This is a formula that Alden has shared with everyone before, but it is a very important rule in trading charts, and to play the game we must understand the rules, so today Alden writes this article in more detail to share with everyone about this 2-2-6 formula.

Through years of accumulating experience in trading, Alden realized one thing: The financial market is a place where emotions are amplified, data is chaotic, and opportunities and traps are often intertwined on the continuously running chart every day, every hour, every minute, every second. Each day, dozens of signals appear on the screen: price exceeds MA, unusual volume increases, engulfing candles, news impact, divergence… The question is: which ones are worth entering? Which ones should be avoided? And without a reference system to filter, we can easily get drawn into seemingly attractive situations that are actually just false probabilities. And immediately we shift from the position of a trader to that of a gambler.

So Alden has defined the rules about waves in the market with the '2-2-6 FORMULA', it acts as a simple but extremely practical filter, helping you classify trading opportunities into 3 specific groups:

GROUP 1: 20% clear opportunity, high probability of winning - Should focus on this

GROUP 2: 20% with no data, easily assessed as a risk - Easy to ignore, do not enter orders

GROUP 3: The most dangerous group, 50/50 chance - Alden still calls these gambling waves, they are the most dangerous traps on the chart

GROUP 1: 20% CLEAR WAVE: JUST NEED TO TRADE THIS PART WELL, YOU'RE ALREADY RICH ENOUGH

You don’t need much. Really. You don’t need 10 orders every day, you don’t need constant opportunities. You just need to recognize '20% of truly clear waves'. That’s where market structure, momentum, volume, trend, and price behavior converge into a high probability point.

For example:

- A strong upward trend, correcting to the old support zone + decreasing volume during the correction + RSI returning to 40 – 50.

- A price accumulation zone of 3 weeks broken by a long body candle, with a spike in volume, after a period of sideways price movement.

- Economic news aligns with price action and is not trapped too early.

These setups do not occur often, but with just 5-7 of these types of trades each month, you are already above 90% of traders trading based on news and emotion.

The most important thing:

- When encountering clear waves, you must dare to enter strongly, entering enough volume according to discipline.

- There must be a quantitative checklist confirming that it is indeed a clear wave, not just a “feeling clear”.

Practical solution:

- Create a separate 'Trading Journal' – only record the clearest orders.

- Regularly log your trading orders.

- You will be surprised to see: most profits come from a few trades, while most other trades just keep the account flat.

GROUP 2: 20% WAVE WITHOUT DATA: EASY TO RECOGNIZE, EASY TO DISMISS, CLEARLY A RISK

But don’t underestimate it… There are signals that appear which you know for sure are not trustworthy, yet your brain still whispers: “Try a little, who knows…”

These are opportunities lacking structure, counter-trend, without confirming volume, or lacking clear corrective waves.

These are the waves where emotions have no opportunity to hesitate. It’s simply foolish to short in a strong upward trend. Therefore, the risks that are clearly visible are no longer risks.

These types of orders are the easiest to avoid if you are honest with yourself.

GROUP 3: 60% 50/50 WAVE - THIS IS THE BIGGEST RISK IN THE GAME

The most dangerous part is not that you are wrong, but that you 'are not sure whether you are right or wrong'. Most market waves fall into the gray area: 'it has signals, but not enough factors to call it high probability'.

The order is not bad, but not good enough either. You see a setup, but the volume is a bit lacking. You see a signal, but there's news coming out. You see it resembles an old pattern, but it doesn't meet enough conditions.

This is where everything is 'almost right': volume is increasing, the pattern seems okay, the news seems to match, but… it lacks a layer of confirmation. And because it is lacking, you don’t want to enter strongly, but also don’t want to miss out. The result? Enter lightly, hold lightly, lose lightly, and then gradually bleed out lightly. Even justifying your own desires to stubbornly trade in one direction, then hitting stop-losses and feeling frustrated, leading to overtrading.

This type of order is dangerous in that: you can draw all sorts of things to justify the decision.

