📊 Do This 5 Minutes Before The Market's Open 🌇

A lot of people are always focused on trying to find a good technique, a good tactic, and they spend a vast majority of their trading lives chasing tactics. Tactics and techniques are very important, but a good tactic and technique that is taken in the wrong place, in the wrong location, makes for a very bad tactic and technique. In many respects, where you apply your tactic and technique is more important than the tactic and technique itself. Are you ready? This is going to revolutionize your trading.

Watch. The Fabulous Four is called The Fabulous Four because it's made up of four fabulous items. Item number one: Whatever item you trade, whatever you're trading, we need a 200-period moving average. That's item number one, a 200-period simple moving average. That I use the simple moving averages, all right. So we take a two—it doesn't matter if you're trading a two-minute time frame, it's a 200-period moving average or the two-minute chart. If you're trading a five-minute time frame, it's the 200 moving average of the five-minute chart. If you're trading a daily time frame, it's the two-minute moving average of the daily time frame, all right. Time frames don't matter; whatever time frame you trade, okay. And this is on all markets. So item one: we need to find out where is the 200-period moving average on that item.

Item number two: the 20-period moving average. Where is the 20-period moving average on your stock or on the item that you trade? So these are two of The Fabulous Four items we need to note, okay. Item number three is that we need to find out where was yesterday's closing price. If you're trading Microsoft, where was yesterday's last closing price? That's item number three. And then item number four will take some explanation from me. We're going to take yesterday's late-day price activity, and that late-day price activity we're going to group it together to form item number four, okay. So these are the four things that make up the Fabulous Four. Now let me go to charts and show you how to put this together.

Okay. Now we're looking at a two-minute chart of Pepsi here. I want you to note that this—item number one—is the 200-period moving average, right there. Boom. That's item number one. Item number two is the 20-period moving average. That's item number two, the 20-period moving average. Boom. We've got two of our items. Now, item number three is yesterday's closing price. Yet this is yesterday, and this is today, right? Okay. So yesterday's closing price was right here, represented by that dashed line. That's item number three. Okay. So I've got item number one, the 200; item number two, the 20; yesterday's closing price. Now, the last item—remember I told you—is yesterday's late-day price data. So we're going to go back about 45 minutes to an hour of yesterday's last 45 minutes to an hour, not much more than that, okay. So we're going to come back maybe here. We're going to take the last part of yesterday's data, and you know what we're going to do? We're going to mark the highest price of the last 45 minutes or so, and we're going to take the lowest price of the last 45 minutes or so, and we're going to create a little block, and this becomes item number four. The last block of data from yesterday is item number four. I'm going to repeat that because that's the—that's the one that's a little bit more complex. We're going to take—once again, let me repeat this—we're going to take the last 45 minutes or so of yesterday's data, all right, and we're going to say what's the highest price that this stock registered in the last 45 minutes? Boom, right there. That's the highest. What's the lowest price the stock registered in the last 45 minutes? Right here, the last 45 minutes, the last—the lowest low of the last 45 minutes. This becomes the stock's late-day price zone, okay, and that zone becomes item number four. Now we have our four items: the 200, the 20, yesterday's closing price, and yesterday's late-day price data. Now what I need to do is I need to group all four of these things into a block. I'm going to take the top of whatever item is the top of the four. This is the top of my four items. This is the bottom of all four items. Sometimes the 200 is going to be the bottom of the four. So which item is the lowest, and which item is the highest? Sometimes the highest is going to be your 200. Sometimes the lowest of your four items is going to be your 200. So sometimes the lowest is going to be the bottom of four. Here's the lowest. Sometimes the highest is going to be the top of item four. Whichever item is the highest is the top of your Fab Four block. Whatever item is the lowest is the lowest of your Fabulous Four block. Once we have the upper part and the lower part, we extend into the future, boom, just like this, and this becomes my Fabulous Four rectangle or block.

Now, now that I have my Fabulous Four, notice that Pepsi opens under the whole Fabulous Four, but it opens in the perfect location. It opens in the best location. It opens in the—the—the highest probability location. It opens—opens in the juiciest location. That location—remember—is right under The Fab Four. So remember, right under The Fab Four is the very best location for betting down. Down here is okay to continue betting down. Down here is best—probably betting up, okay. Remember those locations, all right. So let's grab that Fab Four again. Let me show you. We're going to grab the 200, grab the 20, grab yesterday's closing price—that's three items—we're going to grab the top of yesterday's late-day data, about 45 minutes. We're going to grab the absolute bottom of yesterday's late-day data. Now, what's my highest line out of all of these lines? What's my highest? This one. I'm going to extend that into the future. Now, what's my lowest line? This one. I'm going to extend that into the future, and this gives me my Fabulous Four block. Now I want you to understand that I teach my traders to do this before the market opens. So this hasn't happened yet. Let me show you. This hasn't happened yet. None of this has happened yet. You see, we know the Fab Four before the market opens. Now we're waiting. So when Pepsi opens for its first bar right here, check this out. Pepsi opens right here and gives me a red bar in the perfect location, just under the Fab Four. I'm going to bet to the downside. Boom. If Pepsi opens right here in the perfect location above The Fab Four, I am going to bet to the upside with a long. If Pepsi opens right here in The Fab Four, in the trap zone, I am going to do nothing. You see, if Pepsi opens here with a red bar, I will bet to the downside. You see, if Pepsi opens down here but with a green bar, I am going to bet to the upside. Position one, position two, position three. Wow. Knowing what to do in each of these positions organizes your trading, simplifies the—the Sims—simplifies one of the most difficult questions in the market: Do I buy or do I short? Do I bet to the upside, or are there better odds to bet to the downside? Locations are the answer. The better odds from three is to bet to the upside. The better odds from one and two is to bet to the downside, although sometimes from two you can bet to the upside. This is extraordinarily powerful. Now let's go on to another example.

