As price action (PA) rises, we see areas of clear resistance – sellers step in and the price is pushed back down. As PA declines, we see areas of clear support – buyers step in and PA rises back up. Multiple touches of these psychological price levels creates a support / resistance line. When resistance is broken, it then ‘flips’ and becomes future support. Similarly, when support is broken, it becomes future resistance.

Why it Matters:

• If an alert is received when price is close to horizontal support / resistance, it may be prudent to wait for confirmation before entering. Waiting for confirmation will increase a trader's win rate, but may also decrease their RR. More on confirmation below.

Notes:

• The team chooses to draw support and resistance lines on candle bodies. Other traders prefer using wicks. There is no right or wrong way, but it’s important to be consistent.
• The more touches on a given support/resistance line, the weaker that that level becomes. The logic being that buyers of support will more often than not become "exhausted" with multiple touches as will sellers of resistance.

A trend is a consistent pattern of price movement or price action (PA). This can be defined as being in an uptrend, downtrend, or ranging pattern. Perhaps the simplest means by which to gauge the trend is to zoom out and look for a series of higher highs combined with higher lows (uptrend) or lower highs combined with lower lows (downtrend). Sideways or ranging price action is denoted by price congestion where PA bounces back and forth between the top and bottom of a tight range with no clear trend.

The trend can also be identified by looking at the slope of Simple Moving Averages (SMAs) and Exponential Moving Averages (EMAs). See more on SMAs and EMAs below.

Why it Matters:

• Identifying the trend is important no matter what system one is trading. As they say, the trend is your friend until the end of the trend. In the context of trading alerts from Meta Signals, identifying the trend can greatly increase one's profitability.

1. If PA is ranging, consider waiting for confirmation that PA has left the range before entering the trade.
2. If PA is trending and the alert suggests a continuation of that trend, consider locking in a better entry by waiting for a small move counter to the direction suggested by the alert.
3. If PA is trending and the alert suggests a move that is against the current trend, consider waiting for confirmation that the trend has abated before entering the trade.

A Simple Moving Average (SMA) is calculated based on the average value of the closing prices in a selected range. The calculation is automatically updated each time a new candle opens. The average price calculated for each time point is connected as one continuous line. An Exponential Moving Average (EMA) is similar to a SMA, but a greater weight is assigned to more recent closing prices.

The team's favorite SMAs/EMAs can be found for free on TradingView and include:

• SMA 9: Simple Moving Average 9
• SMA 200: Simple Moving Average 200
• EMA 21: Exponential Moving Average 21
• EMA 55: Exponential Moving Average 55
• EMA 89: Exponential Moving Average 89
• EMA 200: Exponential Moving Average 200

SMAs/EMAs can also be used to very effectively judge the current trend. When they all take on a positive slope, a clear uptrend has formed. When they all take on a negative slope, a clear downtrend has formed. The more extreme the slope, the stronger the trend.

Why it Matters:

• SMAs/EMAs can be used to very quickly gauge a trend.
• Just as PA tends to respect horizontal support and resistance levels, during a trend PA also tends to respect certain SMAs/EMAs. This allows the trader to enter and exit a trade based on confirmation and can often lead to excellent entries and exits far in excess of the original TP levels provided by the alert.

Notes:

• Even on the same trading pair, a trend may be up on one time frame and down on another. Indeed, this is more likely than not. It’s important to assess the trend in the context of the time frame of the alert.
• Different traders use different SMA/EMA settings – for example the EMA 50 is quite common while we prefer the EMA 55. The above SMAs/EMAs have served the team well over the years and tend to be watched by many traders.

The Meta Signals system has been backtested and forward tested extensively based on the assumption that a trade is entered immediately upon receipt of the alert. Over time this strategy is consistently profitable. However, when deciding whether or not to act on a specific alert, especially when the alert is suggesting a trade that is counter to a strong trend, waiting for confirmation before entering can greatly increase one's win rate.

There are many forms of confirmation. For the team, the most reliable are:

1. A close above / below horizontal support / resistance, preferably with high volume.
2. A close above / below a key SMA or EMA that PA has clearly been respecting throughout the prevailing trend.