The problem with 50/50 waves is not losing big, but gradually eroding the account. It doesn’t burn your account right away, but it drains your psychology, time, and patience.

Practical solution:

- Whenever identifying a 'near right' signal, ask yourself: 'If it's 60% correct, would I dare to go in with full risk?' If not, it means you don't believe it, then it's better to stay out or wait for additional confirmation signals.

- Set filters: if a setup does not pass at least 4/5 criteria in the checklist, eliminate it.

- A separate journal for 'Gray Zone Entry'. After 3 months, you will see this section account for 60–70% of orders… and contributes almost nothing significant to the account.

THE 'BELIEF' TRAP OF THE BRAIN

There is a very familiar and subtle mechanism that most traders, especially newcomers, often fall into: 'the brain always seeks to protect your beliefs, even when those beliefs are leading you to losses'.

I once thought a trade would go in the right direction just because all indicators 'seemed reasonable'. But looking back, I realized: I had 'intentionally filtered information', even unconsciously. My brain just wanted to see what it wanted to believe. Price breaking through resistance? Good. Volume a bit low? Ignore. Indicators not really supporting? That’s okay. The viewpoint was already formed, all subsequent data were just 'accessories' to prove me right.

That is the classic manifestation of 'confirmation bias', or also known as the 'confirmation effect': a form of cognitive distortion that makes you only pay attention to information that supports what you believe and inadvertently dismiss warning signals. The danger lies in the fact that it doesn’t come from ignorance, but from the 'desire to be right'.

When you expect the market to rise, you see every sign of an increase. When you just won a buy order, you will easily see opportunities to buy again. Your brain likes to be proven right, rather than warned that it is wrong. And the more you try to protect your initial belief, the more likely you are to hit subsequent losing trades, not because the market is difficult, but because you 'are no longer honest with the data'.

The market doesn't care what you think, nor does it work against you. But the ego does. The ego likes continuity, likes to be right, likes to be praised (even if it's just in your head). And so you unconsciously adjust your perspective to match your expectations, then wonder why a beautiful order ends up being wrong.

The solution does not lie in becoming 'numb', but in 'becoming intentionally objective'. Before entering an order, write down what would make you cancel the order. If there are no conditions for cancellation, it means you are looking for reasons to enter, not looking for reasons to be right.

In the end, you are not trading with the market, you are trading with your own emotional version every day. And if you don’t realize you are wearing a filter of expectations, you will see the market in the color of your own ego, not in the color of the truth.

And because of this mechanism, in 60% of the time the market consists of 50/50 gambling waves, where 50% of the data supports the bullish side and 50% supports the bearish side. There will be enough space for your desires, whether you believe in the bullish side or the bearish side, you will also have data to support that belief. And the function of the brain is to ignore 50% of data in the opposite direction by 'confirmation bias'. At that point, your winning ratio is no different from a gambler placing bets, regardless of your knowledge.

SUMMARY OF ALDEN'S 2-2-6 FORMULA

In the market, 20% are waves to focus on, 20% are waves to avoid, and 60% are trap waves. It sounds simple. But to live with it, you must learn the three hardest lessons in this profession:

1. Know when to focus all your efforts.

2. Know when to absolutely stay out.

3. Know to stop even when you 'almost believe' you are right.

Start by sticking three pieces of paper next to your screen:

- Blue - “20% Clear Opportunity”

- Red - “20% Noise - avoid”

- Gray - “60% Illusion Zone, staying out is also a decision”

Before each order, ask yourself: “Which zone does this order belong to?”

If you cannot answer decisively, default to the Gray zone, cancel.

The 2-2-6 formula is an immune system, not a guide to win quickly. You don’t need many trades. You need to focus on fewer correct trades, and the fewer ambiguous trades, the better. And after living with this formula for a while, you will realize that profits come from the right 20% of trades, while the rest is nearly break-even or slightly negative. And the decision to maintain discipline to stay out during 80% of unclear and risky times is what helps us survive in the market.

Alden Nguyen