Transcription
I discovered something about the markets that has allowed me to trade only 60 to 90 minutes in the morning to consistently find profitable trades every day before going to my full-time job. This is something that I've been teaching for a little while, and it hasn't just worked for me; it's worked for a ton of other people. It stopped them from jumping from YouTube video to YouTube video and ended their years of potential struggle with trading. They finally found something that is consistent.
The whole idea is that this is something repeatable every day. You can show up to the markets, know exactly what you want to do, have a consistent plan to follow, and execute it when the strategy shows up. Then you can move on with your day. I actually made over $600 this morning with this exact strategy I see every day. I've also made a new addition to the strategy that increases the potential for the number of trades you can take every day, which I will show after we go over a basic overview of how this strategy works.
Then we'll dive into the exact trade I took this morning. I'll walk you through how I entered, where I put my stop loss, how I managed the trade, and then once it's going for a profit, how I exit and maximize the potential profit I could make. Now, I only trade using candlesticks and drawing tools, no indicators. What this does is simplify your trading but also allows you to use this analysis on any time frame or any chart that you want.
I specifically trade the S&P 500 futures, the NASDAQ futures, and oil futures. But if you want to trade this on a larger time frame than I do or just on a different market, you can because reading the candlesticks applies to any market. These patterns show up the same because you're reading the raw price movement of the asset you're looking at, and it tells you the correct story.
Over time, I've realized this allows me to create a simplified picture of what's going on in the market. I can easily see where the major support zones are and where the major resistance zones are, along with potential channels or trend lines that the asset is trading in. All I do is look for reversals off of those key areas because those are the simplest to look for.
Again, trading is all about finding something that's repeatable. Let me show you what is so repeatable about this market that you can execute consistently every day. That is, about 30 minutes after the market opens, it likes to consistently reverse. Here's today; if we just go quickly to yesterday, here's about 8:00 as well. For me, the market opens at 7:30, and then at 8:00, it generally kind of moves, has the potential to slow down, and then it reverses. Those are the trades I'm looking for consistently.
Going into today, the first thing I always do is look at a larger time frame chart than when I trade and look for those key areas. So going into this morning, if I just kind of zoom to where the market opened, it opens up right here. What I'm looking at is, okay, we have some pretty clear trend lines that the market's kind of respecting. It's in this condensing upwards channel.
Overnight, the market kind of started to sit here and make a couple of tops. I'm looking at, once the market opens, is it going to shoot up here and then reverse off of this level? Is that a move that I can profit from? Again, waiting for that timing to show up is the most powerful thing. From there, I often go to a 5-minute chart but also a 1-minute chart.
If we zoom back to where the market opened, it kind of opens up here. Again, 7:30 my time is when it opens up, and then it starts to shoot higher. Even once it breaks out of this zone, this is that support level from that higher time frame. Once we get to there, I'm going to go through a kind of a four-step checklist to see if it's a trade that I want to jump in on.
That's what I do every day: I look for these levels, see if it hits my four-step checklist, and then I also try to look for, okay, does it show up with that timing? Is it 8:00 for me, or 30 minutes after the market opens? Is it going to set up this signal and potentially reverse?
To show you what this is like in real time, I want to walk you through the recording of the trade I took this morning so you can get a better feel of what it's like to do this in real time, not just talking about it in hindsight. My step checklist is: the first one is, is it coming up to that level? This is from a 15-minute chart; it's just off of these highs. I'm waiting for it to punch up into this area, and I want to see it start to slow down.
It's okay if it breaks out of this level like this because what often happens is I like to call it a failed breakout. A lot of people are breakout traders; they want to see something break the previous high, and then they're going to bet that it's going to go up because they think, okay, it's broken that resistance level, it's going to go up.
The reason why I like to use zones in my resistance and support levels is that it's really rough on where something is going to reverse. You don't exactly know where that's going to happen, so I like to give it a grain of salt, like, hey, this is the area I'm looking at, but it can come up here a little bit and then reverse as well. This is what I look for: a potential failed breakout.
Now, this is looking at a one-minute chart; that's what I generally like to enter on. I sometimes use a 5-minute chart, and again, you can use this on a bigger time frame chart if you want to. What I'm looking at is, you know, here at 7:30 where the market opened, and it shot up here pretty quickly. I drew a support trend line based on that because I want to see where the trend line is and what it's doing.
