Transcription
Okay, welcome everybody. We're here today to do an in-depth lesson on how I perp trade on short time frames utilizing the Invest Answers IADSS indicator set.
Thank you all for your patience with the technical issues on yesterday evening's video. I really wanted to get this on the end of the weekly wrap-up, but there was some technical stuff going on with the screen recording. I was wrestling with it in Premiere until like 11:00 p.m. And eventually, I was just like, "you know what, this just isn't working," and it's not expressing this clearly. Perp trading; there can be a lot of nuance and detail to it. And while I wasted some hours yesterday, I think it was actually a blessing in disguise because I got to watch it back and spend some time with it. And I reordered the way I explain things and I fleshed some things out this morning that I think will make it more clear.
That said, this is very detailed and it can be confusing and a bit esoteric at times. So, if you do have questions, leave those in the comments down below, and I will do my best to answer all of those. If a lot of consistent themes come up, I'll definitely make a follow-up video to this.
So, what is perp trading or perpetual futures trading? Well, essentially, you're betting on the future price of a cryptocurrency without owning the full position size. You're getting in at an entry point on the chart and saying, "I'm betting that this is going to go up or down, and I'm putting this much of my money on the line at X leverage." Now, you're using leverage on exchanges, sometimes up to 100x. Please don't do that to amplify the gains or losses of those small price movements. And when we're using the Invest Answers IADSS indicators, it gives us an edge on turnaround points and precise entries and exits to amplify our win rate. At a base case, you need to be batting at 60% to make this worthwhile with both slippage and fees accounted for. But really, you want to get to that 80% win rate on trades to make this profitable.
This can be very risky, and I'll say this a few times throughout the video. So, please practice, practice, practice. Paper trade first if you have to, or start with very small amounts of money that don't mean anything to you.
Now, I'm doing this on very small time frames on the chart, getting in and out in one to maybe 12 hours. Sometimes I hold a bit longer if we're in an aggressive trend, but it's very rare for me to hold something for more than a few days. And you can look back at the chart and say, "Well, we had this long, like 3-week uptrend. Why wouldn't you hold through all of that?" Well, when you're in the middle of the uptrend, you don't know what information is coming on the right side of the chart. So, all you can do is see that, oh my gosh, we had this big spike and it looks like a turnaround point. So, I'm maybe holding a little longer in an aggressive uptrend, but I'm looking for spikes to get out on. And then if there's a dip, then I reload and I keep riding it up.
The other reason I do this on ultra-small time frames is because I like to actively manage my trades. I don't set stop losses right below my entry like some people like to do and move those up. That's definitely a strategy, and we'll discuss that. But I like to actively manage, and sometimes on a dip down it doesn't stop exactly where you think and it keeps going a little bit longer. So, I'm layering in and I'm managing that trade to get my entry price lower and then the upside on the rebound will be even greater. Compared to normal trades where I'm holding something for several weeks or months on a macro swing, this really feels like high-frequency trading. And it's a very different game and a different approach to how you read the charts.
And unlike traditional futures, perpetual futures have no expiry date. So unless you get liquidated, you can technically hold positions indefinitely. But bear in mind that there is a funding rate that gets charged every few hours. This funding rate, it's paid every few hours between the long traders and the short traders to keep the contract's price close to the crypto spot price. So, while yes, you can keep a position open indefinitely, it'll eat into your profits over time. Another reason why I favor the short trades over the longer holds.
So, perp trading, it's popular for speculation and for hedging. Personally, I perp trade to grow my bag of an asset I believe in or to generate cash flow. I mentioned in a previous video my January challenge where, just as a fun New Year's thing, I was like, "Hey, in January, can I turn 10 Solana into 100 Solana?" Well, I got lucky with a big uptrend that really gave me momentum. And I was able to turn that 10 Solana into 200 Solana in January. And my position sizing and my trading strategy changes as the trend changes. That same aggressive stance that you take in a big uptrend can't be applied equally to sideways chop or to a downtrend. If you do that and you don't adapt to the changing conditions, you are going to get your ass handed to you. And we'll look at the chart in a minute and go over how I identify trends and how I adapt my personal strategy to each of those.
So, I was originally just going to do the challenge for one month, but I decided to keep it going. So, what I'm doing at the end of each month, I'm taking those profits and I'm either moving it to my long-term cold storage or I'm sending it to the exchange I use if I need to pull it out for living expenses. So, I'm taking those chips off the table. I'm starting fresh with another 10 Solana at the beginning of each month.
