In this interview with Jason Graystone, we will be discussing forex trading, dispelling the myths and teaching you everything you need to know about forex trading!
Since starting his first business at 22 years old, Jason Graystone has successfully built and run multi million pound businesses both in the service sector and online. Coming from a working class family with little education, Jason embarked on a journey of self development from an early age which he says played a fundamental part of his success.
Jason believes that if you have the right mindset and adopt the right personality traits, you can use the same formula to achieve anything you want in life; and it’s this attitude that allowed him to achieve financial independence by the time he was 30. Jason believes that everyone deserves to live an inspired life.
“We are better people when we have time to contribute towards what we are passionate about. We can solve meaningful problems and be rewarded and fulfilled at the same time.” – Jason Graystone
This belief is what drives Jason to help others achieve financial independence by educating them on the true secrets of wealth so that they can be liberated from the societal restraints and live the life they deserve. Jason has become globally recognized for his transparent approach to teaching and his ability to transfer knowledge onto his students through integrity, accountability and his tireless contribution.
Learn more from Jason Graystone:
Free Forex Training Course
The Trading Coach Podcast
$1 Trial Membership Tier One Trading
Ryan Scribner: How’s it going today, guys? Welcome back to The Channel. I’m here in New York City with a man by the name of Jason Graystone. It’s the first time I’ve ever talked to a trader on The Channel here, so it is super exciting.
Ryan Scribner: You’re all the way from London?
Jason Graystone: Yep.
Ryan Scribner: Thanks for taking the plane trip out. I certainly appreciate it.
Jason Graystone: It’s great.
Ryan Scribner: Why don’t you go ahead and start by doing an introduction about yourself, what it is that you do?
Jason Graystone: First of all, thanks for having me on The Channel. It’s a real joy to be out here in New York City.
Ryan Scribner: Aside from the traffic, right?
Jason Graystone: Aside from the traffic, yeah, and the humidity.
Jason Graystone: For those of you who don’t know me, my name is Jason Graystone. I’m a professional currency trader, and I’m also a co founder of a company called Tier One Trading. We specialize in helping people achieve financial independence through speculative strategies in the financial markets. I’m frequently number one author on TradingView.com. I’ve featured in blogs and podcasts. I’m currently writing a book, which will be out later this year. I’m also invited to speak around universities in the UK and take part in research for business development and things like that. I’m really enjoy entrepreneurialism as well as trading, but trading was what allowed me to be financially independent.
Ryan Scribner: Yeah, we were talking about that a little bit off camera. I think it’s super interesting, but for you, trading was a way for you to escape the traditional work environment that you weren’t really a fan of?
Jason Graystone: Absolutely. Trading is something different for everyone. For me, it was a vehicle to get to a point where I just had time. I wanted the time to decide how I spended that time, and it was a way to accelerate my wealth in order to do that. That was my motivation for it.
Ryan Scribner: Yeah, I know that’s one of the most frustrating things, is when you don’t know exactly what it is you want to be doing. You don’t have the time to figure it out, and so I think for a lot of people, maybe they focus on wanting the money, but really it’s more important to figure out why it is that you want that.
Jason Graystone: Absolutely.
Ryan Scribner: That’s really incredible to say, in order to figure out what I really want to do with my life and what really interests you on a natural level, so …
Jason Graystone: For me, the money’s just a byproduct. You need a why, and we’re going to go through that. The reason I wanted to come on this channel is I really resonate with Ryan’s approach, and if you’re familiar with trading at all, you’re going to see that there’s a lot of shit out there, right? I can say shit?
Ryan Scribner: Yeah, that’s perfectly fine.
Jason Graystone: There is a lot of unethical educators. There’s a lot of people selling dreams, false expectations, and people are really falling for this stuff and losing a lot of money. They really are. I lost a lot of money myself. Over the years, I’ve worked with thousands of traders, and I’ve seen a lot of predictable patterns. I’ve seen what works, what doesn’t work, and it is a massive failure rate. It is a massive failure rate.
Ryan Scribner: Yeah, do you have any numbers on that, as far as what it is? I know it’s quite high. In some of the stuff I’ve look at before, it’s most people are unsuccessful with it, right?
Jason Graystone: It’s about 90 percent, yeah.
Ryan Scribner: That’s about what I’ve seen too, about 90 percent are unsuccessful.
Jason Graystone: Yeah, we know that from broker statistics, that about 90 percent of people lose 90 percent of their capital within 90 days, so it’s a 90/90/90 …
Ryan Scribner: Ninety-ninety-ninety. That’s not really a good … although it’s easy to remember, but, yeah. That’s what I’ve heard about trading as well. Obviously, you guys who have watched my channel before know I’m a long-term value-oriented investor. Looking at both of us, we’re kind of polar opposites here, because I’m more focused on the fundamentals of a company, and you’re looking at strictly charts, right?
Jason Graystone: Yeah, absolutely.
Ryan Scribner: You’re looking at currency, so you’re looking at just trading based on patterns, right?
Jason Graystone: Of course. The reason this fits so well is because I was very much a pattern investor. I invested in businesses, stocks, real estate investment trusts and startup businesses as well. Although, take the startup businesses aside, they’re very passive, boring investments. They were long-term. I had an appetite for risk, and I wanted to just accelerate a little bit, so I started exploring speculative markets like options and Forex. I went into Forex, and I blew around 36 to 38 grand initially.
Ryan Scribner: That’s how much you lost? Is that the learning curve that people usually experience, or is that kind of …?
Jason Graystone: I think I made every mistake possible. I followed signals and all of that stuff that I’m going to go through with your listeners. After that I became very good. I learned a lot about what didn’t work, which allowed me to become really good, and I later on realized that it’s actually, you should be focused on what you’re not losing rather than what you’re gaining. If you can just focus on that, you become very good.
Jason Graystone: I went through all the crap … There’s a lot of scams out there. There’s a lot of automated systems, signal services, people selling pipe dreams. Over the years, I’ve been fortunate enough to work with thousands of traders in multiple countries, over 50 different countries. What we’ve seen is, is very predictable patterns in why people fail, because we’ve been analyzing data on the behavior patterns of people, how engaged they are, how accountable they are, what are they watching, what process are they taking, are they going from the start to the finish. Do they skip in? Do they jump in, jumping ahead? Do they actually want it? Have they got realistic expectations?
Jason Graystone: I’ve produced a framework almost that will guarantee your highest probability of success. Obviously, it’s down to you as a trader in the end.
Ryan Scribner: Based on looking at the behaviors of past students and past people who haven’t had a good experience with it?
Jason Graystone: Absolutely. If you follow the framework in this way, which a lot of it is down to psychology, by the way. The skill is the minority, believe it or not.
Ryan Scribner: That’s pretty much the same thing as well with investing in the stock market. It’s the psychology of it, as far as the investing goes and the fundamental analysis, that, based on looking at the numbers and the principles, but it’s a totally different experience actually doing it.
Ryan Scribner: As far as the risk side of it goes, I know you mentioned having that greater risk appetite. I know, personally, I dabbled around with swing trading very early on in my investing career. I can remember I had $500 I was swing trading, and it was keeping me up at night, worrying about it, so I learned early on that I do not have the risk appetite for much of anything beyond what I’m doing now.
Ryan Scribner: How do you know, I guess, when you have that risk appetite? Is it something you just try it out and you find out if you do, or …?
Jason Graystone: Yeah. I think by the time I’d lost 36 grand, it wasn’t just blowing 36 grand in the market. That was a long learning curve. It was over 18 months to two years.
Ryan Scribner: How did you feel about that? Did it make you feel like a bad person, or you just felt like, “Okay, I’m getting there?”
Jason Graystone: I felt frustrated. I did try to look at it as a donation to my education rather than a big loss. At the same time, that’s a lot of money. That can be a life-changing amount of money to lose. Fortunately, I’m a businessman and I’m not stupid, and I would never trade money that I couldn’t afford to lose, but it’s still a lot of money. By the time I’d lost that much, I really felt like I owed it to my family as well.
Ryan Scribner: To do it right at that point, yeah.
Jason Graystone: I was like, “That’s multiple holidays.” I was thinking of all the money that I’d blown. I really just needed to knuckle down and get it done. I knew. You’re so proud as a person. You don’t want to be told that you’re doing things wrong, and then you know, and you just keep doing it. Then by the end of it, you’re like …
Ryan Scribner: There’s no such thing as a free lesson out there. You either pay for it in terms of paying for education, or you make mistakes and you end up losing money.
Jason Graystone: Absolutely.
Ryan Scribner: I have a friend of mine who trades options. He’ll text me sometimes saying he lost 20, 30 grand in a day, but you can tell that it doesn’t affect him. Really, I think what it is, if you feel like less of a person after losing that money, then you probably shouldn’t be involved in something speculative, because it’s just money. It’s a tangible thing, but it doesn’t make or break you as a person. I think a lot of people tie their worthiness to their monetary value, and I think you have to have that separation there to really do something like you’re doing.
Jason Graystone: Absolutely. It’s really important as well before we get into it. I’m going to talk about it in a bit, but it’s really important to build a trading system around your lifestyle and your personality, because if you don’t, you’re essentially doing something that isn’t aligned with your comfort zone, and you’re just not going to succeed. It doesn’t need to be that way. You can build systems around your personality so that you’ve got the best change for success.
Jason Graystone: I’m going to go through a bit of a framework based on all the information and the data that I’ve analyzed over the years. I want to just, before we get right into that, I just want to debunk some myths, because some of your listeners are probably thinking … I get asked all the time, “Isn’t it gambling? Isn’t it risky?”