If you're looking for a reversal and betting that the market's going to go down, you don't want to go against the trend. You often hear the trend is your friend, and in this case, I don't want to go against that either. I'm looking to say, okay, well, this uptrend right here, I think it's clearly broken once it's done this.
From that point, I want to see a potential for it. I like to look for reversal patterns, and a lot of the time, that is something like a double top. If this comes up here and then starts to reverse, I really like that as a signal. The idea is that it's made an attempt to go higher again, and then it's not able to break this new high before getting rejection.
This is a really good candlestick. I actually have a video where I talk all about candlestick patterns; I highly recommend checking it out. It'll go more in-depth on why I really like this pattern. The whole idea here is the market tried to keep going higher, and then boom, we have this massive big rejection bar.
Now, what I've recently started doing too is I want to see how the second candle reacts. To show you what that means, basically, the market came down over those candles, pulled back up, and then it's rejecting. I like to put my order right below that, basically below this low, saying, okay, if it really is going to break down there, boom, I want to get in because I think that's a really good confirmation of essentially this double top being confirmed as best as you can confirm anything in trading.
From there, I enter in on a trade. You can see I put in a stop-loss, a stop market order technically, and so it jumped me in on eight contracts. Then I put my stop-loss up here. I always like to put my stop-loss above a key swing. I don't do it based on a certain size; I like to do it based on the price movement in the market because, again, I'm getting into the trade because of the candlesticks and a logical reason.
I want to get out based on a logical reason. The logical reason for me is, hey, if we come up here and break this high, I want to get out at that point. You can see I actually moved my stop-loss down here because I saw the market make a little double bottom here, and it had a big push up. Quite honestly, this morning, my overall thought with the market and my intuition was kind of saying I think the overall is bullish.
Even though I'm betting that the market's going to go down, I'm getting short based on that, I thought we were more likely to go up. I still jumped in on this trade because the signal was so solid. Again, looking at that timing, it's 8:00; it's 30 minutes after the market opens. That is my key timing of when the market is going to potentially reverse.
Having all these signals show up was good enough to jump in the trade. I was still a little nervous, but in trading, you have to jump through that nervousness. From there, I moved this down to essentially break even after seeing this kind of pullback happen. My thought was, okay, well, if it's going to come down here and break and go up, I want to get out because I'm overall leaning a little bullish on the market.
You can see clearly it held, and then from there, just to show you a couple of targets and how the market works, think about it like this: we have, in the big picture, I've reversed up here betting lower. The first couple of targets would be, okay, the market's going to give this move back up right here, basically to where the market opened, or it could come all the way down here.
Those are a couple of targets you want to think about. Even looking on a one-minute chart, you can see here, here's where the market opened. It had a nice move up, and we're going to look for it to give that back up. I think right about here is three times my risk-reward. I like to go for a higher risk-reward ratio, a positive one, because that's more likely going to make you profitable in the long run.
I'm only right 50% of the time with these, but because I go for three times my risk, I can lose and win about the same time but still make money in the long run. That's the whole goal with trading: find something that's repeatable like this at 8:00 a.m. and then go for something that gives you a positive risk-reward ratio.
It doesn't have to be three times your risk; you can do two times if that makes you more comfortable. But that's how you want to approach trading. Just to kind of zoom this forward because it took a little while to play out, it also started to break lower. Part of me thought about, okay, maybe I should get out at a limit order here when it made this kind of big move lower.
Totally getting out down here at a limit order would have been fine, but I kind of put my stop-loss order here. Then from there, it had a bounce and knocked me out at about $600. I moved on with my day after trading for only 60 minutes this morning.
I discovered something recently about my 30-minute reversal timing in the markets that allows you to look at a few key factors and know when it's not going to do that. You can actually take a continuation trade. This is something that's repeatable every morning: looking for the market to either reverse at a key level or break through a key level, and you can take trades in either direction.
Normally, every morning, I look for key levels and look for things to reverse. But sometimes, if we just zoom out here on a 5-minute chart of the NASDAQ, when things are so bullish, it's more likely to continue breaking through resistance levels. You don't want to be counter-trend trading at that point; you want to be trying to buy the breakouts and get in on the pushes higher.
To show you a real trade of this, normally I draw my levels off of a 15-minute chart. If we zoom out, you can see we are in a really strong uptrend right now. Any previous resistance level we've blown through, and even I can't zoom so far back on a 15-minute chart. You have to zoom all the way out on a daily chart to see essentially this previous all-time high on the NASDAQ of where that level is and where we could potentially break out of.
