Set and Forget Price Action Trading

This is a trading video on set and forget price action trading strengths and weaknesses.


What’s up traders here? Chris Capre, I’ve got a trading video here for you today on set and forget price action trading strengths and weaknesses. I wanted to do this video for a while because I think there is some confusion out there.

If you look at a lot of the material that you see on it there, there’s a lot of people that are either promoting set and forget trading as the bastion in the you know the Pollyanna or the golden key to trading, and it’s how you should trade.

Then there are other people who are bashing it, straight out. I actually don’t see it as black and white or one or the other. I see it as both and. There are strengths and weaknesses to set and forget price action trading.

For those of you not familiar with this. Set and forget is where you’ve done your price action context analysis before you’ve made the trade.

You’ve come to decide, “Okay. This is where I want to get in. This is where I want to get out. This is my stop loss. This is my take profit,” and so forth.

Once you’ve done all that analysis, then you’re saying, “Hey. It’s hell or high water. I’m either going to make money on this one, and I’m going to ride it out until it hits my profit target, or I’m going to ride it out until it hits my stop loss.”

Now, to be clear, most professionals, banks, institutions, hedge funds, prop traders, are not doing pure set and forget trading, meaning that they are oftentimes looking to maximize the profit on every single trade. If they’re in a trade, and they see that hey it’s going against me. Nothing is really folding in my favor.

I don’t really see anything that is … I see the probability is continuing to dwindle against me. They are going to get out. If you read the books of hedge fund market wizards or any of the market wizards books, they’ll tell you get out of your losers quickly, get out of your bad trades quickly, and hold your winners longer.

That should tell you right there that they aren’t doing set and forget. They do have a trading plan. They do have a fixed stop loss and take profit. Many of them do. Some of them don’t.

The bottom line is that they are willing to be flexible when they can read the situation well and understand that the probabilities have either shifted more in their favor or further against them. To be clear, most hedge funds, most banks, most prop traders, are not doing pure set and forget. They’re not just setting there. They put out the trade and then they go play golf and saying, “Okay. Well, I can only make five hundred thousand dollars on this trade so that’s all I’m going to go for,” when there’s a million on the table. They’re not just sitting there doing that. However, you may not be the kind of person that can sit at a computer screen, trade for eight, ten, twelve, fourteen hours a day. That might not be available to you.

I want to talk about the differences between the strengths and the weaknesses so that you can get a much more clear picture about set and forget trading.

You can understand its strengths, understand its weaknesses, and then understand and look at it and evaluate say, “Hey, where do I want to be with this? How do I want to trade myself?” There are strengths and are weaknesses. It’s not one or the other. That’s what we’re going to discuss in this video.

I’m going to begin by talking about the strengths of set and forget price action trading. Now, I consider there generally to be three main strengths to set and forget trading. The first one is that it builds discipline. The second is that it increases emotional fortitude. The third is that it’s best for busy people. Let me kind of dive in to each one, individually.

How does set and forget trading build discipline? When you decide before the market hits your price, “Hey, this is what I want to do. I’m going to buy at this particular trading location here. Here’s my stop loss. Here’s my take profit.”

More often than not, trades will not beeline it straight for your target. In fact, if you look at most of your winning trades, oftentimes they oscillate between profit and loss. Oftentimes, they take more time than you suspect. I would probably say less than maybe twenty, fifteen percent of the time. If you look at all your winners, the majority of them do not beeline it straight for your take profit.

What that means is that the majority of the time you can actually expect to be facing a lot of uncertainty and ambiguity about whether your trade is playing out or not, whether you made a good decision or not. The fact that you have committed to set and forget saying, “Hey. I’m sticking to this whether it hits my stop loss or take profit.”

That builds a certain level of discipline to be able to stick through that and maintain your discipline and your trading plan, regardless of what the result is. That to me, is a real positive. It’s not that you are not building discipline if you’re actively managing your trades. You are. It’s a different kind of discipline that even though it builds some of the same skills in terms of discipline, it also tests you in other areas that set and forget will not or would fail to test you in. The first strength of set and forget is that it will build discipline.