Ryan Scribner: Sure. I’ve said things about that on The Channel a lot, because, to be honest, I don’t know a lot about the trading side. Really, I don’t know much about it at all.
Jason Graystone: No. Like anything, the markets are the market. They just do what they do. It’s not the market that’s risky. It’s the approach you take to the market that’s risky. If you think about a casino, for instance, you’ve got one-armed bandits, you’ve got poker table, you’ve got Black Jack, you’ve got roulette. The reason the casino comes out on top in the end is because there’s no one who’s consistent. There’s no one with an edge. They just go there, blow some money, they’ve got no strategy, no plan, and they are approaching the casino as a gambler, whereas if you look at the winning poker table, it’s always the same players there, always the same players at the top of the tournament.
Jason Graystone: They’re winning the tournament time and time again, because they’ve got an edge. They’re not approaching the casino as a gambler. They’re approaching the casino as a business. It’s like they’ve got an edge, they’ve got a risk management strategy, a money management strategy, they know when to get in and get out, they know when to stop, and they know when to continue. The markets are exactly the same. The market, you cannot control. It just does what it does, so it can’t be risky. The market can’t be risky. Your approach to the market is what’s risky.
Ryan Scribner: Yeah, that makes sense.
Jason Graystone: Lots of people think that it’s risky gambling, but it’s down to you to approach it professionally as a business for it not to be a risk. We’re looking for an edge, a paper-thin edge.
Ryan Scribner: If you approach it like you would the casino, you’re going to get a similar outcome more than likely, right?
Jason Graystone: Of course. Before we go on, people come to me and say, “I want to be a consistently profitable trader.” Well, the clue’s in the title, right? You have to be consistent.
Ryan Scribner: Not all the time, right? Not every trade?
Jason Graystone: Yeah, absolutely. You just need to show up and do the same thing, same thing. I’m going to go into that in a bit.
Jason Graystone: Secondly, people think that you have to be intelligent, you have to have a high IQ. I came out of school with one grade, and that was aught. It’s just simply not true. If it was true, you would see a lot more brain surgeons ditching their 250-grand job, so earning seven figures trading, because they’re far more intelligent than me, right?
Ryan Scribner: Sure.
Jason Graystone: That’s absolutely not true. The next thing is that people think you need to know about all the global affairs, what’s going on in the country.
Ryan Scribner: Sure, current events and what’s going on in the political landscape and everything.
Jason Graystone: Absolutely. Unemployment rates, bank rates, all of that type of stuff, and that’s not true either. As a technical trader, I’m looking for patterns in the market. I couldn’t care less what’s going on in the world. The market doesn’t affect me. The bank rates don’t affect me. Brexit doesn’t affect me. I’m just looking for a probable edge out of patterns in the market that are predictable. You absolutely don’t need to know about all the global affairs of what’s going on.
Jason Graystone: Lastly on that, people think you need lots of equipment, lots of …
Ryan Scribner: Yeah, I’ve seen the six-computer screens and all kinds of stuff going on, and charts. Do you need all that, or is that just something that helps you, or does it complicate the process?
Jason Graystone: I started trading on a 15-inch laptop. You absolutely don’t need all those screens. Once you get down the road, it’s good to have two screens at least, because … I’m going to go through some equipment I recommend for you guys if you’re looking to start trading. Two is good, because you can have the markets, and you can have something else on another screen if you’re doing other things. You absolutely don’t need six screens. Down the road you might … The reason they have six screens or eight screens is because they’ve got a lot going on. To make it easier, they have different charts and different screens.
Ryan Scribner: Sure.
Jason Graystone: You’re not going to be on Wall Street from day one. You absolutely don’t need tons and tons of equipment.
Ryan Scribner: That’s a myth debunked right there, because that’s something I figured you needed the six computer screens, and I’ve said that in the past.
Ryan Scribner: One thing that was interesting I just wanted to mention, I was looking at one of your videos, and you said there have been times where you go a very long span of time without a trade because the right pattern doesn’t show up for you.
Jason Graystone: That’s right, yes.
Ryan Scribner: What’s the longest span you’ve gone without a trade?
Jason Graystone: There’s a saying that, “You don’t earn money from trading. You earn money from waiting.” It’s absolutely true, although, essentially, it’s trading in the end. Trading requires a lot of patience. One of the other myths is that people think that you always have to be in a trade when you absolutely don’t.
Jason Graystone: What we’re waiting for is a set of rules to play out. Then we know we have a paper-thin edge over the market. The probability of what’s likely to happen next based on that pattern happening provides us with our edge. If we can consistently trade that pattern, that’s how we earn the money. That could be one week. That could be five in a day. That could be once a month. That’s how it goes.
Ryan Scribner: It’s really about the patience.
Jason Graystone: It is about patience.
Ryan Scribner: There’s people who think, similarly, when it comes to investing, they think they need to be all in the market at all times, and if they have any cash, they’re like, “Oh, I’ve got to get this money to work. I got to put it to work.” Then you hear about people going all in with the stock market, investing all their money, and then they have no mobility there. If a deal comes along, they can’t buy anything, because they’re already all in to the market. It’s very similar too, that patience aspect and knowing when to hold them, hold onto your money and say, “Okay, I’m going to wait for a better opportunity,” look for what it is that you’re looking for.
Jason Graystone: Absolutely. Bearing in mind, the purpose of this video is to give you the best possibility of succeeding into trading if that’s something you want to do.
Jason Graystone: The last thing I need to mention on this bit is it’s not, don’t look at it as a get-rich-quick vehicle. If you’re trying to think about how much money you can earn from trading, you’re really missing the elephant in the room. It can be the fastest way to grow your wealth. I’ve invested in businesses. I’ve invested in property. I’ve invested in stocks and shares. This really is the most rapid way to accelerate wealth, but if you’re just chasing the money from day one …
Ryan Scribner: You’re in it for the wrong reasons, yeah.
Jason Graystone: You’re in it for the wrong reasons, which is leading us onto really the first step of the framework. The first, and you’ll know just as well as I am, the first step in the framework, the most important thing, is to actually want it, right? What I mean by that is so many people out there are fantasizing over someone else’s dream. They see someone that’s hit a trade or there’s crap where they’re flying around in rented helicopters and Lambos and the money …
Ryan Scribner: Yeah. I’ve seen it all, yeah.
Jason Graystone: Of course. Of course.
Ryan Scribner: Flashy lifestyle, the kind of in-your-face showing off your rich …
Jason Graystone: Absolutely. What people do is they go, “What are you doing?” They say, “Well, I’m trading.” Then they go, “I want to trade.” Do you want to trade, because, I’m telling you, if you don’t enjoy actually looking at the markets and enjoy solving the puzzle, you’re not going to stick with it, because there’s lots of hard work down the line that you’ve got to put in.
Ryan Scribner: Yeah, people tend to ignore that hard work piece, and they just see, “Oh, this guy’s driving a Lamborghini. I can do that too if I started doing whatever he’s doing.”
Jason Graystone: Yeah. It’s not for everyone. Trading isn’t for everyone.
Ryan Scribner: Do you have to have a natural interest in charts and patterns and puzzle solving, like you were saying?
Jason Graystone: I would say that you have to actually enjoy looking at the markets and coming in each day. You don’t have to look at them all day. You can do day trading, swing trading, which we’ll go through, and you don’t have to spend lots of time in front of the chart, but you do have to have an enjoyment for the psychology in the markets and going through the charts, because there’s lots of back-testing data that you need to accumulate so that you’ve got the psychology to put that into your plan. You have to just actually enjoy doing it.
Jason Graystone: Know that you actually want to trade, because that’s the first thing that’s important, and why, because the monetary value, or the monetary gains from trading, it can be life-changing. I was just with a couple of Wall Street traders, and they said the same thing, it can be life-changing. What’s the money for?
Ryan Scribner: Sure.
Jason Graystone: Because it’s just money.
Ryan Scribner: Right.
Jason Graystone: There’s some kids in the [prop firm 00:17:19], they’re just driven by the money, because they haven’t got that … They’re just out of school. They’re just trying to vector the other person for more money. It doesn’t really mean anything to them. They’re just trying to get more money, because it’s a competition, like a [crosstalk 00:17:32].
Ryan Scribner: See who can have the most money in their bank account, not really, “Why do you want that money?” It was interesting too. You were talking about some of your motivations for doing what it is that you do and wanting to give back to the people around you, and really the more money you have the more good you can do for the world, and the more good you can do for people’s lives.
Jason Graystone: Sure. For me, it’s to free up my time to do what I want to do. As I said to you earlier, I ask people or if people say, “You’re driven by money,” these are the sorts of people that I say, “How much would suit you,” and they say something like, “Half a million or a million or two, that would sort me out.” I think that’s very selfish, because you’re just thinking about you and your immediate family.
Ryan Scribner: Not the people around you or your community or people you could really help.
Jason Graystone: Absolutely. I’m thinking much bigger term. When you can teach someone the realistic expectations and teach, and they get results, that’s life-changing, and there’s not a better feeling than that. Even, like I say, the Wall Street traders that we was with yesterday, even they are going into education, because there’s just so much rubbish out there, it’s important to get the information right, because it’s giving it a really bad name, which you’ve probably seen.
Ryan Scribner: Just to tie in here, in case you guys aren’t sticking around for the whole interview, you have a whole YouTube channel, where you do videos like this, educating people pretty much for free?
