Building a Data-Proven FVG Trading Plan

creating a trading plan that actually works is a difficult process so I'm here to help I've done this before for myself and I've done this for other students like yourself that actually bring in results now this video is absolutely perfect to follow along with everything that I do so also feel free to open up a chart now to get to your trading plan we are going to go over three steps and the first step is the PD the second step is the data the third step is the plan now before diving into step one let me give you a bit of a backstory this what I'm about to show you is exactly how I got to my first ever trading plan that was profitable the first thing I did when I was learning about trading is I started to look at the lower time frame as with any other trade that just starts out I thought that's where the magic happens that's where I need to be and every single day that passed by I would notice that certain fair value gaps just held they followed through perfectly and if if I was to enter off those fair value gaps I would have gotten a lot of profit so then the question Rose why do certain of those fair value gaps actually hold at first I would just buy at any 5 minute fair value Gap or short at any 5 minute bearish fair value Gap and this obviously didn't work out that well so I had to figure out well why are those certain fair value gaps actually holding and why are others not holding and that is where we then start noticing a certain pattern that leads to those fair value gaps actually holding so what are we doing we are reverse engineering a trading plan where we start at the entry and we build our way up and in this way we can create a foundation of a strong trading plan and that leads us to step number one the PD in Step number one I want to ask you which PD Ray do you want to enter on and which time frame do you want to enter on those two questions need to be answered now how can we answer those two questions let's start off with the first question which was what PD do you want to enter on how do you know that well which PD resonates with you what does that mean if I explain to you a fair value gap an order block a swing High swing low and there's one PD that really stands out say you just understand it it just resonates with you so if you open up a chart what is the first thing that comes to mind for you is it a fair value Gap is it an order block a mitigation block a breaker block PD Ray that pops out to your eye and that is easy to understand for you that you find interesting that is the one that you want to choose so for me and I think my videos reflect that that has always been fair value gaps so my whole trading plan and everything I basically do is all based around one single PDR and that is fair value gaps so in this video for the examples we are going to use fair value gaps but if it's order blocks for you then you can just simply replace the fair value gaps with order blocks now second question which time frame do you want to enter on this all depends what type of Lifestyle you have for example if you have quite some time and you can actually focus on one single session for 3 hours then the one minute time frame might be very interesting to you but if you also have something next to trading or you don't want to spend a lot of time behind the charts then you can also opt for a higher time frame now the main time frames I would like you to choose from are the 1 minute the 5 minute 15 minute the 1 hour the 4 Hour the daily weekly and potentially monthly that is going to be your entry time frame now if you're not certain which time frame you should choose don't worry about it too much you can always change the time frame you want to enter on because the trading plan that we are actually going to build is not reliant on one time frame meaning the trading plan works on any given time frame now for my current life I would like to use the onour time frame so I want to focus on 1 hour fair value gaps we want to gather the following data how many times does the fair value Gap show up how many times does the fair value Gap hold and how many times does the fair value Gap faill now looking at the screen on the right side we have our trading view on the left side we have a notion where I gathered the data I want to first of all clear a few things up I gathered the data in the following manner I was only looking at fair value gaps in the most recent lack now I'll explain that a little bit more clearly later on then the second one holding means an FG was traded back into and created a new FG before taking out the lag the FG is in it's quite a mouthful let's explain that so for example this is a fair value Gap right there that actually held because this fair value Gap right there eventually created a new fair value Gap a new bearish for in the same direction before it took out the lag right there and to understand a lag when we have a bearish lag it's a swing High to Then followed by a fair value Gap if we have a bullish lag that means we are having a swing low followed by a fair value Gap so for example this fair value Gap right here in this bullish lag did not hold because we took out the swing low right there and then continued higher but this bearish fair value Gap right here did hold because we created a new fair value right there before taking out this swing High all right then we need to understand the data is collected from 1H hour fair value gaps on GBP Us doll right there between Monday June 17th 2024 12 a.m. New York local time and Wednesday June 26th 2024 8:00 p.m. New York local time or simply said whilst I'm recording this video the last two weeks all right then looking at the chart on GBP Us doll and opening the object tree we have the first three maps that are important right now we have a map with not traded into fair value gaps these are fair value gaps that have not been traded into immediately meaning we have created multiple lags before trading back into those so again remember when we said only looking at fair value gaps in the most recent lag those are not the most recent lags anymore so those fair value gaps are not that relevant then we have the