going to instantly improve your trading results particularly if you day trade the markets now back in the days when I used to do a lot of day trading this is a technique that first of all kept me out of a lot of Trades there really stood no chance of making me any money but also showed me turning points in the markets that were actually unbelievable as to how accurate they could be now just to give you a little bit of a background any currency
pair stock or commodity that you're trading will typically have something called an average daily range and what that is is the range that it typically is going to trade within so if we talk about cable pound dollar for example you will see that that typically trades within a range of around 100 to about 120 Pips and what that means is when the markets approach 100 Pips for the day then what you're going to get is usually you're going to get some sort of a turning point in the market so if it's been on a big
tear for the day you've had a big you know trending day that's a sort of point that you're going to look at for some sort of a turnaround so from a trading strategy perspective what you would be doing is you go down to like a one minute chart or something like that as price approaches 80 to 90 of its daily range and you start looking for some sort of a price action reversal what you can also do is you look at that and if you're looking to get into a trade in the direction of the
general Trend and you're approaching 80 to 90 percent of the daily range and you may say to yourself well actually this isn't a high probability trading setup so from that perspective I'm actually going to skip it and I'm going to look for the next opportunity in another currency pair or perhaps you just have to close up your screens for the day and come back tomorrow now how this works is let's jump over to the charts for a minute so I'm on trading view at the moment this is going to be available on any major charting
platform I'm going to go to indicators and in here I'm going to type in average true range this is the indicator that we want you can work this out for yourself but this indicator data it just does all of the work for you so I'm going to put that in there then I'm going to go down here and change some of the settings now it typically comes out at about 14 periods okay so if I go into settings here you'll see the inputs except the length is at 14 period so that's if I'm on a
daily chart which is what I want to use to measure the average true range so I don't want the average true range of a five minute candle or a one hour candle or anything like that I want the average daily range so I'm on the daily chart here from the for a minute what you can do on trading views you can actually go in here and change the time frame so I could say I just I want the daily range regardless of the chart that I'm on I won't change that for the minute but I'll
just go here so we're going to stick with 14 periods then in the style I'm going to change that a little bit just because it makes it easier to see a little bit brighter for me put that in there change it to circles and now I can really see where we're at now what you'll see is generally speaking that the average true range doesn't change all that much over you know a period of days to weeks it's over months and things like that that you'll see a big change so if we look here back so
since sort of April time up until where we are today recording so in August and the average two ranges have been around you know 98 to 100 Pips if we go back to last year when we had the big moves off the back of the bank of England raising interest rates and things like that and we can see that the average true range almost doubled but going to today we can safely say that we're in a range of about 100 Pips now how is this going to help us when it comes to day trading the
markets well let's jump down to something like a five minute chart for a minute okay and what I want to demonstrate to you is what happens and I won't use today because we aren't at the the average true range for the day we haven't completed the day in fact I'm recording this at nine o'clock in the morning so you typically see these turnarounds later on in the day sometime around you know two three o'clock going into the U.S session maybe even the end of the U.S session but what I'll do is let's go back over
a few days and I'll just sort of demonstrate this to you so this was yesterday's I see what the true range was for yesterday high to low so that was around 73 Pips for the day so that's around 75 of the true range now what we want is we want it to be in the 80 to 90 range before we start looking for a Trader before we start saying well we're not going to take a trade because it's at that range if we look at yesterday or the day before there we can see that the
average true range it got up to 110 Pips so again it it exceeded the average daily range and what you can see here is that once it got up to 100 Pips over here the market started to turn around and once it exceeded that it then turned around again so the way that you would use this is when the market approached this level here so if we were looking to take a break out of this High all right so let's imagine let's go in there where's that that's about one o'clock let's go down to a
one minute chart let's put in a vertical line here so we know exactly where we are like so okay so what we're saying is that 4th of August 1310 go down to one minute chart find the 4th of August back here now what we would be looking for is we'd be looking for some sort of a price action reversal okay so what we would do we come to the charts over here the market gets to its daily range at around 1 o'clock that day now we don't just sell at that particular point because the market
is at that level it's really really important that you understand that we're still looking for a price action reversal which for me will be some sort of a you know like a one two three reversal pattern you can use whatever it is that you like but from a price action perspective I like one two three reversals or Candlestick reversals and we actually get that up here so what you could do is as the market approaches this level here it gets through the daily range this is about above 100 Pips and then the market tries to
get higher it sells off a little bit it then attempts to get a little bit higher and what we have here is we've got the one two three reversal so this is point one this is two this is three and essentially when this low over here gets broken that's when we would then look to get involved in the market so we would sell the market here you go for like a one-to-one rewards risk so we'd have our stop somewhere above the highs over there we would then look for a one-to-one reward to risk ratio so
our entry is in at one spot two seven seven two the stop would be around 10 Pips away so looking for around 10 Pips Target and as you can see within three or four minutes you hit that Target okay and this is something that will happen again and again and again so day in day out I'll jump out of the of the uh one minute chart there for a second but you'll see day in day out when the market exceeds you know 80 90 of its daily range there opportune moments that you can look for
you know looking for turnarounds in the market okay if we go to the day before and see what this looks like so where are we over here so we've got this we've got the high over here we go down to the low what is that that's 107 Pips and sure enough what happens so the market gets to that range it then turns around and reverses what happens the previous day so we go from the high over here down towards the low that gets to 120 Pips okay and then you get the turnaround now like I
said you don't just fade to the price action because it approaches the daily range you use the daily range as a supporter resistance level where you're going to look for Price action at that level to confirm the turnaround in the market but it is a sort of dynamic level of support and resistance that really it could become the the Bedrock of your trading so I know some Traders are just kind of typically they only trade the the daily ranges so they'll sit there they'll wait for that you know they'll come to their charts in an
afternoon so it's suitable for those of you that can't trade in the morning you wait for that daily range and then you look to fade the daily range okay so I hope you enjoyed this video I hope you found value there for those of you that day trade the markets I really encourage you to give this a go because it is an awesome way of trading the markets it's a great strategy in and of itself and it's also a great way of keeping you out of Trades that really you have no business being in because
they don't they're not high probability trains if you don't know how to trade the markets if you want consistent already then I really encourage you to jump across to my website I'll post the link beneath the video here you can sign up for my masterclass where I'll show you a bunch of different strategies I'll show you what's working now how I'm trading the markets all in a bit to try and help you become a consistently profitable Trader if you haven't already subscribed to the Channel please hit that subscribe button hit the Bell so that you
get a notification as and when I release a new video and also hit the like button if you like this video okay if you have any questions please post it in the comments beneath this video otherwise have a fantastic day and I'll speak to you in the next one take care now