And the good thing about perp trading is that it is a wonderful training tool. It really builds discipline to buy on bottoms and sell on tops. It trains your mind to recognize small patterns in the charts, and also it helps build mental fortitude for trading, which at times can be a bit stressful. So there are lots of benefits to perp trading if you're cut out for it. And what I mean by that is that it can be stressful. Some people just don't want that in their lives. It's not something they want to deal with. And you do get better at dealing with the stress and the adrenaline over time. But it also can be time-consuming. When I look back at January, my average screen time per week on my iPad was, like, 12 hours a day. And luckily, I have a very patient and understanding wife. But I was taking my iPad with me everywhere—when I was working out, in the car. I got an iPad mount for the cup holder, which probably isn't the safest thing; it was always just in the corner as I was cooking so I could glance at the charts and I could see those alerts come in. Uh, it—it can be taxing on a relationship. So that's also another reason why I've slowed down my perp trading a little bit because that pace and clip I was doing it at in January just isn't sustainable. But sometimes you'll notice trends and you're like, "you know what, I just need to put my head down and take advantage of this for a bit because the opportunity is too good," and the market volatility isn't always going to be out there. You want to take advantage of that volatility while it persists because there are other times where things just go quiet and there aren't perp trading opportunities.
So your next question might be, "Where can I go to perp trade?" And personally, I like to use Jupiter, just jup.ag. A lot of other crypto exchanges have perp trading built in natively, but I just like the simplicity and the feature set of Jupiter. It connects seamlessly with my Phantom wallet, but the only drawback is that you can only perp trade Solana, Ethereum, and wrapped Bitcoin. So, you're limited to those three pairs. If you're looking to trade other crypto pairs, I think you can try Bybit or other exchanges like that. Not all of them are available in the US, but there are options out there that you can look into.
Now, one word of caution. I already mentioned this at the start, but this can be very risky. So, please practice, practice, practice with low amounts and low leverage until you get your system down and figure out what works for you. As a rule, most people say that you shouldn't go beyond 3 to 5x leverage. That's because if you look at the statistics, roughly 80% of positions using greater than 20x leverage end up getting liquidated with significant market movements. And by significant market movements, I mean as little as a 5% swing. And as you're getting into lower market cap coins and further out on the risk curve for crypto, that can happen multiple times in a day. So definitely be careful. I do sometimes use slightly higher leverage, but that's just for very, very short positions where I'm playing a swing in an ultra-tight range where I see that it's just ranging back and forth and compressing. And I know that that could break at any minute. So, I'm also being careful and watching for my exit.
If a trade does turn against you and you're using high leverage, you can be quickly liquidated, which means you're losing all your funds. So, what does it mean to be liquidated? Basically, it means that a trade has turned against you and it's hit your price where all your funds now go to the exchange. So, if you enter a trade at $100 and your liquidation price is $90, it means the price has dropped to that $90 level. And as it's on the way down, you see your loss building, building, building. And at that $90 level, your loss equates the initial capital that you put into the trade, and now it's all gone and it belongs to the exchange. There are things you can do to nurse that trade in a downtrend. You can add more funds lower down to lower your entry price and also lower your liquidation level. You can also enter that at a lower times leverage to really lower that liquidation level to be in a safer position to give you more time to get out of the trade on the next upswing. And we'll discuss a few of those strategies once we look at the charts.
All of this risk is why you have to have very strict rules for yourself. And you need to become a bit mechanical and really learn to put emotion on the side. You generally, in trading, don't want to be acting on emotion, but especially with perp trading, set your rules and follow them to a tea. And I promise that's how you will become successful over time. I never just enter a trade. I don't wake up in the morning and go to my desk and look at the price of Solana and say, "Okay, perp long or short." No, I look at the key levels, the trend we're in, the history, and I build a thesis of where I think the price is heading. And then I set my key levels, really using IADSS to identify some of those where it could head in the short term. And then I set my entry prices at that point. So I'm waiting for the trade to come to me. I'm not in a rush. Maybe the trade won't come to me today, but if it does, perfect. And I'm in a much better situation, and my risk-to-reward has greatly decreased.
So let's dive into the charts to see how I use IADSS and what time frames I use for my style of perp trading. Remember that these are quick, small trades on very small time frames that I'm working with. But you could develop your own strategy, for example, to play a longer swing over several weeks or months. That's a far different approach, a different way of reading the charts, but it's totally possible, and maybe that's better for you.