The second one is that set and forget trading can and will often increase your emotional fortitude. What do I mean by that? As most of your trades they oscillate between profit and loss, both wins and losses. They oftentimes will oscillate between profits and losses. Most often than not they don’t beeline it straight for your stop loss or straight for your target.

What happens is that you’re often going to experience emotions. I’ve talked about this before in some of my prior videos about how to perform under pressure. Make sure you watch that video for sure.

That uncertainty around a particular decision you made often increases your emotional responses. It increases neurological activity. It targets more, or it increases the negativity bias that you are normally wired to do. As you experience those highs and lows, you’ve probably had this experience that you’ve been in a trade.

Maybe it starts off in profit and you’re thinking, “Great. I feel really good about this. I did a great job.” Then all of the sudden it goes into the negative and you’re thinking, “Oh, I did a bad job. This isn’t right. This was a really bad decision.” Then it goes back into profit.

These emotional swings … As these kind of waves of emotion come and go both highs and lows, positives and negatives, the fact that you have been able to stick to your plan and kind of ride things outs builds an emotional fortitude and I. Q. that, “Hey, I can manage these emotions and I can learn to reinforce the right habits.”

There is a strength in set and forget trading that as you kind of ride these waves, that you build your emotional I. Q. and fortitude.

The other third strength of set and forget trading in my opinion, is that it’s generally … I find it generally better for people who are really busy, people who have got full time jobs, maybe you’ve got kids, maybe you’ve got other responsibilities outside of work.

If you only have a couple hours a day, you really don’t have the time to manage your trades or you have less time to really get a read on the market, see all the different sessions, get your finger on the pulse, see the changes. Because of that, if you’ve only got a couple hours a day, I lean towards recommending set and forget trading, at least in the beginning.

There are situations as you evolve your skill set and as you become better at reading price action in real time, I actually suggest abandoning set and forget, but that’s something we can talk about later.

If you are a busy person and you are just starting out, and you don’t have a whole lot of time, this would be my recommendation. These are the three general strengths for set and forget trading.

Now, as I said before, set and forget trading is not the be all end all. It’s not the holy grail. It’s not the best thing in the world and it’s not the worst thing in the world. It’s both. It has its strength and weaknesses.

Now, we are going to talk about some of the weaknesses.

The first is that set and forget limits and can reduce your profit or increase your losses.

What do I mean by that?

Remember how I was talking about earlier in market wizards. A lot of them are talking about, “Hey get out of your losing trades early. Get out of the bad trades early. Don’t let it go for the full loss.”

Most professionals are sitting there looking at this saying, “Hey wait a minute. Nothing in this trade since I’ve gotten in it has shown me that this is going to evolve in my favor. I’ve seen these patterns thousands and thousands of times again. In general it means it’s going to go down and it’s going to hit my stop loss.”

As you build up your real time price action skills, you are going to be able to see these trades that are going to fail in real time and get out of them before they do. That has an advantage. If you’re able to save yourself an extra point five R or point two five R over a couple trades that means a lot, but over hundreds of trades that is a massive advantage. This is very, very important for you to understand.

Also on the flip side of that is that set and forget actually can reduce your profits. What do I mean by that? I’m going to show you a real time example of a trade that I took and that I actively talked about in Twitter. Here is my Twitter post. It was the middle of June and it was a trade that I had been involved in on dollar yen. I’d been looking to short this for a long time.

I got in on the trade here and I posted on June fifteen I said, “Just lifted my limit on dollar yen short from one o five fifteen to one o three ninety.” I was short and I was already up about five hundred and forty pips on this one here. I had a limit at one o five fifteen. I now moved it to one o three ninety and I said even here, “May hold for a one o one fifteen move.”

Here is the actual chart below. I’ve been short since around one eleven. This is a great … If you’re in my course you’ll recognize this corrective impulsive corrective structure. It’s a classic price action pattern you need to understand. BOJ comes in. Pair drops eighty five pips in one minute.

