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Everyone Laughed at His Strategy (Until He Dominated the World Cup 12 Times) — Transcript

by Trading Notes · 2,639 words · 372 segments · language en · Watch on YouTube

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0:00This is Patrick Nill. For most of his
0:03life, he was a bookbinder. He ran his
0:05family company in a small town in
0:07Germany, working 16 hours a day. Then in
0:102018, he sold everything to become a
0:13full-time trader. His parents said he
0:15was going to the casino. His friends
0:17called it gambling.
0:19One year later, his name was on the
0:21leaderboard of the Robbins World Cup,
0:23the oldest and most famous trading
0:26competition on the planet.
0:28And he never left. Patrick has finished
0:31in the top five of that competition 12
0:33times. This year, he is in first place
0:37with a return of around 300%.
0:40Yes, you heard me right, 300%.
0:43That's insane. And here's the part that
0:46nobody expects. Patrick does not sit in
0:48front of six screens all day. He says
0:51one hour in the morning is enough. He
0:53looks at the chart, places his one or
0:55two trades, and the day is over.
0:58Sometimes he does it from his phone
1:00while traveling because the strategy
1:02that made him a world champion is
1:04incredibly simple, simple enough that
1:07anyone can understand it. It's built on
1:09one single idea about how markets move.
1:12And once you see it, you can't unsee it.
1:15Now, if you're like me, you're thinking,
1:17how does he do it? Well, I decided to
1:20look for the answer. I went through
1:22every interview Patrick has ever given,
1:24hours and hours of him drawing on charts
1:27and explaining his model. And I have to
1:29say, this man is a genius of simplicity.
1:33I condensed everything into this video,
1:35and I'm giving it to you for free. So if
1:37this adds value to your trading, hit
1:39that like button and drop a thank you in
1:41the comments. It really helps the
1:42channel grow. Let's get straight to it.
1:45Before we go to the strategy itself, you
1:47need to understand the three principles
1:49Patrick built his entire career on. The
1:52first principle is this. Markets spend
1:55about 70% of the time in ranges and only
1:5820 or 30% of the in trends. And there's
2:01a reason for it. Big players need
2:04liquidity to fill their orders. Inside a
2:06range, they can do that. When the
2:08liquidity dries up, they push price to
2:11one side toward the next pool of
2:13liquidity and a new range forms there.
2:16So the job of a trader is not to
2:18predict. The job is to move from one
2:20area of fair value to the next one.
2:23The second principle is the one Patrick
2:25calls his biggest rule. You never move
2:28your stop loss to give the trade more
2:30room. Never. When you're nervous and
2:33price comes close to your stop, you want
2:35to push it a bit further away. Patrick
2:38says that the moment you do this, you
2:40cannot be profitable anymore. It's a red
2:42flag. He learned this the hard way.
2:45During COVID, oil kept failing. When it
2:48was around $12 or $13 a barrel, Patrick
2:51and his team thought it was way too
2:53cheap. For years, it had cost 10 times
2:55that, so it had to go back up. They
2:58bought. When it fell to 10 and then to
3:01eight, they bought more. At five, they
3:03bought again. They were breaking all of
3:06their own rules, but they thought it was
3:08the deal of a lifetime. Then they
3:10stopped for a second and asked
3:12themselves what the real risk was. They
3:14closed everything that same day and
3:16pulled the plug. That night, oil went to
3:19-$40.
3:21Nobody knew oil could go negative.
3:23They had calculated a maximum risk of a
3:26few thousand dollars per contract. The
3:28real risk was almost 10 times that.
3:32Since that day, Patrick's stop loss is
3:34untouchable. And the third principle
3:37follows from the second. You decide the
3:39stop loss first based on the structure
3:41of the market. Only after that you
3:44decide how many contracts to trade.
3:46Sometimes the stop is small, sometimes
3:49it is big, and the position size adapts
3:51to the stop, never the other way around.
3:54Now that the foundations are clear,
3:56let's see how Patrick actually reads a
3:58chart. Everything in Patrick's model
4:00starts with two letters, P and B. A P is
4:04a strong move up followed by a range. A
4:07B is a strong move down followed by a
4:10range. That's it. You wait for the push
4:13and after the push almost every time
4:15price starts moving sideways. That range
4:18is Patrick's playground. The time frame
4:21where he makes his decisions is the
4:2315-minute chart. He uses the 4-hour
4:25chart to get the big picture and
4:27sometimes he drops to the 5 or 3-minute
4:29chart only to execute with more
4:31precision, but the decision is always
4:33made on the 15-minute.
4:35Now here's a question every trader gets
4:38wrong. When does a range become a valid
4:41range?
