The importance of Location in Trading

[00:00:04.17] - Speaker 1
And we came now to the location. So what is location meaning for you? So we were speaking about timing. And what is location for you, where you're looking for, what is a good location for you for a trading entry, for a trading exit and not to go into the market.

[00:00:26.08] - Speaker 2
So location. So timing for me is first and then location, of course second. Because once you know the market reveals its hand, now you want to start not managing just yet, but analyzing and calculating where your risk is going to be. For example, let's say enter here where the risk is and where the reward is. That has to make sense. That's, that's, that's very important.

[00:00:56.01] - Speaker 1
That's my man. That's my man. That's all about location. Location is meaning where we can place our trades with a good risk and reward. Okay, sorry, Steve, go ahead.

[00:01:06.01] - Speaker 2
Yes, yeah. And yeah, I just quickly want to say where the risk is first and where the reward is. And both have to make sense because if one makes sense and the other, yeah, you're clueless, you shouldn't be entering the trade. So maybe wait a little longer. But where both makes sense. And this is a good, let's say rejection zone. And you know, you have your confluence checklist. Everything is marking off. You look at volume, you're like, okay, it's starting to fill this region. You enter. Maybe you put your risk at the one day max, maybe put your reward near the put support or blind spot level. Makes sense, give you at least 2 to 1, 3 to 1, then boom, you, you hit the trade, maybe ease into it with a few bids or go maybe all in on one. But also make sure you measure your risk. But for me, I like to be a little flexible. Same with Patrick. He splits up his bids a little more, especially once it's confirmed into your direction, start adding into a little bit more once you're zoomed in, of course you zoomed on the chart, it looks a little different.

[00:02:02.22] - Speaker 2
But yeah, once you measure your risk and your reward and make sense, you're like, hey, price, if it gets rejected, it should retrace back to this area.

[00:02:10.12] - Speaker 1
Boom.

[00:02:12.02] - Speaker 2
Then location makes sense. But for let's say price doesn't get rejected, let's say you put a short or, sorry, let's say you want it to start squeezing, but you look on the upside and there's really not much exposure, not much volume areas for it to squeeze to. Then why are you, Then of course there's much more risk to the downside than the upside, right? But if you, if you zoom out of Course if we zoom out, you're always going to find levels to the left but right, nice levels but we, you zoom to the left. What happened here, we had a strong consolidation zone here where Price retraced very powerfully and then yeah, Price went down like crazy, I think another 10%. So you zoom out, you look here. This was a strong level for Price to be able to squeeze out of this level from the left and go past the one day max. The probability is much less. Right. So that's why, you know, that's why you got to look at a couple things on your checklist or whatnot. But for me that's another thing I look at as well. How much power does it need for it to be able to pass that location?

[00:03:11.21] - Speaker 2
And because we've only been consolidating here for about a day, day and a half, I feel like there's not a bit, there hasn't been enough time for us to have enough power to squeeze above there. So that's, that's another thing I look at. I like to zoom out and look at the supply and demand and how Price is reacting from it. So it just made more sense for it to go on the downside. And that's what we got.

[00:03:30.05] - Speaker 1
Yeah, yeah. 100. And also it's if you're trading the NQ, for example, let's, let's speak for, for one minute about the NQ. So if you say to yourself I can risk maximum 10 points, otherwise it's go too messy for me. So then the, maybe the timing is right but you be in a location where you have no big support or resistance will protect yourself. So I like, I like myself to have entry points below some strong gamma levels or blind spot levels. So for example, if you're looking now to NQ here on Steve's shot. So what I really like is to have the protection if I'm going into the trade that I have the one day max and call resistance protection or I have the protection from this camera level. If I be go short so that I can say okay, I can place my stop loss for example, I will go in here, maybe short, I will take this, then I have much more, more buying power. I, I don't risk only 10 points. If I have 10 points then I have to ask myself so is the NQ maybe the right one or should I go to the MNQ to reduce my risk with, with the next one.

[00:04:53.23] - Speaker 1
So for this reason I'm looking always when I speak about location for strong support and resistance area. And here I have the one day max and call resistance will protect me. That's my team. So my team is the one day max and the call resistance. If we're going below this, then I know, okay, my trade, my short will be no more valid. But this is also something what I understand about location where we can place our trades. Is there something what can protect our ass? Did we have something to the upside or to the downside? What protect us? So if we go in the middle and the 50% that's like flipping a coin. So that makes sense. We have no protection. And this is something what is so important if you go into the trade Timing. Ask yourself first, is this the right time? Second, location. What was Steve is saying? And I would say also if you have protection on your side, is there something what protects you? What protects your position? Not your stop loss. Your stop loss is good. But what but if you have no strong areas will protects you where you can place your stop loss above or below this area depending on depending on your direction.