So, we'll go over to TradingView here, and this is the chart with all the basic indicators we added in the last TradingView chart setup video. If you need a refresher on this one, I've put a link to it in the description down below. So, we're on the Solana chart. I'm just going to add one more indicator that I use for perp trading, and that's the stochastic RSI. And I'm just using this on really small time frames on the one and 5-minute chart. And the stochastic RSI is just giving us an indication of momentum with these two moving average lines. And when the blue crosses above the red and turns up, that's your sign that momentum may be shifting. And so on the one and five-minute charts, when you're trying to get a precise scalped entry, if you're waiting for this to drop on the one-minute and then it will most likely rebound and the price will go back up, that's your sign to really execute on the trade right there.
So the main time frames I'm using are the 1-minute, the 5-minute, the 15-minute, and the 1-hour chart. And they all serve a different purpose. And we're starting here on the 1-hour chart first, which is used to help us identify the main trend that we are in. So, we're on the 1-hour, and I just zoomed out to early January here because this is a great example of an uptrend, sideways chop, and then turning into a downtrend. Just looking at the chart, obviously you can see uptrend, sideways chop going into a downtrend. But we also have the IADSS tools of the trend model to identify this blue uptrend, then the chop we're in, and then getting into an orange for more of a downtrend. And the way I approach perp trading is different in each of these environments. So, in a big uptrend like this, I'm pretty much going 100% long because I don't want to go against the trend and the risk-to-reward just isn't there for me to go short in this kind of environment. And you might look at this and say, "Well, Tom, why don't you just get in low here on this buy signal and hold the whole way up?" Well, when this is happening in real time, you have no idea what's on this part of the chart. So, as we're going up and you get these sell signals, you're like, well, maybe the trend is going to turn. You don't know this is going to run up. So, you sell out and then you reload when you get more buy entries. And there's more nuance as we get into the 15-minute chart. And there are many more buy signals. And the 15-minute chart is really what I'm trading on. So, we'll touch on that in a second. Again, the 1-hour is for identifying your main trends. But, if you want to play longer swings, maybe the 1-hour is an option just for looking at this and holding it longer, and you didn't get any confirmed sell signals really till here, till the trend flipped. So that's definitely an option, but a different style of perp trading.
So we're watching this trend on the 1-hour and what is our sign? We discussed this last time that the trend at the top is changing. Well, we're over two standard deviations, or we're just at two standard deviations overbought on the mean reversion. We have this sell signal, and then we're riding the cloud and the cloud rejects us and we break back into it. We flip orange for a moment, lower top, and then we break down further and then we have a lower low. And this is the first time we're seeing a lower low in this whole period here. So this is just a traditional TA signal. But if we're just using IADSS, we have our sell signal, our trend flips here, we have mean reversion at those two standard deviations. So all of that is telling you to get out of the trade. And then we moved into this sideways chop range. So the way my mentality for trading is changing now—I'm 60% long and 40% short in sideways chop. And again, once we get into the 15-minute chart, you will see many more buy and sell signals on these little peaks. But we're just talking about the general trends here. And during this chop and consolidation, and as we've talked about in some of our other videos, just from a TA perspective, this is the most common pattern in markets after a big run-up is a tightening range and then deciding which way it's going to break. And as we have this compression here, this is indicating that an explosive move is coming, but we don't know the direction. So when this broke down, this was the clearest signal to me in this whole time that, okay, we are entering into a bigger and longer downtrend. So for this sideways chop, I was 60% long and 40% short. And then once we enter this downtrend, my mentality and my trading style is shifting and I'm saying, okay, now I'm going to go 80% short and only 20% long. And I'm still going long because these rallies during a downtrend can be quite meaningful and can be some of the most explosive rallies that you see on the charts.
So you can see how I'm using a blend of the IADSS indicators with traditional TA like we discussed—of the compression range breaking down, lower lows forming—to build my thesis for what kind of trend we're in. And if we look at where we are now, yes, we've gotten some confirmation off the IADSS tools, but from a TA standpoint, we formed a higher low, a higher high, another higher low. We're getting into an uptrend, and also there was a bit of an inverse head and shoulders here on the bottom of the pattern, which has a technical price target of $150. So we know that is also working in our favor to point to the upside. So this zone right here, as soon as we saw this, I was paying attention. And then this and this really got me with more conviction to enter really heavy right here into trades that our trend was shifting for the first time in weeks.