4:42Patrick waits for three confirmations,
4:45three touches of the zone. You could
4:48call it a P much earlier after one or
4:50two touches, but Patrick waits very long
4:54on purpose because the longer the range,
4:56the higher the probability that the
4:58breakout actually works. Sometimes this
5:01means he misses the move completely.
5:03He's fine with that.
5:04On a 15-minute chart, a good P needs at
5:07least half a day to form, often a full
5:10day. So we are not talking about 20
5:12trades a day. We're talking about one or
5:15two good setups. And before drawing the
5:17zones, when Patrick is at his desk, he
5:20looks at the market profile and the
5:22volume profile of the week. The value
5:24area high and the value area low tell
5:27him where the market is in balance and
5:29where price will move fast because
5:31there's almost no volume. If a P or a B
5:34forms exactly on one of those levels,
5:37the setup is much stronger.
5:39Once you have a valid range, there are
5:41three ways to trade it and Patrick uses
5:44all three. The first one is the range
5:46trade. You place a limit order at the
5:48bottom of the zone and target the top or
5:51you sell the top and target the bottom.
5:53No partials, just in and out.
5:56Patrick loves it when two ranges sit at
5:58the same price level because he says
6:00they simply work better. He does not
6:02open range trades when the P is
6:04completed in the evening because 8 hours
6:06without seeing the market is too long.
6:09The second one is the breakout with
6:11confirmation. Patrick does not buy the
6:13first candle that leaves the range. Too
6:15many breakouts are fake. He waits for a
6:18candle to close outside the zone, then
6:20price comes back to test the edge of the
6:22zone, and the next candle closes beyond
6:25the breakout candle. That is his
6:27confirmation. On the downside, it is the
6:30same logic, a new low, a pullback, and
6:32then the break of that low. Only then he
6:35enters, usually with a limit order.
6:38The third one is his favorite trade in
6:39the world. Price breaks below the range.
6:42The sellers push, but they do not have
6:45enough power. Price comes back inside
6:47the zone. Patrick goes long right there.
6:50The stop is tiny, just below the low of
6:53the fake breakout, and the potential is
6:56huge because when the market wanted to
6:58go down and failed, it often moves up
7:01with force. In this case, he does not
7:03stop at the top of the range. He holds.
7:06He prefers this setup on the long side.
7:09The mirror image of fake breakout above
7:11the range and a return inside, he trades
7:14much less because when there is power to
7:16the upside, more power usually comes.
7:19With the entries clear, let's talk about
7:21where the trade ends. The stop loss goes
7:24below a structural low, below the zone,
7:27or on a level of the market profile. If
7:30there is nothing to lean on, Patrick
7:32calculates it from the target. If the
7:33target is far away, he accepts a wider
7:36stop as long as the risk-to-reward stays
7:39above three. And as the trade moves in
7:41your favor and new ranges form, you move
7:44the stop below each new P, up and up,
7:48under every new area of fair value.
7:51For the targets, Patrick trades from
7:53fair value to fair value. If there's a
7:55previous range above or below, that's
7:57the target. When he has several
7:59contracts, he takes the first partial at
8:01the edge of the closest zone, decides
8:04the second one on the spot, and leaves
8:06the last contract for the origin of the
8:08whole move. He usually works with
8:10multiples of three contracts for this
8:12reason.
8:13What if the market is at an all-time
8:15high and there is no previous fair
8:17value? Then he measures the size of the
8:20initial impulse and projects it forward,
8:22one to one.
8:24And one last detail that makes a big
8:25difference. Small ranges after a big
8:28move are perfect for breakouts. The stop
8:31is close, the target is far, and you can
8:34get a risk-to-reward of eight or more.
8:37Big ranges are perfect for range
8:39trading, but terrible for breakouts
8:41because the stop would be way too far.
8:44Now, before we go to the chart and trade
8:46this live, there is something you need
8:47to know. The hardest part of Patrick's
8:50strategy is not the entry. It's drawing
8:53the range right. Too early and you trade
8:55a range that's not finished. Too late
8:58and the move is already gone. Patrick
9:00himself admits that his exact rules for
9:03drawing and resizing the zones are the
9:05one thing he does not share. If you want
9:07help with that part, there's a free
9:09indicator on TradingView called
9:11Consolidation Zones Volume Delta by Flux
9:14Charts. It finds the sideways areas
9:16after a strong push and draws the box
9:18for you. It also shows how buying and
9:21selling volume builds up inside each
9:23range so you can see which side is in
9:25control before the breakout comes. And
9:28if you want to go one step further, Flux
9:30Charts also has a paid tool, the Price
9:32Action Toolkit. It shows you market
9:34structure, liquidity grabs below and
9:37above the range, and key levels from
9:39higher time frames, all on one chart. If
9:41you decide to try it, use this code for
9:4320% off. You'll find the link in my
9:45description. All right, let's get back
9:47to the video.