Jason Graystone: Yep. Yeah, I’ve got my own YouTube channel. My personal channel is Jason Graystone.
Ryan Scribner: I’ll link that all up into, down in the description below, for you guys too.
Ryan Scribner: In terms of just giving back, that’s one way that you do it as well, just by making videos helping people, showing them the basics.
Jason Graystone: Absolutely. I’ve got a book coming out later this year that you can go and read. We’re going to go through this video, we’re going to go right into the technicals. I’m going to show you actually how to make money in the Forex market. It’s going to be really valuable for your listeners.
Ryan Scribner: If you end up taking a pause from this video, bookmark it and come back to it, because it’s going to be a long one, but a lot of value in this one.
Jason Graystone: It is going to be a long one. There’s going to be a lot to take in. I’m not going to give you everything, because that will be …
Ryan Scribner: That would be a couple days we’d be stuck here, sleeping at some point.
Jason Graystone: It’s going to be a good one.
Jason Graystone: The first step is I went over what was the want and the why. You have to know that you actually want it and why you want it. The second thing is expectations. This is the next problem. People, because of the way it’s advertised on TV or these adverts, people think, they massively overestimate what’s achievable in a short space of time, so the first 12 months, say.
Ryan Scribner: Sure.
Jason Graystone: They think that they’re going to double their account in a month. They think they’re going to be on yachts in a year, and it’s just not realistic.
Ryan Scribner: Not realistic.
Jason Graystone: It’s not realistic. I’ll be very surprised if it takes you less than 12 months to really go through the process and learn properly and have a system that you’ve tested and paper traded even, and then gone out in the markets. I’ll be very, very surprised. Then because of that, when they actually start doing it, they figure out it’s quite hard. They blow a load of money, and then what they do then is they underestimate what’s achievable from 12 months to 24 months, say. That’s when the results can really, really compound and you see exponential growth. People get turned away by that.
Jason Graystone: What I’m going to do is just give you some expectations. It’s going to take you around 12 months to really, really learn. Then after that, the money, if you can just go through and go through the process in the right way, the money just comes.
Ryan Scribner: In that 12 months, how many hours a week or a day are we talking about here?
Jason Graystone: It depends what type of trader you’re going to be, and I’m going to go through that in a bit more detail, but you can do anything from, the testing is what takes the most time. The testing is what takes the most time, because you’re essentially testing a strategy back in time, and that can take, you want to go back about five years. That can take a long, long time, depending on how many markets you’re going to be looking to trade. That’s the most time-consuming and the most grueling bit, and I’ll go through the process of that.
Jason Graystone: The next thing is, people just going through it not really knowing the numbers, so they don’t know what they’re going for. It’s like, they’re just trading, “Am I going to replace my income or I’m not going to replace my income. What am I doing with the money?” There’s a very, very simple formula. You talk a lot about stock market investing and passive income, building passive income streams.
Jason Graystone: Essentially, if you’ve got any sort of liquid assets, like money in funds, you’ve got some cash, a cash buffer, some savings, anything like that, essentially, all you’re doing is you’re taking that, and you’re working out your expenses for the month, and you just want to minus your trading income divided by your assets, and that is essentially it. What that will give you is a figure in time.
Jason Graystone: If you’re getting paid monthly, say, for instance, you’ve got $5,000 in assets or cash, and your expenses are $2,000 a month, say. If you’re bringing in $1,000 in trading income per month, then if you do the math on that, the 5,000 divided by the 2,000 minus 1,000, which the calculation is here, you’re going to have five months. You can buy five months. You’ve got financial independence for five months.
Ryan Scribner: Okay, I see what you mean.
Jason Graystone: You’ve replaced your income for five months.
Ryan Scribner: I’ve never really thought about it that way. That’s very interesting.
Jason Graystone: Right. This is what I was working from from day one, when I was 26.
Ryan Scribner: Your whole goal was to free up your time?
Jason Graystone: Yeah.
Ryan Scribner: By generating this income?
Jason Graystone: Absolutely. By having that sum, I put this down when I was 26 years old, and by having that sum in place, I knew what it was going for. It wasn’t just a dream. It wasn’t just a …
Ryan Scribner: It was a tangible number, what you were reaching for, not just some pipe dream, like a Lamborghini or a million dollars out of nowhere.
Jason Graystone: Absolutely. By doing that, you have something tangible, as you say. Here’s a great thing. As you get better and better at trading, you can match your living expenses, which then, your financial independence.
Ryan Scribner: Sure. Then at that point you don’t have to go work if you don’t want to do that, right?
Jason Graystone: You free up your time.
Ryan Scribner: That’s the situation you were in, right?
Jason Graystone: You free up your time. As you free up your time, you can earn even more money, because you’re focusing more on trading …
Ryan Scribner: More of your energy and efforts onto … Yeah.
Jason Graystone: Absolutely, so you’ve got it. Just have your numbers, work that out, know what you’re working towards, and know that it’s going to take you a while to learn. That’s expectations.
Jason Graystone: The next thing that’s really important is accountability, self-accountability, because it’s all on you. With other markets, if you’ve got a shot, you’re selling a product, you’re relying on customers, you can blame the staff for not showing up.
Ryan Scribner: Yeah, you have excuses.
Jason Graystone: You’ve got excuses. You can blame the supplier for bad goods. You can blame the economic crisis.
Ryan Scribner: Blame the weather, whatever you want.
Jason Graystone: Blame the weather, blame the traffic, blame the geographical location your shop’s in and everyone’s gone vegan. You can blame things. With trading the markets, it is all on you. If you lose money, it’s your fault.
Ryan Scribner: That’s something that I’ve heard from people as well is, they say, “Oh, the stock market stole money from me.” It’s like, “You handed it over.” If you lost money, you have to at least own up to that. You can’t blame the market. It didn’t reach into your bank account and pluck out money, you know?
Jason Graystone: We hear the same thing. It’s like, “Oh, the broker stopped me out,” or, “The broker took my money.” If you make statements like that or if you hear people say statements like that, it just shows a lack of knowledge towards how the orders are executed in the market. Absolute rubbish. You need to know that you’ve got to be accountable. Self-accountability is absolutely key.
Jason Graystone: Secondly, you’ve got to be accountable to not go off and chase the shiny object. You’ve got to stick at one thing. This is going to take you forever. This is what I struggled with. You think that someone’s got a better system, and you go and follow that.
Ryan Scribner: Yeah, jumping around from one thing to another and just kind of dabbling with it, right?
Jason Graystone: It’s so inefficient, right? If you just have one thing and go for it and don’t worry about …
Ryan Scribner: What everyone else is doing, yeah.
Jason Graystone: Just focus on one thing, one system. Trust me.
Ryan Scribner: That happens a lot of the time too with the stock market, it’s kind of a social thing. If you’re investing, you talk to your friends who are investing, and you hear about your friend’s in a certain stock, and maybe you’re not happy about the one you’re in, so you say, “Oh, I’m going to sell this and buy that,” and you end up jumping around.
Jason Graystone: You’re in too late.
Ryan Scribner: Generating a flurry of activity and really having no success with it, because you’re not really doing it for the right reasons. You’re just trying to …
Jason Graystone: It’s not strategy.
Ryan Scribner: Yeah, there’s no strategy to it. It’s just, “Okay, what’s this guy doing? I’m going to follow him.”
Jason Graystone: Absolutely.
Ryan Scribner: Now Jason is going to jump over and give you guys some recommendations as far as what equipment you need to get started with this whole process, so we’ll see you guys back here in a bit.
Jason Graystone: Sure.
Jason Graystone: All right, in this lesson I’m going to be going over the equipment that I think you need to be able to trade professionally. There’s lots of common misconceptions about needing thousands of pounds worth of PC equipment and six monitors and so on, and that’s simply not true. When I started trading, I started trading on a 15-inch laptop, and I did most of my testing on that laptop as well. In this video, I’m going to go over what I think are the minimum requirements, and then I’m going to go over what I think you should really have if you have the budget for it. If you only have the budget for the minimum standard, then go ahead with that. If you don’t have the budget for the minimum standard, well, you can either not trade or simply go with what you have.
Jason Graystone: When I start talking about i5 or i7 processes, and you say you only have an old Core Duo, then you can start on that, but if you’re going to treat this as a business, I really believe that you need at least the minimum specification laid out in this video. You may be aware that technology moves very, very quickly, and it becomes dated quite quickly. If the last time you upgraded your PC was over three years ago, say, then it’s likely that the software or the hardware that you’re running is out of date. The first thing you need is a decent processor. If you have recently bought a laptop or a PC, the chances are you already have one. It’s going to be an i5 or an i7 processor. The minimum requirement, in my opinion, would be an i5 processor, and if you have the budget, well, then an i7.
Jason Graystone: The second thing that’s important is the RAM. What RAM does is it allows your PC to run multiple processes at once. If you think of the processor being the brain of your PC, then the RAM is how many different things the brain can juggle at one time. What I recommend is 4 gigs of RAM as a minimum. I’m going to suggest to you that you go with an 8 to 16 gig of RAM, but if you buy a new PC or laptop, it’s likely to come with 8 gig unless you specify otherwise. RAM Is very cheap, and if you get the chance to upgrade when purchasing, it will be well worth investing in the upgrade. Otherwise, you may get down the road and wish you had done it when you bought the PC, but just know that 8 gigs of RAM is enough.