So we've identified the trend we're in and what trading style we're going to employ for that particular trend. The next thing I do is to identify key levels. Yes, these clouds on IADSS give great support and resistance. And you can see how it just kind of bounces between these ranges, but I also like to draw in some more traditional support and resistance levels to give me key areas to trade off of. And what I'm doing to identify that, we can use volume analysis as one thing. These spikes in volumes generally tend to indicate key levels, but I'm also looking back at the chart patterns and seeing where that support and resistance has come in. So, just very basically, I'll get the horizontal line tool here. And then, of course, we have our point of control right here. This is the most traded zone, and you can see how it's cutting through all that. So, I'll draw a line there. Generally like to keep these blue, which is fine. We'll keep it at 50% opacity. I'll draw another line in here because you can see we had this support bounce and then we had it play resistance. So, we know some of our downside levels. You could say there's something else right here that lines up with this volume spike. And this will come for you over time—just learning how to look at the charts, look at these volume levels, and look at the patterns and identify these. And then going to the upside for where we are now. We definitely had some resistance here at the top of this volume cluster. And again, as you zoom in, you can dial this in a little bit more, but you can see how there was a topping range here. And again, these resistance levels aren't an exact price. You can see how we kind of chop around that range, but it's just a sign to you that we should start paying attention in this area. And then the next one, overhead, we have that price target at $150, which is slightly above this. We'll just put it here at 49 and change. And you can see how that 150 really played a lot of resistance here. And if we zoom way out, 180 has been our other key resistance on Solana, which incidentally lines up with this spike. So now we know where we have that resistance overhead. And you could maybe draw another line here if you want something in between. You have these small volume clusters just to be a point where if we're going up higher, you could be looking out for some general resistance. And if you watch my normal videos, whenever we get to the Solana chart, you will see it littered with blue lines. That's why this is just because I'm giving myself a lead on these levels and what to potentially look out for for support and resistance on top of what we get with IADSS. Okay. And then the last line I'll just draw in for some underside support. We have this key $112 level, which we were just drawing in visually, but this 112 has provided a lot of support. And then I'm just going to
Put in something around that $100 support range, which we're just above here, just to give us something to the downside. Not really important.
But now with these levels identified, you can see how trading ranges kind of work within these zones very nicely. And now we're just starting to break out. And I still think in the short term, we're targeting that 150 before a little bit of a pullback. So that's my thesis right now. But we're going to go into the 15-minute to get a little bit more detail and talk about how we actually start trading this.
So, now we're here on the 15-minute chart, and this is what I use to identify these micro swings. If we're going into the 5-minute, that's what I'm using for my entries as well as the 1-minute and to give me a few more signals on key entry and exit points or trend changes. The 1-minute is really for scalping that entry or that exit to identify, oh, do we have another minute or two to run? Is this going to be a little blowoff top or a pico bottom where I can try to get a great entry or exit?
So, now that we're on the 15-minute time frame, let's look at how we use IADSS. The only thing that changes for me outside of looking at stochastic RSI on those small time frames is that I'm really using mean reversion as sell signals and as buy signals, which normally I would never do on larger time frames. These are more of confirmation points on larger time frames, but you can see how you don't as consistently get sell and buy signals on every little bottom here, but you do generally get those on mean reversion. So, I'm listening to mean reversion as a buy signal on these bottoms. But if I happen to get a buy signal and mean reversion lining up, I'm paying even more attention to that. And this is an instance where the trend would have continued going down for a while. So, this will be a good example from this past week that we can talk about in a minute.
On the flip side, for the sell signals, again, I'm paying attention to mean reversion, particularly on these big spikes, and I'm looking at that in concert with RSI. I always want RSI to confirm my thesis. This is a great example right here where we got a spike that's way different than what we've seen on the norm for me in reversion. So, this is telling me I should exit my position because RSI is also spiking. And historically, you can see how on the 15-minute RSI bounces very cleanly between the 30 on the downside, which again right here gave you a bottom mean reversion, buy signal, RSI telling you to get in. Great. Then RSI goes to the top side. And historically, you know, when RSI goes to the top, this would be your indication to sell. Like, okay, we've peaked over, we got a sell signal, now we're getting these red arrows flashing. But the one thing that's not changing is the trend. So, when I you're in a trend like this, often what I'll do is I'll just exit a quarter of my position. And then when I see that RSI is maintaining in this top half and we're getting more sell signals, but the trend isn't changing that, okay, we have more momentum behind this move. There's more left in it. So, maybe I'll wait a little bit longer to get out of this trade.