[00:06:10.02] - Speaker 1
Then your stop loss is worthless. It's like the question is if you have a good location where you really like and you like the timing, but you have not enough space to risk. Ask yourself if you can split the risk. If you can maybe say, okay, I like this, I like the idea, I like the trading idea. But I cannot do this with with NQ because I have not so much buying power. I will not risk so much. Then maybe think about maybe switch to 4M&Q contracts or to 2 MNQ contracts. To be in the trade, you must be only to be in the trade. If we start trading, it's like going into the ocean. First you. You put your feet in the water to see if the ocean is cold or warm. You test it. You will never go in with your full buying power. If your full buying power only one NQ contact. This will be mean you go all in in the trade. So reduce the risk. I would say to reduce the risk, test the position and have a strong area where protects you. And this is something what is really, really helpful from my side.

[00:07:22.25] - Speaker 1
And now let's speak about with Dean. Dean, what is meaning location for you, how you interpret location on your trading?

[00:07:32.28] - Speaker 3
You basically said it all. I mean I, I. Because I am really protective of my positions. I look for those super strong areas for my roadmaps. I don't really go into the 50% areas because that's too much of a risk. And as Steve said, I like my risk reward. I want to make money. And so I want My risk to Reward to be 3 to 1, 4 to 1, where I know I'm going to go into my full position, I know I'm going to get that. So I'm always looking for those areas, just like you said, where I have something below that's going to protect me so that if my trade, you know, if the risk of my trade going the opposite way is going to be greatly reduced. And so, you know, today was a great learning experience for me because I, I suffered a loss where I thought I could out think the market, which was really bad. And I jumped into a spot where it was 50% and yep, yep, yep, yep. And so it was, I can tell you exactly where it was. Where is it? Yeah, so I jumped in, so it was around 11 o' clock and I jumped into it, broke blind spot three.

[00:09:03.25] - Speaker 3
And I thought for sure, yep, I thought for sure it was going to continue down because it was such a strong downward momentum and not realizing that I should have really looked at my chart a little harder and seeing that, oh gosh, I'm in a zone. I thought it was going to continue down into the zone and then reject. And then it's sure enough I went into a position and for a call and it reversed on me and I was like, oh crap. And then my thinking was that the location was wrong. I didn't focus on the chart long enough at the time to really see that, oh, duh, this is a spot where it could potentially bounce and then run back up and then you get the second retest of blind spot three for the next wave down. So that, that was my location was right, but the timing wasn't there because it didn't, I didn't wait for the second retest. So this was a great learning experience for me. To say, you know, you had the right location, your timing was off because you needed to wait for that second retest of blind spot three and then you would have caught the, the rest of the wave down.

[00:10:23.15] - Speaker 3
So that, that whole thing of having that protection there and everything was like really important for me. And it was a great learning experience for me today because that one area where I should have waited for the second retest for the second wave down, I didn't, I got impatient, I got a little cocky, little greedy. And I think for people who are learning this and understanding this is that this is a key thing to really wait for and be patient on those second retest for the of the location where you think it's going to go either way because that's Typically where you're going to see the move that you're.

[00:11:06.12] - Speaker 1
You'Re expecting was saying something what is really important. And, and we use this always I think when we're trading. So where are we looking for? For example, Dean was saying, okay, it's a BL3, we get the retest and then boom, we test it. So what we telling the people always about technical correction and follow through. Can you explain this in your words?

[00:11:34.29] - Speaker 2
So, so follow. So, so you mean so I guess the follow through technical correction, the market and the follow through. So the retest continuation or.

[00:11:45.23] - Speaker 1
Yes, yes. So if, if it came down, so what we most of the time expected, if we came so hard down, we will wait like what was Dean saying?

[00:11:55.21] - Speaker 2
Right, so the trend.

[00:11:57.04] - Speaker 1
Yeah. For small technical correction to the upside. So, so people taking profits, we get some, we get some, some, some technical correction and then we will wait if we see from the down of here some follow through. Correct.