Jason Graystone: Next on the list is an upgraded hard drive. If you think of RAM as processes handle at once, then the hard drive is the memory. It’s the place that stores all of the processes that aren’t being used. The speed at which it can grab the unused processes depends on the speed of that hard drive. You can have a lot of RAM and a great processor, but if it takes your hard drive a long time to find the information that the RAM and the processor is asking for, then you’ll still have a slow machine. Many machines will come with a traditional hard drive, such as a one-terabyte hard drive, 7200 RPMs SATA drive, and it will get the job done for most people. Since you aren’t most people, and you are a trader in the making, I’m going to recommend that you upgrade to a 256 gigabyte Solid State drive. There are a couple examples here. The first one is a Samsung SSD 830, which is very good. The next one is a SanDisk SDSSDP-256G25.
Jason Graystone: The next thing I’m going to go over is a solid graphics card, because crashes aren’t fun. The graphics card will allow your PC to run smoothly without lagging, crashing, and run multiple programs and use multiple monitors if you want to without getting that blue screen of death. Then you have to restart your PC, and you don’t want to have to deal with all that. You don’t want a graphics card that’s too small, especially with all the charts and live data that you’ll be using, and I have two recommendations here. The first one is an EVGA GeForce GTX 680, which is an amazing graphics card. It’s what graphic designers use for CGI. The other one is an EVGA GeForce GTX 760, which is nowhere near as expensive as the first one and will happily run a couple of monitors. If you want to be able to run three or more monitors, and you’re that type of person, then you may want to go for something like the 680.
Jason Graystone: The next thing is monitors. Don’t believe that you need six-plus monitors to be able to trade successfully, because you don’t. You can just use one monitor. I would recommend having a second screen, purely because you can use one for your chart testing and one to log your results. You can use one for your analysis and the other to place trades, or you might be part of a live room, where you want the live room on one screen and your charts on the other so you can follow along. This simply makes your life easier, and that’s really the only reason.
Jason Graystone: I have six monitors, but if you think of all the stuff that I do, I run a webinar, have news and social feeds going on, have the lower time-frame paris, the higher time-frame pairs, the screen recording software running, and I need to keep my eye on a lot of stuff at one time, especially as I’m talking to people in the live room and explaining my analysis in detail, I need to be able to keep an eye on things as I trade live in that room, and I don’t want to miss anything. For you, it’s really just not necessary.
Jason Graystone: With regards to monitors, I use the AOC 27-inch HD monitors, but in my opinion, you really should have two qualities. The first is that the monitor should be HD so that charts are crystal clear. The second is that they are anti-glare or matte finish screens. These two qualities will ensure you don’t strain your eyes when spending hours in front of the charts whilst learning and testing and even trading.
Jason Graystone: The last thing is your internet connection. A decent internet connection is essential to trading. Execution is critical, so you need your connection to be fast-working, reliable and not cut off just as you’re about to place an order, or a news event comes out, and you can’t get your stop list in place. It happens, so do your best to make sure it doesn’t. I would recommend an upload speed of at least 786 kilobits per second and a download speed of at least 3 mg, which is very common these days anyway, but make sure you can get fast internet. Don’t skimp on it. It will cost you in the long run, believe me.
Jason Graystone: All right. Just a recap, you need a computer with an i5 or an i7 processor, 8 to 16 gigs of RAM, upgrade to a Solid State hard drive, upgrade your graphics card, a monitor that won’t fatigue your eyes, and a solid internet connection, and that’s it. Even if you go with the low end of all of that stuff, you’ll still have a great trading machine. It’s going to do everything you need it to do. That’s it. That’s what I recommend, and if you have all of that, then you’re good to go.
Jason Graystone: This must be one of the most commonly asked questions that I get. “What charting software do you use? What charts are those? What do I need? Is that okay if I use this one? Is it okay if I use that one?” I know you’re probably seeing tons of different trading platforms advertised on the TV or web, and you have absolutely no idea what one you would need, so I want to share with you what I think are a few of the best charting packages that you can use.
Jason Graystone: I’m going to go over just three different platforms and give you the advantages and disadvantages of all three, in my opinion. Firstly, there are a few functions that I think you need on a good charting package. The first one is flexible movement. In other words, you want to have that 360-degree movement so that you can easily manipulate the charts whilst doing your analysis. The second thing I think is very important is to have real-time data connection. You don’t want a delay in your data, because this will be detrimental to your trading.
Jason Graystone: The third thing is a full set of indicators. You want to have all the indicators at your disposal should you require them. I use very little in the way of indicators for my own trading, but you’ll need to have the RSI ATR and the Fibonacci indicators as a minimum. The first platform I’m going to recommend is TradingView.com. TradingView.com is a completely free charting package that offers extremely flexible and powerful tools in real time.
Jason Graystone: You can now link your broker account to that package, and you can place trades on the charting package as well. For charting and analysis, this is a great package. It has the 360-degree movement on the charts. You can set watch lists. You can set alert levels that will email you or text your phone when the market has reached them, so you don’t have to be at your PC all day. All of your analysis is also saved on the screen until you delete it, so you can close the web page, open up on another PC, and it will all be there just as it was when you left it. It has all the tools and indicators, and the developers are frequently releasing new tools and features. This package will give you news releases, you can place demo trades, so it’s good for your forward testing or demo trading, and it will even log your performance for you.
Jason Graystone: A couple of downfalls to the package, in my opinion, is the lack of data. You can currently only go back around a year or two, which means if you’re testing strategies on the 60-minute time-frame or even the 15-minute time-frame, the chances are you’re not going to get that 100-trade sample size that I recommend.
Jason Graystone: The second thing is that this platform has a social media aspect to it as well, where you can share ideas with other traders, which is quite cool, but the only downside, in my opinion, is the forum section. This can be extremely damaging and dangerous to traders, because trading is a fairly lonely business, and some traders get tempted to participate in the forums, and this results in Chinese whispers, lack of correct information, or just simply the urge or temptation to check that next shiny object, which we’re trying to move you away from. This will end up with you getting lost in the abyss again, and that’s not what we want. Don’t get me wrong. This is a great platform, except there isn’t quite enough data, in my opinion, and the forum section should be approached with caution.
Jason Graystone: The next platform I’m going to recommend, purely because it’s still very popular, probably the most popular trading package, and you may or may not have heard of it, but that’s MetaTrader, or MT4. This package is clean. It has all the indicators you will need here and can place trades directly on the chart, so it’s a charting package and a trading platform in one. The downside to this platform, in my opinion, is the indicators aren’t very user-friendly. The charts aren’t easy manipulated and can be quite limiting when it comes to the more advanced trading strategies. The platform is free, and as long as you have a data feed provided by a broker, you’re good to go.
Jason Graystone: The last trading platform I’m going to recommend is NinjaTrader. NinjaTrader is a very crisp, clean, and extremely flexible charting package. Again, it’s a charting package and a trading platform in one, so you can place trades live on the charts, and all of the tools are extremely user-friendly. The charts are easily manipulated, and everything is customizable. The platform, again, is free if you have a data feed from a broker, and you can save different workspaces for different portfolios or back-testing and real trading workspaces.
Jason Graystone: Also, the platform offers advance ATM strategies, which means once you get slightly more advanced, you can code your own automatic trade executions. This is the platform that I use, and I think it’s a great package, not only because of everything I’ve just mentioned, but to top it off, they have an outstanding support team and tons and tons of video tutorials on their YouTube page.
Jason Graystone: There we have it. You no longer need to worry about what platforms you should choose and what charting package to use. I would say go and have a play with all three, get a feel for which one suits you best.
Ryan Scribner: Okay, guys, welcome back. Now Jason is going to go into more detail here about really identifying some of these patterns in the market, correct?
Jason Graystone: Yep, that’s right. The first thing I want to talk about is the difference between fundamental analysis and technical analysis, because there’s no right or wrong. There’s people that rubbish either/or, and the truth is, there’s no analysis that tells the future.
Ryan Scribner: No. As much analysis as you do, you have no idea what’s going to … You can manage your risk involved with investments, but there’s never a guarantee that the market’s going to go any one way or another.
Jason Graystone: No. I think it’s crazy when people say, “Oh, that’s, you can’t use technical analysis to …” It’s crazy, right? Fundamental analysis is more news-based, more, the economic data, what’s going on in the world. Really, the reason that I don’t like to use fundamental analysis for trading is because you’re not getting the figure or the result. You’re guessing the market participants’ reaction to the result, which is impossible, right? You don’t know how people are going to react to a certain news release or a certain event.
Ryan Scribner: It’s the same way as well with investing in companies when you’re trying to bet on an earnings report. You guess about what the numbers are going to come in at, but you could have one thing in that earnings report that people don’t like, and that stock can go in the complete opposite direction of where you’re expecting it to. I completely understand you on that piece.
Jason Graystone: Yeah, a hundred percent. With technical analysis, technical analysis is based on psychology. There are patterns in the market, although people think the patterns are … We never know what’s going to happen next in the market. Contrary to popular belief, there are patterns in the market that stood the test of time. They’re not entirely random. The way that we build our edge is to identify a sequence of patterns in the market so that we know that if we get this pattern, then it’s likely to do this next.
Ryan Scribner: Sure.
Jason Graystone: What we’re looking to do is build rules around that pattern. If we see something that happens frequently, and we go back and test that, and it’s happened frequently for five years or six years or ten years, then if we can build rules around entering that, exiting that, that move, then we’ve got a high probability, we’ve got positive expectancy. We’ve got a system that provides us with a positive edge, a statistical positive edge. That’s really all we’re looking to do.