But coming back to what we were looking at here on the flip side for selling as you're riding this up RSI mean reversion sell signal this spike down and really pay attention to this 50% on the RSI because you can see when it bounces off the 50% and we maintain in that strong half there's more room left to run. But what's more interesting to me is bringing in again a little bit of traditional TA; we get a second sell signal and a higher price but lower mean reversion sell signal and lower high on the RSI. So that in traditional TA is a bearish divergence. So this is telling me that okay now it's time to get out of all my position and wait to see what happens with the trend. And since this was an aggressive uptrend as soon as we got down here I started reloading a little bit because we didn't have a buy signal here but we had that on mean reversion and our RSI got to the bottom. So I entered a little bit and then we failed going to the top of the range. So when we came back down, I reloaded here and then we got back to the top of the range and even though we didn't get a sell signal, I knew that the momentum was against us. So I actually sold out here. This was using a little bit of discretion just saying, okay, we didn't get that mean reversion signal, but this has been a weak trend, so I'm going to take some risk off the table. And wouldn't you know it, RSI led the way and we dropped back down and then we got another buy signal and it gave me a great entry to ride this back up once more where we're not getting a sell signal. Some of the IADSS signals are flashing here, but we are getting that mean reversion. That's my key sell signal and RSI. And you can see how cleanly this week RSI is just going to the bottom to the top to the bottom to the top. And that is also confirmed by these mean reversion signals at almost the exact same point. It doesn't happen all the time, but when these happen together, that's enough for me to take an entry or an exit. And then if there's a buy signal or a sell signal, that's just icing on the cake.
As we got into this weekend with lower volatility, I was saying yesterday that I wanted to do a live trade, but we were in this sideways chop. And there just wasn't much momentum in either direction to give me a read on a trade. And this is what I mentioned in the intro about waiting for a trade to come to you. The only signal I got here on the 15-minute was that the RSI got down to 30 and started bouncing away. But when I was recording the video yesterday, we were just in this sideways chop here. And I said that, hey, this compression usually leads to an explosive move, but I don't know which way it's going to be. So, an entry here for me would be a bit of gambling. The only thing we had that was telling us that it was going to go up was that generally when the RSI bottoms, it makes its way to the top. And we have been in more of an uptrend. And wouldn't you know it, we broke out this morning. So, this would have been your first clear signal. Granted, I wasn't in a trade, but if you were trying to play both ways, you could say, "Okay, here at the top, I'm going to go short, but we can see that that's just kind of chopped sideways." So, what this right now would be to me is an indication that this is more of a bull flag indicating a move higher because we're not seeing that big pullback. And again, this just comes with time and analyzing that those charts. So, I'm going to set an alert for myself on the RSI here at 30 on the 15-minute. And if that triggers, I'm going to look back at the charts. Maybe we're in that 50% range here. And that would be a decent entry for me. And we'll see if mean reversion also gets down here.
So, let's zoom into the smaller time frames because we want to start building a thesis and identify a potential entry level for this next trade if we are going to go long and think this is going to break up, which I still do because we have that price target of $150 and we've been in an uptrend. So if we go into the 5-minute and we look what's happening here, we can see that the cloud which again is much like Bollinger bands when it begins to squeeze and the price is compressing in those bands. That's an indication that the price is going to have an explosive move. And after that move this morning, we're just starting to see that again. You can see on the 5-minute chart that we actually did bottom on the RSI and we did have a buy signal here. And you can see as soon as these bottoms, this is when you can start paying attention to stochastic RSI. You can see that stochastic RSI starts going up and then it tops. And as soon as it starts dropping down, that's your lead that it's going to go back down. And there isn't going to be positive momentum in this until we start bottoming. And it can stay bottom for a while. But as soon as this turns up, just zoomed in a little bit. You can see we're getting a little bit of support here on the cloud. But as soon as stochastic RSI starts to turn, that'll be your first indicator that price might be bouncing away and might be finding support from the middle of this cloud. So this is one zone that we could identify. And I'm just going to draw a line again. We'll just make that a different color. We'll make that green for our potential entries. Then the next thing I would look at is like, well, what's this price down here? We said around $37. Looking at the 15-minute cloud at that 50% level. Could we get to the $37 range? Well, this is 3750. That could be another level to keep our eyes on. And that would mean that this RSI would come to the bottom and form a double bottom here most likely. And again, just like with the 15-minute RSI sometimes stays in the top half longer and is generally stronger in the top half, this can sometimes stay in the bottom half for some chop for quite a while. And you can see we just barely got above that 50% and then kind of petered out. So, be watching this to see what it does and build your thesis from there.