Going into a 5-minute chart, this is kind of what I was looking at this day. I was looking at, okay, we're coming up into this level. Zooming in on a one-minute chart, what that looks like is, again, looking for my 30-minute reversal timing. The market opens up at 7:30; we kind of started to push higher, and we come up into about 8:00. We come up into this resistance zone and start to slow down.
We kind of start to make a double top here, and it's not a crazy big double top. The reason why I didn't technically take a short here is that if you look at this, it kind of hits my normal checklist. We came up to a resistance zone, we broke this trend line, and we've made a double top and a potential reversal bar right here as well.
But the thing is, with trading, the most important thing is not these little micro patterns that you look at on a smaller time frame chart when you're entering; it's the big picture. The big picture is that this market is really bullish right now. Going back to that daily chart, look at how this box is huge.
You can see that the day did close up, pushing the highs of this box. But right now, when it's opening and we're looking for this reversal, it's right here, at essentially the bottom of this box. Looking at the 5-minute chart, you can see that it kind of moves up here, and we're starting to have a consolidation, a bull flag, as you might say.
That's why the big picture is important. The reason why is that it allows me to say, hey, I actually don't want to bet short here. I'm going to hold off and save my money. Maybe I could be wrong, and it could reverse here, and I'll miss out on a nice swing. But you have to go with your read; otherwise, you're just kind of blindly following a plan and rules.
You have to go with the overall big picture; that's the most important part. That's the hard part about trading; it is a little subjective. Going into this, that's what you have to do sometimes. The NASDAQ just kind of was chopping here, right?
When it gets to that point, a lot of times what I want to see is a big bearish candlestick. What that does is, when the market's chopping so much and just a big candle out of nowhere happens, a lot of people get FOMO; they'll jump in, and it'll bait them. What I like to see is it kind of start to quickly reverse that.
When that happens and it aligns with your overall idea that we're going to actually push higher, that is a very good signal to jump in long. I actually jumped in after that signal. I waited for one more little pullback here as it pushed higher, baited people.
There's a tiny little box right here, and it broke the lows. Essentially, breakout traders and previous me, who maybe wouldn't have seen these signals when I was kind of new to reversing, would have gotten in short here because this looks like a nice bear breakout. But again, using that overall picture, I actually think this is going to go up.
We then got a couple of candles here where it kind of just sits. Going into the recording of this in real time, again to show you, that's where I got long. I jumped in right after basically this kind of pullback here, and then I put my stop loss below this low. I bet that the market was going to go higher.
This is nerve-wracking for me; it's kind of not the norm versus betting that the market's going to go down. But when all those things are aligning and you have this kind of fake lower and this fake lower and you have that bigger picture trend that's really strong, that's where I like to jump in.
You can take that 30-minute timing and say, okay, well, it's not working today because of a few factors, and I can profit off of that in a different way. Once it kind of breaks out up here, I moved my stop loss to break even because, you know, if this just kind of pukes back down right here, the market's just in a really choppy state, and you just want to get out at that point.
The idea is that it's going to break out here, and you're going to find some momentum and be able to capture a profitable trade. Once we start to break out, you can see I'm making really good money off this trade, and this move is happening really nicely in one direction.
When the market moves up so quickly like that, I like to trail up my stop loss and get out when it starts to turn quickly because I want to maximize my profits. I jump out on, you know, two-thirds, three-quarters of my trade right there. What I do is I leave a little bit on with the idea that when you're trading, you're going to have all these emotions in your mind of, well, what if it just keeps going higher?
You know, I closed out all of my trades, and I missed out. Or what if this is it, and I should have gotten out here, and it just reverses? I find scaling out a certain amount over time allows me to mentally deal with that. I can get out, you know, two-thirds, three-quarters of my trade, whatever makes sense, at two or three times my risk.
When a big tight move up like this has broken clearly, I can slowly manage the rest of the trade because it'll allow me to get a little bit more if there is a little bit more in the trade. Sometimes the market can go 5, 10 times my trades; it doesn't happen very often, but when it does, I like to be on that ride.
From here, the market just kind of moves up pretty quick, and I try to trail up this a little bit more and get out. I think that trade closed up probably $900 or something, and it was a great trade. The same thing happened where I was done by 9:00, which was a little longer, but an hour and a half, 90 minutes, and I can move on with the day.
If you want to learn more about this strategy, check out this playlist right here. It'll talk you through everything more about managing these trades, finding the key support and resistance levels, and also talking about those candlestick patterns that are so important to finally entering in on the trade.