Jason Graystone: The reason I love technical analysis is because we don’t have to worry about what’s going on in the world. There’s a saying that the technical trader can trade the market regardless of knowing the market, and although that’s not entirely true, because you have to test the market, what they’re saying is, because of the technicals, it’s the patterns we’re looking for. It’s not necessarily the market. It could be Apple, Google, it could be currencies, it could be futures. It’s the patterns we’re looking for and the psychology in the markets.
Ryan Scribner: Can you make money in both bear markets and bull markets with this type of strategy? Does it matter if it’s going up or down?
Jason Graystone: Yeah, it makes no difference. That’s one of the great things about Forex, which is you can short the market and you can buy the market.
Ryan Scribner: What’s the majority of the trades you’re doing? Are they betting against, or are they bullish trades?
Jason Graystone: With investing, for instance, what you’re really doing as a passive investment, is you’re hoping that it goes up.
Ryan Scribner: Sure. [crosstalk 00:40:55] asset appreciation. You’re going to buy it and eventually sell it down the road at a higher price or collect your dividends.
Jason Graystone: Absolutely. The Forex market is in a different … It essentially moves sideways over time. Although it might be going bullish for a long, long time, it will end up at the same price that it was sooner or later, and we can go short, we can go long. The Forex market actually consolidates for a longer period of time than it actually is in a trend. Seventy to 80 percent of the time, we’re in consolidation, some form of consolidation, and only 20, 30 percent of the time we’re trending.
Ryan Scribner: Do you trade when it’s in consolidation, or no?
Jason Graystone: Yeah. I’ve got strategies for bullish, bearish, or consolidation. Another important thing is to be able to adapt for that, not just be arrogant, sort of stuck.
Ryan Scribner: If you can only make money at a certain … That’s also people who only can make money during a bull market with investing, you have to know how to make money in all, you’ve got to an all-weather investor or trader as well.
Jason Graystone: Yeah. Yes.
Ryan Scribner: All season trader. You can’t just be able to make money at a certain time and then say, “All right, I’m going to take a break for nine months,” or wait for …
Jason Graystone: That’s an interesting point. I think it’s important that you just touch on this again, that trading isn’t investing. We’re not just going long and holding. That’s not what we’re doing. We’re trying to get in and out and capture a higher, a move in the market that has a high probability so that we can get the profits out, and that’s it. We’re going in and out.
Ryan Scribner: I’m sure it varies, but how long do you usually have a trade open then? Is it, you close them at the end of every day, or do you have some overnight?
Jason Graystone: Yep, I do. About three hours a day trading a day, there sort of in and out within a half hour. I really day trade for the education piece so that I can show people what I’m doing, the methodologies, the process. If I wasn’t doing education, I’d purely be a swing trader, so four-hour time-frames. I’m in the trades from anything, for two days, up to two weeks maybe.
Ryan Scribner: They’re holding it overnight. I guess that was one of the other misconceptions, is that all day traders close everything by the end of the day. Is that true or it depends?
Jason Graystone: In the stock market, it’s close of the day. With the Forex market, if you’re in the UK, it closes at 10:00 on Friday night, and it reopens at 10:00 on Sunday night, but that’s it.
Ryan Scribner: The Forex market. Other than that, it’s open 24 hours, Monday through Friday?
Jason Graystone: Yep.
Ryan Scribner: Very interesting, so you could, if you wanted to trade at two in the morning, you have the availability to do that?
Jason Graystone: Yeah, you can trade 24 hours.
Ryan Scribner: Okay.
Jason Graystone: Now I’ve been over the technicals and explained a bit about the patterns in the market, what I really want to do is show your listeners how we can identify these patterns. I’m going to go into my trading desk and give you guys an example.
Ryan Scribner: Okay, sounds good.
Jason Graystone: All right. As mentioned just now, we’re going to look at the way the markets move and how we can identify some patterns, and I’m going to be going through a simple pattern I want to share with you that then you can go and identify for yourself.
Jason Graystone: The first thing I want you to be aware of is the market moves, how the market moves, because you’ve probably seen the market move up, and you’ve probably seen the market move down, and you’ve probably seen the market move sideways. When we’re moving up, we call this a bullish trend, and when we’re moving down, we call this a bearish trend. When we’re moving sideways, this is either called ranging or consolidation.
Jason Graystone: When we see the market moving in any direction, there’s certain things that we can pay attention to that are likely to cause a reaction or the market’s likely to respect. The first thing is going to be even-handled numbers. If we’re talking about the market being driven and the patterns in the market being respected by psychology, patterns being psychologically driven, sorry, one of the things we’re paying attention to are even-handled numbers. Anything like a dollar flat or 1.5 or 1.1, 1.2, anything with an even-handled number, the market tends to respect more often than it doesn’t. Not every time, but more often than it doesn’t. Remember, we’re going for that statistical edge.
Jason Graystone: Another thing that the market respects are numbers with 50 in it, so anything with 50, so 1450, 1550, 1350. Fifty and even-handled numbers, just bear in mind that that’s respected. Any time that the market respects any psychological number, what we see is structure. The next thing we’re going to show you is how the market moves. What you’ll see is this cyclicity, where we see cycles in the market of a new high, a retracement, and then we’ll see a new high. Then we’ll see a retracement. Then we’ll see a new high. The market moves in ebbs and flows like this.
Jason Graystone: Usually, the structure, this is what creates structure. Normally, these structure levels are created by even-handled numbers or significant levels of importance of being respected previously in the market. What also tends to happen is as we push up, what we call this is a resistance level, and what we call this is a support level, so this is like the ceiling, where we hit resistance. This is like the floor, where we bounce, we hit that support level. What we normally find is that when we put in new highs and we push back down, previous resistance then becomes support, so the structure is actually respected as well.
Jason Graystone: One of the things I just want to touch on is how to identify a trend. Then what I’m going to talk about is how we look at the end of the trend, and we can predict a reversal. First of all, to identify a confirmed trend, we’re looking for a three-point move. We’re looking for this move, the retracement, and then the new structure high. Then what we know is, we have a high probability that the market’s going to continue up until we violate this previous outside return or retracement here, at which point we’re in consolidation, and then we need to look for that three-point move again, one, two, three, in order to make a prediction that we’re likely to see a continuation to the downside.
Jason Graystone: Normally, we see this, this, this, this, until we end up reversing again, violating this outside return or retracement, and then we look for that three-point move again. It just continues like that. The reason we do that is because once we hit that three-point move, we know we have a higher probability that the market’s going to move up or down, depending on what direction we’re going in.
Jason Graystone: The pattern I want to talk to you about today, there’s many, many different ways to make money in the market. I’ve been over certain things that affect structure in the market, like even-handled numbers, 50-levels, previous structure, and historical levels that have been respected time and time again. What I want to go over in this video is, when we spot a reversal, so there’s a pattern that happens frequently at this point that we can use to short the market at the end of a bullish trend, or if we’re in a bearish trend, we can then look to, by the end of the bearish trend, and look to buy this up.
Jason Graystone: There’s a simple pattern here called a double top. You might have heard of this referred to as a V-top, but it’s a double top. Essentially, what it looks like is this. We get to the end of the trend, we then have a small retracement here, and then one final push up, we get reject to this test, and then we fail to put in a new high, and then we roll over. This is called a V-top, or a double top, and I’m going to go through the rules of this right now.
Jason Graystone: Let’s just say, for instance, that the market’s been pushing up, and we’ve identified our test, our initial test, and then we’ve started to retrace. What we’re looking for for this to be considered a valid double top is a test of this high. This high wick of the candle, we’re looking for a test of this level, so this zone here, for a second test. What we’re looking for is a test of this high, and what we can’t do is close above this previous high. If the candle pushes up and closes above this previous high, what we’re talking about then is a continuation to the upside. It’s important that we wait, and we wait for the close of this candle. As long as it doesn’t close above the high, it can do this, it can push up and put in a higher high, but it can’t put in the higher close.
Jason Graystone: We’re looking for a test of this zone. We cannot close above this high, and as soon as we get a valid retest, which can look like this, it can look like this, it can even look like this, or it can look like this, because we’ve tested this zone, and we haven’t closed above. As soon as we get this formation, this is considered a valid double top. Normally, double tops are price and time symmetry on the retracement, so we have price and time symmetry on the retracement as well, but, essentially, what we’re looking for is this little V, and then we’re looking for a retest of the initial test high but not a close above the high. This is what we call a double top. Typically, what we’re looking for after this is to enter a trade on the next candle, and then we’re looking for the market to roll over.
Jason Graystone: Now you’ve got a grasp on how to identify some patterns. What we’re going to talk about is how you actually build a trade plan, because this is essentially going to be your business plan for being a trader. What I always say to people is, the first thing you want to ask yourself when deciding what time-frame to trade or when to trade is, when can you consistently be in front of your charts, because people have jobs, people run errands, people take their kids to school. They’ve got their shopping coming on Tuesday. They’ve got the things going out on … Right?
Ryan Scribner: Yeah.
Jason Graystone: When can you actually consistently dedicate time to being in front of your charts, because what we’re going for here is consistent profit. Everything needs to be grounded and based off of a consistent plan. It makes no sense for someone who’s got a full-time job to try and check charts at lunchtime or …
Ryan Scribner: At their desk or sneak it in between … Yeah.