Beyond that, we can zoom into the 1-minute to really get some detail on this. Oh, and you can see the 1-minute is also compressing and we're near the bottom of the cloud on the 1-minute, but the RSI is kind of in the middle of nowhere right now and it hasn't touched the bottom. So, this would indicate to me that we are most likely going to go further down on the 5-minute chart before we bottom, which would point to another double bottom here on the 5-minute RSI. So, you can see how we're using these tools in concert to get a read on this. Again, the momentum on the 1-minute RSI is downward. It's still pointing down. So, I think we're at least going to go here to 3820 and then we can see if we can get a real bounce underway. But what I would want to see as a leading indicator is for this mean reversion on the 1-minute to give us a green dot. Ideally, we flash a buy signal. And then I could zoom out to the 5-minute chart and I can see where we are here. Are we maybe at this volume support? Are we at a good range? And then where are we at the 15-minute? Did our RSI make it all the way down to the bottom to the 30? And if those three time frames are all telling me yes, and we're also getting the buy signal here on the 15-minute, then that would be a solid risk-to-reward entry for me. If the trade keeps turning against me and say we're not at this level yet, we know we have support at this next level to get in a little bit more and beyond that there's this big range that we broke out from. So at that $36 level, we could get in more to lower our entry point. And what I do whenever I enter a trade, let's just say for giggles, I'm entering right here. And my entry one I Oh, look. Trading view alert relative strength index 14 closing crossing down on the five minute. Anyway, we're not paying attention to that right now. So, just drawing another line here. I'll make this yellow. I always on my chart when I'm in a perp trade, I have a line on the chart that represents my entry point. So, say this is our first buy and we go down here and we fail and then I put in another buy right here at $36. That would get my average entry price to this level. So, I'm just keeping this on the chart to see where my entry point is and when I'm in profit and when I'm in loss. It's just a nice little visual for me. You can also see that in your per exchange, but I'm living on the charts here and that helps.
So now the last thing to discuss is what to do if a trade turns against you and how to either lower your entry price or how to get out of the trade. So looking at last week, this was on Tuesday the 15th and I believe this whole drop down here, this uh was from the Nvidia China band news and then we got this buy signal here. Our RSI had bottomed. We got the green dot on mean reversion that I'm also calling buy signal. So, I made an entry here because the day before we dropped on the market open and then we ended up rebounding and it was a good trade. So, I thought, hey, that same thing's going to happen. And wouldn't you know it, Jerome Powell came out and was quite hawkish after hours. So, we continued to drop and we got another little buy signal here. I didn't get another dot, but RSI was down here. So, I entered a little bit more. So, what that does for our entry price, if we're looking at the yellow line, say I was in here and then I ended up buying more right in this range here on the rebound because I'm zooming into the 5-minute. So, I'm really looking for this to bottom on all the time frames. That would then bring my entry price to somewhere in the middle of the range. So, two good things with this. If a trend is turning against you, if you buy again down here, yes, it lowers your entry price so you can get into profits more quickly. But if you're really not comfortable being in the trade, all of a sudden, you can see how our price kind of bounces between these parts of the cloud. If your initial entry doesn't work out and you get your entry point low, as soon as this happens here and you're like, we're probably in a downtrend and we're going to get resistance at this part of the cloud, you could sell out right here and you could just wait for this to play out. I did not do that in this particular trade. I watched it drop all the way to down here. And if we go into the 5-minute, I was looking for a turnaround point. I ended up getting in right around here because we were having this rebound with the two arrows flashing. Our mean reversion was oversold. Same with RSI. So I got into another little position here which then took my entry price to about this level here. And then I was able to let that ride and eventually exit in profits later on. And then I believe I played another swing in here. Just going back out to the 15-minute. So that's one way you can play the trend. And the reason I didn't get out here and I continued to play this to increase my entry and play for a bigger return on the rebound was because these were both news-driven drops and the Jerome Powell thing really just felt like an emotional reaction where people wanted him to be more dovish than he was. Markets continued to sell into the afternoon and evening and then we began to rebound the next day.