9:48Let's put everything on a real chart and
9:50trade it the way Patrick does. First
9:53things first, open TradingView. If you
9:54don't have it yet, I leave a link in my
9:56description. On this chart, I'm on the
9:5815-minute time frame. I zoom out to the
10:004-hour first and I can see the market
10:03has been moving up. So the big picture
10:05is bullish. Back on the 15-minute, this
10:08is what I'm looking for. Here we have a
10:10strong push up, and after the push,
10:13price starts moving sideways. This is a
10:15P. I draw the zone from the high of the
10:18range to the low of the range.
10:20touch here, a second touch here, and a
10:23third touch here. Now the range is valid
10:26for me.
10:27Then this happens.
10:29This candle breaks below the zone. A
10:32beginner would sell this. I don't.
10:35I wait and look at the next candle. It
10:38closes back inside the range. The
10:40sellers tried and they failed. This is
10:43the trade Patrick loves most. I place a
10:46buy limit order right at the lower edge
10:48of the zone, and my stop goes just below
10:50the low of the fake breakout. A very
10:53small stop.
10:54Price fills my order and starts moving
10:56up. I don't close at the top of the
10:58range because when the market wanted to
11:00go down and could not, it often goes up
11:02with force. My first target is the edge
11:05of the next fair value area above us.
11:07And look at this. A few candles later,
11:10and we're there. The risk to reward on
11:12this trade is incredible because the
11:14stop was tiny and the move was big.
11:17Now let's do a short.
11:19On this chart, I'm again on the
11:2015-minute time frame. Same routine as
11:22before. I check the 4-hour chart first,
11:25and this time the big picture is not
11:27clear. The market made a strong push up
11:30and then it stopped. That is exactly
11:32where Patrick likes to look for a
11:33counter trade.
11:35Back on the 15-minute, here's the
11:37impulse up. And right after it, price
11:39starts moving sideways. This is a P. I
11:42draw the zone from the high to the low
11:44of the range. First touch here, second
11:47touch here, third touch here. Now the
11:50range is valid. Then price breaks above
11:53the zone. A lot of traders would buy
11:55this breakout. I don't. I remember what
11:58Patrick said. No confirmation, no trade.
12:02So I wait and watch what price does
12:04next. And here it comes. Price fails to
12:07continue, comes back down to the upper
12:10edge of the range, and this candle
12:12closes back inside the zone. The buyers
12:14tried and they failed. This is my entry
12:17for the short. I sell right at the upper
12:20edge of the zone with my stop just above
12:22the high of that fake breakout. Again, a
12:25very small stop. My target is the
12:27beginning of the impulse because
12:29according to Patrick, that is where
12:31price usually goes back to. And since
12:33there are two fair value areas between
12:35my entry and that level, I take a first
12:38partial at the lower edge of the range.
12:40I move my stop to break even and I let
12:42the rest run.
12:44Price drops through the range, keeps
12:46going, and reaches the origin of the
12:49move. Another trade with a small stop
12:52and a great risk to reward. So we have
12:55the two trades, the long and the short.
12:57But if the strategy is so simple, why is
13:00Patrick a world champion and most people
13:03are not? He has a very clear answer. The
13:06difference between a profitable trader
13:08and a champion is consistency. A
13:11profitable trader can do it once. A
13:13champion does the same thing every day
13:16without changing the rules out of fear
13:19or greed. And he has a rule for bad
13:21days, too. After three or four losses in
13:24a row in the same day, he closes
13:26everything and starts fresh the next
13:28morning. Sometimes your head is just not
13:30in the market and it's better to go.
13:33Let's recap everything we learned from
13:34Patrick Neil. Markets spend most of the
13:37time in ranges and you trade from fair
13:40value to fair value. 4-hour chart for
13:42the big picture, 15-minute chart for the
13:45decision. A strong push followed by a
13:47range gives you a P or a B, valid only
13:51after three touches. Three ways to trade
13:54it, the range trade, the breakout with
13:56confirmation, and the fake breakout with
13:58the reclaim. The stop goes on the
14:01structure. It is set before the position
14:03size and it is never moved to give the
14:06trade more room.
14:08Targets at the next area of fair value
14:10in partials or one-to-one from the
14:13impulse at new highs. and the
14:15psychological requirements,
14:17patience to wait for the third touch,
14:20discipline to close the day after three
14:22or four losses, the calm to do the same
14:25thing every day.
14:27A bookbinder with 16-hour days, laughed
14:30at by his own family, became one of the
14:32most consistent competition traders in
14:35the world with a strategy you can draw
14:37with two letters. That's not luck. That
14:40is a method executed with discipline
14:43year after year.
14:45Thank you all for your support, and I
14:47just want to ask you to tell me in the
14:48comments which market you trade the
14:50most. I'm curious to know where you
14:51spend your time. See you guys next time.

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