fair value gaps in the map did not hold in other words they did not create a new fair value gap before the lack that the fair value Gap is in was taken out and then we have the fair value gaps in the map that held so all these fair value gaps held in other words they created a new fair value Gap in the same direction without taking out the lack that they are in so in total this leads to a sample size of 39 fair value gaps now off of those 39 fair value gaps we have 13 orange fair value gaps meaning they were not directly traded into off of those 13 orange fair value gaps only one of those fair value gaps actually held meaning we had a sting into that fair value Gap and then we created a new fair value gap which is this fair value Gap right here on the left off of this fair value Gap we actually had a sting into it to then follow through higher with a new fair value Gap that means in this sample size the fair value gaps that have not been traded into have a holding rate of 7.69% so we can determine of those 39 fair value gaps that 13 of those are just extremely low probability so we don't want to use those we want to focus on the 26 that are left and those 26 Fair Value gaps that are left are always in the most recent lag then on the trading view we see the 26 usable fair value gaps so that are in the most recent lags off of those 26 usable fair value gaps we have 14 fair value gaps that did not hold and we have 12 fair value gaps the green ones that did hold this creates already a holding rate of 46.5% meaning that if you were to trade off of any of these fair value gaps the chances of them holding is 46.5% in this sample size again understanding that we are dealing with 2 weeks of trading right here the more data we have the more reliable the data is also going to be so if you're going to do this then you can gather a lot of data and you don't have to back test for that you can simply do this in hindsight so now you can imagine the younger version of Ario was quite excited because now we have some data to deal with and we can actually know which fair value gaps want to hold and which don't want to hold through exploring patterns which leads me to step number three the plan now that we have the data we again want to find the reason why certain fair value gaps hold and why others do not hold this can be done by seeing what led up to the moment of a fair value Gap holding meaning if we go up in time frames for example what is happening on the higher time frame whilst that fair value Gap is holding is there a certain technical pattern that can be found or is there a specific time when those fair value gaps hold now once you start recognizing those patterns you now have the basis the foundation of your trading plan of course I'll help you out right here and I've already gone over a few scenarios in the notion on the left side if we now look at step number three the plan right there and we unfold that then we'll start off with trading plan number one which is trades all usable fair value gaps so the first thing that we can do is create a naked trading plan meaning all the usable fair value gaps that we have noted down right here what if we simply enter on all of them and that leads to this result right here where we have a lot of different trades and we create the following outcome in an notion I've written down if you were to trade off of all the usable fair value gaps with the following rules covering the swing point of the lack meaning if we have this fair value Gap right there we enter on the fair value Gap itself and we cover the swing high right there off that lack if it's a bullish lag then we cover the swing low then we target to RR and we don't go break even so it's either a take profit or it's a loss that leads to the following thing I've gathered the data right there of all the trades that you're seeing right here this of course there 26 F Val gaps so it leaves to 26 trades 11 of those trades are winning trades 15 of those trades are losing trades that creates a win rate of 42. 31% a little bit lower than the holding rate that we had of fair value gaps this then creates a profit and a return if you were to risk 1% on all of these trades of 7% in other words 7rr now you might be like well let me just go ahead and enter on every 1hour F Gap from now on again we also need to take something into account and that is psychology our technical plan needs to be in alignment with psychology in other words the trading plan needs to make it easy to not mess up in our psychology so to not get a lot of emotions and we start overtrading and that is a a small detail that a lot of people forget for example if we were to take all these trades right here then you would come across as well a four trade losing streak right there and potentially even bigger because that is only in this sample size that we have right here so can your psychology actually take it if you were to take every single pair value Gap as in if you are in that four losing streak can you keep your psychology in check to not mess up and now start overtrading because those are four hits that you are taking so in my eyes I like to have a little bit of a higher win rate so I take less hits before I take the next winner because with a losing streak what happens is after the first trade that you lose you take a hit so what are the chances that you might do something that is not in the trading plan anymore and you might start taking weird trades because you can't control your emotions anymore and then you take another hit a second hit and that is another moment where you get tested where your psychology gets a hit and if you keep on taking hits then it's only a matter of time before your psychology can't take it anymore and you will start overtrading Revenge trading and that is of course not what we want to do because then we don't lose minus one we lose minus 10 potentially or we lose the whole account so then what I wanted to do is all right so what if we only enter off of fair value gaps that are coming off the previous fair value Gap that held which leads to the following trades right here these trades are all trades off of fair value gaps where the previous