30:39
This Stupid Simple Strategy Works Everyday (Stupid Simple And Proven)
PB Trading
Overview
This video introduces a simple, high-probability trading strategy focused on identifying and capitalizing on order flow reversals. The core concept involves waiting for price to reach a higher timeframe key level (like a fair value gap), then observing a reaction and the formation of a smaller timeframe fair value gap. A trade is entered when price retests this smaller gap and shows an inverse movement, indicating a potential shift in market direction. The strategy emphasizes probability, simplicity, and discipline, with the presenter backing it with a month-long backtest showing a 75% win rate and a 1% risk per trade.
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Chapters
- Mastering one trading strategy is more effective than constantly seeking new ones.
- Consistency in trading comes from refining a single, well-understood model.
- Strategy hopping leads to analysis paralysis and hinders profitability.
Focusing on mastering one strategy prevents overwhelm and builds the deep understanding needed for consistent trading success.
The presenter emphasizes that they have used the same core strategy for two years, adapting it slightly to market conditions rather than switching strategies.
- The strategy relies on four key concepts: fair value gaps, inverse fair value gaps, liquidity, and daily bias.
- Simplicity is crucial; overcomplicating trading with too many indicators leads to poor decision-making.
- The goal is to find high-probability setups by confirming a shift in order flow.
Understanding these foundational concepts allows for the systematic application of the trading strategy, reducing subjective decision-making.
The presenter explicitly states that concepts like fair value gaps, inverse fair value gaps, liquidity, and daily bias are the essential components needed before learning the strategy.
- Step 1: Price must trade into a higher timeframe (1-hour or 4-hour) unfilled bullish fair value gap.
- Step 2: Wait for price to create and then trade back into a 5-minute bullish fair value gap, confirming bullish intent.
- Step 3: Enter a long trade upon an 'inverse' (rejection and move away) of the 5-minute fair value gap, targeting liquidity pools.
This structured approach builds a narrative of increasing probability for a bullish move, moving from a general higher timeframe level to a specific, confirmed smaller timeframe signal.
An example is shown where price hits an hourly bullish fair value gap, then forms a 5-minute bullish gap, retests it, and reverses, signaling a long entry.
- Step 1: Price must trade into a higher timeframe (1-hour or 4-hour) unfilled bearish fair value gap.
- Step 2: Wait for price to create and then trade back into a 5-minute bearish fair value gap, confirming bearish intent.
- Step 3: Enter a short trade upon an 'inverse' (rejection and move away) of the 5-minute fair value gap, targeting liquidity pools.
The strategy is versatile and can be applied in reverse for short trades, maintaining the same principles of confirmation and probability.
The presenter explains that for a short, price would hit a higher timeframe bearish gap, then form a 5-minute bearish gap, retest it, and reverse, signaling a short entry.
- The stop loss is placed at the swing low (for longs) or swing high (for shorts) that formed before the entry signal.
- The break-even point is typically set at the 'internal high' (for longs) or 'internal low' (for shorts) before the entry candle.
- Profit targets are set at the next significant liquidity pool, with a 1:1 risk-to-reward ratio often yielding a 70%+ win rate.
Defined risk management and profit targets are essential for executing the strategy consistently and maintaining a high win rate.
For a long trade, the stop loss is at the low that traded into the 5-minute gap, and the target is the next buy-side liquidity pool, aiming for at least a 1:1 reward.
- The presenter walks through multiple live examples of both long and short trades, demonstrating the strategy's application.
- A one-month backtest of the strategy (July) showed a 75% win rate with 27 trades, risking 1% per trade.
- The backtest results highlight the effectiveness of a high win rate with a 1:1 risk-to-reward ratio.
Seeing the strategy applied to historical data and live examples provides concrete proof of its efficacy and helps learners visualize its execution.
The backtesting results for July showed a total profit of approximately 13% over the month, with 18 winners and 6 losers, validating the strategy's performance.
- While the strategy is simple, consistent application requires discipline and avoiding impulsive trades.
- Learners are encouraged to adapt the strategy to their own style while maintaining the core principles.
- The presenter emphasizes that profitability comes from a combination of a robust strategy, mindset, and disciplined execution.
Trading success is not just about having a good strategy, but also about the psychological discipline to apply it consistently and manage risk effectively.
The presenter mentions that even when a trade fails, if the core levels still hold, re-entering can be a valid approach, demonstrating resilience and adherence to the strategy's logic.
Key takeaways
- Mastering a single, simple trading strategy is more effective for long-term profitability than constantly searching for new ones.
- High-probability trading setups are built on confirming order flow reversals using higher and lower timeframe fair value gaps.
- The core strategy involves price hitting a higher timeframe gap, creating a smaller timeframe gap, retesting it, and then reversing (inverting).
- Strict adherence to risk management, including stop losses and break-even points, is crucial for preserving capital.
- A high win rate strategy with a 1:1 risk-to-reward ratio can be highly profitable when executed consistently.
- Trading success requires not only a sound strategy but also the psychological discipline to apply it without overcomplication or emotional decisions.
- Fair value gaps act as key areas where price is expected to react or reverse, especially when confirmed by smaller timeframe structures.
Key terms
Fair Value Gap (FVG)Inverse Fair Value GapLiquidity PoolDaily BiasOrder FlowHigher TimeframeLower TimeframeProp FirmAnalysis ParalysisRisk-to-Reward Ratio (RR)
Test your understanding
- What are the four essential concepts required to understand the presented trading strategy?
- Describe the three main steps involved in executing a long trade using this strategy.
- How does the strategy differ when looking for a short trade compared to a long trade?
- What is the role of fair value gaps in this trading strategy, and why are both higher and lower timeframe gaps important?
- Explain the risk management rules for stop loss, break-even, and profit targets within this strategy.