Okay. Now we're looking at a two-minute chart here of Gill. Every bar represents two minutes of—try—two minutes of trading. I remember this really doesn't exist yet. So let me get rid of that for you. Right, this doesn't exist yet. We don't have this data yet. This hasn't happened yet. So I'm going to get that off the screen. Okay. And this is five—this is five minutes, ten minutes before the open. [Music] All right. So what you're going to do, you're going to say before the market opens, whether you trade the bo Vespa, whether you trade the dollar, I don't care what you trade; it's the same thing. You're going to grab the four items in advance of the open. You're going to say, okay, where is my 200? Right there. That's item one. Where is my 20-period moving average? Right here, item number two. Where was yesterday's closing price? Right here, item number three. Now, where was the highest price of the last 45 minutes? Right here. Where was the lowest price of the last 45 minutes? Right here. Now, out of all of these lines, what's the Top Line? Right here. Boom. Extend into the future. What's the—what's the lowest line? Right here. Extend into the future. Now this becomes your Fabulous Four block. If your stock opens above the Fabulous Four, you know what to do. If your stock opens below the Fabulous Four, you know what to do. Okay. Now we're still talking generally, but this is the foundation for proper trading. Getting the location right, then if we add the technique in the right location—oh my God—that's where the power comes. Okay. Now we've got—let's move—let's move forward. We have the four items. We've blocked the four items out. We extend into the future, and remember this didn't—we—we do this before the market opens. The market opens and gives us the right color in the right location. Wow. Eventually it moved up here a little bit, but remember I told you it's hard for a stock to penetrate The Fabulous Four Zone. So I'm not nervous if it bounces up in there a little bit, as long as it doesn't break the Fabulous Four Zone. Okay. Now you get the greatest flows from just under the Fab Four. Beautiful. Okay. Again, if this stock opened here and gave you the right color, you'd be betting that way, but it opened here and gave you the right color, so you're going to bet this way. Now here's something else my traders are taught. They're taught to play the color game. The color game is very simple: It's if you're under the Fab Four, you're going to play—you can play or enter anytime. Red eliminates the color green. Boom, boom. You see? You see this green? Red eliminates the low of this green right there. Boom. So we've got two very fascinating entry points. Red eliminates the low of the color green right there. Red eliminates the low of the color green right there. Now you can look at this: Red eliminates this green, but I don't like this one too much because it's happening too far away from the 20. It doesn't have to be touching, but I like them when they're a little closer to the 20, a little closer to the 20. So, for instance, if this red dropped below the green here, I wouldn't take it because it's too far from the 20, all right. So the way this trade would go with my traders is: Boom, entry one; boom, entry two; boom, entry three. And where would they take profits? A move away from the 20-period moving averages, profit taking; a move away from the 20-period moving averages, profit taking. You see, because stocks can get far away from the 20, they can't stay far away. They can get far away; they can't stay far away. So we look to get in near the 20 and get out away from the 20. Get in near the 20, get out away from the 20. Get in near the 20, get out away from the 20. Okay. Okay. That's the game. After the initial play, initial play, secondary play, third play, profit take, profit take, done. You're now off to the beach. Do you understand this? Are you getting this? Do you know how to grab that Fab Four with the four items? Do you know the different locations above The Fab Four and the different locations below The Fab Four? Do you get this color game after your initial entry? Now just play colors, boys and girls, red bars and cream bars. Yay. This game of trading is not as complex as a lot of people make it out to be. This game of trading is made complex by you. The market is a very basic, rudimentary item. It goes up, it goes down, it goes sideways sometimes. That's not complex. You're complex, and you bring your complexity to the game. The game is not complex. The game, in fact, is simple. I'm not saying it's easy—that's the last thing I will promise you, the last thing I will tell you—it's not easy, but it's simple. Simple is different from easy, just like basketball. Basketball is a simple thing: Get this ball in that hoop. Oh, that's it. And prevent the other team from getting the ball in their hoop. That's it. That's the game—simple. Easy? No. But this—but the—the rudimentary elements of the game are simple. You can dramatically increase the odds of your plays if you get the locations right and you match the colors. So above The Fab Four, you want boom, solid green; below The Fab Four, boom, you want solid red. And then after your initial entry, it's just a color game: getting in near the 20, getting out away from the 20; getting in near the 20, getting out away from the 20. And you've got a basic approach that will dramatically raise your level of consistency because you will be playing with the flow, with the power, in the right location. [Music]