Notes:

• In both examples, the more conservative trader would wait for an open and close.
• In either case if the alert is going to play out, confirmation will generally come within six candles on the time frame of the alert.

Should I wait for confirmation before entering the trade?
The upside to waiting for confirmation is that your overall win rate will likely increase. The downside is that by the time confirmation is received PA may have moved significantly from the price at the time of the alert. Unless the TP target is also adjusted, this will naturally result in a lower RR trade.

Ultimately, it’s up to the individual trader to assess the chart at the time of the alert and decide whether or not to wait for confirmation or enter immediately.

There are two ways to exit a trade, either price hits the stop loss (SL) or the take profit (TP) value.

Managing your stop loss

Every alert includes a suggested SL value. The alerts are designed to be exited with a close below the SL value. Experienced traders may see opportunities to increase the RR of the trade by adjusting the SL value based on their own TA skills and/or by exiting on a touch of the SL.

Especially on higher time frames, experienced traders may consider exiting on a close below (long) or above (short) on a time frame that is one half or even one quarter of the time frame being traded e.g., on a 24H time frame one might exit based on 12H or 6H close below/above. This will help to avoid larger losses but will also reduce one's win rate.

Managing your take profit

Each alert provides at least one TP target typically with a RR of at least 0.75 ($75 earned for every $100 risked). Most alerts include two or three TP targets. The simplest way to exit a trade is to set the (TP) in accordance with the Target 1 value. However, this very often leaves significant profit on the table as the TP values 2 and 3 will often times represent much higher RR trades.

Traders can potentially increase profitability in a number of ways:

1. As PA moves close to TP Target 1, move the TP up to TP Target 2. Consider also moving the SL to break even or into profit at the same time. If TP Target 3 is provided in the alert, repeat this as PA moves closer to TP Target 2.

2. Once horizontal support / resistance is broken, move the TP to the next support / resistance level and move the SL up to just below / above the prior level.

3. Switch to a trailing SL. As price reaches close to TP value 1, switch to a trailing stop. This will allow the trade to stay open until PA retraces based on the amount dictated by your trailing stop.

4. Especially in trending markets, phenomenal RR ratios far beyond those provided in the alerts can be achieved by staying in a trade until a SMA/EMA that has been clearly governing PA is broken. This can be seen quite often on 4H Potential Long alerts where one does not exit until price closes below the EMA 21.

The win rate is simply the percentage of trades that hit the take profit (TP) value before closing below the stop loss (SL) value. Most new traders understandably assume that they must win more trades than they lose in order to be profitable. In actuality it is a trader's RR in combination with their win rate that dictates their profitability. It’s critical to understand that a trader can lose more trades than they win and still be profitable.

Most Meta Signals alerts include a TP Target 1 value that provides a minimum RR of 0.75. This means that for every $100 risked at least $75 will be earned (minus fees.) Especially on higher time frames TP Targets 2 and 3 typically provide significantly higher RRs – oftentimes upwards of 3 or more.

Traders who deviate from the SL or TP Target 1, 2, 3 values provided by the alerts need to remain aware of how the new RR affects their required win rate in order to be profitable. For example, if the TP Target 1 value is reduced to a point that provides for a RR of 0.5 ($100 risked for a potential $50 gain), a win rate of 66.67% is required just to break even.

Meta Signals is designed to call the trader's attention to high probability trades. It is far from an all seeing, all knowing oracle. Indeed, especially when it comes to TP on Target 3, the system is oftentimes "wrong" more than it is "right". But due to the high RR of trades that do reach Target 3, the system remains profitable.

No matter what TP level a trader targets, over time the alerts provide a significant edge. Of course you can only benefit from this edge if you have the funds to trade.

Longevity in trading is achieved by managing risk. If you are risking even 10% of your account on a single trade, just a few losing trades in a row leaves you in a massive hole. The general rule then is to risk 0.5% to 2% of your account per trade. This means that with a $10,000 account, a position size needs to be chosen that can result in a loss of no more than $50 to $200 for any given trade.

Losing streaks are part of the game. Therefore, you must also consider how much of your total account to risk at any one time across multiple trades. Most agree that 6% to 12% is a reasonable range.