If I had just had my original target of one o five fifteen, and I wasn’t reading the price action in real time then I would have got out at one o five fifteen, but instead I was reading it in real time and said, “Hey, this structure suggests it’s going to go down, so I lifted the limit ahead of time and it ended up resulting in a very profitable move, much more profitable in my favor. One o five fifteen, here we are one o four sixty seven. At that point, I was able to grab about another … I don’t know. Was that another fifty or sixty pips. That added to more of my bottom line.

Here’s the follow up Twitter post on that one the next day. “Just lifted the limit again on my live dollar yen trade to one o one fifteen.”

I originally had it or I moved it to one o three ninety from one o five fifteen. Now it’s at one o one fifteen. Now, I’m currently up six hundred and sixty pips instead of five forty. That’s an extra hundred and twenty pips. How does this relate back to set and forget trading?

If I was a pure set and forget trader, then that one hundred and twenty pips wouldn’t be available to me. I just had my target. I’m done. That’s it. I’m going to go play golf or something like that. Instead, I was reading the price action in real time and it was communicating to me. Here’s the actual copy of my trade results so you know it was real trade.

I was actually reading it in real time and I’m looking at this and saying, “Hey. The probabilities are heavily in my favor that this is going to fall further. I’m going to keep lowering my limit until I see that the price action in real time is shifting in terms of momentum and the context is changing against me.”

That’s an extra hundred and twenty pips when I was already up five forty. That’s an extra twenty percent gain of profit on that one individual trade. On one trade, that is a decent amount of profit, but on hundreds of trades, that is a massive difference in terms of your account balance. Since you’re going to be making hundreds and hundreds of trades over your career, that will add up.

Now, that doesn’t mean that every time you lift your limit you are going to make more money. You’re going to win some, and you’re going to lose some. If you learn how to shift the probabilities in your favor and really read the price action in real time, this can mean the difference between making twenty percent on a year and thirty or forty percent on a year.

That adds a massive, massive profitability to your account. The two accounts, over time, will never be the same. They won’t even come close. A person who’s doing a set and forget and the person who is managing it effectively in real time is the one who’s going to bank more in their account.

Now, another really good example has to do with poker. If you’ve ever heard my lessons or seen my blog post, poker is something that I suggest studying as a trader because they are so similar. It’s a parallel skill. You build poker skills, and they’re going to transfer over to trading.

If you think about professional Texas hold ’em players, they’re not sitting there with their hands thinking, “Okay. I only want to make two times my bet on this one here.” They’re looking at every single hand and saying, “How can I get the maximum amount of profitability out of this hand.”

To show you a great example of this, one of the most popular, classic examples of this and really just an amazing hand is a situation where three players are going heads up pre-flop. Lewis who’s from the UK has pocket queens, the guy in the video Wrobel has pocket nines, and Tim Lashenka a really good Ukrainian player has pocket twos. They’re all in the pot pre-flop, and they’ve all matched bets and now they are going to see the flop. Watch what happens here. This guy Wrobel here, by the way he’s already kind of already on tilt. Watch what happens once the flop comes.

Commentator 1: I think the pot’s going to be big. I just have that feeling.
Commentator 2: All three players have pairs. That’s something that you don’t see very often pre-flop. It comes queen, queen, nine.
Commentator 1: Oh my God.
Commentator 2: Goodbye Andrew Wrobel.

Okay. So Wrobel’s this guy in the video. Pre-flop he had a really good hand or at least a solid hand. He probably thought he had one of the better hands out there. He was about, pre-flop he had about a fifteen, sixteen, seventeen percent chance of winning. Now the flop comes out. He has pocket nines pre-flop and the flop comes queen, nine, queen. He has a full house. He is thinking he has the absolute best hand on the table, and rightly so.

The probability of somebody having a better hand in this situation are probably one in several hundred thousand.

He’s thinking, “Okay. I’ve probably got the best hand here.” Tim Leshenko, completely drawing dead on this one here. He’s got, both of them, him and Tim Leshenko.