Jason Graystone: They’ll phone to a client, or they’re rushing for a meeting. It’s silly. You don’t want to do that. The first thing you want to do is go, “When have I got an hour to dedicate?” It might be at lunch. It might be an hour after work, after the gym.
Ryan Scribner: But uninterrupted time, basically, is what you’re getting at.
Jason Graystone: It’s uninterrupted time. It doesn’t matter if there’s more volatility. It doesn’t matter what’s going on. Just make sure it’s a dedicated time that you can just dedicate to being consistent. Then just find one pair for now, one market. Don’t try and find lots and lots of different markets. Don’t scout for different markets. Just get to know one.
Jason Graystone: I always like to think of it, when I met my wife, I met her in a bar, and all I knew about her that night was she liked white wine, right? That’s all I knew. The next day when I rang her up and wanted to meet her again, we went out to dinner. I knew what food she liked. Then I knew what pattern, when she had lunch, when she was out on Sunday. If you can just get to know one market first, you’re going to get to know the market, you’re going to understand more about that market and how it behaves. The markets behave in different ways. There’s different markets that behave different ways. It’s best just to know one pair.
Jason Graystone: If you’re looking at what market to look at, just pick one of the majors, one with the dollar in it. You’re going to get a bit of movement. Any pair with the dollar is going … The dollar’s the base currency for the world, and if you pick a pair with the dollar, you’re going to have some movement. It’s not going to be boring. There’s going to be something for you to test. There’s going to be something going on. Just pick one, so Euro dollar, pound dollar, Aussie dollar.
Ryan Scribner: I believe that’s familiar or similar to, as well, with people who day trade, they usually only trade a basket of stocks. They have a couple that they’ve learned the personalities. They typically don’t just pick one out at random. They learn the personality of each one of these stocks. Is that the same thing as what you’re talking about here?
Jason Graystone: Absolutely. I always say that, trading is a business, and these markets that I’ve got on my screens are my employees. They’re my employees. They’ve got different personalities. Some perform better under pressure. Some perform better in the summer. Some show up late. It’s very, very similar to running any type of business. If you look at it like that, you’re going to appreciate that some are going to perform differently. Also, if you did start a business, you wouldn’t employ 30 people on day one.
Ryan Scribner: That’s a very good way to explain that, yeah.
Jason Graystone: Right? It’s insane. You just wouldn’t.
Ryan Scribner: It’s kind of like, because I talk a lot about passive income on The Channel. They say the average millionaire has seven sources of income. You’ll get people who want to start all seven at once. It’s like, what are you going to do, dedicate one hour a day to each one and then become a millionaire? You do one very well, and then you move onto the next one. There’s a lot of ways that that’s applicable.
Jason Graystone: Then once you’ve got your pair then, and you’ve got the strategy, what you want to do is, you don’t just want to take every single setup that you see. If you was to go through different markets and apply one strategy, you’d probably have thousands of thousands of different opportunities per month. What we want to do is, we want to add some filters to that so that we get the higher probability move. Although we’ve got an edge by identifying a pattern in the market, what we really want to do is identify the really high probability. You can add things like filters, and what I’m going to do now for your listeners is just show you how we go back to that example I just gave and then add some filters to that to really give you the higher probability trades. Let’s jump back to the desk.
Jason Graystone: All right. As we’re building out a trade plan, what we want to do now is take the double top principle, and we want to apply some filters so we’re not taking every double top that we see, because if you just apply those rules and you look for those rules for a valid double top, you are actually going to see them form in many places that don’t provide high probability trading opportunities.
Jason Graystone: What we’re doing is we want to build some rules, build out a plan and say, “I’m going to have some filters in place so that I only look for these trades in the highest probability zones.” Taking into consideration what I’ve been over already, what we’re going to look at is, we’re going to see that we’ve pushed up here, and you can see that we’ve held this level before we’ve started to see a retracement. We’re monitoring the market pushing up, and we’ve seen a hold of this level, which just so happens to be the 0950 level. If you look over here on the right, we’re at a psychological number, that 50 level.
Jason Graystone: We’ve hit that level, and what I’m going to say is, if we zoom out now, so if we just zoom out this market and we go back in time, we put our horizontal line in, and we’ve scrolled back in history, and we’ve seen, actually, we’ve tested this level once, twice, three times, four times, five times, six, seven, and we’ve held this level much more often than we’ve broken through it. Every time it’s tested, it holds more often than it doesn’t before it’s violated. What I’m going to say is, you have a rule in your trade plan to say, “I need at least three previous touches of this level before I consider entering this trade.” The first rule is, a minimum of three previous touches of this level before I take the trade.
Jason Graystone: The next thing I’m going to look for is something called the RSI. This little squiggly line down here is the RSI, which stands for relative strength index. What this does is, it indicates over-bought conditions in the market. I’m not going to go into too much detail on this right now, but just know that if we pushed above the over-bought condition, it indicates that the market’s running out of steam. If we couple this as a filter with the fact that we’re at a psychological number that’s been tested three times, at least three times previously, we’re likely to see a little retracement.
Jason Graystone: We’ve seen the retracement already, so now what we’re looking for is that second test and that rejection, that hold of this level. What we’re going to do is, we’re going to watch what price action does next. We know we’re interested in this level. Now we’re going to peel our eyes and wait for the rest of our rules to be met, which I’m going to explain right now.
Jason Graystone: You can see the price action’s started to push back up, but remember the rules of the double top. We are actually, we need a test of the high, the previous high, which is this little zone here, the high wicks of the candle. We need the price action to push up and at least test that zone and not close above the higher of that test. Let’s see what happens next.
Jason Graystone: All right. You can see that this candle here hasn’t quite tested the zone. It’s pushed up, but it hasn’t quite tested the zone. Therefore, it’s not valid, so we can’t take the trade yet. What I’m going to be looking for on the second test, you know I mentioned that we were over-bought. What I’m going to look for is some bearish divergence. I’m looking for equal tests of this high, and I’m looking for bearish divergence, so a slope down on the RSI, equal test of the high on price, bearish divergence on the RSI, and that’s going to be used as another filter.
Jason Graystone: So far we have psychological number, which I’ve moved, psychological number, at least three tests of the level previously, over-bought condition on the initial test, and the bearish divergence on the second test. By waiting for those filters alone, it’s going to turn your trading opportunity that you’re looking for, your trading strategy and your plan, into a very, very high probability system. Let’s see what happens next.
Jason Graystone: All right. You can see on this candle, we’ve actually tested the zone. We haven’t closed above the high, so what we can do now is actually sell the market, next bar market. what that means is as soon as this candle closes, and we have to wait for this to close, because if we don’t wait for this to close, the chances are we could push up and close above the previous high, which would mean it’s invalid, so we wait for the close, we wait for the candle to close, and then we sell the next bar market.
Jason Graystone: Then what we want to do is we want to put our stop loss above the high, and I’m going to use a ten-pip stop loss, so we’re going to go ten pips above. We’re going to up at -60, 0960, and we’re going to take profits off, for this example, a retest of the low. We’re just looking for a pull back down into a retest of this low. We’re going to sell this now next bar market and we’ll see what happens next.
Jason Graystone: There we have it. You can see that we’ve rolled over. This is a high probability, because we’ve waited for those filters to be met. We didn’t just take any double top that we saw. We waited for those filters, which gave us an extremely high probability of being right. In fact, you can see here that we continued down even further.
Jason Graystone: That’s how you identify a trading strategy, a pattern in the market that happens frequently. That’s how you add filters to it to make it a very, very high probability trade rather than just taking those low-quality trades. That’s how we combine it all together to really give you those high probability moves.
Jason Graystone: Let’s just say for the sake of this example that this risk here, where we entered, was one percent of your account. Then if we just clone this, you’re going to see that this was a one, about one-and-a-half-to-one risk reward, which means this would be a one-and-a-half percent profit on your account in one trade.
Jason Graystone: Hopefully, you can get a bit more excited about how we can really hone in on those high probability trades, and instead of there being thousands of different opportunities, we’re honing into ten opportunities a month here to really get those high probability trades out of the market. What that does, it suits many peoples’ personality, because if you’re like me, I personally like to be right more than I’m wrong, and I like to win more when I’m right than I lose when I’m wrong. I just like that edge. Some traders I know, they’re happy being wrong seven times out of ten. They’re happy with that, because they’ve got a much bigger risk-reward profile.
Ryan Scribner: Is that based on your personal preference, or is it based on your risk tolerance, or you just figure that out through testing it out?
Jason Graystone: Absolutely. It’s your personality really. It’s so important to build it around your personality. If you’re not happy being wrong more than you’re right, then don’t have a system that does that, right?
Ryan Scribner: Sure, yeah, makes sense.
Jason Graystone: I like being right at least 50 percent of the time, because then I know I can make money with money management. I’m going to talk about money management now. Once you’ve found a system that is profitable and it’s proven to be profitable, where the real money’s made is through money management. This is a strategy. If you think about a coin flip, if I was to flip a coin, if you flip a coin a hundred times, over that hundred times you’re likely to be right 50 times, right?
Ryan Scribner: Sure.
Jason Graystone: It’s a 50/50 flip. If every time it was heads, I paid you a dollar, and every time it was tails, you had to pay me 50 cents, you’re going to want to flip that coin as many times as possible, because you’ve got a statistical edge of having 50 percent, but you’re going to win more over time.
Ryan Scribner: Yeah, you’re not going to lose as much when you lose. You’re going to make more when you’re right.
