Do you know what trading charts have a high win rate?
The kind of price movement you trade directly impacts your trading win rate.
So I decided to rank the best and worst trading charts I have seen in my eight nine years of trading journey.
Everything I’m going to put near the top of this list is good, and everything at the bottom is bad.
Number six.
This one is very easy to fall for as a beginner trader.
When the price is switching directions pretty much every other candle, most indicator crossover strategies will have a lower win rate on that chart.
Why does this happen?
Well, you see, this frequent direction-switching movement is what we call a choppy market.
For comparison, here’s a clean movement chart.
Most crossover indicators, such as MACD, give a single clean crossover when the price is clean.
In other words, when most of the candles are moving in the same direction.
When the candles are switching directions frequently, indicators can give multiple and early crossovers.
There can even be a divergence where the indicator says sell, but the price keeps moving up.
Basically, this kind of price movement sucks.
When I was trading price-action-only many years ago, I learned to avoid trading when the candle direction was switching frequently.
A few years ago, I even made a free Trading Rush indicator and tool to spot these bad charts.
In a previous testing video, the win rate increased when I filtered these choppy markets.
So I will put this frequent switching direction in the D tier.
Number five.
You know how sometimes the price makes really strong one-sided moves, something like this?
Well, these are great for someone trading a breakout or something similar.
But I don’t like to buy at the top of the uptrend.
I like to buy when the price gives a pullback.
But in these too-strong uptrends, a good pullback never happens.
Many times, I end up just watching the price make the entire strong move.
When the price finally gives a good pullback, that strong move is usually over.
These kinds of strong moves are rare and are a bit difficult to separate from other movements.
They only become clearly visible when the strong move has already happened.
So I will put this in the B tier.
Number four.
Speaking of strong moves, have you ever seen big sudden moves like this on the chart?
Well, these are usually caused by some news event.
I even tested one of those news events in a previous video, and it got a really good win rate.
However, for normal trading strategies, these kinds of sudden big moves suck.
They make the indicator data unreliable for a while.
Indicators, such as MACD, will also use this big candle to calculate their values.
When there is a sudden big downward move and then the price moves up, one might think that they are getting a pullback in a strong downward momentum.
But no, these news moves are usually short-term moves.
They give a wrong sense of momentum and trend to the indicators and you.
So after these news event moves, I like to avoid taking indicator entries for a while.
I will put this in the D tier.
These big moves just get in the way of most trading strategies.
Number three.
The most annoying kind of trend a beginner trader can easily fall for is the slow trend.
For example, let’s say there is an uptrend, and the price gives a pullback.
So you take a long trade when the MACD gives a long crossover.
But then the price gives another bigger pullback.
Your stop-loss is triggered, and then the price moves in the upward direction.
You see, in a slow trend, you can get multiple false entries before getting a proper one.
Many times, when I see a price giving multiple pullbacks, something like this, then I like to trade that chart with caution.
Like, I try to find additional confirmations, such as MACD crossover near support resistance, instead of just MACD crossover.
I will put this in the A tier.
At least it gives more opportunities than the too-strong trend.
Number two.
Even though ranging markets are not good for trend traders, range support resistance areas are one of the strongest support resistance.
They are easy to spot and simple to trade.
I will put range charts in the S tier.
Number one.
There is only one kind of chart that can make even a dumb strategy get a good enough win rate.
It’s the chart where the price is making higher swing highs and higher swing lows, or lower swing highs and lower swing lows pattern.
In other words, the chart where the price is trending normally.
Not too strong and not too slow, but just enough upward or downward momentum where we get enough pullbacks to take trades and make money.
I will put the normally trending charts in the S tier.
That’s all! Thanks for watching!