Wrobel and Tim Leshenko have got a zero percent chance of winning.

Lewis, on the other hand, this guy on the left here from the UK. He had pocket queens. He just hit quads. He, mathematically, cannot lose this hand. He flopped the nuts. What is he doing here?

He’s looking at the other two players thinking, “Okay. I got the nuts. Now I’ve got to strategize how am I going to get the maximum amount out of this hand?”

Wrobel here, thinking he’s got the nuts, is thinking heavily in terms of how he’s going to bet. He’s not sitting there saying, “Okay, I’m only going to make twenty thousand, fifty thousand, a hundred thousand on this hand.” He’s going through all these different scenarios in his mind on how he can make the most out of this hand. Look how much time he takes to think about this here.

Commentator 1: They’re both trying to figure out, how can I get all the money in. By the way, Lewis is thinking he has to be bluffing, right? When you have quads, you have all the cards locked up.
Commentator 2: Wrobel leads right out, betting a full house. That’s something I would never do in this spot to a pre-flop raiser.

Okay. Tim Lashenko folds here. Lewis, who knows he has the nuts now is again running through all the scenarios in his head. “How can I get the absolute maximum amount out of this hand?” This is a skill. That is the difference between set and forget and a person who is doing trading in real time.

The person who is doing set and forget is going to limit their upside, and the person who is actively managing their trades in real time and reading the price action in real time is the one who is going to, more often than not with the right skills, get more profit out of a trade than a set and forget trader is. Let’s go and take a look at how long Lewis, knowing he has a one hundred percent chance to win this hand is going to decide upon his bet size here.

Commentator 2: The pre-flop raiser. Going to take one stab to bluff at it. He’s thinking he’s died and gone to heaven.
Commentator 1: But he’s also thinking it’s got to be a bluff or an Ace high.
Commentator 2: He’s just got to call.
Commentator 1: Yeah. He’s never going to raise. He’s never raising. It would just be a horrible play.
Commentator 2: If he’s last man, last action he’s probably going to get a bet in the pot.
Commentator 1: Look at him. These guys are just incredible.

Okay. What did we see here? We saw at least twenty plus seconds when it normally, on an average, it takes a poker player between five and ten seconds to make a decision. He’s doubling the amount of time and he’s looking over at the chips on Wrobel thinking, “Okay. How big is his stack? What’s the texture of the flop, and how can I get the absolute maximum amount out of this hand?”

This is the kind of mindset you need to have as a professional trader. This is what hedge funds, this is what prop traders and bank traders do. They look at this and say, “Hey, how can I make the maximum amount out of this hand? Are the probabilities in my favor or are they against me?”

If they’re against me, I’m going to be getting out. If they’re in my favor, then I’m going to be getting as much out of this trade as possible. Why only make five hundred and forty pips when I can make another six hundred and sixty or seven or eight hundred? That’s all going to add up to a massive difference in profitability in your account over time. Point number one in terms of the weaknesses of set and forget, it reduces your profit and it can increase the size of your losses. That is one of the weaknesses.

Number two is that you’re actually going to get … You will have weaker real time price action skills. What do I mean by that? If you have gotten into a trade, and you are only waiting for the stop loss or take profit, then you’re not really doing anything else after that. You’re just kind of letting the trade do what it’s going to do. You’re looking for other trades, but when it comes to that individual trade, you’re not reading the price action in real time.

You’re not doing any analysis, and you’re not learning how to analyze different structures and understand how the price action is evolving in your favor, against you, or is it neutral. Because of that, you don’t build real time price action skills. When it comes down to it, a set and forget trader will have much weaker real time price action skills than someone who is working with every trade and trying to get the maximum amount out of each trade because there is more analysis, there’s more patterns, there’s more bars you’re going to see and thus, therefore you’re going to have much more exposure to a wider variety of situations, and you’re going to build your skills for that. That is a weakness of set and forget.