[00:12:13.19] - Speaker 2
Right. Yeah, yeah. So just staying with the trend. Yeah, that's what you want to do. You're always, always sticking with the trend. So yeah, waiting for that first impulse because yeah like market's never just gonna go well it's, it's very rare. Of course we have some of those days where very rare where you know, it just waterfalls all day with no technical correction. But on majority of days, yeah, we wait for that first major impulse, a retracement and then wait for that and then waiting for that second impulse. But on confirmation, but it may also making sure that the area makes sense as well. Because you don't, you, you would on the impulse and that technical correction, you wouldn't want it to be on the 50 range either. So let's say we get the big impulse down a lower low. But if the technical correction is very strong and it comes all the way back up in like let's say the daily or the weekly like 50 range, then that's a little, little complicated as well. You want the technical correction to be well below that 50 range where it makes sense that it's a lower high as well.

[00:13:14.17] - Speaker 2
And always sticking with the trend because yeah like majority, like a lot of strong traders, what they do, they wait for that trend and they capitalize on the trend and you never fomo near at the bottom. You're never going to take shorts at the very bottom because you always got to wait for that technical rebound for it to like continue carrying through. And you saw that on like oil futures today because like futures like oil can be very, can be very clear cut especially with the trend. The trend could really be your friend when you're trying oil. And I noticed like Dow Jones as well. But here again. Yeah, it's just about. That's again about being patient. The timing and the location. But also remember where. But when you get. Once you get that technical correction, make sure you have support behind you as well. Because if you're a no man's land.

[00:13:59.19] - Speaker 1
Yeah.

[00:13:59.29] - Speaker 2
You draw your fibs and that technical correction you don't have much to back you up to go short again where it's in no man's land. That doesn't make sense either. So here you could use the blind spot six or the one because obviously we got. We got rejected by the blind spot one. That's a heavy area of confluence. So that could also make sense as well. You, you pick out one and two or the strong ones. And if we got that strong rejection from one, then that's maybe your checklist. And then you wait for any, wait for that that move up to give you that good short entry for a better discount and then you just follow through. So that could be another like trading idea as well. Like making sure that rejection made sense. Because let's say you got an impulse. Let's say you had a sell off of where there was no major gamma levels, no major blind spot levels. It basically sold off in no man's land. Then they may be question, oh, this sell off doesn't really make sense for it to continue because it never reacted from an important level.

[00:14:53.07] - Speaker 2
So that could be another thing too. Like make sure that reaction is from an important level. If there is no reaction from the level then that's, that's not part of your checklist. So I think that could help as well.

[00:15:01.26] - Speaker 1
Yeah. And also for you, Dean, and I think you, you know it. But sometimes it's really hard to. To follow. If you be in the market, it's always easy to say after this, yeah, you should do this, you should do this. But if you be in the market, it's really hard to follow all this, all the stuff because I know it exactly on myself. But something, but something what, what is working really well. And if we get some, some small pullback on, on some areas like what you get here on B L3 so you can imitantly take out your, your Fibonacci and draw your Fibonacci. Like what I was doing, I was connecting the BL1 to BL3 to find out where we have a hidden liquid target area. And then boom. We came to this area and you were seeing that we were stopping here and then we get the trend again. So this is meaning for me. Okay the uptrend there's no valid. It's only a small, small little correction. We. We have no power to going through this area and then boom. We can, we can re. Enter again or we can, we can position us new.

[00:16:17.10] - Speaker 1
We can build a new position and we can do this also also here. So we can also say okay let's connect the BL3 and then let's connect the BL10. Here we go. Sorry. So then it's only in this area here and we have also no strong power to go and truth this. So there was no no way to say to, to ourselves okay maybe to go long or something like this. It's only technical correction. So we can use tools when we be in the market. So and, and you must have for you simple and easy techniques. So the one technique is like asking yourself this is the right time, this is the right location and then we will speak about the setup but also have tools on your side where you can really quick and easy use. And and Steve, last question before you go. What tools do you have on your side? What you use daily in your, in your trading. What becomes so yeah it's completely normal that you use this during the trading. It's like the Fibonacci. Yeah. Or what are you using? Of course.

[00:17:32.20] - Speaker 2
Yeah like I I showed my risk reward indicator that gives me when I measure my wrist to where I would like to start taking profit. Fibonacci is always strong when you, when you measure from level to level. And also of course the 20 smooth moving average I use but I use that more so when I once I start trailing at the ATR the SMA like when I'm already in profit and like to trail it on the one or two minute and just kind of see if price can like remain below that level if I'm shorting. And for me and then of course the mental mentor Q levels that's really the only indicators I use. Patrick, on on trading view I know you're the same as well. You keep it very clean, very simple. You sometimes throw on like the smooth moving average and and the levels and just in the drawing tools are Fibonacci and that's.