Jason Graystone: Absolutely. That’s called risk management. If you just add a money management strategy to that, let’s say, for instance, every time you hit ten winning trades or ten winning flips, we increase the size, and every time you lost five …
Ryan Scribner: You decrease …
Jason Graystone: You decrease.
Ryan Scribner: Okay.
Jason Graystone: What we’re doing is we’re protecting our capital as we’re going through a bad period, because there will be losses, there are losses. Then we’re increasing your capital, or your position size, as you’re doing well, as you’re going through those hot streaks. What that does, it allows you to accelerate your account and protect your capital.
Ryan Scribner: One question that I have, and I’m not sure if you touched on this previously, but how much … If you really want to get started with this, and you want to go through the whole testing phase, and you know you’re going to lose money, how much money do you realistically need to have in order to get through that learning curve and figuring this all out?
Jason Graystone: Let’s talk about losses then, for instance, because there’s a cost of doing business, right? As you said earlier, whether it’s education …
Ryan Scribner: Yeah, there’s no such thing as a free lesson out there.
Jason Graystone: No, there’s not. It’s a business, so you’ve got to buy a laptop, a PC, right, which I’ve been over, the equipment. You might have to have a membership to a trading platform. It’s the cost of doing business, so there are overheads. With the markets, the losses are the same as any other business, except they don’t come in the same order.
Jason Graystone: If you think about a product, if we sell a physical product, we’ve got a markup on that, but we’ve got overheads, and we’ve had a cost of producing the product. If we sell a product for ten dollars, we might get three dollars profit at the end of it, and every product we sell, we know that we’ve got to pay the overheads, we get three dollars, and we’ve got the profit.
Jason Graystone: With trading, the losses are just the cost of doing business. Then the profits, they don’t come on every trade. It’s over time. You could have a week of losses, and then you could have two weeks of winning trades. It’s not on every single trade that you get the profit and loss, and that’s what people really struggle with, because they think, “Oh, God, I’m losing trades,” but that’s why it’s important to stick to the plan, because you know you’ve got a statistical edge over time.
Ryan Scribner: Sure. Is it really about just consistently showing up and applying the same principles each time?
Jason Graystone: Absolutely. We’re going to talk a bit about back testing now, because now you’ve got the plan, and you’ve got the rules, and you understand money management. The first thing you need to do, or the last thing you need to do, I should say, before you go live is to test the system. This is the thing that’s skipped most. I would say that 98 percent of the people that go into trading don’t do this bit.
Ryan Scribner: Really?
Jason Graystone: Yeah.
Ryan Scribner: You think this is a big part of why that failure rate is so high?
Jason Graystone: One hundred percent. For me, take my example, for instance. For me personally, it was a turning point. It was what changed me from just blowing money to being very consistently profitable. I’m going to talk a bit about back testing.
Jason Graystone: Once you’ve got your market, and you’ve got your system, your strategy, you want to go and test that over time. Use your historical data that I went through on the trading platforms, and what you’re looking for is a minimum of five years, or a hundred trades, whatever comes first. Depending on the time-frame, if you’re very small time-frame, you’re looking for a hundred trades, which might be two years, or if you’re in a higher time-frame, on the four-hour or the sixty, you might have to go back five years to get the hundred trades, right?
Ryan Scribner: Sure.
Jason Graystone: You want a minimum of a hundred trades or five years of data. What the back-testing phase does is it gives you black and white results on the probability of your trading system. What you then you want to do is go out and replicate in the markets what you’ve tested. You don’t want to deviate from that at all. You literally want to build the rules off of your back-tested plan and say, “This is what I’m going to do going forward.” It’s a set of tangible rules that says, “This is the results you’re likely to expect, so go out and do that.”
Ryan Scribner: Based on the historical data looking at those trades.
Jason Graystone: Yeah. If you’ve got a system that provides a return of 40 percent, 50 percent, return on investment per year, you want to stick with it. You want to go with that, right? You don’t want to tweak it, but the amount of people then get that and then go out and start breaking the rules and then going, “Why am I losing money?” The other problem that they do is they test one market, and because that’s profitable, they bring in another market, and they assume the strategy works on that one.
Ryan Scribner: Oh, they try to take that strategy and apply it to a different market entirely?
Jason Graystone: Because they can’t be bothered to test it, right?
Ryan Scribner: Is this the most time-consuming aspect of it?
Jason Graystone: Yeah. It takes me around 20 hours per market to test.
Ryan Scribner: To back-test it, okay.
Jason Graystone: I would say that you need to test one market, one strategy, one time-frame, at a time. You don’t want to be jumping around strategies. You don’t want to be jumping around markets. You just want to get one whole set of results done, and it’s going to take about 20 hours to do one.
Ryan Scribner: That’s funny how that is. The most time-consuming piece is usually the most important piece. Then people just skip it, because they’re like, “Ah, I’m not going to be bothered to spend 20 hours …” and it’s really, if that’s the differentiator there between the successful and the unsuccessful …
Jason Graystone: It really is.
Ryan Scribner: … it’s amazing, but I certainly believe it.
Jason Graystone: I want to give you guys the realistic expectations. If you don’t do this, you’re going to have a very hard time. Just get it done, and it is grueling. It’s horrible. It’s the worst part.
Ryan Scribner: Is it just sitting there looking at chart after chart, looking at the outcome?
Jason Graystone: Tick, tick by tick, going through the rules. If this happens, then I’m looking for this. If that happens, then I’m looking for that. Then you’re setting your entries, and I’m going to give you guys an example on the spreadsheet on how to do that. It is just horrible. I didn’t speak to my wife for three months when I was doing the testing. It was horrible. That’s what’s required. In the grand scheme of things, it’s not a lot of time. You’ve just got to get it done.
Ryan Scribner: Yeah, you just got to get through it. That’s the way it is with anything, and you saying, having been involved in different businesses, there are certain parts of it that you love, and there are certain parts that you hate, but they’re equally important, and you have to get through those parts that might not be so glamorous or interesting to you.
Jason Graystone: Of course. Lots of people don’t talk about back-testing, because it’s not very glamorous.
Ryan Scribner: Yeah, that’s not going to sell this when you sit through, if people are trying to sell their programs, if you sit there and say, “You’re going to hate this. It’s going to be grueling. I didn’t talk to my wife for three months,” that’s not a great sales pitch, you know?
Jason Graystone: By myself. Yeah, yeah.
Ryan Scribner: Buy it anyway, you know? I think that’s why people really appreciate you, is because you’re so honest, and it’s almost kind of takes people back that you’re this honest, because there are a lot of very shady people involved in trading, in particular. You see a lot of it.
Jason Graystone: I get that. There’s people, the trolls on YouTube, and they retaliate, and I get that, because they have been led up the garden path, and they’re like, “Oh, no, I’ve actually got to do some work. This can’t be true. I’m going to just … No, you’re telling lies.” It’s sort of like denial. You can see from the people that I work with and the community I’m in that my only motivation is to give people the truth, based on my own experience.
Ryan Scribner: Absolutely, yeah.
Jason Graystone: If you take one of my private clients, for instance, he applied the strategy, tested a couple of pairs, and then he just went and assumed that it worked on all the markets, right? He was trading for two years, just slowly bleeding money, and he wasted two years of his life until I said to him, “Show me your back-tested data,” and he said, “I haven’t got any.” I said, “Well, you’ve got to go and do that, and I’m going to give you three months to do it.”
Jason Graystone: He went back. Three months later, he had all the tested data. I was checking it all for a, spot-checking everything. He then produced a report that said, “This pair wasn’t profitable. That pair wasn’t profitable. This pair wasn’t profitable with that pattern. This pair wasn’t profitable with that pattern.” He knew to take out all of that stuff, and it changed him from being, bleeding money over two years, to doing three and half, four percent, per month, in three months.
Ryan Scribner: Amazing. It just seems silly to me if that takes … Okay, it is a grueling process, but if it just takes that certain amount of time, to then waste two years doing it wrong, because you don’t want to start and have that proper foundation, is just crazy to me.
Jason Graystone: If you think about it, it’s just because they didn’t go back to the start of this video and actually want it. They haven’t got expectations. They don’t know why they’re doing it. That’s why this process is absolutely crucial.
Jason Graystone: Lots of people over-complicate back-testing. They don’t know where to start. They ask me if we can automate it or use a mechanical system. My answer is always, it’s always best to do it manually. I like good old Excel, and I’m going to show you a spreadsheet that we’ve developed, very comprehensive spreadsheet, that does all of the calculations for you, and it’s also a journal, and it also does your money management. I’m going to just show you in Excel first, just so you can grasp the concept of back-testing, because it really is easier than you think.
Jason Graystone: There’s a few things you want to pay attention to when we’re back-testing. The first column I’m going to put the market. In our instance, we’re trading Forex, so I’m just going to write the pair. That will be the Aussie CAD or, in our example, the double top that we just went over. It was the Euro dollar. The first thing we want is the market or the pair.
Jason Graystone: The next thing we want is the time-frame. We want to know what time-frame we are testing, if it’s the 60-minute, the 15-minute, the four-hour, the daily, or whatever. In our example it was the 60-minute, but we want to make a note of the time-frame.
Jason Graystone: The next thing we want is the entry date. We want to know where we got in. We want to know what date we got in. If we ever need to refer back or we’re crunching the numbers at the end, and we want to find out if there’s any periods that are unprofitable time and time again, and we need to remove them, it’s going to be important to have this information. On from that, we also need the entry time.