The third weakness is the mindset and the mental limits. What do I mean by that? If you have to go through situations where you limit the amount of profitability and analysis and engagement you are going to do in a trade, then you also kind of create this mindset of handling lesser scenarios and limiting your upside potential. Because … akin to point number two, through all the different situations that you will go to and you will experience as a trader, “Oh, well I had a plus two R target and I exit for plus one point five or I ended up going to my plus two R target.”

You’re going go through that experience and see the difference on how your different actions worked out over time. The same thing is you’re going to have trades where you’re going to sit there and go, “Wow. I was a set and forget trader. I got out for one R. The price action and everything was telling me in real time that this thing was going to hit it from the moment it entered. I should have got out earlier. You’re never going to get exposed to those situations. Because of that, you’re going to have a lesser amount of skills, situations, and environments that you can handle because you haven’t kind of put yourself in a wider variety of situations.

The person who has experienced more situations, just like the poker player who’s experienced more different hands and unique situations, they’re going to be much more adept when things get really challenging and the pressure really mounts than the person who just says, “Eh. I got pocket aces. I only want to win two times my initial bet and that’s it.”

There’s no development once you’ve set your stop loss and take profit. Other than the things we’ve talked about, there is not further development in that. You end up reducing the mindset skills and capacities that you have by doing set and forget and you also create mental limits.

I’ve often seen a lot of traders that will say, “Hey, I made my plus two R on the day and so I’m cutting it for the day.” A poker player never looks at a table or a hand and say, “Eh, I’ve made twenty percent profits of my hand this tournament. I’m just going to call it a day.”

No, they’re always looking at how to maximize every situation. You have to understand that there are weaknesses to set and forget trading and these are them. This should hopefully give you a different perspective. It’s not the be all end all and it’s not the worse thing in the world.

If you do it, it’s not going to make you a bad trader, and if you don’t do it, it’s not going to make you a good trader. You have to understand the differences in the full spectrum of what this is.

With that being said, I hope this video kind of gave you a different perspective on set and forget price action trading. If you look at most of the comments, a lot of people are saying this is the only way you should trade, and some people are saying you should never trade like this.

To me, I don’t look at it as clear as black and white. I see the benefits, and I see the downsides. Now that you’ve kind of seen both sides of the spectrum, hopefully this can give you a more complete context to be able to evaluate where do you want to be in this? What is best for you and how can you go about your trading so that it matches your style, your personality, and it’s also most workable for you in your life? It has to be workable for you in your life.

I’m hoping that this really gave you a different perspective. I hope it opened up new ideas. I hope it provoked questions and thoughts and challenged your ideas on it. I hope it is going to force you to really re-evaluate it so that you don’t look at it in such a black and white fashion. With that being said, I look forward to your comments and question on it and your thoughts on it.

Share with me what you think about it. What do you do and have you noticed the differences. If you like this video, make sure to give it a thumbs up below and share with anybody you think can benefit from it. Also make sure to leave comments below and your suggestions on what kind of lessons you would like a future video on.

Lastly, in the description you’ll also see a link to the video. How I talked about how to perform under pressure. This is a great video for you as traders because one of the things you’re going to be often experiencing is pressure. Set and forget trading does not mean that you’re not going to experience pressure, emotions, or highs and lows. It’s a complete falsity and misstatement or it’s a complete misdirection to say, “Hey I’m doing set and forget so there’s no stress.” It’s complete BS.

If you look at yourself, you’ve made tons of set and forget trades and you still experience stress. That’s a real thing. It’s important that you understand all these things. I look forward to your comments and questions and other than that, make sure to check us out on second skies forex dot com. I will see you on my website, and I’ll see you in the next video. Take care everyone.

Buddhist, Trader and Philanthropist

I'm Chris Capre, Founder of 2ndSkiesForex. I help traders of all levels change the way they think, trade and perform. As a professional trader, I specialize in trading price action. As a teacher, my passion lies in showing you how to re-wire your brain for successful trading. Want to improve your edge right now? Visit my Price Action Course page.

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