So, the other thing you can do that is a bit more advanced is say you got in long here and then you see the trend doesn't flip. This continues in a downtrend right around this point as you're breaking these bottoms. You could enter a short at higher leverage. So, this long trade is still losing money in the downtrend, but this leverage short is outpacing those losses on the way down. And then when you start to become confident in a bottom forming, like we have a little bit of an inverse head and shoulders here, you could sell out of that short, move those profits over to your long to increase that position, and then you amplify your gains on the rebound. So, this is a little bit more of an advanced play, but if you're comfortable doing that, it can really increase your profits.
The last two things to think about as you're entering and exiting trades. So, I'm really just talking about entering trades right now, but this works inversely for exiting trades. So, the other thing you can do if you don't want to monitor the trade or nurse it like I did in this example here, if you get in, you can set a stop-loss just below these wicks here. And as this went up, there was this one abnormal wick that would have stopped you out. It would put you out of the trade, but then you would be risk-free for the rest of this. And then you can try again like somewhere down here, and you can set that stop-loss. And this time you would have been okay because we started making those higher lows and moving away. If you don't want to exactly try to time the bottom, the other thing you can do is just to visually look for the turnaround point. So, we had a bit of an inverse head and shoulders. We started seeing that first higher low here. I mean, I guess you could kind of argue there were some higher low wicks here, but we're really looking for candle closes. Higher high, another higher low. This could be a very high confidence entry if you want to play things a bit more conservatively. Now, you're not getting the exact signals to enter right here, but you have the wind at your back and you're still seeing that RSI has room to run up and mean reversion was also in the middle of the range. So, you know, you still have room there. You're just limiting yourself to a smaller slice of the pie. And this is why I like to play these bigger, more volatile swings because it does offer you more opportunity. If you're playing a tight trading range like this, you can only make a few bucks unless you're really going high on the leverage. And I wouldn't recommend that unless you're really comfortable with this or you have money to burn.
The last thing that you can think about for your trading strategy, say this yellow line is my entry price here. And we finally bottomed and we're turning around. And again, we're seeing those higher lows and higher highs form. Just like a conservative person could get in on their first entry here, you could add to your position size here, that would still bring your entry price down and then you have more potential upside. Or if you're in this trade for a longer move, maybe on this pullback or something like that, you're adding to your position size, which would bring your entry price up and this would be a painful little wick. But you can also think about doing that to increase your position as you're confident in an uptrend forming.
The last thing I'll say on this tight trading range we had yesterday going into the weekend which generally I don't like to trade as I was saying you know if there are bigger moves it just gives you more opportunity and to make these worthwhile you do have to employ higher leverage but you can see how cleanly these moves down and up and down and up were respecting mean reversion right here. So if you do find yourself in a bit of a trading range like we saw there where you have clearly identified tops and bottoms and mean reversion is just clearly respecting these if you want to have some fun with it. It's also respecting the cloud and you could play these but again to make these worthwhile you're having to go with higher leverage which means higher risk. So definitely know what you're doing before you think about doing that.
Okay, back to the webcam. I really hope that was helpful to give you a basic understanding of how I use these tools to perp trade and identify clear entry and exit points. Remember, while these tools do give us an edge, nothing works 100% of the time. As trends change, you'll see mean reversion, you know, it has been going up and down, up and down, all of a sudden maybe it's pinned to the top or pinned to the bottom. Same with RSI. That's your indicator that things might be changing and that we'll be entering a different trend and you have to adapt your trading strategy. So, always keep your head out the window. As you spend more time with this and get comfortable with the tools, you'll just be able to look at the charts quickly and understand what's going on. But it does take some time. Don't be
Discouraged. Practice, spend time with it. It can be a lot of fun. And like I said, it can be a wonderful training tool to help you in all your other trading.
So, if you have questions, leave them down below. I'll do my best to answer all those. Happy to do follow-up videos if certain topics just need more clarification. And I am going to be doing more of this training type content.
So, next I'm thinking covered calls and selling puts, but I'm also open to requests. So, if you have any of those, you can also leave them down below.
Hope you guys have a wonderful weekend. Bye for [Music] now. This isn't financial advice. Past results are not indicative of future performance. Do your own research.