Jason Graystone: Lastly, we want to know the entry price, where we’re actually entering, buying or selling. Once we’re in the trade, we want to make a note about stop loss level, so that’s where we’re going to be wrong. Then we want to know our target price, so where the target is. Then, of course, on the way out of the trade, we want to know everything in reverse. We want to know the exit date, because the trade could go on for one day, two days, three days, whatever. We want to know the exit time, and of course the exit price.
Jason Graystone: The exit price is either going to be one of these two. It’s going to be the stop loss, or it’s going to be the target, because we’re either going to get stopped out, or we’re going to hit our target. The exit price will be one of these two, and we can use that combination to calculate the profit and loss at the end. In this one, we can have the total pips, or points.
Jason Graystone: Let’s go back to our example now and put some data into this table. Okay, looking at our example here, we know that we had to wait for a test of this level right here before we entered, and we had to wait for the close of this candle before we entered. If we hover the crosshair over this next candle, you can see that this is the 26th of April, and it’s at 8 am. The first thing we can do is our pair, which is the Euro dollar, so we’re going to go, “Euro, USD.” The time-frame is the 60-minute chart, so we’re going to go, “Sixty minutes.” We know that it was the 26th of April, so we’re going to put, “Twenty …” You guys in America do it opposite to us, so, “Four/Twenty-six/Eighteen … Seventeen.” Sorry.
Jason Graystone: Then we’re going to the entry time, 0800. Then what we’re going to do is put in the entry price. We know that it was next bar market, so we’re going to put the crosshair at this level here, and you can see on the right-hand side of the chart, it says, 1.0946. That is where we sold the market, 1.0946. Our stop loss I said was ten pips above the high, so we looked at the previous high, and we said, “Right. It’s ten pips above that,” so it was up at 0.961, so 1.0961. Then our target price was a retest of these lows down here at 0926, so 1.0926.
Jason Graystone: What we want to do is we want to track what happened next. The exit date was actually straight after, so this lasted one hour, this trade, a maximum of one hour, so the exit date is the same. I’m going to copy that and paste it in there, because I’m being lazy. The exit time was the same hour, so we’re going to go, 0800 again, and the exit price was, of course, our target price, so 1.0926.
Jason Graystone: Then what we’re going to do on this is, because we are selling the market, we’re going to go our entry price minus our target price, which will give us the total pips. You can see that the entry price was 0946. Take away 0926. That’s a 20-pip profit. You can put calculations in here to automate this, but you’re going to essentially see that we’ve got a 20-pip profit on that trade.
Jason Graystone: Now I’m going to show you our spreadsheet, which is a lot more comprehensive. It actually works out everything for you. It’s got some nice little charts here to show you your win percentage, your maximum losing streak, which is essential when we’re setting that risk tolerance and our position sizing. We’re looking at massive sample size. This is earlier on this year. You can see that we’ve been logging trades on this particular project for a long, long time. This goes all the way back to 2009, I believe. If we just scroll up here, there’s tons and tons of data here. This essentially works it all out for you.
Jason Graystone: In this case, we’re taking two positions, so we’re taking two targets, which is a little bit more complex, but it allows you to boost your account a bit more. Then what you can see, that this actually logs the back-testing into a money management spreadsheet, which actually tells you what your position size should be. It tells you the difference between fractional and smooth ratio, and also you can set the level at which, when you go above a certain profit, it triggers your position size so that then you increase your position size.
Jason Graystone: This is, as I mentioned earlier, how we can really accelerate our returns when we’re doing well and then protect our capital when we’re going for a draw-down. You can see just to here, for instance, that we’re increasing our position size until we take a loss, and then we drop back down. We then hit a winning streak until we take a loss. Then we drop down, and then so on. You can see how this takes, in this instance we took a $50,000 account to just under a million, and this is obviously over, since 2009, so this is a nine-year process from taking 50 grand to a million, but pretty decent.
Jason Graystone: This spreadsheet is very, very comprehensive, and you don’t really need something like this, but if you are treating your trading as a business, then I highly recommend that you have something a bit more complex than Excel, but just to go and back-test a strategy, hopefully you can see from now, from this little example here, how simple that can be and how you can really be on your way to go out and start testing these strategies.
Ryan Scribner: Something else I want to ask as well, can this be a hobby, or is this something you really have to be all in about? Can you just day trade casually or get involved with trading casually, where maybe a couple days during the week you want to sit down and trade, or do you really have to have that dedication to this?
Jason Graystone: That’s a really great question. The answer’s no. You cannot dabble in trading. You have to show up. Summer months are going to be quiet. Christmas is quiet. The big institutional traders who move the market, they’re the ones that go into the Hamptons for the summer. You have to understand, we don’t move the market. Retail traders, we have no power moving the market. It’s all …
Ryan Scribner: That’s the same way with retail stock market investors as well. Your buy order of ten shares of Facebook is not going to move that share price, you know?
Jason Graystone: Exactly. Exactly. All we have to do is, during those slow periods, we just have to show up, because there’s going to be maybe one trade, two trades, that we catch that keep us afloat in the summer. We’re really looking at a return on investment over time here. We’re not looking at a consistent hundred pips per day or a thousand pounds per month. It’s over time. You might have a month where you lose. You might have a negative month. You might have a break-even month. June, for me, was extremely profitable. May was flat. Then February was very profitable, and April was flat. It’s just looking at the average over time. You have to show up. You have to be consistent.
Ryan Scribner: Yeah, that is very interesting, because I’m sure a lot of people maybe don’t want to go all in with this, and it’s important to realize that it can’t just be a hobby.
Jason Graystone: It can’t be a hobby. You need to want it. You need to know why you want it. You need to have realistic expectations. You need to hold yourself accountable. You need to learn the right way, start at the beginning in the process, go through it the right way, and then you’ll have the results that you want. It’s as simple as that. The results are inevitable if you just go through that process.
Ryan Scribner: Sure.
Jason Graystone: Finally, let’s just talk about results then. If you’ve gone through that process, realistic results. People think that they’re going to double their account week after week. That’s absolutely ridiculous. What you don’t want to do is risk so much that you’ve taken a big hit, and you are now having to make up so much money just to get back to breakeven.
Ryan Scribner: Sure.
Jason Graystone: I use a smooth ratio money management strategy, which I’ve been over. Some people who just get into trading use a minimum percent risk of their account. Some people like to say one percent. I’d say that’s a good start, right? You don’t want to risk more than one percent of your account on any one trade. If you can consistently do that and just focus on not breaking that, then it’s going to take you a long time to be out of the game, right? You’re going to have your chips. You’re going to have your poker chips. If you blow 50 percent of your account, you’ve got to make up 100 percent of your account to get back.
Ryan Scribner: I’ve mentioned that too before, people think 50 percent loss, 50 percent gain, but that’s not going to get you back where you started. If you have a 50 percent loss, you now have to double your money to start back.
Jason Graystone: It’s very hard to double your account. It’s very, very hard to double your account. Realistically, in terms of results, what you’re looking at is if you can be consistent, and you can go through this process and learn the right way, you’re looking at around three, maybe four percent, conservative, per month, which compounds out to 40 percent per year.
Ryan Scribner: Which can do astronomical things to your money. I know a lot of people don’t understand the power of compounding, but that’s, I know it sounds like a little bit, but that has a huge impact on your …
Jason Graystone: Of course. If you couple that with obviously passive investments …
Ryan Scribner: Sure. Then something else that we could also tie in here as well is, do you recommend that a lot of people maybe take some of the profits from the high-risk side of investing and put it into a more passive strategy?
Jason Graystone: When I started trading well, I was investing anyway. I’ve got automated systems that do my investments and everything. When I started trading, I started splitting the money 70/30, so I had a 70/30 split. Then as I became better and better, I went to 50/50, but, absolutely, if you take some of the profits that you’re getting from your investments and you put them into your trading account, then you’re talking about a serious acceleration strategy there.
Ryan Scribner: Or the other way around as well, where maybe you want to take some of your profits and put them into a …?
Jason Graystone: Into an investment.
Ryan Scribner: … passive strategy where …
Jason Graystone: Yeah, absolutely.
Ryan Scribner: Okay, yeah.
Jason Graystone: It works both ways.
Ryan Scribner: You don’t have to be polarized there where you’re one or the other, you can do a mix of both of these things?
Jason Graystone: No, just find your strength. Again, you’re not going into trading as a be-all-and-end-all. This is another wealth acceleration strategy. It’s not something that’s the end. It’s just going to help you achieve financial independence quicker. That’s it.
Ryan Scribner: Okay, Jason. Thank you so much for coming on The Channel here. I certainly appreciate it. Where do people go if they’re looking to learn more?
Jason Graystone: We’ve obviously been over a lot in this video, and there’s a lot to take in. I recommend you go and re-watch it. If you really are interested in learning more about how to trade the financial markets, you can find the website below this video.
Ryan Scribner: Yep, everything’s linked up in the description. What is it, Tier One Trading?
Jason Graystone: Tier One Trading, yep.
Ryan Scribner: Then you also have a YouTube channel as well, where you’re pretty active posting videos on a consistent basis?
Jason Graystone: Yep.
Ryan Scribner: Okay.
Jason Graystone: Everything’s below, and hopefully be working with you soon.
Ryan Scribner: All right. Thanks so much for coming on.
Ryan Scribner: Thank you guys for sticking around and watching this whole video. If you guys want to see more videos like this, where I talk to different experts out there, let me know down in the comments section below. I’d love to hear your feedback. All right. See you guys later.