fair value gaps held meaning see how this fair value Gap right here followed through with a new fair value Gap then you would enter on the new fair value Gap right there this creates the following data with the following rules the FG needs to be created off a previous Fair Val Gap again same things covering the swing point of the lag targeting to R and no break even so just creating that raw data that's important then you have the following trades right there which leads to 12 total trades six winning trades six losing trades with a win rate of 50% and a profit of 6% or 6 RR which is better and is overall good trading plan but it's not quite there which then leads me to the understanding well what if we were to only enter off of fair value gaps that are in alignment with a daily context let's first understand what context means context is the following if we have context we are moving off of a PDR to a next PDR that creates a context area so in this case we are using fair value gaps here on the daily we have this daily fair value Gap and we also have this daily fair value Gap right there now if we continue lower off of those daily F gaps it will encounter a first discount array because we're coming off of a premium array right there which is the fair value Gap the first discount array in these cases are these swing lows right there this then creates something known as a context area where from the highest point that we sting into those Fair value gaps towards this swing low that is where we can look for entries that is a context area so this right here is a higher time frame technical pattern where we can potentially see hey if we trade within that technical pattern on a time frame above us the 1hour fire gaps have a lot higher probability of holding so let's actually see if that's true these are all the trades right here inside the daily context we have the gray boxes the big gray boxes which are the daily V gaps and we have the lines at the bottom which is where the context ends because that is where we reach that opposing first PD Ray now taking a look at the notion if you were to trade off all the usable fair value gaps in line with daily context following rules only trades within the context area which is again from the daily valap to the first opposing BD aray and the other three rules are the exact same like we have discussed before this leads to the following trades right there which leads to 13 total trades nine of them are winning trades four of those are losing trades with a total win rate of 69.23% and a total profit of 10% or in other words 10 RR so now we understand that if we take every single fair value Gap right there as a trading ID within that daily context then we already have a lot higher probability fair value gaps and that is just simply because we now have have the higher time frame supporting the ID and to add on to the backstory this is exactly how I got to the understanding of where Fair gaps are more likely to hold this is how I got to the understanding of context areas all through my own experience I didn't have anyone telling me hey if you look at a context area you have a lot higher probability trades so take advantage of that knowledge so this trading plan is good but I wanted to test one more thing because what if we now combine those fair value gaps that held and as well inside that daily context area well then we get to the following trade IDs right here where we can see we have a lot less trading IDs but a lot higher probability so if we again take a look at the notion if you were to trade off of all the usable fair vals that previously had a fair valap holding and in line with daily context so fair valap needs to be created off a pre previous fair value Gap only trades within the context areas and again the rest of the rules are all the same then these are all the trades that we can get to right there which leads to a total of seven trades five of those are winning trades two of those are losing trades that is a win rate of 71.43% which is a little bit higher than the previous trading plan and the profit is a little bit lower which is 8% so we take less trades we make a little bit less profit but we take a lot higher probability trades now there is a downfall here because if you now start adding rules onto rules onto rules where you try to filter out all the losing trades then you are going to go through the exact same cycle that I have also been through where you add too many rules and you need to read a whole chapter of a book before you can dive into your chart how many Pips is this fi Gap is this fi Gap exactly Crea at 310 a.m. New York local time and then you will be taking one trade every full moon cycle so there's one extreme where you take too many trades and there's also another extreme where you take too little trades we need to find the balance and once we find that balance we have a very strong Foundation of a trading plan and when we have a strong Foundation we can build on to that and this whole process is what then led me to the following understanding the five found ational levels where we have the first one which is bias the second one is narrative the third one is context fourth one is entry and the fifth and last one is risk management and you might see hey we have started at foundational level number four the entry yes because we are reverse engineering the trading plan where we then got to the understanding hey if I now incorporate context it's a lot higher probability and now I can potentially look at narrative so how can I now find that the highest probability context how can I now find the highest probability narrative how can I make sure that I now find the best buyers all based by just looking at number four first the entry and then your whole trading plan will be based around One Singular BD array in the mmt I provide people with a lot of different trading plans but I also tell you how to get to your own trading plan which is arguably even more valuable there's a link in the description with all the data that I have gathered for this video then I wish you the best of luck always here when you need me and you got this all right perfect thank you